THE recently removed National Social Security Authority (Nssa) management resolved not to follow all its rights in Zimre Holdings Ltd, businessdigest has established.
Sources this week said Nssa executives, through a management committee, assumed powers of the board’s investment committee in the absence of the board.
The previous Nssa board, whose term of office expired in August 2013, was chaired by top lawyer Innocent Chagonda. He was deputised by corporate governance expert David Mutambara.
Other members of the board were former Nssa general manager James Matiza, Chris Hokonya, David Govere, Joseph Kanyekanye, Cecilia Alexander, Rosa Dube, Kennias Shamuyarira, Ephanos Makiwa and Memory Mukondomi.
After the expiry of the board, investment director Shadreck Vera, finance director Patrick Mapani, corporate services director Tendai Mafunda and ICT director Bright Chidyagwai constituted the management committee that ran the affairs of nssa for two years. The management committee, sources said, resolved to follow only 3% of their rights when they could have followed all their rights.
“Its not clear why the management committee opted to follow part of their rights. They could have followed their rights in full and followed government’s rights as well,” a source said.
“There are a lot of questions that need to be answered and they can best be answered by people like Vera and Matiza and the management committee.”
Under normal circumstances, when a management committee makes a decision on investment, the Labour ministry is supposed to sign it off. It’s not clear if the management committee sought the approval of the ministry and how the Zimre issue was presented for approval.
Labour minister Prisca Mupfumira had not responded to businessdigest’s request for a comment on the Nssa-Zimre issues at the time of going to print.
Sources last week 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.
A former Nssa executive confirmed a management committee had recommended that the fund should not follow its rights in Zimre because the group had not paid a dividend to government for 20 years.
The source said before the decision to invest in a company is made, an investment analyst makes recommendations on whether to invest or not. After making recommendations, the analyst presents his recommendations to a management investment committee. The investment committee then makes final recommendations based on the analyst’s report.
The sources added that there was an attempt to conceal who the underwriter was.
“We followed our rights to the extent we could because that is the money we had after government said we could not afford to let go off the shareholding. We did not have enough money to follow our full rights at that particular juncture,” the source said.
Efforts to gets comments from Vera and Matiza proved fruitless as their mobile phones were unreachable.
The Affirmative Action Group (AAG) 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 AAG said in the takeover of Zimre, the Rudlands represented a “brazen, unconsciable, and unpardonable attack on the reflex of local economic empowerment on the high noon.”
Nssa board insiders who spoke to businessdigest on condition of anonymity said there was need for a relook at Nssa’s investment in the country’s largest reinsurer Zimre, with the issue being part the new board’s immediate priorities.
“Where in the world can an asset like ZHL be sold for US$0,02 per share,” the source added.
ZHL controls Fidelity Life Assurance, Nicoz Diamond and owns a significant shareholding in CFI Holdings, an agricultural conglomerate.
After the coming in of the new shareholder — government — Nssa’s stakes in Zimre were diluted to 22% and 19% respectively.
Hamish Rudland last week said the letter from AAG was a grim reminder to investors that deals done in the public domain and approved at the highest levels within government, the ZSE and the boards of directors are far from safe.
“This is the reason we (Zimbabwe) have no foreign direct investment flowing into 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.