Stefaans Brümmer/ Craig McKune/ Owen Gagare
INVESTIGATIONS have uncovered the American source of a controversial US$100 million loan that enabled President Robert Mugabe to steal the 2008 Zimbabwean presidential election run-off in which he faced almost certain defeat.
The payment, which critics say helped the Zanu PF regime buy votes and unleash a campaign of brutal repression, was made possible by a New York-based institutional investor, the Och-Ziff Capital Management Group.
Mugabe’s government was bankrupt and teetering on the brink of collapse as the rival MDC-T defeated Zanu PF in parliamentary polls and its leader Morgan Tsvangirai won the first-round of the presidential election. Facing a trouncing in the run-off poll against the surging Tsvangirai, Mugabe needed money fast.
Investigations by the Mail & Guardian, a sister paper of the Zimbabwe Independent, have disclosed his government sold the family silver –– or rather platinum concessions freshly squeezed from South Africa’s Anglo American Platinum. The ultimate buyer was a mining company founded by former English cricketer Phil Edmonds.
On top of the purchase price, Edmonds’ company threw in the US$100 million lifeline.
That much is known. But Edmonds’ Central African Mining and Exploration Company (Camec), then listed in the UK, did not have that kind of cash. So it did what listed companies do –– issue and sell new shares.
Contrary to listing rules, the purchaser of the shares was not revealed, which meant that the ultimate source of the money remained a mystery. That source, it now turns out, was Och-Ziff.
Zimbabwe’s Political Parties (Finance) Act expressly prohibits foreign funding to political parties.
Although it has some US$30 billion in assets under management, Och-Ziff has kept a low profile.
In South Africa, it is best known for its joint venture with Mvelaphanda Holdings, the private investment vehicle co-owned by Human Settlements minister and presidential hopeful Tokyo Sexwale.
Although the partnership, then cast as “exclusive”, had been announced only months before, Mvelaphanda denies having participated in the Zimbabwe deal. The M&G is not aware of evidence to the contrary.
That Och-Ziff was willing to finance the Zimbabwean loan in spite of the likelihood that Mugabe, whom Western governments opposed implacably, would use it to fuel repression, is surprising. Och-Ziff declined to comment.
Step 1: squeeze
Less than a week before Zimbabwe went to the first-round polls, its most tightly contested yet, Mugabe bagged a prize asset. Anglo American Platinum, the world’s top platinum producer, ceded more than a quarter of its platinum concessions in that country to the government.
While this deal had elements of a “shake down” – Anglo was over a barrel, not least because forex due to it had been frozen by the authorities – it did not do so for free. In return, Anglo was granted empowerment credits and forex indulgences that would allow it to develop a valuable remaining concession.
Step 2: flip
Immediately Anglo had been relieved of its concessions, the government awarded them to Todal Mining, a joint venture between the state-owned Zimbabwe Mining Development Corporation (ZMDC 40%) and a private company, Lefever Finance (60%).
Lefever in turn was owned by the opaque Meryweather Investments, registered in the British Virgin Islands.
While Meryweather’s ownership remains a mystery, it has been associated with Muller Conrad “Billy” Rautenbach, a close Mugabe ally who allegedly fronted for Zanu-PF or its functionaries in business deals.
Rautenbach was placed under European and American sanctions later that year for allegedly supporting Mugabe’s regime. At the time, he was also wanted on criminal charges in South Africa. But in a 2009 plea bargain with South African prosecuting authorities, Rautenbach pleaded guilty, on behalf of one of his companies, to 326 fraud charges. He paid a R40 million fine.
Rautenbach did not respond to requests for comment.
Step 3: cash in
The parliamentary and first-round presidential elections were held on March 29 2008. Although the electoral commission initially withheld the results, Mugabe was on the ropes and he knew it. Less than a fortnight after the vote, the regime turned the platinum assets into instant cash. This is how it was done:
On April 11, Camec, then chaired by Edmonds, bought Lefever for $5-milion cash plus millions of newly issued Camec shares. That went to the owners of Meryweather, whoever they were.
But in a stock exchange announcement Camec confirmed also that it had “agreed to advance to Lefever [which it had just bought] an amount of US$100-million by way of a loan to enable Lefever to comply with its contractual obligations to the government of the republic of Zimbabwe”.
In a nutshell, Camec had acquired 60% of the platinum assets by buying out the state-owned ZMDC’s joint-venture partner in the Todal Mining. For this it paid largely by issuing new shares in itself — but it supplemented the purchase price with the instant cash loan.
Unusually, though the ZMDC was to repay the $100-million, it went straight to Zanu-PF government. ZMDC chair Godwills Masimirembwa told the M&G this week: “It was a loan to the government, the money was used by the government. We don’t know how it was used.”
He claimed there was “no anomaly” in the ZMDC having to repay it, as “we are wholly owned by government”.
But Masimirembwa also revealed just how “soft” the terms were: No repayments have been made to date as they were to come from dividends, of which there had been none. And no interest was payable.
Step 4: buy victory
In the weeks to follow and pending the all-important presidential run-off vote on June 27, Zanu-PF went on the offensive. Amid acute food shortages, it directed government food aid to reward supporters. And in spite of crippling fuel shortages, it deployed security forces and party thugs across the country on a campaign of mass intimidation.
Mugabe won after Tsvangirai pulled out at the last moment, citing the violence and Zanu-PF threats of war.
Roy Bennett, the MDC treasurer and a member of parliament, said this week: “It was public fact that the Zanu-PF government had completely collapsed the Zimbabwean economy. Hyperinflation was a fact; the army had been rioting in public due to a lack of wages; civil servants had not been paid for months.
“The massive deployment to carry out a violent campaign needed funding. Is it coincidental that the Zimbabwe government was loaned $100 million from Camec … after extortion was applied to Anglo to release the platinum deposits which Camec purchased? I would leave it to readers’ imagination where that money was used.”
Camec was pummelled in the British press, but the company shrugged it off, reportedly saying that major shareholders had been consulted and that it believed “investing in Zimbabwe at this early stage is the best way to help the people of Zimbabwe while also generating shareholder value”.
But who paid?
Och-Ziff’s role in providing the money that Camec used to extend the loan remained hidden. However, it may be pieced together from Camec’s 2008 annual report and reading between the lines of Camec announcements at the Alternative Investment Market (AIM), where it was listed.
The annual report shows that at the end of March 2008 – that is 11 days before the Zimbabwe deal – Camec had cash holdings of £17,9-million (then about $36-million), not remotely enough.
However, it had another £37,5 million (about $75-million) in escrow – prepayment by a new investor for new shares Camec would issue.
A Camec announcement earlier that March shows that the original purpose of the new share issue was to raise cash to develop Camec assets in the Democratic Republic of Congo.
But then on March 28 – five days after Anglo had relinquished the concessions to the government and a day before the first-round elections – Camec put out another announcement, saying that “following further discussions with the placees [the new would-be investors] regarding the multiple investment opportunities available to the company in Africa”, it would enlarge the share issue to raise more money – a total of 200-million shares for £100-million ($200-million).
On April 11, a further announcement made it clear that the “multiple investment opportunities” really centered on the Zimbabwe acquisition that day and which would be paid for among other things through the $100-million loan.
The “placees” who had been consulted about this acquisition, the context shows, were in fact mainly one new investor, who bought 150-million of the 200-million new Camec shares. The purchase consideration for the 150-million shares was £75-million ($150-million) – enough for the Zimbabwe loan, and some to spare.
AIM rules require the disclosure of substantial shareholdings – above 3% and then each following 1%. Yet, though the 150-million shares at the time equated to about 10% of Camec, the purchaser’s identify was not declared.
The missing piece of the puzzle came in another announcement months later, at the end of July, in which a company called OZ Management announced that another Camec share issue had diluted its holding — which it put at 150-million shares exactly.
OZ Management is a subsidiary of Och-Ziff. The firm did not deny that it was the purchaser of the 150-million shares ahead of the Zimbabwe deal, but declined comment. – M&G.
• The M&G Centre for Investigative Journalism, a non-profit initiative to develop investigative journalism in the public interest, produced this story. See www.amabhungane.co.za for all their stories, activities and sources of funding.