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By
Mduduzi Mathuthu
Editor
ZIMBABWE,
like Rhodesia under Ian Smith, has been under the spotlight of the international
community for pretty much the same reasons.
Someone made a joke that people used to go to Rhodesia to see the Zimbabwe ruins and now go to Zimbabwe to see Rhodesia ruins.
The real question for Zimbabweans in the face of the extended European Union sanctions is whether Zimbabwe is a failed state or whether the world has failed Zimbabwe. In examining this fundamental question, it is important that the public is properly informed about the manner in which the Mugabe regime appears to have responded to targeted sanctions.
What is remarkable is that Zanu PF itself appears to be a divided party in the face of adversity. Until 2004, the party did not have a clue about its own business interests that were run by two Indian brothers reporting to a few individuals in the party. If Zanu PF was a company, President Mugabe would be the CEO of the company with a board i.e. politburo. Apparently even the CEO had no idea of the kind of transactions that were done in the name of the party prompting an investigation both by the party and the police.
A committee was then set up and reported on the activities of the party. Details of the report were first disclosed to the public by the Zimbabwe Independent on 29 October 2004. A copy of the newspaper article is available on internet under the title Zanu PF busts embargo. It is important that we appreciate what the party had to say about its business exploits, the rationale behind the structures used and the personalities used by the party.
Zanu PF claims that
in order to beat targeted sanctions, it formed shelf companies to warehouse
shares in various corners of the economy. The party acknowledged that
it had moving funds from well-known party firms to lesser-known shelf
companies to secure its investments.
Zanu PF investments have been traditionally held by two companies -
Zidco Holdings and M&S Syndicate. The two companies were party owned
but controlled by the Joshi brothers who have since left the country
with all the secrets. The companies had a number of interests including
holding shares in a number of counters listed on the Zimbabwe Stock
Exchange but since 2003, the party set up a string of shelf companies
to disguise its involvement. All these schemes were structured and executed
without the knowledge of the “board of directors”. It is
important to underscore that a majority of the party companies have
never posted a profit since inception.
The principal reason for the party adopting a strategy to mask its investment
in as much as the government has kept the people of Zimbabwe in the
dark on payments to the IMF, is that it was wanted to avoid the scrutiny
of Zanu PF firms by the international community that reacted to President
Mugabe's repressive policies with targeted sanctions.
"During the
embargo on all companies and banks linked to Zanu PF, the party formed
a company called Segmented Investments," the Independent report
says. "Zidco also formed other briefcase companies and staff shares
were also created."
Briefcase companies which have been set up include Sovereign, Hustonville,
Tescrom, Amelia, Ryobi, Prinfit and M&S Investments (as distinct
from M&S Syndicate).
Some of them list prominent lawyer Edwin Manikai as director. The so-called
briefcase or shelf companies now have a combined 32,05% stake
in First Banking Corporation Holdings (FBCH) which controls First Bank,
Southern Africa Reinsurance (Sare), and troubled NDH. The deal that
gave rise to the party taking control of the bank that Mutumwa Mawere
founded in 1997 was controversial on the back of a corrupt deal involving
the use of government funds to secure a loan for a shelf company, Smoothnest
Investments, jointly owned by Manikai and Dhliwayo.
The funds raised
were then used to purchase shares held by another party company, M &
S Investments, that the party did not even know existed. The funds were
deposited with the National Discount House (NDH), a bank co-founded
by Jabulani Manyanga, who has been specified and is now in exile in
South Africa. NDH was the principal channel for the party’s money
laundering activities. Although the bank was financially troubled, Reserve
Bank governor Gideon Gono did not pounce on it like he did unlawfully
in the case of Trust, Royal and Babican. NDH was to resolve its problems
with Manikai, confirmed by the report to be a key instrument for the
sanctions busting strategies, in charge. With the exit of the Indians,
Manikai has emerged as the key architect of the party’s hidden
activities. He is also a key advisor of Gono and represents the ZABG
in the application by the three banks to set aside the expropriation
of their assets by the RBZ.
In the case of the shareholding in FBCH, it is distributed as follows:
Segmented Investments 13,76%, Hustonville 4,36%, Amelia 3,54%, Tescrom
3,54%, M&S 3,06%, Smoothnest 3,06% and Ryobi Investments 0,82%.
Before the transformation, Zanu PF was represented in First Banking
Corporation through AM Treger and Zidco Holdings, which held 13,5% each.
In July M&S Investments and Smoothnest Investments had a combined
shareholding of 37,84% in Sare, split equally between the two shelf
companies.
In the SMM saga, Manikai seems to be playing a central role on behalf
of his principals using the state machinery. The party is reported to
have used Arafas Gwaradzimba’s shelf company, AMG Global Nominees
(Private) Limited, as front to acquire Mawere’s interests in two
UK companies. To the extent that Manikai and his fellow cronies have
been able to visit the UK on behalf of Mugabe, it is clear that the
international strategy of busting sanctions seems NOT to be working.
Chinamasa has confirmed that AMG is a front of the government of Zimbabwe
in expropriating Mawere’s interests.
The privatisation of the State and the disguising of transactions that rely of public resources represent the most dangerous development in Zimbabwe. In as much as the CBZ was operating without any semblance of corporate governance and Mugabe could use the bank for his personal transactions with the confidence that only Gono would know the true nature of such transactions, the role of the RBZ in the new breed of special purpose vehicles that are now being used to siphon money from the State needs to be interrogated. It is unfortunate that the RBZ only reports to GOD and has become the biggest domestic bank with no credit committee.
While it is acknowledged that Mugabe and his team have imposed sanctions on Zimbabwe through bad policies, the role of the public in exposing the individuals who are playing a central role in the abuse of the state cannot be overstated. To what extent do countries in the West really understand how the State in Zimbabwe has been stolen by a few individuals who now pose a threat to democracy in that they can unleash the economic rents collected under Gono with the blessing of the IMF to decide who the next President of Zimbabwe becomes? The externalisation of black Zimbabwean businessmen as a means of disabling them and potentially weakening all possible centres of opposition must be carefully analysed.
The strategy of Zanu PF would not have worked without an enabling monetary and fiscal policy framework that has led to the centralisation of the State and the assumption of powers by the RBZ of a patronage dispensing machine under the cover of sanctions busting. Indeed, with an aging Emperor and a wife who still needs safety in a world that may change sooner rather than later, the power vacuum is obvious and it is also clear who has taken over the organs of the State. Most of the shelf companies can boast of funding from the various schemes put in place by the RBZ. You can borrow money for agriculture and use the funds to trade in fuel and then externalize the proceeds only if you are on the right hand side of the Governor.
The Zanufication of financial transactions seems to be working and even a multilateral development institution like the IMF can be fooled. Equally, Mevyn King, the renowned corporate governance guru, has joined the gravy train having been appointed by the RBZ to review a Supreme Court judgment that condemned the unlawful takeover of the three private banks. In Zimbabwe, even the judiciary takes instruction from the RBZ. After all how many judges are farmers enjoying subsidised credit?
Only GOD really
knows which companies belong to who even with tough money laundering
legislation. The world need to unmask this dangerous development if
Zimbabwe is to be restored in the family of nations that respect human
rights and the rule of law and not the rule by law.
Mathuthu is the editor of New Zimbabwe.com and can be contacted
on mathuthu@newzimbabwe.com
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