BPOPF should tighten controls and oversight

SHARE   |   Sunday, 19 May 2019   |   By Ricardo Kanono
BPOPF should tighten controls and oversight

Banks are very strict. They don’t award loans easily. Stringent due diligence is done on potential borrowers. Only once they are satisfied that the lender has full potential to return or pay back their loans do they offer such. Defaulters are followed and smoked out. If they don’t pay back their assets are attached and sold out. At worst there is a civil imprisonment loaming. Impairments are written off only as the last resort. And even more such loans are insured – protecting the borrower and the lender. This points to the frugal efforts placed at securing banks’ value and assets so as to keep running. The shareholders sleep well at night. They know that they will not lose heavily – if at all that rare development was to occur. 

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Take that to the pensioners and their investments. The recent fraud scandals where pensioners’ investment has been misappropriated and remains unaccounted for reflect badly on those tasked to be their custodians. Questions abound about the processes and fiduciary responsibilities of the Botswana Public Officers Pension Fund (BPOPF). Carrying and overseeing in excess of P60 billion of the pensioners’ money; it is expected that BPOPF should be fraud proof. The agreements they enter into with asset managers should be very tight and foolproof. It should not be as easy as it has proven in the case of CMB to ransack and do as one wish with the pensioners’ money. Those entrusted with the high stakes job of safeguarding the pensioners money should be clearly aware of the task at hand and rise above the challenges. They ought to do deals that return every value to the pensioners. They cannot be found wanting.

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What kind of agreements do they sign with asset managers? If banks can afford and do take those who default to the cleaners, BPOPF should do even more against delinquent asset managers. The contracts should clearly spell out how recovery of unpaid dues shall be undertaken. No extra money should be availed to asset managers who fail to fully demonstrate and account to funds already distributed to them. A proactive early warning signal should be in place. This comes with stringent oversight regime to assess, monitor and evaluate progress made in each and every investment. At the earliest opportunity when signs emerge that a particular asset manager was playing outside the rules, they should be shown the door and be blacklisted. In fact the conditions for one to be engaged as an asset manager should be tightened up.  There must be security of equal value to funds that BPOPF intends to advance. Assets managers should sign up to adhere to stringent standards.

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The Non-Bank Financial Institutions Regulatory Authority (NBFIRA) cannot afford to watch from the sidelines as bystanders, they should flex their muscle and blacklist any unscrupulous asset manager that defaults on set standards. The pension funds should not be turned into a get-rich-quick scheme for selfish assets managers who care little about the pensioners. These unscrupulous asset managers should be liable for every loss they render on the money given to them to re-invest and increase value of. In particular those that found to have enriched themselves using the pensioners’ money should face the full wrath of the law. More meticulous work should be done on the contracts they sign enough to ensure that they are held to account for every single amount given to them.

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The BPOPF should scrutinize thoroughly any scheme they wish to setup, lest they find themselves saddled with a situation where they do not have control or atleast some oversight over the funds disbursed as it happened in the Botswana Opportunities Partnership (BOP). As the senior partner in the arrangement -despite advancing nothing-clearly CMB was having a field day, splashing BPOPF millions all over the place in dubious investments that in most cases violated conditions of their contract. Similar incidents, which exposed pensioners' funds to risk have been recorded in the past with other asset managers among them Flemming, Afena Capital, etc. This begs the question; Do the weaknesses at BPOPF lie with the systems, incompetent leadership in executive management and/ or the Board of trustees? Do these appointtees have the business acumen to execute their fudiciary functions, running a multi-billion pula entity?

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The Board

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It would appear the Board is dominated by cluesless trustees who enjoy sitting allowances because their constituents nominated them. It is there not surprising that some of the trustees, who are civil servants and by extension members of BPOPF, are hell bent on handing over control of their pensions to the employer.

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The position of Chairman of the Fund, being a major financial institution requires a fundamental understanding and strong knowledge of finance and financial risk relevant to the institution. However, over the years this does not seem to be one of the considerations taken when trustees elect a Chairman. The primary focus seems to be whether that particular individual is an employer or and employee trustee. Forensic auditors have long advised about the glaring conflict of interest by those appointed as Chairman of the fund because of their relationship with the Fund. But nobody seems to be listening. 

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The BPOPF Board Charter has been violated with impunity when senior government officials have been taking turns to chair the board. Section 3 of the Charter provides that the chairman should be independent and free of conflict of interest on appointment. Independence is defined as someone who is not a representative of a stakeholder who has the ability to control or significantly influence management; (and) does not have a direct or indirect interest in the Fund. All chairmen have been public officers and by extension members of BPOPF and therefore have a direct interest in the Fund. Alternatively, as employer trustees they lack independence because they represent a key stakeholder in the board –government of Botswana.

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Even as the composition of the Board appears weak, it could well be that management is inadequately qualified and equally incompetent in the face of the mammoth task before them. Hence, there have been allegations of collusion with some asset managers to siphon millions from BPOPF into offshore accounts held in tax havens. A total audit of the BPOPF and its operations is needed like yesterday to allay fears that there is a lot of mismanagement and embezzlement going on due to poor dedisions or outright thuggery.  The regulators, the DIS and DCEC should be regular visitors to organisations like BPOPF to detect any suspicious transactions as soon as they occur.



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