Investigators recover half of pensioners’ missing P600m
Mbongeni Mguni | Monday April 17, 2023 06:00
The pension fund pumped out P477 million to Capital Management Botswana (CMB), while Bona Life, which relaunched recently, had directed P133 million to the asset manager for investment.
CMB, now under liquidation, was contracted by the BPOPF in 2014 to manage an initial P500 million investment mandate in private equity. The asset manager and the pension fund fell out in late 2017 with allegations of misappropriation, at which point CMB had reportedly been given P477 million to manage. The asset manager sent BPOPF P50 million back and said the amount was final fulfilment and settlement of its (CMB’s) obligations to the BPOPF under the terms of a “partnership agreement”.
A statutory manager appointed by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) published a report claiming the asset manager, under the guise of managing funds for the BPOPF, lost hundreds of millions of pula through bad investments, alleged fraud and personal enrichment, via a complex web of directorships and shady entities.
CMB directors and their legal representatives have strenuously denied the allegations, insisting any use of the funds was under the partnership agreement, a contract the pension fund and various lawyers have subsequently said contains “mind-boggling” clauses.
This week, documents retrieved from the High Court indicate that the battle to trace and return funds invested by CMB was proceeding, although complicated by numerous litigations in both countries. Mmegi has established that minority shareholders, who included a union, a utility company and others, have been paid off, leaving the pension fund and life insurer, Bona Life, as the two outstanding creditors.
It is understood of the millions outstanding to creditors, an investment of P150 million made by CMB in Wilderness Holdings was handed back at some point to the BPOPF. Another P50 million invested in Cell City was also reportedly paid back. Bona Life was offered P47 million as part payment of the outstanding obligations, with the funds being sourced from shares in entities invested in by CMB Fund 1.
Investigators have also recovered more than P10 million in cash which is being held in an interest-bearing account.
“The process is not far from wrapping up, but the challenge is tracing where funds were invested, used and lost, particularly in South Africa,” lawyers close to the case told Mmegi.
One of the complications is in South Africa, where funds from the BPOPF were used to develop a luxury estate, with houses and flats built and sold off. Manor Squad received P45 million in debt from CMB to develop the estate and at the time of the asset manager’s liquidation, some units had been developed, with others due in the pipeline.
Manor Squad has also been liquidated and Mmegi understands a decision was made to finish building the estate, then sell the units off, in order to benefit creditors.
The process could, however, be further delayed as South African media has reported that some homeowners in the estate could file lawsuits, as they claim the properties are of sub-standard quality. Lawyers representing the Manor Squad liquidator have denied the claims.
“We are aware that at least one person has made several visits to the KwaDukuza Municipality where he/ she made false and unfounded accusations... This is now causing frustration and a further delay in the otherwise legal and correct process followed to obtain the final approvals for the transfer of the final units at Manor Estate,” the liquidator’s lawyers said, according to Independent Online.
The deal between CMB and the BPOPF from 2014, took the form of an en-commandite arrangement which is a special partnership where one party is a general partner, possibly with investing expertise, and the other furnishes capital and is the limited partner.
Under the deal, BPOPF as the limited partner, committed to invest initially P500 million in a joint investment vehicle known as Botswana Opportunities Partnership (BOP), while CMB, as the general partner, was also appointed the fund manager for BOP.
The agreement envisaged BOP as a private equity fund in which other parties would later invest and which would be managed by CMB. However, by the time of the disputes in 2017, no other parties had invested and the pension fund held a 99% stake, while CMB held one percent.
The two parties have since battled in the High Court and the Court of Appeal, while also attempting dispute resolution. Local prosecutors have previously also filed criminal charges against the former CMB directors, while creditors have grilled the former directors during hearings called by liquidators.