P100bn scandal opens a can of worms
Drenched in allegations of looting of uncountable billions in public funds, political unrest emanating from bare-knuckled ructions between President Mokgweetsi Masisi and his predecessor and risks of being blacklisted for non-compliance with international anti-money laundering requirements, Botswana’s ratings in credit, corruption and transparency are headed for the pits, writes KEABETSWE NEWEL.
Already, billions of pula invested offshore in foreign reserves by the Bank of Botswana (BoB) and pension monies invested by the Botswana Public Officers Pension Fund (BPOPF) and the Debswana Pension Fund (DPF) are at risk of being returned home because Botswana is viewed as an accomplice in money laundering activities.
In the wake of these money laundering troubles, the head of the Directorate on Corruption and Economic Crimes (DCEC), Brigadier Joseph Mathambo, revealed on national television that they were investigating cases in which funds of around P56 billion have been looted from the national purse. He however would not go into detail as to who took the money, how it was or where the money was taken. A few months later, an agent of the Directorate of Intelligence and Security Service (DISS), Wilheminah Maswabi, is charged with financing terrorism by the Department of Public Prosecutions (DPP).
About US390 million is alleged to have been found in her several bank accounts by the state. Further, Maswabi is said to have transacted some funds to former DISS director general Isaac Kgosi and former president Ian Khama. The state further claims that a breathtaking US10 billion was looted during the Khama administration.
Such allegations are surfacing at a time when Botswana has a deadline of January 2020 by the international community to have put in place legislation aimed at curbing money-laundering or face a complete blacklist. Being “grey-scaled” means that Botswana has been given a final warning to comply, failing which it will be blacklisted. Whether Botswana will have complied in the two months left or not remains to be seen.
Investment experts say being a small economy, Botswana has limited investment opportunities, which drove the country to invest billions of pula in countries like the United States and Europe in pension funds as well as in foreign exchange reserves. Financial statistics from the Bank of Botswana (BoB) show that Botswana had a whopping P73 billion in forex reserves as at August 2019, held by offshore asset managers in cities like London and New York. As things stand, there are risks that these countries could return all these funds.
BPOPF has over P65 billion in assets under management (AUM). According to the Fund’s investment structure, 65 percent of that money, which is the equivalent of over P42 billion, is held by foreign asset managers. DPF manages over P7 billion over P3 billion of it offshore., BPOPF Principal Officer Boitumelo Molefe and the chief executive of DPF Gosego January admitted in previous interviews that Botswana’s being grey-listed posed a risk to their investments.
The Botswana Gazette contacted the Director General at the Financial Intelligence Agency (FIA), Dr. Abraham Sethibe, in connection with the looting of US10 billion in funds from the state during ex-president Khama’s tenure. This publication also wanted to know if reports of this looting could not compromise Botswana’s non-compliance to anti-money laundering requirements by the International Financial Action Task Force (IFATF), considering that the deadline is in two months. Dr. Sethibe declined to comment on the matter.
While the reports that around P100 billion was looted from state coffers are only as allegations so far, Tshepang Loeto, a financial expert and investment analyst with Stanlib Asset Management Botswana, says if it turns out to be true, Botswana’s sovereign credit, transparency and corruption ratings could be affected to the negative. According to Loeto, when credit rating agencies examine a country, top on list is political stability. “They consider whether or not there is unrest that is likely to unsettle investors and even affect productivity and economic output, and consequently economic performance,” he said.
Further, he continued, credit rating agencies like Moody’s and S&P Global consider the level of foreign reserves regarding whether they could support the country in case of a financial blackout, as well the country’s fiscal prudence. Budget deficits and prudent management of state coffers are considered.
S&P Global has affirmed Botswana’s 2019 sovereign credit ratings of ‘A-‘ and ‘A-2’ for long- and short-term bonds denominated in domestic and foreign currencies. However, there are issues of rising deficits underpinned by increased national spending which further compels government to drawdown on reserves.
At brokerage firm Motswedi Securities, Head of Research Garry Juma says rating agencies base their information on data. “The circulating rumours are still speculation until proven true,” Juma said in an interview. “However the allegations are negative and will make investors skeptical about bringing their money to Botswana.”
Stanlib’s Loeto added that the unending fight between Masisi and Khama is bad in the eyes of the international community because it paints Botswana with a black brush, hurting the country’s long standing reputation as a peaceful and democratic nation. Revelations that continue to tumble out of the closet are linked to the ructions between the two men. However, so far there is little of Khama’s histrionics ending because the ex-president seems to have made it his purpose in life to keep his successor out of balance. Loeto holds that should the disturbing rumours of looting of the fiscus prove true, the country’s transparency ratings would be harmed.
Botswana is the 34th least corrupt nation out of 175 countries, according to the 2018 Corruption Perception Index as reported by Transparency International. Corruption ranking for Botswana averaged 31 from 1998 until 2018, reaching an all time high of 38 in 2007 and a record low of 23 in 1998. Loeto says institutions like the Botswana Investment and Trade Centre (BITC) and the Special Economic Zones Authority (SEZA) will have a hard time attracting investors to Botswana because of the negatives emanating from the country’s political side.
On the occasion of Botswana’s 12th general elections, 23 October 2019, ENCA News in South Africa interviewed author and political commentator Victor Kgomoetshwana. He said that for a country that has been rated positively by Transparency International on corruption and transparency, recent developments in Botswana were suddenly surprising on the negative side,