THE MAURITIAN CURSE

12 Oct, 2014 - 09:10 0 Views
THE MAURITIAN CURSE Mr Brian Mukudzavhu, the managing director of Axis Solutions, talks to participants at the seminar jointly held by the company and its Russian headquartered partner, Kaspersky Lab. The latter is believed to be one of the fastest-growing IT security vendors in the world. Axis is a value-added retailer of Kaspersky’s products in both Zambia and Zimbabwe

The Sunday Mail

Mr Brian Mukudzavhu, the managing director of Axis Solutions, talks to participants at the seminar jointly held by the company and its Russian headquartered partner, Kaspersky Lab. The latter is believed to be one of the fastest-growing IT security vendors in the world. Axis is a value-added retailer of Kaspersky’s products in both Zambia and Zimbabwe

Mr Brian Mukudzavhu, the managing director of Axis Solutions, talks to participants at the seminar jointly held by the company and its Russian headquartered partner, Kaspersky Lab. The latter is believed to be one of the fastest-growing IT security vendors in the world. Axis is a value-added retailer of Kaspersky’s products in both Zambia and Zimbabwe

Africa Moyo and Darlington Musarurwa

OVER the years, there has been a swagger about investments originating from Mauritius as investors from the island nation snapped up key investments on the local market, particularly at a time when the economy was wobbly.

Mauritius, which has been successfully modelled as a haven of international capital seeking succour from high taxes in other jurisdictions around the world since the early 1990s, has naturally been able to attract limitless funds from sleek investors.

The glut of capital to the destination has seen some investments being funnelled to Zimbabwe, a destination that has evolved as a high-risk, high-returns market.

But a noticeable phenomenon, where ailing companies that have been subjected to takeover from Mauritian-based entities have curiously failed to recover, and have instead continued to slip further off the cliff, is beginning to attract the attention of the public.

For a nation that has managed to fashion economic growth out of extensive experience in offshore banking, including success in routing international capital to India – a country with which it signed a direct tax avoidance agreement – it is unsurprising that most entities from the country have been targeting the local financial sector.

The Metbank story

The acquisition of then Metropolitan Bank of Zimbabwe, which has since been re-branded to Metbank, by Loita Capital Partners International Limited in May 2007 from local businessman Mr Enock Kamushinda, arguably represents the first big investment by a Mauritian firm.

Though the fee was never made public, independent sources indicate that only US$300 000 was paid for the 60 percent stake.

This, however, has not been independently verified.

But the transaction was honey-laced with a commitment for lines of credit that were supposed to help Government finance imports of critical domestic requirements.

Relations between Loita Capital, an African-focused investment bank founded in 1992 by a group of international bankers, and Zimbabwean authorities, pre-date the Metbank deal.

In fact, Loita Capital claims that in a 12-year period spanning from November 1994 to July 2006 the group managed to organise more than US$335 structured finance facilities for local entities.

Notably, of the US$335 million, US$100 million was an oil import facility, while some funds were channelled towards pre-export financing, export financing and securitisation.

But the local bank has been finding it difficult to play an intermediary role and compete for a significant stake of the market.

Monetary authorities actually view it as a weakling.

On August 27 this year Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya noted that although the bank’s capital was compliant with the minimum capital threshold of US$25 million, “the institution has been facing severe liquidity challenges”.

In December the bank struggled to meet payments to its customers.

Curiously, there were reports at the beginning of the year citing unnamed sources who claimed that Loita, as the major shareholders, were prepared to inject more than US$50 million to recapitalise the business, but, again, this commitment has not yet been followed through.

Instead, the blood-letting has continued. In an internal memo in May this year Metbank announced plans to close and merge seven branches and agencies country-wide.

Subsequently, Bubi Agency was merged with Bulawayo; Gweru Polytechnic was fused into the Gweru branch; Masvingo Polytechnic was joined with Masvingo branch, while the Chinhoyi and Harare Polytechnic branches were merged into Harare’s Central Avenue Branch.

Also, the Sam Nujoma branch was tied to Kwame Nkrumah branch and Hotsprings agency was married into Mutare branch.

Metbank’s fate still remains uncertain.

AfrAsia

The script of another set of Mauritian investors AfrAsia in another local bank, AfrAsia Zimbabwe Holdings Limited – formerly AfrAsia Kingdom Zimbabwe, a merger between Mr Nigel Chanakira’s Kingdom Bank and the new investors – reads eeringly like the unfortunate events at Metbank.

While the entrance of the Mauritian-based consortium onto the local market through the US$9,5 million capital injection was cheered by the market in January 2012, the deal quickly soured.

It is believed that a delinquent US$21 million loan that was extended to Mr Zachary Wazara – understood to be a former acquaintance of Mr Chanikira, who held a 35 percent stake in AfrAsia Kingdom Bank, spoiled the relationship between the latter and AfrAsia.

AfrAsia eventually took over the business by re-purchasing 289 million shares worth US$12,5 million from the group’s founding shareholder Nigel Chanakira’s Crustmoon.

This has, however, not changed its fortunes. Recently the RBZ singled it out as one of the bank’s that was finding the going tough in the local banking industry. But its shareholders continue to show commitment to cling on to the business.

“The Reserve Bank is satisfied with the current efforts by the major shareholder to strengthen the bank’s financial condition as evidenced by an injection of US$10 million which improved the bank’s capital to US$19,2 million as at 30 June 2014,” said Dr Mangudya in the Mid Term Monetary Policy Statement.

This notwithstanding, AfrAsia’s customers’ heartache continues as the bank is presently failing to pay depositors.

The Masawara oil assets debacle

But the controversy surrounding Mauritian investments has gone beyond the banking industry. They have also plagued the oil business.

The drama and intrigue that followed the Masawara’s acquisition of former BP & Shell assets in 2010 also continue to haunt the disposal of the same assets to a family consortium led by banker and businessman Mr John Mushayakavanhu, Woble.

Masawara is a Jersey registered business that is fronted by business magnate Mr Shingi Mutasa.

After Masawara acquired the oil assets in 2010 for US$32,7 millioon, it formed a joint venture with Mauritian-based business, Alveir Management, named Masawara Energy Mauritius(MEM).

Hardly three years after the purchase, the assets were again put on the market with a US$24 million price tag, representing a 27 percent discount.

This raised eyebrows in the market.

There were disputes between Masawara and its Mauritian partner, and, as expected, the case spilled into the courts.

Although the transactions have come full circle, the identity of Alveir Management, which had a 49 percent stake in the business, was never revealed although the National Indigenisation and Empowerment Board tried hard to force Masawara to do so.

India’s displeasure

The murky nature of some of the transactions have begun to raise major talking points, especially after India recently raised its reservations on some of the transactions originating from Mauritius.

In essence, Mauritius was accuded of being used by Indian entities to launder money and evade tax.

Mauritius vice prime minister Mr Xavier Luc Duval, who is also the minister of finance and economic development, reacted angrily to the allegations.

Many investors from the US and Europe continue to route their capital flows into India through this country to benefit from a favourable tax treaty and the ease of doing business.

Speculation in rife that many local businesses externalised money to offshore destinations and have, since 2009, been trying to repatriate it back through round tripping and pseudo- investments.

This again has never been investigated and verified. Attempts too get a comment from the Mauritian High Commission in Pretoria was fruitless.

“We acknowledge receipt of your e-mail. The High Commission will send the response to your questions in due course. We would appreciate if you could kindly consider publishing your article in your later issue,” said the Commission in a terse response..

Also, no comment could be obtained from the Zimbabwe Investment Authority (ZIA) by the time of going to Press.

ZIA board chairman Mr Nigel Chanakira, who coincidentally managed to lure AfrAsia to Zimbabwe, referred questions to the chief executive officer Mr Richard Mbaiwa citing potential conflict of interest.

Mr Mbaiwa was not picking his mobile phone and had not responded to questions sent to him early last week.

The sanctions that continues to be enforced by the European Union bloc and the United States of America continue to starve the local market of quality investments.

According to the Reserve Bank of Zimbabwe, average Foreign Direct Investment for Zimbabwe for 2002 to 2012 was US$88 million compared to US$800 million for Zambia, US$586 million for Mozambique and US$486 million for Botswana.

“This shows that Zimbabwe is receiving subdued FDI levels compared to its peers in SADC. Some of these economies rank lower than Zimbabwe in terms of competitiveness. Given the liquidity challenges that the economy is facing, there is need for increased efforts to attract FDI in order for the manufacturing sector to realise its potential,” said the CZI last week.

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