ONE of the major shareholders in ZB Financial Holdings (ZBFH), Transnational Holdings Limited (THL), led by veteran banker Nicholas Vingirai, has rejected Reserve Bank of Zimbabwe (RBZ) governor John Mangudya’s demands over a series of corporate governance issues, a contested senior appointment and controversial payment of a dividend.
By Bernard Mpofu
Vingirai has also rejected Mangudya’s demand that THL pays back the US$$658 699 dividend that was paid to the group by March 31, 2016, in an unprecedented act of defiance in local banking and corporate politics.
This comes as there have been a number of meetings between the RBZ, ZBFH and THL to resolve the issue. Although events have been moving fast to contain the conflict, the battle for the control of ZBFH and its bank has been intensifying.
With a 26% stake, THL became the second largest shareholder in the group after Nssa’s 37,79% following Vingirai’s victory in a long-running legal battle over shareholding.
As first reported in the Zimbabwe Independent last week, the RBZ boss has accused ZBFH of forcing From Page 1
out independent board members, making a controversial dividend payment, unlawfully appointing the group’s chief operating officer, stalling a merger process, and a raft of alleged corporate governance failures.
In a letter dated March 7 2017 to ZBFH chief executive Ron Mutandagayi, Mangudya raised a chain of issues that he said needed to be urgently addressed, with some of them having a March 31 deadline.
However, in a hard-hitting reply exclusively obtained by the Independent this week, Vingirai — insinuating a plot and skulduggery against him reminiscent of the past — virtually dismissed Mangudya on all the issues he has raised.
Vingirai challenged the legality of the central bank directive calling for the stepping down of ZBFH chief operating officer Mike Manyika. Mangudya had ordered the banking group to pay a fine of US$36 000 (calculated at US$300 per day) and the immediate stepping down of Manyika.
On dividend controversy, the central bank boss said the dividend was declared on May 26 2015 before THL recovered its shareholding from government and hence was fraudulently received. He said the board agreed to a claim by THL shareholders to be paid a dividend for the same financial year before it took control of the shareholding.
However, Vingirai rejected this, saying THL would not pay back the US$$658 699 dividend that was paid to the group.
He argued it had claimed its portion of the dividend pursuant to the settlement of a shares agreement which states that risks and rewards pass to THL on the effective date or May 31 2016. He also cited Article 105 which permits shareholders to direct the company to pay dividends to any nominated party.
“The board constituted an ad-hoc committee comprising two independent directors and tasked it to consider THL’s claim. The committee took into account the agreement which ZBFH had already tacitly ratified by implementing parts of it e.g, the removal of independent directors despite the fact that shares were yet to be transferred to THL,” Vingirai wrote in a letter dated March 10.
“THL is unable to comply with this order until and only when the alleged violation has been proven…
“It is not correct to say that the ad-hoc committee makes decisions, it simply recommends to the board which then decides. It should be noted that the dividend was not paid to the THL directors but to THL. The so-called THL directors have no personal interest in the dividend and therefore the question of conflict does not arise. At this rate one might as well suggest that the Nssa directors should also have recused themselves too, allegedly because they have an interest not to pay the dividend to THL.”
Contacted for comment, Mangudya said the issues were being resolved, but he was unable to elaborate on the details. Vingirai could not be reached for comment. Manyika was also unable to shed light on the issue.
“Due to ethical considerations, we do not normally comment on such issues suffice to say the issues have been overtaken by events,” Mangudya said in a telephone interview. He did not say which events he was referring to.
However, Vingirai’s letter shows that a couple of days ago the battle over the control of ZB Bank and its associated group was still raging.
Responding to central concerns on board changes that saw four non-executive directors that represented government interests resigning after THL reclaimed its shares, Vingirai said this development was above board.
“The board now compromising of two directors nominated by Nssa and three nominated by THL, then proceeded to constitute an ad-hoc committee in terms of Article 89 of the company’s Memos and Articles and tasked it with identifying and recommending to the board suitable directors. The same committee was tasked with identifying a group chief operating officer. The RBZ as well as Nssa were aware of the existence of the ad-hoc committee from its inception,” Vingirai said.
“It would not be proper to challenge the validity of the committee on the basis of what one views as an unfavourable outcome. On the recommendations of the committee, the board has so far appointed three independent directors to the board after they were successfully vetted and approved by the RBZ. This is not a process that could have been rushed as it is necessary to bring on board people of the right calibre who can pass the various RBZ tests and are capable of adding value to the group.”
Turning to the contentious appointment of Manyika, which Mangudya said was illegal, Vingirai said Section 20 of the amended Banking Act only provides for five principal officers — CEO, chief accounting officer, company secretary, internal auditor and compliance officer — who must be employed only with prior approval of the RBZ.
“It is self-evident that there is no requirement to seek approval from the RBZ for non-prescribed positions,” he said.
On the capital adequacy of the group after Mangudya warned that ZBFH’s capital adequacy levels could be compromised after a process to merge the group’s flagship commercial bank and its mortgage lender, ZB Building Society, stalled, Vingirai said there was no resolution on how to meet the central bank’s capital thresholds.
In his letter to Mutandagayi, Mangudya had said the new strategic decision taken by the group would require additional capital of US$108 million and as a result the entities will be undercapitalised, risking failure to achieve the regulatory capital levels by 2020.
“The RBZ must allow due process to take place. In any event, it is my view that it would not be proper for the RBZ to issue a corrective order now, four years ahead of the deadline,” Vingirai said.
“With due respect and in my opinion, the order is based on incorrect information. I can therefore, only recommend that the RBZ rescinds its corrective order until such a time that is has gathered more relevant information concerning the alleged violations which violations should be specifically communicated to the affected parties in order to enable them to respond more comprehensively.
“I would also want to draw your attention to the fact that Transnational has not interfered with the running of ZBFH as a shareholder. Transnational is a competent operator of financial services businesses. To the contrary it is Nssa who have continuously issued directives to the company and interfered with the workings of ZBFH board. It is therefore sinister that the RBZ attack is directed at Transnational and not Nssa.”
Vingirai also attacked Mangudya on how he had handled the matter, creating an explosive crisis.
“Having dealt with all the points you raise Mr Governor, I would like to express my dismay at the manner you have dealt with the resolution of the longstanding dispute between Intermarket, Transnational shareholders of the Intermarket Group in 2006 are the cause of the problem. The RBZ is therefore too heavily conflicted to be arbiter in this matter,” Vingirai said.