United Refineries Botswana (URB), a company that has the directorship of Tati East Member of Parliament, Samson Guma Moyo and the Citizen Entrepreneurial Development Agency (CEDA) and three others is at the centre of a row between some CEDA’s Structured Finance Department employees and their seniors over questionable financing despite not meeting the basic requirements.
In the last seven years the company has been financed four times to the tune of close to P40 million but fit has not paid a dime towards the loan repayment. CEDA exposure with URB currently stands at P40 million and in November 2017, URB put forward a proposal requesting a P9 million loan from CEDA through which they claimed they wanted to refinance a short term facility as payment.
The CEDA department of Structured Financing found the request to be problematic at the word go because there was no board resolution supporting the application, there were no minutes to confirm a Board sitting; URB also failed to avail audited financial statements at the time, and when they were submitted they were not signed by their auditors – which raised eyebrows with those tasked with appraising the application by URB. Further to compound the URB request conundrum was the fact that the financials were only for the year 2015/16 but the company was first financed in 2012/13 hence the CEDA officers wanted a record of what has been happening in the company since being financed.
Things came to a head when the CEDA officials further discovered that the 40 percent shareholding of the parastatal in URB has been diluted to a paltry 18 percent – with the difference being transferred to Guma Moyo. “What concerned us the most was that there was no board resolution supplied to us to explain the shareholding dilution and the transfer of the same shares to Mr Moyo,” said a source within CEDA. He said it is very easy to track share transfer and or sale but in this instance there was “zero record”.
On asking for the subscription shareholding agreement as well as a valuation report that determined the value of the shares, and proof of payment from Guma Moyo to CEDA the officials also hit blanks. Those tasked with appraising the request by URB also got wind of the fact that the same company has financial obligations with Botswana Development Corporation (BDC) where they secured P15 million and P25 million from First National Bank Botswana who were also demanding their monies from URB. “At the time we were doing this appraisal URB was technically insolvent,” he said.
“Our view was that you can’t continue to throw money into a company that is technically insolvent. URB had also never serviced any loan that they took with us,” said our source. On the 23rd of November 2017, upon realizing that their request was not being fast tracked Guma Moyo is said to have shown up at CEDA offices where he interacted with the Head of Department – Structured Financing, James Moribame “to talk about URB request”.
In subsequent days the CEDA officers were under pressure and they approved the request on condition that URB supplies a board resolution, minutes of the board meeting, signed audited financials among other things. These demands were an impossible undertaking on the part of URB hence a difference officer was then assigned to look into their request. The appraisal was submitted on the 15th of December 2017 and was acceded to by management after one of the Structured Finance staff members, who has allegedly been dismissed put a disclaimer to the appraisal.
In her original assessment the said staff member is said to have highlighted risks faced by URB and possible mitigation measures. The Department of Structured Finance was of the view that it should get someone or a firm to manage the money on behalf of URB. Currently the company is failing to service its debts despite millions of Pula pumped into the project. Scores of its employees have not been paid in the last eleven months or so. On the other hand BDC is suing the company for failure to settle a loan of P11 million.
At the inception of the project, P40,7m was successfully raised which was intended to finance the scope of the project in full. However, the business experienced cost overruns due to the following challenging factors Depreciation of the Pula by over 37% from the inception of the project as the cost of plant and equipment was in US Dollars; Unplanned material expenditures, namely excavation and civil works on the plant site, driven by the need to hire the earth moving equipment which has been resident on site since the project started. In addition there were material additions to the plant specifications.
Subsequent delays in disbursements resulting in movement of prices at a rate similar to the depreciation of the currency to the dollar. Against these constraints, P25, 1m was raised from FNB; BWP 12.7m from CEDA to fund the gap that developed following these material changes. The above achieved a 98% completion of the factory. Over and above the contributions, subsequent contributions were made by the founding shareholders to meet the funding requirements of the business via shareholder loans and capital calls that CEDA did not participate as indicated below as follows:
One of the original promoters of the project who spoke to Weekend Post this week Mr Tiedze Chapi explained that the company was formed by Guma and Tibe back in 2010/11. He said the two approached him and asked him to avail his plot as surety so that they could access funds to kickstart the project. He was convinced that he will become part of the company with a 40 percent shareholding while Guma was to hold 40 percent and Tibe was to own 20 percent of the business.
According to Chapi the two availed documents which had his name on them to demonstrate that indeed he was a shareholder and they went on to ask for P11 million from BDC. Although BDC approved their request it was on the condition that they produce proof that they have assets that match that value. Unfortunately Chapi’s land valued less (P608 000) and still with infrastructure on it only went up to P4.3 million way less than the P11 million required hence BDC could not release the whole amount.
Chapi shared that the promoters then went to CEDA where they were given the P11 million. At this point Chapi was not happy with the whole operation and he threatened to pull out only to be intimidated. “I wanted to pull out because I was not sure if I am a shareholder in this company.” Chapi said at this point CEDA came into the picture and injected P7.33 million and a shareholders agreement was prepared by Armstrongs Attorneys.
CEDA then paid another P7.33 million as debenture and the project took off. “My concern is that the money that was injected by the money funding institutions was not traceable in most cases. BDC put in money, it finished, CEDA put in money, it finished and FNBB put in money and it finished, CEDA came back to inject money and it finished and I hear the company is back at CEDA asking for more funds. We have not been audited and I am concerned that my name is in this project and public funds are being used without due process,” said Chapi. Chapi further stated that CEDA has guaranteed a loan of P9.5 million acquired by URB from FNBB at 100%. He stated that BDC has issued a letter of demand to URB and they want their money back.
“I have tried to seek legal advice on the matter and I cannot take it any further because the legal costs are prohibitive on my side. As for BDC, they are suing in the basis of an agreement that I did not sign as a one of the parties and I do not think they will succeed on my part. At some point I was kicked out of the Board and I was being threatened with political influence but I did not budge,” continued Chapi. According to Chapi, he has asked for a forensic audit of the business, “to my surprise one of the firms that was engaged to prepare the report put a disclaimer that it did not meet the required standards but URB still paid P250 000 for it.
Chapi is concerned that employees at the cooking oil plant have been going for up to eleven months without pay. “Some are at seven months without payment,” he added. He added: “Another thing that concerns me is the dilution of shareholding, something that contravenes the shareholders agreement. He said CEDA’s share has dropped from 40% to 18%; his from 12% to 7%; while Guma’s has picked from 16% to 53%.
EFFORTS TO CONTACT KEY PLAYERS
When reached by this publication, Mmoloki Tibe , who is also a shareholder, to inquire about Unified Refineries, declined to discuss the affairs of his company because its “a private entity.” When this publication pressed forward with the matter, putting it to him that, Unified Refineries’ dealings with CEDA maybe of public interest since CEDA is public enterprise, Tibe remorsefully agreed to share more light on the matter with this publication at later time.
His phone then later rang unattended and he could not reply inquiries sent through SMS. Dr Alfred Tsheboeng, Chairperson of the CEDA Board’s mobile phone rang unanswered the entire day, while Cynthia Sebonego, Secretary of the Board referred this publication to CEDA communications chief, Anno Tshipa. WeekendPost team managed to get hold of Tshipa but she was unable to respond to this publication’s inquiry. Weekend Post has promised to give her a right of reply next week. Meanwhile Guma Moyo’s mobile were unreachable because he was said to be in South Africa.
Government is currently sitting on 4 400 vacant posts that remain unfilled in the civil service. This is notwithstanding the high unemployment rate in Botswana which has been exacerbated by the recent outbreak of the deadly COVID-19 pandemic.
Just before the burst of COVID-19, official data released by Statistics Botswana in January 2020, indicate that unemployment in Botswana has increased from 17.6 percent three years ago to 20.7 percent. “Unemployment rate went up by 3.1 percentage between the two periods, from 17.6 to 20.7 percent,” statistics point out.
Leading commercial bank, First National Bank Botswana (FNBB), expects the central bank to sharpen its monetary policy knife and cut the Bank Rate twice in the last quarter of 2020.
The bank expects a 25 basis point (bps) in the beginning of the last quarter, which is next month, and another shed by the same bps in December, making a total of 50 bps cut in the last quarter. According to the bank’s researchers, the central bank is now holding on to 4.25 percent for the time being pending for more informed data on the economic climate.
An audit of the accounts and records for the supply of food rations to the institutions in the Northern Region for the financial year-ended 31 March 2019 was carried out. According to Auditor General’s report and observations, there are weaknesses and shortcomings that were somehow addressed to the Accounting Officer for comments.
Auditor General, Pulane Letebele indicated on the report that, across all depots in the region that there had been instances where food items were short for periods ranging from 1 to 7 months in the institutions for a variety of reasons, including absence of regular contracts and supplier failures. The success of this programme is dependent on regular and reliable availability of the supplies to achieve its objective, the report said.
There would be instances where food items were returned from the feeding centers to the depots for reasons of spoilage or any other cause. In these cases, instances had been noted where these returns were not supported by any documentation, which could lead to these items being lost without trace.
The report further stressed that large quantities of various food items valued at over P772 thousand from different depots were damaged by rodents, and written off.Included in the write off were 13 538 (340ml) cartons of milk valued at P75 745. In this connection, the Auditor General says it is important that the warehouses be maintained to a standard where they would not be infested by rodents and other pests.
Still in the Northern region, the report noted that there is an outstanding matter relating to the supply of stewed steak (283×3.1kg cans) to the Maun depot which was allegedly defective. The steak had been supplied by Botswana Meat Commission to the depot in November 2016.
In March 2017 part of the consignment was reported to the supplier as defective, and was to be replaced. Even as there was no agreement reached between the parties regarding replacement, in 51 October 2018 the items in question were disposed of by destruction. This disposal represented a loss as the whole consignment had been paid for, according to the report.
“In my view, the loss resulted directly from failure by the depot managers to deal with the matter immediately upon receipt of the consignment and detection of the defects. Audit inspections during visits to Selibe Phikwe, Maun, Shakawe, Ghanzi and Francistown depots had raised a number of observations on points of detail related to the maintenance of records, reconciliations of stocks and related matters, which I drew to the attention of the Accounting Officer for comments,” Letebele said in her report.
In the Southern region, a scrutiny of the records for the control of stocks of food items in the Southern Region had indicated intermittent shortages of the various items, principally Tsabana, Malutu, Sunflower Oil and Milk which was mainly due to absence of subsisting contracts for the supply of these items.
“The contract for the supply of Tsabana to all depots expired in September 2018 and was not replaced by a substantive contract. The supplier contracts for these stocks should be so managed that the expiry of one contract is immediately followed by the commencement of the next.”
Suppliers who had been contracted to supply foodstuffs had failed to do so and no timely action had been taken to redress the situation to ensure continuity of supply of the food items, the report noted.
In one case, the report highlighted that the supplier was to manufacture and supply 1 136 metric tonnes of Malutu for a 4-months period from March 2019 to June 2019, but had been unable to honour the obligation. The situation was relieved by inter-depot transfers, at additional cost in transportation and subsistence expenses.
In another case, the contract was for the supply of Sunflower Oil to Mabutsane, where the supplier had also failed to deliver. Examination of the Molepolole depot Food Issues Register had indicated a number of instances where food items consigned to the various feeding centres had been returned for a variety of reasons, including food item available; no storage space; and in other cases the whole consignments were returned, and reasons not stated.
This is an indication of lack of proper management and monitoring of the affairs of the depot, which could result in losses from frequent movements of the food items concerned.The maintenance of accounting records in the region, typically in Letlhakeng, Tsabong, and Mabutsane was less than satisfactory, according to Auditor General’s report.
In these depots a number of instances had been noted where receipts and issues had not been recorded over long periods, resulting in incorrect balances reflected in the accounting records. This is a serious weakness which could lead to or result in losses without trace or detection, and is a contravention of Supplies Regulations and Procedures, Letebele said.
Similarly, consignments of a total of 892 bags of Malutu and 3 bags of beans from Tsabong depot to different feeding centres had not been received in those centres, and are considered lost. These are also not reflected in the Statement of Losses in the Annual Statements of Accounts for the same periods.