Municipal Workers Retirement Fund comes under scrutiny

The board of the trustees of the Municipal Workers Retirement Fund (MWRF) has fired controversial asset manager JM Busha Investments after it lost R60-million of municipal worker’s money. 

The Mail & Guardian has learnt that the fund’s investment committee made the decision on February 28 after the Financial Sector Conduct Authority (FSCA) provisionally suspended the company’s operating licence because of what it called “conduct issues”.

The company made the news in early January when the M&G revealed that the R60-million that the firm invested in Namibia’s SME Bank — which is under liquidation — was municipal workers’ retirement money that the MWRF entrusted them to manage. 

The article also revealed that the investment, as well as more than R100-million worth of other investments in outside jurisdictions, were made without prior permission from the fund — putting JM Busha in breach of its mandate. The investment was made in January 2018 at a time when the Bank of Namibia had already warned SME Bank about its regulatory noncompliance.

Friday’s meeting was specially convened to get feedback from the investment firm after an initial meeting to discuss the loss in December. At the December meeting, chief executive Joseph Makamba Busha promised trustees he would recover the funds even though the bank had been placed under liquidation in 2017.  


The fund’s principal officer Themba Mfeka refused to confirm the termination and the meeting with the regulator, saying it was a matter for the board. “No third party may have privileged information. Any engagement between the fund and FSCA remains as such. The FSCA is a reputable institution. They will not put that at risk.”

The meeting that ended it all

The M&G understands that instead of reporting that the funds were recovered, Busha updated the meeting on meetings with everyone from Reserve Bank officials to liquidators. 

Together with a private investigator he hired to track the assets of SME’s leadership, Busha made a Powerpoint presentation detailing where he thought the money was and why he thought litigation would result in successful recovery.

But his presentation went downhill when the meeting was told about more questionable investments totalling about R250-million inside and outside South Africa, including in controversial pastor Shepherd Bushiri’s investment company. The meeting was told that all the foreign investments were made without prior permission and were in breach of JM Busha’s mandate.

“Once the other investments were mentioned, the private investigator withdrew his services in the meeting and that was the turning point … “In terms of the resolution, Busha will now have until the end of March to conclude all its business with the fund, and the principal officer was mandated to spread the money with the remaining asset managers,” said an insider. 

Another said: “There were other portfolios in Eswatini and Lesotho-based companies without board mandate and Bushiri investment company as well. We smelt a rat.”

FSCA moves focus to fund

With Busha’s licence being suspended while investigations into its conduct continue, the M&G has learned that the regulator’s compliance division summoned Mfeka to a meeting on Monday where he was asked to explain the fund’s actions since learning of the breach of mandate. 

The regulator had previously confirmed its investigation would also include a leg to scrutinise whether the actions of both Mfeka and the board of trustees were in line with their fiduciary duties. 

Essentially this will be a test of whether they, as people entrusted with authority and duty to act in all times to protect the fund, acted correctly and quickly enough to mitigate any further risk.

The M&G has previously reported that fissures at the highest levels of the fund’s leadership have been exposed, as some trustees accused Mfeka of trying to protect Busha. 

New allegations against Mfeka from the same trustees who blew the whistle on the state of the fund, include:

• He allowed JM Busha to do its own administration of the assets it was managing; 

• He allowed JM Busha to submit statements that did not reflect the true position of the assets he was managing; and

• He and the board of trustees allowed JM Busha to manage almost R2-billion in funds even though its fidelity cover is substantially less than that.

Mfeka in a sticky spot

Adding further weight to the allegations against Mfeka is his unwitting confirmation that he was aware of a critical misrepresentation by Busha to the fund but did nothing about it. 

In responses to previous questions Mfeka confirmed that he was aware that Busha was a nonexecutive director in Swaziland Construction company Vuka Construction — which is a subsidiary of Inyatsi Construction. 

Mfeka defended Busha’s presence on the board, saying it was common practice “that investment professionals sit on boards to represent investors’ interests”.

This was confirmed by Busha himself, who said: “There is no conflict of interest as it is common practice that professionals can sit on company boards invested in to look after funds’ interests. You may ask any investment professional who invests in private equity.”

But what the two forget is that since making the investments in 2018, Busha presented them to the fund as money market investments. This means the fund was in actual fact a creditor and not an equity investor in Vuka Construction. 

This week Mfeka accused the M&G of publishing gossip, adding that “no organisation is prepared to spend time dealing with your gossips every week”. 

On the issue of the fidelity cover he said: “That information was shared between JM Busha and the fund then. It cannot be shared with third parties now. Look around you, and tell me that every rand is covered by fidelity cover.”

Another source with intimate knowledge of the debacle said since Busha’s problems — including litigation by eSwatini’s financial sector regulator — the MWRF’s auditors and actuaries have started to ask questions about Busha’s mandate and its investments. 

It is also not clear who does the fund’s regulation 28 reporting after both Nedbank and fund consultants Selekane denied it was them performing this function. 

Another anomaly, which experts said clouded independent insight into the quality of investments made by JM Busha, is that the asset manager did its own administration on its own investments. 

This means they did their own reporting of the performance of the assets, and their statements have already found to be suspect because, for example, the SME investment continues to be on their statements even though the bank was placed under liquidation because it did not have money. 

FSCA spokesperson Tembisa Marele would only say it will allow the regulator to look into a few conduct issues they picked up. 

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Sabelo Skiti

Sabelo Skiti is an investigative journalist.

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