The gloves have come off in the country’s highest profile capital market dispute, which revolves around more than P400 million of public pension fund assets being fought over by several players, including the industry regulator.
On March 9 at the High Court, the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) faces off against Capital Management Botswana (CMB), in a suit in which the regulator wants to place the asset manager under statutory management.
NBFIRA actions were prompted by complaints by the Botswana Public Officers Pension Fund (BPOPF), which is attempting to recover more than P400 million at one time under CMB’s management.
Citizen-owned insurer, Bona Life also reported CMB to NBFIRA over P133 million in assets under management.
The pension fund and the insurer are unhappy about the manner in which the funds were managed.
For its part, CMB says BPOPF has no valid claim to the funds in dispute and Bona Life is attempting to blame the asset manager for its own alleged mismanagement.
CMB also says NBFIRA has no grounds to place it under statutory management and, in any case, the proposed statutory manager, is conflicted, CMB claims.
In his first major case since appointment last October, Judge Omphemetse Motumise will next Friday have to wade through one of the most complex and voluminous corporate law disputes the judiciary has seen in recent years.
The amounts involved are a record, the parties suing are major industry players and those at stake are some of the most vulnerable – thousands of pensioners.
NBFIRA arguments in favour of confirming a statutory manager over CMB are based in part on complaints filed by BPOPF and Bona Life.
However, another key document is a seven page spot inspection done by NBFIRA between January 9 and 12 this year, on CMB’s activities.
The regulator says the spot inspection uncovered 18 contraventions of NBFIRA’s securities corporate governance rules, including areas such as risk management and internal controls, asset audit, investment processes and others.
NBFIRA’s other key argument for the confirmation of a statutory manager is the claim that CMB Fund 1, an entity wholly owned by Capital Management Africa, is the subject of a liquidation claim.
CMB Fund 1 owns certain properties and is described by CMB’s lawyers as being a special purpose vehicle. However, in a hard-hitting response spanning 200 pages this week, CMB dismissed NBFIRA, BPOPF and Bona Life, at various points calling their arguments “nonsensical,” and “irrational”.
In his affidavit, CMB managing director, Rapula Okaile says NBFIRA’s application to confirm the statutory management was “hastily drafted,” leaving it “vague, contradictory and embarrassing”.
Okaile says NBFIRA’s appointment of former High Court judge and veteran attorney, Peter Collins, as statutory manager was “improper and/or arbitrary and/or irrational”.
“From the outset, I must point out that the applicant (NBFIRA) conducted an inspection of the first
“The applicant relies on the claims of third parties, which claims are either not investigated at all or improperly investigated and does not assist the applicant to be able to make a rational decision regarding the appointment of a statutory manager,” reads Okaile’s affidavit.
To NBFIRA’s argument that the appointment of the statutory manager would not be materially harmful to CMB if Collins found nothing suspicious, Okaile says the statement shows “a complete lack of understanding of principles of financial and asset management”.
The managing director says, in fact, CMB may have already lost out on a P20 billion deal as a result of Collins “unlawful appointment”. The deal, he says, involves China investing in a private equity fund housed in Botswana.
“Due to the applicant’s irrational actions, this entire investment opportunity is now on hold and in severe jeopardy.” CMB’s lawyers say NBFIRA’s reliance on a liquidation process against CMB Fund 1 also falls away as the applicant in that case has withdrawn the case.
After arguing against NBFIRA’s spot inspection and its use of the liquidation of CMB Fund 1 as grounds for statutory management, CMB last Friday also moved against BPOPF CEO, Boitumelo Molefe and Bona Life CEO, Regina Sikalesele-Vaka.
The asset manager has filed a P650 million suit against Sikalesele-Vaka and another P10 million against Molefe. CMB’s lawyers, Kanjabanga & Associates, are demanding P650 million from the Bona Life CEO in her personal capacity, which they say is damages for alleged conduct in the running of the insurer.
CMB and BPOPF are partners in Botswana Opportunities Fund, which in turn holds 40% of Bona Life. CMB separately holds another 25%, while Sikalesele-Vaka holds 25%.
Yesterday, the Bona Life CEO responded to the suit. “My view is that this letter is intended to do maximum damage to my reputation and I am consulting my lawyers. I view this as an attack on my reputation.
“Mr Okaile does not have the legal capacity to act on behalf of CMB because it is under statutory management. The matter is a personal attack and I am seeking legal advice on this,” she said.
While Molefe could not be reached, it is expected that she will defend the defamation suit. The BPOPF CEO is scheduled to hold a press briefing this morning on the pension fund’s affairs.