Maravi

(COMMISSION OF INQUIRY) The ZAMTEL Report Pt 3

8. Zesco/Zamtel Indefeasible Right of Use Agreement

8.1 In the process of its review of the sale of Zamtel shares, this Committee came across the Indefeasible Right of Use Agreement between Zesco and Zamtel (the IRU). This Committee noted that as a consequence of the IRU, the Zesco optic fibre network was sold as part of the assets of Zamtel. This Committee interviewed Zesco senior management being Mr. Cyprian Chitundu – Managing Director, Mr. Rogers Chisambi- Director Finance, and Mr. Christopher Mubemba – Project Director Kafue Gorge and Mr. Mangalelwa Sitwala - Telecommunications Manager. Zesco senior management provided this Committee with extensive background information leading to the signing of the IRU.

A brief of some of the background information documents is given herein below:

a. Consultative Meeting between Zesco and Zamtel on the Establishment of National Optic Fibre Network Held at The Communications Authority Board Resolution on Wednesday 2nd July 2008 at 14.30hrs

2nd July 2008
Communications Authority of Zambia

We quote from the above captioned minutes;

Page 2: “He (CAZ Chairman) also reminded Zamtel and Zesco that their assets were public assets and also it was important that the two parties worked together towards a mutually beneficial arrangement for Zesco and Zamtel as well as for the nation.”

“He (CAZ Chairman) explained that a Joint Technical Committee (JTC) comprising Zesco and Zamtel had been set up in march 2008.”

Page 4: “The Chairman wanted to know from the two parties when the final report by the JTC would be presented for implementation. Zamtel Managing Director informed the meeting that the JTC would be able to complete the report by end of July 2008 for presentation to the respective managements and boards during August 2008. This was agreed by the Zesco Managing Director”

This Committee notes that at this moment in time (July 2008) it was the intention of the two parties (Zamtel and Zesco) to investigate and define possible options for mutually beneficial collaboration in respect of their two, individual fibre optic networks.

b. Minutes of a Special Meeting of The Board of Directors Held on 21st October, 2009, at the Head Office Corporate Board Room at Stand 6949 Great East Road, Lusaka, Starting at 09.30hrs
21st October 2009

Zambia Electricity Supply Corporation

We quote from the above-captioned meeting;

Pages 1 & 2: “He (Zesco Chairman) informed the members that he had received a letter from the Hon. Minister of Energy and Water Development which requested the Board to pass a resolution to allow the merger of Zesco and Zamtel Fibre Assets to enable the creation of a Special Purpose Vehicle entity to be created on mutually agreed terms”

Page 3: “The major sticking point was absolute ownership of the infrastructure. Zesco stated that the OPGW that had the fibre cable was part of the electricity infrastructure and hence it could not be co-owned. On the other hand, Zamtel wanted absolute ownership. Zesco’s position was that the partnership could be arranged in the form of long-term rights for use of the fibre or some mutual business arrangement with Zamtel.”

Page 4: “After extensive deliberations, the Board passed the resolution to merge the Fibre Optic assets of Zesco with Zamtel based on mutually agreed terms to be managed and operated by a separate entity.”

c. Minutes of a Special Meeting of The Board of Directors Held on 28th October, 2009, at the Head Office Corporate Board Room at Stand 6949 Great East Road, Lusaka, Starting at 10.00hrs
28th October 2009

Zambia Electricity Supply Corporation

We quote from the above-captioned minutes;

Page 3: “The Chairman informed the members that he had received a letter from the Ministry of Finance and National Planning explaining that there were new developments on the issue of how to manage the Zesco Optic Fibre. The letter was a directive from the principal shareholder and it directed among other things that Zesco should lease the existing Fibre Optic to Zamtel on a lease whose duration would be determined by Government and that Zesco should only use the Optic Fibre for its operations and the Commercial aspect would cease hence forth.”

“The Board discussed the matter extensively and AGREED that this was Government Policy which the Board could not change and therefore it was DECIDED that the earlier resolution to merge the assets of Zesco and Zamtel and the creation of a new entity should be varied to conform with the Shareholder’s directive.”

d. Re: Indefeasible Right of Use Agreement

11th December 2009

Minister of Energy and Water Development We quote from the above-captioned letter, addressed to the Zesco Managing Director;

“As agreed at the said meeting, the following aspects of the Indefeasible Rights of Use Agreement (IRU) should be implemented with immediate effect:”

“1. The term of the IRU shall be indefinite in line with the directive by the Minister of Finance and National Planning in the letter dated 10th November 2009 addressed to your Board of Directors”

“2. The revenue sharing shall be in the ratio 80 percent to 20 percent between Zamtel and Zesco, respectively. The 20 percent payable to Zesco shall be inclusive of maintenance costs of the network;”

“3. The provisions of the IRU Agreement shall be applicable to the existing network and all future networks to be rolled out by Zesco; and”

“4. The partnership between Zesco and Twignet is no longer applicable and shall be terminated with immediate effect in line with the exclusivity granted to Zamtel as per directive by the Minister of Finance and National Planning;”

“As agreed in today’s meeting, it is our expectation that these measures are implemented with immediate effect and an appropriate contract should be subsequently signed with Zamtel Limited immediately.”

e. Indefeasible Right of Use Agreement Between Zambia Telecommunications Company Limited and Zesco Limited 17th December 2009
Zambia Electricity Supply Corporation

Some of the salient clauses in the above-captioned Agreement are;

. Zamtel’s purchase of the Zesco dark fibre, including all future optic fibre network or networks rolled out by Zesco extensions

. Zesco shall use its existing and all future network expansions only for the purpose of power generation activities

. Zesco shall not “light” any of the Zesco Dark Fibres

. Zamtel shall be the sole and exclusive customer of Zesco and the Zesco network in relation to the provision of fibre optic services

. Zesco shall not, during the term of the Agreement, grant any other entity whatsoever (in particular to Twignet BV) rights in respect of Zesco Network, any Zesco Extensions.

. Zesco further agrees that during the term of the Agreement it shall not allow any other entity whatsoever to build optic fibre and operate/use optic fibre services on the power transmission
distribution infrastructure of Zesco.

. The IRU Price payable to Zesco shall be a percentage share of the Zamtel Revenue relating to Leased Line Services only in accordance with the calculation and percentage set out in paragraph 32.2

. Paragraph 32.2: Subject to the criteria set out in paragraph 1.4 below, the Zamtel Revenue shall be shared between the parties as follows: 80% for Zamtel, and 20% for Zesco.

8.2 The Zesco Managing Director informed this Committee that throughout the above process Zesco’s intention was to collaborate with Zamtel and not dispose of their optic fibre network. Zesco had already invested in excess of US$ 20,000,000.00 on the project. He also advised that Zesco had plans to expand their optic fibre network into Tanzania and the region. To this end, Zesco had entered into a MoU with Twiganet BV on the 2nd of October 2009. Zesco and Twiganet BV had jointly invested in excess of US$2,000,000.00 into the feasibility study.

8.3 In fact, prior to 28th October 2009, Zesco was already earning in excess of US$6,000,000.00 annually from its optic fibre network. Zesco board and management were therefore reluctant to divest their asset to Zamtel at no consideration and the board only capitulated due to the directive issued by the Ministry of Finance and National planning as recorded in the Minutes of a Special Meeting of The Board of Directors Held on 28th October, 2009.

8.4 However, in accepting the shareholder’s directive, the Zesco board instructed the Company secretary to address the law and the Articles of Association and “directed Management to propose how the lease should be structured”.

8.5 The Zesco Managing Director was presented with the draft IRU by ZDA. His management team made amendments to the draft and returned the same to ZDA.

8.6 The Zesco Managing Director was summoned to State House where he met with Dr. Richard Chembe - Economic Advisor to the President and Mr. Joseph Jalasi - Legal Advisor to the President. He was subjected to immense pressure by Dr. Chembe who said that he was delaying the process and would not be confirmed in his position.

8.7 On the 17th of December 2009, while he was in Egypt, The Zesco Managing Director was instructed to sign the signature page of the IRU which was faxed to him and which he signed and faxed back.

8.8 On the 28th of January 2010, the Zesco board approved the IRU and the Zesco Managing Director’s contract was terminated. Minutes of a Special Meeting of The Board of Directors Held on 28th January, 2010, at the Head Office Corporate Board Room at Stand 6949 Great East Road, Lusaka, Starting at 16.00hrs 28th January 2010

Zambia Electricity Supply Corporation

Page 2: “Management informed the Board that Zamtel had written Zesco requesting that a specific resolution authorizing Zesco to sign the IRU should be provided as required by clause 2(1) of the IRU Agreement. This resolution was important as it formed part of the conditions precedent to the Agreement. Zamtel argued that the earlier resolution passed by the Board was too general and was passed earlier than the signing of the Agreement and therefore did not conform to clause 2(1) of the Agreement.”

“The Board was therefore requested to pass a resolution allowing Zesco to sign the IRU with Zamtel”

8.9 Having reviewed the background to and the sequence of events that led to the signing of the IRU between Zamtel and Zesco, it is patently clear that Zesco only signed the IRU whilst under the greatest of pressure and duress from GRZ. The IRU document is clearly and ridiculously skewed in favor of Zamtel and is totally detrimental to Zesco. The implementation of the IRU would result in a marked decrease in the competitive nature of the optical fibre market in Zambia, as Zesco the largest possible competitor to Zamtel would be, at a stroke, removed from the market and Zamtel would become the sole and dominant carrier-of-carriers optical fibre network player.

The optical fibre network assets of Zesco have, in the IRU Agreement, been expropriated (with no consideration whatsoever) and handed over to a company that was soon to pass into a majority private shareholding. The great benefits of such an expropriation for the recipient are clear. It is important to note that just as none of Zamtel’s assets were not valued, the Zesco optic fibre network was also not valued despite its acquisition by Zamtel resulting in a substantial increase in both its asset value and potential earning value.

8.10 This Committee is concerned to note that the acquisition by Zamtel of the rights granted under the IRU were acquired after the invitation for expressions of interest were sent out on the 15th of September 2009. In fact, the Solicitor General only having approved the draft on the 11th of December 2009, and the IRU being signed on the 17th of December 2009, the IRU was only signed 5 days prior to the closing date for receipt of non-binding bids which was 23rd December 2009.

The IRU represents a significant change in the value of Zamtel assets as well as its future potential earnings and therefore the attractiveness of Zamtel to potential bidders.

This Committee sees no evidence that this alteration in the “fortunes” of Zamtel was ever formally communicated to all the bidders. It is this Committee’s considered opinion that had all the bidders been given this new and important information it would all likelihood resulted in a change in the Capex figures as well as their overall bid price.

8.11 This amounted to unfair practice and a blatant lack of transparency on the part of ZDA and their transaction Advisors.

8.12 This Committee places on record that in the interview with the Managing Director of Zamtel -Mr. Han Paulsen, actually informed this Committee that he had seen the IRU in the virtual data room and that ability to provide data services using the optical fibre network was a significant component of LAP GreenN’s business plan.

8.13 As a post script the Committee places on record that they also interviewed the former Zamtel Managing Director – Mr. Mukela Muyunda. Mr. Muyunda was of the opinion that the IRU would result in greater financial benefits to Zesco as opposed to Zamtel. This would be in spite of the revenue being split 80 – 20 in favor of Zamtel and Zesco being responsible for all future Capex and Opex. This Committee did not find Mr. Muyunda’s statement at all credible.

9. Government of the Republic of Zambia ZAMTEL shareholding

Investment Promotion and Protection Agreement – Between GRZ and ZDA and ZAMTEL – Relating to The Zamtel Turnaround Projects

10th July 2010
Zambia Development Agency

We quote from the above captioned Agreement;

“Page 23: Subscription Shares – GRZ subscribes for Tax shares amounting to the Zamtel Tax Liability”

“GRZ subscribes for additional shares to the value of the Potential Pensions Deficit (US$ 20 million), Potential Employee Redundancy Liability (US$97.7 million) and the Chinese Loan Amount (US$ 32.7 million)”

The above quotation is also replicated in the Shareholders Agreement dated the 5th of June 2010. The IPPA and the Share holders Agreement both indicate that the

GRZ Tax Shares will be derived from the Zamtel Tax Liability. The Outstanding Tax Liability as at 30th April 2010 according to the information in the ZDA virtual data room was US$ 120 M (ZMK 545,233,958,959.82.) The amount paid by GRZ in July 2010 to clear all Zamtel tax liabilities was K 557,948,972,876.00. This amount represents the GRZ tax shares.

The total of the Potential Pensions Deficit (US$ 20 million), Potential Employee Redundancy Liability (US$97.7 million) and the Chinese Loan Amount (US$ 32.7 million). The Total of these amounts being US$150.4 Million represents the value of GRZ additional shares.

The Share sale and Purchase Agreement dated the 5th of June 2010 states: “Completion is conditional upon

(G) the Vendor subscribing for (and the Company duly allotting and issuing):
(1) the Tax Shares in consideration for an amount equal to the Tax Amount; and
(2) the Investment Shares in consideration for an undertaking by the Vendor to pay or procure to the Company of an amount equal to the Subscription Amount.”

Tax Amount is defined as “….an amount equal to the liability of the Company to make a payment of or in respect of Tax…”

“Subscription Amount is defined as “… the aggregate of the Actual Redundancy Liability Amount, the Actual Pensions Deficit Liability, the Chinese Loan Amount, the Initial Equity Amount and the Escrow Costs.”

The amount paid by GRZ for tax shares was US$120M (K 557,948,972,876.00). The amount paid by GRZ for investment shares was US$214.45 M. GRZ effectively paid Zamtel US$334.45 M to retain 100% of its shareholding in Zamtel immediately prior to privatization.

10. Disbursement of Proceeds

Ministerial Statement by Hon. Felix C. Mutati, MP, Minister of Commerce, Trade and Industry, on The Privatization of Zambia Telecommunications Company Limited (Zamtel) to LAP Green Networks
July 2010

Ministry of Commerce, Trade & Industry

We quote from the above-captioned Ministerial statement:

Page 25: “V) Payment of US$ 42.6 Million as proceeds to the Government” This Committee held extensive interviews with the accounting department staff at the Zambia Development Agency – in particular Mr. Phiri (Chief Accountant). To date, the breakdown of expenditure, in respect of the US$ 42.6 million is summarized as follows:

Expenditure Breakdown of Govt Proceeds of $42,600,000
RP Capital Partners $12,689,759.03 43.31%
Net Cash GRZ Proceeds (MoFNP) $15,000,000.00 51.19%
Legal Fees $702,296.33 2.40%
Zamtel Staff Incentives $85,926.59 0.29%
ZDA/Zamtel Staff Incentives and Overtime $307,462.73 1.05%
ZPA Negotiating Team $65,797.25 0.22%
Zamtel Staff Training $192,907.51 0.66%
Adverts $87,468.98 0.30%
Grant Thornton Consultants - Financial $94,859.14 0.32%
ZDA Zamtel Assets $46,388.08 0.16%
Bank Charges $8,304.28 0.03%
Other Zamtel Related Payments $19,473.60 0.07%
Total Expenditure $29,300,643.52 100.00%

Balance of Funds due to GRZ $13,299,356.48

This Committee noted, with great concern, that from the total amount due to GRZ from the proceeds of the Zamtel sale, GRZ has to date, only received US$ 15 million (51.2%). RP Capital Advisors, on the other hand, received a similar amount of US$ 12.7 million (43.3%)!

This Committee noted that the Agreement appointing RP Capital as transaction advisors provided in clause 6.4 (a) that “the price payable in foreign currency is the higher of: (i) USD 2,000,000; and (b) 5% of the Transaction Value”. Transaction Value is defined as “ .. the amount .. which shall be received by either (i) ZAMTEL; or (ii) the Republic of Zambia, …”.

From the US$ 257M consideration price, US$97M was paid in redundancies, US$20M was paid in Pension deficits and US$32M was paid to the Chinese banks. GRZ effectively US$75.3M. RP Capital therefore ought to have received 5% of this amount being US$3.77M.

This Committee questioned the ZDA Chief Accountant on why a sum of US$12.7M was paid to RP Capital. He advised this Committee that in fact he had also queried the payment but was instructed to pay the US$12.7M.

We also highlight some of the additional expenditure that has accrued on the US$42.6 million, such as payments made to Zamtel staff as Incentive payments. This Committee was unable to establish, or ascertain with any measure of certainty, from the ZDA accounts staff, whether the remaining balance of US$13.3 million is fully accounted for and available from the ZDA bank accounts.

This Committee noted with concern that GRZ have to date, only received the sum of US$15 million as proceeds for the sale of Zamtel. We further noted that the balance of the proceeds (US$ 13.3 million) have to date not been remitted to GRZ and may continue to be whittled away at ZDA over the coming months and years.

11. UN Resolutions and Sanctions on Libya

11.1 Early in 2011, the United Nations imposed sanctions freezing the assets of listed individuals and entities. The Libyan Investment Authority which is the holding company of LAP GreenN was named as an entity on this list.

11.2 This Committee conducted interviews with the Zamtel Legal Counsel Miss Selina Luwisha, ZDA Director General, Mr. Andrew Chipwende and Mr. Dominic Sichinga in his capacity as Director of ZAMTEL on the UN Resolutions and Sanctions imposed on Libya.

11.3 Ms. Luwisha declined to provide this Committee with any information postprivatisation.

11.4 Mr. Chipwende advised this Committee that in fact the UN sanctions applicable to Zamtel had been lifted and undertook to send the Committee a letter to confirm the same. To date this letter has not been received by this Committee.

11.5 In a telephone conversation on speaker, Mr. Sichinga advised this Committee that in order to comply with the UN sanctions the following steps were taken:

1. Mr. Hans Paulsen resigned as an employee of LAP GreenN and was employed by ZAMTEL in order to comply with the directive relating to direct or indirect control.

2. Donald Nyakairu resigned from LAP GreenN and became an employee of Uganda Telecommunications Limited also in order to comply with the directive relating to direct or indirect control.


3. Abdulbasset El-Azzabi has never attended any Board Meetings since the UN Sanctions.

4. Dominic Sichinga is now the Chairman of the Board.

11.6 The Committee notes however, that in his interview with this Committee Mr. Paulsen informed this Committee that he is and has always being an employee of LAP GreenN and not ZAMTEL. He also confirmed this in a letter dated the 22nd October 2011 addressed to the Chairperson of this Committee and copied to LAP GreenN Head Office, and we quote:

“22 October 2011
The Chairperson
Technical Committee-Investigation on the
Sale of Zamtel
RE: INVESTIGATION ON THE SALE OF ZAMTEL

7. SECONDMENT AGREEMENT
Pursuant to the secondment agreement signed between LAP GreenN and Zamtel, LAP GreenN is entitled to second up to 8 members of staff. Currently, 6 members of staff have been seconded to Zamtel.

The value of the contract is USD 20,000.00 net for senior executive management positions and USD 15,000.00 net for seconded managers including other benefits.” We also quote the LAP GreenN official website which lists Mr. Hans Paulsen as the LAP GreenN Group Chief Commercial Officer.

11.7 This Committee notes that Mr. Paulsen’s statement and the official LAP GreenN website contradict the UN Resolution guidelines regarding direct and indirect control of listed entities that were given to Zambia through the response letter dated 2nd August 2011, REF: S/AC.52/2011/OC.03, to H.E. Mr. Lazarous Kapambwe, Permanent Representative of Zambia to the UN, letter dated 2nd June 2011 which sought the UN Committee’s guidance in connection with the scope and application of the freeze measure.

We quote Paragraph clauses 1 - 3 of the response letter

1. “That e.g. based on a thorough review of credible and substantial information, the Member State has determined a listed entity can reasonably be expected not to exercise or not be able to exercise control, directly or indirectly, over an entity in question;

2. That the Member State imposes strict safeguards to reasonably ensure that any funds, financial assets or economic resources are prevented from being made available by Member States or by individual or entities within their territories, to or for the benefit of the individuals or entities listed in Annex II of the resolution 1970 (2011), or Annex II of resolution 1973 (2011), or designated by the committee; and,

3. That, pursuant to paragraph 24 (g) resolution 1970 (2011), the Member State provides the Committee with information about the measures taken, for example with detailed information regarding the circumstances of its case, including the Member State’s determinations associated with the case, the procedures used to reach those determinations and safeguards imposed on the entity consistent with the conditions above.

With respect to the situation raised in your letter of 2nd June 2011 concerning Zambia Telecommunications Limited (Zamtel), the committee notes Zambia’s determination that these three conditions have been met. Consistent with paragraph 24 (g) of resolution 1970 (2011), the Committee expects Zambia to update the Committee on the steps they are taking to ensure the above conditions continue to be effective in case of any changes.”

11.8 This Committee further notes that RP Capital through Mr. Peter Heilner on 6th May, 2011 over a year after their role as Transaction Advisors had ended, did write an email directly to Mr. Hans Paulsen copied to Mr. Joseph Jalasi, Mr. Andrew Chipwende and Nick Foggin (RP Capital) advising them on what steps to take with regards to the UN Resolutions and we quote the email and its attachment.

“Email From Peter Heilner.
From: Peter Heilner
Sent: 06 May 2011 19:50
To: 'Hans.Paulsen@zamtel.co.zm'

Cc: 'jjalasi@zainzm.blackberry.com'; Andrew Chipwende; Nick Foggin; Peter Nemeth
Subject: Zamtel - UN Resolutions
Attachments: 110506_ZAMTEL STEPS UN RESOLUTIONS.docx

Hans,

Further to our discussions today and our previous email communication on the affidavit, please find attached a brief document which describes the course of action that we feel is most appropriate in order to comply fully with the UN sanctions and ensure that the operations and legal agreements governing the direction of the company are not contradicted. Please note that this does not constitute legal advice and the attached should be reviewed by your general counsel. In summary we believe that following key actions should be taken in the following
order:

1) You and the members of the management team who were previously on secondment from LAP should sign the affidavit with the terms outlined in the attached

2) The LAP directors (Elazabi and Donald) should sign agreements to appoint alternate directors in their place in order to ensure compliance with the sanctions and undertake not to recall such alternaties until the relevant sanctions have been lifted. Agreements to be counter signed by alternates, the names of whom will be provided by GRZ (ideally this coming Monday)

3) A board meeting should be held where a resolution is passed confirming the appointment of the alternative directors (as is required under the Companies Act), acknowledging the affidavits signed by the management, re-confirming the appointments of the management team, and acknowledging the other measures put in place by the GRZ in order to comply with UN Resolutions

4) An announcement be made to the public by the GRZ (through ministerial statement or otherwise) outlining the new board composition and making clear the steps taken by the government in order to comply with the sanctions and further highlight that there should be no impediment to Zamtel proceeding in the ordinary course of business

We believe these actions should help put the operational issues and the public relations issues behind the company and allow Zamtel to continue to meet its turnaround goals Please let us know if any of the above or attached is unclear or if there is anything else we can do to be of assistance in this respect.

Best regards,

Peter

Attachment: _110506_ZAMTEL STEPS UN RESOLUTIONS.docx

ZAMTEL

There are three key legal documents governing the composition of the board of directors in Zamtel, namely:

- The Shareholders’ Agreement, entered into at the time of the privatization transaction;
- The Articles of Association of Zamtel;
- Companies Act of the Republic of Zambia.

These documents set the legal perimeter within which to accommodate measures in support of the Government’s steps to respect UN Security Council Resolutions 1970 and 1973.The steps set out below are Zamtel-specific; in other words, they are actions that Zamtel could take independent of the actions of the Government or any other body. They should allow Zamtel to reconstitute its Board of Directors in a manner that respects Zambian Law as it pertains to the situation, and the legal documents which describe Zamtel’s activities.

PROCESS OVERVIEW / CONTENTS

The continued participation of two LAP-appointed Zamtel Board Members is considered to be contrary to complete compliance with the above UN Security Council Resolutions, namely Abdulbasset El-Azzabi and Donald Nyakairu. The most effective and simple solution seems to be as follows:

(i) With the cooperation of Abdulbasset El-Azzabi and Donald Nyakairu, acting under Section 65 of the Articles of Association of Zamtel and Section 213 of the Companies Act, both of the above could appoint an Alternate Director, until such time the sanctions under the UN Resolutions are lifted.

Alternate Director Appointments will have to be delivered to Zamtel and signed by Mr El-Azzabi and Mr Nyakairu respectively, on one side and their Alternate Directors on the other (the latter to be nominated by the GRZ). The Alternate Director Appointments should state the following:

- Unconditional appointment of the Alternate Director by the relevant director (Mr El-Azzabi/ Mr Nyakairu) in accordance with Section 65 of the Articles of

Association and Section 213 of the Companies Act. In line with laws of the Companies Act each has to appoint a different alternate;

- Acceptance of the appointment by the relevant Alternate Director;

- Appointment made upon request of the Directors with the view of implementation of the UN Resolutions and compliance with the laws;

- Appointment valid until such time the sanctions under the UN Resolutions are lifted (as for timing of appointment under subsection (A) of section 213 of the Companies Act;

- In line with Subsection (B) of section 213 all the other Directors (including the Directors making the appointment of the Alternate Directors) need to countersign the appointment and give their consent;

- Both Mr El-Azzabiand Mr Nyakairu would give their commitment not to recall the appointment until such time the sanctions under the UN Resolutions are lifted; and

- Request from both Mr El-Azzabiand Mr Nyakairu to be kept informed of the activities of the board of directors of Zamtel.

(ii) Following the delivery of the Alternate Director Appointments, the Board of Directors of Zamtel would convene, and invite the two new Alternate Directors as well as Mr El-Azzabiand Mr Nyakairu, based on their request.

BOARD RESOLUTION KEY POINTS

1. Quorum –

a. It was noted that the meeting had be duly convened and that a quorum was present;
b. Further note of the presence of Mr El-Azzabiand Mr Nyakairu

2. Background –
a. UN Security Council Resolutions 1970 and 1973 continue to be enforced internationally and in the Republic of Zambia;
b. Zambian government has frozen the assets of LAP Green N in Zambia
– no sale of shares will be permitted, and no dividend payments will be made;
c. The Board of Directors of Zamtel believes that it is in the best interests of Zamtel, and its continued turnaround, to voluntarily take additional steps to ensure compliance with the UN Security Council Resolutions for as long as they are in place

3. Resolutions –

a. The Board of Directors of Zamtel takes note and appreciates the appointments of Alternate Directors (Mr X and MR Y) by Mr El-Azzabiand Mr Nyakairu respectively;

b. Based on the request of Mr El-Azzabiand Mr Nyakairui resolves to allow them to attend future Board meetings of Zamtel only in the capacity of observers, until such time as the UN Security Council Resolutions are lifted;

c. The board resolves that any and all dividend payments and payments liquidation proceeds to shareholders, in particular LAP Green N will be suspended until such time as the UN Security Council Resolutions 1970 and 1973 are lifted;

d. Payments of any form whatsoever to LAP Green N or its affiliates (excluding Zamtel or its subsidiaries) shall be suspended until such time as the UN Security Council Resolutions 1970 and 1973 are lifted.

e. The Board of Directors acknowledges that an affidavit has been signed by Mr Hans Paulsen, in his capacity as Chief Executive Officer of Zamtel, stating that:

i. He is an employee of Zamtel, and Zamtel only, with responsibility only to the Zamtel Board of Directors

ii. Has no contract with LAP Green N

iii. Receives no remuneration from LAP Green N

iv. Is in no way linked to, or in receipt of instructions from, the regime in Libya

v. There are no employees of Zamtel who are conflicted through contracts or relationships with LAP Green N or the Libyan Government or any of the other entities cover by UN Security Council Resolutions 1970 and 1973

f. The Board of Directors also acknowledges that a similar affidavit has been signed by all members of the management team of Zamtel who were previously on secondment from LAP Green N

g. The Board of Directors hereby confirms the appointment, on contract to Zamtel, of all members of the management team of Zamtel, to Zamtel.

4. Conclusions –

a. There being no further business, the meeting then concluded and the secretary was instructed to make the appropriate filings in the Company’s statutory books. It is important to note that these are measures of voluntary compliance with UN Resolutions offered to the GRZ by Zamtel and its majority shareholder (and their representatives). Provided that any breaches occur, GRZ may proceed in enforcing UN Resolutions by adopting administrative actions.”

11.9 This Committee cannot see any justification whatsoever for Mr. Heilner who was a consultant for ZDA to be providing advice to a LAP GreenN employee on a matter concerning sanctions imposed by the UN on the holding company of the same LAP

11.10 This Committee also notes that contrary to Mr. Sichinga’s claims, the Zamtel Managing Director, Mr Hans Paulsen still holds himself out as being a LAP GreenN employee.

11.11 This in effect can be construed to be a contravention of the UN sanctions that Zambia has committed to complying with. Moreover the continued control of the Zamtel board can also be construed to be in direct contravention of the UN sanctions.

12. Conclusion

The terms of reference for this Committee were:

1. To determine how the sale of Zamtel was conducted.

This Committee categorically and unequivocally states that our investigation clearly found that the manner in which the Zamtel sale was conducted was as follows:

a. Driven by an unreasonable sense of urgency and haste with no consideration nor regard for normal and expected deliberations, consultations and reviews. It was set to an inflexible time schedule at the cost of a common sense approach following well established procedures.

b. This Committee has uncovered numerous email correspondence from RP Capital’s Peter Heilner issuing directives to high ranking and senior GRZ, ZDA and Zamtel officials, set timetables and tasks, drafted Ministerial and even Presidential speeches and letters and orchestrated the deployment of personnel to strategic positions and departments. It is clear that from the outset, RP Capital through Peter Heilner single handedly planned, managed, drove, controlled and executed the entire process. The GRZ, ZDA, ZICTA, State House staff, Zamtel and all other such were reduced to the role of mere spectators with little or no input and control over the process. Examples of the extent of Peter Heilner’s control and manipulation over the process are appended hereto as Appendix IV.

2. To ascertain whether all the required procedures relating to the sale were complied with. This Committee can state with authority that all the procedures relating to the sale were not complied with. Of particular note however, are the following:

a. The arbitrary appointment of RP Capital Partners Cayman Islands by Dora Siliya for the valuation of Zamtel assets with no thought given to their terms of reference.

b. Whether the direct selection of RP Capital Advisors as Transaction Advisors by ZDA was based on Mr. Chipwende’s assertion to ZPPA that they had previously executed a related assignment to the satisfaction of ZDA board (which was at best misleading), or as he stated to this Committee that RP Capital refused to hand over their valuation report unless they were appointed Transaction Advisors, their appointment was at the very least highly irregular. Neither of the above reasons advanced can form the basis for appointment of an unknown and unproven consultant for such an important assignment.

c. The decision by Cabinet to sell Zamtel was made without an asset valuation report.

d. LAP GreenN ought to have been disqualified at the pre qualification stage.

e. The negotiating team was not independent as required by Law. The sale was fraught with irregularities in the tender processes, coercion in the acquisition of Zesco’s assets, bad faith with the selection criteria, negligence in the management of the account of GRZ net proceeds and a failure to monitor postprivatization.

Dated the 2nd day of November 2011.

Appendix I

Timeline and Sequence of events

(Tables)

Labels: CORRUPTION, DORA SILIYA, PRIVATISATION, RP CAPITAL PARTNERS, ZAMTEL, ZDA

posted by MrK @ 7:35 PM