Shareholders cream off US$1,6b from Mutapa

ZIMBABWE debt restructuring talks may be in jeopardy after it emerged that the country’s liability may have shot through the roof following secretive payment of US$1,6 billion to unknown shareholders under the sovereign wealth fund, according to a latest Sentry report.

Zanu PF benefactor and tycoon Kudakwashe Tagwirei was allegedly paid US$1,6 billion for shares in Kuvimba Mining House, which owns around a dozen gold, lithium, nickel and platinum mines, under the sovereign wealth fund, whose name was changed to Mutapa Investment Fund.

Tagwirei has denied links to Kuvimba, but previous reports have linked him to the mining conglomerate.

“In 2021, The Sentry revealed how Tagwirei was a secret owner of up to 35% of Kuvimba. Tagwirei and Kuvimba deny he owns the shares, but authorities refuse to identify who received the US$1,6 billion payment for the 35% stake,” The Sentry report read.

The Sentry is an investigative and policy organisation that seeks to disable multinational predatory networks that benefit from violent conflict, repression and kleptocracy.

“If this figure is accurate, then about four-fifths of the US$1,9 billion debt incurred to allow Mutapa to revive failing State-owned enterprises has been used to pay a few private individuals.

“A US$1,6 billion price tag for a 35% stake would value Kuvimba at US$4,6 billion overall — triple the US$1,5 billion valuation given to Kuvimba by the government in 2022. This would raise serious questions about whether Mutapa has grossly overvalued the shares,” The Sentry said.

Last September, President Emmerson Mnangagwa changed the name of the Sovereign Wealth Fund to Mutapa Investment Fund through Statutory Instrument (SI) 156 of 2023.

Through the SI, Mnangagwa amended the Sovereign Wealth Fund of Zimbabwe Act, which included the transfer of government’s various shareholdings in 20 entities to the fund.

The fund is a State-owned investment fund established from balance of payment surpluses, official foreign currency operations, the proceeds of privatisation, government transfer payments, fiscal surpluses and resource earnings.

The SI removed the fund from the provisions of the country’s Public Procurement and Disposal of Public Assets Act to avoid scrutiny.

The Sentry report said transferring public wealth was concerning when the African Development Bank (AfDB) is trying to help Zimbabwe with a debt restructuring process.

“Lenders may not be comforted that debt has leapt to US$21 billion and that new debt amounting to 5% of GDP [gross domestic product] appears to have been issued for the purpose of paying shareholders in Kuvimba with possible links to a crony businessman,” the report read.

“The point of sovereign wealth funds is to preserve and grow wealth to benefit Zimbabwean citizens.

“If the report of US$1,6 billion paid to Kuvimba’s private investors is true, Zimbabwean taxpayers — who will have to repay this debt — should be angry that one of the first acts of their new sovereign wealth fund may have been to allocate wealth from the many to the few.”

Tagwirei did not respond to questions sent to him.

The Sentry recommended an audit of State-owned entities such as the Mutapa Investment Fund by the Auditor-General.

“Both the Auditor-General and the (Parliamentary) Public Accounts Committee (PAC) should urgently open inquiries into Mutapa’s acquisition of shares in Kuvimba. The PAC hearings should be held in public,” The Sentry recommendations read in part.

“Banks and other financial institutions should conduct enhanced due diligence into any entity seeking to sell (‘discount’) the Treasury Bill described in this report.

“In the past, when Sakunda, a Tagwirei-controlled company, was given US$366 million Treasury Bills for its role in running an agricultural programme, it sold parts of the debt instrument to banks at a discount in order to get access to hard currency.”

“The banks would then hold that Treasury Bill until it matured, when they could go to the central bank and redeem it for its face value plus interest.”

The Sentry called on AfDB to nudge the government to publish a list of the entities and financial institutions holding the domestic debt.

“Issues raised by the new debt issuance should be discussed in the AfDB-led structured dialogues on debt clearance, including those working groups that include civil society representatives, so that the government of Zimbabwe can explain the thinking behind the purchase of the Kuvimba shares.”

Mutapa Investment Fund is headed by former Reserve Bank of Zimbabwe governor John Mangudya.

Mangudya did not respond to questions sent to him about The Sentry report.

In March this year, Mnangagwa added seven parastatals to the Mutapa Investment Fund through SI 51 of 2024.

The entities that were added include Aurex (Private) Limited, Export Credit Guarantee Corporation of Zimbabwe (Private) Limited, Fidelity Gold Refinery (Private) Limited, HomeLink Private Limited, HomeLink Finance (Private) Limited, Zesa Holdings Private Limited and Zesa Enterprises (Private) Limited.-newsday