Fight for CSC is more for its US$100 million assets than reviving operations

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Boustead Beef, which entered into an agreement with the Zimbabwe government four years ago to revive the Cold Storage Company, seems to be more interested in the company’s assets than in reviving its operations.

The assets are said to be worth about US$100 million today.

Boustead Beef, which came in as a British investor but is fronted by a former Marondera farmer, Nick Havercroft, was handed over title deeds to CSC properties on 31 January 2019.

According to documents signed by Robert Verworn who represented Boustead Beef, the assets included abattoirs, distribution/selling depots and the canning plant which were valued at US$33.7 million; ranches and feedlots worth US$1.5 million; and residential properties estimated at US$3.9 million.

The assets were officially handed over to Boustead Beef on 22 February 2019 when the Ministry of Lands and Agriculture and Boustead Beef Zimbabwe signed the Joint Livestock Farming Concession Agreement.

According to a letter from the then Permanent Secretary for Lands and Agriculture, Ringson Chitsiko, to the CSC management, dated 27 February 2019, Boustead Beef was given “the full control and management of all assets and operations of the former Cold Storage Company” from that date.

“The former Cold Storage Company is now defunct and the former board has been dissolved with immediate effect,” the letter said.

“My ministry expects you to render full cooperation to Boustead Beef Zimbabwe and make all documents available.

“Please insure (sic) that all members of staff are informed. It is vital that the revival of the Cold Storage Company is speeded up for the benefit of all citizens of our country…”

The CSC assets were, however, worth considerably more because an independent valuation done the previous year, 2018, said that the assets had a fair market value of US$32.6 million and a book value of US$84.8 million.  This translates to US$98.7 million today in US dollar inflation adjusted terms.

According to a statement issued by Information Minister Monica Mutsvangwa in a post-cabinet briefing in May, Boustead Beef was supposed to:

  • raise and invest a minimum of US$130 million into CSC over five years, being for both capital expenditures and working capital for the business;
  • pay off CSC financial debts totalling US$42 530 597;
  • pay rentals of US$100 000 per annum during the first five years of the concession agreement;
  • take over and run the management of the following CSC ranches for an initial period of 25 years: Maphaneni; Dubane; Umguza; Chivumbuni; Mushandike; Willsgrove; and Darwendale;
  • take over and run the management of the following abattoirs for an initial period of 25 years: Bulawayo; Chinhoyi; Masvingo; Marondera; and Kadoma; and
  • take over and manage for an initial period of 25 years, the Harare, Gweru and Mutare distribution centres and residential properties of CSC.

The Agreement also said that Boustead Beef should invest US$45 million in the first year, as follows:

  • Refurbishing of abattoirs, canning factory, distribution US$6 million.
  • Working capital abattoirs, canning factory, distribution US$5 million.
  • Logistic fleet, vehicles, distribution- abattoirs US$2 million.
  • IT systems/meat matex/stock control/etc US$3 million.
  • External cattle purchase facility US$5 million.
  • External buy back facility for processed beef US$5 million.
  • Capital expenditure ranches and feedlots US$4.5 million.
  • Working capital ranches and feedlots US$3 million
  • Logistics fleet ranches, vehicles US$1.5 million
  • Cattle purchase US$10 million

None of this was done. Besides, though the agreement said that Boustead Beef must provide proof of funds four months after signing the agreement, this was never done.
Although Chitsiko told CSC management not to interfere with Boustead Beef to speed up the CSC’s revival, it was clear by September 2019 that Boustead Beef did not have the capacity to revive the company.

It had not invested any money and was using rent from CSC properties to pay workers paltry wages. It closed operations telling workers that it was refurbishing the plant and would re-open in four months. But after the four months, it advised workers in February 2020, that it was retrenching them to make a clean start.  The retrenchment packages were so pathetic that one worker who had served 43 years was told to walk away with less than US$300.

It was,however, only on 9 September 2020, that new Lands and Agriculture Minister Anxious Masuka told Parliament that Boustead Beef had failed to revive the CSC.

Asked by Mzingwane legislator Levi Mayihlome about the future of the CSC, Masuka replied: “As the Hon. Member might be aware, the CSC has gone through very turbulent times over the past 10 to 15 years to an extent that it is operating at between 8 and 10% capacity and all its ranches are literally moribund.

“To that extent, Government scouted for a partner that came on board with certain performance parameters.  Unfortunately, those performance parameters have not been fully met and Government is in the process of reviewing that arrangement so that CSC can get back to what it used to be – to develop the lives of industry and complement Government efforts especially in the light of the recently launched livestock growth plan.”
When asked whether the government had no capacity to do proper due diligence on a partner before engaging them, Masuka replied that this was not the case.

“The Hon. Member wants to know whether or not we have failed to do the sufficient due diligence before a partner comes on board.  Mr. Speaker Sir, the simple answer is no, we have not. However, to clarify that further, I think certain aspects of that agreement were premised on certain preemptive processes that were time bound and that did not happen, which I think Government did the right thing to proactively look and see at if these preemptive processes have not been fulfilled in the first year or so – what is the likelihood that the performance parameters in year 2022 could be fulfilled.

“So I think Government ought to be applauded for having reacted this fast to begin the process of reversing this process before we went far in it and saying the partner can you do more.  So I think the Government has capacity to vet possible partners and Government has done the right thing. Very soon Government will be able to indicate the way forward so that CSC can play its rightful role.”

Although the government appointed a corporate rescuer for the CSC in December 2020, Boustead Beef is still running the show. Ngoni Kudenga, who was appointed the first rescuer never did the job after he was disqualified by the creditors who cited conflict of interest because of his business relationship with Masuka.

Boustead Beef also filed a claim as one of the creditors, something that baffled government officials who thought it was their partner.

Kudenga was replaced by Vonani Majoko but he was removed on 7 July this year. His operations, Majoko claimed, were paralysed by Boustead Beef because it refused to cooperate with him.

Majoko said Boustead Beef collected 70% of the rentals from CSC properties and he collected only 30%.

Boustead Beef, which claimed that it was refurbishing the Bulawayo factory, invited Vice-President Constantino Chiwenga to officially commission the plant in August this year but this turned out to be a sham.

The company has not resumed full operations up to now but announced in November that it had entered into long-term partnership with a United States investor, Ethos Asset Management ro revive the CSC.

Though no figures were mentioned then, a report in the Independent last week claimed that Ethos was planning to invest US$100 million with the first US$20 million expected this month but this had been scuttled because of squabbles with Majoko.

There are fears that Boustead Beef might have used CSC assets as collateral for the Ethos financing as they are worth the amount Ethos is said to be planning to invest.

Some of the title deeds are, however, held by local banks as collateral.

It is not clear how much the CSC debt now is but it  was US$42.5 million when the government entered into agreement with Boustead Beef.

Source: Insiderzim