Monday, September 21, 2020

Inside the CEMAEF honey trap

Since earlier this year, a group of men and women has been on the phone trading horror stories about how government has impoverished them. They seem slightly improbable friends – different classes, jobs, backgrounds, incomes, clothes – and they got to know each other, in fact, only a few months ago. But they are in touch with one another regularly, intensely involved with each other’s lives, sharing vehement feelings of outrage and injury.

They are all part of a group of citizen investors who got equity finance from the Citizen Entrepreneur Mortgage Assistant Equity Fund (CEMAEF) in a bid to save their ailing businesses from the deputy sheriff’s hammer. When they get together on the phone, they, however, exchange stories of how the fund has left them worse off.

Whether or not their grievances are all entirely legitimate, they do expose how badly the fund, which was quickly cobbled together for political expedience, has turned out.

The multi-million Pula fund has been a lightning rod of controversy since it was hatched at a Botswana Democratic Party (BDP) Central Committee meeting nine years ago. It was initially a secret plan by the BDP to use public funds to save businesses of some seven party leaders from being auctioned off. Among businesses which were to be saved were those of some Cabinet ministers and BDP Central Committee members.

The party secretly set up a task force comprising Education Minister Jacob Nkate, Trade Minister Neo Moroka then Managing Director of BP and former minister Joy Phumaphi. The task force report was to be presented to the then party Chairman, Ponatshego Kedikilwe. The task force, however, recommended against the proposed bail out plan, arguing that government did not have enough money to go around all cash strapped citizen entrepreneurs. The task team allegedly established that it would take about P17 million to bail out the seven BDP leaders who were facing loan foreclosures. They cautioned the party against extending the facility to a few party members, saying it could turn into a political scandal.

The party then quickly cobbled together the Citizen Entrepreneurial Mortgage Assistant Equity Fund and sold it to government as a fund that would save citizen investors from loan foreclosures through equity participation. The plan was rushed through parliament with no questions asked. It was then given to the Botswana Development Corporation (BDC) to administer. It was agreed that CEMAEF and the assisted citizen company would form a joint venture company that would settle arrears at the bank and acquire the property of the assisted company. CEMAEF and the assisted citizen company would be incorporated and provide a minimum of eight directors. Suddenly, the plan which cobbled together in haste started to unravel.

In 2004, the BDC contract came to an end and government tendered out the fund for a new manager. BDC tendered for the fund. Patrick Ketsitlile, then a BDC employee who was directly involved with the fund, tendered against BDC under the company N & N Fund Managers.

N&N Fund Managers won the tender and Ketsitlile resigned from BDP and managed the fund under N&N.
Ketsitlile is now the central figure in what could become one of Botswana’s biggest political and corruption scandals ever. A reconstruction of Ketsitlile’s rise shows that he was an ingenious dealmaker who hatched interlocking schemes that exploited loopholes in the fund and trampled the norms of running public businesses more often to serve his desire for wealth. This inside account of Ketsitlile’s career is drawn from interviews with government officials and associates who went into equity partnerships with CEMAEF and a number of official documents.

For example, at some stage while the fund was managing scores of companies, it became necessary to appoint someone to manage their properties, do rental collection, maintenance, management of lease agreements, cleaning and security.

For a time, all things seemed possible. No one questioned Ketsitlile’s brash style. For example, Ketsitlile formed a company called Panama Investments and awarded it the contract to manage all properties of assisted companies joint ventures with CEMAEF. He later formed another company called Cadeaux (Pty) Ltd, which he contracted to carry out repairs in all properties of assisted companies in joint ventures with CEMAEF. Sunday Standard investigations have been able to establish that N & N Fund Managers, Panama Investments, and Cadeaux shared the same workers. All three companies operated from the same office and were all managed by Ketsitlile.

Investigations further revealed that both Panama and Cadeaux (Pty) Ltd were given CEMAEF jobs without having to go to tender.

Sunday Standard investigations also turned up information that Panama and Cadeaux at times claimed money for jobs they had not done, like the upgrading of the electrical system and repair of roof at Harbour Investments. It also emerged that a BMW X5 and Land Rover Discovery driven by Ketsitlile and his wife belonged to N&N Fund Managers but have been registered under a company called Intercontinental Merchants (Pty) Ltd, a company owned by Ketsitlile and one Devdeven who is co-manager of N&N Fund Managers. It is understood that Intercontinental bought the vehicles as agents for N&N Fund Managers and Intercontinental is paid a monthly fee for the cars.

Scores of citizen investors who were hoping the fund would help them are however, having the worst of it. Most see themselves paying hefty monthly installments to support the network of companies set up by Ketsitlile while their mortgages are stuck in one place.

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