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WUC in P8million fraud scandal over HQ building payments

WUC-CEO-Senai

The Water Utilities Corporation (WUC) finds itself in a messy financial scandal following a misappropriated and misused P8 million payment relating to the construction of their headquarters building in Gaborone Central Business District-CBD- which has led to an intense quarrel and lawsuits between consultants.

Around 2013, WUC engaged consultants under a consortium model to construct and fund a head office in the CBD. The project entailed the formation of a special purpose vehicle, a company, the transfer of land in the Gaborone new CBD to the company, the raising of funds with which to finance the cost of the building, which will be guaranteed by WUC, setting the nature of security for payment of finance, the negotiation and settlement of a long term lease between WUC and the company in terms of which WUC will occupy the building as well as the potential of long-term lets by the company of undeveloped portions of the land to developers for development, which meets the criteria of WUC and the company.

The contract was awarded to Oil Refineries Botswana, which later engaged several consultants and grouped them under Belshane Property Group to ease dealing with WUC as a single body.

An engaged sub-consultant, Systems and Services Engineers owned by Alex Monchusi, was hired to provide a range of services to structure and secure private equity funding for the WUC headquarters office, which was done with ABSA bank. Oil Refineries Botswana and Belshane owner as team leader and other consultants later co-opted Monchusi, another subcontractor, as a member of Belshane Property Group consortium in good faith to lead the consortium up to the completion stage of the project.

The winner of the tender, Oil Refineries and Belshane owner, Olebeng Ngwakwena, in court papers say the appointment “sent a wrong message to Systems and Services Engineers owner, Monchusi” and gave him the impression that “he had taken over my brainchild and started bullying members of the team including sub-consultants.”

“The addition of Monchusi was done in good faith with the hope that there would be value add. Never intended that he would be a Leader of the House; Chief Whip; Class Monitor/Head Prefect,” says Ngwakwena in his affidavit, adding that “it was never intended that appointing Monchusi the leader gave him ownership of his company.”

The dispute and fallouts…

When the work was done, the consortium issued a fee note for payment to WUC. However, Ngwakwena says Monchusi and two employees of a local commercial bank which was also a member of the consortium, then following that letter wrote another letter under the letterhead of the consortium, without the consent and knowledge of others, instructing WUC to make the payment for the project to Monchusi’s company knowing that it was improper and that a process has already been triggered.

Ngwakwena and other consultants were not privy to the above arrangements to pay the applicant’s money to a third party. “It only became clearer from the Tax Invoice and bank statement that an initial payment of P1 million had already been paid to Monchusi,” said Ngwakwena. He added that while sub-contractors are looking for payments from them, Monchusi is merrymaking “in the comfort zone enjoying the money which does not belong to him”.

Ngwakwena says Monchusi is engaging in delay tactics in either returning the money or paying the consultants directly and tends to engage in long senseless letters under the letterhead of the consortium questioning their claims as a delaying tactic without the authority of Consortium members.

According to Ngwakwena, Monchusi has admitted to using the entire WUC payment for personal use. “Representatives from the bank – Badly and Sekwakwa who were co-authors of the letter that authorized WUC to pay the Consortium money to Monchusi were all out to try and protect Monchusi by withholding the information from their principal – the bank. Applicants have on several occasions requested Monchusi to return the money and approached the commercial bank to assist with the return of the money, but in vain.

Ngwakwena wants the court to order Monchusi to immediately deposit the P7 million in his possession that they irregularly obtained from WUC to the Registrar of the High Court for safekeeping to avert any risk or undue enrichment pending the finalization of the matter. They further demand the money with a 10 percent per interest per annum from when they took it.

WUC, which is also being sued for misdirecting a payment to a third party, is watching helplessly on the sidelines. The applicants say should the Monchusi return the money, the WUC suit will automatically fall.

Monchusi admits misappropriating WUC payment

Monchusi later admitted to using their money for personal use after attempts to avoid the matter in his many correspondences to all the sub-contractors. In an email, he promised fellow consultants that he was selling his properties to recover the money. “Parallel to the above, I have been speaking to the bank leadership to discuss ways that the bank can assist me,” he wrote.

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Mowana Mine to open, pay employees millions

18th January 2022
Mowana Mine

Mowana Copper Mine in Dukwi will finally pay its former employees a total amount of P23, 789, 984.00 end of this month. For over three years Mowana Copper Mine has been under judicial management. Updating members, Botswana Mine Workers Union (BMWU) Executive Secretary Kitso Phiri this week said the High Court issued an order for the implementation of the compromise scheme of December 9, 2021 and this was to be done within 30 days after court order.

“Therefore payment of benefits under the scheme including those owed to Messina Copper Botswana employees should be effected sometime in January latest end of January 2022,” Kitso said. Kitso also explained that cash settlement will be 30 percent of the total Messina Copper Botswana estate and negotiated estate is $3,233,000 (about P35, 563,000).

Messina Copper was placed under liquidation and was thereafter acquired by Leboam Holdings to operate Mowana Mine. Leboam Holdings struck a deal with the Messina Copper’s liquidator who became a shareholder of Leboam Holdings. Leboam Holdings could not service its debts and its creditors placed it under provisional judicial management on December 18, 2018 and in judicial management on February 28, 2019.

A new company Max Power expressed interest to acquire the mining operations. It offered to take over the Mowana Mine from Leboam Holdings, however, the company had to pay the debts of Leboam including monies owed to Messina Copper, being employees benefits and other debts owed to other creditors.

The monies, were agreed to be paid through a scheme of compromise proposed by Max Power, being a negotiated payment schedule, which was subject to the financial ability of the new owners. “On December 9, 2021, Messina Copper liquidator, called a meeting of creditors, which the BMWU on behalf of its members (former Messina Copper employees) attended, to seek mandate from creditors to proceed with a proposed settlement for Messina Copper on the scheme of compromise. It is important to note that employee benefits are regarded as preferential credit, meaning once a scheme is approved they are paid first.”

Negotiated estate is P35, 563,000

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Councilors’ benefits debacle-savingram reveals detail

18th January 2022

A savingram the Ministry of Local Government and Rural Development sent to Town Clerks and Council Secretaries explaining why councilors across the country should not have access to their terminal benefits before end of their term has been revealed.

The contents of the savingram came out in the wake of a war of words between counselors and the Ministry of Local Government and Rural Development. The councilors through the Botswana Association of Local Authorities (BALA) accuse the Ministry of refusing to allow them to have access to their terminal benefits before end of their term.

This has since been denied by the Ministry.  In the savingram to town councils and council secretaries across the country, Permanent Secretary in the Ministry of Local Government and Rural Development Molefi Keaja states that, “Kindly be advised that the terminal benefits budget is made during the final year of term of office for Honorable Councilors.”  Keaja reminded town clerks and council secretaries that, “The nominal budget Councils make each and every financial year is to cater for events where a Councilor’s term of office ends before the statutory time due to death, resignation or any other reason.”

The savingram also goes into detail about why the government had in the past allowed councilors to have access to their terminal benefits before the end of their term.  “Regarding the special dispensation made in the 2014-2019, it should be noted that the advance was granted because at that time there was an approved budget for terminal benefits during the financial year,” explained Keaja.  He added that, “Town Clerks/Council Secretaries made discretions depending on the liquidity position of Councils which attracted a lot of audit queries.”

Keaja also revealed that councils across the country were struggling financially and therefore if they were to grant councilors access to their terminal benefits, this could leave their in a dire financial situation.  Given the fact that Local Authorities currently have cash flow problems and budgetary constraints, it is not advisable to grant terminal benefits advance as it would only serve to compound the liquidity problems of councils.

It is understood that the Ministry was inundated with calls from some Councils as they sought clarification regarding access to their terminal benefits. The Ministry fears that should councils pay out the terminal benefits this would affect their coffers as the government spends a lot on councilors salaries.

Reports show that apart from elected councilors, the government spends at least P6, 577, 746, 00 on nominated councilors across the country as their monthly salaries. Former Assistant Minister of Local Government and Rural Development, Botlogile Tshireletso once told Parliament that in total there are 113 nominated councilors and their salaries per a year add up to P78, 933,16.00. She added that their projected gratuity is P9, 866,646.00.

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Households spending to drive economic recovery

17th January 2022

A surge in consumer spending is expected to be a key driver of Botswana’s economic recovery, according to recent projections by Fitch Solutions. Fitch Solutions said it forecasts household spending in Botswana to grow by a real rate of 5.9% in 2022.

The bullish Fitch Solutions noted that “This is a considerable deceleration from 9.4% growth estimated in 2021, it comes mainly from the base effects of the contraction of 2.5% recorded in 2020,” adding that, “We project total household spending (in real terms) to reach BWP59.9bn (USD8.8bn) in 2022, increasing from BWP56.5bn (USD8.3bn) in 2021.”  According to Fitch Solutions, this is higher than the pre-Covid-19 total household spending (in real terms) of P53.0 billion (USD7.8bn) in 2019 and it indicates a full recovery in consumer spending.

“We forecast real household spending to grow by 5.9% in 2022, decelerating from the estimated growth of 9.4% in 2021. We note that the Covid-19 pandemic and the related restrictions on economic activity resulted in real household spending contracting by 2.5% in 2020, creating a lower base for spending to grow from in 2021 and 2022,” Fitch Solutions says.

Total household spending (in real terms), the agency says, will increase in 2022 when compared to 2021. In 2021 and 2022, total household spending (in real terms) will be above the pre-Covid-19 levels in 2019, indicating a full recovery in consumer spending, says Fitch Solutions.  It says as of December 6 2021 (latest data available), 38.4% of people in Botswana have received at least one vaccine dose, while this is relatively low it is higher than Africa average of 11.3%.

“The emergence of new Covid-19 variants such as Omicron, which was first detected in the country in November 2021, poses a downside risk to our outlook for consumer spending, particularly as a large proportion of the country’s population is unvaccinated and this could result in stricter measures being implemented once again,” says Fitch Solutions.

Growth will ease in 2022, Fitch Solution says. “Our forecast for an improvement in consumer spending in Botswana in 2022 is in line with our Country Risk team’s forecast that the economy will grow by a real rate of 5.3% over 2022, from an estimated 12.5% growth in 2021 as the low base effects from 2020 dissipate,” it says.

Fitch Solutions notes that “Our Country Risk team expects private consumption to be the main driver of Botswana’s economic growth in 2022, as disposable incomes and the labour market continue to recover from the impacts of the Covid-19 pandemic.”
It says Botswana’s tourism sector has been negatively impacted by the Covid-19 pandemic and the related travel restrictions.

According to Fitch Solutions, “The emergence of the Omicron variant, which was first detected in November 2021, has resulted in travel bans being implemented on Southern African countries such as South Africa, Botswana, Lesotho, Namibia, Zimbabwe and Eswatini. This will further delay the recovery of Botswana’s tourism sector in 2021 and early 2022.”  Fitch Solutions, therefore, forecasts Botswana’s tourist arrivals to grow by 81.2% in 2022, from an estimated contraction of 40.3% in 2021.

It notes that the 72.4% contraction in 2020 has created a low base for tourist arrivals to grow from.  “The rollout of vaccines in South Africa and its key source markets will aid the recovery of the tourism sector over the coming months and this bodes well for the employment and incomes of people employed in the hospitality industry, particularly restaurants and hotels as well as recreation and culture businesses,” the report says.

Fitch Solutions further notes that with economies reopening, consumers are demanding products that they had little access to over the previous year. However, manufacturers are facing several problems.  It says supply chain issues and bottlenecks are resulting in consumer goods shortages, feeding through into supply-side inflation.  Fitch Solutions believes the global semiconductor shortage will continue into 2022, putting the pressure on the supply of several consumer goods.

It says the spread of the Delta variant is upending factory production in Asia, disrupting shipping and posing more shocks to the world economy. Similarly, manufacturers are facing shortages of key components and higher raw materials costs, the report says adding that while this is somewhat restricted to consumer goods, there is a high risk that this feeds through into more consumer services over the 2022 year.

“Our global view for a notable recovery in consumer spending relies on the ability of authorities to vaccinate a large enough proportion of their populations and thereby experience a notable drop in Covid-19 infections and a decline in hospitalisation rates,” says Fitch Solutions.
Both these factors, it says, will lead to governments gradually lifting restrictions, which will boost consumer confidence and retail sales.

“As of December 6 2021, 38.4% of people in Botswana have received at least one vaccine dose. While this is low, it is higher than the Africa average of 11.3%. The vaccines being administered in Botswana include Pfizer-BioNTech, Sinovac and Johnson & Johnson. We believe that a successful vaccine rollout will aid the country’s consumer spending recovery,” says Fitch Solutions.  Therefore, the agency says, “Our forecasts account for risks that are highly likely to play out in 2022, including the easing of government support. However, if other risks start to play out, this may lead to forecast revisions.”

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