Source: Telecel take-over complex – The Zimbabwe Independent April 29, 2016
GOVERNMENT’S move to have full control of the country’s third largest mobile phone operator, Telecel Zimbabwe, is likely to be problematic due to controversy surrounding the shareholding structure of the company’s minority shareholder, Empowerment Corporation (EC) which has a 40% stake in the company.
Government, through state-owned entity Zarnet, acquired a 60% stake of the company in February after state-run pension scheme National Social Security Authority (Nssa) paid US$30 million to the Netherlands-headquartered telecommunications giant, VimpelCom, which had a majority stake.
Following the acquisition, the Zimbabwe Wealth Creation and Economic Empowerment Council, which owns Empowerment Corporation (EC), wrote to Nssa, the Ministry of Information Communication Technology, Postal and Courier Services (ICT) as well as to Telecel’s Zimbabwe lawyers raising concerns over on-going takeover negotiations between EC and Nssa.
Correspondence seen by the Zimbabwe Independent reveals the Zimbabwe Wealth Creation and Economic Empowerment Council believes the proposed deal is illegal.
In a letter dated April 22, the EC chairman Silas Hungwe,who died this week, wrote: “We did not instruct you (Scanlen and Holderness lawyers) to transact, negotiate or engage in any form of dealing with our shares in Telecel Zimbabwe.
“So handling any form of business with Telecel Zimbabwe and Empowerment corporation share purchase scheme to Nssa, without our consent is fraudulent, illegal, null and void.”
Hungwe also gave the background to the formation of EC as well as the shareholding structure of the consortium.
Lately EC has been dogged by wrangles with regards to the ownership of shares as various individuals and companies claim to have interest in the consortium.
“The following are organisations and their respective shares at inception, Zimbabwe Farmers Union (9%), Affirmative Action Group AAG (9%), Zimbabwe National Liberation War Veterans Association (ZNLWVA) (9%), Indigenous Business Women’s Organisation (IBWO) (9%), National Miners Association (9%), Integrated Engineering Group (10%), Kestrel Corporation (15%) and Warehouse (30%).”
EC has previously had problems with shareholders disposing their stake without consulting the board. Documents seen by this paper also show that at inception EC was the majority shareholder with a 60% stake, while Telecel international held 40%.
“EC had 60% stake in Telecel and the 20% stake was sold to Telecel international and the transaction was not done in consultation with other council members,” reads part of the document.
Acting EC chairperson Leo Mugabe said the consortium was still the biggest shareholder in Telecel. He argued that the 20% stake sold to Telecel International was unprocedural and therefore illegal.
“Therefore, whoever is negotiating the sale of EC shares is doing so fraudulently because EC has not been consulted,” said Mugabe.
“We have a lot of issues which need to be resolved before we talk of selling those shares. We have to finalise the issue of the stolen 20% sold by (former EC chairperson James) Makamba so it is wrong for government to say it now owns 60% in Telecel,” he said.
Documents indicate that at some stage, EC tried to sell its shares to local investment and advisory firm Brainworks Capital Management (Pvt) Ltd before the transaction was aborted due to the opaqueness in the consortium’s shareholding.
“Brainworks offered to buy the empowerment corporation at the cost of US$20 million and this was unanimously accepted by the members,” reads the document.
However, controversies surrounding the share ownership structure resulted in Brainworks pulling out of the deal. The same problems have surfaced as government tries to acquire the remaining 40% stake.
Last week ICT minister Supa Mandiwanzira said there was confusion over the 40% stake owned by EC.
“We have heard different people claiming they have shares in Telecel through Empowerment Corporation and these include the war veterans, Zimbabwe Farmers Union, Small Scale Miners Association and even Leo Mugabe,” he said.
“Government will look into the real owners of the shares, whether they paid for the shares and how much they have extracted from those shares.
“Actually, government wants to own 100% of the shares in Telecel. We want to acertain how much money they deserve if there is anything to be paid for.”