Investigations commence on CMB transactions

  • Loses case with costs at Court of Appeal
  • Court confirms Statutory Manager at CMB
  • NBFIRA, BPOPF win against CMB


The Court of Appeal has confirmed Peter Collins as Statutory Manager to troubled asset management firm, Capital Management Botswana (CMB), which will kick start official investigations into CMB transactions involving over P447 million in pensioner funds.
Botswana Public Officers Pension Fund (BPOPF) in partnership with regulator, the Non Bank Financial Institutions Regulatory Authority (NBFIRA) appealed a case in which High Court Judge Omphemetse Motumise had dismissed the appointment of Collins, arguing then that grounds on which the appointment was to be made, no longer exist.
NBFIRA, the BPOPF as well as insurance firm Bona Life, had teamed up in a quest to get the High Court to accede to the statutory management of embattled asset management firm, but Motumise ruled in favour of CMB.
Initially, NBFIRA appointed Peter Collins as CMB Statutory Manager, but CMB directors, led by CEO Rapula Okaile opposed the appointment successfully through lawyers Kanjabanga and Associates. NBFIRA’s attempt to put CMB under statutory management was motivated by a request for intervention by insurer Bona Life. Through its CEO Reginah Sikalesele-Vaka, Bona Life argued that because of the alleged financial irregularities at CMB, it was not sure if its assets worth P133 million held by CMB were safe, since no records were available to prove to prove otherwise.
By December last year, the BPOPF took CMB to court seeking to legitimize its decision to terminate CMB as a General Partner in the Botswana Opportunities Partnership (BOP), a private equity fund in which BPOPF is a Limited Partner. About P880 million was approved for investment through BOP which was managed by CMB. To date, P447 million was drawn down. The case was successfully defended by CMB. The BPOPF’s plan B was to team up with NBFIRA to have CMB placed under statutory management. BPOPF wrote a letter to NBFIRA, pushing the regulator to either suspend or cancel the CMB license because CMB was in breach of several of its contractual obligations.
Motumise subsequently ruled that NBFIRA failed to back its actions with evidence and criticised the organisation for acting irrationally.
In his judgement, Justice Motumise said that little doubt exists that the action taken by the NBFIRA was drastic, with adverse and far reaching implications to CMB, its directors and shareholders. He said the immediate effect of this decision would be to divest the company from the control of its directors and shareholders and render them useless spectators in its management. Beyond that, Justice Motumise said there are implications to CMB business operations, particularly its clientele who would, by right be entitled to consider withdrawing their accounts from CMB. He further said existing and potential clients would have to consider whether to entrust CMB with new work.
Unsatisfied with Motumise’s judgement, BPOPF and NBFIRA further proceeded to the Court of Appeal where they complained that he erred in failing to consider the disappearance of P400 million as a possible financial crime, rather than a contractual dispute, and generally in finding that the other jurisdictional facts had not been sufficiently considered.
Further to their grounds of appeal, the two institutions accused Justice Motumise of failing to address the protection of interests of clients of CMB when considering whether all or any of the second set of jurisdictional facts was present.
Three Court of Appeal Judges, Justices Kirby, Walia and Brand heard the matter and ruled that Justice Motumise erred in granting an order reviewing and setting aside NBFIRA’s decision to appoint a statutory manager, and that the decision must be set aside. In order to justify its initial appointment of a statutory manager, the three judges said it had to appear to NBFIRA, on rational grounds, that one or more of the jurisdictional facts listed on section 46 (4) (a) (i), (ii) and (iii) was present and that it was necessary to appoint the manager. NBFIRA reacted by sending an inspector in January 2018 to investigate CMB. The inspector ascertained that CMB conducted its business through a complex web of subsidiaries and associated companies. Okaile reportedly denied the inspector access to CMB records, and thus the inspector was unable to properly report on CMB activities.
To the three judge panel, that was the first red flag. The inspector discovered that he purportedly audited accounts of CMB for the financial year ended 31st December 2016 which had been submitted to NBFIRA in September 2017 (well beyond the time allowed), had not in fact been signed by the auditors Deloitte & Touché at all. To the three judges, that was the second red flag.
In the case of BPOPF, it was said to have placed P447.5 million of pensioners’ funds in the care of CMB through its management of Botswana Opportunities Partnership (BOP), a private equity fund in which BPOPF was a 99 percent partner and that CMB had purported on disputed contractual grounds to ‘dispose of’ BPOPF’s share of BOP in doubtful circumstances, for only P50 million to a unnamed party. Thus, nearly P400 millions of pensioners’ would be lost if urgent action is not taken.
Okaile and CMB were further ordered to settle costs to NBFIRA and BPOPF including the costs of counsel.