Workers’ R60m ‘lost’ in banks scam

Sixty million rands of South Africa’s Municipal Workers Retirement Fund contributions has been “lost” in the collapse of Namibia’s SME Bank, sparking a rift between the fund’s board of trustees. 

The R60-million investment is part of some R200-million that asset manager JM Busha Investments is said to have invested in several countries in Southern Africa, allegedly without prior written permission from the fund. SME Bank was placed under liquidation in 2017 by a Namibian court.

Two trustees of the retirement fund this week accused its principal officer, Themba Mfeka, of trying to keep the loss under wraps and of being too lenient on JM Busha Investments.

They also accused Mfeka of failing to protect the fund from further losses after JM Busha invested R140-million — the balance of the R200-million — in relatively unknown businesses in the Southern African Development Community region. 

“We [the trustees] only officially learnt about this debacle in late November [2019], when it actually became an issue in June when the consultants [after getting suspicious], raised this [with JM Busha]. But the principal officer did not alert us. 

“This is R60-million of municipal workers’ money and even now that we know and JM Busha has admitted, nothing is being done,” said one trustee who asked to be anonymous.

The Mail & Guardian has seen internal retirement fund trustee documents and discussions, which have been submitted to the Financial Services Conduct Authority (FSCA) after the other trustee, dissatisfied with the non-action on the breach, turned whistle-blower. These documents show that Mfeka was notified of the breach and risk in November, but did not act until December. 

The whistleblower’s report was referred to the Special Investigating Unit by the FSCA.

Mfeka and the fund did not respond to questions sent to them last week, while JM Busha has dismissed the risk, saying the R60-million would be recovered with interest earned by the end of January.

The second trustee said it was concerning that the retirement fund’s money was invested in companies not listed in their countries. 

These investments include: 

l R40-million placed in Vuka Construction, an Eswatini-based construction company;

l R18-million in Generals Holdings, an Eswatini-based waste-to-energy company;

l R7-million in Africa Media Holdings, a Lesotho-based company that published the Lesotho Times newspaper; and

l R4.5-million in Indlelo Investments, an Eswatini-based financial services company. 

The fund, which used to be the South African Municipal Workers Union National Provident Fund, has 26 000 members from municipalities across the country and controls about R12-billion in assets. Besides paying out on retirement, the fund also provides death and disability cover, funeral cover, bursaries and home loans to its members. 

JM Busha, which was formed in 2000, manages R1.5-billion of the R12-billion — the biggest share of the retirement fund’s investments being handled by asset managers.

News of the R60-million loss was heightened by an article by the amaBhungane Centre for Investigative Journalism last year, which unearthed the involvement of four individuals linked to the now defunct VBS Mutual Bank: disgraced VBS chief executive Andile Ramavhunga; Mauwane Kotane, Ramavhunga’s childhood friend and business associate; Zimbabwean auditor Sipho Malaba, who worked at audit firm KPMG; and Sasa Nemabubuni, VBS general manager of sales. 

Slippery: Joseph Busha (left), the chief executive of JM Busha, insists that municipal workers’ retirement funds he invested in Namibia’s SME Bank, paid through infamous VBS Mutual Bank — both of which are being liquidated — will be recovered.

The four were found to have worked to convince Namibia’s reserve bank that R270-million siphoned from VBS Mutual Bank in South Africa was safe in Namibia, when it had in fact disappeared, amaBhungane reported. 

The money is part of R380-million said to have been stolen by SME Bank’s Zimbabwe minority shareholders, and that ultimately led to the bank being placed under liquidation. 

Part of this scheme, the report also stated, involved faking a R150-million deposit to hide the money being looted, as well as channelling JM Busha’s R60-million investment — which was paid through VBS — as part of a payment back to SME Bank on an investment that had matured. 

Despite SME Bank now in liquidation, Joseph Busha, the chief executive of JM Busha Investments, is adamant it can be recovered in full, with interest. Busha also dismissed allegations that the rest of the R200-million invested in Eswatini, Lesotho and other Southern Africa countries was at risk.

In response to detailed questions about these investments, Busha said: “This is to confirm that no funds of MWRF [the retirement fund] is lost. SME Bank is under supervision and we are engaging the liquidators. We will recover the investment. The mandate is multi-asset class which allows for international exposure. We are responsible and accountable.” 

In internal communication to the retirement fund’s board of trustees this past December, Mfeka said Busha had reported to the board’s investment sub-committee at a special meeting held on December 9. 

In the letter, Mfeka said the fund’s consultants, Selekane Asset Consultants, told the meeting it suspected the investment in SME Bank was done without the fund’s approval. 

“JM Busha admits to having erred in not seeking express permission prior to making an investment. They further stated that part of the investment is guaranteed by the Namibian government whilst the other part by directors,” said Mfeka’s letter. 

“They have made a commitment to confirm these guarantees by the end of January 2020. The guarantee is with accrued interest. Litigation against directors of [the] Namibian bank is ongoing.

“The committee decided to wait for the report on guarantees and recovery of investment from JM Busha, which should be reported by the February 2020 meeting before making further decisions on the matter. This includes verification of other unlisted investments in JM Busha.”

The first trustee said it was concerning that Mfeka did not urgently report the matter to the board, and that nothing has been done about the breach and independent verification of investments in other Southern Africa countries. 

“This PO [principal officer — Mfeka] simply kept quiet when this issue came out with amaBhungane, and only took this to a committee of the board and not the full board. They still treat it confidentially, and are still waiting to hear more from Busha when we should be reporting this as per the rules of the fund,” said the trustee.

“How do you take money out of the country that belongs to others without their knowledge?” 

“This is the company [JM Busha] that has the biggest slice of investments out of all our asset managers, so we need to be careful about what they do because the risk is so big,” the one trustee added. 

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Sabelo Skiti

Sabelo Skiti is an investigative journalist.

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