The Zimbabwe Government Exposed for Exporting Corporate Tyranny

What started as a quest for a shared understanding on what a company is and is not in a C2C WhatsApp group evolved into a full blown corporate literacy classroom which the iniAfrica news platform can exclusively report on.

In this instalment, iniAfrica news touches the centrality of the rule of law in creating better economies and analyses what happens when the law is manipulated at the expense of economies especially across the region.

In 2004, facts and circumstances that occurred in the territory of South Africa were used by the Zimbabwean government to create a crime in Zimbabwe resulting in a series of decisions and actions including the introduction of one of the most fascist laws whose application was exported to South Africa.

South Africa is the most sophisticated African state but this story points to some troubling issues regarding the role of the judiciary in providing constitutional safeguards that speak to the political morality entrenched in the constitution.

Although domestic laws of Zimbabwe have no extraterritorial application, this case study shows otherwise.

Fraud was alleged in relation to a court order that was sought and granted on 6 May 2004 in South Africa.

Instead of using the South African justice system to deal with the allegations, the Zimbabwean government arbitrarily chose to process the allegations on facts that took place outside its borders in the country.

The story below is taken from what was shared in the WhatsApp group this morning by Mr. Mawere in relation to the facts of SMM Holdings Private Limited (SMM), a company whose control and management was divested and deprived by the government of Zimbabwe.

Mutumwa Mawere – Yesterday, in a WhatsApp group called – WHAT IS A COMPANY – I posted a thread of a conversation with Mr. Tapuwa Chitambo, Secretary General of an organization called Friends of SMM (FOSMM), talking to the urgency and need to invest in corporate literacy.

Mr Chitambo is one of the founding members of FOSMM as well as a member of a WhatsApp group with the same name.

I then shared a thread of a conversation with Ms. Janice Greaver to Mr. Chitambo who then said: “Janice raises very pertinent issues. The exchange got me thinking I can identify companies that are in a similar position as was SMM back then.

These companies have been indebted to same corporates but the Recon Act hasn’t been used against them.”

Tapuwa and Janice don’t know each other personally but through the Connections2Communities (C2C) bridge, their minds on what Janice shared independently appear to be meeting since the aim of C2C is to provoke a possible paradigm shifting.

C2C is an initiative that seeks to empower and capacitate people to collaborate in solving problems and in collectively utilizing opportunities as compared to doing it individually.

The thread that I shared provoked Tapuwa to think and dig into his acquired inventory of knowledge to arrive at the conclusion that the SMM conundrum was shared by many other companies in Zimbabwe.

He makes the point that the control and management of SMM was divested from its shareholders and directors by virtue of a decree and an order issued by the Minister of Justice using State of Emergency powers.

The question that arose from Janice’s input was whether after the issuance of a Reconstruction Order, when the directors of a company are removed and succeeded by a State-Appointed Administrator, the consequences would be a company or another animal.

This then provoked the question – what is a company? What makes one creature of statute a company and another not?

In response to my question: “What do you think of Janice’s thinking?”, Tapuwa responded as follows: “She points out that by upholding the Judge Willis ruling, South Africa is setting a preference for the draconian law to get life.

Good observation when she asked which company was before the judge. SMM as a registered company under the companies act under the control of its shareholders or the SMM as a company under the reconstruction.

If it was the later then the courts should have looked through the law that gave it life – Precedence.”

Tapuwa raises important issues that help define the identity of a company and how significant the Judges Willis approach to the question of authority as critical issue in testing what is a company or not.

It is important to highlight the facts of the matter here:

In December 2003, the Reserve Bank of Zimbabwe (RBZ) announced new monetary measures that required exporters like SMM, a company that exported about 95% of its output, to surrender 50% of its export proceeds to the RBZ at an exchange rate determined by the RBZ irrespective of the exporter’s actual forex circumstances.

On the face of it, this measure resulted in limited forex available to exporters to import useful raw materials, consumables and equipment.

SMM was not spared of the attendant problems including accessing forex plus being able to cover domestic costs that were subject to hyperinflation.

Between January 2004 and April 2004, the problems caused by this non-market public policy imposition became apparent and acute but however, despite representations to the RBZ and Ministry of Finance, there was no change of policy.

A company called Petter Trading Pty Limited (Petter) was the group procurement company based in SA. As at 30 April 2004, the company was owed about R26 million by SMM which could not pay since forex was now controlled by the RBZ.

In order to protect Petter from attacks by its South Africa based creditors, a court order was sought and obtained in South Africa permitting a company called Southern Asbestos Sales Pty Limited (SAS) to pay to Petter in lieu of what Petter was owed by SMM.

A cession court order was sought and obtained in South Africa with the knowledge and consent of SMM.

SMM, Petter and SAS were all companies under one common control although SMM was incorporated in 1923 and operated in terms of the laws of Zimbabwe. SAS and Petter were SA corporate citizens and by the time of these court arrangements, I was already a citizen of South Africa.

The events that then followed when the existence of the cession court order were made available to the RBZ by SMM seeking to alert the RBZ to the devastating impact of the monetary measures that had been introduced are subject of speculation and innuendos of unprecedented levels.

Allegations were made against me that I had authorized to get cession agreement and caused the cession court order to be sought and obtained in South Africa to allow forex destined to SMM to be diverted in South Africa to Petter.

It was held that Petter and SAS were Mawere companies and as such the alleged diversion was fraudulent to the extent that the court order was solely intended to create a justification for SAS not to remit export proceeds by paying to Petter the judgment amount.

In Zimbabwe this commercial transaction was dramatized to create the impression that the alleged diversion was true and fact.

Although the three companies had their own directors who controlled the affairs of the company, the government of Zimbabwe took the view that it was in the best interests of justice to divest and deprive me of any shareholding relationship with SMM.

The first attempt was to apply for my extradition from South Africa to Zimbabwe ostensibly to assist the authorities in investigating the alleged fraudulent scheme.

A warrant of arrest was issued in Zimbabwe on 17 May 2004 and I was then arrested by Interpol on 22 May 2004. On 25 May, I was granted bail and the matter was to be heard on 30 June 2004.

On the 29 June 2004, the Zimbabwean authorities processing the matter indicated that they were not ready for trial and requested a postponement of 60 days.

My attorneys refused the postponement and the matter proceeded to be determined by the Magistrate as to whether to extend the bail or not. The application for extradition was dismissed.

Following this dead end, the next attack by the government of Zimbabwe was to invoke the Prevention of Corruption Act against me personally on 9 July 2004 on the same allegations that informed the extradition application.

On 13 August 2004, an Investigator was appointed to investigate my affairs although it was known that I was not a resident of Zimbabwe since 1988.

When they discovered that specification was not the appropriate punishment, they proceeded to specify all companies including SMM that were deemed to be under my control. This was done on 26 August 2004 and again this did not yield the intended results.

On 3 September 2004, President Migabe promulgated the Reconstruction Regulations, a statutory instrument allowing the Minister of Justice to issue the Reconstruction Order without the involvement of the judiciary.

On 6 September 2004, an Administrator who was only officially appointed on 14 September 2004 assumed office and dismissed the entire boards of all targeted companies.

The question that then arises is which SMM sued in the SA justice system and whether the court in South Africa had any discretion to recognize the new creature that was born from the use of public power.

Tapuwa after considering Janice’s observations concluded as follows: “I think this needs to be tested and the judgement nullified or reversed. This could be the entry point I into this matter.”

He then promptly requested to join this group. He also informed me that because of data, his access to internet and related services were challenged.

Accordingly, he requested me to assist with data. I then shared the request in the group but no one responded. It was only yesterday that I spoke to Mr. Tendai Mandhlazi about the data challenge.

We both agreed that it was important to do a fund raising awareness and exercise to see if any member of this group would see the need to build it.

I asked Tendai how much he was willing to contribute. He gave an amount of R100 and I responded with my own pledge of R500.

I am pleased to inform this group that a fund now exists that started with R700 being my contribution of R500 and Tendai’s final contribution of R200. I was informed by Tendai that he had paid data of R300 leaving a balance of R500 in the kitty.

If you believe that this project is important and next steps have to be taken to seek clarity on what is a company and more specifically what became of SMM after the coup of 6 September 2004 when the directors were dismissed outside the provisions of the Companies Act and if you are interested in contributing ideas and funds to learn from real life case studies, please step forward.