Sachikonye’s fate hangs in the balance

Godfrey Marawanyika/Shakeman Mugari

FIRST Mutual Ltd (FML) chief executive officer Norman Sachikonye’s future hangs in the balance as the risk management firm faces a daunting task following revelations that

its books had a $30 billion shortfall.


On Tuesday last week the company was suspended from the stock market due to its massive exposure to the ongoing ENG saga.


The Zimbabwe Stock Exchange (ZSE) cited recent press revelations that the group had lost investor and policyholder’s funds to ENG.


Sachikonye, who holds 83 600 shares in the recently-listed firm, could be on his way out, if the irregularities that pushed William Nyemba and others out of the financial services sector are anything to go by.


For First Mutual Life to recoup losses incurred, it has to sell several of its properties. However, given the slump in the property market the company might not be able to meet its obligations.


The other option is for the company to offload its equities or to borrow money from the local market.


But given that its share price has also taken a serious nosedive the option seems bleak.


Reliable sources say pressure is now mounting for Sachikonye to leave his post.


“Any chief executive officer facing a scandal of such a magnitude would have to resign before shareholders push him out,” said a stockbroker who spoke on condition of anonymity because the case is now under police investigation.


“This is the time where professionalism should be the main priority than to be forced out which could be embarrassing to his record.”


Two weeks ago the Trust Holdings Ltd board pushed out chief executive officer William Nyemba and two of his most senior officers as part of the group’s efforts to save face.


“The market says Sachikonye will face problems trying to mobilise business and regain market confidence. The attempt is made more challenging by revelations last week that the directors were given personal loans amounting to around $4 billion,” the analyst said.


“Even more challenging for him and the troubled firm is the current macro-economic conditions that have resulted in a number of financial services firms being strained by the current liquidity crunch in the market.

“Since the company is not directly under the regulations of the central bank but falls under the local bourse, the other option for the firm to raise enough cash would have to be through a rights issue,” the analyst said.


This however would need enough market confidence, which is non-existent at the present moment since the announcement of the 2003 National Budget.


The budget triggered a panic sale of shares which plunged the market.

A rights issue offer is a process whereby more company shares are offered to existing shareholders.


Sachikonye could not comment on market speculation about his fate despite repeated efforts to get him to do so during the past two weeks.

FML spokesperson Ruth Ncube however said shareholders were updated and would continue to be advised of any developments pertaining to the problems currently affecting their firm.


She said there was no basis in changes to the board of directors or at management level.


Ncube said in light of the exposure at their asset management company, Pelagia Kafesu had since been appointed acting managing director.

“This appointment will run concurrently with Mrs Kafesu’s other duties within the group. Mrs Kafesu is a fully qualified actuary, is a board member of First Mutual Asset Management Company, and has considerable executive managerial experience,” she said.”External auditors have been appointed to carry out a full audit in relation to the ENG transactions and their findings shall be announced shortly.”


On speculation that Sachikonye could be dismissed or forced to resign, Ncube said there was no basis at all for this.


“Our asset management company is a subsidiary of First Mutual Ltd, run autonomously from the holding company. In any case there is absolutely no evident basis for dismissal.”


First Mutual Asset Management was established in 1998 as part of the group’s diversification strategy, and has since built capacity as a major asset manager and source of primary and secondary investment capital in the Zimbabwean market. The company’s inception was motivated by the need for specialist in-house asset management expertise to manage the group’s extensive short-term and long-term funds and investments.


In November last year, Trust holdings shareholders approved the merger of Trust Asset Management with First Mutual Asset Managment.