Inside tycoon Rautenbach’s offshore family trust

RECORDS from a massive offshore data leak have provided the most detailed account yet of buccaneering mining and fuel magnate Billy Rautenbach family empire. It started with a marriage settlement. In 2013, one of Zimbabwe’s richest men and arguably one of the most controversial business figures in southern Africa, Muller Conrad “Billy” Rautenbach, donated multi-million-dollar financial investments in his coal and ethanol businesses to his wife.

This restructuring was explained by the need to “compensate” her for her role in building the family’s wealth.

It would kick off a process in which Jenny Lynn Rautenbach, who also uses her maiden name, Noon, would take the lead in establishing a complex offshore family trust fund meant to preserve and grow the family’s assets for generations to come.

With the assistance of Singaporebased trust specialist Asiaciti and other advisers, by 2015, Noon was the settlor of the family’s Bonsai Business Trust, which owned a non-tradeable family investment fund listed on the Singapore Exchange (SGX). The main assets of the fund were intercompany loans (at punitive interest rates) repayable by Rautenbach’s businesses in Zimbabwe.

But a closer look suggests that the donation was just a formality and Rautenbach, who was under United States sanctions at the time, was still in control.

As one administrator clarified in an email, Noon was a “very indirect passive investor into the fund [and who does not even have direct profit entitlement or any kind of investment say]”.

The donation had the effect of distancing Rautenbach at a time when he was still under sanctions — and positioning the family to suck maximum benefit from the Zimbabwe operations should they ever be profitable enough to service the loans.

Records of the Rautenbach marriage settlement and family trust fund are among a batch of 1,8 million files leaked from Asiaciti’s computer servers.

The data provides a partial window into Rautenbach’s more recent business exploits, including details about the significant financial losses sustained by his company Green Fuel, a US$300-million ethanol joint venture company with the Zimbabwean government that has been described as “his greatest achievement”.

The files form part of the Pandora Papers, an anonymous leak of more than 11,9 million documents from the databases of 14 corporate service providers that set up and manage shell companies and trusts in tax havens around the globe.

The International Consortium of Investigative Journalists (ICIJ) is leading the investigation and has shared these files with over 600 journalists across the world in the biggest journalistic collaboration in history. The leaked documents mainly consist of Word and PDF files, images and email conversations from 1996 to 2020, and in some instances as far back as the 1970s.

amaBhungane analysed a number of company documents and a trail of email communication beginning in 2013 when the Rautenbach trust fund structure was constituted.

Detailed questions were sent to Green Fuel and to Rautenbach’s personal assistant, but received no response.

Asiaciti explained in its email response that it worked with clients across the world and its services were “subject to stringent regulation by the relevant authorities in each jurisdiction in which we operate”. (See their detailed response below.)

Fifteen years in southern and central Africa

Rautenbach’s controversial reputation flows from allegations that he used his proximity to government leaders to gain favourable access to business opportunities.

The compliance and risk documents seen by amaBhungane show that Asiaciti consistently rated the family’s trust fund structure as “high risk” — primarily due to Rautenbach’s status as a politically-exposed person (PEP), his influence in Zimbabwe, the negative reports around his businesses and the substantial debt exposure the fund had to his businesses.

He spent the period between 1999 and 2009 as a fugitive from South Africa after he fled the country when he was charged with corruption and customs tax fraud. His company, SA Botswana Hauliers (Sabot) would later pay a fine of R40 million, but Rautenbach never admitted any personal liability and charges against him were withdrawn as part of the 2009 settlement.

Rautenbach’s controversial ties to leaders of former Zimbabwean President Robert Mugabe’s Zanu PF regime eventually landed him on the United States and European Union sanctions list in 2008.

The US called him one of Mugabe’s “cronies” and accused him of providing “support to senior regime officials during Zimbabwe’s intervention in the Democratic Republic of the Congo”.

Both Noon and Rautenbach submitted letters to Asiaciti declaring the source of funds for the assets which would be placed in the trust.

In his letter, Rautenbach states the family’s wealth was a result of “financing and equity investments I have made over the past 15 years in southern and central Africa, mostly Zimbabwe”.

“The origin of the capital used to finance and develop these activities stems from the original family transport and logistics business Sabot, as well as from the mining operations in the Democratic Republic of Congo which were sold to the AIM-listed Central African Mining and Exploration Company Plc (Camec) in 2006, in exchange for cash and shares”.

Camec was sold to Eurasian Natural Resources Corporation (ENRC) in 2009 and, while Rautenbach was under sanctions, it is reported that he made an estimated US$50 million from the sale.

Motivating the transfer of assets to his wife in 2013, Rautenbach wrote: “This donation was made in order to compensate for the effects of the default marital regime under which we were married in 1984 and which today does not reflect or adequately provide for all the support and hard work she has contributed over the years to help growing our investments”.

Documents show that Noon, who in one email was described as a “lady who has more of an ‘old style Europe’ family wealth background”, also transferred her own “traditional family wealth” into the trust structure — but the main assets were loans Rautenbach made to his businesses, the most significant chunk flowing to Green Fuel.

Green Fuel is a bio-fuel company that produces ethanol from sugarcane.

It’s owned by Rautenbach’s Rating Investments and Macdom Investments in partnership with the Zimbabwean Agricultural and Rural Development Authority, which pledged the use of its land leases where Green Fuel operates in exchange for a 10% stake in the company.

Zimbabwe introduced mandatory blending of all fuel with ethanol in 2011, a policy which created a monopoly for Green Fuel which until 2019 was the only licensed company that could supply ethanol for blending.

Rautenbach has been accused of paying government and Zanu PF officials to maintain Green Fuel’s dominance and increase the percentage of ethanol blend because, as the company’s leaked financial documents show, this was critical for the plant’s sustainability.

He did not respond to amaBhungane’s questions about this, but has previously branded his most vocal accuser, former Zanu PF fixer Temba Mliswa, as “an extortionist”.

Over the years, the percentage of ethanol that must be blended with fuel has increased and is now set at 20%. Pandora’s box

It is against this backdrop of alleged cronyism and corruption that Asiaciti agreed to administer the private family trust fund even before Rautenbach’s sanctions were fully lifted.

While Rautenbach was removed from the European Union and United Kingdom sanctions list in February 2012, the US and Isle of Man only lifted theirs in April and July 2014, respectively.

In an initial client review form dated May 2013, Asiaciti states that the firm sought legal advice from a “US law firm” on the implications of Rautenbach’s US sanctions and they confirmed Asiaciti’s “ability to act”.

Asiaciti is a trust specialist firm that offers “wealth structuring and asset preservation” services for ultra-wealthy individuals and their families. The company is headquartered in Singapore and also has offices in low-tax jurisdictions such as the Cook Islands, Nevis, Panama and Samoa.

While it is not illegal for wealthy individuals or corporations to hold assets for succession planning in offshore trusts, a recent report by the Organisation for Economic Co-operation and Development (OECD) on the enablers of tax and white-collar crime notes that trusts and other offshore structures can be misused to obscure beneficial ownership through complicated ownership layers often in several jurisdictions.

This reality is demonstrated in ICIJ’s previous investigations such as the Paradise Papers and Panama Papers that have unearthed how wealthy individuals, world leaders and corporations — aided by major banks, legal firms and asset management companies — have exploited murky offshore structures to launder money, circumvent sanctions and dodge taxes.

Enforcer

Asciaciti did not respond to specific questions sent by amaBhungane, including a question on why it engaged the family, while Rautenbach was under sanctions. Even though Noon was the settlor (the person who transferred the assets into the fund), the leaked documents reveal that Asiaciti’s administrators identified Rautenbach as the “effective controller ... from the onset due to his donation of assets to his wife”.

A 2017 risk PEP form says that he “continues to have significant influence in the structure”.

The structure is made up of a family trust called the Bonsai Business Trust in Singapore, which holds the White Orchid Fund, a private family investment fund listed on the Singapore Exchange (SGX).

The layer under the fund consists of holding companies in Hong Kong, the British Virgin Islands and the Bahamas through which loans flow to Rautenbach’s Zimbabwe businesses.

At the top of the pyramid is the Blaze Purpose Trust, which is the ultimate family ownership structure set up in the Cook Islands, a notorious trust destination favoured by those who want to protect their assets from litigation.

The sole enforcer and ultimate beneficial owner of the Blaze Purpose Trust is none other than Rautenbach, represented by his corporate alter ego Kogo Universal Holdings.

In other words, there is a convoluted line of control starting with Rautenbach’s Kogo Holdings and ending with loans to, and equity investments in, operational Zimbabwean companies, among other things.

These assets were primarily made up of debt funding that had been extended to around five SPVs in the Bahamas and British Virgin Islands. Namely: Elloway, Jefton, Marigold, Lostworld and Bartlow who were intermediary lenders to Rautenbach’s Zimbabwe companies: Green Fuel, Zim-Bio Energy, Ratings Investments, Clidder and Macdom Investments.

Buried in debt

The primary debt that the White Orchid Fund holds in Rautenbach’s businesses amounts to approximately US$120 million, with the greatest exposure being to Green Fuel.

But it is not clear how much of an asset those loans really are.

At the time the loans were placed in the fund in 2015, they were all in default and in 2016, auditors assigned them a net-asset value of just under US$20 million by December 2018 this value was registered by Asiaciti at around US$18 million.

A look at Green Fuel’s financial statements at the time (drawn from the leaks) shows that the company was making substantial losses and its future prospects were being buried under the weight of the debt.

In 2016, the company’s auditors raised concern about its ability to continue as a going concern due to it suffering US$12,8 million losses in that financial year and its current liabilities exceeding current assets by US$229 million.

The bulk of the liabilities stemmed from interest-bearing loans which Rautenbach made to himself at interest rates of between 8% to 20% per annum.

At least four companies, which are a part of the trust fund structure and can be linked to Rautenbach, accounted for US$173 million of the US$186 million debt which was due for repayment.

The debt, however, seems to be highly discretionary.

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