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Brian and Mutumwa’s Chat Room Part 3 – The Constitutionality of The Reconstruction Act and Specification Measures in the SMM Saga

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3 years ago

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Brian and Mutumwa`s Chat Room is a zwnews24 column on an interview series between businessman Mutumwa Mawere and 1873 Radio`s Brian Tawanda Manyati (BTM) under the Connections2Communities (C2C) Conversations. 

In these interviews, Brian and Mutumwa talk about various issues that happen across the spectrum of human life in order to raise community awareness and participation towards societal development. 

This third episode touches on Presidential Powers as well as Specification and Reconstruction Orders with intention to analyze and assess the impact thereof on the socio-economic environment, with the ZIMRE judgment still being our case study.

BTM: Mr Mawere, welcome to today’s episode of the Brian and Mutumwa’s Chatroom. Would you please shed more light on the constitutional rights of THZ in relation to its property being the shares held in UKI and ENDURITE and the rights of ZIMRE in relation to SMM? 

Mutumwa Mawere: “It was SMM that was placed under extrajudicial reconstruction and not ZIMRE since ZIMRE was a separate legal persona with its own creditors and shareholders. Zimre was commanded into reconstruction without its knowledge and consent.”

The role of the Investigator was to protect the property of the specified and yet the intent was to use the rights issue to dilute and compromise the control of ZIMRE by THZ’s 2 subsidiaries. 

The question is on whether a specification order can be used to enable the divestment of assets and deprivation of property rights. If one follows the facts of this case, is it easy to arrive at a conclusion that the Court was used to undermine the rule of law?

BTM: Section No. 3 of the old Constitution had the following areas for consideration:

# Protection from deprivation of property – No property of any kind can be compulsorily acquired or taken away except under the authority of the law.

# Protection of the law – every person is entitled of the law, e.g. if charged with a criminal offense; he or she should be given fair trial within a reasonable time by an independent and unbiased court, open to the public.

From your understanding, which section was used in the ZIMRE case?

Mutumwa Mawere: As regards the ZIMRE judgment, we should be asking what the role of Mawere was in the court proceedings before Judge Makarau. How can a judge dismiss an application that is before the Court simply on account of the status of a witness? 

BTM: What the judge did was tantamount to lifting the corporate veil and there was no corporate fraud against anyone under the circumstances of the ZIMRE case to have warranted lifting of a veil of THZ to the extent of attaching a witness to its matters.

Mutumwa Mawere: Did the judge make any observation on corporate veil or she erroneously believed that a deponent can create and disqualify authority? Was there a dispute before requiring an inquiry into the corporate veil issue?

BTM: I am exposing the actual thing she did, albeit incorrectly.

Mutumwa Mawere: Do you agree that the learned Judge erred in not having regard to the fact that it was THZH’s litigation that was before her and it was irrelevant as to who deposed to the affidavit in support of THZH’s application? What does equal justice under law mean to you? If Makarau did not honor this promise, do you on reflection think she is fit to be a judge?

Mutumwa Mawere: What does equal justice mean?

BTM: Indiscrimination e.g. non-discrimination of a specified person.

Mutumwa Mawere: I mean generally. Equal justice is usually taken to mean equal access to justice, which in turn is taken to mean access to law. But as is frequently noted, a purely procedural understanding by no means captures our aspirations and for a reason those who receive their “day in court” do not always feel that “justice has been done. Her reading of the law in relation to specification is what she relied upon to conclude as you do?

BTM: In my view, even though you were specified, you were not part of the dispute, but THZ though not so specified, she sought to use it still to barricade you from even testifying, and that was harsh on her part.

Mutumwa Mawere: Is this not a separate matter dealing with the limitations imposed on a specified person? Do you agree that the circumference of what a specified person can do or not is a subject matter that has yet to be sufficiently tested for a shared understanding to be established?

BTM: Yes. A company has separate legal persona from the natural person as per Salomon versus Salomon & Co Ltd (1897), however, the action of looking into the company to identify its owner/s is known as “piercing or lifting the corporate veil” as per the cases of Daimler Company Ltd v Continental Tyre Co (1916) or Gumede v Bandhla Vukani Bakiti (1950). Fraud cases often cause lifting of corporate veil to apply especially where corrupt shareowners or senior executives or owner managers operate under the guise of a company which they earmark for winding up in order to avoid heavy fines (such as the penalty of gaol) should their crimes land them in court (out of knowing the company cannot go to gaol).

Mutumwa Mawere: There was no dispute of fraud before Makarau as far as I know. Mawere was not a party to the proceedings. He was authorized by an aggrieved party. None of the companies in the cause were accused of fraud in this specific matter.

BTM: Yes the aggrieved party THZ gave permission to Mawere to be a witness. THZ wasn’t specified. It wasn’t under the investigator. Only Mawere was under the investigator’s ambit, albeit under a separate matter with nothing to do with Zimre. So I am trying as much to find out how strong or weak would be the thinking that THZ must have authorized Mawere through the investigator, or that Mawere himself for knowing he is under an investigator must have gone to the investigator and said THZ wants me witnessing do you permit it, or anything else along those lines? Help me to be full proof with just this part.

Mutumwa Mawere: The facts are as what they are. The judge was confronted with a case of whether to recognize the authority of an administrator to interpose himself in the affairs of separate juristic entities especially where constitutional and property rights were involved. Did she discharge this duty of defending rights? 

BTM: When asked to quantify, I am 90% towards saying No, she did not speculate. The question is on finding out how she reached that position and testing the strength or weakness of the pathway she used to getting to that.

Mutumwa Mawere: Why speculate when the primary basis is explained? According to her a specified person enjoys qualified rights even as a witness.

BTM: The judge says “if I have made an error I have another basis, we need to then give close scrutiny to that basis she only is fully or assuredly relying on it in coming to her ruling.

Mutumwa Mawere: We can only rely on what she converted into writing and not what could have been in her mind.

BTM: I thought that too, may be I went a bit further, that does it have to be stated in black and white or it has to be applied as a matter of a principle of law simply? It is why I started today with wanting to read cases where this principle of veil uncovering was used on my own.

Mutumwa Mawere: If you want to create a new dispute, then you can no longer rely on the judgment. The court was approached by parties to a dispute and that dispute was provoked and triggered by ZIMRE in proposing a rights issue and giving its directors powers to allocate shares without shareholders being given the opportunity to exercise their rights over this action that could have the effect of unfettered discretionary power being given to directors. 

BTM: No I do not want to create a new dispute. I am still dwelling on the ZIMRE judgment. 

Mutumwa Mawere: The issue was about the control of ZIMRE that was now a subject of conspiracy between the management of the company and the government whose actors had created a series of events to prevent any legal resistance to the corrupt scheme to take control via a purported rights offer.

BTM: This I located using the judgment yes. If you remember when I said “The second resolution of the ZIMRE EGM as read from the judgment sought to make a renounceable rights offer which would result in unissued shares controlled by the directors for an indefinite period.”

I went on to ask, “Was it, in your view, so as to create a vacuum for creation of a shareholder later on, thus diluting control later on?”

And stated that, “If yes one of the proxies of the two associate companies, which is you, whose vote against was acknowledged while that of Mr. De Bourbon was rejected, noticed this loophole and hence you wanted your proxy vote standing against such potentially calculated dilution (only borrowing a term from financial reporting it may stand akin to “aggressive accounting” whatever was being done, whereby citable laws/principles/rules/standards are used yes, but in a creative/evasion sense that the prudent/compliance sense). 

The above said, however, the other proxy representing the associate entities Endurite and UKI as appointed by the directors of the associate entities and per investigator’s approval may genuinely have not picked out this loophole or were in a deliberate ploy against their parent’s (THZ’s) stake or they acted the manner they did as part of seeking return favors from government (in the sense that since given both of them had been deemed as specified and could only do things through the investigator which on its own is a potential case of undue influence/duress), they so voted for the resolution and not in line with their parent. 

The judge too may have not picked the ‘statecraft’ but in using the umbrella of the specification order, picked a procedural wrong on your part thus the lack of locus standi based ruling reached in the ZIMRE judgment.”

Mutumwa Mawere: Therefore, the question would be whether the judge was blind to the scheme whose effect was to undermine the rights that the constitution compelled her to protect and defend. The idea is to focus on the key issues arising from what was before the Court and whether the promise of justice was met.

BTM: Furthermore, kindly note that below are 3 questions merged. In the case of Brown v British Abrassive Wheel Company (1919) on alteration of articles of association, the company needed additional finance and the majority shareholders holding 98% of capital were prepared to provide this if they could buy out the 2% minority. The minority refused to sell. The articles were then altered to give the majority shareholders the right to buy the 2% shares. It was held that such alteration was not for the benefit of the company. It amounted to oppression of the minority. What have you to say Mr. Mawere on the above case in relation to the ZIMRE judgment?

Am I observing right that in the ZIMRE judgment what the judge may have not noticed was a crafty intention to place renounceable rights in the hands of the directors for an indefinite period of time, but potentially this could lead to alteration of control of ZIMRE, creation of a swayed majority later, and lead to an effective buy out of a minority created from what was the associate stake of Endurite and UKI at first? Or simply to create a case of an Endurite and UKI which will now be a toothless bulldog say from having their stake altered from state of significant influence (associate status) to a simple interest. With this above also what becomes of interest is what has become of ZIMRE to date post the ZIMRE judgment of 2005, shareholder ship wise. May we benefit using hindsight?

Mutumwa Mawere: There is no suggestion that ZIMRE needed capital and this issue was not before the Court. The issue if it existed would have been known to UKI and Endurite. The significant shareholders of the company were deliberately left out of the loop and the case you refer to bears no resemblance to the true facts of the ZIMRE case. The judge was supposed to look at the facts and the law. The issue that the judge ought to have looked at is whether the Minister should have had the cake and eat it. He specified UKI, Endurite, SMM, and myself and in doing so became a gatekeeper to these parties from seeking the benefit of using the courts to defend their constitutional rights. The resolutions were passed and implemented resulting in the government’s nominees buying the shares placed under the control of ZIMRE directors.

BTM: According to our insolvency law, as governed by the Insolvency Act 06:04, insolvency in general occurs in two ways: first a debtor overweighed by his or her debt and cautiously pestered by his or her creditors recognizes that his or her position is precarious and voluntarily surrenders his or her own estate for the benefit of the creditors; and second, by way of compulsory sequestration whereby the creditors make a court application to have the debtor ordered as insolvent or taken to have committed an act of insolvency. Usually when he or she leaves the country or being out of the country or remains absent with intent to evade or delay the payment of debt. Is any of this particularly relevant to the matters of SMM kindly?

Critical to this is the Insolvency Act which seeks to rehabilitate, because the Insolvency estate remains in the hands of the trustee (basically the investigator in SMM’s case) until rehabilitation. The State clearly created something outside the law with the Presidential Powers regulations of 2004 used to place SMM on reconstruction and later went on to the courts in Nov 2005 to get that act graced at law now. A single creditor for SMM was created name the State, hence the use of phrase “State indebtedness”. Effectively a compulsory sequestration of SMM was sought by a solo creditor namely “the State” in a procedure more or less similar to that the Insolvency Act provides for, but in SMM’s case the Presidential Powers regulations remains an order coming from outside the confines of the law including the Insolvency Act itself. 

Because of this anomaly, I am failing to find how a compulsory reconstruction order as was created, alters the duties of a specified person (the insolvent person now officially declared so using a regulation as of 2004 created outside the law), duties which by and large are similar to duties of an insolvent person during sequestration? What was really going on?

Mutumwa Mawere: There is no comparison between the Insolvency Act and the Reconstruction Act. The Reconstruction Act presumes that a company is divisible into state indebted and Insolvent class and the rest that are not when a company is a company irrespective of who it is indebted to. The equality before the law doctrine precludes any creditor being a special one like the state. The constitution is founded on the doctrine of separation of powers that precludes the executive to assume powers reserved for the courts in the case of Insolvency. It is the court in the event of a dispute that has inherent jurisdiction to determine the existence of indebtedness between equal debtor/creditor parties. It is only when the indebtedness is established that the quantum can be ascertained by the court before insolvency can be tested and established. A creditor is barred from unilaterally establishing indebtedness, quantum and insolvency.

BTM: Furthermore, the duties of an insolvent person during sequestration cause all property he or she acquires to remain in the insolvent estate. He or she can enter into valid contracts but an appointed trustee (admin/investigator) can opt out if transaction prejudices the insolvent. He or she may also follow any profession or occupation or enter into employment contracts and may be sued or sue in his or her own rights, etc. Somehow, this Insolvency law is enforcing the insolvent person’s rights, and so, how come the Presidential Powers regulations of 2004 that the Minister used to allege the Insolvency claim and subsequently unleash a reconstruction order immediately, are more like usurping all the duties (effectively rights) a specified person has during reconstruction (sequestration)?

Is it the case that someone is was trying to implement the second way of coming up with insolvency, however, wrongly? That is, by way of compulsory sequestration whereby the creditors make a court application (but here State as a Solo creditor) would have the debtor ordered as insolvent or taken to have committed an act of insolvency as is usually the case when he or she leaves the country or being out of the country, or remains absent with intent to evade or delay the payment of his or her debt? Did the in the ZIMRE judgment the judge put all these things to test before coming to the position of the specified individual being improperly placed before the court?

Mutumwa Mawere: There should be no confusion as to whether insolvency is akin to reconstruction. Why would anyone have authored the Reconstruction Act if another remedy existed to achieve an intended end? The desired end could not be achieved without inventing new facts and circumstances. Specification was intended to cripple an aggrieved person from challenging the intended expropriation without compensation scheme. They knew or ought to have known that their actions would be challenged and so they preempted this by amputating any potential aggrieved parties. There was never an insolvency claim as you allege. The state was never a creditor of SMM to give it locus to benefit from the provisions of the Companies and Insolvency Act.

BTM: Is this the correct sequence of events to you, that in the ZIMRE judgment the judge threw away the key, the judge who is a person not necessarily the judiciary, threw away the keys, following an extra judicial specification that the judge placed reliance on, and that specification order turned out to in actual fact to be an asset freezing order that sought not to protect your rights as an insolvent/specified person as declared. That it turned out to be something else, what else did it turn out to be in your own view? Is it that it sought in actual fact to disarm you while the State dealt with your assets, while persons attached to it willy-nilly dealt a blow to your rights?

Mutumwa Mawere: The question is whether the Bill of Rights can be tempered by administrative measures involving a government official issuing an order that has the effect of divesting and depriving a person of rights including access to courts and being informed prior to any adverse order? SMM was never insolvent. Not sure where you are getting this notion. Just take the facts as they are than speculate.

Brian Tawanda Manyati is a Chartered Governor and an Accounting Technician. 

Contacts: LinkedIn – briantawandamanyati

Email – [email protected]

To register for C2C Mentorship on Corporate Literacy and Judicial Reform programs, you pay an annual fee of USD36 using the link https://zonfulenergy.com/membership/

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BNM Elite, The Accounting, Taxation, Bookkeeping and Quantity Surveying Consulting Firm Making a Difference in South Africa’s SME Sector

Published

2 years ago

on

January 28, 2022

By

Brian Kazungu, 27/01/2022

BNM Elite, a Johannesburg based Accounting, Taxation, Bookkeeping and Quantity Surveying consulting firm is making a difference in South Africa’s SME Sector through professional and affordable services to people who are taking the entrepreneurship route.

A black female owned business which was formed by two sisters who are both graduates from the University of Johannesburg in South Africa, BNM Elite helps entrepreneurs with statutory and financial compliance as well as cost assessment on construction projects.

With its motto being: We Analyse, We Standardise, We Restore Confidence, through BNM Elite, SMEs have found a cost-saving way to become professional in their engagement with their stakeholders through keeping books in order and being compliant with statutory bodies.

In many parts of the world, South Africa included, many people venture into entrepreneurship for various reasons but may find the journey to be tough because of lack of knowledge especially on how to plan and manage finances in their operations and projects.

The other challenge with SMEs is that they find themselves failing to comply with various statutory bodies out of ignorance and thus making it difficult for them to get contracts and qualify for tenders.

In response to these challenges, out of their academic training and work experiences, Nompumelelo and Bawinile Nyembe established BNM Elite in order to professionally and affordably assist fellow entrepreneurs to profitably navigate the business landscape.

iniAfrica News’s Brian Kazungu spoke to Nompumelelo Nyembe, the Chief Executive Officer of BNM Elite to find out more about their company and the approaches it is taking in assisting SMEs and other businesses to become successful.

iniafrica news: Would you briefly describe the background and nature of your business?

Nompumelelo Nyembe: BNM Elite is a black female owned business consulting firm specialising in Accounting, Taxation, Statutory Returns, Bookkeeping as well as Management Accounting, Business Consultancy and Quantity Surveying services.

It was established by two inspired sisters, an Accountant and a Quantity Surveyor who both graduated from the University of Johannesburg in their respective fields of study.

iniafrica news: What is the main motivation and major push for you to engage in the business that you are involved in?

Nompumelelo Nyembe: As a business, BNM Elite was formed out of the realisation that there are several opportunities in the market for those people with an entrepreneurial mind-set.

The time that we spent in formal employment showed us that there was still room for us to step into the market as independent service providers.

If you look at it, the world is gradually adopting entrepreneurship and many young people, instead of looking for jobs, they are now opting to start their own businesses and yet quite often, they lack the critical financial knowledge to professionally manage their enterprises.

The same applies to those who have ventured into the construction industry since they also need to understand the cost of their projects through the services of a Quantity Surveyor.

In this regard, we then realised that most SMEs cannot afford to employ on a full time basis the services of an Accountant (Tax Practitioner) or Quantity Surveyor who can assist with financial and cost aspect of their operations and that is why we stepped in to bridge the gap.

We give SMEs and even established business the option to access customised accounting, taxation and quantity surveying services only when necessary and this has proven to be a great cost saving approach for many companies and a source of business for us.

iniafrica news: Which products and services are you offering? Would you describe what each of these products and services is all about and the intended benefit of each of these to your targeted and actual clients?

Nompumelelo Nyembe: We specialise in Accounting, Taxation, Statutory Returns, Bookkeeping as well as Management Accounting, Business Consultancy and Quantity Surveying services.

Every business must be able to establish whether it’s making profit or not. As such, without proper bookkeeping and accounting knowledge, it is difficult to manage and control the revenue and expenses of an enterprise and thus the need to engage us as BNM Elite so that we can help with financial understanding and cost effective approaches.

The same applies to taxation and statutory returns issues since compliance with various regulations is important when it comes to tenders and other big projects. We help businesses to comply with the provisions of various government bodies such as SARS and the Department of Labour etc.

Because of both our academic backgrounds and experience in the market, we have thus managed to identify various challenges being faced by many entrepreneurs and we have also figured out solutions which we can offer to these businesses in order for them to succeed.

It is the same story with the Quantity Surveying service that we are offering. We help individuals, SMEs and big companies to establish the real cost of their projects so that they won’t blindly engage in operations. This saves them time and resources since it helps with making informed decisions

iniafrica news: How has the market responded to your products and services so far since inception and what can you attribute to such kind of a response?

Nompumelelo Nyembe: The market response has been very positive and pleasing. We are excited to continue offering these services because besides the fact that it is a source of income for us, our great motivation is that we are making a difference in our communities through helping other businesses to be professional, efficient and profitable.

Our motto is: We Analyse, We Standardise, We Restore Confidence

We are very excited to see that we have managed to live up to this motto as evidenced by the success stories from our clients and on even our own success stories.

The feedback that we get from our clients and the references which we get through our satisfied customers gives us so much joy and we don’t regret following the path that we took in establishing BNM Elite.

Some of the reasons why we have we have been well received as a company and why we have managed to retain our clients is the fact that we believe that every customer, whether as a business or individual is very unique and deserves customised attention.

We have noticed that besides solving their problems, customers enjoy the way we treat them and that is why they keep coming back and keep on referring others to do business with us.

iniafrica news: What is it that is unique about yourself, your team and your services which sets you apart and which also helps you to stand out among various service providers who are in the same category with you?

Nompumelelo Nyembe: The way we merge our expertise and academic insights into solving our clients’ problems makes us very unique. We also have an inspired, qualified, goal oriented and customer focussed team which ensures that we deliver the best service.

The other thing which makes us unique is the fact that we tailor-make or customise or service to meet the different needs of our diverse clientele. Whether your business is still starting or it has been in operation for some years, we devise a way to attend to your specific needs in a way which helps you to achieve your goals.

iniafrica news: Do you have any background in this industry? If yes, could that have helped you in identifying the business opportunities behind your entrepreneurial drive?

Nompumelelo Nyembe: I am a qualified Accountant and Tax Practitioner with a BComm Accounting degree from the University of Johannesburg. Before we started this business, I was formally employed in the same field and this where I gained the much needed experience to be proficient in accounting and tax services.

The other director who is also my sister is a qualified Quantity Surveyor with a Diploma in Building and a B-Tech degree in Quantity Surveying from the University of Johannesburg as well. She has also been formally employed in companies which handled serious construction projects and this has made her well prepared for any Quantity Surveying task.

The academic backgrounds and the experience that we have has helped us with spotting opportunities and responding to them effectively and efficiently.

iniafrica news: In a world where most people, especially the youth are failing to start and run their own enterprises because of lack of capital, how have you managed to launch and operate this initiative?

Nompumelelo Nyembe: One of the greatest advantages which made us to start despite the usual challenges that most SMEs face is the fact that we are a professional service centred business that does not need too much capital to start a business.

In a professional service business like ours, the biggest resource that is needed is the qualifications and expertise. With these in your possession, you can operate from anywhere.

Our business is different from those enterprises which needs serious investment in equipment which require substantial amounts of money for one to get started.

iniafrica news: It is a fact that the current economic situation globally especially in this industry is challenging. As such, what is it that has helped you as a business to continue operating under some difficult conditions that you have encountered?

Nompumelelo Nyembe:  Yes, the global economic situation has resulted in some loss of jobs but it has also resulted in many people converting their skills and expertise into tools of entrepreneurship rather merely looking for employment.

We help such people to professionally establish their business and this gives us a steady supply of clients.

On the other hand, besides people who starting their own businesses because of the economic situation, we also have medium size and big businesses which can no-longer need or afford the services of a full time accountant or quantity surveyor.

We are the best alternative for such businesses because we only engage them only when they need our services for example when doing statutory returns or financial statements.

iniafrica news: Based on your experience, what advice can you give to unemployed youths and many other job seekers concerning entrepreneurship as a way of creating employment for themselves and others?

Nompumelelo Nyembe: To those with the relevant skills and expertise but who have been laid off, my advice is that they can also consider the entrepreneurship route. Yes, I have heard some people say that entrepreneurship is not for everybody, but I believe that it is worth trying. As you prepare your CV, don’t forget to also try and come up with a sound business plan. If you become entrepreneurship minded, you may realise that the only person you are waiting for is you.

To those who are yet to attend college, I advise them to go for courses which will not make you reliant on finding a job as an employee only. It is also worthy doing course which will enable you to offer a service or produce a product whether you are formally employed or not.

iniafrica news: Where do you foresee your business in the future and what legacy do you want it to leave on earth? Why do you have such convictions?

Nompumelelo Nyembe: I foresee BNM Elite expanding and making a big impact not only in South Africa but across the world.

The world has suddenly become a small global village especially for people who are in the professional service industry like us. As such, we believe that as our clients succeed and grow, no matter where they are in this world, we will also succeed and grow together with them.

We want BNM Elite to be an inspiration to the youths especially young girls that you can pursue your gaols as a woman and still make it.

The questions in this interview are adapted from the book, The SME HANDBOOK written by Brian Kazungu.

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SMM Workers ‘Offside’ on Asking Minister Chitando for the Removal of Gwaradzimba, Says Friends of SMM (FOSMM) Secretary General, Tapuwa Chitambo

Published

2 years ago

on

April 23, 2021

By

Mr Tapuwa Chitambo, FOSMM Secretary General

Brian Kazungu, 23/04/2021

In an article published by the Herald on 22 April 2021 under the title ‘SMM workers want Gwaradzimba out, Zimbabwe Diamond and Allied Minerals Workers Union (ZDAMWU) were said to have applied for the removal of Gwaradzimba as Administrator of SMM.

It was also reported that they had done this through invoking Section 5(2) of the Reconstruction of State-Indebted Insolvent Companies Act (Reconstruction Act) which reads as follows:

Section 5(2) of the Act reads as follows: “The appropriate Minister, after consultation with the administrator, may at any time and in any manner, on the application of a creditor, a member of the company, the Master or any person who would have been entitled to petition for the winding-up or apply for the judicial management of the company concerned, vary the terms of a reconstruction order or cancel it by further notice published in the Gazette.”

However, Mr Tapuwa Chitambo, the Secretary General of Friends of SMM (FOSMM) highlighted that some conflicting issues around the status of SMM makes it strange for workers to seek help from the Mines Ministry.

“I find it strange that representatives of ZDAMWU would seek refuge from the Minister of Mines by seeking a remedy that is not specifically provided for in terms of the Reconstruction Act before establishing the status of SMM. Is SMM, a company as defined in the Companies Act or it is a creature that defies any legal persona?

Minister of Mines, Winston Chitando, and Minister of Finance, Mthuli Ncube, are on record having asserted that SMM is a subsidiary of the Zimbabwe Mining Development Corporation, as also confirmed by Gwaradzimba in a meeting with ZDAMWU representatives in March 2021.

Finance Minister, Mthuli Ncube, in his maiden budget included SMM on his list of companies to be privatized.

In clarifying his standpoint, Chitambo revealed that as Friends of SMM (FOSMM), they had made their own investigations and established the following facts:

1. Following the commencement of the reconstruction of SMM on 6 September 2004, Gwaradzimba’s first act was to dismiss the company’s board of directors.

2. In December 2005, the Reconstruction Order that was issued by Chinamasa without any judicial involvement was confirmed by Justice Kamocha on an ex-parte basis.

3. The records kept at the Registrar of Companies in Bulawayo show that on 12 November 2009, in terms of the CR2 form filed and signed by Gwaradzimba, shares were alloted to two companies Nickdale Investments Private Limited (Nickdale) that was issued 76% of the shares in the company with the balance of 24% being held by a company called SMM Holdings Limited (UK) whose address strangely was Gwaradzimba’s.

4. It follows that SMM could only be registered in the Records kept by the Registrar if it met the test of being a company and this precludes the involvement of the Minister of Mines in the affairs of the company.

5. A company necessarily is a creature of law and as such the Reconstruction Act creates no company but was part of a scheme to defeat the ends of justice.

Based on their findings, Chitambo added that in making an application to the Mines Minister, it is either ZDAMWU representatives know something that is not in the public domain or they just want to expose the fraud that has been a constant characteristic in the SMM saga.

He also stated that an admission by Gwaradzimba that his mandate was terminated, would follow that the application by ZDAMWU is ill-advised and should have been preceded by an application asking ZMDC to confirm its relationship with Nickdale.

Nickdale holds the majority of the shares issued by SMM, a development which makes the Minister of Mines to cease to have any legal nexus with SMM from the day shares were issued to the new shareholders.

This paper has established that a resolution was passed on 1 September 2011, ordering Gwaradzimba to hand over the Nickdale share certificates to former Minister of Mines, Dr Obert Mpofu, by the ZMDC board.

The shares were then handed over as ordered leading to Minister Chitando informing Parliament that SMM was a subsidiary of ZMDC based on the fact that the shares in Nickdale that were held by the RBZ were now held by ZMDC.

Chitambo concurred with ZDAMWU that Gwaradzimba continues to hold the Administrator’s office illegally since he relinquished this position to the ZMDC board chaired by Mr Ndlovu and thus also meaning that his purported ‘resurrection’ was unlawful and of no force and effect.

“Based on the above, it is bizarre that ZDAMWU would seek protection from a law that is no longer applicable in relation to SMM by asking the Minister of Mines to immediately replace Gwaradzimba with their nominee, Mr Taurai Changwa, when they are neither directors nor shareholders of SMM.” He said.

Mr. Frederick Kyle, a lawyer who has represented a number of companies and individuals including Mutumwa Mawere in litigations also commented on the matter.

“Mr. Gwaradzimba under oath has deposed to various affidavits asserting that SMM is a company still under his control and management yet in March 2021, he informed representatives of ZDAMWU that he was relieved of his duties in relation to SMM by Hon Mpofu.

He claimed that notwithstanding the fact that the shareholding of SMM had been altered and a new board appointed as required in terms of the Reconstruction Act, the reconstruction order needed to be cancelled in terms of s35 of the Reconstruction Act.

Mr. Chinhema on behalf of ZDAMWU said Gwaradzimba had intimated that Obert Mpofu (former Mines Minister) was responsible for the appointment of the board and new chief executive.

He, however, advised the workers’ union that he was re-appointed informally without any legal instrument providing for this clandestine appointment.

Pursuant to the operation of the ZMDC resolution, Mr Gwaradzimba was relegated to only deal with litigation brought against SMM by Mr Mawere.

However, it is not clear who Mr. Gwaradzimba reported to and still reports to since the handover of the control and management of SMM. Does the Minister of Justice continue to exercise jurisdiction in relation to a reconstructed company?

Assuming the control and management of SMM was not transferred to the restructured board that could only have been appointed by the company’s shareholders, then the records of SMM cannot be kept by the Registrar of Companies.

This begs the question as to whether the control of a company can be vested in anyone who is not its directors…. It is also curious how Gwaradzimba implemented a scheme of reconstruction without the knowledge of SMM’s previous shareholders.

Representatives of ZDAMWU have taken the approach that Gwaradzimba’s relationship with the company was not terminated as a consequence of the changed legal status of SMM from a company under reconstruction to a reconstructed company.

Ms. Janice Greaver, a member of the C2C-BOAF Corporate Literacy Initiative, said: “This matter exposes the pervasive illiteracy in our communities.

ZDAMWU members clearly believe that they now hold the position of some proxy shareholders of SMM on account of accrued wages and salaries incurred after reconstruction.

A company to me is a creature of law. It must have director to act in its name and not a Minister. This is absurd.”

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Disgruntled SMM Workers Who Are Owed About US$36 Million Want ‘Incompetent’ Administrator Gwaradzimba to Be Given a Red Card

Published

2 years ago

on

April 20, 2021

By

Mr Justice Chinhema, Secretary General, ZDAMWU

Brian Kazungu, 20/04/2021

Disgruntled workers from SMM Holdings (Pvt) Ltd who are claiming US$19 million in outstanding salaries from January 2012 to November 2017 and about US$17 million from December 2017 to date have called for the SMM Administrator to be given a red card.

The accrued dues are said to have been incurred during Gwaradzimba’s tenure wherein as SMM Administrator in terms of the Reconstruction Act, he was supposed to firstly dismiss the company’s board of directors in order for him to be vested with sole control and management of the company.

Mr. Gwaradzimba who assumed office on 6 September 2004 and was officially appointed on 14 September 2004 to be the SMM Administrator, was controversially awarded the contract without being subjected to any competition.

SMM was placed under extra-judicial reconstruction which divested and deprived shareholders and directors of the control and management of the company pursuant to an order issued by the then Minister of Justice, Legal and Parliamentary Affairs, Patrick Chinamasa.

According to information seen by this publication, SMM workers, through the Zimbabwe Diamond and Allied Mineral Workers Union have thus far sought the help of lawyers in their endeavour to have Gwaradzimba removed from the position of Administrator.

In their application which was filed with the Ministry of Justice, Legal and Parliamentary Affairs on the 13th of April this year, the union said that the Reconstruction exercise which brought about Gwaradzimba “has yielded no fruit whatsoever over the past two decades”.

They further added that the company is not benefiting anything from Gwaradzimba’s appointment as ‘apparently’ evidenced by the lack of ‘commercial production’ at the mines.

In a sworn affidavit, as a workers representative, Mr Justice Chinhema, Secretary General of the Zimbabwe Diamond and Allied Minerals Workers Union narrated the poor conditions that SMM employees have been subjected to, including lack of income and poor access to health facilities.

He said that their call for Gwaradzimba to be shown the red card stems from the plight of workers who are owed millions of United States dollars in arrear salaries and also highlighted that the same workers are exposed to terrible suffering because of evictions from their houses.

“The second respondent (SMM), under the administration of the first respondent (Gwaradzimba), has failed, neglected or refused to settle salary arrears in excess of over US$19 260 667.99 owed to current workers since January 2012 to November 2017. Salary arrears from December 2017 to date are yet to be computed.

991 ex-employees are owed US$17 676 537.50…..” Chinhema narrated.

According to details in the workers’ application to the Mines Minister, other creditors owed substantial amounts include regulatory authorities, the Mining Industry Pension Fund, NSSA and ZIMRA who collectively have an amount due totalling over US$6 million.

On behalf of SMM employees, Chinhema also argues that Gwaradzimba’s continued reign is unlawful following the transfer of the Ministerial supervision of the Administrator from the Ministry of Justice to the Ministry of Mines as directed by late former President Mugabe.

“Pursuant to that restructuring, the 1st respondent (Gwaradzimba) informed us that the administration and management of the 2nd respondent (SMM) was effectively transferred to a Board of Directors under the Zimbabwe Mining and Development Company (ZMDC) and headed by one Mr Ndlovu.

The 1st respondent (Gwaradzimba) intimated that Honourable Obert Mpofu was responsible for the appointment of the board and the new Chief Executive Officer. The 1st respondent (Gwaradzimba) admitted at that stage that his mandate was terminated.” Chinhema said.

Chinhema clarified that Ministerial oversight on SMM was transferred by the late President Mugabe to Mpofu when shares that were allotted by Gwaradzimba to a company owned by the RBZ, Nickdale Investments Private Limited, were transferred to the Zimbabwe Mining Development Corporation (ZMDC).

The shareholding scheme which was purportedly approved by shareholders and creditors is said to have been merely a gathering of people who were handpicked by Gwaradzimba who ‘fraudulently’ represented SMMH, a UK based company without its knowledge and consent.

Pursuant to this share transfer, SMM’s control and management was vested in ZMDC as a shareholder of Nickdale, leaving Gwaradzimba with no control except to handle SMM litigation matters.”

However, while commenting on the workers’ resolve to remove Mr. Gwaradzimba from his position following an application submitted to Minister Ziyambi Ziyambi, Mr. Mulaudzi of AG Mulaudzi Attorneys highlighted a number of challenges associated with the approach adopted.

“There is no provision for the removal of the administrator once appointed by the Minister.  Even the Court has no jurisdiction to remove let alone cancel or vary the Ministerial order.

It would be interesting to see whether the section relied upon to impeach Gwaradzimba will come to the rescue of the union.

This Act was carefully crafted to prevent any aggrieved party from having any recourse either to remove the Administrator or vary the order without the involvement of the Administrator who has to be consulted by the Minister before any variation can take place.

While the workers accuse Gwaradzimba of incompetence and gross failure, the legal status of SMM is yet to be established and the Minister is yet to find any fault with the Administrator.

Despite the transfer of oversight, Chinhema revealed that Gwardzimba was surprisingly once again ‘informally’ tasked with administrative duties after the ZMDC Board squandered a US$16 million dollar capital injection which was splashed on purchasing of motor vehicles and salaries.

“His (Gwaradzimba) re-appointment was not in terms of the law but owing to the failure to follow the stipulated procedures in the Act, he assumed a de facto role as the administrator of the 2nd respondent (SMM).

He has continued to hold this office illegally as he had, by conduct and by fact, relinquished this position to the ZMDC board as chaired by Mr Ndlovu.” Chinhema appealed.

SMM, the once vibrant mining empire in Zimbabwe was controversially placed under the control and direction of a State appointed Administrator based on allegations that it was financially troubled and that its shareholders had externalised money and were acting with imprudence.

However, the RBZ and investigators who were tasked to do a fact finding work on the company dismissed these allegations and advised against placing SMM shareholders under specification and warned against the continued subjection of the company under the Reconstruction Act.

Regardless of the controversies surrounding the SMM Administrator’s appointment, the then Minister of Justice, Legal and Parliamentary Affairs, Patrick Chinamasa was adamant that his choice in Gwaradzimba was for the good of all the stakeholders.

When he was interrogated by legislators such as Job Sikhala and Mr Madzimure in a Parliamentary Debate on the 20th of July 2005 under the motion “Economic Challenges Facing Zimbabwe”, Chinamasa said “the government had to intervene because workers had spent 3 months without pay”.

Sikhala also warned against constitutional breaches that were inherent in the Reconstruction Act and queried the special interest that was being shown in the company by the Government Executive who were disregarding the rule of law in handling the matter.

Chinamasa then defended Gwaradzimba’s appointment by saying “So the government had to intervene in the national interest in order to rescue the company in order to ensure that the company continues to be a leading foreign exchange earner in our country.”

However, interestingly, the situation at SMM has seriously worsened in almost two decades and yet the same Administrator who was brought in as a saviour is still in charge of the sinking ship thus raising eyebrows on the real motivations which were behind the unceremonious ‘company grab’ by the government.

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