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Guma’s P50 million CEDA jackpot

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.

THE PROJECT

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.

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