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Trust gets US$5million, collapses in 3 years

08 Oct 2021 at 17:58hrs | Views
THE Marange-Zimunya Community Share Ownership Trust (MZCSOT) has collapsed only three years after the Zimbabwe Consolidated Diamonds Corporation (ZCDC) injected US$5 million to prop it, a Zimbabwe Independent investigation has revealed this week.

Details gathered show that MZCSOT was forced to abandon operations after failing to settle rentals for its Mutare offices, compounding a crisis that exploded after it accumulated hefty salary arrears for its only two members of staff.

Chiefs Marange and Zimunya core-chair the MZCSOT on a rotational basis, while Mutare Rural District Council chief executive officer Shepherd Chinaka is the secretary.

The trio make up the board of trustees, which was set up to tap into proceeds of billions of United States dollars worth of diamonds extracted from some of Africa's richest claims.

There had been concerns over alleged looting in Chiadzwa until the government shut private investors out of the gem fields in 2014, before setting up ZCDC, which is 100% controlled by the state.

Chief Marange and Chinaka confirmed this week that the Trust was haemorrhaging.

"The Trust's funds ran out and we could not continue with operations," Chief Marange said.

It is understood that as tempers flared, with the trust battling with cash-flow problems, one of its two administrative staff members took off with a Nissan Double Cab, while another worker walked away with office furniture.

However, questions were being raised about how MZCSOT, one of Zimbabwe's richest resource-based trusts, had plunged into financial dire straits after a US$5 million injection by ZCDC only three years earlier.

ZCDC inherited MZCSOT when it took over assets previously controlled by about seven diamond firms which were exploiting vast tracts of claims in Marange until government policy shift.

The Independent was told that the US$5 million windfall was used up in 21 of the targeted 162 community development projects.

Some of the 21 projects were abandoned midway, according to documents obtained by this publication.

A proposed breakdown of costs, which was denominated in United States dollars, indicated that the Trust received funds for community projects shared between three constituencies.

These were Mutare West, Mutare South and Mutare North.

Each of the 36 wards in Marange received US$80 000, with US$100 000 allocated under district projects while the three constituencies received US$160 000 each.

About US$500 000 was channeled into a revolving fund, as well as towards the completion of outstanding constituency projects.

A similar amount was budgeted for administration expenses.

About US$520 000 was channeled towards enterprise developmental projects to make up the US$5 million.

A document titled "Projects Update" with the same breakdown was pegged in the local currency.

The paper added intrigue to a vexing question: Which currency was used to fund the projects?

While the figures looked correct on paper, a critical look at the Trust's expenditure for the 21 "completed" projects worth US$704 574,40 told a different story.

For instance, US-dollar pegged financial reports showed that a total of 11 boreholes were drilled in six wards under Mutare South at a cost of US$18 840 each.

This translates to a total of US$207 240.

But the Independent established that borehole drilling costs averaged about US$5 000 each, translating to US$55 000.

The data pointed to a US$152 240 potential prejudice.

Other projects included the construction of a community hall at Chitakatira Growth Point at a cost of US$113 000 and four classroom blocks at two schools at a cost of US$147 050,40. Gandayi Clinic was built at a cost of US$68 000.

The Procurement Regulatory Authority of Zimbabwe (Praz) was responsible for awarding tenders for the projects.

All borehole projects were tendered to a company called Waterweb while construction projects were shared between Plutoglass Building Contractors and Abbacote Enterprises.

Plutoglass and Abbacote are Mutare-based companies registered with Praz.

But Waterweb did not feature on the list of companies approved by Praz during a search on the authority's website.

Chief Marange, who appeared to have limited knowledge of the trust's financial affairs, told the Independent: "If there was any fraud, we are not aware of it."

But Chinaka linked potential disparities to currency conversions from United States dollars to the Zimbabwean dollars (Zimdollars).

"I don't know how they (administrator and clerk) were doing it but I think there might be confusion on the currency tendered to finance the projects, between the RTGS (Real Time Gross Settlement System) and United States dollars," he said.

However, he confirmed that some contractors inflated prices during the tendering process.

He said the Trust will call for a meeting with former administrative staff to clarify the issue.

The Independent tracked two of the contracted companies' directors – Gibson Mushoriwa of Plutoglass and George Mgerezi of Abbacote – to gather more details on the matter.

They said their companies were paid in Zimdollars, which created problems as they could not finish all projects.

However, the MZCSOT report indicated that the two companies completed seven projects allocated to them.

"We were not paid in US dollars," Mushoriwa told the Independent.

"We were paid in bond (RTGS). The money was deposited in my company's Steward Bank account. I can give you a print out of the transaction. It was actually a challenge to get the money."

However, he did not provide the paper trail by the time of going to print.

Plutoglass was awarded two tenders, which Mushoriwa said were valued at ZW$146 000 (about US$1 700) and not US$146 000.

These were for classroom blocks at Mazonwe Secondary School in Burma Valley and Mutore Secondary School in Vumba.

He said funds ran out before both structures could be completed.

However, the Trust's records indicated that the projects were finished.

Mgerezi said his firm completed four of the five projects before funding dried up.

He had promised to give the value of the projects in local currency which, according to documents, stand at approximately US$400 000.

Investigations by the Independent indicated that while the funds were disbursed as forex in June 2018, they were later converted to local currency four months later following Finance minister Professor Mthuli Ncube's economic reforms, which separated foreign and local currency accounts.

Though the funds were converted to RTGS, they maintained their value at 1:1 exchange rate with the US dollar.

By February 2019, Ncube devalued the local currency against the US dollar through Statutory Instrument (SI) 33/2019, which led to an inflationary surge that eroded the Trust funds.

A look at the projects' timeline highlights that they were completed between December 18, 2018 and August 8, 2019.

"The 1:1 exchange rate was on paper. When we went to our suppliers to buy material, the prices had gone up in local currency," Mushoriwa argued.

He added that the policy shift affected their projects.

A former trust worker told a mining indaba convened by ZCDC in January 2020 that bureaucratic delays at Praz had fuelled the erosion of funds.

"There are long timelines that are required by the Public Procurement and Disposal of Public Assets Act, which is administered by Praz," he stated then.

Praz public relations manager Charity Tambandini had not responded to the questions sent to her by the time of going to print, saying she was waiting for approval from her superiors. Information requested included the total value of the projects, tender processes and the breakdown of total costs for each project as presented to Praz. Follow-up calls to obtain the information were made to no avail.

So dire was the Trust's financial situation that it had to beg villagers to provide labour, farm bricks and sand for the construction of outstanding projects.

Arda Transau Relocation Development Trust (ATRDT) chairperson Donaldson Masvaure confirmed that MZCSOT only "received cement for the construction of a four-roomed mother's waiting shelter at Arda Transau Clinic".

When the Independent visited the site, the shelter was abandoned mid-way due to lack of funding.

CRD executive director James Mupfumi said there was a need for audits of the financial expenses.

He indicated that the scrapping of the Indigenisation and Empowerment Act, which provided for the disbursement of community funds by respective mining companies "has made the CSOTs redundant in Zimbabwe".

ZCDC chief executive officer Mark Mabhudhu had not responded to questions sent via WhatsApp at the time of going to print. Mines minister Winston Chitando was not answering calls to his mobile number.

Former miners in Chiadzwa pledged to inject US$50 million into the Trust coffers but later backtracked.

Anjin allegedly handed a US$1,5 million dummy cheque to the late former President Robert Mugabe. The firm never released funds to MZCSOT.

Anjin said it would only do so after the government has given it the green light as the future of the Trust remains bleak.

Only Mbada Diamonds and Marange Resources disbursed US$400 000 into the Trust. Again, expenditure of the funds has not been audited.

The Centre for Research and Development (CRD) supported the investigation.

Source - The Zimbabwe Independent
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