BY MTHANDAZO NYONI MEAT processor and marketer, the Cold Storage Company (CSC), is losing thousands of dollars in monthly income from rentals for properties across the country after squabbles erupted over control of the parastatal’s assets.
The disputes have pitted CSC’s corporate rescue practitioner Vonani Majoko against Boustead Beef, an investor that is currently making efforts to rebuild the parastatal.
Investigations by The Standard, supported by the Voluntary Media Council of Zimbabwe (VMCZ) and Friedrich Naumann Foundation(FNF), have revealed that, due to these squabbles, some tenants leasing CSC properties are not paying rentals, resulting in a serious loss of revenue that could otherwise be used to pay off creditors and help to turn around the company.
CSC has debts exceeding US$42,5 million.
In a bid to turnaround CSC, the government signed an agreement for a joint venture lease with the UK-based investor, in March 2019, to stretch over 25 years.
Under this deal, Boustead would assume control of CSC’s ranches and meat processing facilities across the country, along with managing distribution centres and residential properties in Harare, Gweru and Mutare.
However, in the founding affidavit accompanying his court application seeking to place CSC under corporate rescue proceedings in 2020, Agriculture minister Anxious Masuka said the Livestock Joint Farming Concession agreement between the government and Boustead was difficult to implement as creditors were threatening to attach CSC assets.
Former employees had, meanwhile, destroyed important documents.
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Masuka said creditors, including the Zimbabwe Electricity Supply Authority, National Social Security Authority and the urban councils of Bulawayo, Harare and Chinhoyi had laid siege on the CSC, demanding immediate settlement of debts, while disconnecting water and electricity services.
CSC was placed under corporate rescue proceedings in 2020.
Ngoni Kudenga of BDO Zimbabwe Chartered Accountants was appointed corporate rescue practitioner, before being disqualified on conflict of interest allegations.
Kudenga was then replaced by Majoko of Majoko and Majoko Legal Practitioners.
But investigations show that Boustead, which has undertaken to invest about US$130 million into CSC over five years, has not paid any creditor despite collecting rentals from tenants.
The company was expected to pay rentals of US$100 000 per annum during the first five years of the agreement.
It has also emerged that Boustead was only an agricultural start-up with a small balance sheet.
Records show that Boustead only had net capital of US$12 674 between 2013 and 2016.
The company’s directors were named as Nicholas Havecroft, Gavin Havecroft, Nicholas Lee and Harald Torbjorn Gabriel Jakob Kinde.
Asset control Apart from distribution centres and residential properties, the CSC owns ranches which include Maphaneni Ranch, Dubane Ranch, Umguza Chomfukwe Dubane Umzingwane-Railway Block Gwanda Ranch, Chivumburu, Mushandike Ranch (Meyers Rust), Zeederberg Belwigwe, Willsgrove Feedlot and Darwendale Ranch.
The CSC’s Bulawayo complex is the largest meat slaughtering facility in Africa and is second only to the Botswana Meat Commission in terms of the latest technologies.
The investigation by The Standard unearthed that Boustead Beef and Majoko were fighting over control of CSC properties, resulting in poor management of these properties.
“The Harare depot is a huge complex. It is being rented to various businesses and estimates by Boustead Beef are that it generates close to US$90 000 in monthly rentals.
“Part of the rentals are paid to Boustead Beef, but some of the tenants claim they were advised not to pay rentals.
“I am preparing leases for all tenants at the depot,” Majoko said in his progress report dated September 30, 2021.
In an interview on Friday, Majoko said Boustead was not submitting the rentals collected from tenants into CSC operations.
“That side of things is opaque, but all I can tell you is that wherever they are submitting the rentals, it’s not to the CSC,” he said.
In response Boustead consultant, Reginald Shoko, said: “We are collecting less than 10% of the possible revenue and it is being used for the joint venture agreement.
“We have had these allegations before and many stories written.”
On 29 December 2021, Tongaat Hulett which leases Chivumburu Ranch, wrote a letter to Boustead Beef director Havercroft expressing its concern over rental demands.
“We received an invoice from CSC corporate rescue practitioner Vonani Majoko in respect of the same rental payments,” the company said.
“Attached hereto is our email response for ease of reference. To date, we have not received any feedback and we still await a response from Mr Majoko.
“It is against that backdrop that your letter comes as a surprise given our ongoing engagements with the CSC corporate rescue practitioner, appointed by the additional Master of the High Court on the 9th of June 2021.
“It is our considered view that your continued attempts to demand payment from the company represent a parallel line of engagement which, by copy of this letter, requires clarity from both yourselves and the CSC corporate rescue practitioner.”
The company said its interpretation of the appointment of the CSC corporate rescue practitioner was that as at the date of his appointment, he stepped into the shoes of CSC and all its business dealings ought to be handled by and through him.
“We are not aware of the nullification of CRP’s appointment and as such, we request an official correspondence directing the company on who to engage if there has been a change in the status quo,” it said.
“While we remain committed to paying rentals in terms of our agreement with the CSC, we hereby dispute the highly inflated invoice submitted.
“In terms of our calculations, we acknowledge that we owe CSC the following in respect of the 2018-2019, 2019-2020, and 2020-2021 seasons: 2018-2019 sixty bulling heifers, 2019-2020 sixty long weaner heifers, 2020-2021 thirty weaner heifers and thirty weaner steers.
“We are willing and able to make the above payments to CSC or any other responsible authority that may be acting on its behalf once the issue of who is entitled to receive the payment is ironed out.”
Again on February 1, 2022 Tongaat wrote another letter to Boustead through its company secretary.
This time they indicated that they had received instructions from Majoko to withhold payment pending finalisation of logistical arrangements for CSC to receive the rentals, which in any case would be paid to him.
“Following these instructions, we have reiterated on diverse occasions to your client that we remain guided by Mr Majoko’s instructions since he is in charge of CSC’s affairs by virtue of his appointment by the Master of the High Court,” the letter said.
“In the absence of a nullification of his appointment by the Master of the High Court, we remain legally bound to follow his instructions.
“However, if you have any written authority which supersedes that of Mr Majoko kindly please furnish us with the same.
“We remain committed to settle the outstanding arrears to the appropriate persons.”
In response, Boustead demanded that Tongaat pays rentals in respect of Chiwumburu Ranch within 30 days of the letter of demand, failing which they would be evicted from the ranch.
On January 5, 2022, Havercroft wrote a letter to Majoko demanding that he ceases collecting CSC rentals from tenants.
“It has come to our attention that you have been sending communications to various CSC tenants instructing them to renege from the standing arrangement on rental payments.
“Not only is this malicious, but we find the same to be in bad faith in light of the various meetings which we had with you in trying to map a way forward in the resuscitation of the defunct CSC,” the letter reads in part.
“Your actions not only undermine our efforts to have CSC up and running again, but go contrary to the understanding we have with the government of the Republic of Zimbabwe represented by the ministry of Agriculture.
“For the avoidance of doubt, the common understanding between the Ministry and us is that the corporate rescue proceedings were meant to support the resuscitation of CSC by preserving the implementation of the concession agreement between Boustead Beef and the government of the Republic Zimbabwe.”
“One instance in particular is the recovery of rentals from Tongaat Limited, which has refused to pay rentals citing communications to them as creating a parallel structure, which creates confusion as to who should collect rentals.”
Havercroft said these actions could not continue while “we fold our hands and see you reverse the progress made to date.”
“Thus, by this communication we demand that you cease and desist from causing pandemonium and creating parallel structures in the resuscitation of the CSC.
“We demand further that you cease and desist from sending out communications to all tenants without consulting with us.
“Should you fail to heed our demand, we shall be seeking your removal from the office of corporate rescue practitioner (which in our opinion has already manifested by lapse of time making your appointment null and void) on the grounds of undermining the Joint Livestock Concession between Boustead Beef and the government of the Republic Zimbabwe.”
On April 5, 2022, Havercroft sent an email to Stanford Gwanzura who is renting Sheila or Woodbrands Properties asking him to send him a copy of the court order on the rental collection on behalf of the JLFCA, which he claimed Majoko had sent to him.
Havercroft said, “You have now made your position clear that you are now dealing with Majoko despite you recently signing a new ‘else agreement’ with Boustead Beef through our estate agent’s representative.
“In light of this, the new lease which you signed with Sheila or Woodbrands Properties becomes null and void with immediate effect.
“I am now formally giving you three months’ notice to vacate my property and return it to its original state.”
The fight Clashes between Boustead Beef and Majoko are as a result of the Clause 4 of the joint venture (JV) agreement and Section 133 of the Insolvency Act No. 7/2018.
In terms of Clause 4 of the JV agreement, Boustead was expected to manage the LJFCP, run and operate the entire business unhindered by CSC and other government departments, with the freedom to make all decisions.
In terms of Section 133 of the Insolvency Act, the rescue practitioner has the full management control of the company in substitution of its board and pre-existing management, which is dissolved.
Provisions of the Act and of the JV agreement are not compatible, resulting in the clashes.
Where possible, the rescue practitioner should leverage the assets of the company under rescue to resuscitate the company.
The CSC owns landed property all over the country.
In the ordinary course this asset could be leveraged to raise capital to finance the company’s turnaround.
Majoko said it has not been possible to leverage CSC land to raise capital, either by way of sale or by way of collateral.
In a letter dated November 22, 2021 and directed to the Agriculture ministry, Majoko expressed his concerns over considerable and unresolved overlap between his functions as the corporate rescue practitioner and the management of the CSC, which was entrusted to Boustead Beef by contract.
Increasingly, that overlap is coming to the fore, he said.
“I have previously alerted the ministry to the dire situation at the Harare depot caused by the collapse of 148 metres of perimeter walling, which has left the depot unsafe as the property of the CSC is badly exposed to theft and vandalism at a time when there is no security to guard the premises,” the letter reads in part.
“In acknowledgement of the agreement between the ministry and Boustead Beef I contacted Boustead Beef and alerted them of the crisis and requested them to attend to remedial work,
“I forwarded to the ministry Boustead Beef’s response, which was to say that they would not attend to the remedial work.
“They also advised that the Harare depot was in a state no investor could possibly accept and demanded that the ministry attend to have the premises acceptable to Boustead Beef.
“I consider it my duty to have Cold Storage Company assets in working order, no matter the state they run in, if the assets can be repaired.
“I have previously reported that I have engagements with the tenants at the CSC Harare depot and that my engagements were cautiously encouraging.”
Majoko said he opened a CSC dedicated account with the National Building Society, indicating that some rental payments had been made into the account by some tenants who, to his knowledge, were not paying to Boustead Beef.
“I have outlined to Boustead Beef what I intend to have repaired using rental income,” he said. “There, we have locked horns with Boustead Beef.”
In a letter, Majoko said there were threats to sue him should he use the rentals for the repairs because Boustead Beef did not consider him as having that authority.
“As I said, the CSC is not a party to the joint venture agreement between the ministry and Boustead Beef,” he said.
“I am not a rescue practitioner of Boustead Beef, but of the Cold Storage Company.”
Majoko said he had the cooperation of the tenants, who were willing to pay rentals and do their bit in remedial work and it is “my intention to use whatever rental income I can get to attend to the necessary repairs.”
“In some instances, this will involve having the tenants repair the infrastructure on agreement that they set off the cost against rentals.
“I am aware that the model I propose to employ has been employed with success in the Dubane and Maphaneni long-term leases.
“I find no reason why the model cannot be employed where repairs are necessary.”
Majoko pleaded with the Agriculture ministry to guide him on how he could work with Boustead Beef going forward.
“I do not want to be a lame duck corporate rescue practitioner,” he stated.
“There are expectations the creditors and general public have on what I should do as a corporate rescue practitioner.
“At the moment, I am emasculated and will be judged a failure when I have not had control of the CSC.”
10 000 cattle without trace in the founding affidavit accompanying his court application seeking to place the CSC under corporate rescue proceedings in 2020, Masuka revealed that more than 10 000 cattle had been misappropriated from the heifer breeding scheme.
The animals were part of the government’s heifer breeding scheme.
He, however, did not reveal the identity of the people involved or say whether they have been arrested.
“It also came to light that there continues to be rampant corruption and unlawful dissipation of assets by certain executive members, board members, government officials and the respondent’s (CSC) officials.
“More than 10 000 head of cattle have been misappropriated from the government heifer breed schemes,” the minister said.
This publication made a follow up on the issue with Masuka, but with little success.
Firstly, efforts to get a comment from him hit a snag as he did not answer his phone.
Then again on Thursday while he was commissioning a dairy parlour project on behalf of Vice-President Constantino Chiwenga, Masuka declined to comment on the issue, saying he could not do so during the “VP’s programme”.
But Majoko told The Standard that the people with the relevant corporate memory were retrenched without this information being passed on.
“Between February and March 2019, there had been a wholesale retrenchment of CSC staff,” he said.
“If you say that there continued to be rampant corruption and unlawful dissipation at that stage, the CSC management had no longer been in control of CSC assets since February 2019.
“What happened was that people who had actually the corporate memory were retrenched without this information being passed on or being available to Boustead Beef.
“But I can tell you that information comes from the ranch managers.
“The moment you fire all ranch managers you don’t have that information.
“So as a result, there are cattle out there that actually belong to the CSC, but because there wasn’t the proper hand-over exercise that was the risk that was run.
“Are you aware that immediately before he was appointed minister of Agriculture, Masuka was actually a board member of the CSC?”
Majoko said he had spoken to all board members except Masuka to try to find out the truth since “they were said to be engaged in acts of rampant corruption, that evidence has not been brought forward to me.
“But I remain open to anyone, who has got that information to bring it forward.
“Due process will follow because at the end of the cattle finance scheme there were records.”
Former CSC chief executive officer Ngoni Chinogaramombe had this to say: “Maybe Masuka knows something I don’t know.
“I don’t have a comment. I heard about that but I am no longer there.
“So I don’t want to say much. But if a company had so many cattle, how then did it collapse?
At Independence in 1980, CSC was one of Zimbabwe’s major foreign currency earners, as it exported thousands of tonnes of beef to the European Union (EU).
At its peak, the beef processor and marketer used to handle up to 150 000 tonnes of beef and associated by-products annually and exported to the EU, where it had an annual quota of 9 100 tonnes of beef.
