HomeLocal NewsMawere destroyed SMM — Chinamasa

Mawere destroyed SMM — Chinamasa

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Justice and Legal Affairs minister Patrick Chinamasa Monday said business mogul Mutumwa Mawere did not own Shabanie Mashaba Mines Holdings anymore and that he (Mawere) had caused the total collapse of the asbestos mines through fraud.

Chinamasa told the Parliament Portfolio Committee on Mines and Energy, chaired by Guruve South MP, Edward Chindori Chininga, that SMM Holdings was now owned by the people of Zimbabwe and government.

He said Mawere never paid the $60 million required of him to complete the sale and purchase agreement with T&N Plc (formerly known as Turner and Newell Plc), which is a company registered in the United Kingdom since he did not have the funding for the transaction.

Chinamasa said SMM Holdings needed an investment injection of $115 million to bring it back on track.

“The situation right now is that SMM Holdings is 100% owned by government,” said Chinamasa. “He has never been the owner even on the basis of the sale and purchase agreement and we gave him de-facto control of the companies, but not ownership – as ownership of SMM Holdings resides with the government of Zimbabwe, 100%.”

He said after Mawere failed to get funding to purchase SMM Holdings, an arrangement had to be made between Mawere and T&N with the concurrence of the government to assist him to purchase the mines as an indigenisation promotion endeavour.

When Mawere appeared before the Mines and Energy Committee, he accused Chinamasa of fraudulently taking over his companies using the Reconstruction Act and said that particular Act had never been used on any other person except him.

He said Chinamasa used the State Indebted Insolvency Companies Act and the Reconstruction of State Indebted Insolvent companies Act to fraudulently wrest his companies from him.

However, according to Chinamasa, the purchase price of SMM Holdings was supposed to be paid from the operations of the mines if they made profits, but Mawere fraudulently used SMM Holdings to pay for his shares to the company, resulting in the financial quagmire that the mines then later fell into.

“You cannot use company resources to pay for your own shares, and Mawere actually used the company to pay for the shares of SMM Holdings. He did not pay from the profits but paid from revenue receipts of asbestos proceeds,” said Chinamasa.

He said this was done in contravention of Section 58 of the Companies Act, which prohibited companies to use their own resources to pay for shares.

“From my point of view, this came to light after we had appointed an administrator and information started emerging that we were pumping money that was not producing results and we realized we had dug a big hole which could not be filled,” he said.

He went on: “Instead, $43 million was paid from export proceeds towards payment of the $60 million owing. The company was deprived of vital capital to pay wages, purchase raw materials, and pay Zesa, Zimra and other debts.”

Chinamasa said Mawere paid $43 million towards the purchase of SMM Holdings but that money had been siphoned from SMM Holdings, causing the company to be financially broke to the extent that it could not make any meaningful repairs of its plant and machinery, let alone mining development due to cash flow problems.

“This marked the beginning of the downfall of SMM Holdings, in particular Africa Associated Mines and to save SMM Holdings from closing its operations at the mines due to its cash flow problems government had to borrow $60 million from KBC bank as well as guarantee an amount of Z$ equivalent to $18 million through the Minerals Marketing Coorporation Zimbabwe (MMCZ) to provide working capital assistance to SMM Holdings,” said Chinamasa.

He said Mawere also abused the dispensations granted to SMM Holdings in addition to other frauds and illegalities like the forming of a company, Southern Asbestos Sales (SAS), which he registered in South Africa and whose sole business was to act as agent/buyer of asbestos from AA mines and export some to overseas customers.

He said SAS never remitted money that it was supposed to remit to the government of Zimbabwe.

“As at September 6 2004, SAS had withheld or not remitted to Zimbabwe $18 464 071.27, ZAR4 513 025.28, and Canadian $628 071.84 due to SMM Holdings. The non-remittance of these amounts ensured the demise of SMM Holdings because the company could no longer meet its working capital and capital expenditure requirements,” Chinamasa said.

He said to ensure these amounts were not remitted to Zimbabwe, Mawere had instigated, engineered, authorised or uttered a Fraudulent Cessation Agreement in which these amounts were ceded by SAS to Petter Trading, another company owned by Mawere in South Africa.

Chinamasa said following the externalization of the amounts by Mawere, SMM Holdings experienced serious cash flow problems and when the company could not pay wages and ZESA was threatening to cut off electricity, SMM Holdings became over borrowed to almost all banks in Zimbabwe to the extent that the company could no longer be able to borrow from banks in Zimbabwe and elsewhere, resulting in the company being declared insolvent.

He said that was when a specification order was issued against Mawere and an investigator mandated to investigate the conduct or involvement of Mawere in the downfall of SMM Holdings, particularly AA mines, and the Reconstruction order issued in respect of SMM Holdings.

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