THEÂ falloutÂ betweenÂ Kingdom Meikles Africa Ltd (KMAL) chairman John Moxon and chief executive officer Nigel Chanakira was because of the sale of the Cape Grace in South Africa.
According to information gleaned from various sources by Businessdigest, after the merger of Meikles Africa, Kingdom Financial Holdings, Tanganda and Cotton Printers to form Kingdom Meikles AfricaÂ in December 2007 the group entered into discussions with a company called Mentor Holdings Ltd that offered to buy some of the KMAL interests outside Zimbabwe.
The structure that was hoped to be implemented included the disposal of the foreign assets held by KMAL to Mentor Holdings Limited for cash and for shares in Mentor Holdings Ltd. Â
The assets to be sold to Mentor Holdings Ltd included the Cape Grace Hotel Ltd, a company that owns a hotel in Cape Town.
The issue was introduced to the KMAL board on March 5. Directors Rugare Chidembo and Tawanda Nyambirai who later stepped down had some concerns regarding the transaction. Â
Among other things, they insisted on an independent valuation of the Cape Grace Hotel, and a due diligence on Mentor Holdings Ltd. Â
These concerns were not shared by the other directors who subsequently signed a resolution without Chidembo and Nyambirai dated March 10 2008. Â
The resolution authorised Chanakira to sign an option agreement that allowed KMAL to pursue the transaction. Â
The resolution was said to be void as it was not signed by all the directors as is required for circulating
Nyambirai resigned from the board on April 1 and was duly replaced by Econet chief executive officer Douglas Mboweni.
The transaction with Mentor Holdings Ltd involved the disposal of shares in foreign companies held by KMAL, a wholly owned Zimbabwean company Exchange Control Approvals were required. Â
To consider the application for the Exchange Control Approvals, the Reserve Bank required a valuation report of the assets KMAL intended to sell, audited accounts of Mentor Africa Ltd, a subsidiary of Mentor Holdings Ltd, and projected earnings of Mentor Africa Ltd for the next five years. Â
The requirement was stipulated in a letter from the Reserve Bank of Zimbabwe datedÂ July 23.
The Reserve Bank requirement was said to be consistent with Chidembo’sÂ view.
The requirement is said to have made sense some directors who had received an unsolicited offer to buy the same hotel for an amount of 300 million south African rands, compared to the amount of 210 million South African rands that was to be accepted subject to the approval of the Reserve Bank.
Several meetings were held between KMAL and Mentor Holdings Ltd executives and their lawyers.
Several draft agreements were prepared, but none could be agreed upon due to the burdensome terms said to be demanded by Mentor Holdings Ltd.
Moxon was said to be upset by this development as a result of which he proceeded to sign a binding agreement for the disposal of the Cape Grace without board approval.
Moxon allegedly signed the agreement against advice from KMAL’s South African lawyers, Fluxmans Attorneys. Â
Fuxmans had advised Moxon and the companyÂ in a letter dated August 22 about the deal.
Moxon convened four board meetings at which he sought ratification of the agreement he had signed without board approval.
The directors including those appointed by him are said to have voted against the ratification of the agreement on all occasions. Â
At that stage, according to minutes the board became concerned that Moxon had not acted in a manner that was consistent with principles of good corporate governance.Â The board set up a committee comprising Muchadei Masunda and Callisto Jokonya to look into the proposed transaction more closely. Â
The committee reported that Moxon had already sold 26% of the Cape Grace Hotel to a trust associated with Stephen Levenberg without board approval and without fully accounting for the proceeds of the disposal.
This alleged sale transaction is however yet to be fully investigated by the board. Â
The committee is said to have established that Moxon had a longstanding association with Levenberg who is also the managing director of Mentor Holdings Ltd. Â
Thus, it was assumed it was a related party transaction in which Moxon had interests, or associations he had not disclosed to the board. Â
The committee concluded that an independent valuation of the Cape Grace Hotel Ltd needed to be obtained in accordance with the Reserve Bank requirements.
Â Moxon was then conflicted, and it was decided that he should not be involved in the negotiations for the transactions. Â
All these positions were alleged to have arrived at by the entire board without any discord or disruptive conduct.Â The only dissenting voice was said to be Moxon’s. Â
Moxon is said to have felt that the board and management had embarrassed him.Â Chidembo’s is said to have insisted on an independent valuation and a due diligence on Mentor Holdings Ltd was resented by Moxon. Â
Moxon did not like the role played by Jokonya in investigating his conflict of interests and the conclusions Jokonya drew from these circumstances.
KMAL’s Annual Report for the year ended December 31 2007 discloses that Coolbay (Proprietary) Ltd, a South African Company in which companies linked to MoxonÂ owed the company at least US$18,5 million.Â Mentor Holdings Ltd is also said to owe KMAL at least 28,6 million South African rands. Â
The money was said to have been advanced to these related parties without the appropriate approvals. Â
The advance of money to Coolbay, a company associated with a director of KMAL, required the approval of shareholders. Â
There is no record that this advance was approved by the members.Â Investigations conducted thus far show that when these amounts left the country, they were not declared as advances to Coolbay, a company in which Moxon is said to have interests, nor were they declared as investments destined to Mentor Holdings Ltd. Â
The proposal to sell the Cape Grace Hotel to Mentor Holdings Ltd, a company associated with both Moxon and Levenberg, which also owes KMAL some significant amounts of money exceeding the proposed cash component of the consideration, was suspicious in the circumstances. Â
Moxon is a director for Mentor Holdings Ltd
Chanakira is said to have requested that the money be brought back to Zimbabwe. Moxon is said to have been angered by Chanakira’s demands resulting to Moxon andÂ Levenberg requesting him to resign and be “handsomely rewarded”.
Finance Director, Bryan Thorn is said to have requested for the repayment of the money to no avail.
Levenberg who is alleged to have described Chanakira as a “thorn in the flesh” indicated there would be a 22% promoter and finder’s fee and argued that this was standard practice in transactions of this nature. Â
He suggested that the “inner circle” of the promoters to benefit from this fee would be limited toÂ Moxon, Bret Till, himself, and Chanakira.Â Â
After a notice was sent to shareholder for the immediate dismissal of Chanakira, Chidembo and Jokonya.
Chanakira further angered Moxon by launching a counter attack against Moxon to the Reserve Bank and CID serious fraud squad for allegedly externalising US$18,6 million and 21,2 million South African rands.
By Paul Nyakazeya