Behind BOPEU’s cash flow crunch 

SHARE   |   Monday, 11 September 2017   |   By Ditiro Motlhabane 
Behind BOPEU’s cash flow crunch 

The unfolding financial crisis at Babereki Investments (Pty) Ltd, the commercial arm of multi-million Pula rich Botswana Public Employees Union (BOPEU), took a new twist on Thursday when the Chief Financial Officer resigned with immediate effect while an IT officer was suspended indefinitely. The resignation of the CFO follows the suspension of Andrew Motsamai, whose 10-day suspension ends on Tuesday, a day before Babereki Board of Directors convenes to seal his fate. Motsamai has been suspended on allegations of financial impropriety caused by questionable investments and dubious transactions, which landed the company in huge debts emanating from unserviced loans. The delay in taking action against Motsamai was caused by paralysis in the Babereki board, which failed to form a position on the matter and referred it to National Executive Committee of BOPEU. Even after BOPEU leadership rendered advise to Babereki, such decision can only be implemented after the board of the latter meet at the lapse of a seven-day notice for special agenda convening the meeting. The notice was issued on Wednesday. Although his CFO has not stated reasons for sudden resignation in the letter deposited with the office of General Manager Edith Motshegare, sources close to BOPEU point to the looming forensic investigation to determine the veracity and extent of financial mismanagement at Babereki as the cause. The CFO, who is currently serving a one-month notice, is a close ally of the suspended Motsamai and the duo have been inseparable in recent months, travelling together around the world and spending time at tourism projects owned by Babereki in the Okavango Delta. 

Babereki has bought Kadizora lodge in the Okavango Delta and Elephant Valley lodge near Kazungula/Kasane. The company has had to send accountants to the delta to address financial challenges at Kadizora. The IT officer, on the other hand, was suspended with immediate effect on Thursday after he was caught in possession of documents unlawfully obtained from the office of one of the managers. Allegations are that he was also caught by colleagues tampering with company servers to modify entries in the database, just days before Babereki Board meets on Wednesday where it is expected to extend Motsamai's suspension and order a forensic audit at Babereki headquarters in Central Business District, Gaborone. He has since been ordered not to come within 200 metres of Babereki premises. A server is a computerised backbone of any organisation, which is used to store all types of information, archive all critical company decisions and transactions, thus providing backup or storage for such database. Strict controls only available to a select team of IT experts have been imposed to restrict access to the server. 

Financial impropriety 

The impending audit will investigate a trail of financial mismanagement, which was brought to the attention of Babereki Investment Board of Directors when Avis Fleet Management Services demanded payment for instalment arrears for vehicles purchased by the company. Avis threatened to attach property owned by Babereki when the company fell in arrears for three vehicles owned by its directors, a Toyota Hilux pickup and two top of the range Sports Utility Vehicles (SUVs) – Range Rover models. In addition to the luxury vehicles, the three directors also enjoy allowances of P3 000 per person per month. The luxury vehicles were included as part of a fleet that also had six other vehicles – two combis and four hearses – acquired from Avis for use in the newly acquired funeral parlour, Ka Lorato Funeral Services. Only about P350 000 has so far been paid for the vehicles acquired in October 2016. Babereki had just acquired 51% shareholding from the struggling funeral parlour for P6 million and later changed its name to Babereki Ka Lorato Funeral Services. At the time the shares were purchased in 2015, Ka Lorato had very high operational costs with a staff compliment of just 73 employees. The funeral parlour owed financiers around P490 000 and has always survived on bail outs from Babereki ever since the union company became a majority shareholder. Trouble started when Babereki, under the stewardship of Motsamai who was appointed its Chief Executive Officer (titled Executive Chairman) only five months ago in February 2017, experienced financial problems, thus failing to service loans extended to it by financial institutions. The financial crisis at Babereki has led to the looming liquidation of Future Sustain, that is currently before court, and Flying Mission, an aviation school based in Maun for which Babereki paid P8 million to acquire 70% shareholding in April. Liquidation of Flying Mission has already been kick-started. 

Housing scheme 

Another failed project under Motsamai is the ambitious housing scheme launched amid pomp and fanfare in Gaphatshwa in December 2015 dubbed BOPEU Enclave. The union was planning to construct 500 houses for their members that will be purchased at affordable prices. Members were also to be given loans by Banc-ABC as a preferred bank, for the project which was to be rolled out in June/July 2016. Although Babereki has already invested about P12 million for primary infrastructure, the project has stalled when the bank grew cold feet since coming under new management. A source in BOPEU leadership says the uptake was growing with three bedroomed houses fully taken up, two bedroomed houses at 70% uptake while studio (bachelor pads) were still struggling with low uptake. Financial experts, have, however long dismissed the project as unachievable in the model it was proposed. They said in order for BanCABC and BOPEU to make profit out of sales of the houses, they had to charge exorbitant interest rates and loans to be repayable within a shorter repayment period. Longer repayment periods will not be profitable, they said. Another challenge is that BancABC does not participate in GEMVAS, the not-for-profit government welfare scheme that helps public officers acquire property and other assets. GEMVAS therefore disburses loans only at prime rate and for longer repayment periods, which BancABC cannot afford as a fully commercial entity. Due to enumerated challenges, experts said, the scheme will only benefit BOPEU members who are on higher salary scales. For example, using the prime rate to calculate the ceiling of loans under GEMVAS, a member on B5 to B1 scale qualifies for P64,000 to P131,000.00 for 10 years. Members on C4 to C1 scale qualifies for P162,000.00 to P308,000.00. D4 to F0 is P414,000 to P1,347,540.  The formula used by commercial banks will automatically disqualify low salaried employees as the loans will be issued at PRIME +. 

Going for broke

With the collapse in the relationship between BOPEU and Motsamai looking imminent, permutations have been bandied about on what each of the parties will lose or gain in the divorce. In the only five months of the five-year contract he has worked as Executive Chairman, Motsamai has been earning a salary of P65 000 per month. Although there is a growing speculation that calculations indicate that Motsamai could walk away with a handsome separation package in the region of P3.2 to P4 million, labour experts opine that he may walk away with nothing or at the very least a salary of one month. The latter scenario could obtain if he is convicted through a disciplinary process that may have to be undertaken based on the findings of an inevitable forensic audit. As the CEO of Babereki, the buck stops with Motsamai and he has to account for every decision. 

Members briefed

Regional chairpersons, who also sit in the BOPEU National Executive Committee, were scheduled to address regional quarterly meetings over the weekend where members will be briefed on the latest developments. BOPEU President Masego Mogwera was expected to be in Francistown to address the Frankmart region which covers Kasane, Masunga and Tonota while Secretary General Topias Marenga will travel to Maun to brief the Shagumagu region in the northwest. Vice president Gabobake was in Kgaga region covering Kgalagadi and Gantsi.   

Babereki Board of Directors  

Masego Mogwera, Martin Gabobake, Treasurer general, Andrew Motsamai, Victor Leoketsa, Otto Itumeleng.