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Mystery over Zimbabwe army deal?

by Staff reporter
11 Jul 2021 at 20:43hrs | Views
MYSTERY over President Emmerson Mnangagwa's adviser and shadowy businessman Kudakwashe Tagwirei's murky purchase of the Zimbabwe Defence Forces (ZDF) partly-owned Pen East Mining's stake in platinum miner Great Dyke Investments (GDI) deepened this week after the military officially distanced itself from the deal.

Tagwirei's vast business empire was exposed recently through various leaks of revealing documents following a nasty fallout among its executives.

The tycoon's Landela Mining Ventures paid US$21.5 million for a stake in GDI. There were also further mysterious payments, which include US$220 million and ZW$300 million.

The stakes were too high.

Investigations this week show the deal was brokered by the late Foreign Affairs and International Trade minister Sibusiso Moyo who fronted army companies.

The money from the deal was then shared between Moyo, a retired Lieutenant-General, and two top army commanders, one retired and another still serving who worked closely with Moyo as the core of army commercialisation activities.

This raised refresh questions over the army's labyrinths of shadowy company structures and their ultimate beneficial owners.

The Zimbabwean military, which has a web of shady companies and shelves entities, is murky, although it handles millions.

There is usually no transparency and accountability in the military's corporate ventures, which presents fertile ground for corruption.

Apart from creating conditions for corruption, commercialisation of the army poses a political and security threat.
GDI was initially a joint venture between Russian firm Afromet and Pen East Mining, jointly owned by the military's Old Stone Investments and  the state-owned Zimbabwe Mining Development Corporation (ZMDC), according to parliamentary records, before Tagwirei bought Pen East's 50% stake.

Although ZMDC chair Peter Chimbodza in 2018 told the parliamentary portfolio committee on Mines that Pen East's 50% stake in GDI was composed of 30% owned by ZDF's Old Stone and 20% by ZMDC, the ZDF told The NewsHawks they were not aware of the company or deal.

The army spokesman said he did not know who Pen East is, let alone that it is linked to the ZDF.

According to an explosive investigative report by The Sentry which unravelled Tagwirei's vast network of business relationships with state institutions such as the army and ministers, the payment was a shareholder loan to match the money already invested by the other 50% shareholder, Afromet, a subsidiary of Vi Holdings, a Russian industrial conglomerate.

"In addition to that US$21.5 million payment from the parent company, Landela Mining Ventures, to the subsidiary, GDI, correspondence reviewed by The Sentry indicates that Tagwirei made a payment to GDI's former 50% shareholder, Pen East Mining, a company controlled and owned, at least in part, by Zimbabwe's military. Different documents indicate a range of potential payments made by Tagwirei to Pen East in 2019: from ZW$46 million, to ZW$300 million, to US$11 million, or possibly even as much as US$220 million — and this is on top of the US$21.5 million paid to GDI," the report says.

Asked about Pen East and who took the funds, ZDF director Colonel Teddy Ndlovu said: "That information, I do not have. I do not know how I can assist. I do not know the company you are talking about."

Ndlovu referred further questions to the ZDF's director-general in charge of policy, public relations and international affairs, Brigadier-General Augustine Chipwere, who referred questions back to Ndlovu.

There was no information and clarity over the issue.

Internal communications reviewed by The Sentry show that GDI has a gross asset value "well in excess" of US$600 million.

"In March 2020, the two shareholders of GDI each sold 2.2% of the company to Fossil Mines, owned by Tagwirei's reported frequent business partner Obey Chimuka. The US$30 million paid for that 4.4% stake implies a valuation of about US$680 million for GDI. Projected revenues and lifetime earnings before tax, interest, depreciation, and amortisation run into the billions, according to financial projections presented to a potential funder," the report says.

Tagwirei, one of the biggest beneficiaries of the 2017 coup that toppled long-time leader Robert Mugabe, clinched the deal months after the Kgalema Motlanthe commission of inquiry into the 30 July 2018 election and subsequent killing of six civilians in central Harare by marauding soldiers.

Tagwirei bought a stake in GDI after the involvement of the army in the company spooked potential lenders, needed for capital investments to commence mining.

Three-way correspondence between Pen-East, Tagwirei and the Russians revealed how they grappled with the replacement of one controversial partner with another, the report notes.

"While documents and statements show that Zimbabwe's military certainly played a significant role in Pen East, many of the transactions and agreements underpinning its involvement in the mining sector have not been subject to public scrutiny. Correspondence reviewed by The Sentry shows that senior military officials were involved in, or informed about, negotiations for the sale of Pen East Mining's share of Great Dyke Investments," says The Sentry in its report titled Shadows Shell Games.

How GDI was formed

In 2006, retired Colonel Tshinga Dube, who was then head of Zimbabwe Defence Industries, set up a joint venture, Ruschrome Mining, with the help of a Russian cooperation, Russian Centre For Business Cooperation.

The signing of the agreement was witnessed by the ZDF's legal director and the Russian Embassy's defence adviser.

The company would subsequently inherit a Zimplats claim surrendered in 2006 as part of the government's indigenisation programme, although it is not clear whether the army paid anything for the claims.

"Reporting by Russian business newspaper Kommersant and the Zimbabwe Independent suggests that the platinum deal took place in the context of wider negotiations between Zimbabwe and Russia about the purchase of military helicopters or fighter jets. Kommersant named the chairman of Ruschrome's board as Martin Rushwaya, a relative of Mnangagwa and the long-serving permanent secretary of the Ministry of Defence (MOD)," The Sentry says.

Rushwaya now works in the Office of President and Cabinet as deputy secretary for administration.

In 2014, Ruschrome Mining changed its name to Great Dyke Investments and later the Russian joint venture partner changed to Vi Holding, operating through Russian subsidiary Afromet.

The 2019 sale of Pen East Mining's share of GDI was negotiated between Tagwirei's lawyer, Norman Chimuka, while Pen East Mining was represented by Colonel Siwinile Tauya.

According to records reviewed by The Sentry, Tauya, an army officer, is the company secretary of the Zimbabwe Defence Industries.

At critical moments of the negotiations, several emails were copied to Tagwirei,  Moyo, Major-General Chris Mupande and Rushwaya.

Mupande, Rushwaya and Moyo are also listed as directors of Rusununguko Nkululeko Holdings, one of the main holding companies used by the ZDF.  Moyo, who spearheaded military commercialisation, also served as a shareholder and director of other military-owned companies in Zimbabwe.

Furthermore, Moyo, who died early this year due to Covid-19, was the face of the 2017 military coup. He retired from the army on being appointed Foreign Affairs minister after the July 2018 elections.

The late minister became the face of the coup, announcing that Mugabe had been placed under house arrest.

"Although Pen East's two ostensible individual shareholders were civilians, at least one of them is referred to as a nominee by Tagwirei's lawyer in correspondence seen by The Sentry. Rather than these two individual shareholders, it was Rushwaya who signed the agreement transferring Pen East Mining's 50% shareholding in GDI to Landela Mining Ventures, as well as a later addendum to the share purchase agreement," reads the report.

"Once the sale of Pen East's share of GDI was completed, GDI board minutes recorded the resignation of the directors previously appointed by Pen East. One of those directors, Major-General Grey Mashava, is the senior principal director in Vice-President General Chiwenga's office."

Although the ZMDC was supposed to be a shareholder in Pen East, during the negotiations the company would consult top army officials only.

"If ZMDC were the part owner and received its share of the purchase price, then the amount of money paid to the military would have been lower," reads the report.

Investigations show that the sale of Pen East was opaque by design, to avoid scrutiny, and subsequently the shares were bought by Landela Mining Ventures, a Zimbabwean company owned by Sotic International, an offshore firm in Mauritius controlled by Tagwirei.

Landela shareholders are Landela Mining Venture's directors were Jozef Behr, Christopher Fourie, and Obey Chimuka.

"Tagwirei's lawyer, Norman Chimuka, wrote to his client and executives at Sotic International and Sakunda Holdings in February 2020, reminding them that they were due to pay the capital gains tax on the US$220 million sale of Pen East's shareholding in GDI. Norman Chimuka's email was the second of two that he sent on this matter, in November 2019 and February 2020, each referring to the same US$11 million capital gains tax bill derived from a $220 million sale price. Norman Chimuka's November 2019 email also referred to a much lower ZW$46 million payment that his client had made to Pen East Mining, saying that because the exchange rate had moved at the time of payment, the Pen East representatives wanted a further ZW$9 million payment. The purpose of that ZW$46 million payment isn't specified."

The investigation establishes that Fourie questioned the amount for the deal and who had been involved in aspects of the transaction.

Fourie said he was not aware of Tagwirei's activities and payments. He also did not believe the higher figure would have been appropriate.

"… the capital gains tax bill email from Norman Chimuka may have been the product of an attempt by the military to squeeze more money out of the deal. Fourie is cited in one minute of a meeting held on August 27, 2019, as saying he believed the payment for the 50% shareholding was ZW$300 million," further reads the report.

"Whatever the price paid to Pen East, these payments were on top of the US$21.5 million Landela Mining Ventures had paid to GDI. A US$220 million payment to a company controlled by the Zimbabwean military, if that higher figure was indeed paid, would have been large in public finance terms. By comparison, in 2019 Zimbabwe's education budget was $179 million."

The report also raises a red flag on off-budget financing of the military which removed oversight over spending by Parliament and the Auditor-General.

"It would be troubling if a prominent tycoon accused of corruption purchased a mining company from Zimbabwe's military, but there is no conclusive record of the sale price, the ultimate recipient of the payment, or the use of the proceeds from the deal."

Source - NewsHawks
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