ZETDC, CAFCA executives face jail

Source: ZETDC, CAFCA executives face jail | The Financial Gazette  May 25, 2017

By Phillimon Mhlanga, Business Reporter

AN executive with the Competition and Tariff Commission (CTC) has indicated that Zimbabwe Electricity Transmission and Distribution Company (ZETDC) and CAFCA managers could face jail if they are found to have violated the Competitions Act.

This emerged after the CTC issued a statement a fortnight ago saying it had launched investigations into a barter trade arrangement between ZETDC and CAFCA, which it believed undermined competition.
ZETDC, a power transmission and distribution unit of ZESA Holdings and cable manufacturer CAFCA, are alleged to have violated the Competitions Act by engaging in restrictive measures.

The agreement, which initially was signed in 2013 and renewed two years ago, entails CAFCA supplying ZETDC with aluminium electricity conductors in exchange for copper scrap.

Under this agreement, ZETDC is barred from procuring electricity conductors from any other company.
Senior CTC economist, Calistar Dzenga, told the Financial Gazette’s Companies & Markets that if management is found liable by the current probe, they could be sent to jail for up to two years.
“Their (ZETDC and CAFCA) case is being investigated under charge level 12. If found liable, a cease and desist order will be issued and (the company) will be penalised. If management is found liable, they will go to jail for up to two years,” Dzenga said.
Dzenga also indicated that there was an option of fine.

In its public statement, CTC said: “Pursuant to Section 28 (2) of the Competition Act (Chapter 14:28), the Competition and Tariff Commission has commenced an investigation into an alleged restrictive practice as defined in Section 2 of the Act.”

“The ZETDC and CAFCA have a barter trade agreement where ZETDC is supplied with aluminium electricity conductors by CAFCA in exchange for ZETDC copper scrap. It is alleged that owing to the barter trade arrangement no other company can supply ZETDC with aluminium conductors thereby restricting competition in the market of distribution of aluminium electricity conductors.”

It added: “Prima facie, the agreement between ZETDC and CAFCA may constitute a restrictive practice in terms of the Act with the effect that it may restrict the entry of other aluminium electricity conductor suppliers into the market of distribution of aluminium electricity conductors. The Commission will, in accordance with the provisions of Section 28 of the Act, conduct an investigation into the barter trade (between the two companies) to determine whether the agreement restricts competition directly or indirectly to a material degree.”

The barter deal is understood to be contributing more than 30 percent of CAFCA’s sales, meaning that it would be a huge blow for the cable and allied products manufacturing company if it is terminated.
CAFCA’s managing director, Rob Webster, recently said an average of 150 tonnes of copper gave the company about US$788 500 a month under the deal with ZETDC.

The company invested about US$2,5 million in seed aluminium. CAFCA said it also significantly reduced its overheads by cutting out its import bill as it was no longer importing any copper, taking advantage of recycled copper from ZETDC.

At the end of 2014, ZETDC had saved around US$26,4 million through the deal.
CTC has since called on interested stakeholders and the general public to submit their concerns by the end of this month.

Restrictive practices refer to anti-competitive agreements and other concerted action and unilateral conduct of an abusive nature.

The CTC regards restrictive measures as contrary to the public interest if it is engaged in by a person with substantial market control over the commodity or service to which the practise relates.
In its financial results for the year to December 31, 2015, ZETDC said it had narrowed its loss to US$111,5 million from US$118,3 million recorded in the previous year.

Its current liabilities exceeded its current assets by US$781,4 million during the period under review, compared to US$727 million recorded in the prior year.

ZETDC failed to service its loans amounting to US$115,5 million, which were due and payable.
Established in 1947, CAFCA is part of African Cables incorporated in South Africa, which in turn is owned by Reunert Limited.

CAFCA is listed on the Zimbabwe Stock Exchange, which holds the company’s primary listing.
But its shares are also traded on the Johannesburg Securities Exchange as well as the London stock market.

During the year to September 30, 2016, CAFCA reported a profit of US$418 604 compared to US$1,8 million reported in prior year.

Revenue went down to US$18,1 million during the period under review, from US$29,3 million recorded in 2015.