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Row over CSC shareholding

23 Feb, 2018 - 06:02 0 Views
Row over CSC shareholding CSC used to be the major beef processor preparing a large range of products for local and export markets. Efforts to rebuild the company have fallen foul in a row over how the rebuilding will be financed and owned.

eBusiness Weekly

Ishemunyoro Chingwere and Africa Moyo
The intended $18 million investment into the Cold Storage Company (CSC) by the National Social Security Company (NSSA) is understood to have hit turbulence, amid reports of turf battles for control of the entity between two Government ministries once money has been pumped in.

The meat processing firm, CSC, which has been in the doldrums for several years due to funding challenges, falls under the purview of the Ministry of Lands, Agriculture and Rural Resettlement while NSSA is under the supervision of the Ministry of Public Service, Labour and Social Welfare.

Business Weekly understands that NSSA wants a stake in CSC so as to protect its investment, and not be a mere investor who watches the company being managed by others from a distance.

Also, NSSA is reportedly not keen merely invest and be repaid at a later date.

Sources close to the deal say NSSA is skeptical that it might recoup its investment into CSC, given the track record of generally bad management at State enterprises and parastatals, which has resulted in several of them posting unbearable losses annually.

Government has 107 SEPs and 93 of them posted a staggering $270 million loss in 2016, amid indications that 70 percent of them – including Zesa Holdings – are technically insolvent.

It is such a trend of loss making that is thought to be the making NSSA fear it might “sink its money in a black hole”, if it does not get a stake in the firm.

This means if NSSA got its way in the transaction, CSC would literally be run by two separate ministries – Agriculture and Public Service – a position which is reportedly facing fierce criticism particularly from the Ministry of Agriculture.

Interestingly, this is not the first time that NSSA and the Ministry of Agriculture have clashed over the CSC deal.

Last year, NSSA objected to the board of directors chaired by Sylvia Khumalo Jiyane which was appointed by former Minister of Agriculture, Mechanisation and Irrigation Development, Dr Joseph Made.

The current confusion over the management of a revived CSC once NSSA invests $18 million into the firm, is alleged to have forced the prospective funder from pumping money into the business.

There have been reports this week that NSSA has already invested $20 million into the meat processor, but sources close to the deal flatly rejected the rumours saying the Authority was still holding on to the purse strings until there was clarity over shareholding.

Lands, Agriculture and Rural Resettlement Deputy Minister Davison Marapire refused to discuss the matter this week, saying he would prefer to wait for the appropriate time.

“There is nothing that I can tell you (about CSC) for now. It’s not yet ripe, but as soon as we have some feedback to give, we will come to you,” said Deputy Minister Marapire.

Both the Minister of Public Service, Labour and Social Welfare Petronella Kagonye and the Permanent Secretary, Ngoni Masoka, were said to be out of the country on business.

The Principal Director, Simon Masanga, referred questions to NSSA saying they were the best to respond on the issues currently at play but emphasised however that the deal had not yet been finalised.

“…But as ministry we are not involved. The best people to talk to is NSSA; I am sure they have the capacity to respond to all your queries,” said Masanga.

NSSA marketing and public relations executive Tendai Mutseyekwa said NSSA was pushing forward.

“NSSA is excited about the prospects of reviving CSC and intends to have the entity run professionally by a competent board and a suitably qualified management team for the benefit of all stakeholders who include the Ministry of Agriculture and Government as a whole, as well as NSSA beneficiaries.

“NSSA has seconded a resource person to do a pre-due diligence at CSC. The Authority awaits the duly signed shareholder agreements by the relevant ministries within Government, after which a robust due diligence will be conducted by competent persons. This will enable NSSA to develop a sustainable business model as well as facilitate the injection of capital within the first half of 2018,” said Mutseyekwa.

A prominent Harare lawyer who spoke on condition of anonymity said there is nothing amiss with an investor getting control of their investment.

“My hope, above all, is whoever is involved in this will reach an agreement sooner than later and allow CSC to return to its blue-chip status because time waits for no man.

“But really, this is a non-issue because remember, in the past there has been wrangling between the Ministry of Finance and their colleagues at Public Service, Labour and Social Welfare over the control of NSSA with the former wanting to know why NSSA has invested here and not there, and vice versa.

“But that is not the reason that should deny CSC its long awaited restart. If you look at NSSA as an investment vehicle they have grown into one of the biggest investors in a number of companies, so for me the issue should be about having the right people in the boards of these companies,” said the lawyer.

University of Zimbabwe lecturer Professor Isheunesu Mupepereki said if NSSA are going to invest in the CSC, then they should be allowed to have a stake in the firm.

“. . . they are allowed to control the proceedings at CSC as they are the ones who are bailing out a struggling company. To look for an investment to some other parties means that they have their own limitations.

“As long as NSSA are putting up an investment let them do what they can to make progress in the deal. If CSC continues with their thinking they are not going to come out of the murky waters,” said Prof Mupepereki.

CSC used to be the top exporter of beef to Malaysia and Europe.

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