Because of the size of the company, there was a perception that the government of Zimbabwe was directly involved in the acquisition. In fact, this perception is not only in the public domain but is official as shown below. The takeover of my companies following the promulgation of a Presidential decree to allow for the state to takeover any company without compensation under the guise of State indebtedness was unprecedented and illegal. To justify the expropriation the government has been at pains to characterize me as a fugitive although it is common cause that I have been a resident of South Africa since 1995. I left Zimbabwe in 1988 to join the World Bank under the Young Professionals Program. On completion of the program in 1989, I joined the private sector wing of the Bank, the International Finance Corporation (IFC), and worked in various capacities until 1995 when I resigned to relocate to South Africa.

Your readers may be aware that I was elected in absentia in 2003 to a ZANU-PF post as Secretary of Economic Affairs in the Masvingo Province. I was not consulted prior to the election and when I was informed about the election, I advised the party that I was not eligible for the post on a number of grounds. Firstly, I was not a member of the party. Secondly, I was no longer a Zimbabwean citizen since 2002 when I acquired South African citizenship. Thirdly, I am a businessman who had no interests in politics hence my decision not to join any party. Fourthly, I was not a resident of the country and as such it was inappropriate to take a position. However, my decision to decline the post after several warnings that it would cost me dearly, has led to a sequence of events that have seen me being targeted personally and all the assets deemed to be under my control being taken over by the state.

The story is complex but you will be aware that in May 2004, I was arrested in South Africa on trumped up charges of externalization. The extradition application was dismissed by a South African magistrate on the 29th of June 2004. Ten days later, the State specified me under the Prevention of Corruption Act although no charges were mentioned. Following my specification, my companies were also specified under the same act. An Investigator, Assistant Commissioner Mangoma, was appointed to investigate my affairs but to date has failed to produce any report as required by the law. However, the specification of my companies as well as I were meant to prepare the ground for the state to takeover the companies. Following the specification of the companies, the state discovered that there was no legal instrument to takeover my companies. The government then responded by passing a decree placing my companies under the control of a state appointed administrator. Mr. Afaras Gwaradzimba, a chartered accountant that my companies had assisted in setting up his firm was appointed the administrator. Mr. Edwin Manikai, a lawyer who my companies had also assisted financially to set up a law firm, Dube, Manikai and Hwacha, also became a state agent in the pursuit of my assets on the premise that my companies were state indebted.

In this piece I will deal with the allegation that the State was involved in the acquisition of SMM. I thought it would be beneficial to capture a recent parliamentary debate on the same subject (Whole debate available from New Zimbabwe.com upon request).

In response to Hon. Mungofa’s question regarding the intention of the government to arbitrarily take over the control of SMM Holdings (Private) Limited (SMM) from me using the Reconstruction of State Indebted Insolvent Companies Act 2004, Hon. Chinamasa, responded saying: “Mawere did not use any savings but he used government guarantees to purchase the company”. This is indeed the public perception that the government was involved. The truth is that the State had no involvement in the acquisition of SMM. No guarantee was ever used by Africa Resources Limited (ARL), a company incorporated under the laws of the British Virgin Island (BVI), to purchase SMM from T & N Plc in 1996. My approach to T & N was unsolicited as confirmed in the letter from T & N Plc dated 28th September 1995 (Available from New Zimbabwe.com upon request). The Sale and Purchase Agreement (SPA) signed between ARL and T & N was governed under English law and the government of Zimbabwe was not a party to the agreement. In fact, it is surprising that Hon. Chinamasa in his responding affidavit in Case Number 12064/04 between SMM Holdings Limited (SMMH), the sole shareholder of SMM domiciled in England, had this to say “In March 1996, an acquisition agreement was concluded between T & N and ARL. Mr. Mawere is said to be the beneficial shareholder of ARL. In terms of that Agreement, T & N sold its Holdings and interests in SMMH. Simultaneously with the signing of the Agreement pertaining to the acquisition of the T & N interests, ARL concluded a Memorandum of Deposit and Charge in favour of T & N in terms of which the shares in SMMH were pledged as security against payment, over five years, of the purchase price of US$60 million. He then goes to say that between 1997 and 1998, ARL defaulted in the payment of the purchase price for the T & N interests. An amount of US$23 million remained outstanding”.

If the acquisition of T & N interests was financed through government guarantees, how could there be a payment default by ARL? In addition, the acquisition financing was secured by a pledge of shares to T & N and not to the government of Zimbabwe. If the government was the financier of the transaction, why were the shares not pledged to the government? The SPA makes no mention of the government of Zimbabwe either in terms of financing or guaranteeing the transaction and yet the Minister states as fact that the government guaranteed the transaction.

Nobody has interrogated the publicly held view that SMM was acquired through a government guarantee and some have even suggested that Hon. Emmerson Mnangagwa was involved in the transaction. I attach herewith a letter from T & N Plc that helps explain the nature of the transaction (Letter available on request). However, as can be appreciated, to justify the illegal expropriation, the government has been trying to argue that I did not contribute anything to the acquisition and, therefore, the state has a legitimate right to expropriate my assets.

There has been some confusion regarding an offshore line of credit that was arranged by SMM in 1988 from a Belgian bank, KBC. SMM secured an offshore loan of US$60 million in 1998 or two (2) years after the acquisition of the company. The Reserve Bank of Zimbabwe stipulated that the loan be provided by the bank through MMCZ on the grounds that such a loan would be serviced from SMM’s export proceeds. A government guarantee was issued in favour of KBC Bank and the proceeds of the loan were used to refinance domestic indigenous banks i.e. NMB, Heritage Investment Bank (HIB), and Universal Merchant Bank. It is important to note that since 1997 the Zimbabwean economy has been on a downward spiral and no foreign bank was willing to take the Zimbabwe risk without a government guarantee. Under the KBC facility, all payments to T & N were not permitted and surprising Hon. Chinamasa is now alleging that there was a payment default. The need to borrow offshore was primarily because SMM was a net exporter and could service the external loan with its own proceeds. The loan was fully repaid in 2002. SMM generated about US$177 million during the tenor of the loan and yet this is not mentioned.

You readers familiar with Zimbabwe may recall that the RBZ introduced a concessionary financing facility for exporters in 2000 carrying an interest rate of 15% per annum following the announcement of the 2000 budget by the then Minister of Finance, Dr. Simba Makoni. SMM was not permitted to incur any further borrowings under the KBC facility and yet had reduced the outstanding loan amount. An application was then made to borrow in the local market using the same KBC guarantee arrangement. This was done but unlike other exporters SMM ended up paying an interest rate of 35% instead of the 15% available for other exporters.

It is important that you interrogate the assertion by the Minister that SMM was purchased using state funds. How far true is this and what is the evidence? You will also appreciate that a deal of the nature of the acquisition of SMM required a lot of work and outside counsel. To the extent that the deal was an offshore one, all the pre-closing costs were paid by ARL. According to Chinamasa, I did not contribute anything to the acquisition and yet he acknowledges that it was a private sector transaction. I was the principal from the outset until I was targeted by the government with an ulterior motive to takeover my companies.
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