The Botswana Public Officers Pensioners Fund (BPOPF) is gambling P130 million on a bold plan to assist Bona Life with its financial problems.
The infighting that plagued Bona Life led to the insurance company being placed under statutory management by the Non-Banking Financial Institution Regulatory Authority (NBFIRA) in 2020.
The BPOPF which was the majority shareholder and got its fingers burned in the financial crisis that ensued this week confirmed that it has now returned to invest in the same company by pouring P130 million.
BPOPF chief executive officer Moemedi Malindah informed The Telegraph that the deal to inject millions of Pula into Bona Life “has been completed as of 8th February 2022.”
While it has released the insurance company from statutory management, NBFIRA this week declined to comment on reports that it had earlier on allowed Bona Life to violate financial services laws by allowing it to operate without meeting the minimum capital requirements for a year.
In an emailed response The Telegraph queries, NBFIRA spokesperson Boa Ntebele said, “Please note that the questions raised in the media inquiry are not of a regulatory or supervisory nature and will therefore be best answered by the respective entities. I therefore redirect you to engage the respective entities concerned.”
The Telegraph sought to establish among others why Bona Life was allowed to operate for more than a year when it did not meet the Prescribed Capital Target. NBFIRA’s Prescribed Capital Target (PCT) requires that the amount of minimum assets that an insurance company should hold, must be one and a half times larger than its liabilities and reports indicate that this was not the case with Bona Life.
Malindah also admitted that insurance companies have, by operation of law and regulation a prescribed capital level (PCT Level) that they should always maintain. He said if the company falls short of that prescribed capital, it is obliged to raise capital to meet the PCT level.
“This is the reason that necessitated the request for capital by BONA LIFE. From an investor perspective, it was an opportunity for the BPOPF to participate in a business with a potential for attractive returns in the long term,” he said. Furthermore, he said, it was an opportunity for the BPOPF to play an active role in the economy of Botswana by supporting a local businesses and providing stability in the insurance sector and deepening competition.
Asked what BPOPF intends to do to ensure that corporate governance prevails at the company and pensioners’ funds do not go down the drain as it happened in the past, Malindah said it is a regulatory requirement to ensure that corporate governance in insurance firms is in line with best practice and with the NBFIRA standards.
“The first thing that BPOPF/BOP did was to introduce 4 independent non-executive members to the Bona Board. We now have a full complement of board members,” said Malindah. Secondly, he said, it was to ensure that the company is fully funded which also has been successfully completed.
“With the proper governance structures and sufficient funding in place, then the BONA LIFE board has been tasked with ensuring that policy holders’ interests are fully protected, and that the shareholder earns the expected return,” he said. He added that there are many deliverables that the Board must meet, including rebuilding the management team and implementing the turnaround business strategy.
On some concerns by some observers that the decision to inject capital into Bona Life amounted to mismanagement of pensioners’ funds, Malindah defended this decision.
He said businesses do go through some difficulties, and it is for investors to provide the skills and the capital to bring the business to life.
“This is the main mandate of investing. It is erroneous to believe that investors backing and assisting a company that is going through difficulties is misuse of funds. Observers from far might not be privy to the details of the transaction hence that conclusion. There are however, many factors that support this investment,” said Malindah.
He said Bona Life initially went to the market to seek capital. “This was done under Statutory Management following Mr. Paul Masie’s appointment as the company’s statutory manager by NBFIRA. The Statutory Manager was mandated to find a solution that will protect the policyholders first, ensure market stability and protect existing shareholders,” said Malindah.
He said there were other interested institutional investors that were invited by the statutory manager to provide a solution including the BPOPF/BOP (Botswana Opportunity Partnership). “It is worth noting that the transaction was approved by NBFIRA and also the transaction was submitted to Competition and Consumer authority, and we were given the go ahead,” said Malindah.
The boardroom brawl at Bona Life arose after allegations that one of the shareholders, liquidated Capital Management Botswana (CMB) had invested BPOPF funds in Bona Life through an investment vehicle identified as Botswana Opportunities Partnership. The directors of CMB later were accused of diverting funds from BOP through a complex web of companies and attempted to wrestle the entire BOP from BPOPF. Allegations were also that the CMB directors also embezzled funds from Bona Life and six years later the P50 million that BPOPF had invested for 40 percent of the equity is now worth a mere P2.7 million.