Makamba calls off Brainworks deal

Published: 07 June 2015

Empowerment Corporation (Private) Limited (EC) shareholders have "buried the hatchet", with company chairman James Makamba calling off a Friday extraordinary general meeting (EGM) and subsequent deal to sell their 40 percent stake in Telecel Zimbabwe (Private) Limited (Telecel).

The development comes after a bruising battle between Indigenous Business Women's Organisation (IBWO) founder Jane Mutasa and the exiled businessman amid revelations by company managing director Patrick Zhuwao that the mobile venture was "bust", and needed $300 million in recapitalisation funds.

"The February 20 EGM has been cancelled at the behest of Makamba and concurrence with other shareholders, mainly Mutasa. As such, it follows that the Brainworks Capital Management (BCM) deal has also been called off and notices to that effect have already been sent out to EC's registered investors," a source close to the development said, adding the parties had chosen to give dialogue a chance.

Prior to Wednesday's shock announcement, Mutasa had approached Zimbabwe's High Court seeking an order to stop Friday's proposed EGM and $20 million transaction with George Manyere's private equity firm.

In her papers, the Harare businesswoman had queried Zhuwao's locus standi in seeking to dispose off the 80 million Telecel shares - held by EC - to BCM and whether minority shareholders would get full value of their money.

"The ... applicants stand to lose all their lifetime investment they had made in Telecel… through the 6th respondent (EC)… which has ever increasing value well in excess of $200 million and is sought to be donated or be given away for as little as $20 million," Mutasa said.

However, Zhuwao shot back in a stinging opposing affidavit, saying that he was empowered - as a director - by the Companies Act to act in the manner he was conducting EC's business and that the IBWO president had perjured herself about his July 2013 appointment.

Furthermore, the former deputy minister not only said that it was shareholders such as Mutasa who had frustrated investment in Zimbabwe's third largest telecoms firm, but sensationally claimed that Telecel was "technically insolvent".

"The audited financial statements of Telecel… for the year ending December 2013 show… total assets of… $216 million. The current and non-current liabilities were about $203 million leaving a net asset value (NAV) of less than $15 million," Zhuwao said, adding it was strange that the appellants were anticipating a $200 million valuation for the 40 percent.

"…the financial position has… since significantly deteriorated to a NAV position of less than $100 000 by end of 2014. Further… Telecel has not fully complied with licensing requirements and has up to the end of February to satisfy all requirements. Telecel is therefore seriously threatened by licensing risk," he added.

"…the business requires capital in the short term to… to undertake network improvements and… other capital activities all of which requires about $150 million. Cumulatively, Telecel requires in excess of $300 million to validate its license and undertake capital improvements… to restore its competitive stamina in the market."

With EC required to pump in a staggering $120 million to capitalise the business - based on its 40 percent share and potential equity contribution - it remains to be seen what will become of the company since the BCM cash injection has fallen through.
- dailynews