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Babereki board 'flunk' P200m deal

SHARE   |   Friday, 02 November 2018   |   By Ditiro Motlhabane
Mogwera Mogwera

Skeletons continue to tumble out of Babereki Investments closet, after The Patriot on Sunday uncovered a trail of correspondences showing that the board of directors at the Botswana Public Employees Union (BOPEU) subsidiary messed up a lucrative deal for the establishment of a P200 million carbon black plant in Lobatse and/ or Selibe Phikwe.

The carbon plant was to be developed in partnership with Black Bear, whose industrial-scale prototype plant is located in Nederweert, The Netherlands. It is capable of processing more than 1 million waste tires annually, producing 5000 tonnes of Carbon Black, 5000 tonnes of bio-fuel, 3000 tonnes of steel and one megawatt hours of green electricity. The plant is operated in partnership with Kargro, one of Europe’s foremost recyclers of tires. The company plans to roll out more than 1000 plants all over the world, in cooperation with local partners. This would have a huge environmental impact, resulting in CO2 emission reductions equivalent to the planting of more than 1 billion trees, and potentially reducing the world’s annual oil consumption by more than 215 million barrels.

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The P200m deal 

In late 2016, Donald Gaetsaloe -the Chief Executive Officer of Confianza Capital, was engaged as transaction advisor and lead arranger by Babereki, for the capital raising and corporate finance work in the feasibility, development, construction and commissioning of the carbon black plant at Lobatse and/ or Selibe Phikwe. To achieve this, a world class operator and off-taker was identified in Amsterdam and, in January 2017, Gaetsaloe travelled with his family, several Babereki board members and representatives of senior management for an inspection and to commence preliminary negotiations.

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During their week’s stay in Amsterdam, Gaetsaloe was engaged most days working with Black Bear on financials, valuations and in reviewing two key agreements – the Letter of Intent and the Siting Phase Agreement. The Patriot on Sunday has seen various copies of preliminary agreements between Gaetsaloe and the Black Bear negotiation team, together with the summary valuations and agreements.

For unknown reasons, the Black Bear transaction was never pursued any further by Babereki board when internal political squabbles took centre stage leading to the termination of the then Executive Chairman Andrew Motsamai's contract in September 2017. In the email exchange, Gaetsaloe denies that he took his family on holiday in Amsterdam using Babereki funds. He explains to ENS Africa forensic auditors that he paid for his family’s accommodation and travel expenses. "It is unfortunate that Babereki has assumed that I abused my appointment and gave my family a paid holiday. I clarified to Masego Mogwera at a meeting on 4 July 2018 that I paid for my family and that my employee had to travel to Pretoria to assist the Babereki delegation with completion of VISA processes. The CEO of Babereki could have easily clarified this to the Babereki Board. It appears it was designed to look as if I abused my position," reads one email.

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Contacted for comment, Gaetsaloe declined to discuss the Black Bear deal saying the company is still his client in other investment transactions. Gaetsaloe is reported to be engaged by Black Bear directly to identify new investors subject to a feasibility assessment.

Reputational damage

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In a confidential letter to ENS Africa, Gaetsaloe has come out with guns blazing accusing the board of directors of Babereki Investments of tarnishing his image and damaging the reputation of his business. The letter, copied to Babereki Chief Executive Officer and Board, but intended for forensic auditors engaged by BOPEU, Gaetsaloe complains about being "vilified for the hard work, commitment and dedication I had in my association with Babereki”. The leaked memo explains in detail the part played by Gaetsaloe in Africa Wild (formerly Stoffberg) and Flying Mission Services (FMS) transactions, which have been cited by auditors as impairments in the latest financial results released on September 04, 2018 for the period up to 30 June 2017.

"The purpose of this letter is to establish when you will conclude your report and issue your findings so that I can resume commercial activities without hindrance. It is my view that this investigation has carried on for rather far too long and it has created an impression in the market that I committed an offence with respect to my dealings with BOPEU / Babereki," wrote Gaetsaloe. 

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He told the auditors that he made it clear to Mogwera and other Babereki board members at their meeting of 4 July 2018, that he is unhappy with the manner in which he had been treated. He said, at the same meeting, he also made it clear that the P20 million invested in Africa Wild was not shared between him and the promoters of Africa Wild, nor with the former Chairman (Motsamai), which could have been easily verified. "This is a five minute job to verify. I was told by some Babereki Directors that "maloko" (members) believe that this money was syphoned out of the company. This communication started during our trip in Amsterdam in January 2017. There is no prima facie evidence to suggest fraud or corruption on my part and the delayed forensic has only served to suggest some wrong doing on my part," complained Gaetsaloe.

Notwithstanding that Africa Wild and FMS have been impaired by auditors, Mogwera has in a previous interview told this publication that they do not have plans to dispose of the non-performing investments. She even questioned why Gaetsaloe would want to persuade them to do so again their will.

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Forensic audit

South African based investigators ENS Africa were engaged by BOPEU to the tune of R1.313 million on February 01 2018 to conduct a forensic audit into transactions at Babereki, following allegations of embezzlement of funds and maladministration. The terms of reference of the investigation covered acquisitions in Babereki Ka Lorato, Africa Wild and FMS and a P13 million commission paid to a company called Mamataz, owned by a Motsamai close associate.

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The forensic audit had been recommended in a summary of audit findings from Ernst&Young dated 20 October 2017. Five months into the investigation ENS Africa invited Gaetsaloe for an interview on 6 July 2018 in his capacity as the transaction agent/ advisor for the acquisition of shareholding in Africa Wild and Flying Mission Services. It has since emerged that ENS Africa called off the meeting because other interviewees were not present. Even then ENS Africa had ignored a request from Gaetsaloe to be advised on what the interview will cover to make preparations easier to expedite the process. "This was not my problem and to date you have not called me to communicate when you will have this interview and why you could not meet me on my own. Surely Babereki would pay for your time and reimbursable costs. This is highly prejudicial," reads part of an email from Gaetsaloe.

Disqualified

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Gaetsaloe's major protestation comes after the board of trustees of Botswana Public Officers Pension Fund (BPOPF) recently rejected an appeal by his company- Confianza Capital- in a P500 million incubation programme. Confianza had initially been shortlisted alongside two other start-up local asset managers in the incubation programme but was disqualified by the board after a legal due diligence revealed that Gaetsaloe was a subject of a forensic audit at BOPEU's Babereki Investments. Members of BOPEU, who are civil servants, are members of BPOPF, where the trade union enjoys representation in the board of trustees.    



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