Business

CEDA in dicey impasse with VPB

Delta Diaries was liquidated last year
 
Delta Diaries was liquidated last year

At the centre of the standoff are differing opinions between the parties over how to value some of the investments that VPB had made on behalf of the agency under the CEDA Venture Capital Fund (CVCF).

Under a 10-year deal, VPB was in 2003 tasked to manage the P200 million fund and invest in different economic sectors through either debt or equity. Appearing before a Parliamentary Committee on Statutory Bodies and State Enterprises yesterday, CEDA CEO Thabo Thamane said they are currently finalising an audit, which will inform them on whether to take the deadlock to arbitration or not.

“At the end of the 10-year lifespan of the CVCF in 2013, some of the companies invested in had been liquidated, while the fund managers had managed to exit some of the investments.  The differences with VPB concern only ongoing investments that they had not managed to exit by the end the fund’s 10-year tenure.

“They have their own formulae on valuing these investments, which is different from what we feel is the correct way of doing it. “Until we have a value on these subsidiaries, which are now managed in-house, we cannot produce the group’s consolidated financial results,” he said.

Some of the companies in the CVCF portfolio included Delta Dairies (liquidated), Aon Botswana, PG Timbers, Mabule Breweries, Airway Express, ZS Botswana, Builders Merchants Botswana, Tannery Industries Botswana (liquidated) and Biz Capital.

The minimum amount for investment under the fund was P500,000 with a ceiling of P30 million.  In a report submitted to the committee, Thamane said that a forensic audit firm currently on site to assess the performance of the CVCF is about to complete its work.

“The difference between the agency’s expectation and the fund managers delivery at the end of the period has led CEDA to institute a forensic audit to review the activities of the CVCF since its inception.  The findings of the audit will be shared through the CEDA governance structures, including the board of directors, which has a scheduled meeting at the end of this month,” he said.

The CVCF had targeted a 23 percent rate of return on investments. An external audit carried out by PricewaterhouseCoopers (PwC) Botswana for the year ended March 2014, also questioned the CVCF’s decision to provide interest-free convertible loans to collapsed Delta Dairies when CEDA’s investment guidelines stipulate that financial assistance should be provided at subsidised rates.

PwC also queried the decision to take up a 94 percent  stake valued at over P100 million in the dairy company when the guidelines only allow maximum investment of P30 million in a single entity.

According to the terms of reference for the CVCF forensic audit tender floated by government a few years ago, some of the complaints that were to be investigated included alleged collusion with competitors in the operations of companies funded by the CVCF, alleged hostile takeover of companies and marginalisation of promoters and alleged governance issues in the selling of shares in CVCF funded projects.