BY MTHANDAZO NYONI BOUSTEAD Beef UK (Pvt) Ltd director Nicholas Havercroft sold the Cold Storage Company (CSC) book debts to “himself” at a hugely discounted price, prejudicing creditors in the process.
The deal, which is not only illegal but smells of corruption, was entered into by Boustead Beef UK (company number 09860820) and CSC, on March 5, 2019.
Both companies were represented by Havercroft.
According to the debt purchase (DP) agreement dated March 5, 2019 and signed by Havercroft on behalf of CSC, the seller and Boustead Beef UK, the buyer, the CSC debt totalling US$33,072,799 was bought by Boustead Beef UK for only US$330,072 after paying 10 cents on the dollar owed.
The DP agreement was entered into after the government and Boustead Beef (Pvt) Ltd had signed the Livestock Joint Farming Concession Agreement (LJFCA) on January 22 2019.
The LJFCA deal empowered Boustead Beef to assume control of CSC’s ranches and meat processing facilities across the country, along with managing distribution centres and residential properties in Harare, Gweru and Mutare for a period of 25 years.
“In accordance with the terms and conditions contained herein, seller hereby sells, assigns, transfers and conveys to the buyer and buyer hereby purchases from seller all of sellers’ rights, title and interest in and to all of the debts outlined in the High Court scheme of arrangements…and is valued at US$33,072,799,” the agreement exclusively obtained by The Standard reads in part.
“Without limiting generality of the foregoing, the buyer shall be entitled to pay or receive any and all accounts owed or collected by any party with respect to the accounts payable or receivable, including without limitation, proceeds from any applicable insurance policies, pension policies, and outstanding rentals as outlined in section 2.4 of the LJFCA agreement.”
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A legal expert, who requested anonymity, said the DPA was illegal as it introduced a party the government had not contracted with.
“In simple terms, Boustead Beef sold the CSC book debts.
“The deal was not legal because it introduced a party government had not contracted with.
“Secondly, the debt was hugely discounted to 10 cents in the dollar, greatly prejudicing all creditors,” the legal expert said.
According to the LJFCA agreement, the government entered into an agreement with Boustead Beef Pvt Ltd, registration number 4852/2013, not Boustead Beef UK Pvt Ltd operating under company number 09860820.
Boustead Beef Pvt Ltd is a locally registered company, while Boustead Beef UK Pvt Ltd is domiciled at 78 St John Street, London, EC1M 4JA, UK.
As at September 30 2016, CSC creditors were as follows: Local suppliers for goods and services were owed US$2,6 million, foreign suppliers US$2,2 million, Wet Blue Industries US$2,3m, local authorities US6,4m, government departments and parastatals US$4,7m, outstanding pension fund contributions US$4,4m, employees US$6,0m and financial institutions US$4,4m.
CSC was placed under corporate rescue proceedings in 2020 after the government had claimed that the LJFCA was difficult to implement as creditors were threatening to attach CSC assets.
Ngoni Kudenga of BDO Zimbabwe Chartered Accountants was appointed corporate rescue practitioner, before being disqualified on conflict of interest allegations.
Kudenga was then replaced by Majoko of Majoko and Majoko Legal Practitioners.
Investigations show that Boustead, which has undertaken to invest about US$130 million into CSC over five years, has not injected any meaningful capital into the business.
Instead, the company is busy collecting rentals from tenants but not putting money into business operations, according to Majoko.
According to the LJFCA, in the first year, Boustead was expected to invest US$45 million, with US$10 million set to be channeled towards the purchase of cattle to replenish the stock.
The other money was supposed to be invested into abattoir’s refurbishment, canning factory, working capital, plant equipment among other things.
Boustead consultant, Reginald Shoko failed to respond to questions on how much they have invested into CSC operations as per the LJFCA agreement.
Investigations by our sister paper The Zimbabwe Independent have also shown that Boustead was only an agricultural start-up with a small balance sheet.
Records show that Boustead only had net capital of US$12 674 between 2013 and 2016.
The company’s directors were named as Nicholas Havecroft, Gavin Havecroft, Nicholas Lee and Harald Torbjorn Gabriel Jakob Kinde.
Checks revealed Boustead Beef is not a UK company, but a local start-up owned by Havercroft. It only commenced operations in 2013.
It was only set up by Boustead founders to raise money for the CSC deal.
The DPA further states that Boustead Beef was not assuming any liability for the obligation of the seller whatsoever.
This includes any pending legal cases or future legal cases against the seller.
“Seller agrees to cooperate with the buyer in order to notify all creditors and debtors that the accounts set forth have been discharged and or to delete the trade line associated with each account.
“Without limiting the generality of the foregoing, the seller agrees to provide to the buyer any and all backup and supporting information with respect to the services performed at or prior to closing,” it said.
“Seller agrees to provide confirmation of files received by credit reporting agencies, court documents, summons and files used to recall the accounts.
“Any liabilities, accounts, creditors, debtors not listed in the High Court scheme of arrangements shall not be for the account of the buyer.”
The DPA also indicated that the CSC has all necessary rights, authority and power to execute and deliver this agreement and to consummate the transaction contemplated hereunder.
The DPA agreement indicates that CSC has taken any and all steps “necessary to recall from any collection agency any accounts payable or receivable that were held in collections.”
“The seller shall defend, indemnify and hold the buyer harmless from and against any and all claims, liabilities and obligations of every kind any description, contingent or otherwise arising from or relating to a breach of the sellers representations, warranties or covenants hereunder and any and all actions, suits, proceedings, damages, assessments, judgements, costs and expenses (including reasonable attorney’s fees) incident to any of the foregoing.”
“This agreement may not be changed or terminated orally.
“This agreement shall be governed by and inure to the benefit of the parties, their respective heirs, executors, administrators, assigns and all other successes in interest,” it said.
According to section 2,1 of the DPA sale of transferred rights, the seller shall irrevocably sell, transfer, assign, grant and convey the transferred rights to the buyer with effect on the closing date of March 5 2019.
In return, the buyer shall irrevocably purchase the transferred rights, and assume and agree to perform and comply with the assumed obligations as laid out in the High Court scheme of arrangements with effect on and after the closing date.
Boustead Beef, the agreement states, shall not assume, or be deemed to assume, any liabilities or obligations other than the assumed obligations.
It said the CSC agreed to be and remain responsible for, and agrees to perform and comply with, any such liabilities or obligations, including the retained obligations.
“The seller agrees that, prior to the termination of this agreement in accordance with the agreement, the seller shall not, directly, or indirectly, sell, transfer, assign, grant or convey any of the transferred rights to any person other than the buyer,” it said.
Section 2.4 of the DPA states that the CSC consents to the “sale, transfer, assignment, grant and conveyance of the transferred rights and assumption of the assumed obligations, and agree to execute and deliver each related assignment and assumption.”
The agreement states that should the CSC receive any income into their company accounts, these funds should be directed to the buyer’s account and used for the benefit of the LJFCA.
According to section 6.1 of the agreement, Boustead Beef buyer may terminate the agreement with respect to the seller if the seller has failed to consummate the transactions contemplated hereby upon satisfaction of the conditions set forth in the agreement, without any further liability on the part of the buyer, provided that the buyer is not in material breach of its obligations hereunder.
At Independence in 1980, CSC was one of Zimbabwe’s major foreign currency earners, as it exported thousands of tonnes of beef to the European Union (EU).
At its peak, the beef processor and marketer used to handle up to 150 000 tonnes of beef and associated by-products annually and exported to the EU, where it had an annual quota of 9 100 tonnes of beef.
Up to 1992, CSC had a monopoly in the meat industry and when the meat industry was deregulated, the meat processor faced stiff competition.
Currently, there are 77 registered abattoirs in the space the CSC was for long the sole player.
By 2019, the CSC had a 2% market share.
Majoko said the old CSC could not be revived to what it was but could benefit from its best strengths which the competition does not have.
Its strengths lie in its spread countrywide, its facilities such as cold space, finishing and the export market.
No other player has the export capacity of the CSC because of stringent export requirements to enter export markets, regionally and internationally, he said.
Majoko’s efforts to revive the company through leveraging its assets have met with resistance, particularly from Boustead Beef and the Agriculture ministry.
The CSC owns landed property all over the country.
Majoko said it has not been possible to leverage CSC land to raise capital, either by way of sale or by way of collateral.
In a letter dated November 22, 2021 and directed to the Agriculture ministry, Majoko expressed his concerns over considerable and unresolved overlap between his functions as the corporate rescue practitioner and the management of the CSC, which was entrusted to Boustead Beef by contract.
Increasingly, that overlap is coming to the fore, he said.
“I have previously alerted the ministry to the dire situation at the Harare depot caused by the collapse of 148 metres of perimeter walling, which has left the depot unsafe as the property of the CSC is badly exposed to theft and vandalism at a time when there is no security to guard the premises,” the letter reads in part.
“In acknowledgement of the agreement between the ministry and Boustead Beef, I contacted Boustead Beef and alerted them of the crisis and requested them to attend to remedial work.
“I forwarded to the ministry Boustead Beef’s response, which was to say that they would not attend the remedial work.
“They also advised that the Harare depot was in a state no investor could possibly accept and demanded that the ministry attend to have the premises acceptable to Boustead Beef.
“I consider it my duty to have Cold Storage Company assets in working order, no matter the state they run in, if the assets can be repaired.
“I have previously reported that I have engagements with the tenants at the CSC Harare depot and that my engagements were cautiously encouraging.”
Majoko said he opened a CSC dedicated account with the National Building Society, indicating that some rental payments had been made into the account by some tenants who, to his knowledge, were not paying to Boustead Beef.
“I have outlined to Boustead Beef what I intend to have repaired using rental income,” he said.
“There, we have locked horns with Boustead Beef.”
In a letter, Majoko said there were threats to sue him should he use the rentals for the repairs because Boustead Beef did not consider him as having that authority.
“As I said, the CSC is not a party to the joint venture agreement between the ministry and Boustead Beef,” he said.
“I am not a rescue practitioner of Boustead Beef, but of the Cold Storage Company.”
Majoko said he had the cooperation of the tenants, who were willing to pay rentals and do their bit in remedial work and it is “my intention to use whatever rental income I can get to attend to the necessary repairs.”
“In some instances, this will involve having the tenants repair the infrastructure on agreement that they set off the cost against rentals.
“I am aware that the model I propose to employ has been employed with success in the Dubane and Maphaneni long-term leases.
“I find no reason why the model cannot be employed where repairs are necessary.”
Majoko pleaded with the Agriculture ministry to guide him on how he could work with Boustead Beef going forward.
“I do not want to be a lame duck corporate rescue practitioner,” he stated.
“There are expectations the creditors and general public have on what I should do as a corporate rescue practitioner.
“At the moment, I am emasculated and will be judged a failure when I have not had control of the CSC.”
Clashes between Boustead Beef and Majoko are as a result of Clause 4 of the LJFCA agreement and Section 133 of the Insolvency Act No. 7/2018.
In terms of Clause 4 of the LJFCA agreement, Boustead was expected to manage the LJFCP, run and operate the entire business unhindered by CSC and other government departments.
In terms of Section 133 of the Insolvency Act, the rescue practitioner has the full management control of the company in substitution of its board and pre-existing management, which was dissolved.
Provisions of the Act and of the LJFCA agreement are not compatible, resulting in the clashes.
Ironically, Agriculture minister Masuka, who is the former CSC board member, is not helping the situation.
He has not responded to various concerns raised by the corporate rescue practitioner, raising serious questions over his commitment to revive the meat processor.
Last month, while he was commissioning a dairy parlour project on behalf of Vice-President Constantino Chiwenga, Masuka refused to entertain questions from The Standard, saying he could not do so during the “VP’s programme”.