Zimre: the role of state in business
I WISH to take the opportunity to thank you for giving me the time to interact with other Zimbabweans on business matters using your powerful platform. I have continued to receive a number of questions that I am failing to respond to quickly because of work pressures. However, as promised I will continue to respond to the questions through you to allow other people to benefit from the interaction. In this submission, I respond to a question raised by one of your readers about the manner in which the state took over the control of Zimre and its implications on the rule of law
By Mutumwa Mawere
PRIOR to my targeting by the state, Zimre Holdings Limited (Zimre), a company registered in Zimbabwe and whose shares are quoted on the local bourse, was controlled by Endurite Properties (Private) Limited (Endurite) and Ukubambana-Kubatana Investments (Private) Limited (UKI).
Both UKI and Endurite held 22.23% and 24.32%, respectively for a total of 46.55% of the issued share capital of Zimre. Endurite is a wholly owned subsidiary of THZ Holdings Limited (THZ), a company registered in England. Endurite owned 75% of the issued share capital of UKI making the effective shareholding of Endurite in Zimre about 41%. I am a director of THZ since 1996 following the acquisition of Shabanie Mashaba Mines (Private) Limited (SMM) by ARL. THZ is a company controlled by ARL that the government of Zimbabwe through a nominee company controlled by Mr. Afaras Gwaradzimba is trying to acquire through the back door. Thank God the matter is now before the English courts where you can expect justice.
I have attached herewith a copy of the judgment issued by Justice J. Makarau to give you a flavor of how the justice system is working now in Zimbabwe and why you should be concerned about the independence of the Zimbabwean courts. As background, your readers may be aware that on 26th August 2004, following the abortive extradition attempt, the Minister of Justice, Legal & Parliamentary Affairs declared both Endurite and UKI to be specified persons in terms of Section 6 of the Prevention of Corruption Act (Chapter 9:16). Mr. Reggie Francis Saruchera was appointed an Investigator in respect of both companies although no report has been forthcoming after more than a year on his findings. At the time of the specification and subsequently, Hon. Chinamasa denied that the specification of my companies was done with ulterior motives i.e. to takeover my assets using the state machinery. The events that have unfolded on the Zimre issue will clearly demonstrate to you how the state is being manipulated to further private interests.
I have stated before that the attempted extradition, my specification and subsequent specification of my companies was part of a well orchestrated plan by the state using the likes of Gwaradzimba and Manikai to expropriate my assets. On January 28, 2005, Zimre held an extraordinary general meeting (EGM) at which shareholders were to approve or disapprove of a proposed rights issue in the company. To pass a special resolution, Zimre required the consent of a minimum of 75% of the shareholders.
Given Endurite and UKI’s combined 46.55% stake, it was clear that the resolution would not pass and effectively the plan by the state to takeover control of the company could not be achieved. A notice was issued in the Zimbabwean newspapers calling for the EGM. Mr. Nduna, the CEO, is a brother-in-law of Hon. Mnangagwa and he also has been an accomplice in the expropriation scheme. The management of Zimre including Mr. Solomon Tembo, a cousin of Gwaradzimba, did not advice Endurite as a key shareholder about the impending rights offer and knew that the proposal had no chance of succeeding.
THZ made an application before Justice Patel, a former Attorney General who was also part of the cabinet committee that was charged with the responsibility of dispossessing me. The application was rejected on the grounds that Endurite and UKI could still vote at the EGM and it was premature to bring an application before the meeting. I then wrote a letter to Mr. Saruchera to advice him that THZ had given a proxy on behalf of Endurite and UKI to vote against the resolutions at the meeting. As shareholders, both Endurite and UKI had the right to vote at the meeting for or against each of the proposed resolutions. Two different votes were then cast at the meeting. Although it was common cause that I controlled both companies, the government forced directors of UKI and Endurite to vote in favor of the rights issue. The Chairman of Zimre chose to accept the vote from the government notwithstanding the fact that the legitimate shareholder had already voted against through a proxy.
In case HC542/05, THZ sought an order setting aside as invalid the resolutions both ordinary and special, on the grounds that they not receive the requisite number of affirmative votes for their passing at the EGM. When the application was made to nullify the resolutions at the EGM, Mr. Gwaradzimba then came into the picture as an applicant to be joined as a party to both cases No. HC542/05 and HC 632/05. Until then, Gwaradzimba had no interest in Zimre and was outside his control. As your readers may be aware, on 6th September 2004, Hon. Chinamasa had issued a Government Notice in terms of s4 of the Presidential Powers (Temporary) (Reconstruction of State Indebted Insolvent Companies) Regulations 2004, placing SMM under a reconstruction order in terms of the regulations. He also appointed Gwaradzimba as the Administrator of SMM assisted by two other assistant administrators named in the notice. The notice made no reference to Zimre but using the most unusual logic in the regulations, Zimre was retroactively placed under the reconstruction under the guise that it was conducting business with SMM. No other company that conducted business with SMM has been placed under such reconstruction. This was an after thought as there was no other mechanism that would have allowed the state through Gwaradzimba to have an interest in the affairs of Zimre. Surprisingly, the Judge accepted the logic advanced by the state.
It is clear that my specification created a convenient legal disability that was then used by the judge to disqualify the application and allow the state to proceed with the rights offer that consequently diluted Endurite’s controlling interest into a minority interest of about 10%. It is important for your readers to take note about the collaboration between the judiciary and the executive.
The back hand acquisition by the state of Endurite Properties (Private) Limited (Endurite) and Ukubambana Kubatana Investments (UKI) Limited’s controlling in Zimre Holdings Limited (ZHL) should be a matter of concern about the role of the state in business.
At face value, it may appear to your readers and the general public in Zimbabwe that UKI and Endurite’s controlling stake in ZHL had been diluted by an ordinary rights issue. However, the facts confirm an intricate web of conspiracy involving the state through the Minister of Justice, Legal and Parliamentary Affairs, Hon. Chinamasa, the police through Assistant Commissioner of Police, Mr. S. Mangoma, state appointed Administrator of SMM, Mr. A.M. Gwaradzimba, board and management of ZHL. The first part of the plot involved the attempted extradition of me in May 2004 and the subsequent specification which now appears to have been done to facilitate the expropriation of my assets. It is common cause that I am not a resident of Zimbabwe and the specification would ordinarily have no effect extra-territorial but because the bulk of my assets are domiciled in Zimbabwe, the effect of the specification was essentially meant to give the state unfettered access to his assets.
Mr. Gwaradzimba whose role has been shrouded in secrecy appears to be the agent of the state in taking over my assets. The debacle of the ZHL rights offer clearly shows the desperation on the part of the state to conceal the forces behind my dispossession.
When the rights offer started, the role of the state was not apparent. A number of questions emerge from the actions of the state. Was I specified to facilitate the expropriation of my assets? Why did Judge Makarau not determine who had the authority to represent UKI and Endurite because if I had no such right then surely no one else had the right. Can a company under administration be allowed to proceed with a rights offer? Who authorized the state to step into the shoes of Endurite and UKI? What are the implications of the state intervention in a listed company on the security of shareholder rights? What prevents the state using the same approach for other companies that have benefited from the Productive Sector Facility?
The jury is out
on the real impact of the actions by the state.
All material copyright newzimbabwe.com
Material may be published or reproduced in any form with appropriate credit to this website