(HERALD) Biti scuttles inputs deal

Biti scuttles inputs deal
By Mabasa Sasa

Government, largely through the Finance Ministry, has spurned repeated attempts by Pretoria and a South African company to fully operationalise the US$210 million inputs scheme, in the process jeopardising the 2009/2010 cropping season, investigations by The Herald have revealed.

Documents in our possession show that South Africa’s Finance Ministry and ASP Marketing have made frantic efforts to get Finance Minister Tendai Biti to sign a guarantee that will unlock thousands of tonnes of fertilizer and seeds.

Yesterday, Minister Biti said he had never met ASP, that the whole story was a fabrication to make it look like he was sabotaging agriculture, and that the documents in this paper’s possession were fake.

He refused to look at the documents and — after having said he had never spoken to ASP —oddly enough added that he had given them "all the documents they need".

"I speak to Parvin Gordhan (SA Finance Minister) almost every day and there is nothing like this," said Minister Biti.

However, the documents tell a different story.

Government on September 9 entered into an agreement with ASP for the supply of inputs through the ministries of Finance and Agriculture, and CBZ Bank as lead financial institution.

ASP undertook to supply Zimbabwe with grain and inputs worth US$114 million while supplies worth the remaining US$96 million would come from AIG.

The inputs would be distributed at GMB depots via a loan facility largely overseen by CBZ.

ASP asked for a 10 percent down payment before they could move the inputs.

The money was paid a month after the signing, but an irrevocable letter of credit and Government guarantee as stipulated in the contract have not materialised and ASP has in turn found it difficult to finance the movement of the inputs.

ASP needed the guarantee to get its bankers, Absa, to release funding for the project.

Indications are Minister Biti refused to process these documents and a Government guarantee covering US$43,63 million was only issued by Acting Finance Minister Elton Mangoma on October 8 when the substantive minister was out of the country on official business.

This was after Reverend Frank Chikane, formerly director-general in ex-president Thabo Mbeki’s office and the Chief Secretary to the Office of the President and Cabinet, Dr Misheck Sibanda, had been dragged in.

A letter from Rev Chikane to Dr Sibanda on October 19 confirms as much.

"Your intervention assisted greatly as the Acting Minister of Finance immediately sent a ‘Government guarantee’ letter dated 8th October 2009 to ASP Marketing," Rev Chikane said.

However, when ASP took the guarantee to Absa, the South African bank rejected it saying it did not meet expectations.

On November 3, Mr Keith Dutch —an Absa official — wrote to ASP saying: "I have reviewed the Zimbabwean Government guarantee and comment as follows: Document provides little comfort certainly when viewed as security for a B2B (bank-to-bank) with the SA government (No SA entity is mentioned in the document)."

They felt Minister Mangoma’s guarantee only implied backing for CBZ in the event that farmers defaulted on the loaned inputs but gave no security to ASP that Government would indeed pay them for bringing the seeds and fertilizers to Zimbabwe in the first place.

Rev Chikane suggested that the matter be taken up at a government-to-government level.

He wrote to Dr Sibanda saying: "The challenge they (ASP) are now facing though is that their bank (Absa) in South Africa is not able to release the necessary capital to finance the purchase and supply of said inputs . . .

"I have since talked to senior officials in the Department of Finance in South Africa and they are of the view that if the Government of Zimbabwe (through your Ministry of Finance) were to request for such support it would in all likelihood be favourably considered.

"As you would know, I do not really have authority on this matter as I am no longer in Government.

"It would therefore be helpful if the Ministry of Finance of the Government of Zimbabwe could take up the matter directly with the Ministry of Finance in South Africa.

"I have sent a letter to the Minister of Finance to advise accordingly in this regard and hope that the ministry will consider this approach as a way of unlocking the delivery of these inputs which are urgently needed in Zimbabwe.

"ASP has assured us that they are ready to deliver all the inputs requested as a matter of urgency once they have received such a guarantee to enable their bank to release the funds.

"ASP is also mindful of the deadlines related to the rainy season of Zimbabwe."

After that, ASP officials visited the SA Finance Ministry and were given the assurance that any such request from Minister Biti would be actively supported and the inputs would soon be released.

However, indications are that Zimbabwe’s Finance Ministry did not take up the offer.

Keen to assist Zimbabwe, SA Finance Minister Gordhan went to the extent of drafting the kind of letter requesting support that Minister Biti should send to him.

"Minister Gordhan basically wrote a letter to himself and simply asked Minister Biti to put a Zimbabwe Government letterhead on it and append his signature to it.

"The letter would be sent back and would be used by the South African government to unlock funding so that the inputs would start moving," officials close to the developments revealed.

The strategy was for South Africa to unveil R500 million in budgetary support that Pretoria said it would extend to Zimbabwe in March last year and the money would be used to kick-start ASP’s procurement and distribution.

The draft, dated October 27, 2009, reads in part: "We recognise that the processes of establishing government guarantees may take a while and we will certainly miss the deadline of the 2009-2010 rainy season.

"Accordingly, we would like to make a special request that your government allow us to either use the budget support you generously granted us (for urgent infrastructure projects) to secure these urgently needed inputs or use the budget support as a guarantee for the lines of credit provided for in the contract between the Government of Zimbabwe and ASP.

"A guarantee against RSA resources will give confidence to ASP bankers to release the necessary funds to finance the supply of agricultural commodities i.e maize, seeds and fertilizers.

"We would be grateful indeed if our request can receive your urgent and favourable consideration in order to ensure the recovery of the economy and to obviate a potential food shortage in 2010-11."

The copy of the letter in our possession shows Minister Biti never signed and sent it back.

Yesterday he denied its existence and said if The Herald indeed did have it, then it was fake.

Finance Ministry sources, however, said he saw the letter and blew a fuse.

"He did not take kindly to getting a draft of a letter written by South Africans which he was only required to officialise. He said he did not need anyone to teach him his job."

ASP representatives have written letters to various Government officials indicating dismay at what they perceive as lack of co-operation.

In one of them, dated October 9 and directed to Reserve Bank Governor Dr Gideon Gono, a representative says: "The delay on the part of the Government of Zimbabwe heavily compromises the nature of our business in the long term."

An ASP official told The Herald: "We have gone out of our way to help with inputs and grain. The SA government has also gone out of its way but nothing is moving.

"What is our interest? Yes, there is a profit motive. We are a grain trading company and we have been dealing with the Government of Zimbabwe for over 20 years now.

"We don’t understand these sudden delays when the rainy season has already started.

"We always get assurances that things will soon move but nothing materialises.

"We don’t want to get into a situation where we look as if we are deliberately sabotaging your agricultural season by not supplying inputs so that we can get a bulkier and more lucrative contract to supply food aid next year."