Capital Management Africa and Rapula Okaile have filed papers with the High Court opposing the liquidation proceedings against Capital Management Botswana (CMB). They want the court to rescind and set aside the final winding order issued on 18th of September 2018.
The tussle between the two entities is said to be motivated by the urge to regain assets which are estimated at a value of close to P477 million. Shareholders of CMB are accusing Non-Bank Financial Institution Regulatory Authority and Botswana Public Officers Pension Fund (BPOPF) of using false information to motivate the court to liquidate CMB.
There has been numerous court battles relating to Capital Management Botswana (Pty) Ltd (CMB), the Non-banking Financial Services Regulatory Authority (NBFIRA); the Botswana Public Officers Pension Fund (BPOPF), and Bona Life (Pty) Ltd (Bona). The matter involved a process instituted collectively by NBFIRA, BPOPF and Bona to place CMB under statutory management. The appointment of statutory manager Peter Collins was rejected by the High Court but subsequently the Appeal Court confirmed the Collins’s appointment.
Non-Bank Financial Institution Regulatory Authority and Capital Management Botswana (CMB) are first and second respondents respectively. Okaile has a 25% shareholding in CMB which he says justifies his joining in of the liquidation proceedings; on the other hand CMA is also a shareholder in CMB with a 75% stake.
NBFIRA brought the liquidation proceedings against CMB. “I am advised by my attorneys which advise I verily believe that in terms of the Section 166 of the Companies Act, the court in an application by shareholders of a company may grant leave to intervene and or join legal proceedings in which the company is involved,” writes Okaile.
“…we as shareholders of the 2nd respondent wish to be permitted to intervene and join the said proceedings and oppose the liquidation of the 2nd Respondent.” Okaile states that as shareholders of CMB and also respondents to the petition they have a direct interest in the liquidation proceedings hence their move to join the proceedings.
Okaile and CMA say they wish to intervene and be joined as co-respondents in the liquidation proceedings to oppose the proceedings on the basis that once the 2nd Respondent/ Respondent which as per the petition has been placed on statutory management and the statutory manager has compiled his reports and is done with statutory management, there is therefore no basis whatsoever to liquidate the 2nd Respondent/ Respondent.
According to the petition, the basis of the winding up order is basically that the Respondent (CMB) is insolvent and it is unable to pay its debts and its liabilities exceed its assets, and that there are no prospects that the Respondents will be restored to solvency within a reasonable period.
“I dispute and deny that the respondent is insolvent. I would aver that the Respondent owns a block of flats whose market value is P14 million, as shown by the valuation report…I also dispute and deny that even supposing without conceding that the Respondent was insolvent, that it cannot be restored to solvency within reasonable period…I dispute and deny that the CMB is even if it was there, it would have provided sufficient grounds for the liquidation of the Respondent as a suit is simply a suit and not a debt and it cannot be ground for liquidation,” writes Okaile.
Okaile narrates that the basis upon which the liquidation is alleged to be made is patently false and goes on to indicate that the petitioner has failed to demonstrate as to why it is alleged that there are no prospects that CMB could be restored to solvency within a reasonable time.
Okaile denies claims that CMB has rental arrears; further says the company does not have any employees because they were dismissed way back in April 2018 by the Statutory Manager. According to Okaile, the statutory manager has never made an attempt to demand for recapitalization of CMB, “should such a demand for capitalization have been made, the Applicants would have made an effort to do so.”
In another matter that Okaile denies, “The Respondent does not owe Lobatse Clay Works (Pty) Ltd and Yarona Media Holdings (Pty) Ltd P60 million and P17 million respectively. The monies alleged as debts are monies which the Botswana Opportunities Partnership (BOP) comprising of CMB and BPOPF were to invest in the said companies. These are not debts but proposed investments that the BOP and not the Respondent were to make in the said companies.” Okaile writes that the investments were not made because the partners in the BOP fell out.
THE BACKGROUND TO THE DISPUTE – ACCORDING TO PETER COLLINS
“CMB was appointed by BOP as its fund manager and CMB, in its capacity as General Partner delegated responsibility for the management of BOP to CMB in its capacity as fund manager. BPOPF made a capital commitment1 to contribute up to BWP500,000,000 to BOP. In 2015 and 2016 various drawdown notices were issued to BPOPF by CMB on behalf of BOP for the purpose of investing in certain identified private equity investments and for agreed fund expenses and fees. BPOPF duly paid the aforesaid drawdown notices amounting in aggregate to some BWP470,000,000.00.
On 24th August 2017, BPOPF notified CMB that it was in breach of the BOP Agreement, and demanded an explanation from CMB and rectification of various issues, arising out of the BOP Agreement. On 20th September 2017 a drawdown notice was issue by CMB for an amount of BWP77,000,000.00 (“Disputed Notice”) for the purchase of shares in Lobatse Clay Works (Proprietary) Limited and Yarona Media Holdings (Proprietary) Limited.
BPOPF refused to pay and contended that the Disputed Notice was not binding on BPOPF. They asserted that their refusal to comply with the Disputed Notice did not result in an actionable breach of the BOP Agreement, because inter alia: The amount requested in the Disputed Notice exceeded the Capital Commitment made by BPOPF to BOP. The Disputed Notice was not a Drawdown Notice as defined in the BOP Agreement.”
Peter Collins is of the view that the Disputed Notice gave insufficient notice to BPOPF. He sates in the letter that the BPOPF's Capital Commitment, as set out in the Deed of Adherence, was BWP500,000,000. Further stating that the total disbursed drawdowns from notices issued by CMB totalled some BWP470,000,000. As at the date of the Disputed Notice, BPOPF's undrawn Capital Commitment was therefore BWP30,000,000 or thereabouts.
“The total amount that the General Partner sought to draw down in terms of the Disputed Notice was BWP77,000,000.2 This exceeded the available Capital Commitment available. As noted above, the BOP Agreement prohibits drawdowns of amounts from any Partner in excess of their Capital Commitment. The Disputed Notice was therefore invalid because it purported to draw down more capital than was available.
There were discussions, in 2016, between BPOPF and CMB about BPOPF potentially increasing its capital commitment. BPOPF advised CMB, in a letter dated 22 November 2016, that BPOPF had allocated P380,000,000 to BOP but the allocation was expressly conditional upon receipt by BPOPF of a reconciliation of the funds drawn so far, proof of payment of 1% contribution by CMB and a full accounting for BPOPF's capital invested in the BOP Fund.
CMB never contributed the Limited Partner's 1% capital contributions that it had agreed to contribute3 nor did CMB provide the requested reconciliation and accounting. BPOPF's conditional allocation did not therefore ever become an actual commitment by virtue of failure of the suspensive conditions aforesaid. The Disputed Notice did not meet the definition of a Drawdown Notice contained in the BOP Agreement.4 As noted above, "Drawdown Notice" is defined as a notice in substantially the form of Schedule 5 to the BOP Agreement (the "Prescribed Form").
I have also reviewed the documentation relating to the purported removal of BPOPF by CMB as Limited Partner. The documentation reveals that on the 19 October 2017, CMB sent a letter to BPOPF, which purported to be a notice of default. CMB advised that it would proceed to declare BPOPF to be a Defaulting Limited Partner if BPOPF did not pay the Drawndown Amount set out in the Disputed Notice.
On 30 October 2017, BPOPF responded noting that the Disputed Notice was invalid and that BPOPF was therefore not in breach of its obligations under the BOP Agreement. On 28 November 2017, the Advisory Board of BOP exercised its powers under the BOP Agreement5 to remove CMB as the General Partner. Notice was given by BPOPF to CMB of said removal on 1 December 2017.
On 11 December 2017, CMB responded to BPOPF advising that BPOPF's interests in BOP had been sold on for BWP50,000,000.00. CMB did not name the party which had purchased that interest. I have since established that that the payment of P50,000,000 was made out of an account operated by CMB for BOP fiduciary business and not from a third party or from CMB’s own funds.
Peter Collins is of the view that the disposal was accordingly a sham and unlawful for these reasons and for the reasons stated in the agreement I entered into with BPOPF dated 8th August 2018. “You have seen this agreement and you will therefore have read the My decision to enter into the settlement agreement was taken after due deliberation over an extended period while the litigation in both the High Court and Court of Appeal was pending.
I had more than sufficient, objective, uncontradictable evidence at my disposal to come to the conclusion which I did. CMB’s prospects in the arbitration proceedings were not simply dismal, there were no prospects at all on the written demonstrable facts. Lastly, as you are aware, CMB has been now placed under provisional liquidation and the management and control of the affairs of CMB currently vests solely with the provisional liquidator. I suggest that any future enquiries relating to matters of CMB which you may have, be directed to the provisional liquidator,” reads an extended letter from Peter Collins.
BACKGROUND TO THE DISPUTE – ACCORDING TO CMB
“By way of background, BOP’s relationship with the BPOPF was terminated almost a year ago when it proved to be an unreliable partner, it having defaulted on its financial obligations to BOP and the companies that it invested in. The BPOPF’s default had major consequences for a company which BOP intended to invest in, resulting in a loss of some 2000 jobs.
As a consequence of the BPOPF’s default, CMB was obliged in terms of the partnership agreement ruling at the time to seek a new limited partner, which it did, and disposed of the BPOPF’s stake to the highest bidder. The BPOPF waited months before heading to the High Court (on 27 December during the court recess of all things), claiming it was still a limited partner even though it had been paid for its share months prior and kept the money.
The court rejected the BPOPF’s case and pointed out it was supposed to enter arbitration. The BPOPF then waited months again before going the arbitration route, in the interim pushing a massive defamatory media campaign against CMB and working hand in glove with its co-conspirators NBFIRA and Bona Life. Bona Life, which is a company BOP / CMB rescued from insolvency, had blown its capital and wanted more money from the BPOPF.
Thus it found a willing partner in the BPOPF to wage its defamatory war, having been promised a new nest egg in return. Prior to Bona’s management ditching CMB in favour of the BPOPF, CMB had raised numerous awkward governance questions with Bona which no doubt sparked off Bona’s campaign against CMB.
Bona had no “dirt” on CMB, so it made numerous false and defamatory allegations against a CMB sister company (CMBF1), which was not regulated by NBFIRA, working closely with Collins (who was at that point not statutory manager but simply a legal advisor on a deal CMB attempted to broker between CMBF1 and Bona. NBFIRA used Bona’s false claims as an excuse to take over the running of CMB.
All of Bona’s claims were proven to be false. However, the triumvirate succeeded in getting the matter before court. Unsurprisingly, the High Court threw out their case with disdain, but in a peculiar twist, the Appeal Court with ruled in favour of NBFIRA without any lawyers from CMB being present to present their case and delivered its judgment in a matter of days.
Thus NBFIRA (and the BPOPF) was able to assume control over CMB using Collins as statutory manager. In the roughly four weeks that CMB was under statutory management, Collins tossed out the arbitration process (which would have resulted in the true facts being made a matter of record) and entered into a flimsy “settlement agreement” with the BPOPF in terms of which he sought to reverse the sale of the BPOPF’s interest in BOP.
The settlement “agreement” is not worth the paper it is written on. It is an “agreement” between two parties that are not party to, or signatories to, any the legal agreements that underpin BOP. By way of background, CMB was removed by the BOP Advisory Board as the general partner of BOP in mid-January (prior to the commencement of NBFIRA’s shenanigans relating to statutory management). A consequence of that was the automatic cancellation of the BOP partnership agreement and the replacement with a new partnership agreement – in other words, the contracts that the BPOPF was party to no longer exist – and have not for some considerable time.
Thus, Collins, who deliberately chose not to verify this, was unable to reverse the previous contracted sale simply because he had no locus standi to do so. Further, in terms of the settlement “agreement”” the BPOPF has attempted to return the funds it received to the buyer – however the buyer (and new limited partner) has rejected the offer to return the funds and thus remains the lawful limited partner of the BOP.
(For more information please see attached a notice directed to the BPOPF’s lawyers in this regard.) Consequently, neither the BPOPF (nor its company Viltry (Pty) Ltd), have any legal standing with BOP and by extension yourself. They are not entitled to demand, or request, any information from yourself, or to demand, or request and particular action from yourself at all.
For Viltry (or the BPOPF) to attain any legal standing they are required in law to seek declaratory relief from the High Court confirming that their actions and the actions of Collins are valid. Understandably, despite this having been pointed out to them, they have not sought the declaratory relief as they know they will lose – they have no case whatsoever. They are instead again relying on aggressive bullying tactics and their defamatory media campaign to try to gain by deception that which they could not obtain through legal means.
Please be advised that as BOP is a major shareholder in your company, it takes a dim view of the actions of the BPOPF (and Vlitry) and all necessary steps will be taken to safeguard the interests of BOP and yourself. You are requested not to assist the BPOPF nor Viltry in its fraudulent attempt to highjack BOP and its assets. Factually, the BOP is in the process of being dissolved and you will be contacted in due course by the entity appointed for this process for further guidance.
In June 2019, a case involving the Attorney General was brought before the High Court, in which the applicant Letsweletse Motshidiemang challenged Sections 164 (a) and 167 of the Penal Code. The applicant contended that these sections are unconstitutional because they violate the fundamental rights of liberty and privacy.
The applicant argued that these sections violated his right and freedom to liberty as he was subject to abject ignominy. These laws subjected the LGBTIQ community to brutal and debasing treatment through social control and public morality. On the 1st of November 2017, the Botswana High Court further allowed Lesbians, Gays and Bisexuals of Botswana (LEGABIBO) to join the case as amicus curiae.
However, in July 2019, the respondents, in this case, i.e. the Government, filed an appeal against this iconic High Court ruling seeking re-criminalization of homosexuality. Human Rights Group has criticized this move of the Government all over the world. The appeal was heard before five judges at the Court of Appeal on Tuesday. The State was represented by Advocate Sidney Pilane, while LEGABIBO and Letsweletse Motshidiemang were represented by Tshiamo Rantao and Gosego Rockfall Lekgowe, respectively.
Non-Governmental Organizations advocating for the LGBTIQ+ community joined the two parties at the Court of Appeal during this case. They argue that the minority group should enjoy their rights, especially the right to privacy and health. Botswana Network on Ethics, Law and HIV/AIDS (BONELA) Chief Executive Officer, Cindy Kelemi says the issues being raised by LEGABIBO are that as individuals belonging to the LGBTIQ community, they have and must share equal rights, including the right to privacy, which also speaks to being able to involve in sexual activities, including anal sex.
“Those rights are framed within the constitution, and therefore a violation of any of those rights allow them to approach the courts and seek for redress. We do not need the law to be regulating what we do in the privacy of our homes. The law cannot determine how and when we can have sex and with who, so the law does not have any business in that context. What we are saying is that the law is violating the right to privacy,” she said on the sidelines of the decriminalization case in Gaborone on Tuesday.
The first case involving the homosexual act was the Utjiwa Kanane vs the State in 2003. Contrary to section 164(c) of the Penal Code, Kanane was charged with committing an unnatural offence and engaging in indecent practices between males, contrary to section 167. The conduct at issue involved Graham Norrie, a British tourist, and occurred in December 1994. (Norrie pleaded guilty, paid a fine, and left the country.)
Kanane pleaded not guilty, alleging that sections 164(c) and 167 both violated the constitution. The High Court ruled that these sections of the Penal Code did not violate the constitution. Kanane then appealed to the Court of Appeal. BONELA CEO recalls that in its judgment then, the High Court indicated, Batswana were not ready for homosexual acts. Twenty years later, the same courts are saying that Batswana are ready, she says.
“They gave the explicit example that shows that indeed Batswana are ready. There are policies and documents in place that accommodate people from marginalized communities and minority populations. The question now is that why is it hard now to recognize the full rights of an individual who is of the LGBTI community?” She further says intimacy is only an expression. The law that restricts homosexuality makes it hard for LGBTIQ members to express themselves in a way that affirms who they are.
“We want a situation where the law facilitates for the LGBTIQ community to be free and express themselves. The stigma that they face in communities is way too punitive. They are called names; some have been physically violated and raped at times. It shows that the law doesn’t not only prevent them from expressing themselves, it also exposes them to violence.” The law on its own, Kelemi submits, cannot change the status quo, adding that there is a need for more awareness and education on human rights and what it means for an individual to have rights.
“As it is now, it is very tough for some to do that because of a legal environment that is not enabling. We also want to see a situation where LGBTIQ+ people can access services and be confident that they are provided with non-discriminatory services. It is challenging now because health care providers, social workers and law enforcement officers believe that it is illegal to be homosexual. What we are saying is that if you have an enabling law, then that will facilitate for people to be able to express themselves, including accessing health services,” Kelemi said.
“As we are doing this advocacy work, one of the issues that we picked up is that there is lack of capacity, especially on the part of healthcare workers. We noted that when we provide services or mobilize Men who have sex with other men (MSM) to access health facilities, health care workers are not welcoming, forcing them to hideaway. We must put an end to this to allow these people the freedom that they equally deserve.”
The President, Dr Mokgweetsi Masisi, has declared as an act of corruption the attitude and practice by government officials and contractors to deliver projects outside time and budget, adding that such a practice should end as it eats away from the public coffers.
For a very long time, management problems and vast cost overruns have been the order of the day in Botswana, resulting in public frustrations. Speaking at the commissioning of the Masama/Mmamashia 100 Kilometres project this week, Masisi said: “There is a tendency in government to leave projects to drag outside their allocated completion time and budget. I want to stress that this will not be tolerated. It is an act of corruption, and I will be engaging offices on this issue,” Masisi said.
In an interview with this publication over the issue, the Director-General of the Directorate on Corruption and Economic Crime (DCEC), Tymon Katholo, says, “any project that goes beyond its scope and budget raises red flags.” He continued that: “Corruption on these issues can be administrative and criminal. It may be because government officials have been negligent or been paid to be negligent by ignoring certain obligations or procedures. “This, as you may be aware has serious implications on not only of the economy but even the citizens who use these facilities or projects,” Katlholo said, adding that his agency is equally concerned.
According to the DCEC director, the selection, planning and delivery of infrastructure or projects is critical. In most cases, this is where the corruption would have occurred, leading to a troubled project. A public finance expert at the University of Botswana (UB), Emmanuel Botlhale, attributes poor project implementation to declining public accountability, lack of commitment to reforming the public sector, a decline in the commitment by state authorities and lack of a culture of professional project management.
In his research paper titled, ‘Enhancing public project implementation in Botswana during the NDP 11 period,’ Botlhale stated that successful implementation is critical in development planning. If there is poor project implementation, economic development will be stalled. Corruption is particularly relevant for large and uncommon projects where the public sector acts as a client, and experts say Megaprojects are very likely to be affected by corruption. Corruption worsens both cost and time performance and the benefits expected from such projects.
Speaking during this week’s Masama/Mmamashia pipeline commissioning, Khato Civils chairman said Africans deserve a chance because they are capable, further adding that the Africans do not have to think that only Whites and Chinese people can do mega projects. During his rule, former president Ian Khama went public to attack Chinese contractors for costing the government a move that ended up fuelling tensions between China and Botswana after Khama dispatched the then Minister of Foreign Affairs, Pelonomi Venson Moitoi, to China to register Botswana’s complaints with Chinese government-owned construction companies. Botswana had approached the Chinese government for help in its marathon battle with Chinese companies contracted to build, among others, the failed controversial Morupule B power plant and refurbishment of Sir Seretse Khama International Airport (SSIK).
A legal battle between former Botswana Democratic Party (BDP) legislator Samson Moyo Guma and First National Bank (FNB) over a multimillion oil refinery project intensified this week with Justice Zein Kebonang referring the matter to Court of Appeal for determination. The project belongs to Moyo Guma’s company called United Refineries which he has since placed under judicial management.
The war of words between Moyo Guma and FNB escalated after the company’s property worth millions of Pula were put up for sale in execution by the bank and scheduled to take place on 8th October. It emerges from Court papers that the bank had secured an order from the High Court to place the company’s property under the hammer.
Moyo Guma then also approached the High Court seeking among others that the public auction scheduled for 8th October 2021 be stayed. He contended that the assets that were to be sold belonged in reality to United Refineries and that as the company had been under judicial management at the time of the attachment, the intended sale in execution was unlawful.
He also sought the Court to declare that the writs of execution against the properties of guarantors and sureties of United Refineries Botswana Holdings Propriety Limited (the company) are unlawful. Moyo Guma also sought a stay of the execution against the property known as Plot 43556 in Francistown, that is, the land buildings, plant and machinery which make up the property and any all immovable or movable property belonging to the guarantors and sureties of the company pending finalization of the winding up of United Refineries.
But FNB disputed Moyo Guma’s assertions and submitted that the properties in question belonged to TEC (Pty) Ltd and not United Refiners. TEC Pty Ltd which is one of the shareholders in United Refineries is one of the sureties and co-principal debtors of a debt amounting to P24 million owed by United Refineries to FNB. FNB argued in papers that the properties belonged to TEC because it was TEC which had passed a covering mortgage bond in its favour over the property it now sought to execute.
Moyo Guma submitted that the covering mortgage bond passed in favour of FNB did not tell the full story as the property in question was in truth and fact owned by United Refineries and not TEC Pty Ltd. He maintained that the shares had been had been passed by the company in exchange for the properties in question and that the parties had always been guided by the spirt of the share agreement in dealing with each other despite delays in the change or transfer of ownership of plots 43556 and plot 43557 in Francistown.
Kebonang said it was clear to him that the two plots (43556 and 435570 belonged to United Refineries notwithstanding that TEC (Pty) Ltd had passed a mortgage bond over them in favour of FNB. “For this reason the properties were immune from attachment or sale in execution so long as the judicial management order was in place,” he said.
The background of the case is that Moyo Guma together with five other investors, namely Elffel Flats (Pty) Ltd; Mmoloki Tibe; TEC (Pty) Ltd; Profidensico (Pty) Ltd and Tiedze Bob Chapi, each bound themselves as sureties and co-principal debtors in respect of a debt owed by a company called United Refineries Botswana Holdings (Proprietary) Limited (the Company), to First National Bank Botswana (FNBB) (1st Respondent).
FNB had extended banking facilities to the company in the amount of P24 million which was then secured through the suretyship of Moyo Guma and other shareholders. Court records show that Moyo had on the 11th February obtained a temporary order for the appointment of a provisional judicial manager in respect of United Refineries and it was confirmed by the High Court on 24th September 2019.
In terms of the final court order by the High Court issued by Justice Tshepho Motswagole all judicial proceedings against the company, execution of all writs, summons and process were stayed and could only proceed with leave of Court. Court documents also show that First National Bank had sued the company and the sureties for the recovery of the debt owed to it and through a consent order, the bank withdrew its lawsuit against the company.
But FNB later instituted fresh proceedings against Moyo Guma and did not cite the company in its proceedings. “There is no explanation in the record as to why the Applicant was now reflected as the 1st Defendant and why the company had suddenly been removed as the 1st Defendant. There was no application either for amendment or substitution by the bank,” said Justice Kebonang.
FNB had also argued that it sought to proceed to execute against Moyo Guma and other sureties on the basis of the suretyship they signed and that by signing the suretyship agreement, Moyo and other sureties had renounced all defence available to them and could therefore be sued without first proceedings against the principal debtor (United Refineries). The question, Kebonang said, was that can FNB proceed to execute against Moyo Guma and other sureties on the basis of the suretyship contracts they signed?
“The starting point is that the Applicant (Moyo Guma) and others by binding themselves as sureties became liable for debts of the principal debtor and such liability is joint and several. He said the consequences of placing the company under judicial management means that every benefit extended to it should also extend to sureties.
“If the company is afforded more time to pay or its debt is discharged, reduced or compromised or suspended the obligation of sureties is to be likewise treated. It follows in my view that where judicial proceedings are suspended or stayed against the company, then any recourse against the sureties is similarly stayed or suspended,’ said Kebonang.
He added that “In the circumstances of this case, it seems to me that so long as the company is under judicial management, the moratorium that applies to it must also apply to its sureties/guarantors and no execution of the writs should be permitted against them. Any execution would be invalid.”
“Mindful that there is judicial precedent on this point in Botswana, at least none that I am aware of, and given its significance, I consider it prudent that the Court of Appeal must provide a determinative answer to the question whether a creditor can proceed against sureties where a company is under judicial management,” said Kebonang.
Pending the determination of the Court of Appeal, he issued the following order; the execution of writs issued in favour of FNB against Moyo and other sureties/guarantors of United Refinery are hereby stayed pending the determination of the legal question referred to the Court of Appeal.