SENIOR Zanu PF officials, Tendai Savanhu and Fred Moyo, also deputy ministers for Lands and Mines respectively, are embroiled in a serious corruption scam in which Hwange Colliery Company and its subsidiary Hwange Coal Gasification Company (HCGC) lost close to US$200 million through “massive externalisation of funds and fraud” between January 2009 and May 2013, the Zimbabwe Independent can reveal.
A forensic audit report by Welsa International Chartered Accountants shows massive siphoning and salting away of funds from HCGC to the Bank of China without board approvals.
The report indicates the two deputy ministers benefitted from transactions in which they apparently received large amounts of money long after they ceased to be board members of Hwange Colliery and HCGC.
The audit unearthed massive abuse of funds in which Savanhu, also a Zanu PF politburo member, reportedly continued to get money from HCGC when he had long since been fired as Hwange Colliery chairperson. Savanhu was only in HCGC as a representative of Hwange Colliery.
Among many other transactions, Savanhu reportedly had his medical bills at St Anne’s Hospital in Harare and another for services by a medical Doctor Mazonde, both amounting to US$5 000 from April 2 2013 to April 5 2013, paid for by HCGC without the approval of the board.
Further, Savanhu, who is also MP for Mbare, also received numerous sitting allowances for attending HCGC board meetings after he had long been dismissed as Hwange Colliery chairperson until a High Court order interdicted him “from holding himself out as one with authority to represent the Coal Gasification Company and from attending meetings of, signing documents for and on behalf of that company”.
Savanhu was not available for comment. Moyo’s involvement in the day-to-day running of HCGC was also interdicted by the same High Court order after he continued to be a co-signatory to the bank accounts through which money was siphoned from HCGC when he was in fact no longer employed by Hwange Colliery.
Contacted for comment on Wednesday, Moyo, also MP for Zvishavane-Runde, said externalisation of funds did not take place during his time there, indicating the only money he received from HCGC was in board fees.
“I am not aware of that forensic audit and the allegation that I was given large amounts of money,” Moyo said, adding: “The only money I got was the board sitting fees that were given to all board members.”
In an interview on Wednesday, a senior partner at Welsa International, Wesley Sibanda, confirmed carrying out the forensic audit, but refused to give details.
“We did carry out the forensic audit and we are just waiting for feedback from our client,” he said.
Sources close to the issue said when the audit report was presented to HCGC, its board urged acting Hwange Colliery managing director Jemester Chininga to report the case to the police.
“We are aware the case was reported, but we do not know why it is taking so long to bring the perpetrators to book,” a source said.
“This case is complicated because the Ministry of Finance, Reserve Bank of Zimbabwe, Zia (Zimbabwe Investment Authority), Zimbabwe Revenue Authority, the Ministry of Mines and Minerals Marketing Corporation of Zimbabwe failed to raise alarm on externalisation and exportation of coke, yet the agreement makes it clear these parastatals were to be consulted during such transactions and fund transfers.”
The case was taken to the High Court in Harare where the pair was eventually interdicted from holding offices at Hwange Colliery — a listed company in which the Zimbabwe government has a 37,15% stake — and HCGC, stopping them from receiving huge board fees and all other benefits.
Besides government, other significant shareholders in Hwange Colliery are Messina Investments (15,09%) and Mittal Steel Africa, which is part of ArcelorMittal, the world’s largest steelmaker, (9,765).
According to the audit report, Stanbic Bank, ZABG and Kingdom Bank (now AfrAsia Bank Zimbabwe) were used as conduits to illicitly transfer close to US$15 million to the Bank of China without documentation to support the legitimacy of the transfers.
The documents also show that a United Kingdom bank and a Zambian bank, which are not named, were also used to siphon large sums of money to a Chinese investor in HCGC, Guo Feng, through the Bank of China. The total prejudice is estimated at US$200 million. HCGC was formed after Feng and another Chinese investor, Su Longmin’s firm Taiyuan Sanxing Economic and Trade Company, created a joint venture with Zimbabwean businessmen Cephas Msipa, the son of former Midlands governor and minister Cephas Msipa, Leo Mugabe and Gilbert Chawanda’s Stoat Mining (Pvt) Ltd company in October 2006. In 2007, Taiyuan, now working with the Zimbabwean investors on one side, and Hwange Colliery on the other, entered into an agreement for the construction of a coke oven and battery operation at Hwange Colliery on the basis of a build, operate, own and transfer (Boot) agreement.
In June 2011, they obtained an investment licence from Zia under a shareholding structure in which Taiyuan controlled 75% and Hwange Colliery 25%. The special purpose vehicle became HCGC. In terms of the Boot agreement, Taiyuan had five board directors while Hwange Colliery had two.
The chairperson of the board became a Taiyuan appointee, Zhang Jin Yuan. Taiyuan also provided Feng and Longmin as executive directors, while Msipa and Chawanda were non-executive directors. Hwange Colliery forwarded its chairman Savanhu and managing director Moyo to represent its interest in HCGC.
However, Taiyuan and Hwange Colliery soon clashed over the arrangement with the latter claiming HCGC had breached the Boot agreement. As a result, Hwange Colliery sued Taiyuan for damages amounting to US$21 million in the High Court case 537/13.
Hwange Colliery also claimed it had been lured into entering into an agreement with a non-existent company because only after the deal was signed was Taiyuan formed in China. Besides, Hwange Colliery complained Taiyuan was in turmoil because its board members were at each other’s throats over ownership of the company and access to bank accounts. Documents also show Taiyuan investors also claimed to have invested US$40 million when in fact they had only put in US$3 million.
While the dispute was raging, massive externalisation and abuse of company funds without the board’s approvals was underway, documents indicate.
Bank statements studied by the auditors showed Feng was repaid far more than his original US$3 million investment.
On Tuesday Mugabe, who is a board member of Stoat, which partnered Taiyuan in the HCGC deal, said he will fight tooth and nail to make sure Zimbabwe’s resources are not siphoned by foreigners.
“I was barred from getting into our premises by police, but I will not rest until we get to the bottom of all this corruption,” Mugabe said. “I was attacked and labelled all names when I wanted the directorship of this company (HCGC) sorted out.”