Tuesday, October 19, 2021

PriceWaterhouseCoopers fingered in BCL gaffe orgy

BCL Mine company secretary and the company Auditors, the internationally embattled audit firm, PriceWaterhouseCoopers (PWC) may be caught out in the controversial liquidation of the Copper and Nickel Mine.

BCL Liquidator Warren Dixon has revealed that the audit firm failed to maintain proper company records, to the extent of failing to file yearly statutory returns and company financial statements respectively. Warren Dixon recommends additional investigations into the PriceWaterhouseCoopers role in the BCL saga, including looking at a possible conflict of interest that may have violated international standards.

“The role of the external auditor is to offer an opinion as to whether the AFS under review fairly present the financial position of the company and the financial results of its activities.

It is also particularly important for the external auditor to assess whether a company (especially one that has indicators of financial distress) can continue as a going concern for the foreseeable future (generally for a period of at least 12 months following signature of the audit opinion and certainly for at least 12 months following the end of the financial year).

Given the scale and impact of the sudden closure, and subsequent liquidation of BCL, consideration should be given as to whether the auditors did perform their audit in accordance with the required International Standards on Auditing, specifically in relation to material matters involving judgment and disclosures and the extent to which funding decisions were made based on the AFS. Based on investigations to date the financial statements of BCL and its subsidiaries for the last audited financial statements to 31 December 2014 may be materially misstated.

The PL is investigating certain matters relating to the independence of the external auditors and will report in more detail in due course.”

While it is evident that Cabinet did not seek to obtain, let alone demand the missing information directly from the BCL Board or through the intermediary of the Minerals Development Company Botswana (MDCB), its company secretaries or its Auditors, in motivating the Petition for the Liquidation of BCL in Court reliance was placed on the evidence of Paul Avant Smith, the Chief Executive Officer of Botswana Government’s mineral investment arm, the MDCB. Smith attested that he was in possession of files, documents and records relating to BCL. What was not disclosed to the Court was that those records, files and documents were incomplete.

Legal experts indicate that full disclosure is required to be made to Court in proceeding for Liquidation. In particular in cases where such proceedings are made “ex parte” or without notice to other interested parties. What is clear from the Warren-Dixon report is that the failings by BCL management and the resultant collapse of the company was in part due to the low commodity prices but exasperated by gross mismanagement and lack of oversight. The portrayal to Court
that BCL was unable to meet its financial obligations only represented a small illustration of the much more insidious failings
of the government enterprise.

The Court, in granting the Order for Provisional Liquidation on an “ex parte” basis was misled, based on inadequate information
and a misrepresentation of the facts, now revealed by the provisional report.

The first meeting of Creditors, scheduled for the 6 and 7th November at 9.00am in Gaborone, Botswana at the Travel Lodge, Plot 28295 in Block 3, is unlikely to avail to the public much needed answers as to how BCL collapsed. DixonWarren warns that creditors may be liable to contribute to the BCL estate given the level of its insolvency. Creditors who would otherwise invoke the provisions of the Estate’s Act and call for an investigation into the management of BCL and possible criminal or administrative and professional misconduct now run the risk of having to pay into the estate as opposed to benefitting from it. The financial risk to creditors, already under the financial strain is too great for them toal truistically invoke such legal provisions in the public interest.

The now public revelations of mismanagement contained in the Provisional Liquidators Report, filed with Court for creditors of the defunct company, reveal a level maladministration by the management of BCL and its subsidiaries, which together with Cabinets complacency calls for an independent Commission of Inquiry. The Report raises the additional need for criminal investigations. Cabinet cannot escape ultimate responsibility for the company’s collapse. With the responsible ministries usurping governance issues to themselves despite violations of corporate governance procedures when it suited political needs.

Khama, in 2008 set out his platform for governance based on his five Ds-Democracy, Discipline, Dignity and Development, with the fifth D-Delivery added a year later after the 2009 general elections. While Khama has repeatedly called for a zero tolerance on corruption and maladministration, those closest to him have not felt the full extent of the sword of justice, what remains to be seen is whether the public interest demand for full disclosure on a political and economic level will invigorate cabinet to call for an investigation into its own conduct and that of its investments.

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