Echoes of Fidentia disaster as Bophelo Beneficiary Fund’s failure to pay workers’ pension money leaves families devastated
In a case reminiscent of the heartbreaking Fidentia scandal, a pension fund administrator has lost R255 million worth of mine workers’ money. There are now fears that the amount lost by the Bophelo Beneficiary Fund (BBF) could be as much as R560 million – a devastating blow to the families of deceased mine workers who rely on the money to survive. Three widows told City Press this week that they were battling to feed and clothe their children, and send them to school, while fund staff come up with excuses (see page 2).
In the 2007 Fidentia scandal, the company’s boss, J Arthur Brown, squandered about R1.3 billion in investments, leaving more than 47 000 beneficiaries – mainly mine workers and their families – destitute.
In this case, pension money belonging to workers at Anglo Platinum was invested in the BBF, which is administered by Bophelo Benefit Services, a subsidiary of Mvunonala Holdings.
Although it is unclear what happened to the money, a City Press investigation has found that, in trying to hide the lost R255 million, the BBF, which holds the funds on behalf of the Amplats Group Provident Fund (AGPF) and its 7 229 beneficiaries, appears to have cooked its financial statements for last year.
The fund falsely claimed to own two “investment properties” in Johannesburg – the Parktonian Hotel in Braamfontein and an office block on Grayston Drive, Sandton. The BBF’s financial statements for the year ending February 2016 claimed the properties were worth R255 million. The fund’s financials reflect a balance of R578 million – R323 million in equities and R255 million in “investment properties”.
But a senior AGPF official told City Press this week that the fund could be bare, saying: “In fact, we are told that there may be nothing left in the fund.”
Mvunonala Holdings was founded by Bongani Mhlanga, a former employee of Mantadia Asset Trust Company, which was bought out by Fidentia. Mantadia was the administrator of R1.3 billion worth of pension funds stolen in the scandal.
Mvunonala Holdings also owns Mvunonala Asset Managers, a company the Public Investment Corporation (PIC) tasked with investing R3.5 billion in government employees’ pensions. The PIC also owns a 30% stake in another Mvunonala subsidiary, Bophelo Insurance Group.
AMPLATS INVESTIGATES BBF
The AGPF has launched an investigation into the BBF, which administers about R564 million in mine workers’ pensions.
A senior AGPF official said: “We picked up the problems in November last year. We discovered that about 2 000 beneficiaries [of deceased mine workers] who had come of age had not been paid. When beneficiaries come of age, they have to be paid a lump sum of their remaining money. “We asked Bophelo why, and they told us that they couldn’t trace them. In December and January, we started engaging with Bophelo, but it was all to no avail.” The AGPF now fears that the BBF will not be able to account for the money. “In fact, we are told that there may be nothing left in the fund,” the official said. AGPF principal officer Motlatjo Seima said his organisation was “concerned about the high number of terminated trusts and beneficiaries that have not been paid, in some instances for years”. “This, coupled with numerous complaints of nonpayment made by active beneficiaries, has led us to engage in discussions with Bophelo. The responses we received failed to [satisfy us],” Seima said. After the BBF failed to provide the AGPF with information about the fund’s financial health and legal compliance, Seima contracted audit firm KPMG and law firm WMK Attorneys in February to conduct a “formal forensic investigation”. “The appointed attorneys wrote to Bophelo demanding the same information, and we were baffled when Bophelo responded by advising us that we were not entitled to it as we are a third party,” Seima said. Preliminary results have revealed noncompliance with regulations and a possible breach of governance procedures. This week, the AGPF consulted counsel with the aim of bringing an urgent application to force Bophelo to provide the information, Seima said. “By our own calculation, and using the latest reports from Bophelo, the AGPF contributions account for approximately 90% of the total membership and assets of Bophelo, some R564 million in respect of 7 229 beneficiaries and trusts.”
THE DEPORTED CEO
The Mvunonala group is facing many other woes. Earlier this month, the department of home affairs deported Mhlanga, the company’s founder and group chief executive, back to his home country, Zimbabwe. Home affairs spokesperson David Hlabane said Mhlanga was deported because “he was in the country illegally and with fraudulent documents”.
Mhlanga owns a string of properties in South Africa – including a palatial home on Umhlanga’s exclusive Ridge Road with a view of the Indian Ocean. Deeds office searches also revealed that he owns another home in the expensive Meyersdal Eco Estate in Alberton, south of Johannesburg, where properties are on the market for between R7 million and R25 million. Mhlanga also owns two other homes: in Mulbarton, south of Johannesburg, and in Boksburg, east of Ekurhuleni.
After he was deported, Mhlanga resigned as the company’s group chief executive.
Almost two weeks ago, in an email to senior executives, he wrote: “It is with serious regret and a heavy heart that I announce my stepping down as group chief executive of Mvunonala Holdings with effect from May 1 2017. I will, however, stay on as executive chair of the group.”
AUTHORITIES ZOOM IN ON MVUNONALA
The Financial Services Board (FSB) said it was investigating the BBF’s compliance with the Pension Funds Act.
FSB Pension Surveillance and Enforcement head Corlia Buitendag said: “Finally, I can confirm that we are monitoring compliance by the fund with all provisions of the Pension Funds Act.”
A source close to the Amplats-commissioned investigation said the FSB should also be held liable for the problems at the BBF. “They knew about the problems as far back as 2014. In fact, the FSB wrote a letter to Bophelo raising concerns about compliance issues in 2014.”
Meanwhile, the Companies and Intellectual Property Commission (CIPC) said it had already received a request from the department of home affairs to have all companies associated with Mhlanga deregistered.
CIPC commissioner Rory Voller said: “The companies will be deregistered as they were registered using fraudulent documents. The assets will be dormant and, if property is not claimed by legitimate means, it will be ... forfeited to the state.”
PIC spokesperson Deon Botha said the PIC would like Mhlanga to be given the opportunity to respond to the allegations, and it would investigate before deciding what to do.
“However, it is important to stress the fact that the funds managed by Mvunonala on behalf of the PIC for its clients are limited to one asset class, namely local JSE-listed equities. These funds are managed in line with the client mandates and investment guidelines prescribed by the PIC, and are monitored through the PIC’s internal systems and processes on a daily basis,” he said.
“Further to this, these equities are registered in the name of the specific clients and are held in safe custody by the PIC’s master custodian.”
In the event that Mvunonala is no longer able to manage these portfolios, they will be managed by the PIC’s internal equity team without any losses to affected clients, Botha said. He added that the PIC remained committed to entrusting funds with black-empowered asset managers in line with its transformation agenda.
Information obtained from the deeds office and a lease agreement obtained by City Press reveal that the Sandton office block that the BBF claimed to own and that is reflected on its balance sheet is, in fact, owned by the Government Employees’ Pension Fund (GEPF).
The Parktonian Hotel, operated by the Protea hotel group, is a sectional title property. Its website states that a trust associated with the management company retained 165 of the 300 sectional title units, having sold off 135 units to investors a few years ago.
Protea Group spokesperson Bonny Feldman declined to comment.
Botha confirmed the Sandton office block did not belong to the BBF.
“The property situated at 72 Grayston Drive forms part of the GEPF directly held property portfolio,” he said.
“The property was purchased in the 2007/08 financial year when the GEPF acquired the CBS Property Group. Mvunonala Asset Management is the tenant.”