MINES minister Winston Chitando allegedly orchestrated
shady business dealings and presided over the misuse of a US$115,5 million loan
at troubled coal-mining giant, Hwange Colliery Company Limited, an external
forensic audit says.
The forensic audit by Ralph Bomment Greenacre &
Reynolds — which also uncovers corporate governance failures, massive fraud and
tax evasion at the partly state-owned company — further implicates former
Hwange managing director Thomas Makore and senior executives in financial irregularities.
Hwange was last year placed under reconstruction after extended periods of
mismanagement, corruption and plunder. The audit says Chitando, in cahoots with
senior executives, systematically manipulated and creamed off the company
between 2016 and 2017 when he was board chair.
The rot picked up by the auditors spanned three years to
2018. The Independent last year wrote a series of articles about a vicious
fight for the heart and soul of Hwange Colliery pitting the Muskwe led board
and Chitando. In June last year, Chitando asked the board to step down to allow
him to appoint new board members, but the board refused to do so after getting
the solid backing of other shareholders. The board, which also suspended
company directors Shepherd Manamike and Tawanda Marapira, who are implicated in
the audit argued they could not leave in the middle of an audit. The two signed
some of the corrupt deals.
President Emmerson Mnangagwa’s name was last year dragged
into the Hwange Colliery mess after it emerged that shadowy character
Sherphered Tundiya had usurped the power of the board, and effectively took
over control of the coal-miner using the head of state’s name. He forced the
Hwange board to reinstate Marapira arguing his parents were Mnangagwa’s neighbours
and also once summoned and intimidated Muskwe at State House.
The auditors also accuse Chitando of presiding over the
unprocedural hiring of contractors, influencing management to authorise
irregular transactions and routinely single-handedly hiring senior staffers
without following human resources requirements.
Ralph Bomment Greenacre & Reynolds senior auditor,
Terrence Muza, confirmed the audit — which was sanctioned by the disbanded
Hwange board chaired by Juliana Muskwe early last year.
Muza, however, declined to give further details for
professional reasons. “We completed the audit and handed over to relevant
authorities. The rest is up to them,” he said.
Hwange administrator Bekithemba Moyo also received the
audit report on March 7. Moyo confirmed it this week, saying: “We will
implement the recommendations where appropriate. It will be difficult to
discuss classified information with the press. Remember at this stage, whoever
is implicated needs to be given a chance to respond.”
Chitando did not answer repeated calls from the Zimbabwe
Independent. He also did not respond to WhatsApp and text messages seeking
comment on the allegations. The audit questions how the company handled a
US$115,5 million loan which government, the major shareholder, extended to
Hwange during Chitando’s chairmanship in 2016. This, auditors say, came during
a period when Hwange was experiencing some improvement in revenue inflows,
which attracted a standoff between the board and management.
“The foregoing standoff continued after the chairman was
appointed Minister of Mines and Mining Development (Walter Chidhakwa). In
August 2018, the board appointed Ralph Bomment Greenacre & Reynolds to
perform a forensic investigation into the HCCL affairs and report to the board.
After attempts to hold an Extraordinary General Meeting to fire the board
failed, the minister placed the company under administration on the grounds
that the company had failed to repay a loan to the Government, among other
issues of insolvency. The said loan was made by government to the board led by
him before he was appointed Minister of Mines and Mining Development. So, the
substance on the ground is that government gave the loan using its right hand
and the left hand was managing the loan. Other shareholders were not involved
in the board at all and had no influence whatsoever, in how the loan was to be
applied,” the audit says.
“The loan was utilised to clear old pressing
obligations/issues. No meaningful amount was set aside for use in current
production. From the foregoing, no reasonable or informed person could expect
an insolvent company to get up and go in such a short period of time, more so,
without injecting capital into production or into capacitation of income
generating functions, necessary for sustainable operations.”
Chitando, who at the time was also doubling as Hwange
chairman and executive chairman for Zvishavane-based platinum-mining company
Mimosa, is further accused of “cross-pollinating” dealings between the two
companies as he would from time to time ensure that firms doing business with
Mimosa also got lucrative contracts with Hwange, creating a messy conflict of
interest. The audit also raises the red flag over controversy surrounding
Inductoserve Investments (Private) Limited (Inductoserve), a transport company,
which irregularly got lucrative coal trucking contracts from the mine.
Although the auditors could not locate Inductoserve’s
directors for interviewing and questioning, their report implies Chitando may
have had a vested in the trucking company.
Inductoserve, the audit says, was initially Hwange mine
doing business with Mimosa before Chitando introduced it to Hwange.
However, the audit says the local Inductoserve did not
explain and clarify its relationship with South Africa’s Inductoserve
Logistics, which transports bulk goods such fuel, coal, grain, coils,
engineering parts and mining equipment in that country and within the Sadc
region, to do the job.
It later appears from transactions and payments that the
two companies were doing business together, although it is not clear how they
are related to each other and the deal was structured. The local Inductoserve’s
head offices were located in Gutu, Chitando’s rural home district. It also had
other offices in Newlands in Harare, a stone’s throw away from Mimosa’s offices
where Chitando was based.
What is relatively clear, though, is that the local
Inductoserve was doing business with South Africa’s Inductoserve Logistics,
which transports bulk goods such fuel, coal, grain, coils, engineering parts
and mining equipment in the country and within the Sadc region.
“The 2016 to 2017 period, HCCL Chairman Mr Winston Chitando
was a serving executive chairman of Mimosa, a mining company in Zimbabwe. Any
risks of using confidential information or protected strategies or information
protected by work product doctrine of Mimosa in HCCL, it would appear, rests
with HCCL and Mr Winston Chitando if any (i.e use of unauthorised Mimosa
tactics in HCCL including importation of suppliers identified by Mimosa into
HCCL, for example Inductoserve (Private) Limited, a transport company).
Companies and persons who had something to do or some link
with persons who had something to do with Mimosa got lucrative contracts in
HCCL, particularly in haulage and insurance,” the audit says.
It further notes that the shadowy state of Inductoserve and
its arrangements raised the possibility that the deal was specially designed to
conceal tax evasion and siphoning of funds.
The company’s trucks, the audit says, had Zimbabwean
registration numbers, while relevant transactions and payments were locally
through a local bank in Harare. The audit says the dodgy arrangements point to
possible money laundering.
Two Hwange directors, Shepherd Manamike (engineering) and
Tawanda Marapira (finance director and administration), signed the contract
with Inductoserve on behalf of the mining company without the involvement of
South African exchange control authorities. This was in contravention of
exchange control regulations, the audit says. “Mr Manamike and Mr Marapira
signed Inductoserve contract whose payments in the absence of Exchange Control
of South Africa constitutes contravention of Exchange Control as proceeds due
to a South Africa Inductoserve were retained in Zimbabwe at Standard Chartered
Bank in Newlands. Contracting Inductoserve, a South African company, and making
payments to that company into a Zimbabwean bank account give rise to money
laundering questions,” the audit says.
“So we have a South African company that is invoicing under
Inductoserve (Private) Limited of 9042 Industrial Site, Zambezi, Gweru, whose
VAT number is 10053013. There is also a company called Inductoserve whose
registered office is Matsa Store P.O Box 119 Gutu, Zimbabwe,” it adds. “That
company is used in the process of aiding a South African company Inductoserve
to not pay proceeds from business conducted in Zimbabwe to its South African
banks where the company is domiciled. Exchange control issues arose from the
use by a Midrand-based company offering haulage services to HCCL, utilising a
bank account at Standard Chartered Bank located at Newlands in Harare.
“HCCL should stop payments to Inductoserve for breaking VAT
Law by using another company’s Tax Clearance certificate to process payments
due to a South African company until South Africa Revenue Services clears
Inductorserve of South Africa about possible tax evasion.
“The proximity of the bank where proceeds are banked at
Standard Chartered Bank at Newlands, Harare, to Mimosa’s offices also in the
Newlands environs, creates uncertainty about the chairman’s independence to
Inductoserve. The fact that Inductoserve serves Mimosa as well, further
compounds issues of independence.
“Further, this company called Inductoserve whose head
office is in Gutu, Masvingo province at Matsa Store, there could be issues of
co-mingling business of the South African Inductoserve with the Gutu company.
The Inductoserve trucks that we saw at the mine are Zimbabwean-registered
trucks, not South African, meaning possibly the South African company
sub-contracts a Zimbabwean company or that the board was cheated that an
independent South African Haulage company was hired yet it is a Gutu company
doing the haulage work. Alternatively, there is a possibility that the South
African Industroserve was presented to the board in a tender process just as a
cover-up to mislead other board members/directors in awarding the tender to
what essentially would be a Gutu company.”
The audit further points out given the intricate web of
murky issues involved and a cloud of corruption hanging over the company, Moyo
must stop making payments to Inductoserve immediately.
“HCCL should stop payments to Inductoserve for breaking VAT
Law by using another company’s Tax Clearance certificate to process payments
due to a South African company until South Africa Revenue Services clears
Inductorserve of South Africa about possible tax evasion,” it says.
Most parastatals and state enterprises have been destroyed
through mismanagement, corruption and incompetence. Zimbabwe Independent
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