MURRAY & Roberts (M&R) Zimbabwe chairperson Paddy Zhanda is on his way out, amid indications that a transaction that saw his consortium — Zumbani Capital — acquiring a majority shareholding in the construction group was improper and presented a case of conflict of interest on his part.
Report by Chris Muronzi
Sources close to the developments this week told businessdigest that Zhanda, a Zanu PF Member of Parliament, will soon step down from the board of M&R to pave way for an independent non-executive chairperson.
According to sources, minority shareholders raised concerns at Zhanda’s role in the acquisition of the 47% stake of M&R, adding he was a related party and could have had insider information on the deal.
“How is it that he negotiated for a lower price for the take-over, which was at a discount to the market price of 7 US cents,” a source asked. “He could have had insider information.”
Analysts say related party transactions are not allowed on the Zimbabwe Stock Exchange.
A related party transaction, according to Section 10 of the ZSE listing rules and requirements Sub-section 10.1 (b)(ii) is “any person that is, or within 12 months preceding the date of the transaction, was a director of the issuer or of any subsidiary or its holding company or any subsidiary of its holding company”.
This speculation comes at a time when the Securities Commission of Zimbabwe raised concern that dominant shareholders should not occupy board seats and management positions.
On the listed companies, John Moxon at Meikles Africa Ltd is the only majority shareholder who still holds a board seat and executive chairmanship.
TN Holdings founder Tawanda Nyambirai gave up his post as an executive director at TN Bank, saying the role was not in the interest of good corporate governance.
Zhanda and former M&R Zimbabwe CEO Canada Malunga led a consortium — Zumbani Capital — that bought M&R South Africa’s 47% stake in the Zimbabwean operations.
Zhanda, high-flying South African executive Sam Sithole, and Michael McCulloch are members of Zumbani Capital.
Management at M&R Zimbabwe felt that Zhanda had pulled the rug from under their feet after they had initially made an offer for the company.
Zumbani paid only just less than US$1,5 million for the stake. A total 99 792 515 shares exchanged hands at a 79% discount to the market price.
M&R South Africa sold the stake, saying it was not at the core of its business model, which is now skewed towards engineering and not construction.
M&R South Africa said the deal had been priced so lowly to enable the new investors to inject capital into the business as a going concern.
M&R Zimbabwe has been listed as a public company on the ZSE since 1974. The group has two operating divisions — contracting and manufacturing. The contracting division comprises M&R Construction Zimbabwe and Proplastics.