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Source: 55 companies shut down – The Standard March 10, 2019

BY TATIRA ZWINOIRA

OVER 50 companies have been liquidated since President Emmerson Mnangagwa came to power in November 2017, throwing thousands of people out of employment.

Documents obtained by Standardbusiness from the Master of High Court’s office showed that 55 companies were granted a provisional order to be liquidated from November 2017 to December 2018.

Between January and October 2017, 49 other companies were granted provisional orders to be liquidated.

Theresa Grimmel, who oversees some of the liquidated firms through her company Trivade (Private) Limited, told this publication that stringent loan collateral requirements as well as unreliable power suppliers were to blame for the company closures.

“The cost of borrowing money and the punitive interest and short-term on loans; the stringent security requirements for loans; the instability of the electricity network; frequent power outages can cause machinery to fail — very expensively, and the interruption to the manufacturing makes it difficult to continue,” said Grimmel, in emailed responses to Standardbusiness.

“Management is tired — every day there is the need to ‘make a new plan’, the machinery is old, the skills have left the country. Artisans are in very short supply.

“The constant changing of the goal posts — refer to the recent overnight change in the duty rates, this makes business very hard.”

Some of the companies, which Grimmel oversees as a liquidator include Cheney Pelmets (Private) Limited, Laputa Trading (Private) Limited, Tadnet Investments (Private) Limited, Riverside Funeral Services (Private) Limited, and Retnim Pumps Importers & Maintenance (Private) Limited.

Cheney Pelmets manufactured pelmets, blinds and other curtain tracks, but the company closed due to lack of security, electricity challenges and cheap imports.

“It was a long established company and closed because the facility from, which it operated in Chitungwiza was rented and part of a large complex. When there was no electricity to enable Cheney to operate its machinery, the company had to close,” Grimmel said. “It was also facing competition from cheap Chinese imports.”

On Laputa Trading, Grimmel said: “It was a farm, which operated on a rental agreement from a new owner.

“The new owner decided to take back large portions of the farm, despite the lease agreement, and the company was reduced to farming small portions of the land available.

“Coupled with a bad agricultural season and the fact that the new owner then held on to all the machinery, the company closed.”

Laputa Trading was granted a provisional order to liquidate on December 7, 2018, a year after the current government took office.

Other companies on the list of liquidated firms from 2018 include GT Tavarura Bus Services, Oil Seed Processing (Pvt) Ltd, Gramlex Investments P/L, Bush Mills, Chegutu Canners (Pvt) Ltd, Zimbabwe Oil Soap Manufacturing, Malacoe Investments and BCL Ltd.

Others are Notofy Enterprises (Pvt) Ltd, Kingmaker Corporate Resources, Heritage Printing (Pvt) Ltd, Better Agriculture (Pvt) Lt and Grafax Cotton (Pvt) Ltd, among others.

The closure of these companies is a reflection of serious economic challenges and is an indictment on Mnangagwa’s “Zimbabwe is open for business” mantra, observers said.

“For the past 20 or so years we have not found adequate investment to retool,” said Charles Nhemo, a liquidator.

“Our companies are competing with global entities, which are using modern technology.

“You talk of a company using equipment, machinery bought with the latest we have in most companies being in the 80s going back and you are competing with modern technology, which produces products with less labour.”

He said Chinese and South African industries, which were using modern technology, had a competitive advantage as they were in a better position to churn out improved products.

“The major issue is the economic environment,” Nhemo said.

“When we changed from the Zimbabwe dollar to US dollars, there was no investment into new equipment and almost every company’s capital was wiped away because you had no exchange of the Zimbabwe dollar into the US dollar.

“So whatever you had in your bank was wiped away and companies are undercapitalised across the sectors.”

Lawyer Tawanda Chiurayi, who handles company liquidations, said the recent monetary policy changes would make the environment even more difficult for local firms.

“The question really is looking at the effect of moving from the one-to-one to the RTGS dollar will have on what people owe,” he said.

“Statutory Instrument 33 of 2019 said whatever amount or liabilities people have will be converted to RTGS dollars, which in essence suggests amounts have been discounted by about 2,5, which is the official rate.

“So companies that are heavily indebted and have access to forex will find that as a benefit, but those who do not have access to forex will remain in the same position.

“The question would then be: are companies going to be able to improve production and so forth?

“So, really, it is a question of performance. If they owe money, then effectively what it means is that they may still be in a very difficult position.”

A number of companies have been struggling to operate due to foreign currency shortages that have forced them to either suspend or shut down some production lines.

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An Ethiopian Airlines passenger plane bound for Kenya has crashed killing all 149 passengers and eight crew members. An Ethiopian Airlines spokesman confirmed that the Boeing 737 plane had crashed on a routine flight from Ethiopia's capital Addis Ababa to Nairobi on Sunday. Ethiopia's state broadcaster EBC reported everyone on the plane had died and […]

Source: Curtain comes down on Mangudya’s tumultous tenure – The Standard March 10, 2019

BY Kuda Chideme

AS the curtain comes down on Reserve Bank of Zimbabwe (RBZ) governor John Mangudya’s five-year term of office, speculation has been rife on whether he will be handed another contract or not.

Mangudya came into office at a very interesting time, as from the outset, he had his work cut out for him given that the country was still in a stupor following years of economic meltdown.

The then Finance minister, Patrick Chinamasa, in May 2014 pointed out that the governor was coming into office at a time the “power and influence of the central have been diminished”.

This was so because Zimbabwe had just dumped its own currency, which had been rendered worthless by record-setting hyperinflation, and adapted a basket of currencies anchored by the US dollar.

So in the absence of a local currency, the bank did not have much control over monetary supply.

Hyperinflation had been tamed, but the stress of using a strong currency in the greenback were starting to show as liquidity became tight, marking the genesis of today’s pressing bank note shortage.

The central bank was effectively broke and could not play its role as lender of last resort.

Mangudya’s predecessor, Gideon Gono, had bankrupted the central bank, leaving it with more than a billion dollars in debt.

Gono had gone on a wild escapade using bank funds to finance Robert Mugabe’s government.

The bank would pay for everything from basic commodities, which were in short supply as the country’s manufacturing sector was as good as non-existent, to diesel and agriculture implements, which were then used to oil Mugabe’s system of patronage in return for safeguarding his protracted stay in power.

A year after his appointment, Mangudya pushed for the state to take over the bank’s $1,3 billion debt, shifting the burden of Gono’s reckless spending onto the taxpayer.

He argued the move would allow the RBZ to start on a clean slate and allow it capacity to be the lender of last resort.

Around the same time Mangudya was also setting up a vehicle to buy bad debts from the local banks, which were facing excessive levels of non-performing loans of over 20%, way above the international standard of below 5%.

Being a former president of the Bankers’ Association of Zimbabwe, the governor had intricate and intimate knowledge of the country’s banking industry, hence his keenness to set up the Zimbabwe Asset Management Company (Zamco) and save the banks from collapse was only natural.

By 2018, Zamco had taken up $1,13 billion in bad loans.

Commenting on Zamco, Newswire had this to say: “Zamco has indeed successfully given companies and banks a clean slate.

“What is needed, equally, is a clean slate on disclosure and accountability. It must start now, with full publishing of a list of defaulters.

“Taxpayers have paid bills for companies and the greedy elite for too long. They deserve to know whose bills they have been paying for.”

Just like with the RBZ debt, Mangudya has refused to disclose the names of those that defaulted on the loans, which were taken over by the state through Zamco.

The lack of transparency has been a key feature, which has characterised Mangudya’s tenure of office.

Mangudya spent some years at Africa Export and Import Bank (Afrexim bank) working his way to become regional manager in charge of southern Africa.

As governor, he would go on to use his relationship with the regional lender to secure numerous credit lines at a time the rest of the entire ecosystem of international financial institutions had shut their doors on Zimbabwe because of its history of not paying back debts.

Afreximbank has doled out facility after another to Harare be it to finance the procurement of fuel, to stabilise nostro balances, or to support local companies — the bank has always had some extra cash to throw at Mangudya.

Ordinarily, borrowing is not a bad thing at all, every other country relies on borrowing.

While Mangudya would want to be praised for securing these crucial loans, what makes this relationship questionable is again the lack of disclosure surrounding the engagement — detail on all these facilities is always known only to Mangudya.

The bank, on the other hand, never seems bothered to make disclosures on its dealings with Zimbabwe, which is so uncharacteristic of a bank of its stature.

It was Afreximbank which reportedly bankrolled the introduction of bond coins ($50 million) and the subsequent $200 million facility that we were told was backing bond notes.

Despite numerous assurances, the story that the bond note would maintain its value, pegged at par to the greenback, never gained any currency as Mangudya had a difficult time in calming a spooked market.

A number of poorly done public relations stunts, including the framing of the bond notes as an export incentive scheme to promote exports, failed to stave off fears that the bond note would see the return of the dreaded local currency.

The people’s confidence and trust in the central bank was eroded and Mangudya certainly was not the person who would bring it back.

It was only last year after Finance minister Mthuli Ncube’s appointment that the world got to know of the excessive levels of debt that government was in as details emerged that the overdraft with the central bank stood at $2,3 billion, as at end of August 2018, well above the statutory limit of $762,8 million.

The stock of Treasury Bill issuances had also gone unchecked, increasing from $2,1 billion in 2016 to a cumulative $7,6 billion, by end of August 2018.

Mangudya had been facilitating government’s unchecked spending, a concern which he would always dismiss suggesting that the he was supporting a form of quantitative easing (QE) that had helped take the country out of deflation.

Mangudya’s time has been tumultuous, full of deceit and costly communication blunders which could have easily been avoided. The fact that the governor himself is a poor orator who easily gets wound up when asked to explain his own policies did not help his cause, but in all fairness it was not as disastrous as his predecessor.

 

The post Curtain comes down on Mangudya’s tumultous tenure appeared first on Zimbabwe Situation.

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Source: PSMAS bosses squander millions on designer suits, slacks | The Sunday News 10 MARCH 2019

Mr Arthur Choga

Robin Muchetu and Brian Chitemba, Sunday News Senior Reporters

PREMIER Service Medical Aid Society (PSMAS) is said to have splashed a jaw-dropping US$3 million on designer suits for top executives, fuel and curious information communication technology (ICT) upgrades at a time when its client’s medical insurance was being rejected by service providers.

The company is alleged to have spent more than US$75 000 on designer suits for company managers, including buying ladies’ fashion coats, casual shirts and slacks for two employees. The company also shelled out more than US$100 000 on fuel for board members, management and staff. 

It is, however, the ICT upgrades that haemorrhaged the company the most. Documents show that on June 2 2017 then-managing director Engineer Tendai Kapumha signed for ICT upgrades worth $2,6 million (through PSMAS purchase number 22122), of which US$1,1 million was to be paid in advance.

A sum of US$2,4 million was also paid out to Frolgate Technology for supply and installation of new data cabling infrastructure, while US$2,7 million was used to buy other ICT consumables on November 22 2017.  Further, the medical aid company was charged US$60 000 by Checkpoint Health for a mobile app and website development. The company also doled out US$30 425 for the construction and design of an exhibition stand at the Zimbabwe Agricultural show on August 17 2017. 

PSMAS spokesman Mr Arthur Choga, however, defended the expenditures.

“As for the ICT system, we did not just wake up one day and said we were going to buy one. It is something which was discussed and planned over a five-year period. A lot of positive things happened between then and now. We have improved efficiency and mended relations with our stakeholders. We also cut our legacy debt by $17 million before the price madness,” he said.

Sunday News is also in possession of a document compiled by workers which details the alleged malpractices which border on gross abuse of office. The originators of the document have implored Government to investigate issues raised.

“We only bought 10 new ambulances to increase our old ailing fleet, yet we should have bought at least 40 ambulances. We now have ambulances that break down while carrying patients. In the mornings some ambulances are pushed, yet we are busy buying expensive cars. This shows lack of business acumen or a board that does not care at all.

“The company has disbursed over 250 luxurious cars. We are not in the transport business but surely this is pathetic to have such a huge fleet for a company yet pharmacies are empty, no reagents, it is pathetic yet management is concerned with luxurious lifestyles. In 2010 executive directors through their manager went on a spree to purchase old second hand vehicles from Japan wasting company resources. Most employees got cars as old as 10 to 15 years by 2010 yet the cars were first used in 1995 to 2000, but they went ahead and bought employees such old cars with high prices which could have bought newer cars,” reads the report.

It added that management went on to buy themselves new cars such as Prados, Toyota Land Cruisers, Jeep Grand Cherokees, Nissan Navaras, Fortuners and Mercedes Benz. 

“In 2017 the company went on to buy brand new cars from their suppliers and the selection of suppliers was not flighted in the media.”

Meanwhile, the chairperson of the Parliamentary Portfolio Committee on Health Dr Ruth Labode is alleged to be a supplier of drugs to PSMAS members via Apple Pharmacy which is she is allegedly a shareholder. According to the document, Dr Labode is acting in conflict of interest.

“It is a conflict of interest for Apple Pharmacy to have a Service Level Agreement with PSMAS to sell drugs to PSMAS members as the owner is the chairperson of the Health Parliamentary Portfolio Committee. She cannot investigate corruption as she is also a service provider,” read the document.

Contacted for comment, Dr Labode said Apple Pharmacy was a family business and there was no conflict of interest as alleged.

“That is a family business which is run by Mr Labode my husband, I am not the only one who supplies drugs to those clients, we are contracted by PSMAS and there is nothing wrong with that. But if people feel like he should withdraw his services he can do it,” she said.

Mr Ayo Labode, a pharmacist said he was indeed supplying drugs and there was nothing wrong with that.

“I have been running that pharmacy since 2001 and I was the first one to service PSMAS, Dr Labode only went to Parliament in 2014 so how does that influence my running of the pharmacy? Again a doctor cannot run a pharmacy, only a pharmacist can,” he said. 

The document further claims that unqualified people have been employed to management levels in the organisation yet there well deserving people that have been deprived of  opportunities. The company is also alleged to have purchased obsolete X-ray and CT scanning machines purported to be new machines. A PSMAS board member who asked not be named said the company was addressing some of the issues raised.

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