Discredited fund managers were this week scrounging around to craft ways to pour scorn on a damning report issued by South African based consultants outlining the rot at the Botswana Public Officers Pension Fund (BPOPF).
Asset Managers that have been fingered say that the consultants could have been driven by bad faith because they had tendered to become service providers of BPOPF without success.
Commissioned by the Ministry of Finance under the Registrar of the Pension and Provident Funds, the report by Jacques Malan Consultants found evidence of gross defects in corporate governance bedeviling the BPOPF.
Estimated at around P35 billion the Fund is by far the largest in Botswana.
The report says BPOPF violated its strategic plan in as far as the plan pertains to honesty, integrity, transparency, teamwork, accountability, customer focus and Botho.
“The Trustees have not stuck to all these values,” says the report as a matter of fact.
Not only has BPOPF been uncooperative when it was supposed to support the obligations of the consultants under the mandate and terms of reference drawn by the Registrar, worse BPOPF has on numerous accounts been found to be hiding some critical information to government both as the employer and stakeholder.
“In terms of the strategic Plan, they (BPOPF) acknowledge the Employer as a stakeholder whose expectations include growth, effective management, and good corporate governance, yet they have not allowed the employer to check whether these expectations have been met.”
BPOPF is also accused of an uncooperative stance to the consultants.
They are accused of delay tactics when it comes to provision of information required by the consultants.
In some instances they refused outright to pass the requested information.
Yet in some other instances BPOPF would connive and conspire with its service providers to make the consultants’ job unnecessarily difficult.
“As consultants, we were appointed to act on behalf of the Registrar of Pensions and Provident Funds, the BPOPF has shown a lack of respect for the Registrar and have undermined his authority.”
While respecting the sanctity of the independence of the Trustees and the need for them to take decisions without interference, the South African consultants charge that it is imperative for BPOPF to foster a good working relationship with the Employer.
“By seemingly concealing this information, it leaves an impression that something is not right and is being hidden,” says the Report.
Furthermore, the Fund has been accused of carefree attitude when it comes to both corporate governance and adhering to its value of transparency.
Singled out on this footloose corporate governance scheme is Alexander Forbes Botswana, which is one of the premier service providers of BPOPF.
“There are various shareholdings which cause concern as Time Holdings hold 33% of Alexander Forbes Botswana (AFB) and 25% of Flemings Asset Managers (FAM).
Both these organizations are service providers to the Fund and as Time Projects (a subsidiary of Time Holdings) was given the job of project managing the new office block of the BPOPF, there are naturally conflicts of interest. Investigations into this matter did not result in any obvious wrongdoing but the Fund needs to adhere to its value of transparency very carefully.”
The consultants end by emphasizing that in future because AFB is a service provider, “they must be excluded from any tendering process if any part of the AF Group wishes to tender wishes for any services within the BPOPF.”
The ethics by AFB come out for a particular scathing, capturing almost two pages of the report.
“On retirement, a member may either purchase his pension from the Fund or an insurance company. The advice to the member is given by AFB who earn a commission only if the pension is purchased from an insurance company.
Clearly, this is a conflict of interest. On the death of a member often money is paid into a trust. As the only trust available is run by AFB, there is again a conflict of interest. The Fund should consider setting up its own trust which should be run on a non-profit basis.”
Still on AFB, the report says “the administration fees charged by AFB appear to be too high, especially for deferred members and should be renegotiated by the Trustees.”
As part of the Main recommendations to the Registrar the consultants argue that “there must be a wall of good governance between the Fund and any service provider and, in particular, the current relationship with AFB and the Fund, especially the Secretariat of the Fund must be addressed.”
“The Secretariat must deal directly with all service providers and not be prevented by AFB from meeting AFB competitors.”
Also, as part of the recommendations, the consultants say that “the relationship with the current Principal Officer has probably reached a point where it will be difficult for him to work in a new environment and with a good relationship with the Employer. His services should thus be reconsidered. The position of the Chairman at the time when amendments to the Rules were made without Employer approval should also be reconsidered.”
On a Mr. Gaobakwe, a Trustee who has been found to be a liar, the consultants recommend that “should it be proven that Mr. Gaobakwe did indeed lead a private consortium to purchase the Mascom shares, then he should be disqualified”
Taking a swipe at the Trustees, the report states that amendments to the Rules have been made without explicit approval of the Employer.
This is contravention of a Rule which states that “all amendments that affect the financial position of the Fund need to be approved by the Employer. Since this was a major oversight and probably indicates a total lack of respect for the role of the Employer, the position of the Chairman at the time such amendments were made should be reconsidered by the Trustees and the Employer.”
The Report further argues that the size of the Board of Trustees be reduced so as to enhance administration.