ABC denies NECI’s Star Africa report

ABC Holdings Limited Group Chief Financial Officer, Beki Moyo, this week told the Zimbabwe Independent that Nhau was not even present when the deal was negotiated by NSSA’s and ABC’s executives and was only informed about the deal “out of courtesy and to ensure that he was not surprised when the deal was presented to the NSSA Board as he was the chairman”.

“The terms and conditions of the transaction were concluded by NSSA and ABC Holdings executives. We believe both ABC Holdings and NSSA management conducted themselves with the utmost integrity and professionalism in consummation of the transaction,” Moyo further stated.

Moyo also said that ABC Holdings chose to sell to NSSA ahead of a number of bidders because of its desire to “ensure that the indigenous people of Zimbabwe continue to benefit”. 

He disputed reports that the shares had been over-priced and insisted that ABCH executives decided to “persuade NSSA management to merely meet the highest bid of US$12,5 million which NSSA executives accepted”. Star Africa management had valued their stake in excess of US$20 million, according to Moyo.

He also said ABC management and Board had a high regard for the Star Africa business, hence their decision to invest US$10 million “though this instrument at a convertible price of 14c, which is higher than the 12c per share that NSSA paid for its shares.”

“The conversion period expires at the end of May 2012 and it is common cause that this option is out of the money and will in all likelihood not be exercised”, Moyo said.

Moyo’s statement follows publication of a story in which NECI called for the heads of Nhau and current NSSA general manager, James Matiza, following its unravelling of a series of financial irregularities in the way in which the authority used public funds to acquire properties and shares as well as placing them on the money markets.

In particular, the NECI questioned the share purchase by NSSA into Zimbabwe Stock Exchange-listed company Star Africa Ltd at what it said was a US$2,5 million premium to market prices beginning September 2009. The purchase, into a company that most analysts believed was waning, has now resulted in a US$14 million net loss as the Star Africa share price has plummeted.

According to NECI’s report, an investigation into NSSA’s equity investments carried out between March 2009 and June 2010 revealed NSSA bought Star Africa shares at 12,5 US cents a share instead of the average 10 US cents prevailing on the ZSE after the then NSSA Board chairman Albert Nhau negotiated “the deal at his home and bought the shares from his friends.”

“NSSA Senior Management, notably Mr Matiza and the Board Chairman (Mr Nhau) should be held accountable for plunging the Authority into the purchasing of shares at a premium, yet the trend was that the share value was actually declining,” noted the report.

Moyo acknowledged that the deal had resulted in a loss for NSSA but pointed out that it made economic sense at the time.

“Whilst it is true that to date the transaction is out of the money, this has to be viewed against the performance of other medium-sized companies on the ZSE. To try and use the benefit of hindsight to judge what then looked like an extremely good investment is regrettable.  Indeed, financial markets do go up and down hence you cannot win them all”, he said.

When the Star Africa scam was concluded in December 2009, NSSA reportedly lost US$2,5 million at the onset. However, the investment loss has since sky-rocketed to more than US$14 million following the continued plunge in the value of Star Africa shares on the stock exchange.

As at yesterday, Star Africa shares were trading at 0,7 US cents from 12, 5 US cents upon purchase by NSSA in 2009 a more than 1200% loss.
According to NECI, NSSA could have bought the same shares at 10 cents or less through ZSE and saved pensioners’ money.

Matiza allegedly offered US12,5 cents per share at an implied contribution of US$12,158 million staggered in instalments as follows: December 3 2009 -US$3 million, December  30 2009 -US$3 million, January 29 2010 -US$3 million and February 28 2010 – US$ 3,158 million.

NECI says NSSA failed to provide records, a write up or an official explanation as to “how the general manager suddenly came up with a figure of US12,5 cents per share from the agreed and approved bargain price of US10 cents per share.”

According to the report, NSSA directors and management also splashed money on mansions and luxury cars for themselves, while pensioners were struggling to lead decent lives from the paltry US$20 a month they were receiving from NSSA.

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