THE National Economic Conduct Inspectorate (NECI) has urged police to charge former Zisco managing director Dr Gabriel Masanga and the company’s ma
rketing executive Rodwell Makuni for corruption related to the pillaging of the government-owned firm.
NECI said Masanga and Makuni should be held to account for corruption at Zisco unearthed during its recent probe of graft at the company.
“Dr Masanga and Mr Makuni should be charged for corruption,” NECI said. “It is indeed safe to conclude that Masanga and Makuni’s Siamese-like attachment to MISA (Macsteel International South Africa) smacks of blatant corruption as manifested through the bargain price arrangements for steel billets whereby the lowest of the international metal bulletin prices is used as the contract price.”
NECI said the agreement between Zisco and Macsteel was prejudicial to the former, while it was beneficial to the latter. The contract dealt with the provision of technical services by Macsteel to boost Zisco’s steel production capacity.
It was signed in violation of exchange control regulations and without the company secretary, who gives legal opinion, being involved. There was also tax evasion involved in the issue, NECI said.
Zisco paid Macsteel R915 408,49 in 2004, but later it was found that Zisco’s Botswana subsidiary Ramotswa also paid R1,6 million. The payments were not properly explained, NECI noted.
Prior to the current pre-financing contract with Macsteel, Zisco used to deal with UVISCO which later changed to Macsteel, owned 50% by Mittal Steel South Africa, the continent’s largest steel producer with a steelmaking capacity in excess of seven million tonnes per annum and 50% by the Eric Samson family.
NECI said it was clear Masanga and Makuni had vested interests in the arrangement.
“Masanga and Makuni should be held accountable and charged by the board for all losses incurred under the Macsteel pre-financing arrangement,” NECI says. “The pre-financing arrangement with Macsteel should be reviewed with the view of terminating it provided Zisco gets alternative financing structures.”
NECI was damning on Makuni’s dealings with Macsteel.
“Makuni’s marriage with Macsteel smacks of gross infidelity to norms and values of Zisco. Zisco billets are always received but in all the instances the prospective buyers were informed that Macsteel is the official agent on the international market,” it said.
NECI said Astra Corporation of South Korea, for example, was not given an audience even though it had expressed an interest in Zisco products. Cosmofer AG/Fobsel was also snubbed when it proposed a financing project.
NECI also said there was a problem in the agreement between Zisco and the Kwekwe-based Steelmakers. The contract gave Steelmakers the right to buy “steel scrap” from Zisco.
However, there was controversy in how Zisco sold billets, blooms and scrap metal to Steelmakers at below market prices when these could have been sold for much more outside the country.
Zisco claimed the reasons it sold steel products to Steelmakers at below market price included that there was “dumping” of steel products into the country from South Africa and that Steelmakers was prepared to pay in advance.
But sources pointed out there were senior politicians who were benefiting from the controversial Zisco-Steelmakers deal by buying steel products cheaply from Zisco and reselling them at higher prices outside the country. One politician well-known to have a vested interest in the deal is a cabinet minister very influential in Kwekwe and in national politics.
“The value between the quoted price and the charged price was so high that it could have grossly contributed to company losses,” NECI said. “Price lists should be approved according to company policy and procedure. All the price lists should be subject to executive approval before implementation.”
“The Zisco-Steelmakers relationship seems more parasitic than symbiotic. Whenever the two enter into a marketing or sales agreement it seems Steelmakers is always on the winning side. Hence the contract should be terminated.”
NECI also said Masanga should be held personally liable for the contract he offered to Chartwell Capital Group of South Africa for it to restructure Zisco’s balance sheet and debt.
“Zisco paid Chartwell Capital Group R471 827,15 through Ramotswa,” NECI says. “Masanga brought in Chartwell without the involvement of other executives. How he identified the company is not apparent.”
The contract was later suspended midstream after payment.
There was also a problem, NECI said, in the agreement between Zisco and the Reclamation Group Ltd for the supply of machinery. NECI said Zisco bought substandard equipment from Reclamation on which a lot of money was later spent on repairs.
“Truck number BFC648 was serviced to the tune of R1 718 736,67 whilst machine number BCF1029 was attended to the value of R653 085,20,” NECI said “The point being made here is that the equipment was not a wise purchase as they had gone through a lot of repairs, hence the resultant breakdowns.”
Zisco’s technical staff was excluded from the buying of machines and equipment by Masanga and Makuni.
“Masanga and Makuni should be held accountable for the purchasing of this substandard equipment and subsequent financial losses incurred by Zisco. The losses incurred by Zisco should be recovered from the two because they flouted company procedures,” NECI said.
“The contract between Reclam and Zisco should be reviewed as Zisco can be perpetually married to Reclam for a period of five years with a possibility of renewal to 10 years. Makuni must be charged for willfully engaging Zisco in a prejudicial agreement with Lenkas (a division of Reclam).”
Zisco had an agreement to sell Lenkas 10 000 tonnes of steel scrap consisting of 7 000 tonnes of processed and 3 000 tonnes of unprocessed scrap.
There were also questions around the Zisco contract with Indian firms Bharat Roll Industries/Gayson & Co to sell scrap melting rolls to it. The deal was botched and NECI said Makuni failed to provide details on how Bharat Roll “came to be aware of the ‘neglected’ rolls at Zisco”.
In the end, NECI said, Zisco suffered huge financial losses through shady deals and payments that constituted corruption.