In one morning of 2017, Boitumelo Molefe Chief Executive Officer of Botswana’s largest pension fund (BPOPF), and third largest in Africa got a demanding correspondence from one of her service providers Capital Management Botswana (CMB) that she signs an offer to purchase a minority (7%) of Mascom shares owned by Strive Masiyiwa through his company Econet by the aftyernoon on of the same day.
CMB wanted to purchase the shares from Masiyiwa on behalf of the BPOPF. CMB as an investment manager to the Fund one, and on the face of value would say there is nothing wrong with that. Sources close to the events state that, “There were problems on many fronts. BPOPF was given not only a subjective valuation of the shares, but there were also obscenely overpriced.
CMB was requesting that the shares to be purchased don’t come from their allocated portion of money that they managed, but that BPOPF inject more money to them in order to buy the shares. The timeline in which the CEO of BPOPF was to sign and accept the offer was impossible. She literally had a few hours not to consider the offer but to agree to it. Surely being put in the shoes of the BPOPF CEO Boitumelo Molefe, I would smell something sinister about this offer,” said the source.
“Fast forward two years down the line, the same would-be seller being Strive Masiyiwa at a joint Youth Leadership conference with government recently wants to buy more of the same shares he wanted to sell prior, and then list the company. One might say, there’s nothing wrong in a man changing his mind. But that’s not the point here. Industry insiders and pension activists say the country should read a lot on the intentions of Strive Masiyiwa on Mascom.”
They decry that Masiyiwa may not be ideal for the 250,000 plus members of the BPOPF. “BPOPF portion of shares have long been of interest from various groups. First it was the usual ‘Big Men’ of town who wanted to take the Fund’s shares. MTN then followed in wanting to consolidate their holdings. Then Cater Morupisi claiming to represent government also got involved,” states the source.
Boitumelo Molefe is thought to have refused flat out to entertain the hostile purchase of Masiyiwa’s portion of shares in 2017 by CMB on behalf of BPOPF. And this is one of many decisions that caused her relationship to go sour with her then Chairman Morupisi. At the time BPOPF had valued Mascom at P3.5 billion pula, and yet CMB requested P700 million to purchase the 7% of Masiyiwa’s Econet shares. At that amount it put the valuation of Mascom at P7 billion, which was way too high.
Directly, or indirectly one then has to question the integrity of CMB. Like any entrepreneur, Strive would have wanted maximum return for his shares. But unfortunately for him the would-be transactors being CMB had questionable motives. “He needs to tell his side of his story, but one thing for sure he can’t fault us for wanting so desperately to question his renewed interest in Mascom. “Once beaten, twice shy as the English language says.
At the Youth Conference, Econet Founder Strive Masiyiwa spoke of his intentions of buying MTN shares in Mascom, and then floating the company on the Botswana Stock Exchange. He further went on to say that he would like Batswana and Mascom employees to actively participate in the IPO (Initial Public Offering). This IPO media houses reported the listing could actually come within this year. BPOPF is thought to have had first refusal, and purchase the MTN shares but opted not to.
Said an analyst, “my considered view is that the same Strive Masiyiwa returning years later to buy more of the very same shares he wanted to sell should be put to a serious ethical test. “More so that the actors whom he was perceived to be in cohorts with haven’t necessarily disappeared. The investment analyst continued to say hard questions should be asked of BPOPF why they didn’t exercise their right to buy more shares of Mascom.
“Yes, a very lazy and easy excuse is that they are not in the business of telecommunications, or something along the lines that will increase their risk in the investment by buying more shares of the company…. blah blah…. blah. “Mascom is no just a telecommunications company. “It is a pride of the nation, just like Letshego, or a Kgalagadi Breweries.
“What stopped BPOPF with each huge cash reserves doing exactly what Strive is going to be doing, buying the MTN shares and then listing them to reduce their concentration investment risk on the company? “Strive Masiyiwa and his company are the only ones going to be smiling all the way to the bank. “My gut feeling is that everything relates to this So called “Youth Conference” which was actually attended by adults, wanna-be CEOs of town.
“Those that have long wanted to take Mascom away from us Batswana have now come wearing different clothes because it proved impossible before to do that. “It is really upsetting that we continuously miss commercial opportunities and rather have foreigners come take what we could have done here. “The loser here is BPOPF, and Botswana at large.”
“All said and done, we ought to question the Strive Masiyiwa transaction with MTN and Mascom. Bad experiences unfortunately give us reason to doubt the integrity of the transaction. “I won’t be surprised in a few years down the line we find that there were some within government that were stoking the fire at Mascom. “Watch the space”, signed off the analyst. Contacted for comment, Molefe refused to go in detail with the deal saying it was confidential, “safe to say MTN approached them with information that they intend to sell their shares.”
BPOPF PUSHES FOR 73%
But it has since surfaced that BPOPF has taken a hardline approach to the issue and wants to own 73% stake in Mascom. BPOPF is of the view that the proposed transaction by Econet will result in change of controller hence they must be a choice to exercise their pre-emptive rights as the shareholders agreement. Masiyiwa is said to have raised an unsolicited offer to buy the shares currently held by MTN.
It is said that the parties involved in this proposed transaction do not agree with the interpretation of clause 12 of the shareholders agreement that deals with sale of shares and change of controller. The regulator, Botswana Communications Regulatory Authority (BOCRA) is said to have demanded certain information from Mascom but it is not forthcoming because the parties cannot agree on its release. The Mascom Board, which is made up of three BPOPF representatives and three MTN representatives is expected to meet to discuss the matter, but a stalemate is projected.
This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.
The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.
Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.
He was speaking in Parliament on Tuesday delivering Parliament’s Finance Committee report after assessing a motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.
Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.
The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.
The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.
The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.
This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.
Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.
Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.
However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.
Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.
When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.
This as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.
Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.
The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.
Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.
In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.
Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.
Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.
Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.
Acknowledging the need to draw down from GIA no more, current Minister of Finance Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”
He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”