HomeLocalCottco's multi-million dollar Singapore deal raises stink

Cottco’s multi-million dollar Singapore deal raises stink

Senior government officials are allegedly trying to force the struggling Cotton Company of Zimbabwe (Cottco) into a controversial deal with a Singaporean firm Olam, that will see the parastatal forking out a staggering $4 million in management fees annually.

By Everson Mushava

According to investigations by The Standard, some Cottco board members have been using name-dropping tactics to try and force the deal on a sceptical and reluctant management which is of the strong belief that the same services that Olam wants to provide can be provided locally for around $1,8 million.

Vice-President Emmerson Mnangagwa and Reserve Bank of Zimbabwe governor John Mangudya’s names are being used in the attempt to railroad Cottco management into endorsing the deal with Olam, which is already mired in Zanu PF’s factional wars.

If the proponents of the deal succeed, Cottco would pay out $4 million annually for the next three years to Olam, bringing the total to $12 million in addition to the $2 million that it wants to run the Zimbabwean parastatal’s affairs annually.

Documents gleaned by this paper indicate that Olam and the Cottco board led by Cecilia Paradza and Elliot Mugamu have met several times in a desperate push to have the deal signed before end of the year.

The board has allegedly used Mnangagwa’s name in trying to force the management to endorse it.

Leaked WhatsApp chats between Cottco acting managing director Pius Manamike and Mugamu reveal the VP’s purported link to the deal.

In the chats dated October 20, Mugamu claimed he had been informed by the Cottco staff that Manamike was battling to have the Paradza-led board fired because of infighting linked to the Olam deal.

“Last night, a [named newspaper] reporter telephoned and later sent an email. People/farmers and politicians in Gokwe did phone and many of them disclosed that Cottco management and regrettably they quoted you and Njanji [the Gokwe branch head], having approached them for support in reversing the decision taken by government at Cabinet level,” Mugamu wrote to Manamike.

“The fundamental question is who are we as Cottco board members and management to fight government’s position

“For information purposes, the VP from Midlands Province is fully aware of the government’s initiatives and he is in support of what is being done.

“He is concerned with the slow pace of inputs distribution, but he has been assured of our commitment.”

To this, Manamike responded: “I don’t communicate with any farmers; I have not even gone out to meet stakeholders. This could be sponsored people on a smear campaign.”

Both Manamike and Mugamu refused to comment on the matter, referring all questions to Paradza. Paradza also refused to comment, also referring questions to Agriculture minister Joseph Made.

“Thank you for your email. Yes, we were having discussions with Olam, but had not concluded anything. Please refer to the Minister of Agriculture Dr Made for further questions,” Paradza wrote.

Quizzed further to explain if there was indeed Cabinet approval for the Olam deal, Paradza repeated: “Please talk to the Minister of Agriculture.”
Made was not picking calls.

The board, well-placed sources said, was pushing government to authorise the deal and this had strained its relationship with management at Cottco.

Letters, reports and minutes seen by The Standard suggest that Paradza and Mugamu could be strongly behind the deal which was also endorsed by Mangudya.

“We write to advise that government is agreeable for Olam to provide management services to Cottco on the basis that a successful Cottco will rejuvenate cotton-growing farmers and contribute to the growth of agriculture to Zimbabwe,” one of the letters written by Mangudya to Olam dated September 20 reads.

One of the letters was copied to Made, Mugamu and Paradza.

In another letter dated October 24 and copied to Made, Mangudya, Finance minister Patrick Chinamasa, Industry and Commerce minister Mike Bimha and chief secretary to the president and Cabinet Misheck Sibanda, Paradza claimed government had approved the deal.

“Some time back, Olam international [Olam] approached government with an offer to have a stake in Cottco and this offer was turned down by government,” part of the letter reads.

“The Cottco board was informed by government, through the governor of the Reserve Bank of Zimbabwe, that Olam had a second offer of a management contract, which has been discussed and approved by Cabinet for a fee of 2 US cents per pound [and] is still under discussion.”

The 2 US cents would bring the cost of the management contract to about $4 million per year. Olam would also be awarded rights to hire and fire workers, contracting third party agencies for services and operating the bank account, among other things.

Olam would also have sole rights of buying the exportable lint, pegged at 70% of the cotton produced while the remaining 30% would be reserved for the local market.

But in a report dated October 11, Manamike was clear that the Olam deal would not bring any value to the company and the Cottco management should be given a chance to run the business at a much lesser cost of $1,8 million for 100 000 tonnes.

In minutes seen by this paper, the board was advocating for higher Olam fees than what the management proposed. Management argued that inputs had already been distributed and Cottco had done most of the work.

Paradza has already prepared the terms of reference for the Olam-Cottco management contract.

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