Monday, June 14, 2021

BBS dares Bifm Capital to approach the courts

The Board of Botswana Building Society has endorsed the Management’s decision to redeem the Bifm capital shares.

BBS Board has further instructed management to fight the Bifm Capital in court should the Society be sued as a result of the dispute.

In another turn of events, this week BBS put on a strong face after Martin Makgatlhe resigned from the Board.

Makgatlhe, who is known to be close to Bifm, filed his resignation with the BBS Chairman, Cross Kgosidiile, last week Friday.

In his resignation letter, Makgatlhe cited the difficult relations between the Society and Bifm, adding that the standoff was not good for all concerned.

Makgatlhe is managing director of Motswedi Securities, a leading broker and advisor in the country.
Bifm is one of Makgatlhe’s biggest clients.

Spokesperson for BBS, Sipho Showa, said the resignation of Makgatlhe was not a cause for concern for the Society.

“We have a pool of people who can replace him,” said Showa.

The resignation of Makgatlhe was followed by a counter attack on Bifm Capital, launched by the Society, dismissing suggestions that the redemption of Bifm Investment Fund One (Pty) Ltd might lead to the free fall of the Society.

Bifm Investment Fund One is an investment vehicle of Bifm Capital used in their shareholding at BBS. Bifm Capital, through the vehicle, has injected P150 million – of Batswana pensioners – in 2006 for the purchase of paid up shares at P1 per share.

In practice, what it means is that once the shares are redeemed, Bifm Capital is only entitled to nominal face value of their shares of P 150 million with no interest.

In an interview with Sunday Standard, Bifm Capital executive, said calculations could prove that Bifm Capital was entitled to at least P50 million in interest.
This is the bone of contention between BBS and Bifm Capital.

Bifm Capital is 51 percent held by Bifm while the remaining 49 percent is held by CMA- a company that is owned by Marsland and Rhys Carr. The two also provide management services to Bifm Capital at a fee.

Also at the centre of the BBS/BIFM capital dispute is the interpretation of a legal agreement signed by the two parties a few years ago.

For their part, BBS says the agreement has become void, while Bifm Capital says it is the founding instrument that will have to be used to resolve any impasse.

So far, PriceWaterhouse-Coopers is known to have questioned the validity of the document, pointing out that it runs contrary to both the letter and spirit of the Building Society Act and the Rules of the Society.

Other legal experts said this week that in case of a dispute, the Building Society Act would naturally take precedence over the Agreement between BBS and Bifm Capital.

The spirited boardroom brawl which has attracted huge media attention started some two months ago when BBS kick started a process to redeem Bifm Capital shares ostensibly stemming from an incestuous corporate relationship between the two.

In an interview with Sunday Standard, Marsland sought to explain that the Bifm capital involvement in the BBS P2 billion is also a major source of the ongoing wrangle.

Marsland said his company only came into the bidding process of the bond at the invitation by BBS.
He added that during the first round of a closed tender, the Bifm Capital came out as the cheapest and won.
That decision was, however, reversed by the board.

On the second round, his company got disqualified.

As a matter of fact, the P2 billion bond keeps cropping up in interviews and private briefings by both of the warring parties signaling that a lot of bad blood could also be easily traced to the bond’s tendering process.

The loss of the bid cost Bifm Capital in the region of P9 million in fees.
Marsland’s company, CMA, could potentially have pocketed about 49 percent of that plus management fees.

“The issue of the bond tender has been referred to the DCEC,” Marsland said.
BBS dismissively said Friday that Bifm Capital is free to seek remedy anywhere, including the courts, if they feel they have a case.

In an interview, BBS has said they are worried by Bifm Capital’s fondness to resort to “defamatory and personal attacks” in the media, especially BBS Chairman Kgosidiile and Chief Executive Officer , Pius Molefe.

BBS has also come out to reject insinuations by CMA directors that they were key people who started the demutualization process of BBS.

A source at BBS said demutualization was on the agenda in April 2004 and was later revisited in March 2005.

“That was before Bifm Capital became part of BBS,” he said.

At a board meeting of March 21, 2005, that revisited the issue, Molefe informed the board that they were still to iron-out some technical details with the International Finance Corporation (IFC)- a World Bank investment arm.

Present at the board meeting were Nightingale Kwele (Chairman), Pontius Mokgosana, Oaitse Mapitse, Large Charumbira, Seagiso Ramatshaba, Bob Mannathoko, Tebogo Kesupile and Derrick Brink.
In another interview with Sunday Standard, Marsland said whatever the outcome of the dispute between Bifm Capital and BBS it is important for the Society to demutualise so that it could become more efficient in its competition with commercial banks.

He said it was clear that as a result of the inherent inefficiencies which had nothing to do with management, but rather the regulatory structure, BBS was continuously losing the market share.

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