Botswana Public Officers Pension Fund BPOPF has failed in its court bid to stop Capital Management Botswana (CMB) from implementing its decision to eject BPOPF from the partnership Fund known as Botswana Opportunity Fund.
At the centre of controversy is whether the CMB who are a General Partner and Fund Managers of BPOPF’s P880 million have breached the Partnership Agreement (PA) as alleged by BPOPF which claims that since late 2017 it has been requesting information from CMB to which it is entitled under the PA, but nothing has come forth.
The information includes but not limited to audited financial statements of the Fund, in the form prescribed by the PA. BPOPF states that it later appeared that there is a series of breaches of the PA and the Advisory Management Services (AMS) agreements by CMB. Boitumelo Molefe, the Chief Executive Officer of BPOPF states in her affidavit that, “those breaches were material, serious and mostly ongoing, and are incapable of being remedied. Thus CMB failed to act in the best interest of the Fund and its investor, BPOPF.”
But CMB counter argues that they managed the Fund well and would like to continue managing the Fund. BPOPF brought the matter before Justice Godfrey Radijeng on an urgent basis on 27th Decenber 2017 where seasoned Attorneys were lined up. Attorney Gabriel Kanjabanga appeared for CMB, while BPOPF was represented by Advocate S.D Van Nierkerk of South Africa appearing with attorney TC Dumba of Minchin and Kelly
BPOPF argues that CMB has ejected it from the Fund of which it was a legitimate limited partner and this through the arbitrary and completely unjustified designation of the BPOPF as a defaulting limited partner. It has been sent off with only a fraction of what it invested in the Fund, with no accounting provided for an enormous discrepancy between its investment and the net proceeds paid out to it.
In his order issued on December 27, Justice Radijeng dismissed the application with costs for want of urgency. “The application is not urgent and there will be no need for CMB to address the court on points in limine,” he ruled.
Part of Justice Radijeng’s ex tempore ruling states that the two parties entered into a partnership agreement in November 2014 by which BPOPF invested in a private equity (B0P). BPOPF was the limited partner while CMB was appointed General partner. BPOPF submitted that during the period June 2015 to June 2016 there were five (5) drawdown notices issued by CMB by which BPOPF paid P447.50 million of the total P880m committed. BPOPF averred further that during the course of 2017 certain events and facts were uncovered regarding the manner in which CMB was operating the Fund which caused BPOPF grave concern. The BPOPF commissioned its own investigations into the actions of CMB regarding the Fund. The outcome of the investigations was that CMB had and continued to commit a series of material breaches to the PA and AMS placing the Fund and its assets in jeopardy.
On the determination whether the application meets the urgency test, CMB submitted that BPOPF is complaining of alleged breaches by CMB that it has known for a considerable time since the parties contracted.
“I agree with CMB that BPOPF has sat on their rights and failed to move with expedition when the chronology of the event set out and complained about as forming the background to the application were within BPOPF’s power to act on”, said the Judge.The parties’ relationship started in 2014 when BPOPF decided to invest for the first time in private equity investments, specifically unlisted private companies in the country and elsewhere in Southern Africa. In her affidavit filed before the court Molefhe states that with no prior experience in investments of this nature, BPOPF sought a professional private equity investment manager to assist it in making such investments.
This is the stage where CMB presented itself to BPOPF as a private equity investment manager that was in the process of establishing a new equity fund and the final deal between the two was sealed in November 2014 through a Partnership Agreement.
Under the Agreement, CMB was amongst others appointed as the Fund Manager responsible for managing the assets of BPOPF. Since the formation of the Fund, BPOPF remains a limited partner having committed P880 million to the partnership. BPOPF argues that it is the sole investor of the partnership and accordingly it is the beneficial owner of the vast majority of at least 99 percent of the assets of the Fund. Its interest and that of the 166, 879 members are inextricably bound up with the Fund
Molefe argued in her affidavit that CMB has continuously avoided and ignored all requests for clarity in its failure to respond to BPOPF’s letter of 18 December 2017. Further CMB is no longer acting in the best interest of the Fund, but rather in its own, self-serving interests, with significant harm and prejudice to the BPOPFand its members.
She protested that CMB although CMB has been removed as the general partner of the fund, it continues to act as if it is still the partner, and has purportedly taken radical and significantly prejudicial steps and actions in doing so.She said that whilst a payment of P50 million had been made to BPOPF by CMB on 24 November 2017 for the next proceeds of its interest following the alleged sale, the transfer was not accompanied with any letter notifying BPOPF of the payment.
She said it was only on 12 December 2017 when BPOPF did its accounting reconciliation that payment came to light. Molefe's affidavit says that the partnership with CMB was BPOPF’s first foray in investments of this nature. With no prior experience in this field of investments BPOPF, and not being fully aware of all the risk associated with such investment structure, relied on CMB and legitimately placed its trust in CMB that it would abide by the terms of the agreement and discharge its fiduciary duties towards the Fund and BPOPF.