CSC revival isn’t going anywhere?

THE contract between the Zimbabwean Government and UK-based investor Boustead Beef to revive Cold Storage Company may no longer be binding after the latter failed to meet almost all the conditions within the agreed timeframe.

Boustead Beef entered into a 25-year joint venture agreement with the Government in January 2019 to revive once the country’s largest meat processor under a US$400 million deal, but investigations by Business Weekly have revealed that there was no meaningful cash injection into the business by the investor.

This is contrary to claims by CSC-Boustead Beef management that the revival of the business was on course and that fresh capital was being injected to modernise its operations.

Some of the conditions entailed Boustead, upon signing the agreement, demonstrating proof of funding to the tune of US$130 million within four months.

The money was supposed to be raised and invested over five years, starting with US$45 million in the first year-for working capital and capital expenditure.

Upon signing the agreement, all CSC title deeds for industrial and residential properties were to be lodged with Ecobank for “safekeeping.”

It has since been established these conditions, among others, have not been met, rendering the agreement non-binding.

“Conditions precedent are key conditions that have to be satisfied for a contract to become effective,” Godknows Hofisi, a corporate legal consultant said.

“They can be interpreted as a roadblock. If conditions precedent are not met, depending on the wording of the agreement and the gravity, this normally constitutes a breach that renders the agreement invalid. In other words, there will be no binding agreement.”

People familiar with the developments told Business Weekly the current situation at CSC was worse than it was when the Government and Boustead signed the agreement.

“What has happened over the years is vandalism, theft, and asset stripping,” said one person, who declined to be identified.

“We are always surprised to hear them telling the nation that CSC is set for re-opening. It’s not true. All the little activities that you see on social media or in the mainstream media are just to divert attention.”

“Properties; residential and commercial are being leased out. The cattle ranches are being leased out and you then wonder where the money is going,” the source added.

Last week, CSC claimed that the Bulawayo plant would be opened this week, a claim disputed by another source: “They don’t have animals to slaughter; there is nothing in feedlots. All they have are breeding animals…challenge them to prove their claim.”

Boustead has persistently maintained that the revival of CSC was well on course, but blamed pending legal issues for the slow pace, besides the company being under corporate rescue.

Corporate rescue also known by other terms such as business rescue or judicial management is done in terms of the Insolvency Act.

It involves, inter alia, temporary supervision, and management of the company by a corporate rescue practitioner, a temporary moratorium (relief) on the rights of creditors against the company, and the development of a plan to rescue the firm.

Vonani Majoko of Majoko and Majoko Legal Practitioners was in April last year nominated interim corporate rescue practitioner.

The progress report on CSC, prepared by Majokos’ advisor and turnaround consultants Clifford Mushambadzi and Crispen Mwete, said there were no signs that the company was being revived.

They said on-site visits exposed asset stripping, cannibalising, thefts, and vandalism of CSC assets, especially in Chinhoyi and Marondera.

Except for Gweru, most sites look abandoned, with security fences missing and inadequate security arrangements.

The report said Boustead Beef has denied recognising Majoko’s mandate and authority. “(Boustead Beef . . . they have refused to recognise the CRP’s mandate and authority in terms of the Insolvency Act Chap 133. Their approach to implementing the joint venture agreement with the Government is abusive to CSC business partners and is frustrating the CRP’s efforts to achieve a rapid corporate rescue.

“This has placed CSC assets and sound business arrangements at risk,” reads part of the report
CSC Boustead Beef consultant Mr Reggie Shoko said progress on CSC revival had largely been affected by the Covid-19.

This was a departure from earlier claims that pending legal matters were the major impediment to the revival of the company.

“After entering into the JV with the Government we were affected by Covid-19 in terms of reviving CSC,” said Shoko.

Asked how much the investor had invested into the business so far, he said “in terms of the amount that we have spent on major capital equipment, I cannot give you the figures off hand but if you can hold your story until Tuesday next week, I will be able to give yousuch information.”

Asked about the claims that Boustead Beef has refused to recognise the Corporate Rescue Practitioner’s mandate and authority in terms of the Insolvency Act, he responded: “Once an organisation has been placed under corporate rescue, that company must be rescued within 90 days.

“CSC was put under corporate rescue to enhance the joint venture agreement that Boustead Beef entered with the Government.

In this case, the CRP’s time has lapsed and since his appointment, it’s been over 15 months now, he has not called for any creditor’s meeting.”-eBusiness Weekly