There are fears that the Botswana Development Corporation’s multi-million Pula Can Manufacturers is being primed for sale at a heavily discounted price to a foreign company with proceeds of the discount being harvested by a clique of BDC insiders. The sale is expected to go through despite an ongoing investigation by the Directorate on Corruption and Economic Crime (DCEC) against the BDC subsidiary. The DCEC investigation follows a forensic investigation by BDO Spencer Steward, which was tasked with following up “the preliminary findings of internal investigations by the BDC internal audit and to verify and confirm the extent of any possible fraudulent actions perpetrated by the general manager against the company.”
The BDO report, a copy of which has been passed to the Sunday Standard revealed that the extent of the irregularities “was more significant in value than was indicated in the preliminary findings of the internal investigation.”
The report revealed that Can Manufactures General Manager, Booker Bannister, had a conflict of interest because he owned Can Master, a company established with the intention of providing services to the canning industry and food packaging industry through selling and marketing machinery and cans. Its revenue is commission based.
Can Master is an agent of Glud & Mastrand, a company based in Germany that sells square cans used in the canning of beef. States the report: “from the minutes of the board dated 4th October management was supposed to carry out research on square cans. In our view this was an area of conflict with Mr Bannister since his company, Can Master, is getting commission from the sale of the cans to Botswana Meat Commission on behalf of Glud & Mastrand. We doubt if he could allow the research to be carried out in this regard since Can Master is an agent. Mr Bannister was paid 413, 570 Euros for sale to BMC. This was a significant amount that would, without doubt, make him put his interests ahead of those of Can Manufacturers.
In another case of conflict of interest, Can Master pocketed 50, 000 Euros in commission from Cantec after buying and commissioning a can manufacturing line for Can Manufacturers that is not being utilized. “This manufacturing line has been lying idle for the past 7 months and there is no indication of an available market for the 99 mm cans it produces.” The machine was bought on the basis of recommendations made to the board by the former general manager who is also a major shareholder in Can Master, an agent of Cantec, the German company that supplied the machine. This production line required funding amounting to 7, 329,630 Euros. “Our investigation around the purchase of the production line indicates that there was no project appraisal performed by the finance department. At the time of approval, the former general manager and marketing department indicated that customers needed a combination of products in order for sales to be increased.
Despite the fact that the first production line was underutilized in terms of its capacity, the second line of production was approved. Since installation and the first batch of cans were manufactured using the second line of production, information from the marketing department indicates that the size of cans from the second manufacturing are difficult to sell. There has not been a single buyer for the 99 mm cans for the past eight months since they were produced. We do not understand why the same department that advised on the existence of a market prior to the commissioning of the second line in collaboration with the general manager cannot now sell the cans. We doubt the authenticity of the information on the existence of a market,” states the BDO report.
“`The investigations further proved that the two suppliers of Can Manufacturers, namely Jenny Fashions Designers and Jimka Holdings, are related to the former General Manager and the Finance and Administration Manager, respectively. The interests of the former General Manager in Jenny Fashions were not declared to the board as is required in the implementation of sound corporate governance issues and per the contract of employment. The interests of the Finance and Administration Manager in Jimka Holdings were also not declared to the board,” states the report.
It also emerged that in 2007, Can Manufacturers “got supplies of tinplate which had black spots from Otto Wolf measuring approximately 142 tonnes. The raw material was to be replaced or compensation paid to Can Manufacturers. In our view, in the absence of proof, it is possible that the former general manager made some personal arrangements with the supplier. To date there is nothing on record to indicate that any compensation was paid or raw material replaced.” The report was compiled in 2010, and Sunday Standard was not able to establish if any records have since surfaced.
Employees interviewed at the company professed ignorance over replacement of the tinplate. The matter was being handled by the former General Manager and no one except him knows what could have transpired. Our view is that in the absence of proof from the former general manager, he could have benefitted from the transaction in his personal capacity.”
The report further states that Can Manufacturers “has been recording losses since its inception. Of note is the worsening gross loss position. The main causes for the loss are: the cost of the main raw material (tin plate) which is imported and unnecessarily expensive. The company was selling some of its cans at below cost because of the high cost of the imported tinplate. “It appears the former general manager was well aware of other tinplate suppliers in the Southern African region, Europe and Asia. Early 2007, the company sourced quotations from various companies worldwide. A decision was made by the former general manager to use Otto Wolf as the main tinplate supplier. However, our investigations found that some of the suppliers, like Ace Vitorik, supplied tinplate at lower prices. A contract was signed with this company but Can Manufacturers failed to provide letters of credit. We do not understand whether the failure to obtain the letters of credit was genuine or was a deliberate move to avoid buying from Ace Vitorik. From this, it shows the company was paying more for procuring tinplate from Otto Wolf than if the company had sourced from other suppliers, like Ace Vitorik.
It also emerged that the double lacquering of the inside of the tin plate which made it even more expensive was not necessary. A few weeks after the forensic investigations, the former general manager presented a claim of P20 million to BDC. The BDC requested Can Master to provide the basis for their claim which is being awaited. In June 2010 Bannister who was the general manager resigned from the company and Mr. T. Makgoeng was appointed acting general manager. Two months later, in August 2012, Can Master wrote to express interest to purchase the BDC shares in Can Manufacturing. In December 2010, BDC advised Can Master that it is open to approaches for partnership from any potential investor as per its mandate and asked Can Master to provide information on its technical partners to facilitate further discussion. In May 2011, the BDC signed a non disclosure agreement with Can Master. In October 2011, the board of Can Manufacturing, however, resolved to hand over the finding of its forensic audit to DCEC and Can Master’s proposal to invest in Can Manufacturing was put aside until outstanding legal issues are resolved. BDC management, however, disregarded pending legal matter and was continuing negotiations with Can Master. There were signs that Can Manufacturing was being primed for sale to Nampak (South Africa) which could have defeated government’s aim to diversify the economy. By early this month, fears that Can Manufacturing was being primed for cheap sale to a foreign company were turning into reality. According to an insider, plans are afoot for selling Can manufacturers at a heavily discounted price with proceeds of the discount being harvested by the corrupt clique running the BDC sinkhole operations.”