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Musarara’s Drotsky Pvt Ltd exonerated?

02 Mar 2020 at 11:01hrs | Views
Grain Milling companies  incurred a legacy debt for wheat exceeding USD70M by end of 2016. This meant that they could no longer get wheat on credit from their traditional suppliers as they failed to meet their payment obligations on account of scarcity of the greenback in Zimbabwe.

Members of Grain Millers Association of Zimbabwe could either fold their hands and pray for a miracle will the nation ran out of Wheat, bread, flour etc, or they could come up with a solution and ensure that the nation does not run out of wheat.

The only solution to salvage the situation was to open another credit facility to ensure continued wheat supplies into the country. And Reserve bank was supposed to play a key role in this finance structuring.

The facility did not provide for cash  to be given to GMAZ nor any local player, no! The facility allowed GMAZ through their bankers to make a payment for wheat using the Reserve Bank forex availed at 1: 1. The misconception doing the rounds is that GMAZ got 26 million cash and used it for other purposes, this is a falsehood. The fact remains, RBZ was only allowing international payments to wheat suppliers, and the Millers were remitting bond notes, because bread was being sold for bond notes and wheat was being bought in US dollars. The same arrangement was given to the fuel sector, medicines and mining.

Drotsky Pvt Ltd
Grain Millers Association is as the name suggests an Association, a grouping of private businesses who are bound by their constitution and their transactions are private in nature.

Drotsky is a member of GMAZ, companies become members of GMAZ not individuals. Drotsky was one of the few GMAZ members that did not have international debts, hence it could negotiate a transaction on behalf of others as well as offer the necessary guarantees and surety.

Let's take into consideration that the 26 Million USD was not released on time neither was it released once, hence the wheat supplier needed guarantees and surety before the ship load of Wheat left for Zimbabwe. Drotsky took the risk on behalf of all GMAZ members who were participating in the transaction.

Drotsky became a consignee for the wheat that was in transit. In a contract of carriage or shipment, the consignee is the entity who is financially responsible (the buyer) for the receipt of a shipment. Generally, the consignee is the same as the receiver of the goods. GMAZ had delegated Drotsky to serve as the consignee in this particular case after the supplier insisted so. As an association GMAZ had every right to pick and choose who handles their consignment, and GMAZ had to delegate one of their members the same way they delegate one of their members to be the treasurer or to represent them at a business breakfast or in a high level meeting, they appointed Drotsky to handle the wheat transaction on behalf of members.

Drotsky had all the requisite 5 permits required when importing wheat. The importing entity has to be constituted as a company. GMAZ is not one!  

Is this abnormal? Certainly not. The milling industry is a very small industry and players are united, they share infrastructure as and when there is need, they buy in bulk and share consignments according to contribution and they coexist in healthy competition.

There was no law broken in Drotsky Pvt Ltd serving as a consignee, neither was there any misappropriation of funds as the funds were paid directly to the supplier, equally there was no prejudice suffered as all members who participated in the transaction confirm that they received wheat. The Reserve Bank was not prejudiced as they were paid their money, no public funds were misappropriated and no one suffered any prejudice as a result of Drotsky becoming a consignee.

The complaint
There is one complainant who is United Millers as represented by Davis Muhambi. Davis Muhambi claims that they did not know of the facility and were not party to it.

The same Davis Muhambi admitted that he was not paying membership subscriptions to GMAZ. On that admission alone they flouted the rules of the association yet want to benefit from its activities?

Mr Davis Muhambi is also an expelled member of GMAZ, who had legal troubles and financial troubles of his own which he had to deal with while others participated in this wheat transaction. Mr Muhambi went on to form a rival association known as the Small to Medium Millers Association of Zimbabwe SMMAZ. It is questionable that an entire parliamentary inquiry is founded on the testimony of a disgrunteld rival.

The new Constitution of Zimbabwe gives prominence to the fact that all institutions and agencies of the state and government are accountable to Parliament. This mandate is derived from section 119 of the Constitution. Even the Presidency as a state institution is not exempt from accountability to Parliament. Parliament performs executive oversight by scrutinizing government policies, programmes and expenditure plans in order to ensure that they are in line with legislative intent and are governed by documented policies and procedures. Parliament, through its committee system monitors all government policies and programmes to ensure efficient use of finite and scarce national resources. It is then confusing that Parliament is majoring in the affairs of a Private Organisation. The Reserve Bank funds were not tax payer funds, the 26 million facility was not a vote under the National Budget.

 Therefore oversight while welcome and promoted should be directed at state institutions, state programs and state funds.

GMAZ gave 26 Million to Reserve Bank and in turn a 26 million international payment was made to a foreign supplier towards the purchase of Wheat. Drotsky was the consignee, and all parties involved were happy with the arrangement and they received their wheat consignment which translated to bread, flour and other commodities being available on the shelves.

To date the nation enjoys stable wheat supply, the market is satisfied and families are enjoying bread for breakfast and lunch boxes are not in short supply of the commodity. The outcome of the transaction is a positive one as evidenced by the prevailing status qou in meeting demand.

 The problem area is mealie meal, and Parliament should actively deal with the maize shortages and ensure that families enjoy sadza /isitshwala on a daily basis.

Source - Nicholas Ncube
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