Push to scrap Zim bond notes

The Sunday Independent - - BUSINESS - KA­BELO KHU­MALO ka­belo.khu­malo@inl.co.za TAWANDA KAROMBO

THE FALL­OUT over the col­lapse of the VBS Mu­tual Bank ex­tended to the short-term in­sur­ance in­dus­try af­ter in­sur­ance col­lec­tor In­sure Group found it­self un­der cu­ra­tor­ship af­ter it de­posited R250 mil­lion for an ac­qui­si­tion of a stake in the bank.

In­sure was placed un­der vol­un­tary cu­ra­tor­ship last month fol­low­ing a re­view by the Fi­nan­cial Sec­tor Con­duct Au­thor­ity (FSCA) of the reg­u­la­tory sol­vency of In­sure Group Man­agers (IGM). In­sure col­lects from bro­kers and pays to in­sur­ance com­pa­nies. It is be­lieved to con­trol 75 per­cent of the coun­try’s gross short-term col­lec­tions.

Pi­eter Bezuiden­hout, the cu­ra­tor ap­pointed by the au­thor­ity to take charge of In­sure, im­me­di­ately sus­pended the com­pany’s chief ex­ec­u­tive, Charl Cil­liers, who the SA Re­serve Bank (Sarb) foren­sic in­quiry on VBS fin­gered as one of the ben­e­fi­cia­ries of the R1.9 bil­lion loot­ing of the bank. Ad­vo­cate Terry Mo­tau said Cil­liers un­duly pock­eted R12m from VBS.

Bezuiden­hout said the reg­u­la­tory sol­vency con­cerns raised by the FSCA re­sulted from the in­vest­ment of funds by IGM into long-term and illiq­uid in­vest­ment, which funds are re­quired to ser­vice short-term obli­ga­tions.

“The cu­ra­tor is cur­rently study­ing the re­port to the Sarb to as­sess the mat­ter and will in due course de­cide on ap­pro­pri­ate ac­tion to be taken if re­quired,” Bezuiden­hout said.

“It needs to be noted that the al­le­ga­tion against Mr Cil­liers is in his per­sonal ca­pac­ity and not re­lated to any busi­ness con­duct by IGM.”

IGM was founded in 1991 and was un­til re­cently iden­ti­fied as a suc­cess­fully op­er­at­ing op­er­a­tion.

The group said on its web­site that it was, di­rectly and in­di­rectly, re­spon­si­ble for the man­age­ment of up to R17.5bn of pre­mi­ums as at Novem­ber 2016.

Mo­tau’s re­port, ti­tled “The Great Bank Heist”, de­tails how R1.8bn was brazenly stolen from the mu­tual bank, and was scathing about Cil­liers con­duct.

“Cil­liers is a char­tered ac­coun­tant. His com­pany (IGM), hav­ing re­ceived the pro­ceeds of a man­i­fest fraud, now finds it­self in an un­ten­able po­si­tion,” Mo­tau said.

He fur­ther de­tailed how the R250m was squan­dered at an alarm­ing speed. Mo­tau said once the money was fraud­u­lently de­posited, IGM made nu­mer­ous draw­downs on the ac­count over the fol­low­ing months.

“IGM in turn de­posited R18m into the ac­count and sub­stan­tial in­ter­est ac­crued on the ac­count. As at the date of cu­ra­tor­ship, a credit bal­ance of about R75m re­mained in the ac­count. It is clear to me that IGM re­ceived the pro­ceeds of a crime,” Mo­tau said.

Phophi Mukhodob­wane, the for­mer VBS head of trea­sury, con­fessed to in­ves­ti­ga­tors that VBS and Vele In­vest­ment chair­per­son Tshifhiwa Ma­todzi in­structed him to cre­ate a de­posit in favour of In­sure in the amount of R250m “through a sus­pense ac­count”.

Mukhodob­wane said no money would be brought into VBS in or­der to fund the “de­posit” of R250m which was to be made avail­able to In­sure. Nor would a loan in that amount be made by VBS to Vele.

“With the ‘ac­qui­si­tion’ of the stake in IGM, in the fraud­u­lent man­ner de­scribed above, large short-term de­posits were made by IGM to VBS.

“The very first such de­posit was in the amount of R80m on March 6, 2017. That sum was al­most im­me­di­ately with­drawn by IGM,” Mo­tau found. THE ZIM­BAB­WEAN Trea­sury is push­ing for the de­com­mis­sion­ing of the county’s quasi-lo­cal cur­rency, bond notes, as money short­ages this week spilled into the open, with re­tail­ers clos­ing shop while oth­ers hiked prices and de­manded pay­ment in for­eign cur­rency.

Govern­ment in­sid­ers told Busi­ness Re­port that the Trea­sury was con­cerned that the short­ages had pushed prices be­yond con­trol. They said de­spite some re­sis­tance, the clo­sure of KFC out­lets this week as a re­sult of be­ing un­able to buy chicken had brought the ex­tent of the cri­sis to the fore.

“We are con­cerned that try­ing to con­trol prices as sug­gested (by) the party (Zanu-PF) is not the kind of ap­proach that the (Fi­nance) Min­is­ter (Mthuli Ncube) and per­ma­nent sec­re­tary (George Gu­va­matanga) were look­ing for­ward to. It fur­ther strains the trust that the busi­ness com­mu­nity and the in­ter­na­tional com­mu­nity still have in our abil­ity to sort out the cri­sis,” said one, de­clin­ing to be named.

Ncube re­cently said the Trea­sury had se­cured a fi­nan­cial pack­age from Afrex­im­bank to con­vert lo­cal cur­rency bank bal­ances – amount­ing to over $8 bil­lion (R116bn) – into US dol­lars.

How­ever, there has been re­sis­tance from party stal­warts, who feel Pres­i­dent Em­mer­son Mnan­gagwa has ap­pointed tech­nocrats to re­vive the econ­omy.

“The party is not sup­port­ive be­cause it wants to main­tain pop­u­lar­ity hence it is not sup­port­ive of aus­ter­ity mea­sures such as hik­ing taxes and re­form­ing paras­tatals, which are a ma­jor feed­ing point for party of­fi­cials,” econ­o­mist Moses Moyo said.

“It will be up to Mnan­gagwa to call his party to or­der or Ncube will re­sign in frus­tra­tion.”

Zimbabwe is des­per­ate for a break­through from the eco­nomic rav­ages of in­fla­tion, forex short­ages and ab­sence of for­eign in­vest­ment in­flows.

Zanu-PF this week said it was not con­sulted on eco­nomic pol­icy re­forms an­nounced by Ncube and Re­serve Bank of Zimbabwe gov­er­nor, John Man­gudya, this month. Busi­nesses said the dis­agree­ments have put op­er­a­tions un­der un­nec­es­sary pres­sure. In some in­stances, busi­nesses have taken price tags down, while oth­ers have hiked prices. On Thurs­day, the Con­sumer Coun­cil of Zimbabwe said it was ad­vo­cat­ing for a law that would make it an of­fence not to dis­play prices.

Banks said there had been in­creased de­mand for for­eign cur­rency from ex­porters and re­cip­i­ents of money re­mit­ted from the di­as­pora. They said the sit­u­a­tion may es­ca­late in the next few days.

Delta Corp com­pany sec­re­tary, Alex Maka­mure, said: “Govern­ment and reg­u­la­tors are urged to en­gage stake­hold­ers ahead of ma­jor pol­icy pro­nounce­ments to main­tain mar­ket con­fi­dence.”

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