Source: Hwange corruption scandal erupts – The Zimbabwe Independent July 6, 2018
SHAREHOLDERS of Hwange Colliery Company Limited have blocked moves by Mines minister Winston Chitando to unilaterally dissolve the coal miner’s board midway through a massive corruption investigation involving senior management at the firm.
By Andrew Kunambura
Chitando announced two weeks ago that he had nominated new board members and was taking necessary steps to get them appointed. However, the move was thwarted at an extraordinary general meeting last Friday, where shareholders resolved that the current board chaired by Juliana Muskwe must continue until at least the completion of the investigation.
The shareholders accused Chitando of making unilateral decisions as he had not consulted them when he announced the composition of the thwarted board, which was to be chaired by former Metallon Gold chief executive officer Alan Mashingaidze.
Key shareholder, British tycoon Nicholas Van Hoogstraten, confirmed he was opposed to Chitando’s manoeuvres.
Van Hoogstraten, who flew into the country from his base in London on Monday this week, told the Zimbabwe Independent that he is opposed the controversial dismissal of the Hwange board by Chitando, the government’s representative. Government has 36,7%, while Van Hoostraten has 27% shareholding. Van Hoogstraten confirmed he was not consulted when Chitando came up with the new board appointments.
“I am not aware of any motion for proposed new board appointments. I have not been consulted in respect of any proposal to sack the serving board,” said Van Hoogstraten.
The British businessman said he preferred that the board be allowed to conclude its corruption investigation, which has so far seen four senior managers at the company being suspended, including the managing director Thomas Makore.
“I am unaware of the reason for urgency in trying to remove the serving board nor, without good reasons, would I support such a move. I certainly see no reason, at this stage, to fire the serving board especially as they are aware of managerial corruption and their input would be useful,” he said.
“I would add that, on my last visits to Zimbabwe, I had at least two long meetings with the entire board. Obviously, a genuine forensic audit needs to be carried out at Hwange and this must be done by unconflicted professionals — if such is possible in Zimbabwe. It should not be under the ‘control’ of the very same parties or interests that have been responsible for the destruction of Hwange.”
“Serious corruption and incompetence at senior management level has been endemic at Hwange for many years and I am on record as having been outspoken on such issues several times over the past 12-15 years. I withdrew my own appointed directors a couple of years or so back, as events went from bad to worse. I have knowledge of several serious longstanding and continuing frauds at Hwange and have raised these matters several times at my meetings with the board and with ministers, all to no avail.”
Chitando evaded questions when contacted by the Independent this week, saying he was too busy to respond. “I am busy at the moment. I will return your call when I have settled,” he said, but neither called back nor answered subsequent calls.
Muskwe expressed concern about the manner in which her board was being treated by the minister. “What we fear is that if a new board comes in, it may not be able to carry out the job which we are doing. Our internal audits have been completed and we have recommended a forensic audit,” she said.
Hwange workers’ representative committee chairman Deliverance Nyoni said the company’s employees strongly disputed Chitando’s moves and adamantly stood in support of the current board.
“We are happy with the current board. Remember we are also shareholders in relation to the employee share ownership scheme. The current board has stabilised the company by unearthing corrupt activities which should be complemented by a forensic audit,” said Nyoni.
“The issue of the nominated board members could not be discussed, as some shareholders were not aware of the motion,” he added.
This also comes amid revelations of bad blood between Chitando and the Muskwe-led board.
In a report to shareholders which was seen by the Independent this week, the board accuses Chitando of interfering with investigations into allegations of a systematic looting spree at Hwange by the company’s top management.
The board had recommended a forensic audit into the coal miner’s financial books, but Chitando blocked it and went on to announce his decision to dissolve it. In the report, the board openly accused Chitando of interfering with its work.
This also comes after the board suspended four top managers in connection to the corruption allegations. The suspension was meant to pave way for a comprehensive investigation into the allegations, after which the board decided to hire a professional audit firm in order to assist in the inquiry and advise them on the way forward.
Makore resigned in the middle of the probe.
“Following the departure of the former managing director (Makore), the board undertook an assessment of the true state of affairs of the company and a number of misdemeanours were discovered. The board met with the workers, management and the community representatives to understand these key stakeholders’ perspective.
“These stakeholders made their respective representation before the board. Having considered the representations by the workers, management and the community representatives, mainly the employees’ spouses, the board resolved to cause a proper forensic audit in order to understand the extent of damage or prejudice to the company, if any,” reads the report in our possession.
“In order to facilitate the forensic audit, the board resolved to place some key managers on compulsory leave. After the investigations, the board was then going to make informed decisions. Since this decision, the minister of Mines and Mining Development has been giving directives to the board, which amounted to interference with the due process the board had sought out to do.”
Chitando is also accused of going to the extent of phoning board members and threatening them in a bid to protect Makore and his cohorts.
“The board’s resolution to cause a forensic audit has caused discomfort within management. This has seen some elements within management seeking political support to dilute, diffuse or threaten the board in order to protect them. Unfortunately, the minister of Mines and Mining Development has been getting updates on internal developments which he is then using to direct the board to do or not do certain actions,” the report says.
“Ordinarily and normally, the board must interface with the Minister of Mines as the major shareholder’s representative. In the present case, what is happening is that the minister is even calling operatives such as the acting managing director and giving instructions. This, the acting managing director, confirmed to the board chairperson . . . Juliana Muskwe. This has caused confusion, as it now appears as the board has become stagnant and getting ‘ministerial directives’ from subjects of the board itself. The board simply need the legroom to make decisions which take the strategic national asset (Hwange Colliery) out of the challenges.”
“The board considers it prudent for the company to be allowed to regulate its own processes without interference aimed at protecting certain individuals. The minister is a shareholder representative and the board is subservient to the minister and supportive of the minister. What the board is doing is enhancing the minister’s work and elements of management reaching out to the minister seeking protection are interested in personal interests only as opposed to the global corporate interests,” the board said in the report.
The report also raised a red flag over some questionable decisions and business deals which were made by Makore’s management, which could have seen the company losing millions of dollars. In its investigations, the board realised that three senior managers were working without contracts.
“The executives were working without contracts. This led to unaccounted allowances and benefits being enjoyed without a basis. It was after the departure of the former managing director (Makore) that the top three executives sought the board’s blessing to execute their contracts. Working without proper terms of employment placed the company at risk of financial prejudice as payments and allowances to the executives would be a matter of discretion among themselves. Without contracts, the board did not know the exact earnings of each executive.”
The board also discovered rampant nepotism at the company, whereby alleged friends and relatives of Chitando got unmerited jobs at HCCL.
“The employment of cronies is a cause of concern and was raised by the employees’ representatives at the Works’ Council. Retrenchment was targeted and used to create positions for cronies who would serve the interests of the executives without questions. An example is the five senior employees hired in the finance department, all of whom are ex-Zimasco employees. They were employed at a much higher cost than their predecessors in the same positions,” the report says.
The board also discovered a financial anomaly, whereby Makore and five of his alleged cronies accorded themselves cash advances amounting US$350 000, with the former managing director getting a cool US$150 000, which has not be repaid to date. The board further reported that at least US$6 million could have been lost through obscure payments ostensibly to suppliers as recently as last month.
However, most of the supposed suppliers did not deliver the goods.
“The company made pre-payments to suppliers for goods and services which amount to US$6 million as at the end of May 2018. The paid suppliers have either partially supplied or are still to supply their prepaid orders, leaving the company at risk of loss in the event of non-performance as some amounts are over a year old. The board considers this a matter for its urgent attention and capable of resolution by the board,” the report reads.
Although Muskwe confirmed that they conducted the investigations which culminated in the report, she would not shed more light.