Saturday, March 02, 2013

(NEWZIMBABWE) Zimplats refuses to pay US$17m Brainworks bill

Zimplats refuses to pay US$17m Brainworks bill
Not sealed ... Mike Nyambuya with Implats CEO Terence Goodlace and Saviour Kasukuwere
28/02/2013 00:00:00
by Gilbert Nyambabvu

ZIMPLATS and its South African parent, Impala Platinum (Implats), have refused to pay advisory fees demanded by a Harare firm for consultancy work on the platinum producer’s US$970 million indigenisation compliance deal, telling the government to pick up the tab.

In letters seen by New, Implats and Zimplats said Brainworks Capital’s US$17 million fee was the responsibility of the Zimbabwe government and the National Indigenisation and Economic Empowerment Board (NIEEB) which engaged the firm.

Zimplats also stated that they could not be expected to pay Brainworks since the company rendered its services to the NIEEB and the Zimbabwe government.

NIEEB chief executive Wilson Gwatiringa wrote to Zimplats on February 13, asking the company to pay Brainworks US$16,7 million “representing fees for the provision of advisory services to the government of Zimbabwe and the (NIEEB) in the implementation of the Zimplats indigenisation plan”.

Gwatiringa added that “the submission of the invoice to your company for payment is in line with our principals’ directive that advisory charges incurred by the (NIEEB) and the government … will be paid by the companies that are indigenising.”

But Zimplats wrote back on February 22 begging to differ.

“Regrettably (Implats) advised that they are not in a position to honour the payment on the basis that Brainworks was engaged by the NIEEB and was acting for and advising the NIEEB/the government in the negotiations …,” said Zimplats CEO, Alex Mhembere.

“Neither Implats nor Zimplats was involved in any way in engaging Brainworks Capital to act as advisors of NIEEB/the government of Zimbabwe or were we privy to the contractual arrangements relating to Brainworks Capital’s fees and Zimplats.

“As such both Implats and the board of Zimplats believe that the issue of Brainworks Capital’s fees should therefore be settled between NIEEB and Brainworks Capital.”

Brainworks Capital has been the subject of bitter recriminations both in and outside the coalition government after it emerged the company would likely pocket up to US$45 million for advising on nearly all the indigenisation deals reached between the government and foreign mining companies to date.

Foreign firms are now required by law to localise control and ownership of at least 51 percent of their Zimbabwe interests as part of an economic empowerment programme driven by President Robert Mugabe’s Zanu PF party, but opposed by his coalition partners.

Apart from the Zimplats deal, Brainworks says on its website it also offered consultancy services on the US$550 million Mimosa mine compliance plan, Anglo Platinum’s US$142 million deal for its Unki mine as well as transactions involving Canada-based gold producer Caledonia Mining and South Africa’s Pretoria Portland Cement.

But it is the Zimplats deal, by far the biggest agreed to date, which has raised eyebrows amid claims the transaction may be financially detrimental to the country and allegations that Brainworks was handed the advisory contract without going to tender.

However, in a strident defence of the deal, Zanu PF politburo member and former information minister Jonathan Moyo said the transaction had yet to be finalised.

He insisted that there was nothing irregular about Brainworks' involvement, adding that “of particular significance is the fact that the two percent charged by Brainworks Capital is payable by the indigenising company, and in this case, Zimplats. It is not payable by the indigenising entities or by the tax payers. So what's the fuss about?”

But Zimplats says paying Brainworks' fees would also likely breach of corporate governance standards.

“We believe you are aware that technically, the company cannot pay one shareholder costs without extending the same to other shareholders as that can be misconstrued as a dividend payment,” the Zimplats CEO wrote in his letter to the NIEEB.

“Furthermore, Implats raises concerns of corporate governance of their side if they were to pay the (Brainworks) invoice on behalf of NIEEB/government as this would be tantamount to influencing the decision of an advisor to a counterpart in the negotiations.”

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