Wednesday, May 27, 2020

An industry reels in shock as African Alliance takes BPOPF head-on

When Botswana Public Officers Pensions Fund took a drastic step in 2019 to immediately cancel the mandates it had offered to asset manager African Alliance Botswana, few in the highly exclusive and secretive industry could have predicted what that would do to the sector.

Pulling the trigger on African Alliance was an aggressive decision that left many insiders wondering just for how long African Alliance could survive without BPOPF patronage.

Across the industry of fund managers, the nuclear option adopted by BPOPF sent shock waves, with a pervasive effect that was equally chilling.

The dispute has since morphed into nothing short of intrigue.

African Alliance is asking difficult questions.

Now there are fears that the dispute might even reverse the gains made to get Botswana out of gray listing that makes it a member of money laundering countries.

Seventy percent of BPOPF money is invested outside the country.

The increasingly acrimonious fallout is a rebuke to the general serenity with which the investment and asset management industry in Botswana has long come to be known.

The outcome of it all is interpreted as much more than just powerplay gone wrong. 

While the action by BPOPF is seen as a calculated revenge, the subsequent response by African Alliance is seen as brinkmanship. 

For now everybody prefers to watch from a distance and hold their breath.

Sunday Standard asked a number of executives in investment firms to help shine some light on the nasty dispute between BPOPF and African Alliance.

A number of them simply declined to talk. Those who talked did so in hush-hush tones under strict conditions of anonymity.

The wisest guess is that the whole spat can be traced to a fallout over Choppies where there were differing visions between BPOPF and African Alliance.

BPOPF is by far the biggest institutional investor in Choppies. And those investments are held through various investment proxies including African Alliance.

Ahead of Choppies Extraordinary General Meeting last year, BPOPF had called firms investing on its behalf for presentations on how they intended to vote.

The dispute has pitted Boitumelo Johnson against Sean Rasebotsa. Johnson is the CEO of BPOPF and Rasebotsa is her counterpart at African Alliance Botswana. In a normal year the two would be categorized as like-minded – steel willed, driven, ambitious and with outsized egos.

At the Choppies EGM, said a person with knowledge of the meetings, African Alliance indicated that Choppies CEO, popularly known as Ram Ottupath and his long-time associate Ismael Farouk be retained on the Choppies Board.

BPOPF wanted them out. In the end African Alliance went on to vote along those lines.

It was the beginning of troubles. But nobody knows for sure just what triggered what now looks more and more like a race to the bottom.

“Otherwise in the absence of clarity, how would do you characterize such unprovoked assault by BPOPF and then the unbridled escalation by African Alliance?” asked an industry insider this week when approached by Sunday Standard.

He did not want his name disclosed lest he be caught on the crossfire.

Another said given the sheer size of BPOPF and the extent to which it bestrides the economy, the risks might with time prove too big to ignore, especially on grey listing.

However way one looks at it, the encounter is a classic case of David against Goliath. 

BPOPF towers over all of Botswana’s asset management industry.

By any standard the Fund is massive, among the top three largest funds of its kind in Africa. 

With assets under management around $1 billion – give or take, including at Group level, African Alliance remains small.

Barely a year after BPOPF pulled the trigger, the whole thing has become irreversibly messy, with the regulator NBFIRA (Non-Banking Financial Institutions Regulatory Authority) dragged into the standoff and all sorts of insinuations and aspersions cast on its neutrality.

African Alliance Botswana has effectively become a lightning rod. The fund manager is taking the war to BPOPF, and the campaign is growing ever more bitter.

Also dragged on the dispute is the Ministry of Finance, who in the absence of a tribunal acts as the industry’s ultimate arbiter in the case of a dispute.

According to correspondence seen by Sunday Standard, it is only a matter of time before Permanent Secretary Winfred Mandlebe gets entangled what seems to be a growing Gordian knot.

The BPOPF strategy was always a high stakes gamble. By pushing African Alliance against the wall, BPOPF hoped the asset manager would quietly protest, succumb before walking away hoping to one day be lucky again to win favour with BPOPF. 

But African Alliance has chosen a totally different path. It is going for broke.

Integrity stakes are mounting.

African Alliance is asking pointed questions, including governance at BPOPF.

The tone adopted by Tally Thekiso, the Chairman of African alliance Advisory Board is combative and unyielding. In his correspondence he is a man doubling down. Among other things he accuses BPOPF of “impropriety,” “bad faith” and “misdemeanours.”

A businessman who cut his teeth as a low-level government official, Thekiso went on to make his money in textile and apparel. 

In official correspondence as in real life, he is maximalist in his use of bombast and hyperbole.

He takes no prisoners.

He seems resigned to the fact that the fight should go all the way.

In one of the letters seen by Sunday Standard Thekiso effectively accuses BPOPF of corruption.

He wants the Fund investigated.

He enumerates what reads like the terms of reference for a Commission of Enquiry – the role if any of BPOPF Investment Committee in advising the Board to terminate African alliance, the documentation of BPOPF decision making forum and adherence to sound governance, internal decision making policies as well as adherence thereto, the one-sided nature of instrument mandates imposed on asset management industry and also the general conduct of BPOPF with particular reference to intimidation.

“Given our strong performance, no unfulfilled obligations and no indication to the contrary, since the conditional award of the mandate …. we are having a difficult time explaining what transpired to our stakeholders in Botswana,” writes Thekiso in one of the correspondences.

He says BPOPF “lack of transparency” has caused African Alliance “irreparable damages.”

He is convinced that where his company is smaller in size, it will make up for that with what he believes is its irreproachable record of integrity. 

In a sarcastic language he says what started as an “African Alliance simple request for openness based on good faith, underpinned by sound corporate governance appears to be an overarching requirement for BPOPF.”

For now there are no winners.

Suspicion has always been that african Alliance is being punished for a presentation to BPOPF about the Choppies Board,” he writes to the Ministry of Finance.

“The Investment Management Agreement compels BPOPF to act in good,” he argues.

For him there is evidence that BPOPF has not acted in good faith; in the six months of negotiations for renewal, and then going on to terminate African Alliance Botswana “with no explanation or due cause.” 

It is not like BPOPF is scrambling for cover or watching helplessly allowing have its back put against the wall. They are frantically fighting back, knowing that the close to P70 billion war chest under their belt is a source of both power and prestige and if needs be, a weapon with which to whip into line any manager deemed out of step.

The Chief Executive Officer of BPOPF is also steadfastly keeping her unapologetic track, in one instance giving African Alliance seven days to have effected a transfer of all assets in their mandate to a third party.

“We have noted that following the Fund’s instructions to African alliance contained in the Fund’s letter to facilitate the transfer of assets under African alliance management, the Fund has been advised that African alliance has declined to facilitate the transfer. Accordingly, the Fund demands that African alliance confirms in writing when the instruction will be effected and provide the full timelines for the transition within seven days.”

Sunday Standard could not independently verify if her instructions had been carried out.

The sense of exposure at African Alliance Botswana is palpable. It has been exacerbated by a streak of different but seemingly related developments.

Late last year Debswana Pension Fund, probably taking its cue from BPOPF terminated relations with African Alliance as did Fiducia, a relatively new pension fund administrator but one whose influence in the market is already being felt beyond immediate competition.

This has put pressure on African Alliance from multiple fronts. For now the buffer that remains is to count on the instruments at group level. But for how long?

For now it would seem like African Alliance is banking on the unlikely possibility that BPOPF would reconsider and review its position, something that seems ever more distant after the Board Chair Solomon Mantswe dispatched another letter to Thekiso effectively telling him to go and hang as the decision by BPOPF to recall mandates, through evangelically implemented by CEO, she does so with the full backing and authority of the Board.

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