An investigation by Nexus Forensic Services on the Botswana Public Officers Pension Fund (BPOPF) during the period August to December 2014 has revealed a number of deficiencies in the overall management systems and processes at the fund.
The independent investigator was appointed by the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) in terms of the Act and the Pensions and Provident Fund Act to investigate a range of BPOPF operations including governance, internal controls, investments etc. Contrary to the fund Rules, which state that the sole responsibility for the management of the fund shall be vested in the Trustees, the investigation found that in some cases the board of trustees adopted a passive approach in discharging their role of identification, controlling and or mitigating the fund risks and containing the fund expenses. In this regard (Trustees' sole responsibility for the management of the fund) the fund is required to have sound governance arrangements that give the Trustees adequate oversight responsibilities.
Nexus observed that the current chairman of the Board of Trustees Carter Morupisi is a public servant, and in particular an employee of Directorate of Public Service Management (DPSM), which is a recruitment department of government. "This seems to contravene the Fund Board Charter which requires that the chairman so elected should be independent and free of conflict of interest on appointment. In addition, this is a contravention of Principle 2.16 of King III code of corporate governances which requires the chairman to be an independent non-executive board member," reads the report.
The board charter defines independence as 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.
Another finding by Nexus is that some asset managers exceed their mandate in their investments, and recommended that the board of trustees must act on that to review performance regularly on what the asset managers are using funds for.
BPOPF investment portfolio covers private equity, property, infrastructure, equity, fixed income and debt financing.
Private equity space
Morupisi is the current Permanent Secretary to President Ian Khama and former DPSM Director. He took over the chairmanship of BPOPF from his then executive assistant at DPSM-Rapula Okaile before ascending to PSP post. Okaile is the Chief Executive Officer of Capital Management Botswana (CMB), one of the companies which signed asset management contracts with BPOPF in November 2014. Okaile reported for duty on March 01, 2015 as the CEO after serving a three months’ notice at DPSM where he was Assistant Director.
Okaile flatly denied that he could be fronting for some senior government officials, as alleged, or that they could have used insider information to help CMB win the BPOPF contract. "My chairmanship ended in April 2013, long before the new Investment Policy Statement (IPS) was discussed. Even when CMB tendered for the contract I was not part of them," he said.
When it was put to him that he could have been privy to the goings-on at BPOPF since he was Morupisi's executive assistant, Okaile said he only dealt with his boss as far as DPSM was concerned. "I was not privy to information he discussed in the different boards he was sitting," said Okaile.
Okaile also dismissed as farfetched allegations that the decision to relocate BPOPF assets from offshore investment to invest locally by entering the private equity market and setting up an infrastructure fund, as new investment projects, was taken when he was board chairman. "Nothing can be further from the truth," he said. CMB has entered the private equity market with the P500 million BPOPF assets managed since November 2014 first closure. Going forward CMB has embarked on an ambitious roadshow to raise P2 billion. Since they already have the P500 million, they are searching the market negotiating with other pension funds to raise the remaining P1.5 billion. Targets include the Motor Vehicle Accident Fund (MVAF) and Debswana Pension Fund (DPF). As part of the strategy CMB has created a fund known as Botswana Opportunity Partnership, with closure targeted for November 2015. Okaile said they operate on a diversified portfolio covering manufacturing, Information Technology, education, water and power/ energy where they can invest. Unlike some asset managers who invest BPOPF funds destined for investment locally outside the country Okaile said of CMB: "All companies we invest in have to be domiciled in Botswana, but with plans to expand into the region". In fact the BOP (Botswana Opportunity Partnership - a partnership between the BPOPF and CMB with the mandate to invest in businesses in Botswana on behalf of the BPOPF) will tomorrow hold a press briefing to announce a new partnership with Bramer Life. The Patriot on Sunday also has it on good authority that CMB is about to conclude a transaction with local manufacturer Flo-Tek to buy shareholding in the company.
Asked if they were not favoured in the BPOPF contract since they are said to be new comers, Okaile said they have been in the industry for a longtime and have the experience from the time they were trading as BIFM capital. He said the company ran an annuity book for Botswana Life - a subsidiary of BIHL group, of up to P500 million plus other investments in big corporations like BancABC and Letshego. "BIFM Capital made Choppies what it is today, from the time when they only had four shops in Botswana," he said.
CMB was originally established in 2004 as BIFM Capital-a private equity subsidiary for Botswana Insurance Holdings Limited (BIHL). BIFM Capital was formed by BIHL and Capital Management Africa (CMA) – the holding company for CMB. In 2013 CMA left the partnership leading to transformation from BIFM Capital to CMB, domiciled in Botswana. BIFM Capital principal founders are Rhys Carr (South Africa) and Timothy Marsland (British), who currently holds 70% shares in CMB. CMB is an investment management company operating in private equity space.
Okaile also dismissed as unfounded, allegations that CMB is eyeing the Government Employees Motor Vehicle and Property Advance Scheme (GEMVAS) in partnership with Botswana Public Employees Union (BOPEU). Speculation is rife that the union is looking to partner with some South African investors to take over the scheme, which was taken back in-house at the Ministry of Finance and Development Planning from UNIGEM - an investment company owned by public sector trade unions in May 2015. BOPEU has repeatedly denied the allegation. "That's farfetched. We do not administer schemes. We are just fund or investment managers, we focus on investment not administration," said Okaile, further explaining that the only relationship he has ever had with BOPEU president Andrew Motsamai was when they were trustees at BPOPF.
Listed equity space
As at mid-March 2015 Afena Capital had been allocated over P1, 044 billion for an equity portfolio. Afena Capital hit a jack pot and increased their stake in the BPOPF assets they manage at the beginning of June 2015 when the Finance and Investment Committee recommended to the board of trustees that they be awarded the entire With Profit Pensioner Portfolio equity portion worth approximately P800 million because "the portfolio is too small to be split and (we) recommend it is managed by one manager".
Apparently the decision was influenced by the fact that other contractors manage assets worth more, being BIFM and Investec each at P1.9 billion, P4.2 billion for Fleming, P3.6 billion for Allan Gray and P3.0 billion for African Alliance.
Afena Capital CEO Bakang Seretse expressed shock at allegations that his company is a newcomer in asset management industry. "Inexperienced? We have been a service provider for BPOPF as Investec Asset management for over 15 years. If they claim we do not have a track record what measure are they using? I have been servicing clients in Botswana for over 14 years. My other colleagues also have experience in the financial sector of well over 12 years each from their previous employers," he said.
He continued: "If they claim we are a young company why then are they picking on Afena? They are bitter and sore losers. Why were they overlooked by a majority of clients in the last two years? About 20 clients’ accounts/mandates have been coming to Afena. They can’t start crying over the BPOPF contract when they lost 15 or so other clients in the last two years".
Seretse denied allegations that Afena is financing the construction of a shopping mall in Nigeria, saying he has never been to Nigeria, and moreover his company is not in the property space. He also denied allegations that he has a cosy relationship with BOPEU's Motsamai and was invited to present a theme paper at the union's convention in Palapye. He also denied that he helped BOPEU set up their investment arm - Babereki Investments. "I honour a lot of invitations from different sectors, why this one? Many other senior government officials also officiated there. I have no relationship with Babereki," he said.
Asset managers in the property portfolio are set to make a killing after the Finance and Investment Committee recommended that a valuation report they presented to the board for their properties be adopted and used as a basis for asset managers’ remuneration. The BPOPF property portfolio saw a 54 per cent leap from P182.7 million to P281.1 million. The growth was mainly driven by new acquisitions into the portfolio being a residential property located in Extension 15, Gaborone and former AKD house in the Main Mall. SADC and Letsema Office park saw a meager two per cent upward revision in their valuations. Owing to growing demand for industrial property and prime location status Plot 22041, G/West Industrial valuation is up five per cent compared to 2014 financial year, while Alberta and Pipex properties represented retractors in valuations. Over supply in office space coupled with current migration to prime office locations, particularly CBD, has affected valuations of some properties under the BPOPF portfolio leading to a seven per cent decline at plot 22044.
At a meeting early June the board also approved a recommendation from the Finance and Investment Committee to acquire a 20 per cent stake at P280-300 million investment in Puma Energy Botswana. The approval comes after Dr Molatlhegi of Monthe Marumo& Company incorporating Molatlhegi and Associates completed a due diligence process where he advised that the material risk previously identified have been materially minimised and mitigated therefore capable of being managed.
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