President Robert Mugabe and National Indigenisation and Empowerment Board (NIEB) chairperson David Chapfika have handed Nigel Chanakira – founder and minority shareholder of Kingdom Financial Holdings Limited (KFHL) – substantial political support to repossess the banking institution he lost last month.
President Mugabe at the weekend said Meikles is obliged to sell its 42,9% stake in KFHL to Chanakira who has the right of first refusal, in terms of the underlying provisions of the Indigenisation and Empowerment Act and general regulations.
The general regulations, which put the principal Act into force, were gazetted in January and amended in June. “We have said ownership should be 51% local and 49% foreign,” Mugabe said. “We should not be afraid to take what is ours. If it is in South Africa then foreign rules would apply.”
Chanakira is sweating to repossess KFHL by bulking up from his current 2,58% after he lost a boardroom war with John Moxon, who controlled Kingdom Meikles Limited (KML) – the merger of KFHL and Meikles Limited.
Meikles Limited last month rejected Chanakira’s bid to buy back the banking institution saying his payment plan was not convincing and announced it would proceed with its demerger, retaining control of KFHL.
The company – which is controlled by the Meikles family, led by Moxon – had asked Chanakira to pay $15 million in two tranches and given him up to August 6 to submit a payment plan.
But Chapfika yesterday said Chanakira had up to five years to raise money and pay for Meikles’ stake in KFHL in terms of Zimbabwe’s Indigenisation and Empowerment Act and its subsidiary legislation.
“Under the Act, indigenous people have up to five years within which they are expected to pay (for they equity),” Chapfika said. “Proposals should be put in place on how Chanakira can make payments.
“There is no way he can be asked to pay the money immediately. Moxon will get a fair compensation but over a period of time.”
In terms of indigenisation general regulations, all mergers and acquisitions should “immediately” comply with the law, which legally sets aside 51% equity to indigenous players.
Chapfika said Meikles Limited should promptly amend the terms of its demerger with KFHL and restore Chanakira’s pre-emptive rights to re-align the deal with the law.
Failure to abide by the “inviolable provisions”, NIEB would invoke the Indeginisation and Empowerment Act to enforce compliance. Early this month, Finance Minister Tendai Biti and Reserve Bank of Zimbabwe governor Gideon Gono also said the monetary and fiscal authorities would intervene in the corporate saga, which triggered specifications and threats of arrests last year, to restore battered client and investor confidence in Kingdom Bank.
The interventions may also see Chanakira redeeming his pre-emptive rights to a 10,5% stake that Econet Wireless Zimbabwe’s EW Capital “sold” to a consortium led by Rugare Gumbo after Chanakira allegedly refused to resign from KML by the deadline stated by their agreement.
In the agreement, Econet and Chanakira’s Valleyfield Investments had agreed to “exchange, swap and trade” their shares in KFHL and KML on a one-to-one basis.
The embattled banker says he had agreed to the demerger deal on the understanding that Meikles Limited and Econet Wireless Zimbabwe would sell their equity interest in KFHL to him.
But the terms recommended by the Meikles board this month give board control of KFHL to Moxon after the demerger.
Meikles Limited would retain 42,9% of KFHL, 75% of TM Supermarkets and 100% of Tanganda Tea Company, Thomas Meikles Centre, which holds the hotels division and department stores, and Cotton Printers, now in liquidation.