Zimplats speaks on messy deal

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HARARE – Mining giant Zimplats is struggling to contain reports that it, together with the National Indigenisation and Economic Empowerment Board (Nieeb) undervalued the company’s worth, as the Nieebgate scandal rages on.

Investigations by the Daily News have revealed that Nieeb did not consult relevant government arms like the Reserve Bank of Zimbabwe (RBZ),  the ministry of Mines and that of Industry among others.

It also emerged during investigations that a company which was awarded the deal for advisory services for seven of the indigenised companies did not go through tender as required by law.

Transactions worth more than $300 000 have to go through the Tender Board.

Besides the suspected undervaluing of Zimplats, questions are also being asked over “vendor financing” provisions in the deal which legal experts say could be ultra vires the Companies Act.

Zimplats has valued its machinery and equipment at $2,7 billion while the resources underground have been pegged at the same value, raising fears that the deal has been seriously undervalued.

Government insiders told the Daily News that professional valuations conducted by other companies of international repute indicate that the Great Dyke contains platinum reserves valued at $200 billion at the current market price of platinum, which is averaging $1 700 per ounce, while valuations done to specific platinum reserves smaller than Zimplats indicate a single endowment of over $20 billion as compared to the $2,7 billion for Zimplats

In a terse two-line statement to the Daily News this week, Zimplats appeared to play down the issue.

And as Mike Nyambuya’s Nieeb pushed forward with its efforts to deny that government was cheated in the $971 million deal, Zimplats also insisted due diligence on the deal was done.

“Zimplats followed due process with integrity when valuing its assets,” Busi Chindove, Zimplats’ head of corporate affairs said in the statement.

“The final transactional value was arrived at through negotiation by the joint technical team.”

Adding intrigue to the whole debacle is what Justice and Legal Affairs minister Patrick Chinamasa said in November 2010 in the dispute between asbestos miner SMM and government where he clearly stated that export receipts from the company could not be used to settle a $60 million debt in the purchase price of the Zvishavane-based asbestos mine.

In the Zimplats deal, structured by private equity investment firm Brainworks Capital, payment of the shares will come from 85 percent of the dividends declared by Zimplats over the 10-year period.

Indigenous people must pay $971 million within a period of 10 years, failure of which the shares revert back to the owners of Zimplats.

Clause 14 of the Zimplats deal partly reads: “On the expiry of 10 years following the effective date, Zimplats Holdings will have the option to repurchase as many of the VF shares as it is sufficient to settle, by way of set off, the VF balance as at the end of the VF term (Repurchased VF Shares).

“In the event that an indigenous entity commits any one of a number of specified acceleration events, Zimplats Holdings will be entitled to repurchase the VF shares earlier.

Indigenous Zimbabweans have 10 years to pay the $971 million but if they fail, they will be given 10 days within which to pay cash or they will forfeit the shares.

Zimplats has in the last 10 years only paid a total dividend of $50 million making it almost certain from the onset that the indigenous people will not be able to pay the $1 billion repayment to secure their 51 percent.

Chinamasa told Parliament: “It is very wrong, any lawyer will tell you that you cannot use a shareholder, to use the receipts of the company to pay for the purchase price of those shares.”

“It is not allowed in terms of the Companies Act and in any case, even a bookkeeper will tell you that receipts are the income of a company,” Chinamasa said.

“It is the receipts that are used to pay for the production costs, the running costs, (and) the working capital of that company.”

While Brainworks managing partner George Manyere yesterday told the Daily News that questions about how the company bagged the top-dollar financial advisor contract must be directed to Nieeb, he denied that he is due to pocket up to $45 million from the Zimplats deal alone, saying he stands to pocket “only” $14,5 million.

Charles Kuwaza, the State Procurement Board (SPB)’s executive chairperson, has told the Daily News that the SPB did not receive any proposal from Brainworks and the accounting officer at the Indigenisation board or Nieeb has not approached them in that regard, adding he got to know about Brainworks when the Daily News  exposed the Nieebgate Scandal.   

Finance minister and secretary-general for Prime Minister Morgan Tsvangirai’s MDC, Tendai Biti also said implementation of the indigenisation programme was not only illegal, but only benefits well-heeled elites.

“In the Indigenisation and Empowerment Act, you will not find the word community share trust, you will not,” Biti said.

“Then you come to the regulations, statutory instrument number 30 of March 2010 that was passed or enacted by Saviour Kasukuwere, again you will not find the name community share trust.

“So the issue of community share schemes is actually an afterthought which is not backed by the empowering act, the Indigenisation and Empowerment Act such that community share schemes don’t actually have legal existence vis-a-vis the Indigenisation and Empowerment Act.”

Biti added: “To the extent that there is no company in Zimbabwe that I know of which has actually parted with 51 percent of its shareholding whether its Zimplats or not, you are having the anomalous situation where companies are bribing themselves out of compliance with the act by paying a mere US$10 million, US$5 million, whatever is the amount of the community share scheme.”

“Another problem with this empowerment programme is certainly in the way it is being implemented; it is very opaque. Nobody knows the circumstances that those companies are parting with those monies.”
Politically, the evolving dynamic holds both promise and peril for government, not to mention for Zimplats.
Now that it is possible the deal might be revisited in Parliament next week, the ruling administration might reap some of the credit if it is seen to be riding herd on the Zimplats deal.

Zimplats’ move to give thumbs-up to a flawed deal is revealing: the government through Nieeb going toe to toe with a foreign corporation in which it holds no tangible benefits.

In its current form, Zimplats stands to regain its shares in 10 years, perhaps explaining its move to quickly give the transaction a clean bill. – Gift Phiri, Political Editor

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