GLOBAL Emerging Markets (Gem) RioZim Investments, a 44% shareholder in RioZim Ltd, conflicted itself and misled authorities into believing RioZim Ltd had acquired a 78% equity stake of Murowa Diamonds (Pvt) Ltd without paying a cent for the equity ahead of other shareholders in the group.
Investigations by the Zimbabwe Independent have unearthed a web of deceit, double-dealing and conflict of interest as well as lack of board independence in the Murowa diamond acquisition.
Gem appointees on the board of RioZim Ltd — Lovemore Chihota, Caleb Dengu, Saleem Beebeejaun, Iqba Sharma, Lovemore Chihota and Bekhi Nkomo — and an Old Mutual appointee, Kurai Matsheza, waived the rights of other shareholders to a cheap and gilt-edged opportunity to turn the company’s financial fortunes around under the pretext that the group did not have cash for Murowa.
But Gem founder Harpal Randhawa went on to negotiate and acquire the asset for himself after assuming a US$17 million inter-company loan to Rio Tinto Plc.
When the RioZim Ltd board waived pre-emptive rights of other shareholders to Murowa Diamonds, Gem RioZim Investments principal Harpal Randhawa had already commenced negotiations with Rio Tinto Plc to acquire the world class asset for himself through RZ Murowa Holdings, a British Virgin Island incorporated company. Against such a background, RioZim shareholders were prejudiced of a lucrative investment where the mining group would only have to repay an inter-company loan for equity.
A Rio Tinto Plc statement at the conclusion of the Murowa diamond disposal shows the mining giant could have been under the impression it had sold Murowa and Sengwa to RioZim through an investment vehicle called RZ Murowa Holdings Ltd.
“Rio Tinto has completed the sale of its 78% interest in Murowa Diamonds and 50% interest in Sengwa Colliery Ltd (Sengwa) to RZ Murowa Holdings Limited,” Rio Tinto Plc said in a statement last year.
“RioZim Limited, an independent Zimbabwean mining company listed on the Zimbabwean Stock Exchange already holds a 22% in Murowa Diamonds and a 50% interest in Sengwa and will assume the overall management of both entities. Rio Tinto believes that the future of these assets can be best managed by entities with existing interests in Zimbabwe.”
RioTinto Plc did not disclose how much the company been sold to RZ Murowa.
Judging by Rio Tinto’s statement, Gem has through a devious scheme disposessed all other shareholders in RioZim Ltd of an asset that could also have benefited every shareholder.
This comes as it emerged this week that among some of its mandates as per the July 2012 management contract between RioZim Ltd and Gem RioZim Investments, the company was supposed to help the local mining group to increase its shareholding in Murowa.
Documents seen this week show a shocking level of double-dealing and conflict of interests in the manner RioZim Board of directors handled the Murowa Diamonds pre-emptive rights.
RioZim directors broke Zimbabwe Stock Exchange (ZSE) rules by failing to call for an Extraordinary General Meeting (EGM) for shareholders to vote on the take-up of their pre-emptive rights in Murowa Diamonds.
It has since emerged that a number of the directors have serious conflict of interest in exercising their fiduciary duties to RioZim shareholders. After the Independent’s report on the irregularities relating to the Murowa transaction, the RioZim board of directors announced it had waived the rights of shareholders to Murowa.
Contrary to assertions by RioZim that an AGM of August 28 2015 had rubberstamped the waiver of Murowa’s pre-emptive rights, minutes of the meeting show that the issue was only raised from the floor and was never part of the agenda.
According to the ZSE listing rules, related party transactions have to be approved by other shareholders in an EGM.
The Board of RioZim did not call for an EGM. Instead the Gem appointed board gave itself the power to decide on behalf of all other shareholders to waive their pre-emptive rights.
In a press statement, RioZim said: “On 10 June 2015, the Board of Directors of RioZim passed a resolution to irrevocably and unconditionally waive the company’s rights of pre-emption in connection with the transfer of the sale of shares to RZ Murowa Holdings.”