Filthy rich Botswana Public Officers Pension Fund (BPOPF) could soon find itself at loggerheads with the regulator over the continued absence at board meetings of chairman of the Board of Trustees, Carter Morupisi. Being the fund for the largest employer in Botswana – the public sector - BPOPF is by far the biggest in the country catering for the civil service, Botswana Defence Force (BDF), Botswana Police Service (BPS), Prison Services and local authorities among others. BPOPF controls over 80% of the market share, with assets worth over P60 billion invested in different sectors locally and offshore. Sources close to the Fund informed The Patriot on Sunday that ever since a decision was taken to remove Morupisi from the chairmanship of Mascom Wireless – where BPOPF is the majority shareholder through its subsidiary DECI – he does not attend board of trustees meetings claiming to be held up elsewhere. He has already missed three Board meetings, the latest one held at the Grand Palm Hotel in August. In contrast, Morupisi is said to be continuing to conduct business as board chairman at Mascom. There is a strong suspicion that such absence is a strategy to avoid impeachment, after he told the board of trustees in February that he was winding up business at the cellphone giant. Efforts to reach Morupisi failed as he was said to be attending meetings.
Should the regulator - the Non-Bank Financial Institutions Regulatory Authority (NBFIRA) – catch wind of the chairman's truancy, a sequel to the 2014/15 standoff between the parties could be in the offing. Last year SA based forensic investigators – Nexus Forensic Services – engaged by the regulator to probe the goings-on at BPOPF found that Morupisi's appointment contravenes the Fund Board Charter which requires that the chairman should be independent and free of conflict of interest on appointment. 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. "In addition, this is a contravention of Principle 2.16 of King III code of corporate governance which requires the chairman to be an independent non-executive board member," said Nexus, who were appointed by NBFIRA in terms of the Act and the Pensions and Provident Fund Act, to investigate a range of BPOPF operations including governance, internal controls and investments. Nexus also uncovered a number of deficiencies in the overall management systems and processes at the fund. BPOPF has repeatedly rejected the finding on the board chairman. Morupisi is a public servant, and in particular an employee of Directorate of Public Service Management (DPSM), which is a recruitment department of government. He is the current Permanent Secretary to the President (PSP) and also doubles as Secretary of Cabinet and Head of the Civil Service.
The Board of Trustees
BPOPF board of trustees is the major governance structure for ensuring the successful attainment of the objectives of the fund. The board comprises a total 21 trustees including the Principal Officer, where the employer and the employees each contribute nine trustees and their alternates, one pensioner trustee and one independent trustee. Section 13 of the Board Charter requires the Board chairperson to review the performance of each board member annually with the assistance of an independent facilitator. Sources said the only performance review ever undertaken was only recently, done by an independent consultant. The omission of performance review for trustees was also confirmed by Nexus investigations, which revealed that the trustees’ performance review were not performed for 2012 and 2013 years. "It was also observed that contrary to the Board Charter which authorises the board to delegate some responsibilities to the Chief Executive Officer, the fund does not have a documented delegation process which describes what activities are delegated to the executive. The absence of a delegation matrix may render it difficult for the trustees to assess performance of staff," reads part of the Nexus report. BPOPF has since introduced the matrix.
Contrary to the Fund Rules, which state that the sole responsibility for the management of the fund shall be vested in the trustees, forensic investigators from Nexus 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. Nexus, therefore, emphasised the need for the fund to have sound governance arrangements that give the trustees adequate oversight responsibilities. A number of trustees have also confessed that they are clueless about financial matters and pension funds in particular and often finding themselves endorsing management decisions without a thorough risk assessment. Delegating the responsibility of the board to management amounts to abdication on fiduciary functions and due diligence the trustees are expected to perform to eliminate risk. Corporate governance gurus observe that removing Morupisi from the board at Mascom will be a daunting task because as chairman at both the parent company and subsidiary he is the sender and receiver of communication/ decisions which directly affect him.
Sources said even at the time he took over as chairman at Mascom Morupisi nominated himself on behalf of the BPOPF Board of Trustees and confirmed his own appointment. "Another problem with Morupisi presiding over BPOPF board is that half (9) of the trustees are public servants making them all his juniors. How then are they expected openly to differ with him at the Fund and later report to him at government enclave?" said a source. There is a school of thought that, like most of his peers (technocrats); Morupisi is overburdened with sitting in too many Boards, which in turn compromise his performance and focus. He is Permanent Secretary to the President, Secretary of Cabinet, and sits in numerous other Boards among them Mascom, Debswana and Debswana Pension Fund (DPF), and Botswana National Productivity Centre (BNPC). Sources said in addition to missing BPOPF Board meetings Morupisi does not attend training sessions and retreats organised for all trustees by management. This goes against the requirements of the BPOPF Board Charter, which stipulates that a trustee should dedicate sufficient time to the business of the fund, and that the chairman should always be available to mentor other trustees and provide guidance on matters before them.
One of the potential challenges to the BPOPF structure, which was identified by policy analysts at Botswana Institute for Development Policy Analysis (BIDPA), Dr Gape Kaboyakgosi and Masedi Motswapong, is that the board composition is based more on a constituency model than a competency model. "With its size, there is the risk that were it to experience problems, the majority of the sector will be affected as the majority of assets are concentrated in one fund," they warned. The analysts also caution that the relevance of BPOPF to the needs of all its constituents needs reassessment, since it represents many organisations with different risk profiles and thus different investment needs. Proposing unbundling of BPOPF, they gave the example of disciplined forces members who join the institutions at a younger age and leave the service earlier than other professions covered by the Fund.
Corporate governance in pensions
In an academic paper examining the regulation of retirement funds in Botswana, Dr Kaboyakgosi and Motswapong advice that if optimally deployed corporate governance can be an effective instrument of risk management achieved through formation of board of trustees. Corporate governance of pension funds entails the managerial control of the organisations and how they are regulated, including the accountability of management and how they are supervised. "Board members ought to be persons with impeccable character who also understand the pensions industry sufficiently to provide guidance to fund managers on how to manage pensions. Such trustees hold fiduciary responsibility for the performance of the funds. Trustees are thus very important stakeholders in management of pensions in Botswana.
It is on their capability, dedication, know-how and self-application that the performance of the pensions stands," the duo wrote. Therefore, they recommend that to improve performance of pension funds investment in education of trustees is of paramount importance. Another point raised by the analysts is that "the BPOPF trustee structure appears exceedingly large and unwieldy". One of the challenges to corporate governance, identified by the paper, is that Botswana does not have sufficient numbers of properly trained people to act as trustees and give sufficient guidance to the management of the fund. To comply, fund managers have to train their own trustees at their own costs. The regulator is also aware of the challenge.