TELECEL DIRECTORS ON COLLISION COURSE
14 June 2018
HARARE — Telecel Zimbabwe has plunged into further chaos over its ownership structure amid a standoff between two directors, James Makamba and Gerald Mlotshwa who are each claiming chairmanship of the telecoms group.
Makamba through Empowerment Corporation, a 40 percent shareholder in Telecel, has held the chairmanship since inception in 1998, but it has since emerged that he lost his shareholding in the company after defaulting on a debt owed to a local investment company and a South African institution.
Empowerment Corporation is a local consortium of businesses and individuals that was put together for the establishment of Telecel Zimbabwe in 1998. Its shareholders include Makamba through Kestrel Corporation, the Indigenous Business Women Organisation but the shareholding is personalised through Jane Mutasa and her own Selporn Investments, Zimbabwe Miners Federation, Affirmative Action Group, War Veterans Association and Zimbabwe Farmers Union.
Both Makamba and Mlotshwa claim to chair the group with the former saying he is empowered by existing company registration certificates while the latter is armed with share purchase agreements that both parties were signatory to.
With the ownership wrangles being largely played out in the media, its Telecel that has continued to suffer. The net effect of this has shown through declining market share and revenues with the group now the worst performing mobile network operator in the country.
Telecel troubles started in 2015 when Government started making public pronouncements around the group’s licence and indigenisation structure.
But even then Telecel was in need of capital to expand its network, a situation which has since grown dire. While the earnings potential of the company is huge, there has been a lot of value destruction over the years on the back of inefficiency and during a particular period management ineptitude. The business had been starved of resources for re-investment. The group is also highly leveraged.
Sources familiar with the matter told this publication that Government intervention would be key to solving the director dispute. Government through Zarnet controls the majority stake in Telecel at 60 percent and because of that they have the right to appoint a chairman and to resolve the directorship dispute for the advancement of the company.
Agreements suggest that Makamba lost control in 2017
An investment vehicle fronted by George Manyere controls the majority shareholding in Empowerment Corporation in spite of efforts by Makamba to continue holding on to the shares he lost over unpaid debt.
Makamba, who has fallen on hard times; a situation which forced him to return to Zimbabwe from self-imposed exile, issued out a statement yesterday that contrary to reports that he had exited Telecel, he still holds the majority stake in Empowerment Corporation.
In a ‘statement of factual position’ issued through lawyers Chinyama & Partners, Makamba says he never resigned as director or chairman of Telecel; and that while he had at one time wanted to sell his equity to a certain consortium, it (the consortium) had failed to fulfil the terms of the conditional purchase and sale agreement.
This failed arrangement, he said, had seen him writing a conditional letter of resignation which could only have been effective upon meeting of conditions in the conditional agreement of sale.
Makamba supports this position with a letter from company secretary Carlton Consultants who confirmed that according to a CR14 form filed on March 14, 2006 with the Registrar of Companies, Makamba together with Mutasa were Empowerment Corporation board members and that they had not received instruction to effect any directorship changes. The letter is dated June 8, 2018.
However, minutes of an extra-ordinary general meeting held in Sandton South Africa on February 9, 2017 and seen by this publication show that Makamba lost part of his shareholding in EC while he agrees to sell the remaining part under a separate share purchase agreement, the net effect of which would result in the full and complete exit of Kestrel. The meeting was attended by Makamba, Mutasa, Manyere and top lawyer and businessman Gerald Mlotshwa who chaired the proceedings.
According to the minutes, the meeting resolved to reorganize Empowerment Corporation shareholding following Manyere’s acquisition of Kestrel’s debt from Brainworks and from a South African financial institution which had been securitized by Kestrel’s shares in EC.
However only the undisputed shareholding of 68 percent would be re-organised. Under the new structure, Manyere through MHMK group would hold 38.75 percent, Kestrel Corporation 30.25 percent, Selpon Investments 21 percent while the remainder would still be held by historical promoters.
Under a separate share purchase agreement signed in May 2017, Makamba further consented to dispose of his remaining shareholding to Mlotshwa for an agreed sum. The meeting also agreed to appoint Manyere, Mlotswa and partner Walter Kambwanji to the board and that Makamba would resign as EC director and chairman of Telecel.
In June 2017, Makamba wrote to Telecel Zimbabwe directors giving notice of his resignation as director and chairman of the telecoms company although stating that it was subject to the completion of the transaction. An EGM was supposed to be convened in August 2017 to note the transaction and the appointment of the new directors but failed because of ongoing Government fights. However, another EGM, without Government representation, took place and passed just one resolution, which was the appointment of Mlotshwa as a director.
Well-placed sources said that when pressed to conclude the EGM of August, 2017 (after Government had nominated its directors), Makamba expressed reluctance and told Mlotshwa and Manyere that the agreements had lapsed.
“But after some compromise it was agreed that Mlotshwa would take over his debt of $3.5 million and only then would he be issued with the remaining shares.”
However, when it was clear that Makamba would not finalise the transaction, Manyere went on to file summons seeking the return of the deposit paid to him which, with accrued interest, was just under $4 million.
Through Scanlen & Holderness, Makamba however sought to settle the matter out of Court with his lawyers presenting two options; that either Manyere and Mlotshwa complete the transaction though due to an increases purchase price being paid pursuant to the May 2017 agreement or that they carry on with the debt takeover. Makamba is said to have agreed to complete the transaction of the two share purchase agreements.
However, since then, the boardroom issues at Telecel have turned into high drama, with Makamba allegedly firing Mlotshwa from the board, a move which was deemed illegal. Mlotshwa in turn reconvened the adjourned EGM of August, 2017 to complete the transaction, as this had never been set aside at all by any of the parties and noted the resignation of Makamba.
When sought for comment, Mlotshwa who confirmed he is the new chairman of the group said he was ready to effect the payment due to Makamba of $11.05 million as per the agreement signed although adding that the businessman was free to take legal action.
Manyere said whichever direction the transaction takes what’s clear was that Makamba had lost part or all of his shareholding in EC. — Financial Express.