HARARE – Top Harare lawyer Gerald Mlotshwa has emerged as the sole and beneficial owner of Empowerment Corporation (EC)'s 40 percent stake in Telecel Zimbabwe (Telecel) after his partner George has reportedly opted out.
The development not only comes as James Makamba's return was expected to help resolve some lingering shareholder issues at the empowerment outfit, but will also see the new team supporting a $400 million capital raise for strategic acquisitions and launch of new products next year.
“You will be aware that Mlotshwa was introduced as a board member on Thursday and after his consortium had invested in EC around June this year. While he certainly started out with Manyere, we understand the man is on a solo mission now,” a source told The Financial Gazette last week.
“And with Makamba in town, who had a 95 percent stake in the empowerment group via Kestrel Corporation, no-one is better placed to settle some of the outstanding issues at Telecel and enable the mobile operator to mobilise cash for a massive recapitalisation plan,” they said, adding the incoming shareholders also had short-term ambitions of seeing the company being vertically integrated.
With a 40 percent equity in Zimbabwe's third largest cellular firm, EC has been the subject of endless wrangles between various interest groups and founding shareholders such that this was giving impetus to Communications minister Supa Mandiwanzira's plans for a 100 percent stake in the entity.
Already, government owns 60 percent of the Graniteside-based company and after buying out Vimpelcom Limited’s share held through Global Telecomms Holdings-owned Telecel International in a $40 million deal.
According to earlier media reports, Mlotshwa and the Brainworks Capital Management (BCM) founder had signed share purchase agreements with Makamba – the current chairman – nearly 10 months ago, and have just been waiting to tie up a few loose ends for the consummation of the transaction.
These included a ratification of the deal by several parties and regulators, including EC shareholders through an extra-ordinary general meeting, cabinet and other shareholders.
Suffice to say, Mlotshwa has been instrumental in trying to help Makamba resolve some of the shareholder and legal disputes since 2014.
While Manyere’s return for a Telecel stake represented a second bite of the cherry after his initial $20 million bid for EC’s equity had fallen through in 2015, the latest – attempts and – arrangement came via a reported debt repayment plan, which also included ABSA Bank.
Under the agreement, the private equity financier was expected to acquire a 16 percent stake of Telecel after paying the South African bank and its related parties some $8 million.
And as the battle for control of Telecel rages on, it is understood that Mandiwanzira has even offered Mlotshwa’s consortium $26 million to totally exit the group.
Following his return from a 12 year self-imposed exile, Makamba was quick to confirm Mlotshwa’s appointment on his twitter account last week and industry watchers were optimistic that the former broadcaster’s availability would help stabilise, and steer Telecel in the right direction.
Even, though, the flamboyant businessman has been battling six other founding shareholders over EC's control, the ex-Zanu PF legislator increased his stake to 95 percent after underwriting a $2 million capital raising initiative and obtaining further equity after a pro-rata distribution of an unissued 30 percent share(s) in the company some 18 years ago, information obtained by businessdaily in November 2014 shows.
And Makamba seems to have confirmed that position in a late 2015 statement, which said: “The shareholding of EC went through various reorganizations during the formative years of Telecel due to the need for EC to raise funding for its contribution to the capital requirements of the project. It is these reorganizations within the shareholding of EC that have formed the unfortunate basis for the current disputes.
“EC, as represented by me… has taken the decision to finally resolve, all matters pertaining to the shareholding of the company. EC has engaged the relevant ministries with the specific purpose of rationalising and resolving the issues…,” he said.
This also followed bitter disputes with other founding shareholders, including Jane Mutasa’s Indigenous Business Women’s Organisation and Selpon, the Affirmative Action Group, small scale miners and farmers.
With an active 1,8 million subscribers out of 4,6 million customers, which is according to the latest Postal and Telecommunication Regulatory Authority of Zimbabwe 2017 third quarter report, the telecommunications firm urgently requires $200 million-plus to boost its operations.
And in line with Mlotshwa and the new shareholders’ goals, Telecel chief executive Angeline Vere has also announced on the company’s official twitter account that they were keen on upgrading their network to 4,5G LTE in 2018.
Meanwhile, Manyere and his partner Walter Kambwanji have exited BCM by way of swapping shares in the investment group for a stake in Getbucks, and its life assurance arm.
Under the arrangement, the duo will get or acquire a 15 percent scrip in the listed microlender after relinquishing their portion of the 9,1 million treasury shares in the Johannesburg Stock Exchange-listed holding company.
The disposal also follows Manyere's resignation as BCM chief executive in February this year and where he was replaced by Brett Childs. – Financial Gazette