By Gilbert Muponda
There is a causal link between Zimbabwe's economic melt-down and the
breakdown of the rule of law .The Ministry of Home Affairs has to be under untainted hands if the economy is to attract investors and increase production. ZANU-PF maintains that the real cause of the economic meltdown is the sanctions regime under which the country has been left with no choice but to resort to unorthodox economic and political methods.
It is my contention that a link clearly exist between economic performance and
the respect of the rule of law. The imposition of the will of the former ruling
party on the country has taken many forms including the passage of laws that
promote and entrench partisanship and the use of state power to interfere
with the bill of rights enshrined in the constitution of the country. This has resulted in widespread violation of private property rights which is the cornerstone of any market based economy. Through-out human history there has never been a lawless society that has economically succeeded. Its unlikely Zimbabwe will be the first one to succeed in an environment characterized by property and human rights being non-existent .Lawlessness breeds poverty and unstable economic environment.
The separation of powers doctrine, a fundamental requirement in any
constitutional democracy, is no longer applied in contemporary Zimbabwe.
The selective use of the law to punish and reward targeted persons
undermines the rule of law, which reduces investment in the economy. The shocking breakdown of the rule of law has had its own adverse effects on economic performance.
The break down of the rule of law was particularly apparent in the
destruction of the Agricultural sector which led to
Wide spread disruptions on Agricultural production. Whilst land reform
was absolutely necessary its implementation accompanied by law
breaking and court orders being ignored and the Ministry of Home
affairs mostly doing nothing exacerbated the economic decline. Confidence
building critical to attract investment and restore
Economic growth .There is need for new investment to increase
production and tame Zimbabwe’s record setting hyper-inflation.
Law and order is a basic requirement of any functioning modern
society. Unfortunately, the Ministry of Home affairs which has the
responsibility of maintaining law and order has done such a bad job
that the former ruling party cannot and should not be entrusted with
this critical ministry if Zimbabwe is going to re-join the
international community and regain lost glory due to the reputation
acquired by due to the failure of this ministry to uphold the law.
From around year 2000, Economic slide was accompanied by the break
down of the rule of law starting with invading productive farms most of which had not even been gazzetted .And during that period Company
invasions increased. During that period Company invasions increased this led to the resignation of the then Minister of Industry and Commerce Dr Nkosana Moyo
It was clear then that without rule of law there won’t be any economic prosperity and it’s clear now that the Ministry needs fresh ideas and focus and direction
and it has to be made aware of the critical role it will play in
Zimbabwe’s Economic recovery by creating conducive business
environment by fair application of the rule of law.
Foreign Direct investment will not increase if there is no rule of law
.Foreign aid which has been critical in various sectors is unlikely to come if there is no culture reform and a serious attempt to rebuild confidence in the law enforcement agencies which are part of the Ministry of Home Affairs.
Brain drain has resulted in massive loss of skill and experience .Its
unlikely this will be reversed if the conditions that have been
allowed to make Zimbabwe very hostile to skilled and experienced
employees are not addressed.
Capital flight will continue as long as there is perception of
lawlessness and selective application of the law. This means the
Ministry of home affairs needs a culture change and has to be under a
different party to manage that change and improve perception that the
law will be applied uniformly.
During the stage managed anti-graft campaign of 2003-4, the Ministry of
Home affairs through the Zimbabwe Republic Police (an institution
whose credibility is in tatters) facilitated and enabled a massive
wealth transfer with several business people either arrested,
threatened with arrest or haunted out of the country .Whilst this was
hailed at the time it had a negative impact on the Economy, investor
confidence and caused brain drain and partially reversed economic gains.
The ministry of Home affairs through ZRP instead of investigating
first, they proceeded to arrest so as to investigate .Whilst these
arrests were going on a record number of businesses changed hands
under controversial circumstances .Such events affect investor
sentiment and confidence .Below is the partial list of the Businesses
that changed hands courtesy of the Ministry of Home affairs.
1- Royal BANK from J.Muzwimbi to Government of Zimbabwe
2 - Barbican Bank Dr M.Ncube to Government of Zimbabwe
3 - Trust Bank
4 - Shabanie Mashaba Mines from ARL to Government of Zimbabwe
5 -Kondozi Farm
6- Century Bank Holdings from ENG Capital to RBZ Governor, Dr Gono
and Mr. Sean Maloney
7 -First Mutual Life
8 - CFI Holdings
9 - Intermarket Holdings from Transnational Holdings to Government
owned ZB Holdings
10 - Zimre Holdings
This made global news headlines, whilst it seemed normal, it wasn’t in
that it highlighted the lack of uniformity in application of the law
.This generally fed into the perception that it’s risky to invest in
Zimbabwe because there is no rule of law. And to change this
perception it’s imperative that the law enforcement function be
reformed and be under an untainted custodian.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
Saturday, November 1, 2008
Wednesday, October 29, 2008
KMAL Board room wrangle and Affirmative Action
The discussion on Affirmative action and Kingdom Meikles Africa boardroom battle has drawn widespread comments from unlikely sources. It should be noted that whole affirmative Action agenda should be about leveling the playing business and opportunities fields and not the grabbing of assets or victimization of one racial group. The concept is noble but can easily be corrupted and abused in the absence of proper and clear guiding principles. It appears as Zimbabweans we have failed to come up with clear principles, guidelines and legal framework to make the process more credible and successful. Such principles, guidelines and legal framework must be incorporated into a wider national vision geared towards building a stronger economy and uplift citizens' standards of living
Whilst the Affirmative action needs to be viewed beyond personalities at times real life case studies have to be highlighted to illustrate the challenges faced by black business people . As intended beneficiaries of the Affirmative action programme in Zimbabwe, black business people need to come up with generally acceptable standards of doing business including conflict resolution and lobbying. The lack of generally acceptable standards has led a perception of associating most if not all black businesspeople being painted with the same brush and being labeled corporate hooligans. In business perception counts for a lot and there is clear need to counter this perception in deeds and in words.
Zimbabwe has very few successful black business people who can be role models and mentors to those aspiring to go into business. For that reason, those who have succeeded have to set the right standards of conducting business since high expectations are on them.
Postcolonial stage values are needed in the same way the colonial system was underpinned by its own values and principles that served to advance the interests of the settlers who had a clear vision of creating a nation based on certain values, expectations and ideals. It is not exactly wise to just blame the colonial set-up when there is no direct, focused and committed effort to build a national vision designed to ensure that exploitation of resources and opportunities results in general enlistment of the citizenry not just a few well-connected individuals masquerading in various shapes and forms.
Zimbabwe's business landscape is widely constructed by various Business factions, which are very polarized to a similar extent that exists on the political front as in ZANU PF factions and polarization between ZANU and MDC. The Zimbabwe business scene is full of accusations and counter accusations of business people alleging they were victimized or arrested because of a rival businessperson. A disturbing trend is any Zimbabwean business of note has once been arrested or been a target of arrest for one point or the other. This needs to stop. The Zimbabwe business community needs to work as a team to address this tragedy which is undermining national economic potential . The current Kingdom Meikles Africa Limited saga immediately comes to mind. Kingdom Meikles Africa Limited was hailed as a successful indigenization transaction that met the Government’s 51 % local ownership law.
It is undeniable there is a conflict between shareholders/executives which has spilled to the courts and the Police head quarters. Having been following these developments, I could not help but pick up various standards being applied to such an extent that the whole scheme of things undermines the Affirmative action agenda. In the KMAL saga it is reported that the KMAL CEO Mr. Chanakira has reported to the police that the Company chairman Mr John Moxon, must be arrested because of "externalization" (which is uniquely Zimbabwean crime).The report in itself may or may not have its merits. However, under normal corporate governance procedures such a report should be made by the firm's internal auditors, financial director or company secretary after investigations conclude that there is prejudice or laws have been broken.
Having read an article (http://zim2day.com/index.php?option=com_content&task=view&id=1336&Itemid=80) by Mr. Mutumwa Mawere in which allegations are made that Mr Mawere connived to have Mr. Chanakira arrested sometime in 2000 it is difficult to comprehend why Mr. Chanakira would want to have another businessperson , John Moxon arrested. Him having claimed to be a victim of alleged engineered arrest would not be expected to resort to using the ZANU-PF controlled state machinery to attempt to leverage and try to win a boardroom battle .A battle he can easily win squarely by making a solid case to other minority shareholders .
As background (to the arrest) Mr. Chanakira played a significant part in the disposal by Dr Daniel Shumba of his shares in TS Masiyiwa Holdings (Private) Limited (TSM), a company controlled by Mr. Strive Masiyiwa that was the controlling shareholder of Econet Wireless Holdings. Mr. Chanakira through Kingdom Stockbrokers (Private) Limited acted on behalf of Dr Shumba in the sale of his shares to NSSA. However, although Kingdom sold the shares to NSSA at a price of Z$4.25 per share, Shumba only received a price of Z$2 per share with the balance being pocketed by Kingdom. Dr Shumba discovered this anomaly only some time later leading to the arrest of Mr. Chanakira. The documents reviewed by GMRI Capital confirm that Kingdom admitted to prejudicing Dr Shumba and refunded him for the unjust enrichment. NSSA as well instituted legal action against Kingdom on the same transaction alleging that Kingdom had acted fraudulently and obtained a court order compelling Kingdom to make good to NSSA on the diverted income and shares.
GMRI Capital has confirmed that sometime in January 2004, Mr. Chanakira who has claimed that his troubles with the law was instigated by rival businesspersons including Mr. Mawere did try to reach out to Mr. Mawere. A meeting reportedly took place at Mr Chanakira‘s office. Mr. Mawere was surprised to find Minister Elliot Manyika in Mr. Chanakira's office. While the precise relationship between Minister Manyika and Mr. Chanakira is not known it is astonishing that a person like Mr. Chanakira who has acquired a reputation as a victim of ZANU-PF will end up inviting a senior member of the party to such a business meeting.
The relationship between Mr. Chanakira and Minister Manyika is somewhat puzzling let alone the mere fact that Mr. Chanakira would find it fit to involve Minister Manyika in his business interests. The mere fact that Minister Manyika sought to involve himself in Mr. Chanakira's affairs must be worrying. Former Attorney General, Gula Ndebele, was fired by President Mugabe for meeting with an accused Mr. James Mushore who was later acquitted but nothing much has been reported about the alleged criminal aspect of Mr. Chanakira's case raising suspicion about selective application of the law. This is how the Affirmative action program is undermined and end up being ridiculed even though it is a noble and progressive concept .
Inspiration plays a large role in business development. Leading business people like Mr. Chanakira have provided a good example to many would be entrepreneurs and they are really role models to many. Were it not for the KMAL boardroom battles we would not care about evaluating Mr. Chanakira's background and his effort to have Mr. Moxon arrested. We all have our own views on Mr. Moxon and the colonial baggage he represents but it is high time that we reflect on the dangers of using indigenization for personal and opportunistic purposes which may cause long term reputation damage to the Affirmative Action program.
As Zimbabwe seeks to create a more equitable business environment the grey areas need clarification. This will go a long way in confidence building and in attracting foreign investment. Foreign investors need to know that there is a clear affirmative action programme in place and that programme has clear rules and principles and the rules are not selectively applied. The perception that those who have direct access to politicians can easily subvert the goals and principles of affirmative action defeats the whole purpose of the programme.
The rule of law and corporate law must at all times be central in how business is conducted .This will go a long way in creating a true class of unquestionable role -models who can inspire other generations whilst simultaneously creating a value system that will safe guard the gains of affirmative action programme.
Real life experiences should teach us to build strong systems, which can outlive the founders and be bedrock for future generations’ prosperity. A haphazardly implemented affirmative action program will likely end up being a get-rich-scheme for a few who are acting in the name of the program. The lack of clear national vision and targets results in anger being regrettably vented out on other ethnic groups who were better organized and more focused. Affirmative action without principles and values is a hollow strategy which will result in economic stagnation and frustrations.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
Whilst the Affirmative action needs to be viewed beyond personalities at times real life case studies have to be highlighted to illustrate the challenges faced by black business people . As intended beneficiaries of the Affirmative action programme in Zimbabwe, black business people need to come up with generally acceptable standards of doing business including conflict resolution and lobbying. The lack of generally acceptable standards has led a perception of associating most if not all black businesspeople being painted with the same brush and being labeled corporate hooligans. In business perception counts for a lot and there is clear need to counter this perception in deeds and in words.
Zimbabwe has very few successful black business people who can be role models and mentors to those aspiring to go into business. For that reason, those who have succeeded have to set the right standards of conducting business since high expectations are on them.
Postcolonial stage values are needed in the same way the colonial system was underpinned by its own values and principles that served to advance the interests of the settlers who had a clear vision of creating a nation based on certain values, expectations and ideals. It is not exactly wise to just blame the colonial set-up when there is no direct, focused and committed effort to build a national vision designed to ensure that exploitation of resources and opportunities results in general enlistment of the citizenry not just a few well-connected individuals masquerading in various shapes and forms.
Zimbabwe's business landscape is widely constructed by various Business factions, which are very polarized to a similar extent that exists on the political front as in ZANU PF factions and polarization between ZANU and MDC. The Zimbabwe business scene is full of accusations and counter accusations of business people alleging they were victimized or arrested because of a rival businessperson. A disturbing trend is any Zimbabwean business of note has once been arrested or been a target of arrest for one point or the other. This needs to stop. The Zimbabwe business community needs to work as a team to address this tragedy which is undermining national economic potential . The current Kingdom Meikles Africa Limited saga immediately comes to mind. Kingdom Meikles Africa Limited was hailed as a successful indigenization transaction that met the Government’s 51 % local ownership law.
It is undeniable there is a conflict between shareholders/executives which has spilled to the courts and the Police head quarters. Having been following these developments, I could not help but pick up various standards being applied to such an extent that the whole scheme of things undermines the Affirmative action agenda. In the KMAL saga it is reported that the KMAL CEO Mr. Chanakira has reported to the police that the Company chairman Mr John Moxon, must be arrested because of "externalization" (which is uniquely Zimbabwean crime).The report in itself may or may not have its merits. However, under normal corporate governance procedures such a report should be made by the firm's internal auditors, financial director or company secretary after investigations conclude that there is prejudice or laws have been broken.
Having read an article (http://zim2day.com/index.php?option=com_content&task=view&id=1336&Itemid=80) by Mr. Mutumwa Mawere in which allegations are made that Mr Mawere connived to have Mr. Chanakira arrested sometime in 2000 it is difficult to comprehend why Mr. Chanakira would want to have another businessperson , John Moxon arrested. Him having claimed to be a victim of alleged engineered arrest would not be expected to resort to using the ZANU-PF controlled state machinery to attempt to leverage and try to win a boardroom battle .A battle he can easily win squarely by making a solid case to other minority shareholders .
As background (to the arrest) Mr. Chanakira played a significant part in the disposal by Dr Daniel Shumba of his shares in TS Masiyiwa Holdings (Private) Limited (TSM), a company controlled by Mr. Strive Masiyiwa that was the controlling shareholder of Econet Wireless Holdings. Mr. Chanakira through Kingdom Stockbrokers (Private) Limited acted on behalf of Dr Shumba in the sale of his shares to NSSA. However, although Kingdom sold the shares to NSSA at a price of Z$4.25 per share, Shumba only received a price of Z$2 per share with the balance being pocketed by Kingdom. Dr Shumba discovered this anomaly only some time later leading to the arrest of Mr. Chanakira. The documents reviewed by GMRI Capital confirm that Kingdom admitted to prejudicing Dr Shumba and refunded him for the unjust enrichment. NSSA as well instituted legal action against Kingdom on the same transaction alleging that Kingdom had acted fraudulently and obtained a court order compelling Kingdom to make good to NSSA on the diverted income and shares.
GMRI Capital has confirmed that sometime in January 2004, Mr. Chanakira who has claimed that his troubles with the law was instigated by rival businesspersons including Mr. Mawere did try to reach out to Mr. Mawere. A meeting reportedly took place at Mr Chanakira‘s office. Mr. Mawere was surprised to find Minister Elliot Manyika in Mr. Chanakira's office. While the precise relationship between Minister Manyika and Mr. Chanakira is not known it is astonishing that a person like Mr. Chanakira who has acquired a reputation as a victim of ZANU-PF will end up inviting a senior member of the party to such a business meeting.
The relationship between Mr. Chanakira and Minister Manyika is somewhat puzzling let alone the mere fact that Mr. Chanakira would find it fit to involve Minister Manyika in his business interests. The mere fact that Minister Manyika sought to involve himself in Mr. Chanakira's affairs must be worrying. Former Attorney General, Gula Ndebele, was fired by President Mugabe for meeting with an accused Mr. James Mushore who was later acquitted but nothing much has been reported about the alleged criminal aspect of Mr. Chanakira's case raising suspicion about selective application of the law. This is how the Affirmative action program is undermined and end up being ridiculed even though it is a noble and progressive concept .
Inspiration plays a large role in business development. Leading business people like Mr. Chanakira have provided a good example to many would be entrepreneurs and they are really role models to many. Were it not for the KMAL boardroom battles we would not care about evaluating Mr. Chanakira's background and his effort to have Mr. Moxon arrested. We all have our own views on Mr. Moxon and the colonial baggage he represents but it is high time that we reflect on the dangers of using indigenization for personal and opportunistic purposes which may cause long term reputation damage to the Affirmative Action program.
As Zimbabwe seeks to create a more equitable business environment the grey areas need clarification. This will go a long way in confidence building and in attracting foreign investment. Foreign investors need to know that there is a clear affirmative action programme in place and that programme has clear rules and principles and the rules are not selectively applied. The perception that those who have direct access to politicians can easily subvert the goals and principles of affirmative action defeats the whole purpose of the programme.
The rule of law and corporate law must at all times be central in how business is conducted .This will go a long way in creating a true class of unquestionable role -models who can inspire other generations whilst simultaneously creating a value system that will safe guard the gains of affirmative action programme.
Real life experiences should teach us to build strong systems, which can outlive the founders and be bedrock for future generations’ prosperity. A haphazardly implemented affirmative action program will likely end up being a get-rich-scheme for a few who are acting in the name of the program. The lack of clear national vision and targets results in anger being regrettably vented out on other ethnic groups who were better organized and more focused. Affirmative action without principles and values is a hollow strategy which will result in economic stagnation and frustrations.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
Tuesday, October 21, 2008
Affirmative Action in Africa
Since the end of colonial rule Zimbabwe and most African countries have been faced with a daunting challenge of leveling the business playing field .This is based on the historical imbalances that were created by colonial administrations which favored and promoted settler interests at the expense of all other citizens. Many nations have resorted to affirmative action which is has different names depending with the country. Affirmative action describes deliberate policies aimed at a historically economic and socio-politically sidelined group intended to promote its access to opportunities and resources. In particular black entrepreneurs have found it particularly hard to graduate into big, formal business enterprises. Affirmative Action is a moral and political question .The intervention of politicians and amendments to the laws has resulted in inaccurate and often misleading conclusions that Affirmative action is undesirable. Affirmative action measures were established to fight racial discrimination which prevented equal access to opportunities and resources such as land, minerals and mineral mining rights .
It is clear affirmative action was not some sinister plan invented in Zimbabwe and has been widely used in many countries. GMRI Capital reviewed affirmative action processes and programmes carried out in the USA, India, Nigeria , Canada, Sri Lanka ,Malaysia, Brazil and South Africa .In the Zimbabwean case a confusion arose due to the emergence of many political entrepreneurs who in turn have managed to overshadow social and economic/market entrepreneurs .Affirmative action policies address and redress systematic economic and political discrimination against any group of people that are underrepresented or have a history of being discriminated against in particular institutions such as banks, pension funds and Insurance firms in accessing loans and other credit facilities.
The world over a key objective of affirmative action is to redress negative effects of actual or perceived, past or current discrimination .The International Convention on the Elimination of All Forms of Racial Discrimination stipulates that affirmative action programs may be required of countries that have ratified the convention, in order to rectify systematic discrimination. It has to be noted this has to be done within the guidelines of the rule of law such that the legal framework has to be set up to support it. The disadvantages to people black entrepreneurs and the benefits to those entrenched in business are passed on to each succeeding generation unless remedial action is taken.
Affirmative action is not always popular and at times becomes a controversial subject .Opponents of affirmative action policies argue that they are based on collectivism and merely another equal form of discrimination because they can result in qualified applicants being denied an opportunity because they belong to a particular social group .Indigenization as it is called in Zimbabwe has been frowned upon by many as it has been associated with some perception that if you need affirmative action then you are not actually a qualified entrepreneur .This is both inaccurate and unfortunate as it ignores universally accepted facts that such redress is necessary if the business playing field is to be leveled and economy stabilized by including the majority in accessing opportunities and resources .
On the other side advocates and opponents of affirmative action agree that aim of public policy should be to achieve justice .In Zimbabwe and Africa this is paramount because there is a historic imbalance of resource and opportunity access especially access to business inputs and infrastructural support. Such imbalances are not healthy as they promote instability and resentment which often leads to counter productive friction within an economy. In addition lack of access to opportunity and resources is often detrimental to the economy as it limit’s the market participants and usually reduces aggregate demand which in turn reduces economic activity. As an example, most opportunities are heard about through informal networks of friends, family and neighbors. Since the results of racism are segregated communities, this pattern leaves people many Black entrepreneurs out of the loop for business venture opportunities.
In practice, the division between the market entrepreneur and the political entrepreneur can be blurred. Many business entrepreneurs share both characteristics in varying degrees. The term Political entrepreneur refers to businessman who seeks to gain profit through subsidies, protectionism, government contracts, or other such favorable arrangements with government through political influence more like influence peddling. This is also known as corporate welfare.In Zimbabwe and a some other African nations this has been a common problem .And the enjoinment of this to affirmative action has somehow blurred the merits of the programmes of affirmative action.
Over many decades discriminatory practices have led to a huge over-representation of certain ethnic groups which brought the need for affirmative action .Debates about affirmative action are about more than legal issues. Taking action to end racism as sought by affirmative action programmes is the challenge and responsibility for most African nation as they seek a more inclusive economic platform. Affirmative action helps mitigate the historical effects of institutional racism .Much of the opposition to affirmative action is framed on the grounds of so-called "reverse discrimination and unwarranted preferences."
Political entrepreneurship is used in a very different way by those that wish to contrast what they see as a pure "market entrepreneur" with someone that uses the political system to further a commercial venture or their own career. In the Zimbabwean and African context case this has been very difficult as it seems there is no escape of the political web if one wishes to operate any meaningful venture. The Government being the biggest customer for most services/products tends to exert influence on most enterprises and as a result it’s an impossible exercise to separate the entrepreneur’s class.
A social entrepreneur recognizes a social problem as a business opportunity, then uses entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas a business/market entrepreneur measures venture performance in terms of profit and return, a social entrepreneur assesses success in terms of the impact on society. In the Zimbabwean and many African nations the market for most products and services is usually dominated if not controlled by the Government. And for any entrepreneur to make real progress there is usually a pre-requisite need to interact and seek government backing and support. This is how Affirmative action becomes imperative in helping Black entrepreneurs in Zimbabwe and Africa gain a foot hold in meaningful business ventures.
GMRI Capital reviewed several studies which showed Affirmative action just by itself can not be viewed as the ultimate solution for Black entrepreneurs seeking to enter big business in Zimbabwe and Africa. But it is an important part of the various steps that are required to improve representation of Black entrepreneurs in accessing resources and opportunities in a meaningful and notable way .Affirmative action will not eliminate racial discrimination, nor will it eliminate competition for scarce opportunities and resources. These programmes can not replace competence or the usual basics required to succeed in any business venture . Affirmative action programs can only ensure that everyone has a fair chance at the business opportunities available in Zimbabwe and Africa.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
It is clear affirmative action was not some sinister plan invented in Zimbabwe and has been widely used in many countries. GMRI Capital reviewed affirmative action processes and programmes carried out in the USA, India, Nigeria , Canada, Sri Lanka ,Malaysia, Brazil and South Africa .In the Zimbabwean case a confusion arose due to the emergence of many political entrepreneurs who in turn have managed to overshadow social and economic/market entrepreneurs .Affirmative action policies address and redress systematic economic and political discrimination against any group of people that are underrepresented or have a history of being discriminated against in particular institutions such as banks, pension funds and Insurance firms in accessing loans and other credit facilities.
The world over a key objective of affirmative action is to redress negative effects of actual or perceived, past or current discrimination .The International Convention on the Elimination of All Forms of Racial Discrimination stipulates that affirmative action programs may be required of countries that have ratified the convention, in order to rectify systematic discrimination. It has to be noted this has to be done within the guidelines of the rule of law such that the legal framework has to be set up to support it. The disadvantages to people black entrepreneurs and the benefits to those entrenched in business are passed on to each succeeding generation unless remedial action is taken.
Affirmative action is not always popular and at times becomes a controversial subject .Opponents of affirmative action policies argue that they are based on collectivism and merely another equal form of discrimination because they can result in qualified applicants being denied an opportunity because they belong to a particular social group .Indigenization as it is called in Zimbabwe has been frowned upon by many as it has been associated with some perception that if you need affirmative action then you are not actually a qualified entrepreneur .This is both inaccurate and unfortunate as it ignores universally accepted facts that such redress is necessary if the business playing field is to be leveled and economy stabilized by including the majority in accessing opportunities and resources .
On the other side advocates and opponents of affirmative action agree that aim of public policy should be to achieve justice .In Zimbabwe and Africa this is paramount because there is a historic imbalance of resource and opportunity access especially access to business inputs and infrastructural support. Such imbalances are not healthy as they promote instability and resentment which often leads to counter productive friction within an economy. In addition lack of access to opportunity and resources is often detrimental to the economy as it limit’s the market participants and usually reduces aggregate demand which in turn reduces economic activity. As an example, most opportunities are heard about through informal networks of friends, family and neighbors. Since the results of racism are segregated communities, this pattern leaves people many Black entrepreneurs out of the loop for business venture opportunities.
In practice, the division between the market entrepreneur and the political entrepreneur can be blurred. Many business entrepreneurs share both characteristics in varying degrees. The term Political entrepreneur refers to businessman who seeks to gain profit through subsidies, protectionism, government contracts, or other such favorable arrangements with government through political influence more like influence peddling. This is also known as corporate welfare.In Zimbabwe and a some other African nations this has been a common problem .And the enjoinment of this to affirmative action has somehow blurred the merits of the programmes of affirmative action.
Over many decades discriminatory practices have led to a huge over-representation of certain ethnic groups which brought the need for affirmative action .Debates about affirmative action are about more than legal issues. Taking action to end racism as sought by affirmative action programmes is the challenge and responsibility for most African nation as they seek a more inclusive economic platform. Affirmative action helps mitigate the historical effects of institutional racism .Much of the opposition to affirmative action is framed on the grounds of so-called "reverse discrimination and unwarranted preferences."
Political entrepreneurship is used in a very different way by those that wish to contrast what they see as a pure "market entrepreneur" with someone that uses the political system to further a commercial venture or their own career. In the Zimbabwean and African context case this has been very difficult as it seems there is no escape of the political web if one wishes to operate any meaningful venture. The Government being the biggest customer for most services/products tends to exert influence on most enterprises and as a result it’s an impossible exercise to separate the entrepreneur’s class.
A social entrepreneur recognizes a social problem as a business opportunity, then uses entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas a business/market entrepreneur measures venture performance in terms of profit and return, a social entrepreneur assesses success in terms of the impact on society. In the Zimbabwean and many African nations the market for most products and services is usually dominated if not controlled by the Government. And for any entrepreneur to make real progress there is usually a pre-requisite need to interact and seek government backing and support. This is how Affirmative action becomes imperative in helping Black entrepreneurs in Zimbabwe and Africa gain a foot hold in meaningful business ventures.
GMRI Capital reviewed several studies which showed Affirmative action just by itself can not be viewed as the ultimate solution for Black entrepreneurs seeking to enter big business in Zimbabwe and Africa. But it is an important part of the various steps that are required to improve representation of Black entrepreneurs in accessing resources and opportunities in a meaningful and notable way .Affirmative action will not eliminate racial discrimination, nor will it eliminate competition for scarce opportunities and resources. These programmes can not replace competence or the usual basics required to succeed in any business venture . Affirmative action programs can only ensure that everyone has a fair chance at the business opportunities available in Zimbabwe and Africa.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
Saturday, October 11, 2008
Kingdom Meikles Africa Boardroom battle analysed
Gilbert Muponda
Last week writing on this website GMRI Capital briefly reviewed the board room squabbles that have besieged one of Zimbabwe’s leading companies Kingdom Meikles Africa Limited .Due to the overwhelming response its imperative that we clarify certain aspects of the on-going board-room battle.
The matter has to be taken beyond personalities and viewed in the context of the wider picture and historical trends considering how Zimbabwean Entrepreneurs have been looked down upon and generally found it hard to graduate into big business. For this reason it is imperative that Mr. Chanakira highlights his strengthens and how he built his business from scratch to such an extent that Meikles found it an attractive investment. Since the board room has racial undertones which are very hard to prove we believe the three threatened executives have to undertake road shows meeting KMAL investors highlighting the value they add to the group whilst highlighting the weakness of the transactions, strategy and tactics being pursued by the major shareholder.
There is need for both parties to try and fight a clean fight. The board room battle must abide by the rule of law otherwise the Company could become damaged goods and will find it very hard to access international finance markets. It is well known that running a business in Zimbabwe is like swimming in a shark infested beach, therefore both parties are well prepared for the fight ahead. The again is fighting clean and try to leave the business untainted by this battle.
A shareholder profile analysis by GMRI Capital shows either party can win the battle should they build a solid case to the Minority shareholders who are not directly involved in the battle.Mr Moxon through various investment vehicles controls close to 43% of the voting shares. Whilst Companies linked or associated with Mr. Chanakira controls approximately 25% of the shares .This leaves a float of approximately 30% which either party can tap into in the proxy fight.
Late in 2007 Kingdom Meikles Africa entered into an option agreement, which was might include an exchange of assets, to invest in Mentor Africa, a new Pan regional, sub Saharan Investment Company, subject to all regulatory approvals. At this point we couldn’t confirm whether the exchange control approvals have been obtained. Mentor Africa is headed by Mr. Stephen Levenberg and Mr. Brett Till former Chief Executive Officer and Financial Director, respectively, formerly of Mvelaphanda. Group plans or planned to expand into the sub Saharan region in areas which may include natural resources, telecommunications and hospitality. The current boardroom battle largely emanates from this transaction under which KMAL “sold” its world famous Cape Grace Hotel to Mentor Africa. The quarrel centers on Asset Valuation, Fees Paid, and Use of the Proceeds as well as Strategic focus going forward.
It appears the sale of the Hotel wasn’t done at arms length terms and conditions. Reportedly the KMAL majority shareholder has vested interest in Mentor Africa which is giving rise to the allegation that KMAL is being asset stripped thereby prejudicing all minority shareholders who will not benefit from the transaction on a pro-rata basis. In addition to the disagreement on the sale there is reportedly another battle on the use of proceeds from the sale with Majority shareholder trying to retain the funds outside Zimbabwe which may as well be a good idea if the funds are wisely invested but the lack of information makes it hard to ascertain the benefits.
Kingdom Meikles Africa Limited put on hold a planned private placement of its shares in London after government nullified an earlier approval making its shares fungible between the London and Zimbabwe bourses. A KMAL spokesperson confirmed this development, saying the 5.9mn share placement is on hold for now. The loss of fungibility, as announced on the KMAL website, took away the sparkle for would-be investors.
Government of Zimbabwe, battling the black market for foreign currency, accused certain participants of using fungible shares from Old Mutual to determine the exchange rate for the black market, in the process triggering a spike in domestic prices. KMAL got caught up in the cross-fire that ensued from the use of Old Mutual (OMIR) shares in the determination of the black market exchange rates, resulting in the annulment of an earlier approval for the KMAL shares listed on the London and Zimbabwe stock markets to trade across bourses. Moreover, the Old Mutual shares, whose fungibility was also suspended, were said by government and its agents of being used for the purpose of externalizing foreign currency by buying shares locally and selling them abroad .This has attracted Authorities attention which KMAL could do well without.
Meikles Group History
Meikles was formed in 1892 Meikles brothers opened a successful trading business in Fort Victoria in Victoria Province in Rhodesia. Part of the initial capital was land and cattle proceeds from the Pioneer Column conquest by British South Africa Company in which the Meikles brothers are believed to have participated. During its formative years Tanganda Tea Company which is part of the group is believed to have used slave or forced labour on its estates and plantations in the Eastern Highlands of Zimbabwe. Given this background the Meikles group is a sensitive asset considering Zimbabwe’s current unpredictable political and economic environment.
In 1890, Rhodes sent a group of settlers, known as the Pioneer Column, into Mashonaland. Pioneer Column was a force raised by Cecil Rhodes and his British South Africa Company in 1890 and used in his efforts to annex the territory of Mashonaland, later part of Southern Rhodesia (now Zimbabwe).
The least 400 man Pioneer Column was guided by the explorer and big game hunter Frederick Selous and was officially designated the British South Africa Company Police (BSACP). When they reached Harari Hill, they founded Fort Salisbury (now Harare). Rhodes had been distributing land to the settlers even before the royal charter, but the charter legitimized his further actions with the British government. It should be noted that Meikles at one point owned all the land east of Nelson Mandela Avenue and North of second street including the all that area covering the Africa unity square up-to Enterprise road ,which land had been distributed before Rhodes got the Royal charter .
British South Africa Company set up a “Loot Committee” which determined that settlers who participated in the war would be rewarded with a free farm measuring anywhere, with no obligation to occupy the land; each man was also guaranteed 15 reef and 5 alluvial gold claims, while the “loot” – cattle was to be shared in half going to the Company- the remaining half being divided equally among the men and officers. This is according to Wikipedia and various other sources.
Creation of KMAL
The merger the merger transaction saw the issue of seventy eight million shares to the shareholders of Kingdom Financial Holdings (excluding Meikles Africa), Tanganda Tea Company and Cotton Printers. The price was $8, 5 million a share, being the Meikles Africa share price at 31 December 2007. The issue value was compared to the net assets of the acquired companies resulting in goodwill of $614 trillion in historic terms.
Mr. Moxon is respected in the Zimbabwean business community but in this instance it appears he may shown poor judgement.Considering the current political-economic environment in Zimbabwe it is not advisable to try to replace Directors en-masse in the manor in which he is trying. It may as well be his right but as an investor with a position to protect it may have been a better idea to move more prudently and cautiously and not dramatically as he has tried. Firing a partner to replace him with his own sister is hardly a model for good corporate governance practice.
Current Squabbles
Zimbabwe is in desperate need of success stories such as Nigel Chanakira and this takes the matter beyond KMAL Board room. Kingdom is regarded as one of the few success stories on Zimbabwe banking and it’s proudly Zimbabwean. Loading it with South African and other foreign directors and senior management is likely to be resisted at all level. Many believe once the Bank is foreign owned/managed then it will be even harder for local entrepreneurs to access loans and other credit products. This is a serious implication for the Zimbabwean Economy and the banking sector.
GMRI Capital has been able to confirm that there is no fall-out between Econet and Kingdom or their respective major shareholders over the KMAL situation. The dispute is over asset stripping and externalization which will prejudice minority shareholders including Chanakira.Econet side in fact were the first to be uncomfortable with the Mentor Africa transaction .This explains why earlier Board members from the Econet team left the KMAL Board.
The current power struggle represents an opportunity for the former Kingdom team to increase their stake in the group and re-align their vision with that of Meikles by ensuring that Mr. Moxon doesn’t find his way back on to the Board. At the same time they should try to block the appointment of his sister to the board. It is unclear what qualifications does Mr. Moxon’s sister hold which make her more qualified than Mr Chanakira. Given the rising temperatures Mr Chanakira should try to remain focused on legal facts and build a solid case about his qualifications, competence, determination and vision. This is what is required to convince other minority share holders to vote with him. All this should be done according to the Company’s act and within the confines of the rule of law as indicated above there are enough floating shares to support the participant with the Group’s interest at heart. This is critical if the Group’s vision of a Wall Street listing is to be realized.
A few analysts have been advocating for the break up of the Group due to the current squabbles .How ever that view seems driven more by emotion and frustration than the benefits to the shareholders. It is advisable that the former Kingdom team should try to exert more control on the entire KMAL group, rather than just try to withdraw the assets they contributed to the merger. In short they need to implement a Pac-man take-over strategy. However the rule of law must be respected and the race card must not be over-played focus should be on the merits and the synergies between the warring parties.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
DISCLAIMER
The views expressed are the views of GMRI Capital and are subject to change based on market and other conditions. The opinions expressed may differ from those with different investment philosophies. The information we provide does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. We encourage you to consult your tax or financial advisor. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Investing in shares may not be suitable for all investors. Seek independent advice if necessary. Past performance is no guarantee of future results.
Last week writing on this website GMRI Capital briefly reviewed the board room squabbles that have besieged one of Zimbabwe’s leading companies Kingdom Meikles Africa Limited .Due to the overwhelming response its imperative that we clarify certain aspects of the on-going board-room battle.
The matter has to be taken beyond personalities and viewed in the context of the wider picture and historical trends considering how Zimbabwean Entrepreneurs have been looked down upon and generally found it hard to graduate into big business. For this reason it is imperative that Mr. Chanakira highlights his strengthens and how he built his business from scratch to such an extent that Meikles found it an attractive investment. Since the board room has racial undertones which are very hard to prove we believe the three threatened executives have to undertake road shows meeting KMAL investors highlighting the value they add to the group whilst highlighting the weakness of the transactions, strategy and tactics being pursued by the major shareholder.
There is need for both parties to try and fight a clean fight. The board room battle must abide by the rule of law otherwise the Company could become damaged goods and will find it very hard to access international finance markets. It is well known that running a business in Zimbabwe is like swimming in a shark infested beach, therefore both parties are well prepared for the fight ahead. The again is fighting clean and try to leave the business untainted by this battle.
A shareholder profile analysis by GMRI Capital shows either party can win the battle should they build a solid case to the Minority shareholders who are not directly involved in the battle.Mr Moxon through various investment vehicles controls close to 43% of the voting shares. Whilst Companies linked or associated with Mr. Chanakira controls approximately 25% of the shares .This leaves a float of approximately 30% which either party can tap into in the proxy fight.
Late in 2007 Kingdom Meikles Africa entered into an option agreement, which was might include an exchange of assets, to invest in Mentor Africa, a new Pan regional, sub Saharan Investment Company, subject to all regulatory approvals. At this point we couldn’t confirm whether the exchange control approvals have been obtained. Mentor Africa is headed by Mr. Stephen Levenberg and Mr. Brett Till former Chief Executive Officer and Financial Director, respectively, formerly of Mvelaphanda. Group plans or planned to expand into the sub Saharan region in areas which may include natural resources, telecommunications and hospitality. The current boardroom battle largely emanates from this transaction under which KMAL “sold” its world famous Cape Grace Hotel to Mentor Africa. The quarrel centers on Asset Valuation, Fees Paid, and Use of the Proceeds as well as Strategic focus going forward.
It appears the sale of the Hotel wasn’t done at arms length terms and conditions. Reportedly the KMAL majority shareholder has vested interest in Mentor Africa which is giving rise to the allegation that KMAL is being asset stripped thereby prejudicing all minority shareholders who will not benefit from the transaction on a pro-rata basis. In addition to the disagreement on the sale there is reportedly another battle on the use of proceeds from the sale with Majority shareholder trying to retain the funds outside Zimbabwe which may as well be a good idea if the funds are wisely invested but the lack of information makes it hard to ascertain the benefits.
Kingdom Meikles Africa Limited put on hold a planned private placement of its shares in London after government nullified an earlier approval making its shares fungible between the London and Zimbabwe bourses. A KMAL spokesperson confirmed this development, saying the 5.9mn share placement is on hold for now. The loss of fungibility, as announced on the KMAL website, took away the sparkle for would-be investors.
Government of Zimbabwe, battling the black market for foreign currency, accused certain participants of using fungible shares from Old Mutual to determine the exchange rate for the black market, in the process triggering a spike in domestic prices. KMAL got caught up in the cross-fire that ensued from the use of Old Mutual (OMIR) shares in the determination of the black market exchange rates, resulting in the annulment of an earlier approval for the KMAL shares listed on the London and Zimbabwe stock markets to trade across bourses. Moreover, the Old Mutual shares, whose fungibility was also suspended, were said by government and its agents of being used for the purpose of externalizing foreign currency by buying shares locally and selling them abroad .This has attracted Authorities attention which KMAL could do well without.
Meikles Group History
Meikles was formed in 1892 Meikles brothers opened a successful trading business in Fort Victoria in Victoria Province in Rhodesia. Part of the initial capital was land and cattle proceeds from the Pioneer Column conquest by British South Africa Company in which the Meikles brothers are believed to have participated. During its formative years Tanganda Tea Company which is part of the group is believed to have used slave or forced labour on its estates and plantations in the Eastern Highlands of Zimbabwe. Given this background the Meikles group is a sensitive asset considering Zimbabwe’s current unpredictable political and economic environment.
In 1890, Rhodes sent a group of settlers, known as the Pioneer Column, into Mashonaland. Pioneer Column was a force raised by Cecil Rhodes and his British South Africa Company in 1890 and used in his efforts to annex the territory of Mashonaland, later part of Southern Rhodesia (now Zimbabwe).
The least 400 man Pioneer Column was guided by the explorer and big game hunter Frederick Selous and was officially designated the British South Africa Company Police (BSACP). When they reached Harari Hill, they founded Fort Salisbury (now Harare). Rhodes had been distributing land to the settlers even before the royal charter, but the charter legitimized his further actions with the British government. It should be noted that Meikles at one point owned all the land east of Nelson Mandela Avenue and North of second street including the all that area covering the Africa unity square up-to Enterprise road ,which land had been distributed before Rhodes got the Royal charter .
British South Africa Company set up a “Loot Committee” which determined that settlers who participated in the war would be rewarded with a free farm measuring anywhere, with no obligation to occupy the land; each man was also guaranteed 15 reef and 5 alluvial gold claims, while the “loot” – cattle was to be shared in half going to the Company- the remaining half being divided equally among the men and officers. This is according to Wikipedia and various other sources.
Creation of KMAL
The merger the merger transaction saw the issue of seventy eight million shares to the shareholders of Kingdom Financial Holdings (excluding Meikles Africa), Tanganda Tea Company and Cotton Printers. The price was $8, 5 million a share, being the Meikles Africa share price at 31 December 2007. The issue value was compared to the net assets of the acquired companies resulting in goodwill of $614 trillion in historic terms.
Mr. Moxon is respected in the Zimbabwean business community but in this instance it appears he may shown poor judgement.Considering the current political-economic environment in Zimbabwe it is not advisable to try to replace Directors en-masse in the manor in which he is trying. It may as well be his right but as an investor with a position to protect it may have been a better idea to move more prudently and cautiously and not dramatically as he has tried. Firing a partner to replace him with his own sister is hardly a model for good corporate governance practice.
Current Squabbles
Zimbabwe is in desperate need of success stories such as Nigel Chanakira and this takes the matter beyond KMAL Board room. Kingdom is regarded as one of the few success stories on Zimbabwe banking and it’s proudly Zimbabwean. Loading it with South African and other foreign directors and senior management is likely to be resisted at all level. Many believe once the Bank is foreign owned/managed then it will be even harder for local entrepreneurs to access loans and other credit products. This is a serious implication for the Zimbabwean Economy and the banking sector.
GMRI Capital has been able to confirm that there is no fall-out between Econet and Kingdom or their respective major shareholders over the KMAL situation. The dispute is over asset stripping and externalization which will prejudice minority shareholders including Chanakira.Econet side in fact were the first to be uncomfortable with the Mentor Africa transaction .This explains why earlier Board members from the Econet team left the KMAL Board.
The current power struggle represents an opportunity for the former Kingdom team to increase their stake in the group and re-align their vision with that of Meikles by ensuring that Mr. Moxon doesn’t find his way back on to the Board. At the same time they should try to block the appointment of his sister to the board. It is unclear what qualifications does Mr. Moxon’s sister hold which make her more qualified than Mr Chanakira. Given the rising temperatures Mr Chanakira should try to remain focused on legal facts and build a solid case about his qualifications, competence, determination and vision. This is what is required to convince other minority share holders to vote with him. All this should be done according to the Company’s act and within the confines of the rule of law as indicated above there are enough floating shares to support the participant with the Group’s interest at heart. This is critical if the Group’s vision of a Wall Street listing is to be realized.
A few analysts have been advocating for the break up of the Group due to the current squabbles .How ever that view seems driven more by emotion and frustration than the benefits to the shareholders. It is advisable that the former Kingdom team should try to exert more control on the entire KMAL group, rather than just try to withdraw the assets they contributed to the merger. In short they need to implement a Pac-man take-over strategy. However the rule of law must be respected and the race card must not be over-played focus should be on the merits and the synergies between the warring parties.
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
DISCLAIMER
The views expressed are the views of GMRI Capital and are subject to change based on market and other conditions. The opinions expressed may differ from those with different investment philosophies. The information we provide does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. We encourage you to consult your tax or financial advisor. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Investing in shares may not be suitable for all investors. Seek independent advice if necessary. Past performance is no guarantee of future results.
Friday, October 3, 2008
Disturbing Trend at Kingdom Meikles
Kingdom Meikles (KMAL.ZI) majority shareholder John Moxon is calling an EGM for October 23 2008 to have Group CEO Nigel Chanakira, and non-executive directors Rugare Chidembo and Callisto Jokonya, removed from the board. Insiders on both sides confirmed to GMRI Capital that the fallout centered around Cape Grace being sold into "Mentor Africa", currently an investment shell being run by former Mvelaphanda CEO Stephen Levenberg, who would apparently get a 22% "promoter's fee" for the transaction. Such a high fee is unheard of in most markets . An informed source confirmed to GMRI Capital that the KMAL CEO tried to stop the sale which he believed was not in the Group’s interest and amounted to asset stripping.
The identity of the buyer and their relationship with leading shareholders needs to be clarified for the good of the company’s reputation and in line with internationally accepted corporate governance practices. It is strange for a Zimbabwean based Group to be selling hard currency generating assets such as the Cape Grace Hotel especially ahead of the 2010 World Cup. Considering that the 2010 World Cup is just around the corner and Cape Grace Hotel is expected to make windfall profit’s the Group CEO appears justified in his opposition to this ill-timed disposal of such a critical asset. Given the information gaps it seems KMAL will be forced to disclose more information why they want to fire the Group CEO who is highly respected in Zimbabwean financial markets and is an inspiration to young professionals seeking to set up own ventures .Its hardly credible that a Group would want to fire a founding partner just because there is poor communication within the board, so the market is awash with rumors as to the true nature of the problem, but there is general consensus of asset stripping and possibly racism being among the problems.
KMAL tried to re-assure the market by saying the resolutions being sought are not in any way going to endanger the merger that brought together Kingdom, Meikles and Tanganda. However the market’s reading was it sounds more like we can fire the CEO but we will be taking his Bank. The market seems taken by surprise that there is a direct move to fire the Group CEO which is an extreme measure .Normally when there are serious disagreements with a key partner who is also a material shareholder the issue can be resolved by either re-assigning the key partner or possibly make him a non-executive director. This allows an orderly succession and protects the Company’s reputation .The way this has been handled somehow will endanger the Company’s reputation for some time to come and will make its road to Wall Street listing bumpy.
The resolutions are for the removal of Chanakira, Chidembo and Jokonya ("to be removed as directors of the company, with immediate effect").Resolution 5 covers the appointment of Marilyn Hugill, Moxon's sister, as a director, while another the appointment of 4 South African-based directors comprise resolutions 6-9.The other directors to be appointed are Ashwin Mancha, Jack Mitchell, Fiona Silcock, and Carl Stein. Of the directors appointed following the December 11 vote in favor of the merger between Meikles Africa and Kingdom, only former Kingdom chairperson Busi Bango will remain. No resolution has been filed to remove Econet CEO Doug Mboweni, who replaced Tawanda Nyambirai earlier this year. This appears a well calculated move to drive a wedge between shareholders representing Econet and those representing the former Kingdom.
The replacement of the 3 Directors at this stage appears not so well-thought out given the Government of Zimbabwe’s well stated views about foreign control of what they term sensitive assets such as Banks and other financial institutions. This move will not escape racial scrutiny given that its 5 South African directors replacing 3 Zimbabweans on the board of a Zimbabwean domiciled Company.
Conglomerate format not the in thing in many leading markets. This format has been left to Private Equity funds. The widespread trend is to build solid and sector focused businesses. Fears that Meikles may be going the wrong direction. It maybe time to visit the prenuptial agreements and see if the group can not be broken down to its pre-merger entities.
The Kingdom/Meikles merger deal victim of recently signed GNU pact between ZANU and MDC since Meikles feel 51% rule may not apply anymore. The signing of the GNU agreement changed sentiment and the brought about a feeling that some of the recent radical proposed and passed legislation on indigenous ownership may not be applied once the New Government takes office. This remains to be seen.
Troubles come with territory. Board room wrangles and wars are normal and not for the faint hearted. Meikles was tapping into political capital and young dynamic management in Kingdom. This is like new money meets old money, Chrysler meets Daimler AG, and AOL meets Time Warner. The markets are awash with such deals gone sour. In the Zimbabwean scenario this is very sensitive because it appears one of the few remarkable success stories of Zimbabwean banking is being stripped of a business built from scratch. This is perception because not all details are known. However in business perception can easily replace reality in the eyes of the investors and the public.
Meikles team was reportedly unhappy with the Kingdom valuation ahead of the merger. They reportedly felt the conversion and exchange ratios favored the Kingdom shareholders. Threats to block the deal were well pronounced before voting on 11 December 2007.
The fungibility of shares was limited by the RBZ.This appears to have angered the Meikles team as fungibility was one of the key aims of the deal in addition to making Meikles politically acceptable. It appears Meikles mis-calculated.They were looking for a window dressing CEO who would rubber stamp all decisions and play yes man role. This role appears not well suited for Chanakira and Chidembo both renowned for their strong will to defend positions which they feel justifiable.
Meikles was formed in 1892 Meikles brothers opened a successful trading business in Fort Victoria in Victoria Province in Rhodesia. Part of the initial capital was land and cattle proceeds from the Pioneer Column conquest by British South Africa Company .In 1915 Thomas Meikles opened a hotel in present-day Harare The company was listed on the Zimbabwe Stock Exchange in 1996.Kingdom is a product of sheer hard work and well calculated acquisitions .It was started by a group of young entrepreneurs led by Nigel Chanakira .This includes the reverse listing through the DCZ takeover which solidified Kingdom’s position as a leading and respected local brand.
Meikles has been historically a disappointing performer for many market watchers.This was mainly as a result of the Companies core-strategy of relying on exchange gains for group profits for most of the last decade.Meikles raised foreign currency at listing and deposit a huge chunk with the Central bank. Perfectly legal but hardly beneficial to shareholders. A shareholder expect executives to be able to do what shareholders cant do for themselves, so it does not make much economic sense to raise hard currency only to deposit it at the RBZ as Meikles have done over the last decade. The market expected the injection of Kingdom executives to add more dynamism into the Meikles Group but should the proposed resolution pass as proposed then Meikles will remain Meikles.
Meikles appear to be importing the flawed South African Black Economic Empowerment (BEE) model. Most BEE deals have been based on a token appointment of a few Black executives for window dressing purposes whilst the real decision makers and beneficiaries remain unchanged. In this instance it appears Meikles wanted a few black executives for window dressing purposes and go a bit further by stripping them of the assets after they serve that purpose.
Reliable sources confirmed to GMRI Capital that politicians ( from both parties) are particularly irked by the fact that Meikles is trying to replace Black Executives with 5 imported white executives as if Zimbabwe does not have its own qualified white executives. Their view is that there is an effort to Internationalize the Company by grabbing Zimbabwean built brands and simultaneously dump indigenous entrepreneurs who built the business.
The disturbing trend of events indicates the challenges that Zimbabwean entrepreneurs face. It is extremely difficult to raise capital and to network yourself into the old money network. When they seek partners to expand their businesses the story is often the same the invited guest turns to a monster and tries to swallow of kick you out. .In this case young professionals established solid business and brand .In their efforts to expand and further strengthen the business they invited and older and long established institution which is now trying to dump them whilst grabbing the business they formed .
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
DISCLAIMER
The views expressed are the views of GMRI Capital and are subject to change based on market and other conditions. The opinions expressed may differ from those with different investment philosophies. The information we provide does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. We encourage you to consult your tax or financial advisor. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Investing in shares may not be suitable for all investors. Seek independent advice if necessary. Past performance is no guarantee of future results.
The identity of the buyer and their relationship with leading shareholders needs to be clarified for the good of the company’s reputation and in line with internationally accepted corporate governance practices. It is strange for a Zimbabwean based Group to be selling hard currency generating assets such as the Cape Grace Hotel especially ahead of the 2010 World Cup. Considering that the 2010 World Cup is just around the corner and Cape Grace Hotel is expected to make windfall profit’s the Group CEO appears justified in his opposition to this ill-timed disposal of such a critical asset. Given the information gaps it seems KMAL will be forced to disclose more information why they want to fire the Group CEO who is highly respected in Zimbabwean financial markets and is an inspiration to young professionals seeking to set up own ventures .Its hardly credible that a Group would want to fire a founding partner just because there is poor communication within the board, so the market is awash with rumors as to the true nature of the problem, but there is general consensus of asset stripping and possibly racism being among the problems.
KMAL tried to re-assure the market by saying the resolutions being sought are not in any way going to endanger the merger that brought together Kingdom, Meikles and Tanganda. However the market’s reading was it sounds more like we can fire the CEO but we will be taking his Bank. The market seems taken by surprise that there is a direct move to fire the Group CEO which is an extreme measure .Normally when there are serious disagreements with a key partner who is also a material shareholder the issue can be resolved by either re-assigning the key partner or possibly make him a non-executive director. This allows an orderly succession and protects the Company’s reputation .The way this has been handled somehow will endanger the Company’s reputation for some time to come and will make its road to Wall Street listing bumpy.
The resolutions are for the removal of Chanakira, Chidembo and Jokonya ("to be removed as directors of the company, with immediate effect").Resolution 5 covers the appointment of Marilyn Hugill, Moxon's sister, as a director, while another the appointment of 4 South African-based directors comprise resolutions 6-9.The other directors to be appointed are Ashwin Mancha, Jack Mitchell, Fiona Silcock, and Carl Stein. Of the directors appointed following the December 11 vote in favor of the merger between Meikles Africa and Kingdom, only former Kingdom chairperson Busi Bango will remain. No resolution has been filed to remove Econet CEO Doug Mboweni, who replaced Tawanda Nyambirai earlier this year. This appears a well calculated move to drive a wedge between shareholders representing Econet and those representing the former Kingdom.
The replacement of the 3 Directors at this stage appears not so well-thought out given the Government of Zimbabwe’s well stated views about foreign control of what they term sensitive assets such as Banks and other financial institutions. This move will not escape racial scrutiny given that its 5 South African directors replacing 3 Zimbabweans on the board of a Zimbabwean domiciled Company.
Conglomerate format not the in thing in many leading markets. This format has been left to Private Equity funds. The widespread trend is to build solid and sector focused businesses. Fears that Meikles may be going the wrong direction. It maybe time to visit the prenuptial agreements and see if the group can not be broken down to its pre-merger entities.
The Kingdom/Meikles merger deal victim of recently signed GNU pact between ZANU and MDC since Meikles feel 51% rule may not apply anymore. The signing of the GNU agreement changed sentiment and the brought about a feeling that some of the recent radical proposed and passed legislation on indigenous ownership may not be applied once the New Government takes office. This remains to be seen.
Troubles come with territory. Board room wrangles and wars are normal and not for the faint hearted. Meikles was tapping into political capital and young dynamic management in Kingdom. This is like new money meets old money, Chrysler meets Daimler AG, and AOL meets Time Warner. The markets are awash with such deals gone sour. In the Zimbabwean scenario this is very sensitive because it appears one of the few remarkable success stories of Zimbabwean banking is being stripped of a business built from scratch. This is perception because not all details are known. However in business perception can easily replace reality in the eyes of the investors and the public.
Meikles team was reportedly unhappy with the Kingdom valuation ahead of the merger. They reportedly felt the conversion and exchange ratios favored the Kingdom shareholders. Threats to block the deal were well pronounced before voting on 11 December 2007.
The fungibility of shares was limited by the RBZ.This appears to have angered the Meikles team as fungibility was one of the key aims of the deal in addition to making Meikles politically acceptable. It appears Meikles mis-calculated.They were looking for a window dressing CEO who would rubber stamp all decisions and play yes man role. This role appears not well suited for Chanakira and Chidembo both renowned for their strong will to defend positions which they feel justifiable.
Meikles was formed in 1892 Meikles brothers opened a successful trading business in Fort Victoria in Victoria Province in Rhodesia. Part of the initial capital was land and cattle proceeds from the Pioneer Column conquest by British South Africa Company .In 1915 Thomas Meikles opened a hotel in present-day Harare The company was listed on the Zimbabwe Stock Exchange in 1996.Kingdom is a product of sheer hard work and well calculated acquisitions .It was started by a group of young entrepreneurs led by Nigel Chanakira .This includes the reverse listing through the DCZ takeover which solidified Kingdom’s position as a leading and respected local brand.
Meikles has been historically a disappointing performer for many market watchers.This was mainly as a result of the Companies core-strategy of relying on exchange gains for group profits for most of the last decade.Meikles raised foreign currency at listing and deposit a huge chunk with the Central bank. Perfectly legal but hardly beneficial to shareholders. A shareholder expect executives to be able to do what shareholders cant do for themselves, so it does not make much economic sense to raise hard currency only to deposit it at the RBZ as Meikles have done over the last decade. The market expected the injection of Kingdom executives to add more dynamism into the Meikles Group but should the proposed resolution pass as proposed then Meikles will remain Meikles.
Meikles appear to be importing the flawed South African Black Economic Empowerment (BEE) model. Most BEE deals have been based on a token appointment of a few Black executives for window dressing purposes whilst the real decision makers and beneficiaries remain unchanged. In this instance it appears Meikles wanted a few black executives for window dressing purposes and go a bit further by stripping them of the assets after they serve that purpose.
Reliable sources confirmed to GMRI Capital that politicians ( from both parties) are particularly irked by the fact that Meikles is trying to replace Black Executives with 5 imported white executives as if Zimbabwe does not have its own qualified white executives. Their view is that there is an effort to Internationalize the Company by grabbing Zimbabwean built brands and simultaneously dump indigenous entrepreneurs who built the business.
The disturbing trend of events indicates the challenges that Zimbabwean entrepreneurs face. It is extremely difficult to raise capital and to network yourself into the old money network. When they seek partners to expand their businesses the story is often the same the invited guest turns to a monster and tries to swallow of kick you out. .In this case young professionals established solid business and brand .In their efforts to expand and further strengthen the business they invited and older and long established institution which is now trying to dump them whilst grabbing the business they formed .
Gilbert Muponda is a Zimbabwe-born entrepreneur. This article appears courtesy of GMRI Capital. He can be contacted at gilbert@gmricapital.com. More articles at www.gmricapital.com
DISCLAIMER
The views expressed are the views of GMRI Capital and are subject to change based on market and other conditions. The opinions expressed may differ from those with different investment philosophies. The information we provide does not constitute investment advice and it should not be relied on as such. It should not be considered a solicitation to buy or an offer to sell a security. It does not take into account any investor's particular investment objectives, strategies, tax status or investment horizon. We encourage you to consult your tax or financial advisor. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. Investing in shares may not be suitable for all investors. Seek independent advice if necessary. Past performance is no guarantee of future results.
Sunday, September 28, 2008
PRIVATIZATION NEEDED TO REBUILD ZIM ECONOMY
Gilbert Muponda
Sub-Saharan African states urgently need expanded and more dynamic private sectors, more efficient and effective infrastructure/utility provision, and increased investment from both domestic and foreign sources. Privatization is one way to address these problems. But African states have generally been slow and reluctant privatizers; a good percentage of industrial/manufacturing and most infrastructure still remains in state hands. Given prevailing public hostility towards privatization, and widespread institutional weaknesses, such caution is defensible, but nonetheless very costly. The long-run and difficult solution is the creation and reinforcement of the institutions that underpin and guide proper market operations .
Regarding the impact of privatization, clear benefits from privatization have been recorded in terms of the contribution to government financial flows and at the enterprise level where there is a definite trend for privatized enterprises to improve performance, largely as a result of new investment, which has a delayed positive effect on employment .
Ten countries account for most of the privatization in Africa so far: Mozambique, Angola, Ghana, Zambia, Kenya, Tanzania, Guinea, Madagascar, Nigeria (federal government only) and Uganda. A study points to the surprising difficulty of obtaining transaction data in many countries and the failure of most governments to establish monitoring procedures so as to be able to track and evaluate enterprises’ post-divestiture performance.
The trend of the privatization process in Africa reflects some of the problems: lack of political commitment, poor design, insufficient resources, weak management, and corruption. The trend is a cause of concern because privatization is a one-off opportunity not only to reduce the fiscal and administrative burdens of a large public enterprise sector but also to stimulate private sector development, to instill greater government accountability, and to contribute to the fight against poverty; and that opportunity has been grasped by few governments. Zimbabwe has had several stop-start-stop attempts at Privatization programmes. A few entities have been successfully privatized such as Cotton Company and Dairibord .The current economic situation will require tough choices to be made and allow Privatization and commercialization of several so-called “strategic” entities.
Parastatals such as Zisco, ZESA, CSC, NRZ and Air Zimbabwe are leading candidates for Privatization from which the State can raise a substantial amount of capital to finance infrastructure and other social services. Given the attractiveness of some of these assets the State can include requirements to dispose of these assets in the much needed foreign currency provided local and indigenous partners are somehow accommodated. Foreign partners normally help to strengthen the talent base and access to foreign markets and a stable financial base .
African governments’ commitment to the process was generally half-hearted
The controversy starts with why African governments have privatized. The study maintains that the evidence suggests that most governments have privatized reluctantly and not for the reasons set out in policy statements. Rather, it is other, non-stated factors that have motivated the process; and this is particularly relevant now that major enterprises are being privatized and corruption is surfacing as an issue.
Governments have not made efforts to sell the process to the people. So, programs have tended to stagger along, prompted by the Breton Woods institutions and other donors. Zimbabwe may be faced with a similar situation very soon.
Case studies indicate that the following have been the principal incentives for African countries to divest:
Political change; The need for World Bank, IMF and donor financial assistance; The need to generate proceeds; The precarious state of some public enterprises; The need to maintain employment levels; and At times, the need to satisfy vested interests
An important claim is that, despite an expressed desire to broaden ownership, in practice little has been done to accomplish this objective.
It is not an end in itself, but it is a key tool for improving the efficient allocation of resources, for mobilizing investment, and for stimulating private sector development. Privatization does this because it:
brings into the open the inefficiency of state run businesses;
makes investment opportunities available;
highlights the need and becomes the catalyst for capital market development; and
contributes towards openness by forcing government dialogue with the public
There is growing pattern of flawed classification of enterprises as strategic and non-strategic ( monopoly utilities have invariably been characterized left out of the privatization program), non-establishment of important operating policies, non-transparent use of proceeds, weak mobilization of potential investors, weak privatization agencies and the lack of appropriate legal authority.
The lessons of experience are being applied center on the following : demonstrate commitment; pay greater attention to securing consensus; ensure transparency; invest more in design and preparation; put institutional building blocks in place before launching a program; and do more to broaden ownership
Now that most countries have gained experience of the process and have developed their capacity to manage it, privatization has entered its main phase. This phase has four noteworthy features which have important implications for the privatization process:
emphasis on large enterprises;
increasing demand for public information and accountability;
creation and growth of capital markets; and
Much greater efforts are underway to stimulate private investment.
Indeed, with new investment in many of the privatized enterprises, we are seeing improved performance, expansion and new jobs being created. And that is the message that we must get across to labor leaders and politicians. They know that privatization will focus attention on poor resource allocation, inefficiencies, and weak corporate governance. But they must also understand that it is bringing in:
the investment that is needed in new technology, people and marketing;
better value products and services which benefit local consumers;
better working conditions and pay; and, in the longer term
More sustainable employment.
Many of the Asian economies had characteristics similar to African economies today. Foreign investment and investment in developing human capital were crucial elements to success. Local participation and skills transfer were also central. Africa can now do likewise with the added advantage of being able to use much cheaper and advanced information technology to skip a generation in development .An economic recovery strategy for Zimbabwe should be centered on the private sector playing a leading role in mobilizing capital , skills and other resources .Its expecting too much from any government to be able to lift the country after years of deep recession .The key is therefore for the state to create a conducive environment in addition to divesting from state enterprises and create more room and opportunities for Private sector participation .
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gmricapital. This article appears courtesy of GMRI Capital. More articles at www.gmricapital.com
Sub-Saharan African states urgently need expanded and more dynamic private sectors, more efficient and effective infrastructure/utility provision, and increased investment from both domestic and foreign sources. Privatization is one way to address these problems. But African states have generally been slow and reluctant privatizers; a good percentage of industrial/manufacturing and most infrastructure still remains in state hands. Given prevailing public hostility towards privatization, and widespread institutional weaknesses, such caution is defensible, but nonetheless very costly. The long-run and difficult solution is the creation and reinforcement of the institutions that underpin and guide proper market operations .
Regarding the impact of privatization, clear benefits from privatization have been recorded in terms of the contribution to government financial flows and at the enterprise level where there is a definite trend for privatized enterprises to improve performance, largely as a result of new investment, which has a delayed positive effect on employment .
Ten countries account for most of the privatization in Africa so far: Mozambique, Angola, Ghana, Zambia, Kenya, Tanzania, Guinea, Madagascar, Nigeria (federal government only) and Uganda. A study points to the surprising difficulty of obtaining transaction data in many countries and the failure of most governments to establish monitoring procedures so as to be able to track and evaluate enterprises’ post-divestiture performance.
The trend of the privatization process in Africa reflects some of the problems: lack of political commitment, poor design, insufficient resources, weak management, and corruption. The trend is a cause of concern because privatization is a one-off opportunity not only to reduce the fiscal and administrative burdens of a large public enterprise sector but also to stimulate private sector development, to instill greater government accountability, and to contribute to the fight against poverty; and that opportunity has been grasped by few governments. Zimbabwe has had several stop-start-stop attempts at Privatization programmes. A few entities have been successfully privatized such as Cotton Company and Dairibord .The current economic situation will require tough choices to be made and allow Privatization and commercialization of several so-called “strategic” entities.
Parastatals such as Zisco, ZESA, CSC, NRZ and Air Zimbabwe are leading candidates for Privatization from which the State can raise a substantial amount of capital to finance infrastructure and other social services. Given the attractiveness of some of these assets the State can include requirements to dispose of these assets in the much needed foreign currency provided local and indigenous partners are somehow accommodated. Foreign partners normally help to strengthen the talent base and access to foreign markets and a stable financial base .
African governments’ commitment to the process was generally half-hearted
The controversy starts with why African governments have privatized. The study maintains that the evidence suggests that most governments have privatized reluctantly and not for the reasons set out in policy statements. Rather, it is other, non-stated factors that have motivated the process; and this is particularly relevant now that major enterprises are being privatized and corruption is surfacing as an issue.
Governments have not made efforts to sell the process to the people. So, programs have tended to stagger along, prompted by the Breton Woods institutions and other donors. Zimbabwe may be faced with a similar situation very soon.
Case studies indicate that the following have been the principal incentives for African countries to divest:
Political change; The need for World Bank, IMF and donor financial assistance; The need to generate proceeds; The precarious state of some public enterprises; The need to maintain employment levels; and At times, the need to satisfy vested interests
An important claim is that, despite an expressed desire to broaden ownership, in practice little has been done to accomplish this objective.
It is not an end in itself, but it is a key tool for improving the efficient allocation of resources, for mobilizing investment, and for stimulating private sector development. Privatization does this because it:
brings into the open the inefficiency of state run businesses;
makes investment opportunities available;
highlights the need and becomes the catalyst for capital market development; and
contributes towards openness by forcing government dialogue with the public
There is growing pattern of flawed classification of enterprises as strategic and non-strategic ( monopoly utilities have invariably been characterized left out of the privatization program), non-establishment of important operating policies, non-transparent use of proceeds, weak mobilization of potential investors, weak privatization agencies and the lack of appropriate legal authority.
The lessons of experience are being applied center on the following : demonstrate commitment; pay greater attention to securing consensus; ensure transparency; invest more in design and preparation; put institutional building blocks in place before launching a program; and do more to broaden ownership
Now that most countries have gained experience of the process and have developed their capacity to manage it, privatization has entered its main phase. This phase has four noteworthy features which have important implications for the privatization process:
emphasis on large enterprises;
increasing demand for public information and accountability;
creation and growth of capital markets; and
Much greater efforts are underway to stimulate private investment.
Indeed, with new investment in many of the privatized enterprises, we are seeing improved performance, expansion and new jobs being created. And that is the message that we must get across to labor leaders and politicians. They know that privatization will focus attention on poor resource allocation, inefficiencies, and weak corporate governance. But they must also understand that it is bringing in:
the investment that is needed in new technology, people and marketing;
better value products and services which benefit local consumers;
better working conditions and pay; and, in the longer term
More sustainable employment.
Many of the Asian economies had characteristics similar to African economies today. Foreign investment and investment in developing human capital were crucial elements to success. Local participation and skills transfer were also central. Africa can now do likewise with the added advantage of being able to use much cheaper and advanced information technology to skip a generation in development .An economic recovery strategy for Zimbabwe should be centered on the private sector playing a leading role in mobilizing capital , skills and other resources .Its expecting too much from any government to be able to lift the country after years of deep recession .The key is therefore for the state to create a conducive environment in addition to divesting from state enterprises and create more room and opportunities for Private sector participation .
Gilbert Muponda is a Zimbabwe-born entrepreneur. He can be contacted at gilbert@gmricapital. This article appears courtesy of GMRI Capital. More articles at www.gmricapital.com
ENG Investment in CENTURY BANK
http://www.zimbabwesituation.com/jan6_2005.html#link4
Zim Online
Reserve Bank governor, ministers' investments trapped in closed bank
Thur 6 January 2005
HARARE - Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono and two
senior government ministers' investments are trapped in the collapsed CFX
Bank Limited.
State security minister Nicholas Goche, State Enterprises Minister
Rugare Gumbo and central bank governor Gideon Gono bought 17 percent of CFX
from the liquidated ENG Capital Investments Private Limited through an
investment vehicle known as Network Investments.
The trio later bought 13 percent more from CFX founder Sean Maloney
when he was ordered by the central bank to reduce his stake from 66.59
percent to about 30 percent.
Former ENG directors Nyasha Watyoka and Gilbert Muponda are contesting
the takeover by the three top government officials.
The two allege the ENG liquidator Reggie Saruchera undervalued the
shares prejudicing the former directors. They want the courts to set aside
the sale of the 309 million shares by the liquidator to Network Investments.
CFX Bank was shut down by the RBZ on December 23 after it was
discovered that it was not in a sound liquidity position. Senior executives
allegedly concealed information on accumulated losses of $115 billion from
auditors, leading the central bank to shut down the bank.
The bank is now under the management of a curator appointed by the
central bank..
At least nine banks and financial institutions have collapsed in the
last 12 months as a result of gross mismanagement. - ZimOnline
Zim Online
Reserve Bank governor, ministers' investments trapped in closed bank
Thur 6 January 2005
HARARE - Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono and two
senior government ministers' investments are trapped in the collapsed CFX
Bank Limited.
State security minister Nicholas Goche, State Enterprises Minister
Rugare Gumbo and central bank governor Gideon Gono bought 17 percent of CFX
from the liquidated ENG Capital Investments Private Limited through an
investment vehicle known as Network Investments.
The trio later bought 13 percent more from CFX founder Sean Maloney
when he was ordered by the central bank to reduce his stake from 66.59
percent to about 30 percent.
Former ENG directors Nyasha Watyoka and Gilbert Muponda are contesting
the takeover by the three top government officials.
The two allege the ENG liquidator Reggie Saruchera undervalued the
shares prejudicing the former directors. They want the courts to set aside
the sale of the 309 million shares by the liquidator to Network Investments.
CFX Bank was shut down by the RBZ on December 23 after it was
discovered that it was not in a sound liquidity position. Senior executives
allegedly concealed information on accumulated losses of $115 billion from
auditors, leading the central bank to shut down the bank.
The bank is now under the management of a curator appointed by the
central bank..
At least nine banks and financial institutions have collapsed in the
last 12 months as a result of gross mismanagement. - ZimOnline
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