BPOPF takes legal in CMB’s P500 million breach
By close of business on Friday, Capital Management Botswana (CMB) was expected to have complied with an order compelling it to return Fund money in its possession back to the Botswana Public Officers’ Pension Fund (BPOPF) accounts after it was found to be in breach of the Partnership Agreement as a general partner.
BPOPF lawyers who were working on administering their order against Capital Management Botswana (CMB) following termination of a contract on 30 October, 2017, had pushed from the CMB end and now BPOPF has no choice but to take legal action, Weekend Post has learnt.
Sources close to the case indicated that CMB has not complied with the order directing them to transfer all the funds back to the BPOPF’s account five weeks later. In the letter of the minutes leading to the termination of the contract which survived only two years, BPOPF labeled CMB’s persistent breach of the obligation in managing and handling of the funds as negligent and an act of misconduct.
“We note that a number of these breaches also amount to ‘misconduct’ on the part of the Fund Manager. The sheer extent of the incidences of breach, the persistence of the same breach, the failure to inform BPOPF of any breaches and failure to take the steps to remedy breaches not only constitutes a failure to meet the standard of a prudent individual but also amounts to grossly negligent conduct.”
According to the minutes, CMB just allocated money to companies anytime of the day and not following the stipulated procedures, like proposed investments and securities to be acquired. BPOPF entered into agreement (Advisory and Management Services Agreement 9AMSA)) with CMB as the fund manager of P500 million on 3rd November, 2014. BPOPF at the time committed P500 million. And at the time the contract was terminated, over P477M was drawn down, leaving about P22M of undrawn capital commitments by BPOPF. The Fund was established as a private equity fund
WHO BENEFITED FROM CMB MISCONDUCT?
Principal in the conflict between BPOPF and CMB is breach of the Investment Policy. One of the companies that benefited from the breach is Wilderness Holdings, the tourism company is also in the bad books as far as the BPOPF records are concerned. “The investment in Wilderness Holdings is not an investment in company implementing private equity projects. It is an investment in public equities, which constitutes a breach of the investment policy,” states the minutes. The Investment Policy in the context of the BPOPF refers to investment in portfolio companies implementing private equity projects. “No argument has been made that Wilderness Holdings implements private equity projects and the interposing of a special purpose vehicle does not resolve the issue.”
And as if that was not enough, the amount invested in Wilderness Holdings constituted 30% of Total commitment. According to a legal opinion rendered to BPOPF this is in breach of clause 12 of the Investment Policy which limits any investment in a single portfolio company to 25% of the Total Commitment. Therefore, Wilderness was awarded an amount beyond the limit. BPOPF stressed that this breach is not capable of being remedied. It was also identified that a company by the name Kawena also breached the prudential limit for the investment in any portfolio company. Furthermore it emerged that the Kawena breach is capable of being remedied.
A PLETHORA OF BREACHES
There are several other breaches to the agreement between BPOPF and CMB, with attorneys of the former pointing out that Drawdown Notices did not comply with the provisions of the Partnership Agreement in that they do not contain information required in relation to the description of the business, the amounts being allocated to each investment, and that certain information is missing.
“We understand that the Fund holds an investment in Makuba Airlines for which there is no corresponding Drawdown Notice. It appears the funds that were drawn down for some other purpose were utilized to make this investment. This is a serious and material breach of the Partnership Agreement which cannot be remedied,” the attorneys observed.
The legal assessment by BPOPF also noticed breach of Key Man Provisions and breach of Reporting Obligations. “It would appear that the General Partner has breached its obligation to supply BPOPF with quarterly reports throughout the life of the Fund.” The assessment also identified signs of conflict of interest in some of the dealing such as the one that involves a company called AGILE Investments and one Mr Rowley.
It also established that there were excessive Fund expenses, for example on 3rd March 2016, the General Partner drew down an amount of P12 500, 000 representing 2.5% of the Total Commitment. “Fund expenses must be actually incurred by the General Partner before they are reimbursed. No evidence was provided with the drawdown that such fees were indeed incurred.” The legal team is clear that the available remedy is for the removal of the General Partner and BPOPF has been advised to seek damages as compensation for financial loss suffered as a result of the breach.
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Malawi appeals for help over Cyclone Freddy at PAP
As of yesterday evening, the death toll from the Cyclone in Malawi had risen from the initially reported 190 to 225 in a short period of time, over 20 000 people have been displaced, and the worst of fears are yet to come as the fatalities continue to mount. This was reported by a Malawi Member of Parliament attending the Pan African Parliament session in Midrand, South Africa, Hon Steven Mikiya.
Mikiya was giving a statement on behalf of Malawi as the ongoing Pan African Parliament in South Africa.
Mikiya said the Cyclone has wreaked the most havoc in our countryâ€™s Southern Region. â€śThe Southern Region, has been hardest hit with widespread heavy rains and strong winds. This caused a rapid rise in water levels and subsequent flooding. Meanwhile, power supply has been disrupted, roads blocked off and rendered impassable and mudslides have also been widely reported,â€ť he said.
He made a special appeal to the PAP:Â â€śWhere I come from, there is a parable which I would like to share with you which says, â€śmzako weniweni umamudziwa panthawi ya mavuto.â€ť Simply put, a friend in need is a friend indeed or put loosely, a person who helps at a difficult time is a friend you can rely on.â€ť
Mikiya continued: â€śYes! Misfortune has knocked on our door and left in its wake a trail of death and destruction that may take years to fully recover from. However, amidst these difficulties, I have every reason to believe that sometimes when you are in a dark place and think you have been buried, you have actually been planted. My belief, Mr. President, arises out of my faith in this gathering and out of the conviction that it is not coincidental that Cyclone Freddy hit Malawi and Mozambique while the delegations of both countries are here.â€ť
According to Mikiya, the level of destruction, the loss of life, property and the decimation of the entire fabric of established communities has been unprecedented. He noted that all this, is coming at a time when Malawi was starting to show signs of recovery from the deadly COVID-19 pandemic that also came hard on the heels of Cyclone Ana and Cyclone Gombe that left a similar trail of devastation and destruction in Malawi and neighbouring countries.
As of Sunday, this week, from the 12th of March, Malawi and Mozambique have been facing the devastating effects of Cyclone Freddy that made a landfall over Mozambique on Saturday the 11th and reached Malawi by Sunday the 12th of March.
The Malawi legislator said he has absolute faith in the Pan African Parliament, which he described as â€śa league of nations brought together by a shared ancestry, history, identity as well as our beloved continent which we inhabitâ€ť.
Meanwhile, Malawi President, Lazarus Chakwera, has declared a State of Disaster in the affected areas effectively appealing for local and international support for the affected families.
Mikiya appealed to the Pan African Parliament drawing â€śpositiveâ€ť inspiration from Europe which rallied around Turkey after the destructive earthquakes to bring the much-needed relief and humanitarian aid to the people of Turkey.
He said Africa should demonstrate to the world that the African Union and its Organs are not mere talk shows, but effective institutions which stand up when it matters most.
â€śAlone, it may take us a lifetime to fully recover, but together, in the Pan-Africanist spirit of Ubuntu, our lives and livelihoods will return to a semblance of normality in record time. This is the time to live by our operative mantra, â€śOne Africa, One Voice.â€ť Mikiya concluded.