CLAIMS MPS LOBBIED TO REJECT ECSPONENT REPORT

MBABANE - As the nation awaits in anticipation for the debate of the Ecsponent forensic report tabled in Parliament recently, there are claims that some Members of Parliament (MPs) are being lobbied to not adopt it.

As per Parliament procedure, it is expected that MPs will debate the report and eventually adopt it. Some MPs who spoke on condition of anonymity have relayed to this publication that there were certain forces who were lobbying them to reject the report in its current form and demand the ‘real one’. It has been gathered that those lobbying for the rejection have claimed that the report might have been altered, with some content having been left out.

Possibility

One of the MPs who spoke to this publication said there was a belief that as was the case with the Funduzi report on drugs shortage, the Ecsponent one tabled in Parliament was more of an executive summary and that there was a possibility that crucial content was omitted. The Ecsponent Eswatini Forensic Investigation Report was prepared by Cliffe Dekker Hofmeyr (CDH) Inc for the Central Bank of Eswatini (CBE). The report was tabled by the Minister of Finance Neal Rijkenberg at the House of Assembly three weeks ago. Interestingly, it was Parliament that demanded the investigation and this was in response to cries from the public after over 1 000 emaSwati lost over E340 million after investing in Ecsponent Eswatini.

Interviewed yesterday, Minister Rijkenberg said while he was not aware of the lobbying, he was confident that the report tabled in Parliament was the authentic one and contained all the findings. The minister reiterated a statement he made in Parliament when tabling the report to the effect that when he received the report after the CBE had finalised it, there was a realisation that there could be exposure of criminal activities contained in the report. He said the ministry then engaged the Royal Eswatini Police Service (REPS), who advised that they did not want their plans of pursuing the criminal elements to be jeopardised by making the document public.

“So for five weeks, the police were looking into the report and following up on criminal activity. The police then came back and advised that we could now table the report as we were under pressure since Parliament had called for the forensic,” he said. Elaborating, the minister said the police advised that due to the criminal elements or activities that had been exposed, it would be wise to protect the witnesses, which was why their names were bloated in the report.

Protection

“It is only the names, not even sentences, that were blocked and this was simply for witness protection. Otherwise nothing was changed or removed. There was no tampering,” he said. He emphasised that all the report he tabled in Parliament contained all the findings made by the investigators. Also, the minister said he believed that the forensic investigation was conducted by a credible consultant and that the nation should have confidence in it. Meanwhile, efforts to obtain a comment from the CBE were not successful, as the entity had not sent a response to a questionnaire this publication had sent last Wednesday.

The question this publication had sent was, ‘Can the CBE, as the entity that instituted the forensic investigation, tell the nation in confidence that the report tabled in Parliament is the complete one and there is no content that has been left out? If there is some content that has been left out, what motivated such a decision?’ Meanwhile, the forensic report contains insight on findings regarding the licensing process of Ecsponent Eswatini. One of the findings in the report is that Ecsponent Eswatini, as an investor advisor, had initially had its application rejected by the Capital Markets division of the Financial Services Regulatory Authority (FSRA). 

The application, according to the report, was made on October 7, 2013 and was subsequently rejected on December 14, 2013.  One of the reasons provided for the rejection was the fact that Ecsponent had already collected deposits from the public without obtaining authorisation and licence for conducting an investment scheme from the FSRA and that there was ambiguity on the proposed investment products which indicated lack of understanding.  The FSRA further reasoned that the key proposed personnel of the company, whose name has been deliberately withheld, did not have the relevant experience required to become appointed as a director of the company.

Administration

In terms of administration, the report states that the administration of the Ecsponent Eswatini investments was done in South Africa, including calculations of interest and dividend payments plus payments to the investors. Also, payments of operational expenses were also allocated to the Eswatini operations by the parent company. “A monthly management fee would be levied on Ecsponent Eswatini by the parent company for all the administrative and management functions that were offered by the parent company,” reads part of the report. The report also mentioned that Ecsponent Eswatini had its own bank accounts that were opened in Eswatini, and the signatories were Eswatini nationals, however, the control of the bank accounts rested with the management in South Africa.

It was mentioned that Ecsponent South Africa, as the parent company, ultimately controlled Ecsponent Eswatini. Also, the forensic uncovered that from 2014, Ecsponent Eswatini extended loan facilities to its related companies.  “Funds would flow from Ecsponent Eswatini to Ecsponent South Africa and its subsidiaries, however, most of the subsidiaries did not payback the funds to Ecsponent Eswatini,” the report mentioned. Despite eventually presenting the forensic report, the consultant who investigated the loss of over E340 million invested in Ecsponent was unable to access bank account statements for six top businessmen and 15 companies.

Information

It was stated that the investigators sourced some of the information, but also placed reliance on information communication to the legal head of the CBE, who had explained that when required, requests for information which was located in the jurisdiction of South Africa could be made through cooperative agreements, including mutual legal assistance that existed between CBE and authorities in the neighbouring country. It was mentioned that at the time of compiling the final report, requests for bank account statements for the six businessmen had been made and the information had not been obtained. They include five whose nationality is cited as South African and one Zimbabwean. All of them, according to the report, have been cited by virtue of having held senior positions in some of the companies that are said to have exchanged funds with Ecsponent.

The scope of work as communicated in the request for proposal, included to investigate and establish whether there were any irregularities in the way in which Ecsponent placed investments with its investment managers and its foreign subsidiaries. The forensic was also aimed at investigating and ascertaining whether assets were invested in line with its investment policy and further ascertain whether all Ecsponent assets had been accounted for and appeared in its books. Also, the forensic had to ascertain whether Ecsponent conducted its business affairs, including the operations of any investment schemes in line with the requirements of the Securities Act read together with the Financial Services Regulatory Authority Act 2010.

Directors

It also had an aim to ascertain whether Ecsponent’s directors had the necessary authority to act for the company (i.e. Ecsponent) and whether all investment decisions were backed by Board resolutions and effected through authorised signatories in line with the company’s governance manuals and procedures. Furthermore, the forensic had to investigate and ascertain whether Ecsponent’s directors conducted proper due diligence assessments before placing investments. The investigation also had to ascertain the source of Ecsponent’s assets and where they were subsequently invested and the investment method(s) that were utilised.

CDH also had to ascertain whether Ecsponent was able to meet its financial obligations in terms of paying the promised returns to investors and further establish the flow of funds from Ecsponent and whether such flow of funds involved possible money laundering or fraudulent activities and transactions. Meanwhile, the forensic report reflects that about E50 million of the monies invested by emaSwati in Ecsponent Eswatini were used to pay for consultants plus operating costs.

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