Councils skipped gov’t approval for Bluthorn deals

Monitoring: Serame says investigations are continuing 
Monitoring: Serame says investigations are continuing PIC: MORERI SEJAKGOMO

Nine local authorities and land boards which invested more than P100 million in Bluthorn Fund Managers’ collapsed unit trust scheme had no authorisation from the finance ministry to do so, BusinessWeek has learnt.

Running between 2018 and 2019, the unit trust scheme was touted as promising lucrative returns for the councils and Land Boards but ran into trouble when the dividends were not paid despite reaching maturity. Investigations by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA), a statutory manager, liquidators as well as a recent High Court ruling have found that Bluthorn Fund Managers was part of a family of related companies where funds were moved about “like brothers and sisters sitting at a family table and exchanging money between themselves”.

Justice Michael Leburu recently gave liquidator, Kopanang Thekiso the go-ahead to liquidate the group as a single entity, although it is presently unclear how much will be recoverable to investors as evidence of irregular loans to directors and cover-ups has also been revealed.

Finance minister, Peggy Serame recently told Parliament that some of the local authorities and Land Boards had invested up to P40 million in the unit trust scheme, with the total purse reaching P106 million.

“In terms of the Local Government Act, local authorities can invest surplus funds with the approval of the Minister responsible for finance. “However, there is no evidence that such approval was sought and granted by this ministry,” she told Parliament recently in response to a question from Thamaga-Kumakwane MP, Palelo Mataosane.

Local authorities, which are dependent on government’s revenue support grant for their budgets, had hoped to shore up their finances with the Bluthorn investment, drawn by the high rates of return on offer. The nine identified by Serame are fewer than a more exhaustive list developed after the appointment of statutory manager, Peter Collins in April 2020.

In total, it is estimated investors in the Bluthorn unit trusts lost more than P250 million.

Serame said as a unit trust scheme, Bluthorn had pledged that the funds from councils and others would be pooled and invested in high return and diversified assets, thus offering capital growth and returns.

“Bluthorn and its controllers misrepresented in their prospectus that investments would provide higher returns at low risk as the loans advanced to SMEs were highly risky in that they were not secured,” she said. “The loans were incorrectly reported in the audited financial statements as having no impairment, therefore with no provision having been made in cases of default and no security noted against such loans which are contrary to international financial reporting standards.”

She added that through monitoring, numerous contraventions of licensing requirements were discovered triggering NBFIRA’s action to freeze accounts, appoint the statutory manager and consequently appoint a liquidator.

“The matter is still under investigation at the law enforcement agencies and the outcome will determine the course of action to be taken against the individuals concerned,” Serame said.

Bluthorn’s liquidator is presently establishing a money trail for the funds that were invested, while creditors wait anxiously for answers on whether there will be any recoveries.

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