CSC rescue mission triggers sleaze fears

By Shame Makoshori

The Robin Vela-led National Social Security Authority (NSSA) board consolidated its investment strategy this month, with a plan to pour millions of dollars to revive operations at troubled beef producer, Cold Storage Company (CSC).

This was after considering how CSC, which is 100 percent controlled by the State, has been reduced to a shell through many years of corruption and unchecked mismanagement that has seen its assets stripped.

CSC, at one time the largest meat processor in southern Africa, processed 150 000 tonnes of beef and associated by-products annually during boom times in the 1990s, and exported to the lucrative European Union markets, where it had an annual quota of 9 100 tonnes, earning the country at least US$45 million worth of foreign currency annually.

This track record has been destroyed by disastrous State interference and asset pillage.
This has left CSC saddled with over US$25 million in debts, from US$9 million in 2009, mainly from fixed costs.

The meat processor is said to owe its 400 employees about US$3,5 million in salary arrears, which it has struggled to pay after posting losses every year over the past 10 years.

The firm is now operating at less than 10 percent of its capacity, and its employment numbers have fallen from 1 500 in the 1990s.

Vela has presented his board as an agent of change in the way NSSA conducts itself, especially in deciding where to invest hundreds of millions of dollars in public funds under its custody after presiding over a number of questionable investments across industries in the past.

“NSSA’s investment in CSC is well on course,” Vela told reporters recently, while making an update on the progress that his board had made in turning around NSSA.

“The authority, in line with its commitment to investing in national projects of a strategic nature such as agriculture and infrastructure, is working with government to resuscitate the CSC during the course of the year. Indicatively, US$15 to US$18 million will be required. We believe that this will unlock value in the livestock industry through job creation, foreign currency earnings and increased contributions to the benefit of our contributors/pensioners and the economy at large. Progress in this regard is on course and further updates will be given in due course,” the NSSA boss added.

A fact to note is that US$18 million is a drop in the ocean, considering the depth of the crisis at CSC, which is battling high gearing and corporate governance deficiencies.

Instead of looking into the predicament of pensioners, the NSSA executives have pillaged NSSA for personal gain.

Surprisingly, in the midst of a sea of evidence about their actions, very little action has been taken about those that have been exposed by audits as the culprits behind the looting.
Vela’s board however, took action and sacked a number of executives last year.
Criminal charges were also preferred against them.

While some analysts felt it was still possible to turn around CSC’s fortunes, questions are already being raised about the decision to invest in a firm that has been on its knees for decades.

CSC now requires millions of dollars worth of imported new plants for its abattoirs.

Its operations have shrunk tremendously in the past decade, and its market share has been taken over by privately run abattoirs that have given a good account of their abilities under extremely difficult times in Zimbabwe.

Pouring US$18 million in an insolvent firm could only help it secure working capital, which is not the crux of the problem at CSC.

It requires massive capital to return to full scale production.

It is possible that NSSA’s proposal is doomed, or ill conceived, even before it is executed.
Public funds could be wasted, unless the NSSA board has something up its sleeves that it has not announced.

This week, analysts also questioned NSSA’s recent investment in National Building Society (NBS).

Would public funds be safe in CSC?

This was unlikely, said economist, John Robertson.

He said NSSA would do well by pursuing a privatising strategy, which is unlikely to be agreed by government.

“I don’t think it is NSSA who came up with this idea,” he said.

“It is government that wants to pay debts through NSSA. NSSA must look into privatising CSC. This is one company that must be privatised, bring in new investors and even look at listing on the Zimbabwe Stock Exchange. They then need to look at reviving the exports other than bailing out government. A number of CSC’s abattoirs are no longer in working condition. Their assets have been stripped and some have disappeared. That will need millions of dollars,” Robertson said.

Investor activist, Jacob Mutisi, said he had a grim view of NSSA’s investment, especially in NBS.

“I am not one of those who watch and let our investments being destroyed,” he said in a commentary that looked at NSSA’s track record as an investor.

“As a true Zimbabwean who has strived to protect his investments after having lost a lot of money in Kingdom, Interfin, Barbican and CAPS Holdings, every time I see any investment activity taking place, I always put my investment analyst hat on and analyse the opportunities that exist. Why did the NSSA board set up National Building Society? This is an institution that has massive equity in all major financial institutions in Zimbabwe. NSSA should have injected capital into any existing building society institution instead of adding unnecessary overheads and wasting our money. What experience does NSSA have in running a building society? My question is: “Is this another avenue to loot our contributions?” My worry is we will be going back to James Matiza’s era were looting was the order of the day and yet these people have gone scot free enjoying their lootings. The time has come for all hard working Zimbabweans to demand accountability and transparency at our treasured asset NSSA,” Mutisi added.

Matiza was general manager at NSSA from 2009 until he was sacked by the Vela-led board after an audit exposed extensive looting in 2015.

One of the biggest investment boobs was at starafricacorporation a few years ago, when NSSA lost a lot of money.

Another audit into the operations of NSSA two years ago exposed shocking evidence of sleaze, which led to Matiza’s sacking.

This involved the construction of the Rainbow Beitbridge Hotel (RBH), whose cost went up a staggering 16,3 times to US$49 million at completion in 2014.

The initial budget for the project had been pegged at US$3 million in 2007.

Worse still, details of the project indicated that on August 6, 2013, NSSA went ahead and extended to RTG a US$4,4 million loan to purchase beds and other equipment to run the hotel, even as management had advised against the transaction.

A company called First Finance also set tongues wagging within NSSA’s corridors after it surfaced during an audit of the pay-as-you-go pension scheme.

Directors at the pensions administrator said they were not aware of the existence of the firm which sounded like a financial institution, and they were not aware of who established it.

But auditors at Deloitte Advisory Services, which conducted the audit, said they found First Finance among the key investments made by NSSA during an extensive audit of NSSA in 2015.

NSSA, whose key executives were sacked in 2015 for alleged delinquency, lost US$30 million through an ill-fated investment in a distressed bank, Capital Bank, which has since closed.

This was after the Ministry of Finance forced the compulsory pensions administrator, over which government has control, to back down on a plan to halt the transaction in 2013.

Tendai Biti, now president of the People’s Democratic Party, was finance minister in 2013 when government insisted that NSSA pour millions to bailout ReNaissance Merchant Bank, which was later to be rebranded Capital Bank, but eventually twisted in the wind due to lack of capital.

Biti has denied that he had any influence in NSSA’s bailout of ReNaissance.

ReNaissance was one of seven distressed banks that sunk with a combined US$34 million worth of investments from the authority, according to a 124-page audit of NSSA operations by Deloitte Advisory Services dated October 30, 2015.

Vela has vowed to stop the bleeding.

But with questionable investment decisions such as the planned CSC resuscitation deal, fears are that he may open fresh floodgates for looting by a connected few, at the expense of long suffering investor? Financial Gazette