Zimbabwe: Hurdle in Govt Telecel Takeover Bid

11 November 2016

Telecoms

Government efforts to completely take over Telecel Zimbabwe through Zarnet have hit a fresh hurdle after it emerged that the Empowerment Corporation has signed an agreement to sell 15 percent of its 40 percent stake in the firm to a local investment vehicle, Brainworks Capital Management. According to information at hand, Empowerment Corporation intended to sell its shares in Telecel Zimbabwe to settle its debt with ABSA Bank Limited of South Africa.

Documents in our possession show that a Memorandum of Agreement in this regard was signed on October 13, 2016.

This comes at a time when Government is close to completing the Telecel takeover transaction that has been pending for a while due to a shortage of foreign currency to pay the total price of US$40 million agreed for Vimpelcom's 60 percent stake in Telecel Zimbabwe.

According to the agreement, Dr James Makamba signed the Memorandum of Understanding representing Kestrel Corporation, while Mr George Manyere stood in for Brainworks Capital Management.

Kestrel Corporation is wholly-owned by Dr Makamba and holds significant shareholding in Empowerment Corporation.

Other signatories to the deal are Mrs Jane Mutasa, representing Empowerment Corporation, and Mr Ian Temba of ABSA Wealth, a division of ABSA.

Commenting on the latest developments yesterday, Information Communication Technology and Courier Services Minister Supa Mandiwanzira said details will be released once everything was completed.

He said Government's intention remained to own 100 percent of Telecel and sanitise the business.

Possibly after two years, Minister Mandiwanzira said, Government would then decide whether to dispose or to list on the Stock Exchange.

He said the other option was to entirely retain the business.

"I have heard of what you are saying (sell of Empowerment Corporation), but can I make it very clear that the Government is clear itself, please underline very clear, that it is going to own 100 percent of Telecel.

"We would rather advise that anyone who wants to do a transaction, come and talk to Government first.

"The Government is very clear that Telecel was founded on the basis of empowering Zimbabwean people in various walks of life among them war veterans, small-scale miners, women in business and members of the Affirmative Action Group, among others.

"Somehow along the way, the intended beneficiaries have cried foul and squabbling among the shareholders has stunted growth at the mobile operator. Therefore, our intention is very simple. We are taking over 100 percent to clean it up, and anyone intending to do some side transactions must take note of this serious Government interest."

Part of the MoU signed by Economic Empowerment and Brainworks reads: "Brainworks shall acquire from Empowerment Corporation 15, 50 percent of the issued share capital of Telecel Zimbabwe Limited (Sale shares) for an aggregate purchase price of US$7,750,000. 00 (Purchase price). The purchase price shall be settled in accordance with clauses 2 and 3 below.

"Payment of US$2,750,000 of the purchase price shall be satisfied on completion by way of set-off against the Brainworks liability which Brainworks shall sell and cede to Empowerment Corporation in settlement of US$2,750,000.00 of the purchase price. Empowerment Corporation shall immediately thereafter carry out a share buy back of the proportionate shares held by Kestrel in Empowerment Corporation in final settlement of the Brainworks liability by Kestrel."

The agreement further reads: "The balance of the purchase price not settled in accordance with clause 2 9 being US$5,000,000. 00) shall be satisfied in the amounts and on the dates set out in sub clauses a) to c) below.

"All payments shall be made by Brainworks without deduction or set off and such payments shall, when made, constitute settlement in full of the purchase price and settlement in full of the ABSA liability:

"On completion, US$2,200,000 into a Zimbabwean bank account nominated by ABSA. On completion, US$500 000 immediately into an account as nominated by Nedbank to meet advisory fees and costs for the transaction subject to Reserve Bank of Zimbabwe approval and on completion US$800,000 and 10 equal monthly payments thereafter of US$150,000.00 directly into an account as nominated by ABSA subject to Reserve Bank of Zimbabwe approval of the offshore deferred payment to ABSA."

Brainworks Capital Management chief executive Mr George Manyere yesterday confirmed the development.

He said they are owed money by Empowerment Corporation and EC had offered to settle its debt using its Telecel Zimbabwe shares.

"It's not correct to say we have purchased shares in Telecel Zimbabwe, but we have money that we are owed by Empowerment Corporation and they had offered to pay using those shares," he said.

"Government has to exercise its right to purchase the shares and our only interest is to recover our money. If we are paid in cash, then its fine."

Asked on whether paying the money to a South African bank does not amount to externalisation of funds, Mr Manyere said everything would be done with the approval of the apex bank, adding that the money was not likely to leave Zimbabwe.

Source: The Herald 9 November 2016