Paper exposes Indigenisation scandal

By Farai Mutsaka, Gift Phiri and Eric Chiriga

HARARE – Zimbabwe’s indigenisation drive has turned out to be a massive cash cow for well-heeled and politically-connected elites, as details of massive misrepresentation and grand looting for deal makers emerge. 

A three-month investigation by the Daily News revealed shocking details — including that of advisory firms netting massive cash contracts without going to tender.

One of the advisory firms which played a consultancy role — Brainworks Capital — fronted by former banker George Manyere — is expected to pocket up to $45 million from the Zimplats deal alone. Brainworks also has under its armpits, indigenisation consultancy deals for six other top earning companies.

It does not end there.

Even more shocking are revelations that only the British courts will handle any disputes which might emanate from the empowerment deals reached between government — through Saviour Kasukuwere’s Ministry of Indigenisation — and the indigenised companies.

It could not be established at the time of going to print last night if the Attorney General had been consulted to verify the legality of the deals with the indigenised firms.

But the Daily News has authoritatively established that the Ministry of Mines, under whose jurisdiction the indigenised mines fall, and the Reserve Bank of Zimbabwe (RBZ), who play an advisory role in such deals, were not consulted.

Insiders at the ministry of Indigenisation who spoke on condition of anonymity confirmed that RBZ governor Gideon Gono was not consulted. The Governor has in the past repeatedly complained that proper procedures were not being followed.

This led to Gono giving a hint towards the anomalous situation during his monetary policy statement two weeks ago when he expressed displeasure with the way some financial advisors in the programme were carrying on their mandates.

Efforts to get a comment from Gono yesterday were fruitless yesterday as he was said to have travelled out of the country.

But RBZ spokesperson Alson Mfiri said: “We don’t comment on or discuss specific exchange control matters with the press. Find out what you want from the relevant authorities or the tender board.”

Insiders at the firms which were indigenised told the Daily News’ investigations team that dishonest senior executives and advisory firms to the programme had agreed to what they described as “stinking deals.”

In the past two months, the Daily News investigations team has been secretly visiting the firms that were indigenised and spoke to dozens of workers, who will remain anonymous for fear of victimisation.

The paper was also inundated with calls from junior employees who were crying foul at the way advisory firms were “messing up” the programme in collusion with some government officials.

As it is, the Daily News has discovered that financial advisors have undermined the indigenisation programme in a manner that could destabilise the credibility of the empowerment agenda.

Firstly, the $971 million Zimplats takeover deal touted as the toast of the empowerment drive, sailed through without relevant government advisory structures as is the norm with such huge transactions.

While the Zimplats deal will only benefit government, communities and employees after 10 years, Brainworks Capital stands on the threshold of pocketing a cool $45 million windfall from consultancy fees.

The Daily News has discovered that Brainworks was verbally appointed without going to tender as is the norm with government deals worth more than $300 000. By the time of going to press, tender board boss Charles Kuwaza had not responded to questions sent to him.

Documents in our possession reveal that the Zimplats deal could be just “small change” as Brainworks also has several “sweetheart” deals to stitch indigenisation transactions for the following top-earning companies:

Pretoria Portland Cement (PPC), Anglo American Zimbabwe (incorporating Unki Platinum), Caledonia (incorporating Blanket Mine), Mimosa, British American Tobacco and Larfarge.

Larfage and Zimplats board chairperson Muchadeyi Masunda said: “I’m not aware of any payment that has been made by either Lafarge Cement Zimbabwe or Zimbabwe Platinum Mines in settlement of “advisory fees” arising from the “indigenisation deals”.

At the risk of stating the obvious, the basic tenets of the Law of Contract clearly stipulate that there has to be privacy of contract between one party seeking “advisory services” and another party providing the required “advisory services” in order to create an obligation on the part of the recipient of the professional advice to then pay to the provider of the services sought the fee for professional services rendered.

“Needless to say, the quantum of such fee is a matter for negotiation and agreement between the “seeker and provider of the advisory services” in question.”

But, what is likely to miff President Robert Mugabe most is that London courts will have jurisdiction over local empowerment deals when he prides his legacy in completely freeing Zimbabwe from colonial bondage.

This means if there is a dispute, Mugabe will have to deal with British courts a few years after the 88-year-old leader told former British Prime Minister Tony Blair that: “Blair, you can keep your England and I will keep my Zimbabwe.”

According to the Brainworks structure, local courts will have “non-exclusive jurisdiction to settle any disputes arising out of or in connection” with the deal.

Brainworks’ managing partner and chief investment officer George Manyere could neither deny nor confirm that his company would get a windfall from the empowerment deals. “No no it’s not correct,” Manyere said when questioned why his consultancy firm was awarded the contract without going to tender.

“Talk to Nieeb. (National Indigenisation and Economic Empowerment Board) Get the comment from Nieeb and the ministry,” he said adding, “All this time why were all those people quiet.”

Brainworks are reportedly supposed to get two percent of the $971 million — equating to $19,4 million — for its advisory service. It also gets an additional 2,5 percent, excluding tax, for raising the vendor financing which adds up to about $24,2 million.

From the Zimplats deal only, Manyere’s Brainworks stands to pocket a total $43,6 million. According to the Daily News research, the proposed mechanism of ceding dividends to repay the $971 million loan in 10 years is not sustainable.

At 10 percent interest per annum, the indigenisation parties will need to make an annual repayment of approximately $158 million. Wilson Gwatiringa, the Nieeb chief executive officer said: “I’m busy in meetings the whole day, send your questions to my email.”

The Daily News sent questions to Gwatiringa but there was no response at the time of going to press with a Nieeb spokesperson thrice saying “I will come back to you” which she never did. The Daily News phoned her at around 1920hrs yesterday evening but she did not pick up her phone.

As the issue reaches boiling point, it has been established that Gono last Thursday summoned Kasukuwere, officials from his ministry, Indigenisation board members, officials from advisory firms and Nieeb employees where he reportedly tore to pieces the deals facilitated by the consultancy firms.

One insider at the ministry of Indigenisation who attended the meetings confirmed the development and said: “To be honest, I think authorities must re-examine the deals with the indigenised firms.

“Gono has been sitting on an arsenal of information unfavourable to some processes of indigenisation but he is at pains to see how best to make a bad situation look normal. It has to be appreciated that in some circles, Gono is viewed as anti-indigenisation and therefore vulnerable to attacks.

“But Gono still took us to task over all the agreements signed but it was unfair because some of us are not in control of processes that led to this as we take instructions from our bosses. For example, some board members do not have details of the deals,” said the official.

He added that so heated was the issue that Gono even phoned the chairperson of the indigenisation board , retired general Mike Nyambuya in the presence of officials from Nieeb and the ministry and asked him to explain anomalies in the deals but they too failed.

“Gono then directed that a working committee comprised of Kasukuwere’s officials, Nieeb management, indigenisation board members and RBZ officials work together to unravel the issues that were of concern to the governor and we worked throughout the weekend.

“But we could still not come up with satisfactory answers. All I can say is that this thing will explode in our faces,” added the top insider. Daily News