BOUSTEAD Beef UK (Pvt) Ltd director Nicholas Havercroft sold the Cold Storage Company (CSC) book debts to “himself” at a hugely discounted price, prejudicing creditors in the process.
The deal, which is not only illegal but smells of
corruption, was entered into by Boustead Beef UK (company number 09860820) and
CSC, on March 5, 2019.
According to the debt purchase (DP) agreement dated March
5, 2019 and signed by Havercroft on behalf of CSC, the seller and Boustead Beef
UK, the buyer, the CSC debt totalling US$33,072,799 was bought by Boustead Beef
UK for only US$330,072 after paying 10 cents on the dollar owed.
The DP agreement was entered into after the government and
Boustead Beef (Pvt) Ltd had signed the Livestock Joint Farming Concession
Agreement (LJFCA) on January 22 2019.
The LJFCA deal empowered Boustead Beef to assume control of
CSC’s ranches and meat processing facilities across the country, along with
managing distribution centres and residential properties in Harare, Gweru and
Mutare for a period of 25 years.
“In accordance with the terms and conditions contained
herein, seller hereby sells, assigns, transfers and conveys to the buyer and
buyer hereby purchases from seller all of sellers’ rights, title and interest in
and to all of the debts outlined in the High Court scheme of arrangements…and
is valued at US$33,072,799,” the agreement exclusively obtained by The Standard
reads in part.
“Without limiting generality of the foregoing, the buyer
shall be entitled to pay or receive any and all accounts owed or collected by
any party with respect to the accounts payable or receivable, including without
limitation, proceeds from any applicable insurance policies, pension policies,
and outstanding rentals as outlined in section 2.4 of the LJFCA agreement.”
A legal expert, who requested anonymity, said the DPA was
illegal as it introduced a party the government had not contracted with.
“In simple terms, Boustead Beef sold the CSC book debts.
“The deal was not legal because it introduced a party
government had not contracted with.
“Secondly, the debt was hugely discounted to 10 cents in
the dollar, greatly prejudicing all creditors,” the legal expert said.
According to the LJFCA agreement, the government entered
into an agreement with Boustead Beef Pvt Ltd, registration number 4852/2013,
not Boustead Beef UK Pvt Ltd operating under company number 09860820.
Boustead Beef Pvt Ltd is a locally registered company,
while Boustead Beef UK Pvt Ltd is domiciled at 78 St John Street, London, EC1M
4JA, UK.
As at September 30 2016, CSC creditors were as follows:
Local suppliers for goods and services were owed US$2,6 million, foreign
suppliers US$2,2 million, Wet Blue Industries US$2,3m, local authorities
US6,4m, government departments and parastatals US$4,7m, outstanding pension
fund contributions US$4,4m, employees US$6,0m and financial institutions
US$4,4m.
CSC was placed under corporate rescue proceedings in 2020
after the government had claimed that the LJFCA was difficult to implement as
creditors were threatening to attach CSC assets.
Ngoni Kudenga of BDO Zimbabwe Chartered Accountants was
appointed corporate rescue practitioner, before being disqualified on conflict
of interest allegations.
Kudenga was then replaced by Majoko of Majoko and Majoko
Legal Practitioners.
Investigations show that Boustead, which has undertaken to
invest about US$130 million into CSC over five years, has not injected any
meaningful capital into the business.
Instead, the company is busy collecting rentals from
tenants but not putting money into business operations, according to Majoko.
According to the LJFCA, in the first year, Boustead was
expected to invest US$45 million, with US$10 million set to be channeled
towards the purchase of cattle to replenish the stock.
The other money was supposed to be invested into abattoir’s
refurbishment, canning factory, working capital, plant equipment among other
things.
Boustead consultant, Reginald Shoko failed to respond to
questions on how much they have invested into CSC operations as per the LJFCA
agreement.
Investigations by our sister paper The Zimbabwe Independent
have also shown that Boustead was only an agricultural start-up with a small
balance sheet.
Records show that Boustead only had net capital of US$12
674 between 2013 and 2016.
The company’s directors were named as Nicholas Havecroft,
Gavin Havecroft, Nicholas Lee and Harald Torbjorn Gabriel Jakob Kinde.
Checks revealed Boustead Beef is not a UK company, but a
local start-up owned by Havercroft. It only commenced operations in 2013.
It was only set up by Boustead founders to raise money for
the CSC deal.
The DPA further states that Boustead Beef was not assuming
any liability for the obligation of the seller whatsoever.
This includes any pending legal cases or future legal cases
against the seller.
“Seller agrees to cooperate with the buyer in order to
notify all creditors and debtors that the accounts set forth have been
discharged and or to delete the trade line associated with each account.
“Without limiting the generality of the foregoing, the
seller agrees to provide to the buyer any and all backup and supporting
information with respect to the services performed at or prior to closing,” it
said.
“Seller agrees to provide confirmation of files received by
credit reporting agencies, court documents, summons and files used to recall
the accounts.
“Any liabilities, accounts, creditors, debtors not listed
in the High Court scheme of arrangements shall not be for the account of the
buyer.”
The DPA also indicated that the CSC has all necessary
rights, authority and power to execute and deliver this agreement and to
consummate the transaction contemplated hereunder.
The DPA agreement indicates that CSC has taken any and all
steps “necessary to recall from any collection agency any accounts payable or
receivable that were held in collections.”
“The seller shall defend, indemnify and hold the buyer
harmless from and against any and all claims, liabilities and obligations of
every kind any description, contingent or otherwise arising from or relating to
a breach of the sellers representations, warranties or covenants hereunder and
any and all actions, suits, proceedings, damages, assessments, judgements,
costs and expenses (including reasonable attorney’s fees) incident to any of
the foregoing.”
“This agreement may not be changed or terminated orally.
“This agreement shall be governed by and inure to the
benefit of the parties, their respective heirs, executors, administrators,
assigns and all other successes in interest,” it said.
According to section 2,1 of the DPA sale of transferred rights, the seller
shall irrevocably sell, transfer, assign, grant and convey the transferred
rights to the buyer with effect on the closing date of March 5 2019.
In return, the buyer shall irrevocably purchase the
transferred rights, and assume and agree to perform and comply with the assumed
obligations as laid out in the High Court scheme of arrangements with effect on
and after the closing date.
Boustead Beef, the agreement states, shall not assume, or
be deemed to assume, any liabilities or obligations other than the assumed
obligations.
It said the CSC agreed to be and remain responsible for,
and agrees to perform and comply with, any such liabilities or obligations,
including the retained obligations.
“The seller agrees that, prior to the termination of this
agreement in accordance with the agreement, the seller shall not, directly, or
indirectly, sell, transfer, assign, grant or convey any of the transferred
rights to any person other than the buyer,” it said.
Section 2.4 of the DPA states that the CSC consents to the
“sale, transfer, assignment, grant and conveyance of the transferred rights and
assumption of the assumed obligations, and agree to execute and deliver each
related assignment and assumption.”
The agreement states that should the CSC receive any income
into their company accounts, these funds should be directed to the buyer’s
account and used for the benefit of the LJFCA.
According to section 6.1 of the agreement, Boustead Beef
buyer may terminate the agreement with respect to the seller if the seller has
failed to consummate the transactions contemplated hereby upon satisfaction of
the conditions set forth in the agreement, without any further liability on the
part of the buyer, provided that the buyer is not in material breach of its obligations
hereunder.
At Independence in 1980, CSC was one of Zimbabwe’s major
foreign currency earners, as it exported thousands of tonnes of beef to the
European Union (EU).
At its peak, the beef processor and marketer used to handle
up to 150 000 tonnes of beef and associated by-products annually and exported
to the EU, where it had an annual quota of 9 100 tonnes of beef.
Up to 1992, CSC had a monopoly in the meat industry and
when the meat industry was deregulated, the meat processor faced stiff competition.
Currently, there are 77 registered abattoirs in the space
the CSC was for long the sole player.
By 2019, the CSC had a 2% market share.
Majoko said the old CSC could not be revived to what it was
but could benefit from its best strengths which the competition does not have.
Its strengths lie in its spread countrywide, its facilities
such as cold space, finishing and the export market.
No other player has the export capacity of the CSC because
of stringent export requirements to enter export markets, regionally and internationally, he said.
Majoko’s efforts to revive the company through leveraging
its assets have met with resistance, particularly from Boustead Beef and the
Agriculture ministry.
The CSC owns landed property all over the country.
Majoko said it has not been possible to leverage CSC land
to raise capital, either by way of sale or by way of collateral.
In a letter dated November 22, 2021 and directed to the
Agriculture ministry, Majoko expressed his concerns over considerable and
unresolved overlap between his functions as the corporate rescue practitioner
and the management of the CSC, which was entrusted to Boustead Beef by
contract.
Increasingly, that overlap is coming to the fore, he said.
“I have previously alerted the ministry to the dire
situation at the Harare depot caused by the collapse of 148 metres of perimeter
walling, which has left the depot unsafe as the property of the CSC is badly
exposed to theft and vandalism at a time when there is no security to guard the
premises,” the letter reads in part.
“In acknowledgement of the agreement between the ministry
and Boustead Beef, I contacted Boustead Beef and alerted them of the crisis and
requested them to attend to remedial work.
“I forwarded to the ministry Boustead Beef’s response,
which was to say that they would not attend the remedial work.
“They also advised that the Harare depot was in a state no
investor could possibly accept and demanded that the ministry attend to have
the premises acceptable to Boustead Beef.
“I consider it my duty to have Cold Storage Company assets
in working order, no matter the state they run in, if the assets can be
repaired.
“I have previously reported that I have engagements with
the tenants at the CSC Harare depot and that my engagements were cautiously
encouraging.”
Majoko said he opened a CSC dedicated account with the
National Building Society, indicating that some rental payments had been made
into the account by some tenants who, to his knowledge, were not paying to
Boustead Beef.
“I have outlined to Boustead Beef what I intend to have
repaired using rental income,” he said.
“There, we have locked horns with Boustead Beef.”
In a letter, Majoko said there were threats to sue him
should he use the rentals for the repairs because Boustead Beef did not
consider him as having that authority.
“As I said, the CSC is not a party to the joint venture
agreement between the ministry and Boustead Beef,” he said.
“I am not a rescue practitioner of Boustead Beef, but of
the Cold Storage Company.”
Majoko said he had the cooperation of the tenants, who were
willing to pay rentals and do their bit in remedial work and it is “my intention
to use whatever rental income I can get to attend to the necessary repairs.”
“In some instances, this will involve having the tenants
repair the infrastructure on agreement that they set off the cost against
rentals.
“I am aware that the model I propose to employ has been
employed with success in the Dubane and Maphaneni long-term leases.
“I find no reason why the model cannot be employed where
repairs are necessary.”
Majoko pleaded with the Agriculture ministry to guide him
on how he could work with Boustead Beef going forward.
“I do not want to be a lame duck corporate rescue
practitioner,” he stated.
“There are expectations the creditors and general public
have on what I should do as a corporate rescue practitioner.
“At the moment, I am emasculated and will be judged a
failure when I have not had control of the CSC.”
Clashes between Boustead Beef and Majoko are as a result of
Clause 4 of the LJFCA agreement and Section 133 of the Insolvency Act No.
7/2018.
In terms of Clause 4 of the LJFCA agreement, Boustead was
expected to manage the LJFCP, run and operate the entire business unhindered by
CSC and other government departments.
In terms of Section 133 of the Insolvency Act, the rescue
practitioner has the full management control of the company in substitution of
its board and pre-existing management, which was dissolved.
Provisions of the Act and of the LJFCA agreement are not
compatible, resulting in the clashes.
Ironically, Agriculture minister Masuka, who is the former
CSC board member, is not helping the situation.
He has not responded to various concerns raised by the
corporate rescue practitioner, raising serious questions over his commitment to
revive the meat processor.
Last month, while he was commissioning a dairy parlour
project on behalf of Vice-President Constantino Chiwenga, Masuka refused to
entertain questions from The Standard, saying he could not do so during the
“VP’s programme”. Standard
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