Zimbabwe: New Twist to CFX Rescue Plan

Zimbabwe: New Twist to CFX Rescue Plan
Martin Kadzere and Golden Sibanda
5 November 2009


Harare — FORMER ENG director Gilbert Muponda has launched a fresh bid to scuttle Interfin Holdings Limited's plans to acquire CFX Financial Services citing his proprietary interest in the shareholding of CFX FS.

The latest developments have risen just after the specified businessman blocked acquisition of the local financial institution by the Finance Bank of Zambia. Interfin Holdings is now poised to acquire a 51 percent controlling stake in CFX FS and has been enlisted as underwriter and technical equity partner for CFX's proposed US$10 million rights offer.

Lawyers representing the specified businessman on Monday wrote to Interfin advising about Muponda's interests in the CFX FS shareholding, which could again throw spanners in CFX's other rescue plan.

"We are of the humble view that your company should formally be made aware of our client's proprietary interest in the shareholding of CFX Financial Services Ltd.

"For your convenience, therefore, we forward herewith copies of the following documents," wrote Mr Obert Gutu of Gutu and Chikowero Attorneys. The letter was also copied to CFX Financial Services' managing director Mr Emmanuel Tagarira as well as the Minister of Finance Mr Tendai Biti.

Muponda is contesting CFX Financial Services' takeover of Century Bank, which the businessman claims belonged to his now defunct ENG Capital Limited. Muponda is demanding an audit on how the troubled financial institution acquired Century Bank when CFX FS merged with Century Holdings in 2004. The exiled businessman claims 309 million shares belonging to Century Bank were fraudulently sold at the time of the merger.

CFX FS through its lawyers Kantor and Immerman, had earlier written to Muponda's lawyers questioning his legal stand on the Century shares considering that he remains a specified person in Zimbabwe.

In addition, CFX FS had also claimed that Century Bank liquidator sold the shares in question to settle the bank's exposure to creditors.

Furthermore, CFX FS questioned why Muponda had not raised his reservations at the time of the sale of the shares adding ENG Capital, which owned the shares, had also long ceased to be operational.

CFX FS had also demanded that in the event ENG Capital was still operational they be furnished with the full list of its directors, supported by CR14 documents filed with the registrar of companies and the full details of its shareholders.

"Whether or not ENG Capital (Pvt) Ltd is operational is not relevant at this juncture. What is relevant is the fact that Century Bank was owned by ENG Capital (Pvt) Ltd at the time that it was acquired by CFX Financial Services Limited.

"Put alternatively, it is incumbent upon CFX Financial Services Limited to provide a clear audit trail of how it acquired Century Bank. Thus, the issue of the 309 million shares that were held by our client in Century Bank becomes pertinent," wrote Muponda's lawyers.

Muponda has demanded to know "who purchased these shares and at what price? Why were the shares sold at a special bargain price? At the end of the day, who was the real beneficiary of this particular transaction?"

He said if proceeds of the sold shares paid creditors and depositors of the institution, the payment plan should be made available.


Muponda said his latest enquiries about the "Century shares will assist in helping you make an appropriate decision concerning the reported interest by your company in CFX Financial Services Limited".

The former ENG boss claims his specification was part of a grand plan to dispossess him of his shares in Century Bank, held through ENG.

Swiss Re backed Finance Bank of Zambia had appeared certain to acquire the 51 percent stake in CFX before pulling the plug on the deal, ostensibly, after Muponda warned CFX FS was subject to ongoing dispute.

Wrote Muponda: "This transaction may expose your bank to high reputational risk as the dispute may entangle your organisation as the rightful owners of CFX/Century Bank assets seek to reclaim their shares." Muponda's lawyers have indicated that efforts are underway to have the ex-ENG director de-specified.