CMB clears the air
Correspondent | Friday May 24, 2019 13:12
What follows is a tale of spectacular negligence, as well as financial wrong- doing on a breathless scale, resulting in losses of hundreds of millions of Pula, not only for pensioners, but for local and foreign investors as well, as well as thousands of jobs.
At the centre of the debacle are some of Gaborone’s top lawyers, as well as senior corporate executives controlling billions of Pula of investments. At the epicentre is the Botswana Public Officers Pension Fund (BPOPF), run by the controversial Chief Executive Officer (CEO) Boitumelo Molefe.
The extraordinary stream of lies that have been told about CMB and its CEO, Rapula Okaile and director Tim Marsland, are enough to make even US President Donald Trump blush.
Molefe occupies a plum seat in Gaborone. She controls almost the entire long-term savings pool of the country, which places her in a position to dole out hundreds of millions of Pula as “fees” to various down stream service providers. Key among these are of course fund managers, but also so is the legal fraternity. A single court case would normally net the legal fraternity a few million in fees, but given the complexity of the BPOPF, these fees run into tens of millions of Pula.
Being on the BPOPF legal supplier list is a highly sought-after prize for Botswana’s lawyers, especially in a country where rushing off to court is a national sport.
Dragging a legal battle out for non- business reasons is a well-treaded path, the logic being to bankrupt the “small guy” using the muscle and financial resources of the pensioners who are none the wiser as to how their money is being wasted.
The CMB matter is actually relatively simple. CMB in 2014 set up a private equity fund, following a tender floated by the BPOPF requesting proposals for the BPOPF to invest in private equity. CMB supplied its own legal agreements, but the BPOPF insisted that it provide its own agreements, since the BPOPF wanted “internally standard” agreements. The BPOPF’s agreements stated that it would invest P500 million in the fund, not upfront, but as and when CMB found suitable projects to invest in – thus CMB was able to call on the BPOPF for payments up to P500 million.
The main agreement – the partnership agreement – ran to some 165 pages and spelt out how the relationship should work. The partnership was to be called the Botswana Opportunities Partnership (BOP). The BPOPF was called the Limited Partner and CMB was called the General Partner. CMB’s job was to find investments, assess and analyse them, and then present these to the Investment Committee. Upon approval by the Investment Committee, the minutes and a drawdown notice (in effect an invoice) was sent to the BPOPF, for payment.
All of these activities are documented – it is a transparent and upfront process.
The BPOPF had no direct say in the management of BOP – however, it had rights to appoint members to the powerful Advisory Board, which Board had oversight rights over BOP. Thus, any actions that the BPOPF wanted to take were to be taken via its members on the Advisory Board.
That said, the sheer power wielded by the BPOPF and Molefe meant that any client of the BPOPF would move mountains to keep her (and the BPOPF) happy. And they did. And still do.
The difference between the private equity model and the model used by other asset managers was that after making an investment, CMB was expected to play an active role in assisting the companies it had bought shares in to grow and make money – the ultimate beneficiary would be the BPOPF. CMB was incentivised by being paid a fee of 1.5% of the total assets under management. In addition, it was entitled to a share of any profit made when it finally sold any of the companies it had invested in. CMB also had skin in the game – it had to dig into its own pockets and pay 1% of the purchase price of an asset itself. Given that in the first two years CMB acquired most of the assets, it meant that CMB earned little remuneration – almost half of what it earned as fees it had to plough back into BOP as its own equity contribution.
This meant that CMB would only reap rewards over the long term.
CMB’s first investment was in Bona Life. CMB played a major role in the early success of Bona Life, lifting it out of certain insolvency and designing a business plan that would have catapulted Bona Life into the big league. However, behind CMB’s back, Bona pursued its own plan. CEO
Regina Vaka made it clear that she wanted an indigenous company. She did not want foreign employees nor foreign shareholders. CMB agreed that Bona should be indigenous – however, there were practical limitations as certain skills had to be imported.
A key post at Bona Life was that of Principal Officer. Several Batswana candidates qualified, but for some reason Vaka hired a Zimbabwean national – Gift Noko. Noko was a surprising choice, as he had been at the centre of the collapse of the Zimbabwean life insurance industry, which collapse was largely driven by fraud.
When this was pointed out to Vaka, she brushed it under the carpet. Then, Noko penned letters alleging wrong-doing at CMB. Rumours about impropriety at Bona circulated (including a failed micro-lending venture) and Noko vanished. Thus it was not possible to question Noko – a vital chain of evidence had disappeared.
Vaka had clearly decided to pursue her own business model, but refused to share any details of the plan with CMB. However, she had spent the P50 million that CMB (via BOP) had invested in Bona Life. She demanded that CMB hand her a further P100 million.
CMB refused, until it saw the new business plan. Vaka then reported CMB to Directorate on Corruption and Economic Crime (DCEC), falsely claiming CMB was involved in “financial crime” – a claim that remains unsubstantiated till today. That false claim was a central pillar in the plot to destroy CMB, as Vaka could make it seem as if CMB was dishonest, simply by stating they were under investigation by DCEC – an investigation instigated by her.
Vaka signed off all investments made by Bona. She typically visited each investment for herself and on 30 November 2017, flew to Balito in South Africa’s KwaZulu/Natal province to assess a project called Manor Estates. Apparently, Vaka later denied having made the trip. Flight records confirm the trip was made, as well as interviews with representatives of the estate.
Practically, CMB should never have been under investigation by DCEC since neither Bona Life nor CMB have any relationship with the government – thus neither fall within the sphere of DCEC. (Regardless, then DCEC director general Bruno Paledi (since redeployed) took up the cudgel and the relentless pursuit and harassment of Okaile and Marsland had begun.)
After making the Bona Life investment, came an investment into Wilderness Holdings. Molefe called Okaile and suggested that CMB should look into a deal to invest in Wilderness. She suggested that Okaile pursue the discussion with a prominent local banker, who played the role of middleman.
CMB assessed the opportunity and discovered that just 5% of Wilderness was in local hands – surprising since Wilderness was a crown jewel in the country’s tourism industry. CMB proposed to push local ownership to 25% and designed a deal to achieve this. It asked the CEO Keith Vincent about rumours that then President Ian Khama was a shareholder. Vincent assured CMB that Khama was not a shareholder.
CMB entered into the deal on the basis that Wilderness was to be delisted.
Next came CellCity, followed by Kawena Holdings (a supermarket business) and Agile (an education company), as well as Makuba Airlines (a licenced start-up airline).
All of the investments followed the same modus operandi. All of the paperwork of the investments was in order. On each occasion the BPOPF met its contractual obligations without quibbling.
By mid-2016, BOP was well placed to begin to make significant profits. The hard work to find excellent investment opportunities had been done and it was time for growth and the making of huge profits for the BPOPF (and by extension CMB). Such was CMB’s success that more companies sought BOP as a partner and CMB approached the BPOPF to see if it was willing to make a further investment in the fund of P500 million.
The BPOPF agreed in November of 2016, not to the requested P500 million, but to P380 million.
It was the P380 million that caused the trouble - when CMB called on the BPOPF to pay a portion of the P380 million for two important projects (one of which was saving Lobatse Clay & Tile – arguably a national asset – from certain collapse) the BPOPF simply walked away – it was as if the P380 million was no longer there.
The Lobatse Clay & Tile investment was of such importance that CMB presented the opportunity to the BPOPF’s own investment committee. Although this was not a normal process, CMB felt that it was an opportunity to show the BPOPF trustees directly what the benefits to the BPOPF members, and the country, were of the private equity model.
CMB disclosed in the strictest confidence that during a geological assessment of one of the sites that an unusual mineral characteristic had shown up – one which needed further investigation as it could materially affect the value. Also, that while the BPOPF was investing just P60 million, that the project value would climb to P500 million on the basis of being run under the business model proposed by CMB.
Regardless, when CMB sent the drawdown notice to the BPOPF (which would mean control of Lobatse Clay and Tile would pass to BOP (and indirectly the BPOPF)), the BPOPF went silent. It simply ignored the invoice. In fact, it ignored some nine letters relating to the drawdown. Internal sources assured Okaile that they would make the payment. But the BPOPF simply refused to put anything in writing.
Consequently, the BPOPF placed itself in default. CMB wrote again warning the BPOPF to pay or it would be in default. It ignored the warning. A default is a serious matter. A default by the BPOPF was even more serious – if the BPOPF was unable to pay its bills, it would have major implications for its membership.
The BPOPF should as a minimum have been placed under care by its regulator the Non-Bank Financial Institutions Regulatory Authority (NBFIRA). However, CMB was leery of rocking the boat and on advice, followed the procedures laid out in the contracts between the BPOPF and itself (the same agreements that the BPOPF insisted that CMB should agree to).
The BPOPF was formally designated a defaulting partner and in October 2016 its share in BOP placed up for sale, as stipulated in the agreement. Its share was sold to the highest bidder. As of 30 October 2016, the BPOPF no longer had any interest in BOP.
Unfortunately, in life one cannot simply walk away from a contractual obligation. And in the case of the BPOPF, it had consequences – the BPOPF had defaulted on its legal obligations and thus was in default.
As anyone who has defaulted on their home loan knows – defaulting is a problem. For example, a bank may be owed P300, 000 on a house worth P2 million. Come auction day, the bank will sell the house for minimum P300, 000. The defaulter loses P1.7 million. In the case of the BPOPF it was even worse – buyers were scared off because Molefe’s reputation is well known for running to courts and waging defamatory wars in the media. Thus the price that anyone was willing to buy the BOP share for was very low.
And that is what happened.
The relevant clause in the BPOPF’s own agreement is explicit: “the General Partner shall be entitled, and is hereby irrevocably authorised by the Defaulting Limited Partner, to dispose of the Defaulting Limited Partner’s interest in BOTSWANA OPPORTUNITY PARTNERSHIP to one or more third parties at such price and on such terms and conditions as the General Partner, in its sole and absolute discretion, deems fit”.
The BPOPF had therefore legally caught itself in a trap of its own making.
Despite those events, CMB on numerous occasions in writing offered to assist the BPOPF in getting more money for its assets – as is common practice for the BPOPF it simply either ignored the offers or turned them down. In the last offer made in April 2018, the BPOPF was explicit – it did not want to settle or receive more money – it for some reason relied on a court matter between NBFIRA and CMB to solve its problems.
By way of further background, back in December of 2016, the BPOPF had gone to court and on 27 December 2017 (waiting until the courts were closed), sought an urgent interdict to reverse its October exit from the BOP. Judge Godfrey Radijeng awarded in favour of CMB, as the matter was obviously not urgent. This meant that the BPOPF, if it felt it had been wronged, was legally obliged to enter into arbitration between itself and CMB – as stipulated in its own agreements.
Judge Radijeng noted that the BPOPF had not showed why it could not be “afforded substantial redress in due course”. That redress should have come via an arbitration process described in detail in the BPOPF’s agreements. In January 2018, the BPOPF did commence arbitration, but instead of following due process, opted to short circuit the process and on August 8, 2018 entered into a settlement between CMB and the BPOPF with Peter Collins, who at the time was statutory manager of CMB.
Unfortunately, Collins and the BPOPF got it wrong – CMB was not a party to the BOP agreements at the time that Collins was appointed statutory manager.
Collins was “settling” something that did not exist. Collins in fact had to go through the arbitration process to achieve one key objective – that of doing for Molefe what she failed to achieve in court. But they knew the BPOPF was on shaky grounds as far as arbitration was concerned – they would almost certainly lose as CMB had done nothing wrong. And so the BPOPF signed an agreement that has no legal validity. And the BPOPF’s loss of the assets was cemented by that action, as included in the agreement was a clause in terms of which the BPOPF abandoned its rights to arbitration. The December 27, 2016 judgment was the first and last court ruling on BOP. Subsequent events saw the BPOPF commence with the arbitration process.
The so-called “settlement agreement” had a number of peculiarities to it. Chief was that it appeared that the primary purpose the agreement was not to assist the BPOPF in getting back its share of the BOP, but was to fully indemnify Collins and NBFIRA from any legal actions that may follow as a consequence of any actions taken by Collins or NBFIRA. Collins has the right to force the BPOPF to pay his legal fees ad infinitum. The very significant damages that are likely to arise are to be paid for by the BPOPF – Collins himself would end up scot-free – the BPOPF membership would once again carry the can for the wayward actions of their CEO.
It begs the question why the BPOPF would need to indemnify its own regulator from the consequences of its own actions. It is a major question that needs close examination by a competent authority.
Since the agreement was signed by Molefe, it must be verified whether the Board of Trustees knew about the agreement and the consequences.
Molefe herself confirmed the importance of Collins: She told the Weekend Post that Collins has taken charge and BPOPF is banking on him to direct way forward. “We are now going to be guided by CMB new Statutory Manager Peter Collins; he is a very important and key person going forward for all of us.”
Of further importance in unravelling the tale of CMB are certain events that took place in around March of 2018. Things had turned ugly.
On March 16, 2018, two DCEC officers detained (who have subsequently redeployed) Okaile’s wife Neo. There is no record of any warrant having been issued for her detention. She was released in the early hours of the following morning only after an urgent application to the High Court. In court evidence, it emerged that she was told she was being held “to get her husband” who was out of the country at the time. Same was never denied by the DCEC officers. The DCEC officers seized Okaile’s vehicles and other equipment, which were either in his own name or that of a business in which he had interests. Okaile had borrowed the money from Bank of Gaborone to acquire the vehicles and fund the business and had contracts to honour – clearly the actions were designed to crush Okaile financially, or at the very least to send him a message.
These events took place despite Okaile having fully co-operated with DCEC.
Two events appear to have driven the haste to crush both Okaile and Marsland – the imminent judgment in the High Court as well as the departure of HE Ian Khama who was to be replaced by current President Mokgweetsi Masisi on April 1, 2018.
CMB had donated to Masisi’s campaign to be elected as chairperson of the Botswana Democratic Party, following an approach from Sadique Keboneng. Keboneng arranged for CMB to meet Masisi – Masisi made it clear that there should be no expectations of favours granted for donations and on this basis, satisfied that everything was above board, CMB made a donation. No other party approached CMB.
Meanwhile, a senior insurance figure from Gaborone, had on November 30, 2017, accordingly to flight records, flew on SA543 from Oliver Tambo Airport in Johannesburg to King Shaka Airport in Durban. Sitting next to this figure was the individual who was allegedly fingered in hiring an assassin to murder Marsland. That evening, the two returned to Johannesburg aboard SA570.
According to the assassin’s statement to South Africa’s elite policing unit the Hawks (Directorate for Priority Crime Investigation), during March 2018, the assassin said he was approached by an individual (the same individual on flight SA543 to Durban) to murder Marsland. Initially, it seemed there was no haste but around March 23, 2018 (the same time that Okaile was under assault in Gaborone) the matter had become urgent. The hit was ordered immediately. The assassin got cold feet and called Marsland to reveal the plot. The assassin went into hiding as he feared for his life. In his statement to the Hawks, the assassin said: “[she] later approached me, in the presence of [...], and told me that she can make me a very wealthy man and make me a fair deal. She proceeded to tell me that she wanted Marsland “taken out” and to disappear”. A sum of R5 million was offered to the assassin, which security analysts noted was surprising in a country where hits cost R20, 000 up to R1 million for a high end killing.
“Whoever ordered the hit clearly didn’t know what they were doing,” he noted.
Clearly, Marsland’s death (and Okaile’s financial demise) at that point would have been a fortuitous outcome for the plotters, given that their legal actions were going badly. They stood to lose significant sums given the reputational and financial damage they had wrought on CMB and its directors, as well as many other interested parties.
Meanwhile, in the statutory manager matter, Justice Omphemetse Motumise was due to release his judgment on April 24, 2018. The plotters knew they had no case and it was going badly (they lost).
The BPOPF, Bona Life, and regulator NBFIRA had gone to court in February 2018 to place CMB under statutory management. From the court papers, they had no evidence that justified placing CMB under statutory management. However, they hoped that while under statutory management they would be able to dig up some dirt on the company and the directors to justify, with hindsight, their actions. Justice Motumise agreed with CMB and the plotters lost their case.
Key evidence favouring CMB was concealed in the trial. During Collins’ first stint as statutory manager, a letter had been received from BURS waiving fines it had previously levied on CMB for late payment of VAT. This issue was material to the case, as the tax ruling had delayed the signing of CMB’s audited accounts. NBFIRA would later make hay of this issue in the case in front of the Court of Appeal. Had the letter from BURS come to light, NBFRA’s case would have been blown out of the water.
The push to get Marsland out extended back to April 2017, when Molefe approached Okaile at the GICC during the launch of the new BPOPF logo. Previous director Rhys Carr had left the company in 2016 and Molefe wanted to know how long it would take him to get rid of Marsland.
Okaile’s response was neutral, as Marsland was his business partner,
except if they were to tie CMB to a government figure. Permanent Secretary to the President (PSP) fitted the purpose – he was chairperson of the BPOPF, he was an obstacle to many of the side plans being plotted, and he was close to Okaile, since they used to work together.
Former Kgori Capital Managing Director, Bakang Seretse, obliged with a far-fetched allegation. In a letter to his close friend Molefe, he stated: “We have been advised by (name withheld) that chairman of the Fund has a beneficial interest through CEO Okaile Rapula in CMB and that he has held several meetings with them. While we cannot independently vouch for this, we thought it was important to bring it to your attention to avoid issues of potential conflict
of interest”.
There was no evidence whatsoever to support Seretse’s claim. In just 57 words, Seretse had set out to destroy the reputation of government’s chief
bureaucrat. And astoundingly, the utterer of the 57 words had himself been charged with fraud and other crimes. Seretse’s own business partner had been gunned down in cold blood on the streets of South Africa’s capital of sin, Sandton. Basis Point Capital CEO Vusi Mhlanzi was silenced, according to media reports, after he uncovered financial impropriety relating to Seretse’s business dealings. Mhlanzi did not have any defensive skills or training and thus was an easy target for the assassins. Seretse enjoyment of the pleasures offered in sin city were well known – he was also an essential part of the scheme to take down CMB involved the taking down of government’s chief, the PSP Carter Morupisi. The cabal had realised that they could not mobilise DCEC to their cause given its mandate extended only to government well known to certain members of Sandton’s underworld. Seretse’s comments were in any event nothing other than heresay, and should have been completely disregarded. However, since they were manufactured for the specific purpose, Molefe seized on them as “proof” that Morupisi was “corrupt”, was central to the campaign to shut CMB down. Collins was also involved with a company called Delta Consolidated, which was a direct competitor to CMB. Collins’s CV makes no mention of this. Delta CEO Andre Bester was and assisted by Wayne Osterberg (who at the time was contracted to Fleming Asset Management (Pty) Ltd, a company owned by CMB’s parent company CMA, and whom Collins appointed as his assistant as statutory manager.
Bester, on Linked-in, described the activities of Delta as: “• Negotiation and deal structuring with private equity companies; interacting with Fund Managers in the raising of funds to establish a listed entity on the Botswana Stock Exchange • Product development for the life insurance industry • Identifying corporate amalgamation opportunities and restructuring of existing businesses”.
Delta was therefore a direct competitor to CMB.
Seretse’s close relationship with Molefe is well known – what is not yet publicly known is what was in it for Seretse to make the wild and obviously bogus claim about Morupisi. Seretse has in various for a threatened to spill the bills – hopefully the beans will be spilled on this relationship as well. Collins, meanwhile, was fully immersed in his job to destroy CMB. Collins had resurrected his role several times in the CMB matter. He had initially been legal advisor to a company which CMB intended to invest in via CMBF1, called Limane. Limane’s was ultimately destined for the portfolios of Bona Life and was critical to the continuing financial well-being of Bona Life.
During December 2017, Vaka and Collins discussed the matter via SMS and it was agreed that Limane would seek CMBF1’s insolvency (using the Limane transaction as a pretext). This would in turn serve as a motivation for NBFIRA to seek to place CMB under statutory management. Once Collins had signed the “settlement agreement” one would have expected his Except Collins knew that CMBF1 had nothing to do with CMB. He stated same in a sworn affidavit to court when explaining how he “wasn’t conflicted” acting for Limane and NBFIRA since CMB and CMBF1 were different parties. Interestingly, in the same court papers, Collins supplied his CV – Collins has no experience relevant to the management of a company such as CMB.
Despite the fact that his own CV makes it clear that he has no relevant experience, Collins went on to write a “technical” financial report where he accused CMB of all manner of wrong-doing. The report was blatantly nonsense and was tossed out by Judge role in the sorry saga to be over. But no. Collins was resurrected again – this time as legal advisor to the liquidator John Little.
Collins came up with yet another scheme to attack CMB – trawling through the Companies Act he discovered a little known clause which allows for the Master of the Court to hold an inquiry into a liquidated company. Collins called a number of witnesses to the hearing, one of these being Rizwan Desai of Desai Law Group fame. Desai was CMB’s lawyer. Previously, he had acted for Bifm Capital (the previous name of CMB). Yet the report somehow re-appeared in the Court of Appeal and with Desai when he dropped them on the eve of a previous court battle with the Botswana Building Society (BBS). Desai promised Bifm Capital that he had arranged for senior council to defend in the BBS matter, only to inform Bifm Capital shortly before the trial date that his firm was placing business interests first and he dropped Bifm Capital.
BBS won the matter in court, but the fact is, both sides lost. Desai, during his time as Bifm Capital lawyer, had drafted legal agreements for a company called Bifm Capital Investment Fund One, which allowed the company to act as a special purpose vehicle to provide investments for its client Botswana Life. These agreements were used as a basis for a new SPV that was used to assist Bona Life. The email trail between Marsland and Desai shows that Marsland forwarded the earlier agreement to Desai and asked Desai whether they were still relevant, given the new Companies Act. Desai amended the agreements, chiefly altering the basic investment instruments so that a trustee would no longer be necessary in the structure.
The email trail clearly shows that this change was on the basis of advice by Desai. And yet, in the hearings, according to media reports, Desai claimed that Marsland had forced the change. Further, Desai made wild allegations about the relationship between CMB and Molefe. Desai had often griped that he was not on the advisor list to the BPOPF. It is unknown if he has subsequently made the grade. Desai had signed onto CMB’s venture into China and was to be the legal advisor to the mooted Chinese investment fund. Desai had also set up his own financial investment company (in effect a competitor to CMB with Martin Makgatlhe, who was a key member of the CMB Investment Committee), which approved the various BOP deals. Desai’s venture had apparently closed down.
During the hearing (according to media reports) Collins claimed to the court that Marsland had been subpoenaed in Johannesburg. He claimed that Marsland had heatedly refused to sign receipt of the subpoena and therefore Marsland should be arrested for not appearing at the hearing. This is false. Lawyers confirmed with the Sheriff of the relevant area that no request to serve a summons had been received. Further, the area where Collins claimed the altercation had taken place is captured on CCTV – no such event occurred. In yet another falsehood, shortly before a Wilderness general meeting, an article appeared in a newspaper claiming that Marsland was on a red list of Interpol. The claim was completely false. Any journalist could have checked the validity of the claim with Interpol – a process which takes roughly five minutes. Yet the newspaper published regardless. The question is why?
Another turning point in the relationship with Molefe related to Mascom. CMB had been approached by one of Mascom’s shareholders Econet. Econet was on a cash-raising exercise and wanted to dispose of its Mascom shares to raise funds to support its Zimbabwean operations. CMB reported the opportunity in writing to Molefe (the letter was not copied to anyone else) stating that it could not undertake the exercise on its own as it was too big for the BOP portfolio.
Further CMB explicitly noted that it had not had an opportunity to value the business as it did not have access to the financial information of Mascom. It noted that Econet had proposed a price, but it did not know if it was fair. Within days, the letter appeared in the media and CMB was slammed and accused of improperly attempting to fleece the BPOPF for fees. A recent media report claimed that CMB in its letter had valued Mascom at an unreasonable price – the accusation is demonstrably false.
The end result of these events is a investment massive loss for all concerned. Bona Life is likely to go insolvent. Thousands of jobs were lost. Molefe remains at the head of the BPOPF and shows no signs of backing down. The fight will continue with whoever has the correct legal stance ultimately prevailing. One hopes that at that time, heads roll.