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Dada and BURS brawl over P12 million

Botswana Democratic Party’s long-time treasurer, Satar Dada’s prime enterprise, Motor Centre Botswana is locked in a Court of Appeal case wherein he wants the Supreme Court of the land to declare him as not liable to pay P12.2 million of income tax.


Dada is appealing his case which was dismissed by Justice Godfrey Radijeng at the High Court in Lobatse in March of 2016. Before taking the case to the courts of law, Dada’s appeal was dismissed by Botswana Unified Revenue Services (BURS) Board of Adjudicators.


The case dates back as far as 2008 when Motor Centre had written to BURS seeking clarity on how it was to treat the tax consequences of losses it had incurred in its dealings with Lobatse Cash stores and Lobtrans which are owned by a certain Mr Asmal. Asmal is described as a member of the local Muslim community and was known to the Dadas.


Motor Centre’s dealings with Lobtrans started by way of Asmal’s third company called ASA Bureau de Change which dealt in foreign currency. Because Motor Centre, a Toyota franchise, buys vehicles and parts in South Africa on a weekly basis, Toyota South Africa required that it be paid in South African rands when it was paid on a monthly basis.


Motor Centre would usually acquire the rands from its bankers in advance so as to fix its Pula costs for its own pricing. The rate offered by Motor Centre’s bankers was a corporate exchange rate. After the rands were acquired they would then be paid into Motor Centre’s FNB rand account and thereafter payment would be made to Toyota South Africa.


In 2008, Motor Centre started acquiring the rands from Asmal and what would transpire on a monthly basis was that Motor Centre would pay Lobatse Cash Stores (LCS) Pula amount by way of cheque drawn in Pula to LCS in order to purchase the South African rand.
LCS would simultaneously give Motor Centre a 30 day post-dated cheque drawn in South African rands at a rate more favourable than that offered by the banks on a corporate rate, usually 2 to 4 cents per Pula.


Motor Centre would then hold the post-dated cheque until the end of the 30 day period when it would receive payment into its FNB rand account, whereupon it would return the post-dated cheque to LCS. Dada’s court papers further state that the apparent reason that Asmal could offer a better rate than the banks was that he achieved early settlement discounts in South Africa on his fuel purchases as he was a distributor of fuel for BP Botswana.


Dada further states that when this relationship started in 2003 the monthly Pula purchases of rands was in the region of P3 million but by 2006 the figure had multiplied to between P10 and P12 million. However, at the beginning of 2007 Lobtrans, LCS and Motor Centre entered into an agreement where the latter would invest R50 million into Lobtrans for a period of 12 months and Motor Centre was to make the payment to LCS.


Motor Center was then given Lobtrans fleet of tankers and trailers as security. The papers continue to state that thereafter, Motor Centre sold its excess rands to FNB in Gaborone where it made a profit. They further state that towards the end of 2007 the relationship with Asmal came to an unhappy end and the usual payment for the December 2007 purchase was not made at the beginning of January.


Dada’s papers further state that Motor Centre brought to account an amount of close to P54 million as a loss for the year ended in August 2008. The papers further indicate that initially BURS allowed the deduction of the loss in its assessment of Motor Centre’s tax liability for the 2009 tax year. They continue to state that however, in a later assessment dated December 6th 2011 BURS disallowed the loss in assessing the income for the 2009 tax year and that’s when the tax dispute exceeded the sum of P12, 4 million.


Dada also argues that the Board of Arbitrators misdirected itself in its judgement. He states that it was the duty of the board to ascertain the legal nature of the transaction that occurred to which the taxation laws are to be applied. “ By defining the issue the way they did, the board ignored entirely the doctrine of substance over form,” he states.


However, the Commissioner General of BURS states in the responding affidavit that Motor Centre was let down by Yusuf Dada who signed an agreement without paying necessary attention to the content. “It is a matter of common knowledge that a person who signs a contractual document thereby signifies his assent to the contents of the documents, and if these subsequently turn out not to be to his liking he has no one to blame but himself.


“This is even more so if one decides not to read the document prior to signature. Mr Yusuf Dada exhibited his assent to the contents of the written agreement by way of signature,” BURS states.

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13 AUGUST 2022 Publication

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DIS blasted for cruelty – UN report

26th July 2022
DIS BOSS: Magosi

Botswana has made improvements on preventing and ending arbitrary deprivation of liberty, but significant challenges remain in further developing and implementing a legal framework, the UN Working Group on Arbitrary Detention said at the end of a visit recently.

Head of the delegation, Elina Steinerte, appreciated the transparency of Botswana for opening her doors to them. Having had full and unimpeded access and visited 19 places of deprivation of liberty and confidentiality interviewing over 100 persons deprived of their liberty.

She mentioned “We commend Botswana for its openness in inviting the Working Group to conduct this visit which is the first visit of the Working Group to the Southern African region in over a decade. This is a further extension of the commitment to uphold international human rights obligations undertaken by Botswana through its ratification of international human rights treaties.”

Another good act Botswana has been praised for is the remission of sentences. Steinerte echoed that the Prisons Act grants remission of one third of the sentence to anyone who has been imprisoned for more than one month unless the person has been sentenced to life imprisonment or detained at the President’s Pleasure or if the remission would result in the discharge of any prisoner before serving a term of imprisonment of one month.

On the other side; The Group received testimonies about the police using excessive force, including beatings, electrocution, and suffocation of suspects to extract confessions. Of which when the suspects raised the matter with the magistrates, medical examinations would be ordered but often not carried out and the consideration of cases would proceed.

“The Group recall that any such treatment may amount to torture and ill-treatment absolutely prohibited in international law and also lead to arbitrary detention. Judicial authorities must ensure that the Government has met its obligation of demonstrating that confessions were given without coercion, including through any direct or indirect physical or undue psychological pressure. Judges should consider inadmissible any statement obtained through torture or ill-treatment and should order prompt and effective investigations into such allegations,” said Steinerte.

One of the group’s main concern was the DIS held suspects for over 48 hours for interviews. Established under the Intelligence and Security Service Act, the Directorate of Intelligence and Security (DIS) has powers to arrest with or without a warrant.

The group said the “DIS usually requests individuals to come in for an interview and has no powers to detain anyone beyond 48 hours; any overnight detention would take place in regular police stations.”

The Group was able to visit the DIS facilities in Sebele and received numerous testimonies from persons who have been taken there for interviewing, making it evident that individuals can be detained in the facility even if the detention does not last more than few hours.

Moreover, while arrest without a warrant is permissible only when there is a reasonable suspicion of a crime being committed, the evidence received indicates that arrests without a warrant are a rule rather than an exception, in contravention to article 9 of the Covenant.

Even short periods of detention constitute deprivation of liberty when a person is not free to leave at will and in all those instances when safeguards against arbitrary detention are violated, also such short periods may amount to arbitrary deprivation of liberty.

The group also learned of instances when persons were taken to DIS for interviewing without being given the possibility to notify their next of kin and that while individuals are allowed to consult their lawyers prior to being interviewed, lawyers are not allowed to be present during the interviews.

The UN Working Group on Arbitrary Detention mentioned they will continue engaging in the constructive dialogue with the Government of Botswana over the following months while they determine their final conclusions in relation to the country visit.

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Stan Chart halts civil servants property loan facility

26th July 2022
Stan-Chart

Standard Chartered Bank Botswana (SCBB) has informed the government that it will not be accepting new loan applications for the Government Employees Motor Vehicle and Residential Property Advance Scheme (GEMVAS and LAMVAS) facility.

This emerges in a correspondence between Acting Permanent Secretary in the Ministry of Finance Boniface Mphetlhe and some government departments. In a letter he wrote recently to government departments informing them of the decision, Mphetlhe indicated that the Ministry received a request from the Bank to consider reviewing GEMVAS and LAMVAS agreement.

He said: “In summary SCBB requested the following; Government should consider reviewing GEMVAS and LAMVAS interest rate from prime plus 0.5% to prime plus 2%.” The Bank indicated that the review should be both for existing GEMVAS and LAMVAS clients and potential customers going forward.

Mphetlhe said the Bank informed the Ministry that the current GEMVAS and LAMVAS interest rate structure results into them making losses, “as the cost of loa disbursements is higher that their end collections.”

He said it also requested that the loan tenure for the residential property loans to be increased from 20 to 25 years and the loan tenure for new motor vehicles loans to be increased from 60 months to 72 months.

Mphetlhe indicated that the Bank’s request has been duly forwarded to the Directorate of Public Service Management for consideration, since GEMVAS and LAMVAS is a Condition of Service Scheme. He saidthe Bank did also inform the Ministry that if the matter is not resolved by the 6th June, 2022, they would cease receipt of new GEMVAS and LAMVAS loan applications.

“A follow up virtual meeting was held to discuss their resolution and SCB did confirm that they will not be accepting any new loans from GEMVAS and LAMVAS. The decision includes top-up advances,” said Mphetlhe. He advised civil servants to consider applying for loans from other banks.

In a letter addressed to the Ministry, SCBB Chief Executive Officer Mpho Masupe informed theministry that, “Reference is made to your letter dated 18th March 2022 wherein the Ministry had indicated that feedback to our proposal on the above subject is being sought.”

In thesame letter dated 10 May 2022, Masupe stated that the Bank was requesting for an update on the Ministry’s engagements with the relevant stakeholder (Directorate of Public Service Management) and provide an indicative timeline for conclusion.

He said the “SCBB informs the Ministry of its intention to cease issuance of new loans to applicants from 6th June 2022 in absence of any feedback on the matter and closure of the discussions between the two parties.”  Previously, Masupe had also had requested the Ministry to consider a review of clause 3 of the agreement which speaks to the interest rate charged on the facilities.

Masupe indicated in the letter dated 21 December 2021 that although all the Banks in the market had signed a similar agreement, subject to amendments that each may have requested. “We would like to suggest that our review be considered individually as opposed to being an industry position as we are cognisant of the requirements of section 25 of the Competition Act of 2018 which discourages fixing of pricing set for consumers,” he said.

He added that,“In this way,clients would still have the opportunity to shop around for more favourable pricing and the other Banks, may if they wish to, similarly, individually approach your office for a review of their pricing to the extent that they deem suitable for their respective organisations.”

Masupe also stated that: “On the issue of our request for the revision of the Interest Rate, we kindly request for an increase from the current rate of prime plus 0.5% to prime plus 2%, with no other increases during the loan period.” The Bank CEO said the rationale for the request to review pricing is due to the current construct of the GEMVAS scheme which is currently structured in a way that is resulting in the Bank making a loss.

“The greater part of the GEMVAS portfolio is the mortgage boo which constitutes 40% of the Bank’s total mortgage portfolio,” said Masupe. He saidthe losses that the Bank is incurring are as a result of the legacy pricing of prime plus 0% as the 1995 agreement which a slight increase in the August 2018 agreement to prime plus 0.5%.

“With this pricing, the GEMVAS portfolio has not been profitable to the Bank, causing distress and impeding its ability to continue to support government employees to buy houses and cars. The portfolio is currently priced at 5.25%,” he said.  Masupe said the performance of both the GEMVAS home loan and auto loan portfolios in terms of profitability have become unsustainable for the Bank.

Healso said, when the agreement was signed in August 2018, the prime lending rate was 6.75% which made the pricing in effect at the time sufficient from a profitable perspective. “It has since dropped by a total 1.5%. The funds that are loaned to customers are sourced at a high rate, which now leaves the Bank with marginal profits on the portfolio before factoring in other operational expenses associated with administration of the scheme and after sales care of the portfolio,” said the CEO.

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