PURPOSE Asset Management has accused the National Social Security Authority (Nssa) of fraudulently investing in the defunct ReNaissance Merchant Bank (RMB) with the intention of asset-stripping the beleaguered institution, the Zimbabwe Independent can report.
Through a High Court application, Purpose, which was a client of RMB, says Nssa invested in the bank so as to acquire its shares in Africa First Renaissance Corporation Limited, now known as First Mutual Holdings Limited. It says Nssa disinvested and shut down the first respondent, Capital Bank Corporation — then known as ReNaissance Merchant Bank — before proceeding to set up its own banking institution, the National Building Society (NBS).
Nssa and Capital Bank shareholders and directors are also cited as respondents in the application where Purpose seeks to recover US$1,39 million owed to it by Capital Bank, with interest. The company also wants the court to declare that Nssa as well as Capital Bank shareholders and directors are jointly and severally liable to the company for the debt. It also wants the parties to pay costs of the suit.
High Court judge Justice Clement Phiri postponed the matter to July 31 2019 after it was set down on Tuesday with Tendai Biti representing Purpose and Tawanda Zhuwarara representing Nssa.
The asset management company, which is accusing Nssa of corporate cannibalism, was owed US$4,451 million by RMB at the time of its closure.
RMB was placed under the management of a curator, Reggie Saruchera of Grant Thornton, by the Reserve Bank of Zimbabwe (RBZ) in June 2011 after it booted out RMB chief executive officer Patterson Timba.
Nssa then injected US$24 million for 84% shareholding in the bank in 2011. However, in October 2013, Nssa advised Capital Bank, through a meeting of shareholders, that it would no longer inject fresh capital into Capital Bank.
The bank, which had been taken off curatorship in 2012, shut down in 2013, as a result of the pull-out.
This was despite its word that it would adequately capitalise Capital Bank to ensure its survival in the aftermath of the curatorship, according to the application by Purpose’s executive director’s founding affidavit.
“It will thus be contended that Nssa acted cynically and with impunity, in using Capital Bank as a conduit of selfish aggrandisement to the prejudice of creditors such as ourselves as well as employees and other interested parties.
“In the case of Nssa, apart from recklessness, it is contended that the same, conducted Capital Bank Corporation Limited (Renaissance Merchant Bank)’s business with intent to defraud persons such as ourselves and to asset-strip the bank which it in fact did,” the application reads.
“Further, in as far as Nssa is concerned, it has used its position as shareholder of Capital Bank to enrich itself by a) not allowing Capital Bank to issue a rights offer to capitalise itself; b) not following up on the rights offer issued by Africa Renaissance.
“In addition, insofar as Nssa is concerned, once it had acquired shares in Africa Renaissance, it took the decision of not investing in Capital Bank, but instead went on to establish its own bank, the National Building Society. It is common cause that the previous shareholders of RMB and Renaissance Financial Holdings Ltd (RFHL) and other related parties owed the bank about US$17, 9 million. As a result of this, and many other factors, the bank was placed under recuperative curatorship. It was during this time, that Nssa entered into an agreement with the curator to purchase shares from the same.
“It is our humble contention that Nssa ought to have entered an agreement with the shareholders and not with the curator we contend that the curator had no powers to dispose of any shares that did not belong to him and, therefore, Nssa bulldozed the situation and created the current mess we find ourselves in.”
The asset management company said as part of its exit strategy, Nssa reduced its exposure in Capital Bank by buying gold and statutory reserve bonds from the bank which had been used as security to their deposit. The company said Nssa did so while aware it intended to exit the from the bank on October 17, 2013.
“We also need to place on record that the bank had taken an initiative to identify new investors on its own since resumption of operations. For instance, when the bank was exploring the Microfinance Banking Model, it met a Kenyan Bank that indicated interest to partner with Nssa in Capital Bank. A non-disclosure agreement was even signed to exchange information,” the application read. “However, when the bank through its managing director presented this to the Nssa management, he was told that Nssa wanted 100% shareholding in the bank and therefore was not interested in partnering anyone.
“In addition, once Nssa had shut down the bank recklessly, as pointed out, it proceeded to set up its own bank, NBS in respect of which it was capitalised to the tune of US$45 million. Had the US$45 million been pumped into Capital Bank, then the bank would still be operational to date and it would not have been paid off.”