Mutanda rejects Zimdollar TBs as payment for CAPS stake

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HARARE – Businessman, Fred Mutanda, is rejecting Treasury Bills (TBs) issued out to him by the Government as payment for his 68 percent stake in CAPS Holdings as some of the bills matured after Zimbabwe had introduced local currency, Business Weekly can exclusively.

Mutanda is insisting on payment in the US dollars as per agreement with the Government.

On November 11, 2015, Mutanda agreed to sell his CAPS stake to the Government for US$20 million.

Another agreement of US$25 million was signed on November 28, 2015 for a delictual claim by Mutanda after he was cleared of allegations that he had taken 50 doses of critical drugs manufactured by CAPS Private Limited and registering them in Europe under CAPS International, bringing the total amount to US$45 million.

Both agreements entailed that the Government, through the Reserve Bank of Zimbabwe (RBZ) would issue TBs amounting to US$45 million as payment for the shares.

On November 27, 2015, the then Finance and Economic Development Minister, Patrick Chinamasa, directed the Reserve Bank of Zimbabwe (RBZ) to issue the TBs.

A schedule seen by Business Weekly shows that the central bank issued three batches of US$6,7 million of Treasury Bills of 12 months, 24 months and 36 months on December 1, 2015 for the payment of CAPS shares at a coupon rate of 5 percent.

At the Bills’ time of maturity, the US dollars and Zimbabwe’s surrogate bond note were at par.

On December, 23, 2016, the Reserve Bank issued additional two — US$8 million Treasury Bills of 5 years at a rate of 5 percent, all matured in December last year. The last batch of US$7,5 million was issued in January 1, 2017 (at 5 percent) and is due to mature in January next year. The total TBs issued amount to US$43,5 million.

The last batches matured when Zimbabwe had scrapped the peg between its bond note and the US dollar in February 2019 and subsequently launched the interbank market where bond notes and electronic dollars known as Real Time Gross Settlement (RTGS) traded in a managed float against foreign currencies.

Zimbabwe ended the fixed exchange rate of 25 since the scrapping of the 1:1 peg after introducing the foreign currency auction system in June 2020 and the value of the Zimbabwe dollar has since depreciated by 78,4 percent against the US dollar.

Pay forex or return my shares

Mutanda argued it was unfair to redeem the maturing TBs in local currency given that the agreement between him and the Government was in United States dollars.

“If they want a settlement, they should pay me what we agreed,” Mutanda told Business Weekly in an interview. “We need to find a compromise. Our Government should act responsibly and do the right thing or they should return my company.

“When he introduced the bond note, the governor (of RBZ Dr John Mangudya) assured the nation that will be at par with the US dollars because it was backed by a Afreximbank facility. “I even wrote the Afreximbank seeking guarantees. No one can then turnaround this because of the Statutory Instrument.

“They cannot take my company for free. I never went to Government saying that I am selling my company. They can to me with the offer and said this is what we want to pay.”

Currency reforms

The Government issued the electronic currency (the RTGS) after enacting the SI 33 of 2019.

According to the law, all RTGS balances, except funds held in Nostro foreign currency accounts and loans denominated in forex, became opening balances in RTGS at par with the United States dollars. Assets and liabilities that were valued in United States dollars became RTGS dollars at a rate of one-to-one to the US dollar.

Any variance from the opening parity was to be determined from time to time by the rate at which authorised dealers under the Exchange Control Act exchange the RTGS Dollar for the United States dollar on a willing-seller willing-buyer basis.

Mutanda claims he has since returned all the money to the RBZ “and I have notified them.”

In a letter to the Minister of Industry and Commerce dated February 2, 2022, Mutanda said he had instructed the bank to return the money. “I have noticed Government has attempted to enforce…the sale and purchase agreement by paying the maturity United States dollar value, in RTGS of the same of the US dollar denominated Treasury Bills way beyond their maturity debts,” said Mutanda.

“Please note that I have instructed the bank to return the funds back to the Government.”

Industry and Commerce Minister, Dr Sekai Nzenza, declined to comment as the matter is before the courts. Dr Mangudya was not immediately available for a comment.

Mutanda has been embroiled in a wrangle with the Government over ownership of CAPS, with the businessman insisting the Government re-engaged on the agreement.

In November last year, an arbitration ruling confirmed that the Government is the majority shareholder and holds the right to appoint a board. Arbitrator Ahmed Ebrahim ruled that the appointment of the board by Dr Nzenza was lawful since CAPS had become a public entity. CAPS Pharmaceuticals Trust (CPT), a consortium of pharmacists, which claims to be CAPS shareholders had challenged the appointment, saying the Government was only a minority shareholder in CAPS.

It claimed to be the majority shareholder, owning 51 percent shareholding in CAPS (Pvt Ltd) with the remainder held by CAPS Holdings. The matter was referred to arbitration after CPT sought a provisional order prohibiting the Government and the board from being involved in the running of the affairs of the company.

The claim was on the basis that Mutanda ceded his shares to CPT after the Government threatened to invoke the Health Profession Act requiring shareholders in pharmaceutical companies to be owned by pharmacists.

In the 2011 agreement, workers held the first right of refusal should Mutanda decided to sell his shares.

Source: Business weekly