Share ownership trusts, youth fund a ruse?

INTRODUCTION and formation of community share ownership trusts (CSOTs), employee share ownership trusts, and the youth fund came as a welcome development to ensure Zimbabweans benefit from their natural resources.

Veneranda Langa

But the opposite appears to be true as the schemes are wrought with corruption.

Oral evidence being gathered by different Parliamentary Portfolio and Thematic Committees about the way CSOTs, employee share ownership trusts and the youth fund are being run has to date shown non-implementation of what is envisaged in the Indigenisation and Economic Empowerment Act.

Criminal behaviour is being exhibited where funds are looted for self-benefit at the expense of communities and workers, as well as politicisation of the schemes.

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A recent visit to Mabvuku/Tafara showed that youths from the area were ignorant about the youth fund and had no knowledge of how they could access the funds in order to start projects.

It also revealed that most of the youths there were too poor to afford even to photocopy forms which the Ministry of Youth, Indigenisation and Economic Empowerment needs in order to process applications for youth loans.

This is despite the fact that Old Mutual  put in $10 million at CABS to enable youths with different projects to access start-up funds through the youth fund.

Since dollarisation, CBZ (MDC-T)has also disbursed $2,3 million for the youth fund and $6,8 million for women-related projects.

Youths fail to access fund

Sanudi Lijesa, the Ministry of Youth, Indigenisation and Economic Empowerment acting district head for Mabvuku/Tafara, confirmed that youths in high-density suburbs were often left out of the projects compared to youths in affluent suburbs due to ignorance of the fund. Lijesa said they also lacked basic finances to do small things such as making photocopies of their documents for verification by the Youth ministry and banks. “Many youths in Mabvuku/Tafara face challenges of lack of funds resulting in failure to photocopy forms that they are required to fill by the ministry in order to start up their businesses,” Lijesa said. “The result is that youths from poor suburbs like Mabvuku end up failing to get loans from the youth fund. The ministry has no funds to help the youths to do the photocopies. They fail to raise amounts as little as five dollars in order to participate.” He said the ministry was doing its best to encourage the youths to participate in different activities, including forming youth clubs and doing driving lessons with the Vehicle Inspection Department, but they failed to raise the $20 required to write examinations for a provisional driver’s licence due to their dire need. Mabvuku/Tafara has a population of around 350 000 people — most of them in the low income bracket, as well as pensioners. The roads there are thin strips that have massive potholes and signs of deprivation are evident with most households living in crowded conditions. There is also massive air pollution in the area due to operations of cement manufacturing industries. Another officer from the ministry who is based in Mabvuku, Taurai Masunungure, said apart from the youth fund, communities could benefit from CSOTs, as well as employee ownership trusts. “In youth loans the applicants can get amounts ranging from $5 000 to $10 000 while in employee share ownership trusts companies are supposed to ensure workers acquire 5% to 26% shares. Companies are also required to cede 10% of their shares to CSOTs,” Masunungure said. However, he admitted that the Mabvuku/Tafara CSOT had not taken off despite that there were companies like La Farge who were extracting stone used in the manufacture of cement. He said of the 61 CSOTs Mabvuku/Tafara was the first CSOT in urban areas and logistics of how the community was going to benefit were still being set up. Mabvuku Tafara MP James Maridadi (MDC-T), however, said an amount of $300 000 was released by La Farge to the Mabvuku Tafara CSOT, but there were suspected cases of looting of the fund.

“I have written a letter to the Ministry to ask them to instigate an inquiry into how those funds were used because they should benefit the people of Mabvuku,” said Maridadi. The Parliamentary Thematic Committee on Indigenisation and Economic Empowerment chaired by Harare Metropolitan Senator Cleveria Chizema (Zanu PF) is currently investigating how the $300 000 was used by the Mabvuku Tafara CSOT. Although CSOTs and the youth fund seems not to have produced good results yet in Mabvuku/Tafara, employee share ownership trusts have produced better results. According to Masunungure, CSOTs are meant to be bankrolled by companies mainly in the extractive industry while employee ownership trusts are meant to enable workers at companies to buy shares. Human resources officer at TM Pick and Pay Supermarkets in Mabvuku Frank Mutemeri said the people from Mabvuku-Tafara were benefiting in that their company policy was that they should employ people from within that community as opposed to outsiders. “Many people are unemployed and we needed to employ people from the local community to work at the supermarket. We had 150 vacancies and 100 posts were filled by people from Mabvuku Tafara. This helps shops because workers will not incur transport costs. “We also work with performing artistes to promote products from our shop. We have also included local drama groups and we promote products through competitions, dance and drama,” Mutemeri said. Arts and Culture officer for Epworth, Mabvuku and Tafara in the Ministry of Primary and Secondary Education Lazarous Munyotcha said the Nziramasanga Commission of Inquiry into the education sector revealed children who were not gifted in academics could do arts, carpentry, traditional dancing and even drama. Munyotcha lamented that they were not accommodated in youth empowerment programmes resulting in them engaging in drunken behaviour and criminal activity. “There is need for the youths who are gifted in arts to form drama clubs to undertake cultural activities so that their talents are not wasted. Artists also need to be assisted with project proposals so that they can get funding from the youth fund or approach banks for loans,” Munyotcha said. Mike Masedza of the Tafara Mabvuku Arts Association said engaging in the arts industry was no longer attractive for the youths in Mabvuku as there was lack of assistance by big corporates operating in the area. “There is need for financial assistance in the form of local and overseas exhibitions. It is not only financial assistance that we need but we also need assistance in the form of venues for exhibitions. There is also need to assist youths to utilise social networks to ensure that they get business deals with international investors,” he said. “There is no knowledge of how much pieces of art or sculpture can fetch by the youths. As a result, some products end up being sold for as little as $100 when they can be sold for thousands of dollars outside the country.” A Mabvuku-Tafara community leader Rex Chikoti said there were around 300 000 young people in Mabvuku and Tafara and if they were engaged in arts and culture activities they could raise at least $10 per week each. “That would be around$3 000 000 in circulation in Mabvuku Tafara. The halls at Mabvuku Tafara are now white elephants. They used to be film shows to entertain the youths and there is need to partner with donors to bring those back. “Children who are gifted in arts and culture can work with local shops to promote their programmes instead of engaging in crime, prostitution and drug abuse,” Chikoti said.

Youths default on loan repayment

Despite the existence of a law to ensure communities and youths benefit through economic empowerment, Parliamentary Portfolio and Thematic Committees have been inundated with many cases of exposing graft in the way the youth fund, CSOTs and employee ownership trusts are being run.

CABS and CBZ managers recently appeared before the Parliamentary Portfolio Committee on Youth, Indigenisation and Economic Empowerment chaired by Gokwe Nembudziya MP Justice Mayor Wadyajena (Zanu PF) and revealed massive default rates by youths who accessed youth funds, but were failing to repay the loans.

CABS managing director Kevin Terry said their youth fund was administered by a board of trustees and Old Mutual which put in $10 million shares as security at CABS so that the bank loaned $10 million to the youth fund. He said the default rate for repayment of the loans was at 77%.

“Of the $4,9 million that has been disbursed to 3 608 beneficiaries, $4,2 million is non performing and is in arrears,” Terry told the Committee.

CBZ Holdings Group chief executive officer Never Nyemudzo said since dollarisation they had disbursed $2,3 million for the youth fund and $6,8 million for women related projects.

“In terms of performance the default rate has been 45% and 55% have been able to pay. A lot of the defaulters are in the manufacturing and poultry sectors. We had a special youth fund run by the ministry which grew to $1,8 million where youths were allowed to lend at 100% credit risk, while for the ordinary fund they borrowed at 80% credit risk to the ministry while 20% credit risk was on the bank,” he said.

“In total, we have distributed $945 000 under the special fund and $1,4 million is the balance outstanding. Under the ordinary fund we borrowed $1,3 million and $1 000 000 is the balance outstanding.”

In other Parliament investigations into the youth fund, it was revealed before the committee that youths that were politically connected were the ones who got the loans, while some of them fraudulently gave wrong information to the banks like wrong addresses and understating their ages.

Most CSOTs also revealed before Parliament that big mining companies mining in their communities had not ceded 10% shareholding to them and had not given them start-up capital to begin to embark on projects to benefit communities where they were extracting mineral resources.

CSOTs were formed as conduits for community participation in shareholding in various businesses involved in extraction of natural resources, where 10% shareholding in qualifying businesses should be reserved for CSOTs.

At one of the CSOTs which were officially opened by President Robert Mugabe, the Zimunya Marange CSOT, mining companies extracting diamonds pledged $50 million and made the President present a blank cheque and to date that amount has not been deposited to the account of the CSOT. Only $400 000 was deposited and the Zimunya Marange CSOT leadership cited political interference as one of the reasons hindering release of the funds by mining companies.

A Transparency International Zimbabwe (TIZ) report on CSOTs in the mining sector also revealed that politicians abused them resulting in communities being deprived from enjoying their benefits. According to the TIZ report which focused on gold, diamond and platinum mining, there was lack of transparency in awarding tenders for CSOTs and their funds were entrusted to chiefs, who in most cases lacked the technical competency to manage them.

Due to political interference, CSOTs were seen as a Zanu PF creation meant to benefit its members instead of the wider community and Zimbabweans regardless of party affiliation.

The 2012 First Report of the Parliamentary Thematic Committee on Indigenisation and Empowerment on the Status of Implementation of the Indigenisation and Empowerment Policy revealed during visits to mining communities by the committee, communities complained that employment opportunities at those mines were being given to outsiders.

“They complained of cracks on their houses and school buildings as a result of blasting and the neglecting of spouses and children of some of the workers who died on duty at the mines.”

The committee was also told that livestock sometimes fell into shafts left uncovered by the mining companies while there was also massive land degradation, destruction of forests, water points and lack of benefits such as upgrading of roads.

With employee share ownership trusts, the story is the same because Parliament has been getting startling evidence from workers’ unions about how most companies had not even submitted their indigenisation requirements to cede 10% of their shares to workers.