Scandal rocks Zuva Petroleum

Published: 21 February 2014

THE purchase of Zuva Petroleum assets by a company owned by John Mushayavanhu has torched off controversy over allegations the banker could be fronting for a British-based commodities firm, Glencore Holdings.

Woble Investments, which is owned by Mushayavanhu, the chief executive officer of banking group FBC Holdings, and his wife, wrapped up the transaction early this month with an announcement by London-listed Masawara Plc that it had transferred its 51 percent stake in Masawara Energy Mauritius Limited (MEM) to the company, which it described as "wholly owned by indigenous Zimbabweans".

MEM is registered in Mauritius and is the controlling shareholder of Zuva Petroleum, which constitutes assets previously owned by BP & Shell in Zimbabwe.

After the sale of the assets to Masawara, the BP & Shells assets were rebranded to Zuva Petroleum.

But the announcement camouflaged a raging domestic conflict over ownership, with a National Indigenisation and Economic Empowerment Board (NIEEB) report suggesting Masawara never owned the Zuva shares in the first place and that it was a front for Glencore, which funded the purchase and is again the financier of Woble's purchase of the same shares.

The NIEEB report, a copy of which was seen by the Financial Gazette, said Masawara "never owned" the former BP & Shell assets purportedly sold to it, insisting that Alveir purchased the assets and thereby held, and still held 75 percent interest indirectly in Zuva.

According to documents seen by this newspaper, Alveir is one of several financing arms of Glencore International based in the British Virgin Islands.

"The real owners are and will remain Alveir, and now Glencore Holdings. Woble is merely a front. The proposed transaction is therefore illegal, contrary to indigenisation and empowerment law and is a sham," said NIEEB.

"The board recommends that for the reasons (mentioned in the report), the Minister rejects the proposals and direct that only a genuine entity be allowed to purchase the 51 percent shareholding," said NIEEB.

But Masawara said in a London Stock Exchange's AIM filing that it had concluded the transaction "following receipt of all required regulatory approvals".

The Masawara announcement said: "Masawara is further pleased to advise that, since the initial announcement in respect of the transaction, the parties agreed to an increase in the transaction consideration to US$29,325 million (from US$24,888 million). Following receipt of all outstanding regulatory approvals in respect of the transaction, a revised sale and purchase agreement was signed with Woble Investments (Private) Limited on 31 January 2014. The transaction consideration was received by Masawara on January 31, 2014 and proceeds will be applied in line with Masawara's investment strategy."

Mushayavanhu this week angrily reacted to request for a comment on the issue, saying: "This is a tired story being peddled by one Don Nyamande, an ex-employee of Zuva. He has peddled numerous, versions of the same story…."

"For the record, my transaction has been approved by NIEEB, Reserve Bank and the External Loans Co-ordinating Committee who have full details regarding the terms, collateral and other conditions attached to the loan," said Mushayavanhu.

"I have connections with various providers of offshore and structured financial solutions as a result of my many years in the financial sector and was able to secure the funding for the transaction using these contacts," he said.

But Indigenisation Minister, Francis Nhema, denied they had approved the transaction.

"I have raised the question with players involved in that transaction so that we can explain to people what happened. I have not approved the deal," he said.

NIEEB said Woble was being financed by a loan from Glencore, which it said was the owner of the shares under Masawara.

NIEEB, which was given questions on the issue by the Financial Gazette on January 16, 2014, declined to comment due to the sensitivity of the matter and referred questions to the Ministry.

Oliver Lutz, an investor relations officer for Masawara in Harare, has not been taking calls.

NIEEB said in May 2013, Mushayavanhu had along with the majority shareholder of Strauss Logistics Zimbabwe, Bethwell Gumbo, held a meeting with NIEEB officials in which they indicated that Strauss Logistics wished to buy 51 percent shareholding in MEM from Masawara and that the company wanted an indigenisation certificate to do so.

"In the same meeting it was also indicated that messrs Mushayavanhu had an interest in Strauss Zimbabwe of about 10 percent. Mr Mushayavanhu, through FBC (Bank) was also supposed to arrange for financing," NIEEB said.

"At some point it must have been apparent that the indigenisation certificate of Strauss was not forthcoming, hence the decision to have Woble Investments acquire the shares instead," said the report.

It said Alveir had in March approached the Mauritian courts to enforce its right of first refusal after reports emerged about the planned transaction with Strauss.

"However, in this instance it appears to have no problem with Woble acquiring the same lot of shares. The only logical conclusion is that Alveir is not just agreeable to this but is intricately involved in this transaction," said NIEEB.

It said that it was interesting that Ketani Joshi, who has interests in Strauss, also had interest in FBC led by Mushayavanhu.

Ketani is a member of the Joshi family that used to run ZANU-PF businesses until they fled the country after investigations into alleged irregularities in the operations of the companies.

They helped start FBC Bank, which was then known as First Banking Corporation.

When asked about the involvement of the Joshis in the transaction, Mushayavanhu said: "The Joshi family is not involved in this transaction at all."

But he skirted questions on the involvement of Glencore, specifically that he was "a front for Glencore".

NIEEB said: "Glencore is introduced as the financier. Glencore has primarily the same interests in logistics, distribution and petroleum as does Strauss. It is interesting that as part of the conditions for financing, Woble will cede rights to distributions entirely to Glencore. Also, the effective controller of the purchased shares for the time being is Glencore. It is clearly more than coincidence that Glencore has financing interest in the sector to which it is a player, when as a matter of fact its core business is not venture financing. The only other sensible conclusion is that it must have covert interests."

The indigenisation board said in order to more properly assess this proposed transaction, the history of the Masawara and BP & Shell transaction was important.

NIEEB, which advises the Minister of Indigenisation and Economic Empowerment, said in 2010, Masawara won the bid to acquire BP & Shell assets in Zimbabwe for about US$30 million. The transaction was consummated and approved by the Minister with the following conditions:

- That Masawara would dispose 10 percent shareholding to an employee share trust;
- That Masawara would dispose 50 percent of its retail sites to its dealers;
-That Masawara would dispose shares to youths, women and the disabled; and
- That Masawara would treat the leases of all dealers fairly.

But the transaction had been opposed by indigenisation players and other stakeholders for being "a sham, a front and not a genuine indigenisation transaction," said the NIEEB report.

"Despite this, approval was granted on the aforesaid conditions as a means of promoting broad-based indigenisation," said the report.

It noted that complaints by dealers and workers that conditions attached to the transaction had not been fulfilled led to investigations by NIEEB which found that Masawara had not honoured the conditions and that the company had been "diluted at the MEM level by selling 49 percent shares to an unknown entity, Alveir Management, thereby diminishing the effective indigenous interest of former BP & Shell assets to below 26 percent".

Masawara denied that it had been diluted, but insisted it still held 99 percent of MEM, with Alveir Management, from which Masawara had borrowed through a pledge of shares in favour of Alveir, owning one percent.

"This position was contrary to the reported position from Masawara financial statements in which Alveir Management had acquired 49 percent shareholding in MEM. If it did, as indeed it did, then the extent of Alveir's interest is unclear since it provided more than the proportion of 49 percent," said the NIEEB report.

It said there was reason to suspect that Alveir held more interest than 49 percent since it had funded more than 75 percent of the finance under terms undisclosed to the ministry.

It said if Masawara held 99 percent shareholding, why was it exiting MEM by selling only 51 percent?

"This shows that Masawara misrepresented the true shareholding to government and that Alveir in fact owns 49 percent of MEM. This casts light on NIEEB's earlier findings (concerning) the dilution of Masawara in MEM."

It also noted: "Further, despite providing the bulk of the finance for the transaction, Alveir was never mentioned prior to and upon conclusion of the transaction and acquisition of indigenisation approval. The fact is important for the question who is the actual buyer, and therefore owner of the former BP and Shell assets."

The report said it had tried to ascertain the real identity of Alveir Management but had failed.
- fingaz