‘You escape injustice by confronting it’

THERE are a lot of unanswered questions pertaining to the circumstances that led banker Mr Nicholas Vingirai to “flee”these shores in 2004. His investment, Transnational Holdings Limited (THL), had a controlling stake in Intermarket Holding Limited (IHL), whose investments are visibly dotted around the city.

Through the 2006 scheme of arrangement, Intermarket — whose units included Intermarket Bank, Intermarket Discount House, Intermarket Life and a banking unit in Zambia — were all merged into ZB Financial Holdings.

But Mr Vingirai was later acquitted and given a stake in ZB Financial Holdings as part of a compromise agreement with Government.

Recently, in an interesting turn of events THL was again involved in a bruising fight with ZB over dividend payouts and some of Mr Vingirai’s nominees in the merged entity. Last week, Sunday Mail Business Editor DARLINGTON MUSARURWA tracked down Mr Vingirai to get an insight into what really transpired. Q: Mr Vingirai, there is belief that you fled the country in 2004 in order to escape justice. Is that so? If it is not the case, what are the circumstances that led to your departure? A: Nothing could be further from the truth. On the contrary, I stayed away in order to escape injustice until I came to the decision that the only way to escape injustice is to confront it, even when the odds suggest otherwise. I left the country for South Africa on a business trip sanctioned by the Board. While I was there, I was called by people I will not name who, in no uncertain terms, told me that my life was in danger if I dared to come back to Zimbabwe. My close associates in Zimbabwe also received “appropriately”-packaged death threats. This perhaps explains why Transnational was docile in the face of the storm that ensued. While outside the country, I survived on my savings for a short while. Having worked for the Commonwealth stationed in West Africa as a financial markets field expert for some years, I had some savings. When my savings ran out, I was cared for by friends. In 2011, I felt that the yesteryear euphoria was over and it was time for me to come back home and play my part in building the country. Q: Had you been around, do you think that Intermarket Holdings Limited (IHL), together with its subsidiaries, would have suffered the fate it did; for example, that of being merged into ZB Financial Holdings Limited? A: Like I alluded to earlier, it was a moment of madness, therefore, there is no telling what could have happened. What I can say is that I would have strongly resisted all attempts to unfairly dispossess me of my rights. Perhaps this is why they resorted to keeping me out of the country. I am yet to understand how ZBFH came to control IHL well before the purported merger. More importantly, I want someone to explain to me in simple terms how ZBFH, being the “acquirer,” was also the transaction financial adviser, and management of IHL. Yes, ZBFH prepared the management accounts of IHL, proceeded to prepare a valuation of IHL and then “acquired” it! The same Board which recommended to ZBFH that it was in its interest to acquire IHL turned around, sat as the IHL Board and recommended that it was in its interest to be acquired by ZBFH. You can see that the whole saga was surgically contrived. Q: What role did your investment vehicle Transnational Holdings Limited (THL), which had a controlling stake in IHL, play in the 2006 scheme of arrangement which subsequently led to the disposal of THL’s 51 percent stake in Intermarket to ZB Financial Holdings? A: Whatever actions that may be attributed to THL, such actions were out of duress. The days were evil. That said, THL was never accorded its rights of pre-emption hence the court challenge. Q: Do you feel the scheme was properly constituted? A: To answer this question one has to create a bit of context. The position was that Intermarket Discount House experienced liquidity challenges, like the rest of the market, after the RBZ abdicated its role as the lender of last resort. Therefore the scheme of reconstruction should have been confined to that entity, and not the whole group. In any event, it would have been important to secure the services of an independent transaction advisor to run with the process. I am not aware that this was the case. Let me at this juncture state that in a “fractional reserve” banking system such as practiced in most modern economies, Zimbabwe included, sudden “tightening measures” by the authorities will in the most of cases lead to illiquid financial markets. Persistent illiquidity eventually collapses not just the financial markets but the entire economy. The sudden policy shift of late 2003 into 2004 and the resultant illiquidity saw most banks failing to settle their positions at the central bank. Rumours of possible bank failures spread very quickly, leading to a “run on the banks”; and thus, the market was faced with the classic systemic twin risks of illiquidity and panic withdrawals by depositors. Q: Interestingly, former Reserve Bank of Zimbabwe (RBZ) (Governor) Dr Gideon Gono wrote a letter in October 2012 absolving you of any wrongdoing. So, who was the complainant in your case? A: The complainant was the Reserve Bank

of Zimbabwe Q:Obviously, the High Court ruling by Justice Susan Mavangira in July 2013 was a major turning point to the fortunes of THL as it was a precursor to the deal that restored your shareholding in Intermarket and, by extension, ZB Financial Holdings. How was your current shareholding in IHL assets determined and how much stake do you, as represented by THL, currently hold? A: THL’s current shareholding in ZBFH was determined by the RBZ using their sole discretion. We had problems with this subjective approach because we felt that an objective process ought to have been followed even if only for posterity. Q: But help me understand this, if you were absolved of any of the alleged crimes and your shareholding in THL restored, so what then becomes of THL status as a shareholder in IHL between 2004 and 2016? A: There are two different issues here: the case against me as an individual and the shareholding dispute. Whether I was cleared or not THL was and still is a shareholder in IHL, be it that the extent of the shareholding is disputed. Over the period, THL ought to have been paid whatever dividends were due to it and this didn’t happen. IHL’s financial statements show that IHL paid dividends but THL never received its share. Certain business lines conducted by IHL entities were collapsed into ZB Bank, for example, the discount house activities and private banking. This diversion of income from IHL to ZB Banking unduly prejudiced THL to this day. In addition to this, ZBFH overburdened IHL with arbitrary charges. The net effect of all these manoeuvres was that IHL was milked dry at the disadvantage of its minority shareholders such as THL. THL ought to be compensated for this. Q: One of the contentious issues among shareholders was the dividend payment of US$600 000 to THL, which shareholders, at an AGM held on May 12, 2017, said has to be paid back? Do you feel that you are entitled to that payment? A: In our view THL is entitled to the dividend and we believe that is not disputed. What is disputed is whether THL has a sustainable claim against ZBFH or Government who received a dividend that they were not entitled to. THL’s position is that ZBFH erred in not paying the dividend to THL and therefore it was necessary for the company to correct the wrong. THL’s claim was based on the Agreement with Government which spelt out a number of provisions, including one which passed risks and rewards to THL on the effective date. The claim was also in terms of clause 105 of ZBFH’s Articles. The counter argument that ZBFH and its shareholders can’t be bound by an agreement that they were not party to would have been correct had the company not tacitly approved the Agreement. The company tacitly approved the agreement when they issued a cautionary statement and a separate notice to clients advising that an Agreement had been concluded and was being implemented. Note that the statements were made way before THL’s representatives were appointed to the Board of ZBFH. What were stakeholders meant to understand from the formal public pronouncements by the company? True to the cautionary statement, the company proceeded to implement the Agreement, including the appointment of three THL directors as provided for in the Agreement. It is our position that the Board ratified the Agreement on behalf of the shareholders and in doing so the Board acted within the provisions of the Companies Act, ZSE listing rules and indeed the powers granted them by shareholders, specifically considering that the Board has discretion over unissued shares subject to relevant governing statutes. The last Chairman’s statement also confirms what the cautionary statement communicated. It is interesting to note that ZBFH has not retracted its cautionary statement more than a month after the AGM. Q: Also, there seems to be a determination from the AGM that you will not be given an additional 6 percent stake in IHL – as previously agreed – and that you should pay back the dividend, while removing some of your representatives in the business. Are you going to comply to these directives? A: We prefer to engage with Government holistically as a piecemeal approach is likely to produce negative results. Our actions will therefore be influenced by our engagements with Government or a court order should matters progress that way. Q: As it stands what is the way forward? A: The Agreement was brokered by Government and therefore we are engaging Government. If that fails, the courts are always available but as you know it is always infinitely better to find each other. But we are not going to ask the courts to enforce the botched Agreement despite our view that ZBFH ratified the Agreement. Our view is that the purported merger should be reversed because it offended the provisions of the Articles and Memos of IHL. In essence, ZBFH must hand back what it took illegally. An illegality cannot be cured can it? Q: You and your investment vehicle, THL, owed the IHL Group substantial amounts how did the Curator deal with these? A: This is part of the riddle that we are trying to grapple with. As things stand, we are yet to get a full account of how much was charged to us and how that was cleared. What we do know is that our substantial investments were liquidated. Q: If you are to walk away from the merger, do you think that IHL has the asset and client base to sustain the business? A: I am not sure how to answer your question. At the risk of being labelled arrogant let me say that I started IHL with nothing but a vision. However, we are not starting from zero now; we do have a significant asset base as well as clients. Q: And which assets are these? A: IHL still has viable subsidiaries/investments, for example, ZB Reinsurance, ZB Buildings Society, ZB Life, Mashonaland Holdings. Intermarket Banking Corporation, although dormant, has a significant asset base. Q: Do you think that you still have

options in the current circumstances? A: Options are always available. The critical thing at this stage is to regain control of our assets. Q: But what is your vision for the business going forward? A: Our vision has never changed although the means of achieving the vision must adapt to the current country, regional and global dictates. Lets define this more at a later stage.