Zimbabwe: Leo Mugabe Eyeing 20 Percent Telecel Stake
President Robert Mugabe's nephew, Leo, is positioning himself to snap up a 20% stake in Telecel Zimbabwe amid reports of an escalating fight to control the country's second largest mobile phone operator.
Mugabe has reportedly formed a coalition made up of companies and organisations that were members of the Wealth Creation and Empowerment Council (WCEC), which was awarded a mobile licence by government in 1997, to buy the shareholding from Telecel International, which owns 60% of Telecel Zimbabwe.
The remaining shareholding is held by WCEC's consortium, Empowerment Corporation, a company in which Mugabe's Integrated Engineering Group is a shareholder. Telecel International needs to sell a 20% stake in the mobile company to locals to comply with the country's telecommunications regulations. The value of the 20% stake could not be established at the time of going to print last week. Other members of the Empowerment Corporation -- James Makamba and Jane Mutasa -- are also eyeing the 20% stake.
Sources in Telecel Zimbabwe and documents in possession of businessdigest revealed that Mugabe has teamed up with WCEC members -- the Zimbabwe Farmers Union, the Zimbabwe National Liberation War Veterans Association, the Indigenous Business Women's Organisation and the Small Scale Miners Association -- to have Makamba and Mutasa specified for alleged corruption.
Mugabe denies eyeing the stake, but confirmed he was working with WECC to rationalise the shareholding in Empowerment Creation. The Mugabe coalition alleged that Makamba and Mutasa transferred their shares in Empowerment Corporation to their respective companies -- Kestrel Corporation and Selpon Investments -- giving them majority control in the corporation.
In a letter dated April 27 signed by WCC chairperson Sailas Hungwe to Attorney-General Johannes Tomana, the council questioned why the state chief prosecutor had last month dropped US$1.7m fraud charges against Mutasa and others. Mutasa was arrested for defrauding Telecel Zimbabwe, but the state withdrew charges citing lack of evidence.
"In its meeting of 26 April 2010, the council resolved that ...police must investigate other fraudulent matters perpetrated by Jane Mutasa and involving fake invoices that were paid by Telecel for services which were not provided or performed," read the letter. "(Investigate) the conversion of IBWO by Jane Mutasa into her personal company, namely Selpon Investments, without the WCC's approval as per its constitution."
Earlier, WCC had written to Justice minister Patrick Chinamasa seeking the specification of the Empowerment Corporation, Mutasa and Makamba. Chinamasa's office on February 2 advised Hungwe that his ministry was no longer administering the Prevention of Corruption Act.
"The Act has been re-assigned to the Ministry of Home Affairs," read the letter from Chinamasa's office. "Your request will, therefore, be forwarded to that ministry by copy of this letter."
Mutasa last week confirmed to business sdigest the boardroom wrangle within Empowerment Creation saying problems were being fueled by greedy elements.
She said: "Greedy and ambitious individuals who never paid for their shares are the ones causing problems in Telecel and in the wealth (WCEC) council."
Mugabe on the other hand claims none of the members in Empowerment Corporation, the investment vehicle used to form a partnership in Telecel Zimbabwe, paid for the shares.
"Shares were issued out to the organisations which make up Empowerment Corporation based on the value of the licence and there is no one who paid anything," said Mugabe. "Whatever cash was used was a loan from CBZ which was borrowed against the licence and serviced using proceeds from Telecel."
Mugabe insists that there is no way he would have paid for something that was being offered for free.With Makamba specified and unable to exercise his first right of refusal and Mutasa now out of the mobile company's board, Mugabe would be closer to snap the 20% stake.
Mutasa maintains that there were shareholders who failed to pay for their stakes in Empowerment Creation resulting in her exercising her preemptive rights to shore her stake in Telecel Zimbabwe.
Mugabe on the other hand, said there is no way this could have happened as the shareholding was meant to be "as broad-based as possible" when the Empowerment Corporation was formed.
"All the shares should be returned to the original owners as of 1997 and the new stake should be kept under Empowerment Corporation," said Mugabe.
Mutasa said it would be unfair to say she converted shares to her own company as there are other shareholders, Native Investments for example, which also had shareholding despite being owned by individuals.
Two members of the Empowerment Corporation, Native Investments owned by Phillip Chiyangwa and Magamba Echimurenga, a consortium representing veterans of Zimbabwe's liberation war, cashed out their shares in Telecel.
The late war veteran leader Chenjerai Hunzvi is said to have cashed out his organisation's shares.
Shareholding in Empowerment Corporation has been changing over the years, amid allegations of manipulation by shareholders as well as the pulling out of others.
It is, however, agreed that as of 1997, Kestrel Corporation, owned by Makamba had 15% while Mugabe's Integrated Engineering Group owned 10%.
Other shareholders including Affirmative Action Group, Magamba Echimurenga, National Miners Association of Zimbabwe, IBWO and the Zimbabwe Farmers' Union had 9% each.
The remaining shareholding was shelved for future determination. According to minutes of an Empowerment Corporation meeting seen by businessdigest, Makamba is said to have sold a 20% reserved for future determination to Telecel International without the consent of other members. According to the minutes, Makamba made a commitment to return both the shares he acquired from Magamba Echimurenga, AAG, ZFU and those he allegedly sold to Telecel International.
Telecel Zimbabwe chief executive officer Aimable Mpore could not be reached for comment last week as he was abroad. Efforts also to reach Makamba over the past two weeks were in vain.