Contrary to Verma’s assertions, evidence adduced in court leading to the company being placed under judicial management and final liquidation of Pula Steel indicates that the Verma family was the greatest beneficiary of the deal.

Court records submitted during the application for judicial management shows that CEDA was approached by Pula Steel partners comprising of Wealth Generation owned by Brian Mosenene and Mpho Balopi ; and the Verma Family represented by Verma senior and the spouse. CEDA then injected funds as they believed that it was a good business proposition and especially being in Selibe Phikwe, but before any production could start, BCL developed interest in being part of the project.

CEDA was not aware at all material times that one of the Verma’s was in partnership with the spouse of the BCL General Manager at that time in an unrelated  business nor was it privy to the discussions that led BCL to develop interest in Pula Steel. BCL paid for their consideration in Pula Steel and as per the Shareholders Agreement they were given a controlling stake whilst Phase 1 implementation was underway. Pula Steel under the management of Verma senior as CEO proceeded to procure equipment for Phase 2 with funds that were supposed to complete Phase 1 of the project. This led to a shortfall in funds to complete Phase 1 hence the capital call that resulted.

CEDA questioned the wisdom of allowing such a cardinal transgression in planning and subsequently CEDA declined to take part in the Capital Call and ended up being diluted. CEDA at the time stated to Pula Steel that its decision not to participate was based on the unjustified change in scope without CEDA’s consent and without a proper business case.  Whilst BCL did deposit their portion of the capital call, the Vermas indicated that they had paid a creditor a certain amount and therefore wanted it to be treated as their contribution, whilst the event took place prior to the capital call but could not produce paper trail to that effect.  Disagreements ensued that fuelled the mistrust within the shareholders because it was an expectation that such funds be deposited in an account and be recorded as such.

Hot debate
Besides non-compliance with the agreed capital call governance, funds were being raised for a different purpose than paying the referred creditors of which the resultant effect was that there will be a shortfall on the targeted capital being raised. This was hotly debated and contested, and other shareholders were adamant that the Vermas had not paid as agreed. However, over time as this was being debated, BCL being the majority shareholder decided to recognise the Vermas’ contribution and capital call process was closed and funds released for the company’s use.

Money then finished off very quickly as it came and still the business was not operating optimally. Pula Steel then made another capital call. This time around BCL made it clear that they will not participate because they were in liquidation. Besides BCL, other shareholders proceeded to consider the capital call. Following its internal processes, CEDA reverted and indicated that its exceptional participation woud be based on certain conditions being met which were stipulated in a term sheet.

The conditions that CEDA put in were that a Management Services firm be engaged to ensure that policies and procedures are embedded in the organisation for good corporate governance. CEDA needed to know as to what transpired from a company that required an initial P40m to a company that had already gobbled up more than P120m within a short space of time.

Since CEDA insisted on the Management Services Firm, Grant Thornton was engaged to undertake the assignment. Their results are contained in the report presented to the High Court. It showed that Pula Steel did not adhere to the basic principles of financial management, had poor record keeping, unpaid PAYE obligations to BURS, proper good governance, an improper pricing strategy, over reliance on a narrow customer base in South Africa and exacerbated by questionable related party dealings that were undeclared.

Hence CEDA insisted on the Vermas stepping down from the management team based on the results of the audit that showed that they were not running the company properly, poor financial management discipline, governance lapses, related party transactions and obligations that had no clear contracts. Creditors were not being paid yet money had been contributed by shareholders to among others deal with such matters. There was also employees dissatisfaction and in some cases those who questioned the Vermas were dismissed, an example being Jacob Motlhale who was the finance manager.

CEDA clear
Records seen by Botswana Guardian indicate that CEDA made it clear that its funding must give the Agency control of up to 49 percent so as to put things in order. CEDA required that it has control over three key positions being the CEO, Finance Manager and Production /Technical Manager. Another condition was that CEDA become a signatory in Pula Steel bank account, contributions from shareholders should be deposited in an escrow account at Armstrong Attorneys. 

This was to prevent an earlier scenario where the Vermas had decided to not deposit their contribution in a company account and instead insisted that they paid creditors. Other conditions were that CEDA takes security of Pula Steel plant and land against the funding; that all Pula Steel Directors including the Vermas resign from their positions and new Directors be appointed. This would have given the Vermas only one position.

Further the term sheet was made in March 2017. There was a set date for contributions to have been made but the Vermas and Wealth Generation did not meet the deadline. Only CEDA met the deadline of the capital call and had placed its contribution with the attorneys, and the deadline was extended for other shareholders. Subsequently numerous meetings ensued where the Vermas suddenly objected CEDA conditions and made it clear that they do not want to resign from the company and that they wanted more shares. It was discussed that if they wanted more shares, then they must put in more funds, something that they could not do.

Seeing that there was no progress, CEDA applied for judicial management which was agreed to by all the shareholders including the Vermas. From March to August, nothing could move as the Vermas allegedly changed goalposts time and again citing that CEDA conditions are not fair to them. During this period, the Judicial Manager was in charge of the company but could not do much to resuscitate the business without funding. CEDA did not move an inch on its conditions, citing that Pula Steel is in distress because of the bad management by the Vermas and therefore it cannot ignore such a factor in releasing its funding.  CEDA made it clear at court that its contribution of about P28m is available provided Pula Steel meets its conditions, which were objected to by the Vermas as they wanted control of the company.

The creditors including Pula Steel staff and other shareholders supported the new CEDA deal except for the Vermas. CEDA chief executive Thabo Thamane strongly stood his ground before the Master of High Court during one of the creditors’ meeting held on June 26th 2017. Thamane stated that CEDA could inject capital only if its terms were complied with to avoid money going down the drain. Indications are that had CEDA put in the P28m without clear conditions, the exposure in Pula Steel by the government owned entity would be substantial.

Published in News
Wednesday, 13 March 2019 15:51

Verma in hostile bid to reclaim Pula Steel

Former Pula Steel Casting and Manufacturers director, Depaak Verma came short of accusing government officials, CEDA and judicial management officers of being corrupt during a no-holds-barred tirade this week. Verma called a press conference at Hilton Hotel titled, ‘Where is Pula Steel’ ostensibly to share the family’s side of the story.

The family are the initial shareholders of Pula Steel. He blasted the liquidation and the ongoing tendering process, which seeks to sell the Plant. “So many questions have been asked on the company with much focus lately on why the company went for tendering in the first place,” he said. Verma lost control of his company in 2016. He used the conference to attack officers he met in line of duty accusing them of bringing him down and wanting him out of business. Under the Verma family arrangement, huge sums allegedly went missing as per affidavits filed in court during the liquidation process.

Pula Steel troubles started in 2016 when BCL mine who were the majority shareholders got into liquidation.   In 2017 CEDA approved capital funding amounting to P28, 621, 308, 50 following an application by the Verma family on October 2016. CEDA conditions were that shareholders of Pula Steel indemnify CEDA from any claims laid against the company prior to investment period, as well as resignation of all directors and re-appointment of new ones.

The new shareholding structure left BCL with 22.70 percent shares, Verma (23.25), Wealth Generation (5.5) and CEDA with 49 percent shares. CEDA never deposited the money because they were not satisfied that their conditions were met. This appears to have caused friction between Verma and CEDA’s Thabo Thamane and his leadership team.

Bid claim
Verma said he failed to win his company back despite having put an impressive bid that no one could match. He cast doubt on the criteria used to award the tender. He suspected that CEDA must have financed someone to win the bid, asking rhetoically; “what criteria was used to award the bid? Did I not have the capacity? Did I not have the knowledge? Did I not add value to the plant? I do not know that.

“I do not know if they had given the name of the potential owner, but the name of the potential owner was not yet announced until March 2nd. I am still a creditor I deserve the right to know who bought the plant. “What I can say is in February information came out that my bid is successful. It was agreed that within seven days the potential winner had to deposit 30 percent of the money for whatever bid he put in. I have suspicion of the two companies who won, but I can not name them because it can be defamation”.
 He said he is left with no choice except to take the matter to court as they cannot understand why the bid has not been given to his family.

Amongst those Verma attacked were Chief Executive Officer of CEDA, Thabo Thamane, Judicial manager Vijay Kalyanaraman questioning why he was appointed while he was doing jobs for CEDA at the same time. He also asked why CEDA put conditions before they could invest the agreed amount. He claimed that if he was allowed to continue his company model had the potential to grow even much bigger than Debswana.

Speaking to Botswana Guardian Kalyanaraman said he was appointed in his professional capacity and was not new as he previously did an assessment on Pula Steel, before CEDA came aboard. Kalyanaraman said he stepped out as judicial manager because he realised that there was misalignment between Pula Steel shareholders as they did not have a common vision. “The shareholders under Verma family management had different interest which was not in the best interest of the company”. For his part Thamane said it is his responsibility as accounting officer of CEDA to look after the funds of government. 

“I will do that and I will continue looking after these funds within the set parameters, rules and regulations as determined by the CEDA Board. “I will not want to comment on Verma’s character assassination on my side because we are reviewing his press conference and statements and will be accordingly advised by our advisors”.

Published in News

The Ministry of Investment, Trade and Industry (MITI) will this Saturday launch the first-ever Market Street Day to give manufacturers and retailers an opportunity to network.Public Relations Officer at MITI, Kaelo Kaelo explained that the objective of the event is to afford exhibitors an opportunity to network for business and share knowledge and ideas, in order to expand their market base.

It is also to showcase locally manufactured products and to bring together producers and retailers. Kaelo clarified that the initiative doesn’t cater for property at the moment. He said they want retailers to come and find out for themselves what they can get from the manufactures so that they can view their products and see how they can liaise for business.

Most of the shops in Botswana get their products from South Africa thereby creating a misperception that there is nothing to procure in Botswana.He said they expect over 100 companies to showcase at the event, adding that exhibitors will be there strictly by invitation. He said some of the companies were incubated by LEA, CEDA and BITC. He appealed to members of the public to join the ministry to appreciate locally manufactured products.

The event will be held at Central Business District (CBD) in the space between the High Court and the Ministry of Investment, Trade and Industry.

Published in Business
Tuesday, 26 June 2018 10:39

CEDA’s shady cabal exposed

A declaration of war on corruption by the CEO of CEDA, Thabo Thamane, has set him on a collision course with disgruntled employees challenging their dismissal after they were found guilty of contravening the Agency’s conditions of service.

Thamane recently vowed to rid CEDA of corrupt employees in a bid to restore its integrity and trust. Subsequent to introducing the declaration, Thamane was quoted extensively in the local media vowing to discipline corrupt employees who actively violate CEDA policies and procedures. “We have to restore Batswana’s trust in us because we are custodians of public funds,” said Thamane.

The ink had hardly dried on his statement before CEDA was called once again to defend its stance last week at the Francistown Industrial Court where one of its employees, Victor Chivasera who was dismissed after being allegedly found guilty of negligence and contravening the Agency’s rules and regulations, had challenged the decision.   Representing CEDA, attorney Doctor Pusoentsi of Modimo & Associates argued that   Thamane’s decision was procedurally and substantively fair and therefore Chivasera's application for reinstatement must be dismissed because his relationship with CEDA has broken down irretrievably and “he is not entitled to any compensation,”.

BG News has learnt that Chivasera was dismissed in the wake of a P900 000 corruption scandal that was allegedly exposed by a routine patrol by the law enforcement agencies which culminated in the arrest of illegal immigrants who were working at a construction site. It is said that upon being apprehended, the illegal immigrants allegedly revealed that they were employed by a certain Kabelo Moalosi who worked as Portfolio Executive - Services at CEDA Palapye Branch. Further investigations revealed that CEDA had recently awarded a P900 000 loan to a certain Modiro Moalosi to construct a guest house at the same plot at which the illegal immigrants were arrested.

It is said Modiro Moalosi turned out to be Kabelo Moalosi’s mother. Kabelo Moalosi later confessed to a forensic investigations team that had been commissioned by CEDA that he prepared and submitted the loan application on behalf of his mother. He also allegedly informed his two colleagues - Victor Chivasera and Malebogo Moseki - about the project. Chivasera, who was employed as Team Leader, received the application and later allocated it to Moseki for processing.

The Investigations also revealed that Moalosi, Moseki and Chivasera are members of the same church. It is further alleged that Moalosi was actively involved in the appraisal of the loan application as he captured critical documents into the CEDA computer system. He also allegedly conducted site visits and filled out the Loan Appraisal Report. The loan application in question was allegedly later recommended for approval and endorsed by Chivasera.

Having satisfied themselves the forensic team later reported that Moalosi had violated principles of conflict of interest as defined by the Corruption and Economic Act and the CEDA Conditions of Service. Both Chivasera and Moseki were accused of negligence as they disbursed payments without verifying that indeed work had been done.

Subsequent to their investigation CEDA forensic team concluded that both Chivasera and Moseki were negligent in their duty because they both never met, saw the owner of the project  and, or engaged her in any way, but instead proceeded to pay the contractors without any building inspection certificates to confirm that work had been done. Based on the above, CEDA dismissed the trio of Chivasera, Moseki and Moalosi. Chivasera has since launched an application challenging his dismissal. The parties will file their submissions in July while judgment will be delivered in August 2018.

Published in News

Citizen Entrepreneurial Development Agency (CEDA) has funded 1200 youth enterprises for a total of P600 million to date, says Chief Executive Officer, Thabo Thamane.

Briefing the media on Tuesday, Thamane said out of the money disbursed, P326 million has funded Agribusiness projects, P187 million funded services projects while only P71 million funded property and manufacturing projects. 

He said over the years the agency has promoted entrepreneurship, job creation and youth empowerment through provision of funding, business advisory as well as training and mentoring services for new entrepreneurs. 

“We strongly believe that young people are not only key drivers of future prosperity but also vital untapped human resource,” said Thamane explaining further that since 2014, CEDA has provided training to 277 young entrepreneurs, out of which 188 were trained on procurement and business management, while 77 were trained on piggery production.

Thamane said the agency is concerned with project mismanagement especially the youth projects under Young Farmers’ Fund. He said about 20 percent of youth have abandoned their projects. “When we visit these projects we always realise that the parents have now taken over the projects and the youth are no longer involved in them. This might be an indication that parents use the youth to access funding, but we are dealing with the problem,” he said.

He said through its new Mabogo-Dinku product the agency has disbursed P4.5 million creating over 5000 jobs, mostly for women. The product offers loans to individuals who belong to self-help groups that support them in saving and loan repayment accountability and through surety at application stage. 

The loans range from P500 to P150 000 per person and are payable in a period of three to 12 months with repayment frequency ranging from weekly. CEDA has reserved P20 million for the product during 2017/18 financial year.

Thamane also highlighted that the agency has been able to generate income to support its operations. The agency receives government subvention each year to fund businesses. It also generates income in the form of interest and collection on loans already financed to augment government subvention. 

“Government has given CEDA grants amounting to P934.7 million over the last three years and the agency disbursed P1.19 billion in the same period,” said Thamane. CEDA has achieved a collection rate of 105 percent in the last financial year ending March 2017.  The set target for collection was P330 million and the actual collection amounted to P346 million.

Published in Business
Wednesday, 15 February 2017 16:01

CEDA calls the shots at Pula Steel

Government’s funding agency- CEDA - has skilfully manoeuvred its way to reclaim the majority shareholding of the country’s only steel plant - Pula Steel.

Had this not happened, the plant would have gone under the hammer together with its former parent company -BCL- when the latter was placed under provisional liquidation. Not only has CEDA taken control of Pula Steel, but it has appointed an audit firm, Grant Thornton to appoint qualified personnel to executive management as well as to do status records with the aim of reporting any wrongdoing to the law enforcements agencies.

The appointment of Grant Thornton to probe Pula Steel is the second following the appointment of another audit firm, Pricewaterhouse Botswana, to investigate BCL investment into the company by Minerals Development Company Botswana (MDCB).
The multimillion Pula plant has never operated since the shareholders invested in it. It was hoped it would start production after dilution of the BCL shares following a new capital call.

The shareholders set the date for production of the much in demand billets for 1st February 2017, but that was postponed to ensure the atmosphere was conducive for production including paying the employees outstanding salaries for December and January. Last week the plant employees decided to take the law into their hands by locking their CEO and Investor, Ranvir Kumar Verma inside the plant as they demanded to be paid their salaries as well as the removal of the Verma family from key managerial positions.

The situation calmed down after the intervention of Thabo Thamane, the chief executive of CEDA who assured them that they’d receive their dues as investors have injected new capital. Botswana Guardian investigation has established that the latest capital call of the Pula Steel which saw all the shareholders, except for BCL, injecting capital in order to save the company from collapsing, elevated CEDA to the majority shareholding at 49 percent after they bought equity. This automatically diluted BCL from 64.5 to 22 percent shareholding. Other shareholders are the Verma family and a citizen-owned company, Wealth Generation who own 23.5 and 5.5 percent respectively.

BG News has it on good authority that although BCL was represented at the board meeting when capital call was made, its representative, Nigel Dixon- Warren, who is the provisional liquidator, could not commit BCL as he does not have the mandate to either sell or buy on behalf of the company. It is said that the total capitalisation of Pula Steel is P29 million, and when CEDA bought equity, they did not only become the majority shareholder, but they took control and proposed to other shareholders that a management company should be appointed at Pula Steel.

BG News has learnt that CEDA has appointed a local audit firm, Grant Thornton which started last December. The first assignment of the latter was to do status records, meaning that the audit firm was mandated to scrutinise every document to ensure that all is in order. Part of the conditions that CEDA has set is that should Grant Thornton’s findings reveal any transgression when they scrutinise Pula Steel, then CEDA will refer such infractions to law enforcement agencies such as DCEC and others. CEDA has also proposed that Thornton should help to find suitable personnel for the positions of CEO, Chief Financial Officer and Technical Manager for Pula Steel.

Current shareholding
BG News has established that the meeting that the CEDA did not attend led to their shares being diluted to 5.5 percent as they had not injected any capital. The same meeting led to BCL majority shares increasing to 64.5 percent, while Verma family went high to 23.5 percent with Wealth Generations staying at 6.5 percent.

BCL provisional liquidator, Nigel Warren- Dixon could not say much save that, “I am aware of what is taking place at the Pula Steel board because I sit there in my official capacity as provisional liquidator representing BCL. But, I am unable to discuss because Pula Steel is a private company and discussing such matters with other parties will be a breach of my duties in accordance with the Company’s Act.” The CEO of CEDA Thabo Thamane could not be drawn into much discussion but confirmed that Pula Steel will turn around and CEDA is committed to ensuring that jobs are protected and even more will be created as the plant operates.

Published in News
Thursday, 15 November 2012 13:18

CEDA spent P3.2bn in 10 years

Faced with funding 80 percent start-up businesses, Citizen Entrepreneurial Development Agency (CEDA) has managed to survive 67 percent of its funded business beyond three years, spending a whooping P3.4 billion in the process. CEDA has funded 5324 start-up businesses and expansions in various sectors of the economy, ten years since its inception.

At it establishment CEDA inherited a myriad of challenges from its predecessor programmes such as the Botswana Enterprise Development Unit (BEDU), the Financial Assistance Policy (FAP) and Micro Business Fund. To date CEDA has spent P2.291 billion in Development Fund.

The Development Fund is distributed as follows, the Service sector accounts for P1.076 billion, Agribusiness P687 million, and Property and Manufacturing P526 million.  Young Farmers Fund which government has earmarked to address the problem of unemployment amongst the youth, through creating viable businesses in the Agricultural sector accounts for P216 million.

CEDA as an Agency for the development of viable sustainable citizen-owned business enterprises provides a Credit Guarantees Scheme (CGS) for citizen owned businesses, which intend to borrow from commercial banks but do not possess collateral required by the banks.

CEDA Guarantee Scheme accounts for P352 million. CEDA received more responsibility with takeover of the Citizen Entrepreneur Mortage Assistance Equity Fund (CEMAEF), which at the moment accounts for P17 million, whilst equity investments account for P138 million and CEDA Venture Capital Fund P212 million.

Vice President Dr. Ponatshego Kedikilkwe recently revealed that collectively these enterprises have created an estimated 30, 607 jobs for Batswana.

“As we celebrate our achievement of the past 10 years, we also reaffirm to Batswana, that CEDA will remain a financial development arm tasked with the responsibility of developing entrepreneurs through the provision of funding, requisite training and mentoring, working together with its sister parastatal, the Local Enterprise Authority (LEA),” said Kedikilwe.

Published in News

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