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TITO MBOWENI’S BODY QUESTIONS INYATSI’S E150M

09/08/2020 08:52:00 BY MFANUKHONA NKAMBULE

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MANZINI – The Financial Sector Conduct Authority (FSCA) of South Africa is questioning an investment of E150 million given to Inyatsi Construction by SA asset managers.
A South African company styled JM BUSHA Asset Managers (Pty) Ltd invested the money with the country’s leading construction firm to raise capital.

It is alleged that the investment was unauthorised as the clients (owners of the funds) were not aware it had been given to the construction company.
The FSCA, established by the Financial Sector Regulation Act 9 of 2017, is in charge of the oversight and regulation of the non-banking sectors of South Africa’s financial services, and is responsible for market conduct regulation and supervision.
It reports to Tito Mboweni, the Minister of Finance.

counterpart

It must be said that JM BUSHA Asset Managers (Pty) Ltd is the same entity whose sister company JM BUSHA Capital Swaziland was taken to court in October 2019 by FSCA’s Eswatini counterpart, the Financial Services Regulatory Authority (FSRA).
FSRA approached the High Court on October 9, 2019 on an exparte basis seeking an order to, among other things, interdict and restrain Inyatsi Construction Group Holdings (Pty) Ltd and PricewaterhouseCoopers Services from paying JM BUSHA Capital Swaziland (Pty) Ltd a sum of E16 million.

These were proceeds of Inyatsi Construction Holdings Medium Term Note Series ICL 206 and 207, which were due for payment on October 11, 2019. The Times SUNDAY has seen documents from South Africa’s FSCA wherein it complains that JM BUSHA Asset Managers (Pty) Ltd invested a portion of funds for its five South African clients, mainly Workers Pension and Provident Funds, with Inyatsi Construction without their (clients) knowledge.

Apart from the E150 million invested with the construction company, JM BUSHA Asset Managers allegedly invested E200 million with Shepherd Bushiri Investments, a company incorporated under the laws of South Africa.
It was founded by Prophet Shepherd Bushiri, the senior Pastor of Enlightened Christian Gathering (ECG), which has a branch in Eswatini.
Another entity that was listed among companies that received unauthorised investment is the SME Bank Namibia which was given E60 million.

The company that invested the money with Inyatsi made an enforceable undertaking in terms of Section 151 (1) of the Financial Sector Regulation Act of 2017.
Reads Section 151 (1): “A person may give a written undertaking to the responsible authority concerning that person’s future conduct in relation to a matter regulated by a financial sector law, and that undertaking, upon its acceptance by the responsible authority, becomes enforceable by the responsible authority as contemplated in this Act.”
Subsection 2 was also invoked, which reads: “A written undertaking referred to in subsection (1) may include an undertaking to provide specified redress to financial customers.”

limitations

The undertaking was signed by Joseph Makamba Busha on June 23, 2020 on behalf of JM BUSHA Asset Managers (Pty) Ltd and FSCA’s Divisional Executive Brandon Topham on July 13, 2020. Reads Article 6 of the enforceable undertaking: “JM BUSHA did not comply with the guidelines, limitations and restrictions provided for in the investment mandates of these clients and were consequently unauthorised investments. In addition, JM BUSHA did not properly disclose the investments to the clients.”
The Times SUNDAY contacted the FSCA if it had an audience with Inyatsi Construction to establish facts of the matter and what the money (E150 million) was for. In response, the Authority’s Communication Department told this publication that the money was given to Inyatsi as capital investment.

FSCA stated that it did not investigate why the company wanted to raise capital because such practice would have been outside its scope and jurisdiction. Further asked how it discovered that Inyatsi received an investment of E150 million, the SA statutory body said it has extensive powers of investigations. It said it could subpoena documents, interview persons under oath and obtain relevant evidence such as bank statements, phone records, to mention a few of its powers and functions.
Would there be any disciplinary action against Inyatsi? The FSCA made it clear in its statement that the Eswatini company was not subject to its jurisdiction.

In fact, FSCA said it did not express an opinion to the effect that Inyatsi had contravened any law. Gugulethu Bennett, the Group Marketing Manager at Inyatsi Construction, said her company was aware of the matter. Bennett was asked if Inyatsi Construction was aware of the undertaking made by JM BUSHA Asset Managers (Pty)Ltd wherein invested a portion of funds of its clients with her company to the tune of E150 million.

biannually

She said Inyatsi had medium term note which was paid biannually. The group marketing manager disclosed that it had to be repaid by October 2021.
She pointed out that they had an agreement in place with the asset managers, which they were abiding by.

Joseph Makamba Busha, the Representative of JM BUSHA Asset Managers (Pty) Ltd, declined to comment on the matter, but hinted the suspension of his company’s licence by FSCA has been lifted. A source close to him refuted assertion that the clients that included the Electrical Contracting Industry Pension and Provident Funds, Engineering Industry Pension Fund, Metal Industry Provident Fund and SAMWU Risk National Provident Fund were not aware of the E150 million investment with Inyatsi.
He said they invested the money with the local company to get returns. When he was informed that Inyatsi Construction managed multimillion Emalangeni tenders in Eswatini and might not have actually needed the money, the source said: “You are talking about money that appears in the financial books, there’s no company that has money which you can physically touch. Companies want to raise capital, that’s what Inyatsi did.”
He said other entities raised capital with the Public Service Pension Fund (PSPF).

“Is there anything wrong with money being taken from PSPF? Certainly not! Pensions and provident funds for workers in Eswatini are being used for investments in South Africa, and that is what we were trying to do, invest money for SA workers in Eswatini. Is there anything wrong about that?” wondered the source, who came to the defence of JM BUSHA Asset Managers (Pty) Ltd.
Article 4 of the document states that JM Busha and Joseph Makamba Busha (‘Mr. Busha’), the Managing Director, Chief Investment Officer; representative and key individual of JM BUSHA has agreed to give the enforceable undertaking.

Licence suspension

Article 3 states that the licence of JM BUSHA had been suspended due to its failure to comply with the financial soundness requirements in terms of Determination of Fit and Proper Requirements for Financial Services Providers, 2008.
However, in a Notice published on July 31, 2020, the FSCA announced that the suspension of JM BUSHA Asset Managers (Pty) Ltd (FSP 730) has been lifted with effect from July 14, 2020. The Notice is called the Notice on Lifting of Suspension of Authorisation No.3 of 2020. It was issued by CD da Silva on behalf of FSCA.

Meanwhile, it is reflected in the documents that JM BUSHA and Mr Busha (respondents) had undertaken, in terms of Section 151 (1 (2) of the FSR Act to do the following –
l Remedy the non-compliance issues relating to the financial soundness of JM BUSHA within 30 days of the last signature on this enforceable undertaking;
l Take all reasonable steps to recover the funds identified in this enforceable undertaking for the benefit of the clients, and to pursue and exhaust every lawful avenue to recover the funds. The costs of such recovery will be for the account of the respondents and not to be funded, directly or indirectly by the clients;

l Subtantially augment the compliance function of JM BUSHA by inter alia:
(a) Appointing an internal compliance officer separate from the investment managers and investment function of JM BUSHA;
(b) Appoint an external compliance firm to assist JM BUSHA in its compliance function;

(c) Appoint an additional independent key individual who will focus on compliance;
(d) Submit monthly reports to the FSCA, on or before the 7th day of each month, on all material compliance issues, and specifically on investment mandate compliance, signed by the key individuals and countersigned by the internal and external compliance officers, and the external auditor of JM BUSHA, until such time as the FSCA relieves JM BUSHA of the required reports or reduce the reporting requirements.
Documents in the possession of this newspaper state that the respondents acknowledged that they were familiar with the provisions of Section 151 of the FSR Act, and more specifically 151 (4). Section 151 (4) reads: “If a financial institution licensed under a specific financial sector law that gave an enforceable undertaking breaches a term of the undertaking, the responsible authority may suspend or withdraw the licence.”