News / National
Zimbabwe Defence ministry, Chinese at loggerheads
08 Jan 2016 at 01:52hrs | Views
A rift has developed between the Ministry of Defence ministry and a Chinese investor over a multi-million dollar shopping mall after the army unilaterally used the property as collateral to secure a US15,8 million loan on behalf of a local communications service firm, the Zimbabwe Independent has learnt.
Information at hand shows that the Chinese investors, co-owners in Long Cheng Plaza, located in the capital, are unhappy with government's decision to act as a guarantor for Africom, which got a loan from the African Export-Import Bank three years ago.
Afrexim Bank is a pan-African multilateral financial institution devoted to financing and promoting intra and extra-African trade.
The Defence ministry, through its investment arm, Fernhaven Investments, has shares in Africom. The National Social Security Authority (Nssa), which also has shares in Africom, guaranteed the loan in 2013, thereby exposing public funds.
Africom has, however, failed to service the loan, exposing Nssa to the tune of $15,8 million, while also putting at risk the mall built by the Chinese.
Longcheng Plaza Mall, built on wetland in Belvedere, Harare, started operating in December 2013. The mall was constructed by a Chinese company, Anhui Foreign Economic Construction Corporation (Afecc), at an estimated cost of about US$200 million.
Sources close to the deal told the Independent this week that the Chinese were not happy the mall was used as collateral on a mortgage without their consent.
Afecc did not benefit from the US$15,8 million deal. "What happened is that the Chinese had money to buy the wetland while the army used its influence to convince Local Government ministry to sell the land, ending up in partnership in which the army gained shares," the source said.
"However, the Chinese are not happy the mall was used as collateral for Nssa without their acknowledgement."
The Chinese are, however, negotiating to buyout the army's shareholding in the property following the fallout. However, the army is trying to convince Nssa to release the mortgage bond, so that the title deeds are registered in the name of Afecc.
Details of the deal are also contained in an audit report compiled by international audit firm Deloitte, seen by the Independent.
According to the report, Afrexim Bank extended a US$15,8 million loan to Africom in 2013, which Nssa guaranteed. Essentially, Nssa agreed to assume Africom's loan in the event that it failed to perform.
Nssa, whose investment interests span banking and finance, equities, property and infrastructure, holds an unquantifed amount of shares in Africom.
The audit report shows that on September 21, 2015, Nssa received a letter of demand for the US$15,8 million from International law firm Baker & McKenzie on behalf of Afrexim, indicating that Africom was failing to service the loan.
Nssa guaranteed the loan after a meeting with the Office of the President and Cabinet, which pressured the authority to support the transaction.
The approval was signed by former Public Service minister Nicholas Goche on December 4, 2013.
"Interim Board at a meeting held on November 7, 2013 resolved that Nssa guarantees the Africom Holdings debt to the extent of its shareholding only, which was 4,3%," reads the report.
The report also says the Defence ministry registered a mortgage bond on Longchen Plaza Mall in favour of Nssa.
Nssa wanted collateral in case Africom and Fernhaven Investments fail to pay the US$15,8 million to Afrexim Bank.
On September 23, 2015, Nssa received another letter from legal practitioners Chihambakwe, Mutizwa and partners, highlighting the demands of Afrexim Bank, which had a deadline of October 2, 2015. According to the report, there was no response from Nssa.
The report says: "Meeting between Afrexim guarantors and Africom held on September 30, 2015, resolved that Africom lawyers draft a response to Africom and circulate it to guarantors for review before forwarding to Scanlen and Holderness legal practitioners for drafting the actual letter to Afrexim Bank."
Nssa board chairman Robin Vela said the social security agency was negotiating with Zimbabwe Asset Management Corporation (Zamco) to absorb the US$15,8 million loan.
Information at hand shows that the Chinese investors, co-owners in Long Cheng Plaza, located in the capital, are unhappy with government's decision to act as a guarantor for Africom, which got a loan from the African Export-Import Bank three years ago.
Afrexim Bank is a pan-African multilateral financial institution devoted to financing and promoting intra and extra-African trade.
The Defence ministry, through its investment arm, Fernhaven Investments, has shares in Africom. The National Social Security Authority (Nssa), which also has shares in Africom, guaranteed the loan in 2013, thereby exposing public funds.
Africom has, however, failed to service the loan, exposing Nssa to the tune of $15,8 million, while also putting at risk the mall built by the Chinese.
Longcheng Plaza Mall, built on wetland in Belvedere, Harare, started operating in December 2013. The mall was constructed by a Chinese company, Anhui Foreign Economic Construction Corporation (Afecc), at an estimated cost of about US$200 million.
Sources close to the deal told the Independent this week that the Chinese were not happy the mall was used as collateral on a mortgage without their consent.
Afecc did not benefit from the US$15,8 million deal. "What happened is that the Chinese had money to buy the wetland while the army used its influence to convince Local Government ministry to sell the land, ending up in partnership in which the army gained shares," the source said.
"However, the Chinese are not happy the mall was used as collateral for Nssa without their acknowledgement."
The Chinese are, however, negotiating to buyout the army's shareholding in the property following the fallout. However, the army is trying to convince Nssa to release the mortgage bond, so that the title deeds are registered in the name of Afecc.
Details of the deal are also contained in an audit report compiled by international audit firm Deloitte, seen by the Independent.
According to the report, Afrexim Bank extended a US$15,8 million loan to Africom in 2013, which Nssa guaranteed. Essentially, Nssa agreed to assume Africom's loan in the event that it failed to perform.
Nssa, whose investment interests span banking and finance, equities, property and infrastructure, holds an unquantifed amount of shares in Africom.
The audit report shows that on September 21, 2015, Nssa received a letter of demand for the US$15,8 million from International law firm Baker & McKenzie on behalf of Afrexim, indicating that Africom was failing to service the loan.
Nssa guaranteed the loan after a meeting with the Office of the President and Cabinet, which pressured the authority to support the transaction.
The approval was signed by former Public Service minister Nicholas Goche on December 4, 2013.
"Interim Board at a meeting held on November 7, 2013 resolved that Nssa guarantees the Africom Holdings debt to the extent of its shareholding only, which was 4,3%," reads the report.
The report also says the Defence ministry registered a mortgage bond on Longchen Plaza Mall in favour of Nssa.
Nssa wanted collateral in case Africom and Fernhaven Investments fail to pay the US$15,8 million to Afrexim Bank.
On September 23, 2015, Nssa received another letter from legal practitioners Chihambakwe, Mutizwa and partners, highlighting the demands of Afrexim Bank, which had a deadline of October 2, 2015. According to the report, there was no response from Nssa.
The report says: "Meeting between Afrexim guarantors and Africom held on September 30, 2015, resolved that Africom lawyers draft a response to Africom and circulate it to guarantors for review before forwarding to Scanlen and Holderness legal practitioners for drafting the actual letter to Afrexim Bank."
Nssa board chairman Robin Vela said the social security agency was negotiating with Zimbabwe Asset Management Corporation (Zamco) to absorb the US$15,8 million loan.
Source - Zim Ind
