Zimre deal under probe

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AUTHORITIES are questioning how a consortium of local business people—Hamish and Simon Rudland — ended up with a 40% equity stake in Zimre Holdings Ltd (Zimre) amid indications a probe at National Social Security Authority (Nssa) is also centred on establishing why the social security fund did not follow its rights when new shares were issued a few months ago, businessdigest has established.

Chris Muronzi

Sources said government was looking at the deal to establish why Nssa did not follow its rights in the US$15 million rights issue and what really transpired leading to the takeover. Only 18,03% of the reinsurers shareholders followed their rights, leaving the underwriter, NMB Bank, to pick up over 80% of the issued shares.

“We want to know why Nssa did not follow its rights. The whole decision is curious given that Nssa is very liquid,” a source told businessdigest.

This comes after the Affirmative Action Group vice-president Sam Ncube wrote a letter to the president’s office and various government ministers calling for the reversal of the deal.

“We write to your good office to register our deep and profound indignation at the takeover of Zimre Holdings by an economic cabal that seeks to strip it of its assets while our government is lulled into the false narrative of a private investment into the same,” reads part of the letter signed by AAG vice-president Sam Ncube and addressed to Indigenisation minister Patrick Zhuwao, Labour minister Prisca Mupfumira, chief secretary to the President and Cabinet Misheck Sibanda and Nssa board chairman Robin Vela.

“The takeover of Zimre Holdings by Simon and Hamish Rudland represents a most brazen, unconsciable, and unpardonable, and attack on the reflex of local economic empowerment on the high noon. The asset is worth a billion for crying out loud. All told and weighed in, it amounts to a most blatant reversal of the few gains of the indigenous entrepreneurial spirit and a rightful kick in the mid-section of the body-politic of those who believe we should and can do more by our people.”

Nssa board insiders who spoke to businessdigest on condition of anonymity last week said there was need for a relook at Nssa’s investment in the country’s largest reinsurer Zimre Holdings with the issue being part of the new board’s immediate priorities.

Nssa, according to the insider, was unhappy with the coming in of the Rudlands.

“Zimre is an asset which was of huge value and we had 40%. We had been told NMB bank were underwriting that but that is clearly not what happened, companies like Zimre are companies which we say we need to take a hard look at, they have taken advantage of the long suffering shareholder through hyperinflation and dollarisation whereby Nssa has been there and acting as lender-of-last-resort until somebody, a pirate from a boat with the promise of new cash, came and they went ahead and forgot they are going to dilute Nssa who they had never paid a dividend to,” said a board insider.

After the coming in of the new shareholder, government and Nssa’s stakes in Zimre were diluted to 22% and 19% respectively.

When reached for comment this week Hamish Rudland said the letter from AAG was a grim reminder to investors that deals done in the public domain and approved at the highest level in government, the ZSE and the boards of directors are far from safe.

“This is the reason we (Zimbabwe) have no foreign direct investment coming to the country. Scrutiny is always good but it needs a softer and quieter approach so as not to upset business and investors. The deal was concluded through an EGM 12 months prior to the article being placed by the AAG,” said Rudland.

“The fact is that Zimre was an undercapitalised unit, needing recapitalisation, this was achieved in the rights issue and the business can now survive and thrive and has the ability to recapitalise other business units where it holds interests, this is good for the economy, all stakeholders and the country. The consortium acquired 40,1% of the issued shares, through a capital injection which will be reduced to below the ZSE threshold within 24 months, this is under the indigenisation legal threshold of ownership in companies.”

He laughed off suggestions by the AAG that the company was worth US$1 billion.

“The balance sheet reflects the value of the company, this is public record, the value is way below the billions indicated by AAG, unfortunately equities in the market are undervalued due to tight liquidity and poor business performance of listed companies, our aim is to reverse this and make shareholders the priority and give shareholders the real values they deserve as investors. We will drive management to achieve this, failure will not be acceptable,” Rudland said.

“The culture in our listed companies needs to change where shareholders are rewarded for investing in companies, this will bring more people into the equities markets and increase the vibrancy of the economy. We also need a safe investment climate for all shareholders, where they are guaranteed that there money is safe. Performance of listed companies and return on investment is what drives the market, we need this culture in our business community.”

Rudland said the deal was underwritten by NMB, adding all disclosures were made according to ZSE and other regulators.

“We did not expect to get to the level we got, this was due to Nssa only following a portion of their rights. We expected below 20% of the company,” he said.

“Deals done in the public domain run according to regulatory protocols, these I believe are robust and transparent and cannot be manipulated as there are rigid checks and balances at every level. As an investor in the ZSE, I hope this is the case or all investments are then not safe!”

Rudland said ZHL has some great investments.

“Unfortunately, these also need recapitalisation, CFI requires US$20 million, Nicoz requires approximately US$11 million, there will be further capital raised in these companies and we need to give all shareholders comfort that there money is invested safely and will give returns. Sensationalism does not assist in this,” he said.

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