Stanlib Investment Management Services (SIMS) failed to account for expenses in the National Petroleum Fund (NPF), leading to a failure to audited financial results for two years, 2014 and 2015, The Business Weekly & Review has established.


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Stanlib Investment Management Services (SIMS) failed to account for expenses in the National Petroleum Fund (NPF), leading to a failure to audited financial results for two years, 2014 and 2015, The Business Weekly & Review has established.

The impropriety emerged after the Auditor General (AG), Pulane Letebele announced in her report for the financial year ending 31st December 2016 that the Fund Managers who were engaged to manage the day-to-day affairs of the Fund on behalf of the Accounting Officer have not submitted the financial statements for the financial year ended 31st March 2016, and therefore the values of investments as of that date have not been verified.

The Business Weekly & Review contacted Stanlib to establish reasons for its failure to comply to no avail. “We are unable to comment on the questions you have raised. Any dealings with any of our clients are strictly confidential,” said Thabo Moipolai, the Chief Executive Officer (CEO). An additional probe by this publication, reveals that SIMS was the fund manager for NPF, having been allocated the mandate since 1991, according to Bopelo Julius, a spokesperson at the Department of Energy at the Ministry of Mineral Resources, Green Technology and Energy Resources.

Government would not reveal what commission fees have been paid to Stanlib since 1991 for the management of the NPF nor the current percentage commission. Julius asserted that the contract between the Fund Manager and themselves, like with any other service provider are confidential between the contracting parties. It would therefore not be possible that the Department of Energy disclose the information, he advised. Available information reveals that fund managers usually get 1 percent of the value of the fund. In October last year, the balance of the Fund was recorded at P600 million.

Letebele’s report informed that the accounts of the Fund for the financial year ended 31st March 2016 have not been included in her report because Stanlib, who were engaged to administer the Fund had not been able to prepare the accounts, nor had they been able to clear outstanding matters from the audit of the accounts of the previous year, despite the extension of time beyond the contract-end date to enable them to do so.

It emerges that when PriceWaterhouseCoopers (PWC) did an audit on Stanlib’s book of accounts, according to findings by The Business Weekly & Review, there were unaccounted funds by Stanlib, which needed to be qualified before PWC could approve audited financial reports. In accounts jargon, Stanlib could not provide ‘Supporting Schedule’ in kits balance sheet. Supporting schedules are one of several ways to communicate material information that is supplementary to assets and liabilities appearing in the company’s balance sheet. It means that the fund manager could not support some of its expenditures. Sources reveal that there was over P2 million in expenditures which Stanlib could not account for.

Government, when responding to this publication’s inquiry said that Stanlib has in the past not been able to finalize on the accounts owing to queries from auditors on the 2015 financials. “As a result 2016 accounts could also not be completed,” Julius said. The Fund Manager is mandated to submit reports on a yearly basis. Section 7 (d) of the National Petroleum Fund stipulates that the balance sheet and statement of the income and expenditure shall be included in the annual statement of the Fund of the Accountant General to the Auditor in accordance with section 34(2) of the Finance and Audit Act.

According to Government, the deadline for submission to the Accountant General is the 30th of June of every financial year for inclusion in the Annual Statement of the Fund. However, due to issues on queries raised by the Auditor General, Stanlib was unable to comply in time when submitting their reports.

Further, it emerges that Government was also not assertive in dealing with Stanlib, in failing to implement contractual terms. The Business Weekly & Review asked government on the consequences of non-compliance by Stanlib, and the actions taken against the fund manager, if any.Juliusonly said that The Department of Energy and indeed the Ministry of Mineral Resources, Green Technology & Energy Security has taken this matter of not reporting in time seriously. “To this effect there has been continuous engagement with the previous manager to comply with the reporting requirements,” he noted.

Kgori Capital (formerly Afena capital) took over Stanlib Investment Management Services and was appointed on the 1st December 2015 with the contract coming to effect on the 6th January 2016, according to Julius. He said that the most recent tender was floated on the 14th September 2015. 13 companies collected and paid for the tender.

He, however could not reveal details of the value of the NPF. “Please appreciate that the NPF assets continuously fluctuate in value owing to imports of fuel, market movements and commitment of the NPF assets towards the Ministry’s Infrastructure commitments.

Having observed some of the challenges in the management of Energy Funds, the Department of Energy has embarked on a number of ambitious activities to bring the management of the Funds to international best practice, according to Julius He said they have identified gaps for control processes to be implemented, such as putting in an end to end system for levy collection to ensure accuracy of levy revenue. He said they have also identified operational deficiencies which will be addressed.
Julius advises that there is now full adherence to the Fund Order and that they have revamped the investing of NPF funds resulting in higher investment returns.

The National Petroleum Fund (NPF) was established under the Finance and Audit Act, CAP.54.01 and has four main purposes, to meet the engineering, construction and operational costs of the strategic storage facilities for Government fuel; Purchase petroleum products for the Government strategic stocks; Stabilize prices charged by the oil industry; Meet insurance premiums in respect of the Government’s strategic oil installations and oil stocks.

Currently, the NPF levy is set at 13.5 thebe per litre for both petrol grades and diesel sold to consumers. It means that per every litre of fuel, Batswana contribute 13.5 thebe to the NPF. Minister Sadique Kebonang revealed that Cabinet has approved another fuel levy, which will kick in on July 1, 2017. The new 17.5 thebe per litre tax of fuel will be aimed at raising funds for Botswana Oil to build storage infrastructure and buy petroleum products stock.

The new tax will be in addition to the current fuel levy of 13.5 thebe per litre. Botswana consumes about 1.2 billion litres of petroleum products per annum. This means the new tax could raise as much as P200 million per annum.

The new Petroleum Supply Security levy will now be used to purchase stock for Botswana Oil while also raising funds for the construction of storage facilities, according to information sourced by The Business Weekly & Review.

Government needs approximately P3 billion for construction of a new government strategy storage facility at Tshele Hills with a storage capacity of 180 million litres at a cost of about P1.2 billion.

Works have also started on the expansion of the existing Francistown bulk fuel storage depot for increasing capacity by 60 million litres, a project that is estimated to cost P600 million. In addition Government seeks to construct a new 30 million litres storage facility in Gantsi to cater for supplies through the route in order to serve the North Western part of the country.
Botswana Oil is considering securing coastal storage facilities in Mozambique and South Africa, which will bring the costs of construction to P1.5 billion. Government, through Botswana Oil, will then use another P1.5 billion from the new Petroleum Supply Security levy to purchase stock for Botswana oil.

In his generation Newel is one of the most recognisable names in Business journalism. A recent finalist in Media Institute of Southern Africa Media Awards, Newel has written extensively in the boardroom dynamics around public pension funds and related investment interests. His areas of interest are companies and markets, including the financial reports of major companies in the country. Currently he is pursuing the developments around the management contracts for one of Africa’s most lucrative Public Pension Fund, the Botswana Public Officers Public Funds.