POLITICIANS PUMP E50M INTO ESWATINI MOBILE

MBABANE – The new team of politicians that recently assumed office for the next five years (November 2018 to November 2023) has inherited a huge financial risk.
They have the Members of Parliament and Designated Office Bearers Pension Fund (MOPADO) Board of Trustees to thank for this.

This is because MOPADO, which until Tuesday was chaired by the country’s longest serving MP Marwick Khumalo, invested E50 million with Eswatini Mobile despite being advised that the investment was risky. 
Other members of the Fund were former Senator David Dlamini, former Mkhiweni MP Rodgers Mamba, former MP Thulani Masuku, former Gege MP Mbongiseni Malinga, former Senator Thandi Shongwe, former Ludzidzini Council member Absalom Muntu Dlamini, former Chief Officer in the King’s Office Bheki Dlamini and Ministry of Finance representative Mxolisi Fakudze.

warned against investing

MOPADO’s investment managers, Imbewu YeSive Investment PTY LTD, warned that investing this amount of money could result in a ‘significant loss’.
This was a major difference from an amount of E10 million-worth of shareholding that Eswatini Mobile had offered to the Fund.  
Instead, Imbewu recommended that at least E15 million should be invested in Eswatini Mobile.

The Times SUNDAY has seen the advice, which is dated February 28, 2018, that the investment managers wrote to MOPADO.
“Imbewu has been informed that the trustees wish to now consider investing E50 million of the MOPADO Pension Fund’s asset into Swazi Mobile (now Eswatini Mobile). There are a few pertinent issues that need to be discussed, debated and agreed when considering this proposal,” Imbewu wrote.

The first issue raised by the investment managers was that MOPADO’s investment policy statement required that any investment into private equity should be done with full trustee approval, “especially since the trustees were aware of only E10 million being invested into this project”.

The second issue was that “from an equity perspective, the concentration risk of allocating in excess of 15 per cent of the Fund’s assets in a single entity is extreme, and there is no underlying security”.
Thirdly, the investment managers said “from a debt perspective, the concentration risk of allocating in excess of 15 per cent of the Fund’s assets in a single entity is extreme, therefore a thorough analysis of the Swazi Mobile balance sheet is required and the requisite security needs to be pledged by them”.

distribution of assets

Imbewu then raised a fourth concern, which was that the term of office of the then Parliament was coming to an end and the distribution of assets after the dissolution of Parliament could manifest in one of two possible scenarios.
The first scenario was a massive disproportionate holding in Eswatini Mobile shares, where the remaining and new members (politicians) would ‘take on this risk’.
The second scenario was “the forced sale of Eswatini Mobile shares into a possibly illiquid market”, which the investment managers said “could be at a significant loss”.
An illiquid market, according to investopedia, is the state of a stock, bond, or other assets that cannot easily be sold or exchanged for cash without a substantial loss in value.

It states that illiquid assets may also be hard to sell quickly because of a lack of ready and willing investors or speculators to purchase the asset.
Additionally, investopedia says a company may be illiquid if it is unable to obtain the cash necessary to meet debt obligations.
The business dictionary describes it as a market in which it is difficult to sell assets because of their expense, lacks interested buyers, or some other reason.
An example of this is listed as including real estate, some stocks with low trading volume or collectibles.

It is said that assets in illiquid markets still have value and, in many cases, very high value, but are simply hard to sell.
Having outlined all these issues, Imbewu then wrote: “The initial Swazi Mobile proposal was based on having strategic investors from within Swaziland (now Eswatini) as the key stakeholders. MOPADO had been approached by Swazi Mobile with an offer to take up E10 million shareholding that was available. This level was within the five per cent allocation that was envisaged per deal. Considering therefore the increased value of MOPADO, this could be increased to E15 million.”
The investment further advised: “Imbewu would therefore recommend that, given the negotiated share price of E10 per share, the Fund invest E15 million and acquire the corresponding number of Swazi Mobile shares. We look forward to your further consideration in this regard. We welcome any alternative suggestion though and are available to assess the impact.”

The Times SUNDAY contacted Comfort Shabalala, who is MOPADO’s Principal Officer, to find out the rationale of going against Imbewu’s advice and he said he could not comment because he was bereaved.
“I have lost my father and I am currently at home making preparations for the funeral. I cannot say anything at the moment,” he said. He said as an Eswatini citizen, this reporter should understand that he could not speak because he was bereaved.
“Contact me on Monday, please,” Shabalala said.  
He stated that there was no one that could speak on his behalf because even the MP Khumalo-led Board of Trustees had left office on Tuesday, April 30, 2018 following the lapse of their extended stay in office.

initial five-year term

The trustees’ initial five-year term was supposed to end on December 15, 2018 but Finance Minister Neal Rijkenberg granted them an extension, something that irked most politicians as they felt the minister did not have such powers.
Meanwhile, MP Khumalo said he could not comment because he was no longer part of the MOPADO Board following the lapse of their term of office. However, a former Board of Trustees member said they had no knowledge of the advice from Imbewu that was against investing E50 million in Eswatini Mobile.

“Such advice was never tabled before the Board and the person who wrote this advice is a mere office clerk who is not an advisor.  Maybe the advice was given to Shabalala but it never reached the level of the Board,” he said.
The former trustee wondered why it was an issue that they had invested in Eswatini Mobile when other local pension schemes had also made similar investments with the mobile telecommunications company and even invested more money compared to MOPADO.
“In any case, we are answerable to the members of the fund who are the ones who should raise concerns if any and we will duly give responses,” added the former trustee.

seek clarity from khumalo

On the other hand, a member of the Fund, who is a former Cabinet minister, spoke to this publication on condition of anonymity, and said they had confronted Khumalo to seek clarity on why his team ignored Imbewu’s advice.
“He told us that if they had invested E15 million, the Fund would not have qualified to have a representative in the Eswatini Mobile Board. He said the E50 million meant they were eligible to have one of them sitting in the board and in that way would be able to monitor the investment,” the member said.  

He said Shabalala is the one who now sits as part of the Eswatini Mobile Board as a representative of MOPADO.
“Khumalo said they decided to have Shabalala represent the Fund in the Board because the term of office for the Fund’s trustees lapsed after five years yet the principal officer would always be there and would ensure continuity,” stated the member.
When Imbewu Yesive Investment  PTY Ltd were contacted, they referred all comments to MOPADO, citing confidentiality.

The Eswatini Mobile investment is the second deal that the MP Khumalo-led Board undertook, which is now public knowledge. The other one is the E12 million purchase of land that used to belong to Eswatini Mobile founder and businessman, the late Victor Mfana Gamedze. The land was sold to MOPADO by Gamedze’s wife, Lungile Hotencia Gamedze, on August 23, 2018.

The land, which measures 1.3480 hectares, is situated at Ezulwini near Corner Plaza and Cash Build Hardware on the stretch where Lungile’s father, the late Prince Makhungu, has a homestead.
The princess sold the property to MOPADO in her capacity as a trustee of Madlenya Trust, which belonged to her late husband.

seeking direct investments

According to Imbewu, MOPADO has been actively seeking direct investments in Eswatini following the legislated increase in the local allocation to 50 per cent of the value of the Fund.
The Securities Act of 2010 compels pension funds to invest 50 per cent, as opposed to the previous 30 per cent, of their assets locally  in an aim to release a substantial amount of pension fund assets invested offshore back to Eswatini to support the local economy. This then led to Imbewu carrying out an analysis to determine the appetite for these types of investments considering the returns achievable as well as the various risks inherent in them.  
One part was the membership analysis, which looked at the possible liquidity requirements of the Fund based on the members’ ages.

“From this analysis, we noted that about 43 per cent of the Fund assets are for members who could retire immediately. The balance of the assets is for members who are not eligible for retirement, however, they would still require a third in cash on exit from the Fund. Therefore, the Fund should aim to have about 60 per cent of the assets available immediately to accommodate exiting members,” the investment managers said.
The other part of the analysis was the option of allocating 20 per cent of the Fund’s assets in private equity.

This, according to Imbewu, would then result in the immediate liquidity level of the Fund being at around 60 per cent.
“This would meet the needs of the Fund while also achieving the objective of having exposure to direct investments. The Fund would then consider three or four projects for direct investment of about five to 10 per cent each depending on the type of project and the risk and liquidity levels of each as the opportunities arose,” stated Imbewu.

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