NAMIBIA’s Government Institutions Pension Fund is being sued for N$228 million by a former beneficiary of its unlisted investment programme, who claims in court papers that the Pension fund’s management may have conspired with Namfisa and certain politically exposed persons to deregister it.
Baobab Capital, now defunct, has resorted to taking its former benefactor to court as means of recouping income it lost after a damaging 2021 decision by the GIPF to terminate its N$140 million agreement halfway through its 10 year initial investment period.
GIPF’s unlisted investment programme invests in non-listed companies and assets. The programme’s goal is to stimulate the economy by providing capital for high growth potential ventures.
GIPF’s acting CEO Melkizedek Uupindi, said the GIPF would not respond to specific questions because the matter is confidential and also in court. He, however, said that the fund intends to defend itself and oppose the suit.
“Baobab Capital’s claim against GIPF has no merits and will vigorously be defended,” said Uupindi in an emailed response.
GIPF entered into an agreement with Baobab Capital, during 2016, as part of its unlisted investment programme necessitated by regulations of the pension fund Act. The regulations prescribe that pension funds should invest at least 45% of their assets into the Namibian economy.
Baobab Capital, a Namibian-owned firm, specialised in funding early-stage businesses, hoping to grow them into medium and large-scale enterprises.
The GIPF’s decision to terminate its relationship with the private equity and venture capital firm, coincided with the Namibia Financial Institutions Supervisory Authority (Namfisa) investigating and deregistering the company.
Namfisa, during September 2020, gave the company notice of deregistration.
This meant Baobab Capital was prohibited from operating as an investment management firm in Namibia.
The financial watchdog responsible for regulating the non-banking financial services sector, cited financial irregularities and accused the company’s directors of conflicting interests and poor management of pensioners’ money, entrusted to it by the GIPF.
Baobab Capital’s head, Jerome Kisting confirmed the suit, saying the GIPF was in breach of contract and this breach violated the two entities’ subscription agreement, investment plan and management agreement. He added that the country’s biggest pension fund failed to pay drawdown and late payments to payment notices submitted and direct interference in the way Baobab was being managed.
“These breaches caused financial harm and loss of value to Baobab Capital and the Baobab Growth Fund assets (wherein the GIPF was an investor),” Kisting said.
He added that he is not able to comment on the value or operational status of the assets (investments made) because Baobab Capital was frozen out by the GIPF in August 2021.
Now the firm has taken the matter to court and is demanding that it be paid N$228 million in money it says it would have made, had the GIPF not pulled out of their agreements.
Baobab Capital is now claiming the GIPF owes it for breach of contract, loss of income and investment opportunities.
Baobab is further accusing GIPF and Namfisa officials of colluding in a political conspiracy to have the company deregistered and closed down.
“We have reliably learned that there may be up to four fund managers where the GIPF and Namfisa are alleged to have conspired to have the fund managers de-registered. The funds were subsequently given to other fund managers to manage,” Kisting said.
The company is also asking the court to order that GIPF pays interest to be calculated at the banking prime lending rate, plus a 6% yearly rate dating back to 2020 when its troubles with GIPF and Namfisa started.
The company is claiming:
- N$7.4 million in drawdowns it was supposed to receive from GIPF at the end of July 2021.
- N$141 million the company said it suffered in loss of income and value as a result of GIPF’s contract termination during August 2021. The N$141 million is made up of N$23.2 million, Baobab claims it would have earned in management fees for the reminder of their ten-year agreement; A N$1 million management fee for the financial year ending 1 July 2020; and a N$117 million in carried interest, which amount to 20% of how the investments would have grown, after returning GIPF’s initial investment amount and handle rate.
- N$971 652 the company suffered damages as a result of GIPF’s decision to prematurely terminate their relationship on 23 August 2021.
- N$3.2 million in legal fees and costs it had to pay, while its agreement with GIPF shields the company from any legal costs, expenses or actions.
- N$1.2 million in transactions cost, after the GIPF failed or refused to pay drawdowns that would have facilitated Baobab’s investment into projects. As a result the potential deals were cancelled, leaving the investment firm to shoulder the cost of the failed transactions.
- N$74 million in loss of income and value, as a result of what the company claims was a conspiracy between GIPF, Namfisa officials and politically exposed individuals to have the company deregistered.
In its court documents, Baobab claims that the N$74 million emanated from it, setting up a second fund to which GIPF had committed to pumping N$250 million into. MMI Namibia and decided to pump a further N$20 million into Baobab’s second fund. Had this fund kicked off, Baobab would have earned a yearly 2% in management fees for a period of 10 years from the money coming from GIPF. this would have amounted to N$54 million. The company also claims that it lost the value of N$20 million it was supposed to receive from MMI Namibia.
Baobab’s second fund failed to materialise after Namfisa decided to shut its doors and cancel its licence to operate as an investment manager.
“The fund manager has determined from correspondence and witnesses that GIPF management colluded with, alternatively conspired with Namfisa and certain politically exposed persons to deregister the fund manager and SPV,” read Baobab’s particulars of claim.
Kisting said they are contemplating suing Namfisa as well, but only once its case against the GIPF is concluded.
