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Summary of the evidence given by Hon. Chinamasa to the Mines and
Energy Portfolio Committee
African Parliamentary Support Trust
January 10, 2011
of Justice and Legal Affairs, Hon. Patrick Chinamasa finally appeared
before the Mines and Energy Portfolio Committee today, Monday 10
January 2011, after two failed attempts by the committee to have
him appear before it in December last year. He apologized to the
committee and said his failure was due to communication breakdown
as he was out of the country when the committee first invited him.
He further said there was no way he could snub the committee as
he wanted his side of the story to be heard, especially after Mutumwa
Mawere’s presentation to the committee in November 2010.
to Mawere’s SMM Empire
Hon. Chinamasa informed the Committee that government
assisted Mawere in his bid to acquire Shabanie and Mashava Mines
(SMM) in 1996 within the context of indigenization. In this regard,
Mawere was assisted with state loans and guarantees. The Minister
said government regarded Mawere as a forerunner of indigenization
and hence the kind of favourable assistance he got from government.
For example, government even granted him a dispensation to export
outside the parameters of the Minerals Marketing Corporation of
Zimbabwe (MMCZ) in order to maximize exports and thus expedite the
payment of the purchase price.
The Minister further revealed to the committee that
Mawere never owned SMM as widely reported in the press. He said
the arrangement between Mawere and the British company (T &
N) that owned SMM was only to transfer management rights of SMM
to Mawere until such a time when he had settled US$60 million towards
the purchase of the company. Only then was SMM to be transferred
to his ownership. Mawere was to use profits or dividends towards
the purchase of SMM.
Hon. Chinamasa further claimed that instead of using
profits or dividends towards the purchase of the company, Mawere
took US$43 million from the company’s revenue (export receipts)
as payments to T&N. The Minister said this was in contravention
of section 58 of the Companies Act. Hon. Chinamasa further alleged
that Mawere was siphoning SMM funds to establish new companies under
his name in South Africa instead of investing in SMM. As a result,
SMM began to experience cash-flow problems which led to management
approaching government for bail-out.
The committee was also informed that Mawere was
supposed to settle the US$60 million purchase money within 12 months
of the agreement (1997) but he defaulted on payment. The Minister
told the committee that government only discussed that T&N had
already cancelled the agreement of sell long before the company
was put under reconstruction.
the Company under Reconstruction
Minister Chinamasa informed the committee that government’s
motivation to put SMM under reconstruction was to save the company
from further collapse and thus protect 6 500 jobs and about 60 000
people in Zvishavane mining town whose livelihoods dependent on
the mining activities of SMM one way or the other. He said government
tasked him with this responsibility since he had handled a similar
case (ZISCO STEEL) before when he was the Attorney General. To this
end, he appointed Gwaradzimba as the administrator and two other
assistants to reconstruct the company.
The idea was to convert loans and guarantees that
government advanced to SMM into equity since it was clear that the
company had become insolvent and thus in no position to pay back
what it owed to government. This the government did under the reconstruction
Act and thus acquired 76% shareholding. Government went further
and negotiated with T&N for the remainder of shares (24%) and
thus government became the sole owner of SMM.
said before Mawere entered into agreement with T&N, SMM used
to export directly to its customers. However when Mawere took over
management of the company, he created a handling company (Southern
Asbestos Sales or SAS in short) based in South Africa. He wholly
owned this company and the arrangement was that this company would
retain two and half percent of proceeds. The Minister told the committee
that Mawere, through SAS did not remit export receipts as required
by the law. Hence the government was prejudiced of US$18 million,
R4 million and some other amount in Canadian dollars.
Further to this Hon. Chinamasa accused Mawere of
fabricating fraudulent documents in order to circumvent remittance
of export receipts.
All the above-mentioned led to him and SMM being
specified in 2004 under the Prevention of Corruption Act. Chinamasa
said at the time, the administration of the Prevention of Corruption
Act was under his administration and that was how he came to be
involved in the specification of Mawere and SMM. However, he informed
the Committee that the administration of the Act has since been
transferred to the ministry of Home Affairs. As a result, he said
he was not furnished with the circumstances leading to the despecification
of Mawere and SMM.
The Minister told the Committee that although SMM
was now wholly owned by government, government did not have money
to resuscitate the company and was in the hunt for an investor.
He confirmed to the committee that government had instructed him
to only consider Chinese investors. Members wanted to know if government
would insist on this instruction given that it has taken too long
to court Chinese investors. He said government was prepared to review
this instruction on the recommendation of the SMM Administrator.
Hon. Chinamasa put the estimated cost for the resuscitation
of SMM at US$150 million.
On the plight of workers, who have gone for more
than years without pay, Hon. Chinamasa said at the moment government
did not have money to assist. These could only be addressed once
the litigation process has been finalized and a new investor found.
of Committee Business
Committees will resume business during the week
of 31 January 2011. The Mines and Energy Committee on Monday 10
January 2011 was arranged in order to accommodate the Minister’s
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