The Sunday Mail
Darlington Musarurwa and Ishemunyoro Chingwere
A 28-page dossier compiled by ex-workers of the Cold Storage Company indicates the State-owned enterprise could have lost more than US$12 million in well-knit schemes that brought the once mighty meat producer and processor to its knees.
Exposure of the alleged looting follows a fallout between workers — both current and former — and management over a US$2,1 million retrenchment kitty that will mostly benefit managers, some of whom are accused of bringing CSC down.
CSC’s management and creditors were expected to strike an agreement on May 18, 2017 through a scheme of arrangement, but former workers scuppered the process by lodging objections with the High Court.
The ex-workers are against an aspect of the deal that will put tidy sums in the pockets of managers.
Workers say that one of the key conduits through which significant asset leakages occurred, including alleged looting of beef stocks, was via franchise agreements signed with local companies to sell beef for CSC.
CSC had 22 Meat Pride retail outlets operated as franchises or directly-owned shops in areas such as Bulawayo, Kadoma, Chinhoyi, Karoi, Kariba, Victoria Falls, Chitungwiza, Rusape and Mutare.
The units in Chinhoyi, Kariba, Victoria Falls, Rusape and Chitungwiza were in the orbit of the Harare branch.
Through the franchise agreements, companies partnering CSC were supposed to supply not less than two tonnes of “acceptable beef” and related products per month, pay employees, and manage day-to-day operations and marketing.
While costs for water, electricity, rentals, rates and consumables were shared equally, the contracted company was supposed to share 70 percent of costs of repairs and maintenance. It return, it would get 70 percent of gross beef sales.
CSC would invest in butchery equipment, display chillers, island freezers, coldrooms, fridges and cash registers. It was also responsible for tiling and structural changes to outlets.
But during the subsistence of most of these agreements, particularly those in Chitungwiza and Harare, this never happened — and some of these companies even ended up claiming beef from CSC.
“The requisite financial accounting and recording of these transactions and assets were in most cases incomplete, fraudulent and collusive misrepresentations that eventually led to the collapse and or cancellation of franchises,” reads part of the dossier.
“However, most franchised assets were not returned to Cold Storage Company as should have been the case. Most franchises retained both (sic) their renovated shops, CSC equipment/asset, beef stocks and sales proceeds. And neither were reconciliations of trading accounts done to establish the requisite financial positions of the parties at their termination.”
The alleged financial prejudice runs into millions of dollars.
The dossier also says key documents such as lease agreements could have been destroyed to cover up the scam.
Chitungwiza & Southerton scandals
For the Chitungwiza franchise, CSC roped in Olitrade as its partner from January 2009 to December 2009 and the property on which Meat Pride operated was leased from Old Mutual.
It is alleged that Olitrade never held up its end of the bargain and ended up claiming 600 tonnes of beef from CSC Harare under unclear circumstances.
When auditors requested a copy of the lease agreement, it was never found — even as workers maintain that there was never a CSC undertaking to supply Olitrade with beef.
It was the same script for Southerton (Harare) Meat Price where a similarly structured agreement was signed on January 5, 2009 with Olitrade.
According to the dossier, “There is evidence of Olitrade fraudulently getting 20 tonnes of CSC Harare branch beef weekly towards an unspecified tonnage . . . this despite Olitrade having no proof of having been owed this unspecified tonnage by CSC Harare branch.”
The deal ended in July 2011 after phase one of the Botswana Meat Commission agreement set in.
Though CSC closed the business on June 2012, workers say there are indications the outlet was being operated by some Harare branch managers as evidenced by “the Stand 8824 Southerton business licence issued under CSC name on City of Harare account number BUS00014947”.
Here, CSC could have lost more US$480 000 from beef claimed by Olitrade.
After that, CSC entered another agreement to lease the Chitungwiza property to Meat Mart, a company owned by a Mr Muchabaiwa, from January 1, 2011 to December 2011.
According to that agreement, the new tenant would lease “unspecified assets” from CSC while also taking over employees at national employment council rates.
Rentals were pegged at US$250 per month, with Meat Mart bearing the costs of repairs and maintenance.
However, Meat Mart lodged a claim of US$11 782 for costs incurred in refurbishing the cold room; and then suggesting that the CSC “debt” could be offset by forgoing paying rentals for 47 months.
Even after its lease expired on December 31, 2011, Meat Mart stayed put; and by the end of September 2015 owed more than US$14 250 in unpaid rentals.
Further, Meat Mart allegedly did not pay workers it inherited from CSC.
CSC lost more than US$500 000 in unpaid rentals and levies for utilities, especially for properties leased out in Harare to companies like Refresh Beverages and Drummonds Chickens.
As a major consumer of water at CSC’s Harare branch (37 500 litres per month), management had — with the aid of a consultant — decided to make Refresh Beverages foot 30 percent of the bill.
However, on October 6, 2009 Refresh’s operations executive, a Mr Kandarira, wrote to CSC’s acting national sales manager Mr Jamisa Ndlovu for a downward variation to 12 percent for water and 10 percent for electricity.
The parties settled on 15 percent for electricity and 30 percent for water.
Refresh started defaulting and when it eventually moved out in December 2010, its bill had soared to US$152 377,66.
But workers allege that through a “deliberate and systematic window dressing exercise”, CSC gave Refresh a US$60 000 bill.
It was only through irate workers’ intervention that management withheld Refresh’s 28-tonne refrigerated trailer as lien (property held until a debt is paid) for the unpaid bill. There was to be more intrigue surrounding the truck.
CSC management leased the truck to another tenant, Quick Ice, in a deal that was initially supposed to run for five months through April 16, 2011 at US$1 000 per month.
Nothing was ever paid, allegedly prejudicing the public entity of more than US$57 000.
The last time the trailer left the premises – laden with 28 tonnes of meat – it was never seen again.
It is alleged that CSC management struck a deal with Refresh Industries to release the trailer under unclear circumstances.
Allegations are that CSC lost more than US$321 000 from that episode.
It goes on
CSC charged Drummond Chickens 20 percent monthly for water and 31 percent for electricity as it used much power for its coldrooms.
But Mr Troy Drummond, the owner of the business, wrote a letter on June 11, 2009 seeking a downward review, also questioning Zesa and Harare City’s billing system.
He then started paying US$300 and US$750 monthly towards water and electricity respectively.
On December 10, 2010, CSC took legal action against Drummond to recover more than US$97 590 in unpaid bills (case number HC9751/12).
When the firm moved out in December 2010, US$97 590 was billed instead of US$130 808 that ought to have been charged.
When workers demanded the terms of the lease agreement, it could not be found.
By the time of going to print, CSC chief executive officer Mr Ngoni Chinogaramombe had not responded to questions sent to his e-mail address and his mobile phone.