IT was officially reported today, 19 November 2015, in the Herald newspaper that an agreement has been concluded between VimpelCom’s 51.9% held subsidiary, Global Telecom Holdings S.A.E. (GTH); and a nominee of the government of Zimbabwe, Zarnet Private Limited (Zarnet) providing for the sale of the entire shareholding held by GTH in Telecel Zimbabwe (TZ) for a consideration of US$40 million.
It is hardly surprising that the reported transaction was conceived and executed in the context of predatory rule, a primitive stratagem used by state actors in failed states, constituting a minimalist approach to development.
The facts and circumstances leading to this stated-led acquisition are now well established but what is significant is that the transaction represents ostensibly the displacement of one class of indigenous shareholders by a financially challenged predatory state.
It is worth highlighting that what is really at play in this transaction is an attempt to remove the Economic Corporation Private Limited (“EC”) completely from TZ notwithstanding the fact that the primary reason for the involvement of EC in TZ as a shareholder was because of the indigenization and economic empowerment compliance obligations.
It is common cause that the government of Zimbabwe having born from the womb of a colonial state cannot claim any prejudice from the colonial dispensation yet the true effect and intend of the transaction is to permit rent seeking and maximization by fortunate state actors from the operations of entities under their control.
The proposed acquirer has no funds to make the acquisition other than using state power to raid the funds meant to provide financial security to the working people who involuntarily contribute to NSSA.
It is not unusual in failed states that state actors prey on their own constituents. For the EC to be a beneficiary of an equity stake in TZ, its shareholders had necessarily to be acceptable to the ruling elites. Clearly, this transaction would be unthinkable if the shareholders of EC were still considered to be politically connected.
The content and context of the correspondences by state actors about this transaction is telling as to what it now takes to rob US$40 million from the working class of Zimbabwe simply by creating a façade of some national interest in relation to dubious transactions. It exposes a fundamental departure from what is normally associated with developmental, accountable, responsible and responsive forms of rule.Advertisement
The actors in the TZ drama are relatively young and presumably enlightened people yet are the driving minds behind the abuse of state power in such a brazen and cowardly manner. One can only imagine what tactics were employed to secure the deal. The Minister, Hon. Supa Mandiwanzira, the driving mind behind the deal, must be elated that he finally managed to accomplish what many have been trying to do privately.
It may not be apparent to any layman why Hon Minister would object to NSSA, as the provider of funds, to acquire the shares as a principal. It is self-evident that in a predatory and failed state, it becomes important for key state actors to create their own pockets of economic rent collection. Zarnet is a step removed from public scrutiny hence its attraction to crafty political actors.
It is evident that political manipulation can substitute good corporate governance standards. In this matter, it is the case that 100% of the acquisition funds will be provided by NSSA without following any of the processes and procedures that protect the rights and interests of NSSA’s beneficiaries.
It is proposed that Zarnet will end up with an equity stake that is presently held by GTH without paying any cent for it. NSSA’s role will be to be a financier of record but following the deal, it is Zarnet that will be the driver of the transaction. However, given the relationship between Hon. Mandiwanzira and Zarnet, one can predict with some level of confidence that Zarnet will have absolutely no autonomy over the TZ investment leaving Hon. Mandiwanira as the chief puppet master.
It is regrettable that the post-colonial dispensation has introduced a new lucrative career that allows mediocre people to be elected and thereafter acquire a licence to loot in the name of the financially blind majority. Following the transaction, Zarnet will replace GTH as the controlling shareholder of TZ.
The fact that Zarnet is financially thin will not augur well for the future of the company. However, it will henceforth control the strategic direction of TZ including the closing of key transactions including the upgrading of the system. It cannot be lost to anyone that such one can make good commissions on supply chain deals through opaque control arrangements that Zarnet will facilitate.
Without any financial exposure, Hon. Mandiwanzira will end up controlling a large chunk of all companies directly and indirectly controlled by the government. In such a structure, the continued involvement of possible spies like the shareholders of EC will be highly inconvenient leading to the inescapable conclusion that EC’s days are numbered. It will be more convenient to rent seeking actors to push EC into economic oblivion.
It is predictable and in fact inevitable that following the acquisition, a new conversation will take place between the barbarians in the den and the EC about the issue of outstanding license fees. The nightmare of EC shareholders is about to unfold. Although NetOne does not pay the same fees that is being asked from Econet and TZ, proposals will soon be tabled to TZ’s shareholders for the conversion of the license arrears into equity. When that sinister proposal is approved that will mark the demise of EC.
One can easily figure out what has driven a broken government to limit its horizon to the kind of transactions that add no value to the real promise of independence. In fact, the government is already a major player in the ICT space and in particular in the mobile phone industry. It is the sole shareholder of the first recipient of a mobile phone network licence, NetOne, whose performance confirms the old age known fact that the state and its actors cannot be trusted to deliver the promise of wealth creation in a sustainable manner.
NetOne is challenged financially as is the case with its sole shareholder, yet the experience of this instrument of the state counts for nothing in informing the decision of whether to divert critical national resources that could be deployed elsewhere to reward GTH unnecessarily. It is common cause that GTH and EC are the two elephant shareholders in the room and as is typical in any such marriage, one would expect the protections normally enshrined in shareholder agreements to limit the predatory shenanigans of hungry state actors.
It is instructive that in the press statement issued by Vimplecom no mention is made of any commitment to respect EC’s pre-emptive right in respect of the shares. What is clear is that with the stick that the government wields over TZ, no other purchaser would be interested in stepping into GTH’s shoes. If I had not experienced the same treatment, I would be tempted to criticise Hon. Mandiwanzira for being a misguided state actor.
However, for those that followed closely the SMM Holdings Private Limited (SMM) matter, will recall that the first step of creating new facts and circumstances in relation to the affairs of SMM was to initially accuse the shareholder of a manufactured crime of externalization. This was followed by a warrant of arrest and when this failed, the state of emergency powers was borrowed solely to create a new reality of purported state-indebtedness.
The perpetrator of this scheme included Hon. Chinamasa, now the Minister of Finance. He authored the Reconstruction of State-Indebted Insolvent Companies laws that allowed him and not the courts to appoint an administrator in relation to the affairs of SMM.
However, Hon. Chinamasa and his cabal at the material time had constructive knowledge that SMM was a wholly owned subsidiary of SMM Holdings Limited (SMMH), a company registered in the United Kingdom. The predatory cabal knew that my company had not completed the payment of the purchase price.
This opened a convenient window for these state actors to bring into life a special purpose vehicle, AMG Global Nominees Private Limited (AMG), as a presumed nominee of the government to approach the former owner of SMMH to acquire the claims held by way of security in relation to SMMH. AMG like Zarnet was financed in an opaque manner by the Reserve Bank of Zimbabwe. The claims were purchased as a matter of fact but the scheme could not succeed as it was vigorously opposed in the UK courts resulting in the transaction collapsing.
With respect to the correspondences referred to above, it is worth noting that a non-binding expression of interest for the acquisition of 60% of TZ shares was addressed to the legal title holder of the said shares but surprisingly under the care of Hon. Mandiwanzira. The letter was dated 20 August 2015. As at this date, it cannot be disputed that Hon. Mandiwanzira had nothing to do with GTH yet in the mind of the then General Manager of NSSA, the Minister was in the loop of things.
Like in the case of SMMH, the former shareholders of the company, were informed that the government had already taken irreversible steps to acquire the control and management of SMM and as such the only outstanding issue was to acquire the shares and in so doing complete the putsch. The whole scheme was intended using public funds to spite me. If anyone was in doubt of the foolishness of using public funds to interfere with commercial activities, the story of SMM is pregnant with lesions.
It is not clear from the purported expression of interest what was at play to encourage NSSA to make such an unsolicited bid speculating with funds that do not even belong to the government. In terms of an email dated 23 September 2015 authored by Hon. Mandiwanzira addressed to the Chairman of NSSA, Mr. Robin Vela, it is clear that the role of NSSA was merely to be an agent of predatory state actors.
Clearly, Zarnet like AMG has no financial capacity and the manner in which such a juristic person is being used to further the purported interests of the state must worry any democrat. Clearly, one would have expected Hon. Mandiwanzira from his experience in the private sector to know that economic prosperity can best be advanced by market forces. Even a blind person would know better that Econet is where it is because of the power of the human spirit driving it.
After 35 of independence, it is reasonable to expect the new generation of leaders to resist the broadening and deepening of wrong and small ideas in the human mind. It would not take a rocket scientist to know that the path chosen by Hon. Mandiwanzira is a suicidal one. He may not know what lies ahead but financial doom is inevitable but the deal makers dressed as state actors will suffer no personal financial injury from their deeds.
It is telling that in terms of this letter, Hon Mandiwanzira makes what ordinarily would be an innocuous statement in relation to Zarnet that: “It will pay US$0,00 for equity we don’t think there is any equity value.” This is really a warning statement to EC that its holding in TZ is worth nothing.
Why then would GTH be rewarded with a positive value of US$40 million in a transaction that involves the very shares that are doomed to have no economic value? There can be no doubt that the terms and conditions of the transaction would be kept a top secret allowing for predatory actors to pounce on EC shareholders, who are black like me. It is also significant that the emails confirm the murky nature in which NSSA is now operating under even against the backdrop of a purported restructuring led by Mr. Vela’s new board.
The fact that Mr. Vela had this to say: “having spoken to my line Minister, Honourable Priscah Mupfumira who confirmed that government has taken a decision a have the transaction done, I asked NSSA to re-evaluate the transaction on the following basis, which I (in bold for emphasis) believe would then be doable,” is instructive. It would appear that when the government, however, defined makes a decision, then the board of NSSA has to acquiesce to such dictates confirming the politicisation of investment decisions by NSSA.
One would expect that Mr. Vela would be courageous enough to resist such pressure but alas in contemporary Zimbabwe, the erosion of institutions is being administered by the most unlikely actors, so-called professionals. It is also significant that Mr. Vela stated that: “before I proceed to get the investment team to further progress with the above transaction and get formal approval to execute, I would like to ensure I have your acceptance on the same.”
Mr. Vela makes this statement fully alive to the fact that NSSA is a tripartite body involving the three social partners, labour, government and employers in its governance. Its source of funds is the working people who are not even aware that their future is being handled in this manner. The funds are being played football with by actors like Hon. Mandiwanzira.
Finally, we now know that NSSA under Mr. Vela is no longer safe leading people to probe into the man called Mr. Robin Vela. Who is he? Where did he emerge from? Is he the right man for the job if he can positively play his part in undermining what NSSA should stand for? What is the relationship, if any, between NSSA and the line Ministry that would allow for US$40 million to exchange hands on the basis of decisions made by the cabinet of Zimbabwe?