via Liquidity crunch hits ‘bling kings’ – DailyNews Live by Ivan Zhakata and Lloyd Mbiba 1 JUNE 2014
Although Zimbabwean savers of all descriptions, from individuals and small businesses to corporations and institutions, have suffered in the ongoing liquidity crunch, the effect is seen most starkly among Harare’s high-spending “floss kings” being arraigned before the courts for fraud.
Middle-class entrepreneurs have been devastated by the crisis, and more and more tycoons are falling foul with the law.
On Thursday, Genius Kadungure, the “tycoon” famed for throwing all-white parties, was finally freed on bail by the High Court after it upheld an earlier ruling by a Harare magistrate.
The formerly high-flying tycoon is fighting R1,5 million fraud charges in court.
Since his incarceration last week on Thursday, the businessman and socialite was defiant, blaming a cabal of powerful bureaucrats and figures for creating the mood of resentment that led to his arrest in the fraud case.
Kadungure spent the long Africa Day holiday in a grimy cell in Harare.
Amid the murk, prosecutor Michael Reza said he defrauded two businessmen and a Zanu PF activist by misrepresenting as an agent for a local diamond company.
The businessman, who runs a gas company with branches in Botswana, South Africa and Zimbabwe, was arrested last week on Thursday on suspicion of embezzlement.
He maintains his innocence. He is not the only Zimbabwean tycoon who has run into trouble.
Flashy musician and businessman, Energy Mutodi, is also fighting graft allegations in court for allegedly swindling home seekers.
The Chigorodanda singer allegedly swindled Harare home seekers of $588 787 after luring over 16 000 civil servants to join and contribute to his housing trust.
Deduction orders were given to the Salary Services Bureau (SSB) to subtract certain amounts of money on a monthly basis from civil servants who had joined the trust.
At least $588 787 was paid in by the complainants and Mutodi, contrary to his promises, allegedly withdrew all the money and converted it to his own use.
Signs indicate conditions are deteriorating in the maintenance and investment of the businessman’s vast wealth — and while this development may gladden some people, it is an ominous sign for upcoming entrepreneurs.
At the dizzy peak of his fame, Kadungure craved every watt of limelight on offer, hosting all-white parties and flying in guests for specially-themed parties.
His lavish $17 000 all-white birthday party in one of Harare’s affluent suburbs, Greystone Park, remains a major talking point.
The birthday celebrations lasted three days, with the first day as an all-white party, second day being a family-only affair and finally swimming party on the last day.
Calling himself the “king of bling”, he flaunted his wealth.
He pulled corporate manoeuvres with — at least to the old guard — a shocking style guaranteed to ruffle feathers.
Economists say the liquidity crunch has hardly touched Zimbabwe’s super-rich, including politicians: thanks to the intricate structure of holdings registered in Pacific and Caribbean tax havens and ingenious schemes of share distribution.
Instead, it’s small and medium-sized businesses that were most often caught out.
George Nyama, 52, owner of a Harare-based goods shop, says his business has not been doing well since last year.
“We were thinking of selling our business because it barely paid its way, and we have been running at a loss for the last year,” he said.
Alexander Mutero, 40, managing director of a transport company, says most of his employees — operational staff, logistics specialists and accountants — will probably be fired, or have to take deep pay cuts.
“The company is still operating, but we have no capital left,” he told the Daily News on Sunday. “Shock, horror and depression prevail.”
The other emotion, naturally, is anger — that the authorities could ignore such a crisis in a way that businesspeople would hardly expect of the ruling regime.
“The liquidity crunch is killing business, and many are resorting to illegal activities,” Mutero said. “To put it simply, this is failure, gentlemen.”
The economy has for the past decade depended on small businesses and upcoming tycoons in the wake of de-industrialisation.
It was well-heeled tycoons “flossing”, as it were.
These businesses have underpinned the southern African nation’s economy. But now all that is under threat as the country faces up to potentially decades of austerity and economic pain.
The small time businessmen are now feeliing the pinch, as money becomes scarce.
Economic expert Eric Bloch told the Daily News on Sunday that the rising cases of fraud are committed by people who are not satisfied with their wealth.
“There is widespread corruption in Zimbabwe especially with high levels in government and parastatals, and it has been observed that many others are emulating that in order to make themselves rich,” Bloch said.
“In the process they are contributing to the destruction of the economy.”