HomeBusiness DigestMawere defiant over SMM

Mawere defiant over SMM

Conrad Dube

BUSINESSMAN Mutumwa Mawere has said that, contrary to government claims, no Zimbabwean funds were used to help finance the acquisition of SMM Holdings and THZ Holdings from T&N Plc.

Mawere, through his company Africa Resources Ltd (ARL) incorporated in the British Virgin Island, acquired Shabanie Mashava Mines Holdings Ltd (SMM) and THZ Holdings from T&N Plc in 1996.

In an affidavit last week, Mawere argues that his approach to T&N Plc to acquire its remaining Zimbabwean and Zambian assets was unsolicited and not part of any programme by the Zimbabwean government to localise foreign-owned companies.

The transaction was negotiated by him as a principal and not as an agent of the government of Zimbabwe, Mawere states in the court papers.

Total pre-acquisition costs involving legal, financial and technical due diligence, negotiation, structuring and transaction closing, according to Mawere, were about US$1 million financed from his personal funds.

“No funds from the government of Zimbabwe were used to help finance the acquisition of SMMH and THZH by ARL. The payment mechanism was approved by the Reserve Bank of Zimbabwe as a commercial transaction with no undertaking by the government of Zimbabwe to step into the shoes of ARL in respect of payments to T&N Plc,” Mawere argues.

The government has said that they regarded the acquisition by ARL as a national project requiring support.

Minister of Justice, Legal and Parliamentary Affairs Patrick Chinamasa last month told parliament that the company acted as a nominee of the government to acquire a controlling interest in T&N, claims which Mawere’s court application seeks to contest.

“If you start your business through borrowings and you do not return this debt, you give control of your company to the creditors of the business,” Chinamasa told parliament.

“Mawere did not use any of his savings but he used government guarantees to purchase the company. He was hoping that if the company flourishes, he would be able to pay back what he would have borrowed. That did not happen,” he added.

But Mawere argues that SMM secured an offshore medium-term facility from Belgium-based KBC Bank.

He said it was a central bank condition that the principal borrower, during that time, be Minerals Marketing Corporation of Zimbabwe (MMCZ) and not SMM.

“In addition, the facility was structured as an offshore loan to be serviced by SMM’s export proceeds. However, the financing bank required a government undertaking that the arrangement would remain in place for the life of the loan, failing which they would have recourse on the government.”

Mawere argues that SMM was a commercially viable entity as confirmed by the due diligence of the financing bank but because of the state intervention in the foreign exchange market, KBC was not comfortable with Zimbabwe’s risk exposure.

He said that SMM secured a five-year offshore facility in September 1998 “that essentially refinanced the short-term facilities from local banks”.

During the life of the facility, SMM generated a total of US$177 million, according to Mawere.

Mawere also claims that Zimbabwe’s risk exposure and intervention in the foreign exchange market reduced offshore financiers’ confidence to finance offshore loans.

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