Probe team warns, cautions Dora
By Ernest Chanda
Wed 20 Feb. 2013, 14:00 CAT
THE Government Joint Investigations Team on Monday warned and cautioned Dora Siliya in connection with the
signing of a memorandum of understanding (MoU) with RP Capital Partners of Cayman Islands, which led to the privatisation of Zamtel.
According to team spokesperson Namukolo Kasumpa, Siliya, who is former communications and transport minister was cautioned for the offence of abuse of authority of office, by signing an MoU and an Addendum without authorisation.
She disclosed that as a result of such a transaction, Siliya committed the government to an expenditure of over K800 million (KR800 thousand), an act arbitrary and prejudicial to the interests of the government of the Republic of Zambia.
Kasumpa said that during the warn and caution process, Siliya opted to remain silent and did not respond to the allegation.
According to an MoU which Siliya, in 2008 signed with RP Capital Partners Limited to evaluate Zamtel's assets, ahead of its privatisation, the Zambian government was mandated to pay RP Capital Partners Limited a fee amounting to five per cent of the negotiated amount and would get US $2 million about K10.3 billion as transaction fees at the end of the transaction.
However, at the end of the transaction, RP Capital Partners Limited got about US $12.8 million (approximately K65 billion) from the Zambian government after the sale of Zamtel to Libya's Lap Green Network.
And despite legal advice from the Attorney General's Chambers against engaging RP Capital Partners Limited without following the procedures, Siliya, on behalf of the Zambian government, on December 22, 2008 signed the MoU with RP Capital.
According to the MoU, RP Capital Partners Limited had been contracted by the Zambian government to provide consultancy services to the government in connection with valuation of Zamtel for purposes of the potential sale of government shares in Zamtel, assistance in negotiations with prospective acquirers in conjunction with the government team and project management of the potential Zamtel sale process working with the Ministry of Communications and Transport and/or the Zambia Development Agency (ZDA), as the case may be.
And on Saturday, June 5, 2010, then finance and national planning minister Dr Situmbeko Musokotwane announced that the government had agreed to sell 75 per cent shares in Zamtel to Libya's LAP Green Network for US$257 million (about K1.3 trillion).
And since RP Capital Partners Limited was entitled to five per cent of the negotiated amount, in this case US$257 million, it meant that the firm would be given about US$12.8 million.
Then president Rupiah Banda's son, Henry, was said to have introduced RP Capital Partners Limited to Siliya and the Ministry of Communications and Transport.
In early 2009, sources revealed to The Post that Henry was one of the contact persons for RP Capital Partners Limited and that he had attended some meetings at the ministry.
Henry has since refused to appear before investigative wings and is on a self-imposed exile in South Africa.
Labels: CORRUPTION, DANNY GERTLER, DORA SILIYA, RP CAPITAL PARTNERS
Read more...
Henry seeks to halt interpol alert
By Chiwoyu Sinyangwe
Tue 10 Apr. 2012, 13:30 CAT
HENRY Banda's decision to hire high-profile international lawyer, Robert Amsterdam gives insight into the amount of money he accumulated when his father ruled Zambia, says home affairs minister Kennedy Sakeni.
Henry, a fugitive son of former president Rupiah Banda, is wanted by Zambia's joint investigative team for suspected fraud in connection with his role in the US$257 million sale of the Zamtel to LAP Green Networks of Libya.
Although not a government official in 2008, Henry is alleged to have connived with former communications minister Dora Siliya to single-handedly hire RP Capital of Caymen Islands to value the asset liability position of Zamtel in preparation for the controversial sale in 2010.
Siliya has been taken to court for allegedly cancelling a duly-awarded tender for provision of radar services to the then Lusaka and Livingstone International Airports, a decision investigative wings say cost the country K1.9 billion.
Henry has been placed on the International Police (Interpol) red notice list as a wanted person.
Henry, currently domiciled in South Africa, has hired Amsterdam of Amsterdam & Peroff LLP to halt the Interpol alert.
"These unspecified allegations against Henry Banda are politically driven and without foundation. It is clearly not a genuine investigation," stated Amsterdam, who also represents former president Banda, in a claim to counter Zambia's pursuit for Henry.
But Sakeni said Henry was not being persecuted but "merely" being asked to come and clear his name.
Sakeni said Henry's hiring of Amsterdam told a big story of how much "foreign exchange" the former president's son had accumulated.
"People who have money, what can you do? Maybe, he has no confidence in our local lawyers? We don't know how much they are paying that lawyer," Sakeni said in an interview.
"It's up to individual level but certainly they have the money. How else can they hire an expensive lawyer of the nature if they don't have the money? It gives us a bigger story. Where have they got that wealth to hire such as an expensive lawyer? I am told the lawyer is paid millions of US dollars. I believe we have our lawyers who may be even much better than him. But that is their business, we can't go into it."
According to their official website, Amsterdam & Peroff states that it offers legal counsel to companies and individuals facing critical challenges.
Among the prominent individuals Amsterdam has represented are incarcerated Russian billionaire and politician Mikhail Borisovich Khodorkovsky, and former Thailand prime minister Thaksin Shinawatra.
Shinawatra hired Amsterdam to serve as international lawyer and adviser to the defence counsel of the United Front for Democracy Against Dictatorship.
Though Amsterdam could not represent Khodorkovsky in Russia as no foreigner can argue before a Russian court, and the Federation has refused to issue a visa, he still represents Khodorkovsky on the international stage.
And Sakeni described as a "welcome development" the announcement by South African High Commissioner to Zambia Moses Chikane that South Africa was aware that Interpol is now active on Henry's case and that his country was ready to do its part as long as it was within the stipulated laws.
"The young man is not being persecuted. He shouldn't hide in the father's immunity just because the father was president," Sakeni said.
"If he is suspected of wrongdoing, we should not just fold our arms and just look at him like that. He is just like any other citizen. A suspect is just a suspect like any other person. He is not of special status. If the state has high suspicion that he was involved in some corruption or crimes of any kind, he should just own up and appear before the officers so that they are able to interview him and get the truth."
Sakeni advised Henry to voluntarily come back to Zambia rather than through an arrest.
"Maybe he knows too much that and he is convinced that he committed some felony of some kind and that is why he has been running away," said Sakeni.
"Some of his friends, including those who been arrested, are on bail. So, why run away? For how long is he going to run away? The world has become too small. Running away will not do. The best he can do is not even to wait for Interpol to bring him. Let him come back and clear his name. He has got many years to go in his life. Running away doesn't solve any problem and the world has become too tiny for anyone to hide. What happened to Osama Bin Laden? He eluded the world for so many years but there it was. It's not good to run away, especially if the cases you are facing are not capital offences?"
Sakeni said the allegations against Henry were mere white collar crimes.
Labels: CORRUPTION, HENRY BANDA, KENNEDY SAKENI, RP CAPITAL PARTNERS
Read more...
ZAMTEL Accounts frozen because of suspected Money Laundering activities
TIME PUBLISHED - Saturday, January 21, 2012, 11:38 am
Sources in Lusaka have told the Times of Zambia that authorities have frozen Zamtel accounts pending money laundering investigations as a result of the transaction between the former MMD Government and LAP Green of Libya.
And Information, Broadcasting and Tourism Minister Fackson Shamenda has said that security wings had the right to freeze any bank account in the country.
Mr Shamenda, who is Chief Government spokesperson, said the investigative wings could freeze any bank accounts if it was discovered that there were suspected irregularities.
“Government does not go round freezing bank accounts but if law enforcement officers have suspected an anomally, they have a right to freeze any account,” he said.
He said operations of Zamtel and welfare of employees would not be affected and the Government had done transparently everything pertaining to the sale of Zamtel in the best interest of the nation.
Mr Shamenda urged Zambians to desist from speculation but verify alreports regarding the Zamtel sale following the release of the report
by the commission of inquiry.
“In as far as there is freedom to access and disseminate information strongly feel that people should verify this information with their sources first,” Mr Shamenda said.
And National Union of Communications and Allied Workers of Zambia (NUCAW) president Patrick Kaonga, said it was common knowledge that the Zamtel accounts were frozen because the company’s staff could not deposit any revenue into the accounts.
“Yes, in terms of being aware about the Zamtel accounts, it is common knowledge because when staff go to deposit money at banks, they are told that they can’t make any transactions,” he said.
Mr Kaonga, however, said Zamtel management had not issued any official correspondence regarding the freezing of the company’s accounts by the Government.
Asked for how long Zamtel staff had not been able to make deposit, he said, they learnt about it on Thursday when employees who went to make deposits were told they could not do so.
LAP Green Networks, majority owners of Zamtel, also disclosed that Zambian authorities had frozen all their bank accounts as part of investigations into the alleged irregular sale of the Zambian telecommunications company.
In an e-mail response to a Reuters query yesterday, Lap Green denied any wrongdoing saying: “The authorities have no reasonable grounds whatsoever to believe that the moneys in the seized accounts and any other Zamtel accounts are from the proceeds of criminal activity.”
The response further states that the authorities had seized bank accounts belonging to Zamtel in connection with allegations of money laundering, “which are utterly false”.
LAP Green maintained that Zamtel’s accounts only contained monies that directly related to its activities as a communications service provider in Zambia.
The statement said Zamtel was engaging relevant authorities in an effort to have its accounts unblocked.
“We are also currently working on avenues for the amicable resolution of matters. We have also taken measures to ensure services to Zamtel’s clients are not affected,” the statement further reads.
The response also states that aside from anything else, the Zambian Government remained a shareholder in Zamtel and had representation on the board of directors who had access to and knowledge of the company’s accounts.
LAP Green said Zamtel’s accounts were audited every quarter and the Government was aware and knew the result of the audit reports, which made it clear that there was and had been no wrongdoing.
[Times of Zambia]
Labels: CORRUPTION, FACKSON SHAMENDA, PRIVATISATION, RP CAPITAL PARTNERS, ZAMTEL
Read more...
(MAILING LIST) Privatisations under probe by the Sata government
Privatisations under probe by the Sata government:
ROAN ANTELOPE MINING CORPORATION:
Following relentless pressure from the IMF and World Bank, the Chiluba government (including minister
Sata) agreed to privatise Zambia Consolidated Copper Mines (ZCCM), starting in 1997 with the Luanshya and Baluba Mines (and the Mulyashi green-field project) in Luanshya. The Zambia Privatisation Agency recommended selling the mine to First Quantum Minerals, current owner of Kansanshi Copper-Gold Mine, but Chiluba overrode the agency, instead selling the mine for USD 35 million to Roan Antelope Mining Corporation (RAMCOZ) owned by the Binani Group of India.
RAMCOZ struggled from the beginning, but the government refused to take responsibility for the failed privatisation, which had massive social implications in a town that owes its existence to the mine. The government even intervened on behalf of Binani whenever creditors threatened to discontinue business with the mine.
Eventually, in 2001, ZANACO Bank placed RAMCOZ under receivership with massive debts and leaving thousands of workers jobless. The appointed receiver was Hichilema’s Grant Thornton. In 2004, J&W Investments, a subsidiary of Enya Holdings of Switzerland, took over 85% of the RAMCOZ assets as the Luanshya Copper Mines (LCM) at about USD 7.5 million. ZCCM Investment Holdings acquired a 15% shareholding in the venture. In 2008, in
the face of falling copper prices, Enya placed LCM under care and maintenance, having accrued a USD 20 million debt to third-party creditors such as Zambia Revenue Authority, Copperbelt Energy Corporation and contractors. In 2009, Enya’s stake in LCM was sold to China Nonferrous Metals Mining Group for USD 50 million.
The Chinese expect to increase copper output at LCM to 120,000 tonnes per year, up from 23,750 tonnes in 1999 under RAMCOZ. THE INTERCONTINENTAL HOTEL in Livingstone was sold on competitive
tender to Sun international of South Africa for USD 6.5 Million in 1998. The purchase included leasehold rights to Rainbow Lodge. Grant Thornton’s role was not immediately obvious, but Sata has queried why Hichilema chaired the board of Sun International (Zambia) until 2006.
LIMA BANK: In 1987, the two government institutions, the Agricultural Finance Company and the Zambia Agricultural Development Bank were merged to create Lima Bank. Like its predecessors, Lima’s main purpose was to provide small-scale farmers with short-term loans. However, the bank experienced problems from the start. It had inherited a large non-performing loan portfolio and liquidity problems caused by poor loan recoveries, inadequate government funding and political interference. The bank suffered from the borrowing attitudes of small-scale farmers, who saw a loan from the government as a grant – which did not have to be repaid in drought years. LIMA Bank was liquidated by the Chiluba government in February 1997 – with Grant Thornton as appointed
liquidator. KAGEM MINING LIMITED was started in 1984 as a joint venture between an Indian-Israeli cooperative
Hagura Mining (45%) and a Government company, Reserved Minerals Corporation (55%). In 1998, government offered Hagura an option to buy a further 42% of Kagem at USD 1.8 million – but later reversed on its decision to sell. As a result, Hagura took government to court, and the two parties settled the matter out of court:
Hagura agreed to buy 30% of Kagem at USD 3.6 million. Hagura now owns 75% of Kagem and the government 25%. Grant Thornton was involved in the valuation of Kagem. Zambia National Commercial Bank (ZANACO) was formed by the government in 1969. The government had tried to partly privatise ZANACO for years, going back to 2001, when the bank made a net loss of just over K 65 billion (about USD 18 million) due to bad debts. Its initial offer of selling a 35% stake attracted little interest, but in 2007, the Mwanawasa government concluded
the sale of 49% of ZANACO to Rabobank of the Netherlands for USD 8.25 million (criticised for being low by Sata). ZANACO’s net assets as at 31 December 2004 stood at USD 20.5 million.
FINANCE BANK: In December 2010, the Bank of Zambia took over Finance Bank because it violated the Banking and Financial Services Act – although critics said the takeover was orchestrated by the Banda government’s wish to neutralise the bank’s founder Rajan Mahtani. In September 2011, the bank was sold to First National Bank at K 27 billion. In October 2011, President Sata handed the bank back to Mahtani. Critics said the reversal of the sale was inspired by Mahtani’s financial support of Sata. Mahtani is involved in several court cases in relation to Finance Bank, but last week, the State discontinued one case where Mahtani was charged with money laundering and acquiring beneficial interest in voting shares of Finance Bank, and this week, the State entered a nolle prosequi in a matter where Mahatani was charged with obtaining credit by It is official – the government has decided to reverse the sale of Zamtel . At the beginning of the week Justice Minister Sebastian Zulu said a reversal would depend on the outcome of negotiations with LAP GreenN. Later in the week, however, Zulu clarified that “[w]e are taking back the shares, and if there will be any negotiation, it will be to determine whether LAP GreenN deserve any compensation or not”. The Banda government sold 75% of Zamtel to LAP GreenN of Libya for USD 257 million in 2010. After assuming office, President Sata appointed a commission of inquiry to look into the sale. In November 2011, the commission deemed the sale “irregular, illegal and fraudulent” – and this week, Sata ordered that the commission’s report should be made public to “insulate our people against blatant lies”, directing that an express copy should be sent to the Libyans “who have dirty money and dirty hands”.
Main findings of the 112-page report:
RP Capital of Cayman Islands was “arbitrarily” appointed in 2008 to evaluate Zamtel by then Minister of Communications and Transport Dora Siliya – despite the Attorney General recommending a tender. When a tribunal found she had breached the Constitution, Siliya resigned, but the High Court ruled that the tribunal had “acted excessively”, and Siliya was appointed Education Minister. Siliya submitted that RP Capital had been recommended by ministry officials, but the commission said the ministry “contradicts Ms Siliya’s statement”.
It is said that President Banda’s son, Henry, who has gone AWOL in South Africa, introduced Siliya to RP Capital. The Zambia Development Agency (ZDA) team was not independent as required by law showed “gross negligence” (the ZDA has not commented). RP Capital controlled the privatisation process, as the committee uncovered numerous emails from RP
Capital issuing directives to high-ranking government, ZDA and Zamtel officials, including drafting ministerial and even presidential speeches and letters (such as a letter from president Banda to Chinese president Hu Jintao to ask for support in obtaining a loan to acquire the government’s share in Zamtel - see below).
Zamtel was “grossly undervalued” at USD 38 million despite having a book value for fixed assets of USD 81 million and a much greater market value (estimated by RP Capital itself at about USD 5 billion in two years). Regardless, Zamtel was sold for USD 257 million – disregarding that other companies such as Unitel of Angola (rumoured to be lined up by Sata to take over a repossessed Zamtel) had offered double the money and agreed to retain 60% of the staff. LAP GreenN, which failed all three of the mandatory pre-qualification criteria, retained 30% of Zamtel’s workers. Chairman of Vodacom Zambia Enoch Kavindele said Zamtel should have been sold for USD 3 billion, pointing out that Vodafone of the UK in 2008 paid USD 900 million for a 70% stake in Ghana Telecom with slimmer growth prospects than Zamtel.
The MMD government paid USD 334.4 million as “tax shares and subscription” for its 25% stake in Zamtel (which it owned), while LAP GreenN paid USD 257 million for its 75% - of which the government was entitled to USD 42.6 million. To date, the government has only received a cash sum of USD 15 million – while RP Capital has received USD 12.6 million as its 5% fee of the sales price. The transaction was structured in a “deliberately complicated” and “ridiculous manner” to let LAP GreenN take over Zamtel as a debt-free company with USD 64 million in its bank account paid by the Zambian government (equivalent to the privatised company’s capital expenditure for its first year of operation). The contract for the sale of Zamtel between the government and LAP GreenN was prepared before the negotiation process was complete as “it is inconceivable that a contract of this magnitude could have been prepared, approved and executed and copy forwarded from the Zambia Public Procurement (ZPPA) all in the course of one morning”.
Musokotwane’s defence:
Former Finance Minister Situmbeko Musokotwane called Sata’s allegations “un-researched pronouncements”.
He queried the independency of the commission, arguing that it consisted of politicians: Since they are “fully aware” of the president having pronounced that the sale was fraudulent, “it cannot surprise anyone that their report had to follow the same line of thinking or else they would have been sacked from their jobs”.
Musokotwane pointed out that the final price for Zamtel was higher than the value set by RP Capital – and challenged the PF government to refute the findings of a 2011 audit report by Ernest & Young, “which found Zamtel to be insolvent with enormous and unsustainable debt against few obsolete assets”. In 2009, Zamtel made a loss of more than USD 30 million, spending more than 50% of its revenue on salaries, while Airtel and MTN spent less than 25% on the same (analysts cautioned against direct comparisons as Zamtel offered three services: Landline, mobile phone and internet). Musokotwane further alleged that all of the USD 257 million had been received by Zambia and used to pay workers and clear Zamtel’s large debts. In 2010, the MMD government reported that the USD 257 million was broken down into USD 117.7 million to employee benefits and liabilities, USD 64 million directly injected into Zamtel, USD 32.7 million to settle external liabilities and USD 42.6 million to the Zambian treasury. Musokotwane pointed out that the price was the best ever received for a parastatal company in Zambia: According to the MMD, LAP GreenN’s total commitment came to almost USD 400 million including money pledged for network expansion and government guarantees. The gross value raised from the 262 privatisation before Zamtel was USD 433 million.
Zamtel’s response:
Initially, LAP GreenN stated it would “do everything possible to retain our stake in Zamtel”. Then it said it would “welcome any opportunity to work with the government to secure a swift and positive outcome that benefits both Zambia and Zamtel”. By the end of the week, it went quiet. It was reported that LAP GreenN chairman Wafik Alshater was due in Zambia to seek an audience with the government, but Justice Minister Zulu said he would not meet Alshater – “not for the time being anyway”.
The commission’s small concession:
The commission did recommend that a “thorough and comprehensive” forensic audit of the sale should be instituted (Daily Nation 13, Post 13-16, Daily Mail 13-17 and Times 15-17).
Labels: LAP GREEN, NEOLIBERALISM, PRIVATISATION, RP CAPITAL PARTNERS, SITUMBEKO MUSOKOTWANE, ZAMTEL
Read more...
LAP Green describes as baseless assertions that Zamtel was undervalued
TIME PUBLISHED - Thursday, January 19, 2012, 8:00 pm
LAP Green Network Chairman Wafik Alshater has described as completely baseless accusations that Zamtel was undervalued at the point of sale. Mr Alshater in an electronic statement released to QFM has also dismissed allegations of wrong-doing by LAP Green during the acquisition of the 75 percent stake in Zamtel.
Mr Alshater claimed that LAP Green followed due, facilitated by a consortium of internationally renowned professional service companies, including Standard Bank, Denton Wilde Sapte and KPMG South Africa.
He said that the open and competitive bid process was overseen by the Zambia Development Agency and included the direct involvement of the Attorney General and international legal advisers, Simmons and Simmons.
Mr Alshater added that the 75% stake sold to LAP Green in June 2010 for $257 million about K1.37 trillion constituted the highest amount ever paid for a privatized company in Zambia and was at the time one of the higher valuations for a telecoms asset in Africa
He said that Zamtel is a successful turnaround story and that LAP Green remains keen to cooperate with the Zambian government to ensure the continued growth and success of the company.
And Mr Alshater has accused the media in Zambia of subjecting LAP Green to a concerted campaign of misinformation.
He said that the willful misrepresentation of LAP Green has forced the company to explore legal options to protect its reputation.
QFM
Labels: LAP GREEN, RP CAPITAL PARTNERS, ZAMTEL
Read more...
COMMENT - This is most of the report on ZAMTEL - tables at the end not included. Check here to find
part 2 and
part 3. UPDATE - Here is an
online link to the report from Lusaka Times.
REPORT TO H.E THE PRESIDENT OF THE REPUBLIC OF ZAMBIA MR. MICHAEL CHILUFYA SATA OF THE COMMISSION OF INQUIRY INTO THE SALE OF ZAMTEL CHAIRED BY HON. SEBASTION ZULU S.C. MINISTER OF JUSTICE
INDEX
1. Minister’s Report
2. Recommendations of the Commission of Inquiry
3. Summary of Technical Committee Key Findings
4. Report of the Technical Committee inquiring into the sale of
75% of GRZ shareholding in Zamtel
5. Appendix I -Sequence and timeline of events
6. Appendix II - List of documents perused by the Technical
Committee
7. Appendix III - List of people interviewed by the Technical
Committee
8. Appendix IV - List of oral submissions made to the
Commission of Inquiry
9. Appendix V - Transcripts of oral submissions made to the
Commission of Inquiry
10. Appendix VI - List of written submissions made to the
Commission of Inquiry
11. Appendix VII - Written submissions made to the
Commission of Inquiry
Recommendations of the Commission of Inquiry
1. Zamtel
1.1 The immediate termination of all Agreements relating to the sale of Zamtel to LAP GreennN and the immediate return of 100% of Zamtel to the people of Zambia for the following reasons:
i. LAP GreenN failed ALL the 3 mandatory prequalification criteria rendering this transaction null and void ab initio;
ii. The price at which Zamtel was sold clearly shows that the company was grossly undervalued and GRZ paid more than it received;
iii. In effect, GRZ paid LAP GreenN to receive a gift of 75% of Zamtel;
iv. The ZDA negotiating team was not independent as required by Law and did not negotiate in the best interests of the Zambian Nation resulting in Zambia receiving the same amount of cash equivalent to the amount paid to a single consultant for its sale of the whole of Zamtel.
1.2 The immediate termination of LAP GreenN appointed and seconded directors and management for the following reasons:
i. As a natural consequence of 1.1 above;
ii. In order to ensure compliance with the UN sanctions on LAP.
1.3 The immediate reconstitution of the board of Zamtel for the following reasons:
i. In order to ensure compliance with the UN sanctions on LAP;
ii. In order to reflect the recommended new shareholding.
1.4 A thorough and comprehensive audit of Zamtel post privatization.
2. Zesco Optical Fibre
Immediate termination of the IRU between Zamtel and Zesco and return of control and ownership of the optical fibre to Zesco for the following reasons:
i. It was illegal;
ii. It was signed by Zesco under extreme duress;
iii. It was not in the interests of Zesco and was solely designed to benefit LAP GreenN at the expense of the Zambian people.
3. Zambia Development Agency
i. The ZDA senior management must be held fully responsible and culpable for the grossly negligent and cavalier manner in which they conducted and “oversaw” the sale of Zamtel.
ii. ZDA should immediately account for and render the balance of GRZ proceeds received for the privatization of Zamtel and must immediately transfer the same to GRZ.
iii. ZDA must forthwith focus on monitoring post privatization a provided in the ZDA Act.
4. RP Capital Group
i. That a civil lawsuit be immediately instituted to recover the excess fees paid to RP Capital;
ii. RP Capital, its affiliates and its employees must be immediately barred from conducting business in Zambia;
iii. A civil lawsuit be immediately instituted against RP Capital and Simmons and Simmons for professional misconduct / negligence in qualifying LAP GreenN in spite of LAP GreenN failing ALL the 3 mandatory prequalification criteria.
5. Other
5.1. A review of all the legislative changes made to accommodate the Zamtel transaction at the expense of the Zambian tax player such as:
i. Reduction of mobile license fees;
ii. International gateway fees;
iii. PSTN exclusivity license;
iv. Barring of a fourth mobile operator.
The Zamtel sale was a clear case of economic sabotage which pervaded and compromised key GRZ institutions to the extent that GRZ decisions and policy were being managed by a foreign consultant. The full extent and continuing effect of these actions can only be determined if a full scale and thorough comprehensive forensic audit of the Zamtel privatization process is instituted.
Internal RP Capital documents project the value of Zamtel in 2015 being in excess of US5 Billion, the benefit of which the Zambian people would not have enjoyed.
[Selling a company with $5 billion in assets and business for $257 million is a crime in itself. Selling it at a loss of $77 million is an outrage. - MrK]
SUMMARY OF TECHNICAL COMMITTEE KEY FINDINGS
1. ENGAGEMENT OF RP CAPITAL PARTNERS CAYMAN ISLANDS
1.1. The engagement of RP Capital Partners Cayman Islands for the valuation of the assets of Zamtel, by way of a MoU signed and executed by the Ministry of Communications and Transport and the Zambia Development Agency, on the 22nd of December 2008 was totally irregular.
1.2. The single-sourcing selection of RP Capital Partners Cayman Islands was singlehandedly driven by the Minister of Communications and Transport against the express advice of her ministry officials and that of both the Solicitor General and the Attorney General.
[That is minister Dora Siliya. - MrK]
1.3. We also note that the ZDA Board, at a Board Meeting held on 26th December 2008, expressed great disquiet at the attempt to have the ZDA Board essentially rubber-stamp a MoU that was fundamentally flawed, non-transparent and one that did not follow laid-down procedures. In addition, the Board noted that a due diligence exercise to establish the credentials of, and the persons behind RP Capital Partners had not been undertaken.
[In this article: Rautenbach: 'I was not detained' - but he names his perceived enemy', insider Billy Rautenbach names diamond magnate Dany Gertler as the individual behind RP Capital of the Cayman Islands: " Rautenbach also directly named his key "enemy," by stating that he believes the current "dispute relates to Dan Gertler of RP Capital". " - MrK]
1.4. We also note, from the Zamtel Audited Accounts for 31st March 2009, that Zamtel had, in the past, engaged world-renowned international experts in the field of telecommunications open market assets valuation (i.e. Experts engaged by Commonwealth Telecommunications Organisation in 1997). This is an example of the caliber of consultants that would be expected to undertake the valuation of Zamtel’s assets.
1.5. We further note, that it was an essential pre-requisite for Cabinet approval of the partial sale of Zamtel, that Cabinet be availed of an accurate, professionally conducted valuation of the Zamtel assets. A proper valuation of the Zamtel assets did not take place.
2. ENGAGEMENT OF RP CAPITAL AS TRANSACTION ADVISORS
2.1. RP Capital Advisors were engaged by the Zambia Development Agency to act as Transaction Advisors for the Zamtel Sale.
2.2. The basis for ZDA’s decision to single-source RP Capital Advisors as Transaction Advisors was based on ZDA management’s satisfaction with the work that had already been completed by RP Capital affiliates in respect of the “valuation” of the Zamtel assets.
2.3. We note as per 1.5 above, that a proper valuation of the Zamtel assets did not take place under the MoU. Even under the Agreement appointing RP Capital as Transaction Advisors, no mention is made of RP Capital Advisors conducting a valuation exercise of the Zamtel fixed assets.
2.4. We also note that no due diligence in respect of the suitability of RP Capital Advisors (capacity and capability, previous experience, etc.) was ever conducted by ZDA when they elected to single-source RP Capital Advisors.
2.5. This Committee hereby places on record that the engagement of RP Capital Partners by ZDA, was extremely hasty, did not follow normal tender procedures and may have been under duress. Each of the above, renders the engagement illegal.
3. VALUATION OF ZAMTEL ASSETS/BUSINESS
3.1. As has been stated in 1. above, a detailed, professional valuation of Zamtel assets never took place. The only “valuation” that this Committee was availed, is the one contained in RP Capital Advisors’ final report. This “valuation” is not a professionally conducted assets valuation, but essentially a desktop paper exercise that make numerous assumptions.
3.2. The value of Zamtel’s fixed assets as contained in the summary report by RP Capital Advisors dated 22nd July 2009 and presented to Cabinet is US$ 38 million.
3.3. We further note from the Audited Zamtel Accounts dated 31st March 2009, that the book value of Zamtel’s fixed assets only (property, plant and equipment) was approximately US$ 81 million (K 412,072,000,000). This is however, the book value and not the market value of Zamtel’s fixed assets which would be expected to be considerably higher than the book value.
3.4. This Committee finds it difficult to understand how RP Capital Advisors could arrive at a value of Zamtel’s fixed assets of US$ 38 Million in the absence of conducting a thorough, detailed and professional valuation of Zamtel’s fixed assets.
4. ZAMTEL SALE
4.1. The Cabinet decision to endorse and authorize the partial sale of Zamtel shares took place at the Cabinet Meeting of the 23rd July 2009. The Cabinet decision was based on a five page Project Zamtel: Cabinet Summary report provided by RP Capital Advisors. This report is a summary of the 316 page final report produced by RP Capital Advisors. Both of these documents are dated the 22nd of July 2009.
4.2. This Committee finds it totally inconceivable that the Cabinet and any of its sub-committees, officials and advisors could have read, digested, analyzed and drawn meaningful conclusions from the voluminous report within a period of less than 24 hours.
4.3. We repeat 3.2 above, and state that in making its decision to proceed with the partial privatization of Zamtel, Cabinet did not have a proper value for Zamtel’s fixed assets, as the fixed assets value presented in the RP Capital Advisors summary is only US$ 38 million.
4.4. LAP GreenN failed all three of the mandatory prequalification criteria and ought to have been disqualified in the preliminary stage.
4.5. The negotiating team appointed by ZDA was not independent.
4.6. The negotiating process gave away more than it gained.
5. ZESCO OPTICAL FIBRE NETWORK
5.1. A Joint Technical Committee comprising Zamtel and Zesco staff was set up under the auspices of the Communications Authority in July 2008 on the understanding that the two parties would seek to rationalize and harmonise their optical fibre network roll-out and expansion plans, based on mutually beneficial and agreed commercial terms.
5.2. Contrary to the above, on the 28th October 2009 the Zesco Board were informed by the Board Chairman that the Ministry of Finance, as principal shareholder, was directing Zesco to cede their optical fibre network to Zamtel and to cease all commercial operations on their optical fibre networks.
5.3. Immense pressure was exerted on the Zesco Managing Director to sign an Indefeasible Right of Use Agreement (IRU). Named individuals threatened him with the loss of his job and accused him of dragging his feet and holding up the process.
5.4. Revenue sharing under the IRU is 80% Zamtel and 20% Zesco; provisions of the IRU will apply to all existing and future optical fibre networks to be rolled out by Zesco.
5.5. The Zesco MD whilst on an official trip to Egypt, was forced into signing the single signature page of the IRU Agreement under extreme duress and thereafter faxing it back to Zambia on the 17th of December 2009.
5.6. The Zamtel board retrospectively approved the IRU in a board meeting held on the 24th of December 2009. The Zesco Board passed a retrospective board resolution at a Board Meeting held on the 28th January 2010 authorizing Zesco to sign the IRU Agreement which had, in fact, already been signed by Zesco on the 17th December 2009 and the Zesco MD’s contract of employment was terminated.
5.7. This Committee believes that in expropriating the Zesco optical fibre network assets and handing them over to the soon to be privatized Zamtel, GRZ acted in bad faith. GRZ was in effect purloining valuable assets from a 100% government owned company and giving them away – free of charge – to a company that they would soon only own 25% of! We believe that this was done with the express intention of making the soon to be privatized Zamtel, a more attractive proposition to potential buyers, and did not take into account that Zesco had made a considerable investment (approx. US$ 20 million) into their optical fibre network and were operating it on a very profitable basis.
6. FINAL PURCHASE PRICE OF ZAMTEL
6.1. The final purchase price for a 75% shareholding in Zamtel by LAP Green Networks (LGN) was US$ 257 million and is broken down as follows:
ZAMTEL STAFF PENSIONS LIABILITY: US$ 20,000,000
CHINESE BANK LOANS: US$ 32,700,000
ZAMTEL WORKERS REDUNDANCIES: US$ 97,700,000
LAPGREEN NETWORKS EQUITY INVESTMENT: US$ 64,000,000
GRZ PROCEEDS: US$ 42,600,000
TOTAL PAID BY LAP GREEN N: US$ 257,000,000
From the information provided by ZDA Chief Accountant, the proceeds due to GRZ have, to date, been disbursed as follows;
Expenditure Breakdown of Govt Proceeds of $42,600,000
RP Capital Advisors $12,689,759.03
Net Cash GRZ Proceeds to date (MoFNP) $15,000,000.00
Legal Fees $702,296.33
Zamtel Staff Incentives $85,926.59
ZDA/Zamtel Staff Incentives and Overtime $307,462.73
ZDA Negotiating Team $65,797.25
Zamtel Staff Training $192,907.51
Adverts $87,468.98
Grant Thornton Consultants – Financial $94,859.14
ZDA (Zamtel sale) Assets $46,388.08
Bank Charges $8,304.28
Other Zamtel Related Payments $19,473.60
Total Disbursed $29,300,643.52
Balance of Funds due to GRZ $13,299,356.48
6.2. Of the total sale price of US$ 257 million, as per the terms of the sale, GRZ was
only entitled to US$ 42.6 million (16.6% of the sale value).
6.3. We note, from the foregoing that GRZ have, to date, only received a cash sum
of US$ 15,000,000. We further note that RP Capital Advisors received a cash
payment of US$ 12,689,759.03, based on 5% of US$ 257 million.
6.4. The majority of the funds due under the sale went into paying Zamtel Workers
Pensions Liabilities, Zamtel Workers Redundancy Payments, Chinese Bank Loan
and a cash equity injection by LAP Green Networks into Zamtel of US$ 64
million.
7. GRZ PURCHASE OF 25% ZAMTEL SHAREHOLDING
In accordance with the Share sale and purchase Agreement the following liabilities
accrued to the parties:
I. Prior to completion, GRZ was required to pay Zamtel : US$ 120,000,000.00 Subscription monies in respect of Tax shares US$ 214,440,000.00 Subscription Amount Total US$ 334,440,000.00 This figure represents the value paid by GRZ for a 100% of the shareholding in a debt free Zamtel with a US$64,000,000.00 surplus reserve.
II. Post completion, LAP GreenN was required to pay to GRZ : US$ 257,000,000.00 This figure represents the value paid by LAP GreenN for 75% of the shareholding in a debt free Zamtel with a US$64,000,000.00 surplus reserve.
This in effect means that GRZ paid Zamtel US$ 334,440,000.00 for the retention of 25% shareholding in Zamtel while Lap GreenN paid GRZ US$ 257,000,000.00 to acquire a 75% stake in Zamtel.
III. Payment of Outstanding Zamtel Telephone Bills by GRZ
This Committee were informed by the Zamtel MD that the outstanding GRZ telephone bills which stood at approximately US$7,000,000.00 at the time of privatization, has to date been reduced to US$100,000.00. This Committee finds it both sad and disappointing that GRZ who had over the years, consistently failed to support Zamtel by the promptly settling their telephone bills, enthusiastically and regularly did so post privatization.
8. Other LAP GreenN operations in Africa
In its prequalification application form LAP GreenN stated that they owned 5 operations in Africa. The following is the status as at the date of this report:
i. Uganda
Uganda Telecom
On the 16th of October 2009 LAP GreenN stated in its prequalification
application form that it owned 69% of Uganda Telecom who had 2,584, 252
subscribers and therefore LAP GreenN attributable subscribers were
1,783,134.
As at the date of this report the status of Uganda Telecom is: “Ugandan Government recently took over full management of the company in line with the UN decision to freeze all assets owned by Gaddhafi. In this case, the Ugandan Government is holding the 69% owned by Libyans in trust until the matters in Libya are resolved.”
ii. Rwanda
Rwandatel
On the 16th of October 2009 LAP GreenN stated in its prequalification application form that it owned owned 80% of Rwandatel who had 487,470 subscribers and therefore LAP GreenN attributable subscribers were 389,976.
As at the date of this report the status of Rwandatel is: In April 2011 Rwanda revoked the Rwandatel license which belonged to LAP GreenN due to an inability to invest in accordance with their commitment.
iii. Niger
Sonitel & Sahelcom
On the 16th of October 2009 LAP GreenN stated in its prequalification application form that LAICO Networks (a subsidiary of LAP) owned 51% of Sonitel & Sahelcom who had 823,133 subscribers and therefore LAP GreenN attributable subscribers were 419,798.
As at the date of this report the status of Sonitel & Sahelcom is:
“The Government of Niger has cancelled a deal to sell majority stake in state owned Telco Sonitel and its mobile arm Sahelcom to LAP Green Network stating that the Libyan Government Investment vehicle had not respected the terms of transaction”
iv. Cote D’Ivoire
Oricel
On the 16th of October 2009 LAP GreenN stated in its prequalification application form that it owned 75% of Oricel who had 852,661 subscribers and therefore LAP GreenN attributable subscribers were 639,496.
As at the date of this report the status of Oricel is:
v. Sierra Leone
Ambitel
On the 16th of October 2009 LAP GreenN owned 85% of the Company which
had no subscribers at that date they were still in the process of rolling out
the network.
It is clear from the above, that in its short 3 year history, LAP GreenN has proved to
be inept and incompetent at running telecommunications networks.
9. Official GRZ Statement on the Release of the Zamtel Sale Report
This Committee notes that the previous Minister of Commerce Trade and Industry
Hon. Felix Mutati, in justifying his refusal to release the Zamtel sale official report
stated on the 14th of June 2010, and we quote "I don't see how releasing the RP
Capital report will help the citizen because they will not even understand it. It is just
figures on paper. I would advise people to instead listen to the rational explanation
of the government over the Zamtel sale."
In view of its findings, this Committee believes that to the contrary, had a full and
comprehensive report been released, the Zambian public would have drawn
logical conclusions regarding the conduct and execution of the sale.
REPORT OF THE TECHNICAL COMMITTEE INQUIRING INTO THE SALE OF 75% OF GRZ
SHAREHOLDING IN ZAMTEL
1. Introduction
1.1 Background
In accordance with a directive from His Excellency the President of the Republic of Zambia, the Hon. Minister of Justice instituted an inquiry into:
i. The Sale of Zambia Telecommunications Company (ZAMTEL);
ii. The sale of Finance Bank Zambia Limited;
iii. The financing by the National Pension Scheme Authority (NAPSA) of the Zambia National Building Society House Project; and
iv. The purchase of land by NAPSA from Meanwood Property Development Limited. The Hon. Minister of Justice has constituted a Committee to conduct the inquiry. A Technical Committee to assist the Committee through relevant expertise was set up on the 13th of October 2011. Due to the importance and urgency of the assignment the Technical Committee was divided into four groups to conduct the inquiry.
1.2 Terms of Reference
This Technical Committee was tasked with investigating:
The Sale of Zamtel
i. To determine how the sale of ZAMTEL was conducted; and
ii. To ascertain whether all the required procedures relating to the sale were complied with.
1.3 Composition of the Team
The Technical Committee inquiring into the sale of 75% of GRZ Shareholding in ZAMTEL comprised the following:
i. Mrs. Dimple Ranchhod Lawyer - Chair
ii. Mr. Misheck N Kaoma Procurement - Secretary
iii. Mr. Cosmas Mwananshiku Accountant - Member
iv. Dr. Mupanga Mwanakatwe Telecommunications - Member
v. Mr. Emmanuel Mbewe Telecommunications - Member
vi. Mr. Don Zyambo Valuations - Member
1.4 Documents Perused
At the commencement of the assignment, the Ministry of Justice availed this Technical Committee a number of documents. It is worth noting that these documents were compiled by the Zambia Development Agency in response to a letter from The Hon. Minister of Justice requesting the same.
This Committee wishes to place on record that a substantial portion of these documents were irrelevant to the Committee’s Terms of Reference and consequently this Committee lost several days perusing them.
This Committee therefore had to spend additional time identifying and sourcing material and relevant information that was essential to the task at hand.
A complete list is available in Appendix II.
This Committee puts on record the following:
1.4.1 ZAMTEL
This Committee requested but has at the date of this report not received:
. A copy of the management contract between LapGreenN and Zamtel referred to by the ZAMTEL management team during their interview with the Committee. Instead Zamtel only provided the Committee with a letter containing values of the basic pay of senior management and a copy of a secondment contract between LAP GreenN and Zamtel.
. A copy of a detailed LAP GreenN business plan relating to the acquisition of Zamtel shares that in the opinion of this Committee should have been submitted to ZDA for purposes of the bid evaluation and negotiations in order to enable ZDA assess, monitor and evaluate post privatization business performance.
The ZAMTEL CEO declined to provide the same as he considered it to be LAP GreenN proprietary information. He further advised the Committee that the only business plans submitted to ZDA was the one attached as Schedule3 of the Shareholders Agreement.
It is the Committees opinion that a 4 page sketch cannot be considered a serious business plan for the sale of this magnitude.
1.4.2 Ministry of Communications and Transport
This Committee requested but has at the date of this report not received:
. the dossier provided by RP Capital Partners;
This document either does not exist or has been lost or destroyed.
. the report prepared by MoCT staff to the Minister recommending RP Capital Partners;
Likewise, this document either does not exist or has been lost or destroyed.
. Email correspondence between RP Capital Partners and MoCT officials.
Despite several requests for this information, MoCT has failed and or is unwilling to furnish the Committee with this information. The Committee hereby places on record that the practice of MoCT is to delete user accounts from its email server upon an official leaving the Ministry. This is clearly not good practice and the Committee expects that even if a user is deleted from the email server, official records should be retained for future use and reference.
1.4.3 Zambia Development Agency
This Committee requested but has at the date of this report not received:
. Email correspondence to ZDA from Nkwazi.gov.zm accounts relating to Zamtel and RP Capital; The Director General of ZDA undertook to provide the same but as he had reservations on the security clearance of the Head of IT at ZDA, he declined to avail the Committee the available information without vetting by a ZDA director.
. Zamtel updated business plan as required by Clause 9.4 (A) of the Shareholders’ Agreement dated the 5th of June 2010 between The Government of the Republic of Zambia and ZAMTEL and LAP GreenN.
The Director General of ZDA was unable to provide the same and referred the Committee to Ministry of Finance as the same was not the responsibility of ZDA post privatization but that
responsibility was with MoF as the holder of GRZ shares. The Committee places on record that this statement contradicts the provisions of Section 5 (2) (n) of the ZDA Act which defines one of the functions of the Agency as “monitor post privatization activities to ensure compliance with any agreement entered into for the privatization of any state owned enterprise”.
It is the opinion of the Committee that this is an extremely important document in the post privatization process as it is the ONLY document on which GRZ can assess the performance of the Zamtel business and ensure that LAP GreenN undertakings and commitments have been satisfied and if not, make an informed decision on exercising termination and/or claw-back options.
. A complete and accurate account of monies received and their disbursements.
The ZDA chief accountant was unable and/or unwilling to provide the same.
The Committee places on record that the ZDA chief accountant furnished the Committee with numerous versions of the account of monies. Each version conflicted with the other and no version has balanced and the chief accountant was unable to justify the numbers. The Committee has no confidence in the accounts presented by the ZDA chief accountant.
. A due diligence on RP Capital
The privatization manager advised that the same was never done. In conducting its assignment, the Technical Committee met and interviewed several people and a list is attached as Appendix III.
The Committee places on record that prior to consenting to the initial interview, the CEO of Zamtel advised the chair that he needed clearance from the National Transition Council in Libya. The CEO subsequently advised that he had the clearance from the NTC in Libya and therefore attended the interview.
Applicable Law
2.1 The applicable law in this instance is set out in the Zambia Development Agency Act of the Laws of Zambia Section 4 (1) of which provides for the establishment of the Zambia Development Agency as a body corporate.
The Director General of ZDA also advised the Committee that as the Privatization Act had not been repealed as per the provisions of Section 84 (2) of the ZDA Act, the Privatization Act also applies to the Zamtel privatization.
It is the opinion of the Committee that as the Zamtel sale was approved by Cabinet and conducted under the provisions of the ZDA Act, only the ZDA Act is therefore applicable and this is the only Act the Committee considered.
2.2 In addition to the Zambia Development Agency Act, the Zambia Public Procurement Act No. 12, 2008 of the Laws of Zambia applies to the engagement of consultants and prescribes the following methods of procurement:
1) International Selection
Participation in open international selection shall be open to all bidders, including citizen, local and foreign bidders.
2) National Selection
Participation in open national selection shall be limited to citizen and local bidders.
3) Limited Selection
Limited selection may be used where:
a. the consulting services are only available from a limited number of suppliers; or
b. there is an urgent need for the consulting services and engaging in open selection would therefore be impractical.
4) Direct Selection (Direct Sourcing).
Direct selection is done by directly requesting proposal/s from one firm or individual where only one firm or individual is the qualified and available entity to conduct the consulting services or the consultant is to be engaged with the view of continuing the downstream tasks of similar nature of a previous assignment, in order to reduce the time frames of engagement, or to standardize the quality of services provided, or under emergency
situations and that using other selection methods will not yield quick results.
3. Sourcing and Engagement of Consultants
3.1 Engagement of RP Capital Partners Cayman Islands for the Valuation of Zamtel Assets:
3.1.1. Background
Although this transaction was extensively covered in the Dennis Chirwa led tribunal (the Tribunal), whose report and findings were extremely useful to this Committee, we hereby highlight some of the elements.
Ministerial Statement by Hon. Dora Siliya, MP; Minister of Communications and Transport in Response to a Point of Order Raised by Kantanshi MP. Mukanga Yanfwa. On The Engagement of RP Capital Group and What Tender Procedures Were Followed To Value Zamtel Assets
13th February 2009
Republic of Zambia National Assembly
We quote from the above-captioned Minister’s Speech;
“After various consultations, it was clear that the immediate task for the Ministry was to undertake a Valuation of the Assets of ZAMTEL to ascertain the true value of the company on the open market.”
“It must be noted that, Government could not enter into any commercial agreements with the companies that were expressing interest because of inadequate information, which I needed as the responsible Minister to take to Cabinet to seek formal approval to actually partially privatise Zamtel.”
From the above, it is clear that it was the intention of GRZ to have the Assets of Zamtel properly valued in order to ascertain the true value of the company on the open market.
We further quote from the above-captioned report;
“At the meeting, RP Capital introduced itself as an entity that could assist the Government of the Republic of Zambia in addressing the issues regarding the assets valuation of Zamtel and possible sale of Government stake in Zamtel and to provide Transaction Advisor Services at own cost subject to administrative costs and/or professional fees being paid once the transaction had taken place.”
3.1.2. Process adopted
i. RP Capital Partners Cayman Islands were sourced and engaged by the Ministery of Communications and Transport (MoCT) by its Minister Dora Siliya.
ii. Dora Siliya unilaterally and arbitrarily signed a MoU with RP Capital Partners Cayman Islands. She stated to the Tribunal that this was on the recommendation of her staff who had reviewed a dossier submitted by RP Capital Partners and were satisfied with their review.
The Committee was unable to find any documentary evidence supporting the Minister’s claims. To the contrary the Committee has obtained a MoCT internal memo which in fact contradicts the Minister’s statement. This Committee places on record that this memo was neither mentioned nor availed to the Tribunal.
Internal Memo – Ministry of Communications and Transport – Director of Communications
19th November 2008
Ministry of Commerce, Trade & Industry
We refer to, and quote from the above-captioned internal memo, whose subject title is “Valuation and Possible Sale of Government Stake in Zamtel: Signing of The Memorandum of Understanding (MoU) with RP Capital:
“Page 2: Before the MoU is signed between the Ministry and RP Capital, it is important that the Cabinet Approval be sought through a joint Cabinet Memorandum on the purpose of the valuation and ultimate engagement of RP Capital as Transaction Advisors. Only if this is done can the process be deemed transparent by the stakeholders, failure to which the Ministry may be drawn into protracted speculations as to whether Government is going to get value-for-money in the transaction. The quality and cost as proposed by RP Capital in the attached letter may not be justifiable without a competitive process being undertaken.”
This committee notes that contrary to the Minister’s claims that her ministry officials advised that RP Capital Partners were the ideal consultants, her officials had in fact advised her not to sign the MoU, and to follow the normal and proper laid out procedures expected in a transaction of this nature. This is a matter of concern to the Committee as the Minister misled the Tribunal.
Tribunal Report on Investigation on Allegations of Breach of Parliamentary and Ministerial Code of Conduct Against Hon. Dora Siliya M.P. Minister of Communications and Transport 16th April 2009
GRZ Tribunal
We quote from the above captioned report;
Page 19: “In the process, RP Capital Partners submitted a dossier about themselves. Her officials were happy about it and made recommendations. She acted on these recommendations. Everything that the Ministry did as far as RP Capital Partners Limited was concerned was done through the office of the Permanent Secretary”.
Our extensive enquiries at the MoCT have indicated that the abovementioned RP Capital Partners Limited dossier does not and did not ever exist. All the senior staff interviewed at the MoCT deny ever having sight of such a dossier, nor is it on any of the MoCT files. This includes the Permanent Secretary. This finding is in total variance with the former Minister’s claims.
Furthermore, our findings indicate that there is no documentary evidence of the experience and caliber of RP Capital Partners, in relation to complex telecommunications transactions of this nature and magnitude.
It is the opinion of this Committee that in selecting and appointing RP Capital Partners Cayman Islands as the Zamtel Assets Valuation Consultants, Dora Siliya acted unilaterally and against the advice of her professional staff within MoCT.
With the foregoing in mind, it is the considered opinion of the committee that GRZ should have, by way of an international open tender, sought to procure the services of an established, internationally reputable and competent consultant to carry out the valuation of the Zamtel assets.
iii. Although the MoU is dated the 22nd of December 2008, ZDA who was a Party to the MoU only considered the MoU at a Special Board Meeting on the 26th of December 2008.
ZAMBIA DEVELOPMENT AGENCY
MINUTES OF THE 10th SPECIAL BOARD MEETING OF THE ZAMBIA
DEVELOPMENT AGENCY HELD ON THE 26th DECEMBER 2008 IN THE
BOARDROOM, PRIVATISATION HOUSE
We quote from the above minutes:
“8.5 In a lengthy discussion that followed IT WAS NOTED inter alia that: ….
(ii) the manner in which the Consultants were engaged does not appear to be transparent;
(iii) it was not clear whether proper tender procedures had been followed;
(iv) The ZDA Board was not consulted in the preparation of the MOU; …..
(viii) the MOU does not cover in detail the scope of work for the Consultants;…
(x) the ZDA could have been made a party to the MOU as a result of an
afterthought;
(xi) the people involved with the consultant were not known;
(xii) the Terms of Reference for the consultant are not clear; ……
8.6 After further discussion IT WAS AGREED that the Memorandum of Understanding can be signed subject however to amendments being made to it to address the concerns of ZDA and to provide for the process to be undertaken in accordance with the provisions of the Zambia Development Agency Act, Act No. 11 of 2006. “
iv. The Director General of ZDA also advised the Committee that in fact he was out of the country when the MoU was signed and in his absence, one of his officers a Mr. Matoka was summoned to the MoCT office and then Minister Dora Siliya instructed him to sign the document which he did.
v. The Committee interviewed then Chairman of the ZDA Board (Mr. Luke C Mbewe). Mr. Mbewe stated that following the ZDA Board Meeting, he made the effort of going to Dora Siliya’s office to discuss the MoU. Dora Siliya sent him out of her office and told him that he was wasting time and delaying the process.
vi. The ZDA Board approved the signing sometime in January 2009.
31 October 2011 Strictly Confidential Page 21 of 114
3.1.3. RP Capital Partners Valuation Report Project Zamtel: Valuation & Transaction Recommendations
22nd July 2009
RP Capital Partners
The “valuation” of Zamtel Assets that was done by RP Capital Group, is contained in the above-captioned 316 page report. The “valuation” methodology used by RP Capital Group, in the above report, is based on future discounted cash-flows and incorporates a number of assumptions relating to the company’s Key Performance Indicators (KPI’s). The “valuation” did not take into account, whatsoever, an actual valuation of the Zamtel assets.
This Committee noted that although the future discounted cashflow method is a possible option that can be used in the valuation of a company; it is however, merely an option that should have been used in addition to the actual valuation of the Zamtel assets. This would have permitted a comparison of the results emanating from the two methodologies.
In any event, the future discounted cash flow method that was used by RP Capital should have taken into account the three distinct business activities that Zamtel was engaged in namely Mobile, Fixed and Internet.
It is the opinion of the Committee that the fact that as the Zamtel assets were never valued as stated above, this may have led to a reduction in the final value that was placed on the enterprise by RP Capital and consequently GRZ. The Committee notes that due to the specialized and complex nature of the Telecommunications industry, the consultants hired to value Zamtel assets should have had proven experience and specialized staff.
3.1.4. Cabinet Approval
i. In April 2009, the President of Zambia constituted a Cabinet Committee of four Ministers to oversee the privatization of Zamtel. The Minister of MoFNP was the chair of the Committee.
ii. The first meeting of this Committee was held on the 29th of June 2009 and “the objective of the meeting is to receive a brief from RP Capital on the progress regarding the valuation of the assets of Zamtel.” (Reference letter dated the 26th of June from the Permanent Secretary MoFNP to the Permanent Secretary MoCT.
iii. On the 22nd of July 2009, in addition to the 316 page report, RP Capital also prepared a 5 page document labeled Project Zamtel: Cabinet Summary.
iv. On the 23rd of July 2009 Cabinet considered recommendations by four Ministers and decided that Zamtel be privatized.
This Committee has highlighted and underlined the above dates because we find it totally inconceivable that a report of this size, complexity and magnitude could be fully digested, analyzed and conclusions drawn from the same by the Committee of four Ministers as well as their relevant technocrats in the course of 1 day.
This Committee then safely assumes that the Cabinet approval was based not on a summary report on the recommendations of the Committee of Ministers but actually only considered the 5 page Cabinet Summary prepared by RP Capital.
v. The Permanent Secretary at the Ministry of Commerce, Trade and Industry wrote to ZDA the next day. Ministry of Commerce Trade and Industry 24th July 2009
We quote from the above:
“(d) directed the Minister to ensure that the privatization of Zamtel is conducted in accordance with ZDA Act No. 11 of 2006. In this regard, you are requested to provide an action plan that will expedite implementation of action (d) above as directed by Cabinet.” This Committee notes that we were unable to determine whether the action plan requested above was ever prepared and also notes that such a document would have been critical to this report.
This Committee can then safely assume that no action plan was prepared by ZDA but the privatization process was solely based on the 316 pages RP Capital valuation and transaction report.
3.2 Engagement of RP Capital Advisors by the Zambia Development Agency (ZDA) as
Transaction Advisors on the privatization of Zamtel.
Labels: CORRUPTION, DORA SILIYA, PRIVATISATION, RP CAPITAL PARTNERS, ZAMTEL, ZDA
Read more...
COMMENT - According to this article in the New York Times, Peter Heilner of RP Capital Partners structured the ZAMTEL sale.
(NY Times) Privatization of Zambian Phone Company Degenerates Into a Feud, By MATTHEW SALTMARSH
Zamtel report shows that RP Capital official issued instructions and drafted presidential speeches
TIME PUBLISHED - Monday, January 16, 2012, 11:07 am
THE report by the Commission of Inquiry into the sale of Zamtel has revealed more anomalies, including one in which an official from RP Capital Partners of Cayman Island, issued directives to high ranking senior Zambian Government officials and drafted ministerial and presidential speeches on matters surrounding the Zamtel deal.
The 112 paged report states that the committee tasked to probe the sale of Zamtel discovered
numerous e-mail correspondence from a Peter Heilner, issuing directives to senior Government, Zambia Development Agency (ZDA) and Zamtel officials.
“The 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,” the report reads.
The report states that it was clear from the outset that RP Capital, the transaction advisors in the Zamtel deal through Mr Heilner,single-handedly planned, managed, drove, controlled and executed the entire process.
The report says the Government, ZDA, Zambia Information Communication Technology Authority (ZICTA), State House staff, Zamtel and many others were reduced to the role of mere spectators with little or no input and control over the process.
The report says that audited Zamtel accounts dated March 31, 2009 peg the book value of the company’s fixed assets - that is only the property, plant and equipment at US$81 million (K412,072,000,000).
The report states that the $81 million is just a book value and not the market value of Zamtel’s fixed assets which would be expected to be considerably higher than that.
“The committee finds it difficult to understand how RP Capital advisors could arrive at a value of Zamtel’s fixed assets of $38 million in the absence of conducting a thorough, detailed and professional valuation of Zamtel’s fixed assets,” the report reads.
The Government further decided to pay for the 25 per cent shareholding it already owned in Zamtel and paid a total $334,440,000 in what was termed as Tax shares and subscription amount while Lap Green only paid $257 million for the 75 per cent shareholding of which the Government was only entitled to $42.6 million translating to 16.6 per cent of the sale value.
The Government has to date only received a cash sum of $15 million and that RP Capital received more than $12.6 million based on 5 per cent of $257 million.
[5% of 257 million is $12.85 million, not $12.60 million - a difference of $250,000 - MrK]
The report reveals that the Zesco optical fibre network assets valued at approximately $20 million was given free of charge to Zamtel.
Lap Green also took over Zamtel as a debt free company with $64 million sitting in its bank account which was provided by the Zambian Government.
And giving examples of correspondence, Press releases and speeches prepared by RP Capital’s Mr Heilner for the Government, the report attached a letter drafted by him and signed by former president Rupiah Banda on November 9, 2009 to Chinese President, Hu Jintao, asking for a loan from the China Export and Import Bank.
In the draft letter, Mr Banda was asking his Chinese counterpart to assist the Zambian Government obtain $75,424,323 concessional loan from the $10 billion programme for infrastructure in developing countries to cover the amounts owed to Zamtel’s Chinese equipment suppliers, Huawei and ZTE for projects that the two companies were in the process of completing.
“I write to you to request your assistance in a matter that is of national importance to the Republic of Zambia. As you may be aware,the Government of the Republic of Zambia is currently in the process of privatising Zamtel which has severely under performed in recent history.
“This privatisation will revitalise the telecommunications sector in Zambia through increasing investment and will contribute substantially to the development of Zambia as whole,” read the letter drafted by Mr Heilner on behalf of former president Banda to President Hu.
The letter stated that the sale of Zamtel was of considerable urgency in order to ensure the success of the company and on-going development of Zambia.
“I would like to request your support in obtaining approval from the China Export and Import Bank in respect of Zambia’s application,” the ?letter read.
Another document drafted by Mr Heilner was a Press statement by the then minister of Communications and Transport, Geoffrey Lungwangwa, on the ICT sector in Zambia.
In the statement allegedly written for the minister by Mr Heilner,Professor Lungwangwa said that the government and the communications Authority of Zambia (CAZ), ZICTA, had set out two ways in which they intended to encourage the deployment and usage of ICT products and services in Zambia.
Prof Lungwangwa said the first was through careful management of the licensing regime and that CAZ intended to issue no additional fixed or mobile licenses for the foreseeable future.
He said the second was through pricing and that CAZ intended to use its powers as set out in the new ICT Act to intervene in the wholesale market that existed between telecommunications operators.
Mr Heilner is also alleged to have provided answers to parliamentary questions, Order number 760, where questions concerning how much money the Government ministries and departments owed Zamtel immediately prior to the acquisition by Lap GreeN and how Lap GreeN intended to recover the debt.
The other question was on the total value of Zamtel assets at the time of privatisation.
[Times of Zambia]
Labels: RP CAPITAL PARTNERS, ZAMTEL
Read more...
COMMENT - Watch this space in the coming week.
President Michael Sata directs Minister of Justice to release the ZAMTEL Report to the public immediately
TIME PUBLISHED - Saturday, January 14, 2012, 6:12 pm
President Michael Sata has directed the Minister of Justice Sebastian Zulu to release the Zamtel Report to the public immediately in order to protect public interest and curb blantant lies from shameless detractors.
This is contained in a press statement made available to the media by the Special Assistant to the President for Press George Chellah. President Sata said that the Commission of Inquiry that he constituted to probe the sale of Zamtel came out with brilliantly documented submissions.
“Since we have not released the Report to the public, our detractors and perpetrators of crimes against Zambia and its citizens have had a field day, regrettably supported by some sections of the media and opposition political party leaders who for strange reasons have axes to grind against the Patriotic Front Government,” President Sata says.
“To protect public interest and to insulate our people against blantant lies I direct that we release the Report with due immediacy. Arrange to furnish all foreign missions in Zambia with the Report. And most importantly, let the Ministry of Foreign Affairs send a copy to the Libyan Government using the fastest route.”
The Head of State has assured Hon. Zulu that the Minister of Finance Hon Alexander B. Chikwanda stands ready to aid the process should any financial needs involved in this exercise go beyond the Ministry of Justice’s allocation.
Labels: CORRUPTION, MICHAEL SATA, RP CAPITAL PARTNERS, ZAMTEL
Read more...
Hakainde's chameleon behaviour over Zamtel
By The Post
Fri 13 Jan. 2012, 14:00 CAT
THE Zambia Daily Mail in its edition of yesterday carried a story quoting Hakainde Hichilema, the president of opposition UPND, questioning the government's sincerity in the manner they were proceeding with the Zamtel transaction that may face reversal.
Hakainde was quoted as having accused the PF government of only wanting or planning to reverse the controversial US$257 million transaction because they already had found another company that may buy Zamtel. "It's clear that there is corruption going on in the PF government," the Zambia Daily Mail quotes Hakainde.
"Right now, there is already a bidder or buyer of Zamtel by single-sourcing. They have identified a buyer through the same method they were complaining about."
This was yesterday. But this is not the first time Hakainde was commenting on the sale of Zamtel.
In The Post edition of Wednesday, June 16, 2010, we carried a story with a headline:
"Rupiah, his sons and Dora are guilty over Zamtel sale - HH." In this story, Hakainde charged that Rupiah Banda, his children, Dora Siliya and the team are guilty of corruption in the sale of Zamtel and they will never wash themselves clean.
In this story, Hakainde accused Rupiah and his sons and Siliya of benefitting from this dirty transaction.
"RP Capital Partners which valued Zamtel assets was contracted without tenders because they wanted kickbacks. There is no question about it…State House was involved, Dora, President Banda's children were involved," The Post quoted Hakainde.
He went on to say that president Banda and Siliya's verbal onslaught on Zambians and institutions opposed to the Zamtel sale showed that they were covering their corrupt tracks. Hakainde argued that many Zambians had opposed the transaction from its beginning but president Banda and his team did not heed the advice.
"It's extremely important that the people of Zambia do realise that we had raised the flag on the privatisation of Zamtel a long time ago, starting from the tender process where they appointed RP Capital Partners without tender against the Public Procurement Act of 2008," The Post quoted Hakainde.
"You are all aware that Mumba Malila, as Attorney General, had objected and that cost him his job, David Kapitolo director general of Zambia Tender Board Authority now Zambia Public Procurement Authority, he raised issues that cost him his job and several other people and I think you are aware that Chitundu at Zesco lost his job over the optic fibre network."
Hakainde said he still stood by his statement at the beginning of the Zamtel sale that it was a corrupt process. "There is no way Dora Siliya can try and wash this transaction clean, it has been a dirty transaction from day one. We did indicate to people that, ‘look, you never award a contract like that'. Firstly, they ignored local firms; secondly, family contracts resulted in the contracts of that magnitude and resulting in K70 billion to K80 billion public funds going into RP Capital Partners," The Post quotes Hakainde.
"I am sure you have followed that there is going to be a number of claw-backs on retrenchment payments, it's not that it's wrong, on investment. There is a paragraph where they are saying the government is going to reinvest that money.
Did they tell us how much money they are going to reinvest? You have sold a company so that you bring an investor, but you are now going to be responsible for reinvestment, from the same money you are going to be paid. That is all wrong."
Hakainde questioned the government's decision to sale Zamtel with the newly installed fibre network, which cost about US$85 million for only US$257 million, meaning that the rest of Zamtel's infrastructure was sold for only US$172 million. "If you look at other expenses or costs related to optic fibre network; first there is the Zamtel expenses on fibre optic, I think it is a substantial amount of money, I am told about US$70 million.
You are aware of the Zesco fibre optic network of about US$15 million. When you add the two, it is US$85 million - this is new investment. So already when you look at a real estate that Zamtel owns; that price of US$257 million is completely nothing," The Post quotes Hakainde.
"That is our contention. That the value is low, that the process was corruption and Dora Siliya herself was corrupt. No question about it. I am not surprised that they are all excited; maybe there is something they are sharing now. That is why they are all excited." Hakainde said the government should not have sold 75 per cent shares. "There was no need to dispose of 75 per cent; they could have disposed of 51 per cent and 49 per cent could be held by Zambians," The Post quotes Hakainde.
"This is our contention and nobody will bully us into submission as Rupiah Banda and Dora Siliya are trying to do. These two have demonstrated improper conduct, corrupt conduct in the sale of Zamtel. We will never stop talking about it."
Hakainde reminded president Banda to learn from what was happening in Ghana where former president John Kufuor had sold Ghana telecom to UK's Vodafone.
"When John Kufuor was president of Ghana and John Atta-Mills was the opposition leader, they Atta-Mills and opposition parties objected to the way in which they telecoms company was sold. I think John Kufuor thought it was a joke. When John Atta-Mills went into government, they are restructuring that transaction," The Post quotes Hakainde.
"We cannot say that because there is a contract signed even though the process towards signing that contract was corrupt, we should be bound by it. It means that you can go and commit a crime to start with and then legalise it and then say, ‘I have already signed a legal contract'. Not even common sense allows that."
This is what Hakainde was quoted by The Post as having said in its edition of June 16, 2010. Contrast this with what Hakainde was quoted as having said in the Zambia Daily Mail of yesterday!
And again, this was not the first time Hakainde was being quoted by the media on the sale of Zamtel. In The Post edition of February 9, 2009, Hakainde charged that there was an ugly face of corruption in the government's partial privatisation of shares. He said president Banda's government was ignoring legal procedures on the sale of Zamtel because of corruption.
"There is a process you follow; the procedures are there…the procedures are very clear but the issue is not whether the procedure is there or not, the issue is that you have a corrupt team that is beginning to ignore legal provisions…This is what you see in the procurement of petroleum, maize and now the privatisation of Zamtel…They are in a hurry to pocket money. It's because of appetite for money. I can tell you that the people of Zambia are looking, they are not foolish and time will come when the chickens will come home to roost…I ask the people of Zambia to fight on; to resist this dilapidation which is being brought about by the MMD government. There are too many things that smell a rat…"
And featuring on Radio Phoenix's Let the People Talk programme on February 20, 2009, Hakainde said president Banda and vice-president George Kunda must tell the nation why they must not acknowledge that they have failed the public on the Zamtel issue.
"We are also aware that there is a related party who is associated with RP Capital Partners, is it RB Capital Partners? Now I can see the minister struggling and I know Dora very well.
I feel sorry for her. I think she is a messenger. She finds herself being a messenger of a well-orchestrated plan to actually take money from public coffers, US$2 million. And let's not debate about whether the MoU is legally binding or not. The intent is very clear.
I am told RP Capital Partners are already working on the assignment. When you are telling a lie, it shows and the Vice-President was very busy telling the nation that there was nothing wrong. Mr Vice-President, are you saying that your Attorney General is irrelevant? Are you saying that to tell RP Capital using inside information is not wrong? The President I think mishandled himself on this matter…This is pure corruption."
Hakainde has capitulated and cannot say these things today. The people involved are today his political partners in the MMD-UPND pact. But what he said when he was free to speak his mind and tell the truth on these issues still stands. And this is what Michael Sata is today correctly and justly pursuing on behalf of the Zambian people.
And given this background, it is easy to understand why Alexander Chikwanda, our Minister of Finance, is today saying that taking the government to court over public companies that were acquired in a corrupt manner is not sustainable and will not be accepted. We agree with Alexander when he says that "while Zambia strives and will continually and consistently strive to attract foreign investment, that era of dubious investments through corruption is gone and gone forever.
Dragging government to court in cases where some public officers breached our laws and there was a proven fraudulence by investors is not sustainable exercise even under international law".
Just because those who corruptly bought 75 per cent of Zamtel shares are foreigners then they should get away with corruption and be allowed to keep that which they fraudulently acquired! Corruption is corruption regardless of the nationality of who is involved in it.
The corrupt nature of this transaction was well-analysed and articulated by Hakainde. But because of political dishonesty, Hakainde today cannot speak the same words, the same language on this issue. He has changed colours like a chameleon. Let's not follow chameleons. Let's give Michael and his government the full support on this issue because they are right.
There is no abuse or ill-intention that one can justifiably insinuate from what they are doing. Hakainde is just trying to hide his treachery and unprincipled behaviour over this issue by accusing Michael and his government of ill-intention.
LAP GreenN will not be allowed to keep the fruits of corruption. And this will send the right message to all foreign investors in this country not to engage in corruption because it will take them nowhere and they will risk losing everything. Whatever this may cost, it will be worth it because it will prevent this type of corruption in future.
Labels: CORRUPTION, DORA SILIYA, HAKAINDE HICHILEMA, RP CAPITAL PARTNERS, ZAMTEL
Read more...
3.2.1. The Tender Process
i. On the 18th of August, 2009 the Director General of ZDA wrote to the Director General of Zambia Public Procurement Authority (ZPPA) seeking a waiver from Open Selection (International or National Selection) to Direct Selection tendering process.
In that letter the Director General ZDA reported that the ZDA Board had recommended that RP Capital Group be engaged on the basis that the firm had previously conducted some preparatory work to the satisfaction of ZDA and therefore should be contracted to continue with Transaction Advisory Services. In their application for a waiver to ZPPA the ZDA enclosed a Request for Proposals (RFP) for review.
ii. On 19th of August, 2009 a follow up letter was sent to the ZPPA providing further information and clarifications that, among others, RP Capital were engaged previously for preparatory work on 09th December, 2008 at a cost of the higher of US$2million or 5% of the Transaction proceeds.
iii. On the 27th of August, 2009 the Director General of ZPPA granted ZDA a waiver from Open Selection to Direct Selection to engage RP Capital Group. Consequently a Direct Invitation for Proposals was sent to RP Capital Group.
iv. Proposals were received and on the 11th of September, 2009 the Director General ZPPA asked the Director General ZDA to evaluate the bids.
v. On the 14th of September, 2009 - Since the tender was a Two Envelope System, the ZDA Director General submitted the results of the Technical Evaluation results in which RP Capital had scored 86.2% over and above the prescribed minimum of 75% in the RFP.
vi. Also on the 14th of September, 2009 the ZPPA Director General (DG) approved the Technical Evaluation report administratively. This Committee notes that this approval was done by the ZPPA Director General (DG) administratively instead of an approval by the Central tender Committee (CTC).
vii. Also on the 14th of September, 2009 the DG ZPPA invited the DG ZDA and RP Capital to the opening of the RP Capital Advisors Financial Proposal which was scheduled to take place at 15.30hrs on the same date. The Financial Proposal was opened at 15.48 hrs and subsequently sent to ZDA for a combined Technical and Financial evaluation.
viii. The report on the combined Technical and Financial evaluation was submitted back to ZPPA also on the 14th of September, 2009 for consideration of the award of contract to RP Capital and on the same day at a sitting that took place at 21.00 hours the Central Tender Committee (CTC) approval was granted to ZDA. This Committee highlights the extraordinary speed and urgency attached to the selection of RP Capital particularly as they were single sourced.
ix. On the 15th September, 2009 the contract between ZDA and RP Capital Advisors was signed and a copy was sent to ZPPA.
This Committee again places on record that it is inconceivable that a contract of this magnitude could have been prepared, approved and executed and a copy forwarded from ZDA to ZPPA in the course of one (1) morning. This Committee can safely conclude that this contract was preprepared prior to tender approval and award and ZDA merely signed the contract without any negotiations or review whatsoever of the terms contained therein.
3.2.2. Additional relevant information
i. In the interview with the Director General of ZDA, he informed the Committee that he met with RP Capital Partners and GRZ officials to request for the RP Capital documents prepared under the MoU. He advised the Committee that RP Capital refused to hand over any information unless they were appointed as Transaction Advisors on the sale of Zamtel.
This statement was of grave concern to this Committee. This Committee notes that if true, RP Capital essentially held GRZ to ransom. The emphasis in the preceding sentence is deliberate as there are many inconsistencies in the sequence of events as established by the Committee.
a. On the 25th of March 2009, the Permanent Secretary - MoCT wrote to RP Capital suspending the MoU until further notice.
b. On the 27th of March 2009, Dora Siliya instructed the Permanent Secretary – MoCT to urgently withdraw the above letter.
c. On the 1st of April 2009, the Permanent Secretary – MoCT withdrew the letter.
d. The Committee interviewed Mr. Henry Sakala – ZDA Privatization Manager who is on our record as having advised the Committee that as far as ZDA was considered, the MoU signed between RP Capital was a “nullity and had died a natural death after the Dennis Chirwa Tribunal.”
e. On the 23rd of June 2009, the Permanent Secretary – MoCT wrote to RP Capital “re-affirming the procedure of under-taking the valuation and possible sale of Government stake in ZAMTEL.”
f. As stated earlier in this report, the Report from RP Capital and Cabinet summary that was presented to the Committee of 4 Ministers is dated the 22nd of July 2009.
g. Only upon Cabinet approval of Zamtel for privatization on the 23rd of July 2009 did ZDA enter the picture. At this point RP Capital had already handed over the documents under the MoU to the Committee of 4 Ministers. This Committee is therefore at pains to understand which documents were withheld from ZDA by RP Capital as claimed by Mr. Chipwende that forced him to single source RP Capital as transaction Advisors.
h. It is worth pointing out that the ZDA Board Chair did not recall that the ZDA Board ever approved the Direct Selection of RP Capital as claimed in the letter dated 18th August 2009 to ZPPA by the ZDA Director General.
3.3 Engagement of Simmons and Simmons
3.3.1. The Tender Process
i. On the 26th of November, 2009 the ZDA Privatization Manager wrote to ZPPA asking to process a Limited Selection tender for legal firms for advisory services for the process of selling 75% shares in Zamtel. The Request for Proposals (RFP) was sent out to the following legal firms.
1) Baker & McKenzie –UK;
2) Simmons and Simmons – UK;
3) Paul Hastings – USA;
4) Morrison & Forester, - USA; and
5) White & Case - UK.
ii. The closing date for receipt of proposals was 28th December,2009 and only two proposals were received from:
1) Simmons and Simmons; and
2) Paul Hastings.
iii. On the 30th of December, 2009 ZDA submitted a Technical Evaluation report to ZPPA in which Simmons and Simmons were technically qualified and requested for the opening of the Financial Proposal accordingly. On the same day ZDA submitted to ZPPA a combined Evaluation Report recommending the award of contract to Simmons and Simmons.
iv. The Central Tender Committee (CTC) of the ZPPA deferred the approval and instead requested ZDA to address some concerns regarding the ability of legal firms to respond to tenders and the legal fees quoted in view of the Legal Practitioners Act.
v. ZDA sought guidance from the Attorney General’s office and that was provided on the 7th of January, 2010 and subsequently submitted to ZPPA for further considerations.
vi. On the 7thof January, 2010 the CTC granted authority to ZDA to award the contract to Simmons and Simmons at a cost of US$660,000.00 exclusive of taxes.
vii. A contract between Simmons and Simmons and ZDA was signed on the 5th of February 2010 although clause 2.2 of this contract provides that “The Consultants in good faith began carrying out the services under this contract on the 9th of January 2010.”
3.3.2. Additional Relevant Information
i. In their initial interview with Mr. Henry Sakala – ZDA Privatization Manager, this Committee had queried the appointment of a foreign law firm. Mr. Sakala had explained that Zamtel was a highly complex transaction that required lawyers specialized in the telecommunications industry and because no local law firms had the relevant expertise, a foreign firm had been appointed.
A perusal of the Description of the services appended to the contract for legal services entered into between ZDA and Simmons and Simmons, particularly clause 4, which specifically lists the tasks expected of the consultant, reveal no task that would require specialized telecommunications lawyers.
To the contrary, it is this Committee’s opinion that local lawyers with knowledge of the Zambian laws would have been better suited for the task.
ii. This Committee interviewed the ZDA Head of Legal Department – Mr Charles Mulenga. Mr. Mulenga informed this Committee that he had strong reservations about the Zamtel sale from the start and therefore delegated all legal work connected to Zamtel to his junior Ms. Yadika Mkandawire.
iii. This Committee also interviewed Ms. Yadika Mkandawire Lead ZDA Counsel on the Zamtel sale. Ms. Mkandawire informed the Committee that whilst she was consulted on a few of the minor agreements and documents, she was not privy to nor was she consulted on any of the Zamtel transaction documents.
Ms. Mkandawire also informed this Committee that she performed the role of a “legal clerk” and not one of lead Counsel. She believes this may have been as a result of the fact that she was previously employed in the Attorney-General’s chambers and was therefore perceived to be from the
“Mumba Malila camp and was deliberately left out of the loop. Ms. Mkandawire informed the Committee that once the privatization process commenced, she was in fact removed from the email mailing lists at ZDA and was only provided piecemeal instructions.
She stated that the ZDA legal department was reduced to the role of observers. Ms. Mkandawire gave an example of meetings held in London with RP Capital and ZDA where the Attorney General sent a lawyer from his chambers and ZDA lawyers were left out and only heard of the meetings from third parties.
iv. Prior to the engagement of Simmons and Simmons, ZDA had engaged the services of Messrs. Mulenga Mundashi. This Committee also interviewed Mr. Mundashi after his professional privilege had been formally waived by ZDA. Mr. Mundashi informed this Committee that he had been appointed by ZDA as external transaction lawyers on the 26th of October 2009 with a very broad mandate. His firm was consulted on several documents and rendered advice on the same.
Mr. Mundashi was also consulted on the issue of GRZ waiving outstanding taxes due to ZRA from Zamtel. His advice was that ZRA tax could not be waived without Parliamentary sanction. Mr. Peter Heilner of RP Capital disagreed with his advise and consequently Mr. Mundashi arranged a meeting with the then ZRA Commissioner – Domestic Tax Mr. Wisdom Nhekairo.
Mr. Mundashi and Mr. Peter Heilner met Mr. Nhekairo at ZRA and Mr. Nhekairo confirmed Mr. Mundashi’s advice. Messrs. Mulenga Mundashi were subsequently asked to render a bill for their services and their bill was paid.
v. It is worth mentioning that prior to the 26th of November 2009 when the tender process for legal services that led to the appointment of Simmons and Simmons commenced Simmons and Simmons were already in contact with RP Capital regarding the privatization of Zamtel..
We refer to email correspondence dated the 19th of October 2009 from Peter Heilner of RP Capital to Arthur Stewart and copied to David Shasha – both Partners at Simmons and Simmons as well as Arthur Stewart’s response dated the 20th of October 2009.
“From: Peter Heilner [mailto:Heilner@rpcapitalgroup.com]
Sent: 19 October 2009 18:53
To: Arthur Stewart
Cc: David Shasha; Peter Nemeth; Jayne McCann
Subject: RE: Zambian counsel
Arthur, David,
As discussed, the following is a list items that we need to clear before the first week of November for inclusion in the virtual data room:
· Indefeasible Right of Use Agreement between ZESCO (the national power utility) and Zamtel whereby ZESCO grants Zamtel the exclusive right to all the unused (that ZESCO does not use for internal purposes) optic fibre on its network for a fixed rate for an indefinite period. Commercial terms and a rough agreement have already been put together
· Amendments to the Articles of Association of Zamtel – Transition from a 100% government owned company to a private company and the inclusion of veto rights associated with 25% shareholding that the government is retaining
· Review of contract amendments with equipment suppliers (Huawei and ZTE) and associated government guarantees (some drafted)
· Review of covenant waivers from lenders (Chinese State banks)
· Review of “conditional” redundancy agreements with Unions (drafted) There are also likely some other more minor items which might crop up from time to time.
I would appreciate it if you could prepare a cost estimate as soon as possible on this basis and I will clear with my client and we can get started immediately. From a contractual perspective Simmons would be working with RP for this interim period. Zambian local counsel will be retained by the ZDA separately and will be available to provide input from a drafting perspective throughout this period.
Let me know if any of the above is unclear or if there are any further questions.
Regards,
Peter”
“From: Arthur Stewart [mailto:Arthur.Stewart@simmons-simmons.com]
Sent: Tue 10/20/2009 11:55 AM
To: Peter Heilner
Cc: David Shasha; Peter Nemeth; Jayne McCann
Subject: Estimate for Support Period
Peter:
Many thanks.
On the basis that we are providing an estimate of legal fees to provide support on the various items of work set out in your email below for a 2 week period (the "Support Period") our estimated pricing (exclusive of VAT and disbursements) is as follows:
We would apply a 10% discount to our standard hourly rates. We estimate that our overall fees for the Support Period should not exceed £40,000 -£50,000 in aggregate. Within this general estimate we estimate that the fees in relation to items 1 and 3 may be as follows:
1. IRU (Indefeasible Right of Use Agreement) - the drafting and negotiation (if needed) of the IRU during the Support Period we would estimate our fees at £6,500 -£8,000. To the extent that our actual fees recorded are lower than this amount we will bill the lower amount;
3. Amendment to equipment supply contracts - this is a difficult item to price accurately since we do not know the scope of the amendment (i.e. whether it is the minor addition of some products or services or a more major project such as the provision of network to a major geographical area for example).
However, we can estimate our fees for drafting and negotiation support during the Support Period at £12,000 - £14,000. This figure is obviously created with a view to covering the possibility of the amendment being at the more major end of the scale. If the amendment is much more minor then the fees would be much less and we would bill what is recorded. The work on the guarantees would also be included in this sum.
When you have had a chance to digest this please call us to discuss. We are looking forward to getting started and working closely with you on with this very exciting project.
Best regards
Arthur and David
Arthur Stewart
Partner
D +44 (0)20 7825 3800
F +44 (0)20 7628 2070
E arthur.stewart@simmons-simmons.com
Secretary
Jayne McCann / Janice Frost
D +44 (0)20 7825 4094
F +44 (0)20 7628 2070”
In addition to the email evidence above, this Committee’s findings are that Simmons and Simmons are RP Capital’s attorneys of choice having previously acted for them on several assignments as can be seen from their respective websites.
It is clear from the above emails that the tender award to Simmons and Simmons was a predetermined and foregone conclusion.
4. Invitation of bidders for Zamtel
4.1 The pre-qualification process.
i. On the 15th of September 2009, the ZDA advertisement/ notice for the sale was published in the local and international media.
ii. Friday the 16th of October, 2009 17.00 hours was the closing date for the interested bidders to submit their Expression of Interest (EoI) and eight (8) international firms submitted namely:
. LAP GreenN - Libya,
. Altimo Holdings – Russia,
. Unitel/Angola Cables –Angola,
. Bharat Sanchar Nigam Limited (BSNL) – India,
. Mahanagar Telephone Nigam Limited (MTNL) –India,
. Portugal Telecom –Portugal
. Telecel Globe (Part of Orascom Telecom);and
. Telkom South Africa - RSA.
iii. The ZDA Board prequalified all the eight (8) interested bidders including LAP GreenN.
4.2 Comments and observations on LAP GreenN.
4.2.1. Following a review of the bid from LAP GreenN this Committee noted serious and critical anomalies in the qualification of LAP GreenN in the preliminary stage which ZDA, their lawyers and their transaction advisors deliberately ignored.
The Public invitation announced on the 15th of September 2009 for invitation to prequalify for participation in Zamtel privatization set out three mandatory criteria.
i. 1st criteria – Minimum 5 years operation in the telecommunications industry.
We quote from the Zamtel privatization pre qualification application form sent by ZDA to all prospective bidders:
“Only Companies with a minimum of 5 years licensed operation in the telecommunications industry, as the primary activity of the Company, will prequalify.”
We further quote from the LAP GreenN’s completed pre-qualification application form as submitted to ZDA wherein LAP GreenN state that they have been in the telecommunications industry for 8 years:
“16th October 2009
LAP GreenN Application form”
Page 4: “Criterion 1: Number of years in operation in the telecommunications industry – 8 years”
We also quote from the above mentioned minutes of ZDA Board Meeting of
the 31st of March 2010:
Page 2: “Incorporated in 2007, LAP Green Networks shares its mission with its
parent, LAP, namely to contribute to the development of African nations.” LAP GreenN having been incorporated in 2007 at the time of prequalification (16th October 2009) had been in existence for less than three years. It is clear from the above, that LAP GreenN did not meet the first of the mandatory pre-qualification bidder selection criteria – namely the requirement to have been a telecommunications operator for not less than five years.
Furthermore, it was a requirement in the 1st prequalification criteria, that documentation in support of criteria 1 be submitted and we quote:
“For Sole Applicant Companies: (i) A copy of at least one (1) license for the Company to operate a national telecommunications network”.
A diligent search by this Committee reveals that LAP GreenN does not own any licence to operate a national telecommunications network.
It is the considered opinion of this Committee that LAP GreenN should have been eliminated at the pre-qualification stage as it did not meet both the five year minimum telecommunications operator requirement and the national telecommunications network licence requirement to comply with the 1st criteria in the mandatory pre-qualification.
ii. 2nd Criteria – Minimum 3,000,000 active subscribers in the telecommunications sector. LAP GreenN had no subscribers attributable to itself, its holding company or its parent company.
In order to attempt to satisfy this 2nd criteria, LAP GreenN relied on a percentage of subscribers proportionate to their shareholding in 4 separate companies in which LAP GreenN had equity interests namely Uganda Telecom Ltd of Uganda, Rwandatel of Rwanda, Oricel of Ivory Coast and Sonitel & Sahelcom of Niger.
It is the considered opinion of this Committee that this is an absurd attempt at subscriber numbers engineering as for example, any shareholder in a public telecommunications company could then lay claim on a number of subscribers proportionate to their shareholding.
In any event, even the instructions contained in the prequalification application form clearly state on page 3 that a lead member must be “capable of satisfying criteria 1 and 2 on its own”. LAP GreenN failed the 2nd mandatory prequalification criteria.
iii. 3rd criteria – Minimum US$250 Million or more in shareholders’ equity. LAP GreenN attempted to satisfy this criterion through its parent company and stated that the capital of the company was US$500 million. However, in order to satisfy this criterion, the prequalification form requires that a sole applicant provides, and we quote “a copy of the Company’s most recent, published accounts no older than for the accounting period including June 2008”.
This Committee highlights and quotes from page 6 of LAP GreenN’s prequalification application form:
“We have provided our balance sheet as per draft accounts which clearly show that we have capital well above the minimum of US$ 250 Million. Please note that the audit of our financial statements for the year ended 31 December 2008 has not been completed. We will furnish you with the audited accounts as soon as the audit is completed.”
Clearly, LAP GreenN had no audited accounts. LAP GreenN therefore also failed the 3rd mandatory prequalification criteria
Despite LAP GreenN having failed ALL THREE OF THE MANDATORY PREQUALIFICATION CRITERIA, they were allowed to proceed to the next stage of the Bidding process.
5. Evaluation of bids
5.1 Bidding Round
i. After the pre-qualification process the eight (8) bidders were invited on 23rd October, 2009 to submit their non- binding bids (offers) for the purchase of 75% percent shares in Zamtel and the closing date for the submission of their proposals was the 23rd of December, 2009 at 15.00 hours local time.
ii. On the closing date four (4) out of the eight (8) bidders submitted their nonbinding offers in the tender box at the ZDA office building and these were:
. Altimo Holdings – Russia;
. Bharat Sanchar Nigam Limited (BSNL) – India,
. Lap Green Networks –Libya,
. Unitel/Angola Cables - Angola.
iii. On the 11th of January, 2010 the ZDA Board approved the acceptance of the four (4) offers after the due process of evaluation and therefore, all four (4) qualified to the next stage of the bidding process.
5.2 Comments and observations on the Altimo Holdings bid submission:
i. The electronic bid was received by the ZDA five (5) minutes after the closing time and therefore, the bid was late and should not have been accepted. Although ZDA received an application from the bidder justifying that the late arrival was due to a technical fault of their internet saver. The ZDA Board accepted the appeal one week later and the Altimo Holdings bid was accepted and elevated to the next stage. Under normal tendering practice electronic bids are never accepted due to the possibility of technical problems. In fact, the bidders had a mandatory obligation to submit hard copies of the same, in addition to the soft copy, physically by dropping it in the tender box at the ZDA office.
ii. In addition to accepting the late bid from Altimo Holdings, the bid was further given an “amnesty” during the evaluation process by the evaluation team after the evaluation team noticed that the bid did not include a Capex figure. A Capex figure of US$58million was put forward by Altimo Holdings after contact by the Evaluation Committee.
6. Short listed bidders/Final bids
6.1 The final binding bids.
i. On 2nd February, 2010, solicitation documents were sent to the following firms for their final binding offers. The closing date for the submission of their bids was 12th March, 2010.
ii. On that closing date, only three (3) bids were received from the following firms:
. Altimo Holdings – Russia,
. Lap Green Networks – Libya,
. Unitel/Angola – Angola.
iii. Bharat Sanchar Nigam Limited (BSNL) – India did not submit their bid. They had requested for an extension to the closing date which had been rejected by ZDA.
iv. After evaluations and recommendations from the ZDA management, the ZDA board the ZDA approved the acceptance of binding bids from both Lap Green Networks and Unitel/Angola on 31st March, 2010 and authorized ZDA management to invite the 2 bidders for negotiations.
v. The bid from Altimo Holdings was disqualified for, among other reasons, their bid being incomplete as it did not include a business plan. The Board approved that the Altimo bid be placed in reserve, in case the Lap GreenN and Unitel bids failed at the negotiation stage.
vi. At its approval meeting for the negotiations, the ZDA Board also approved the appointment of the negotiating team. This Committee notes that the provisions of Section 40 (1) of the ZDA Act, provide that “The Board shall appoint an independent negotiating team for each sale”.
This Committee is therefore surprised by the inclusion of the following:
a. The Attorney General – Mr. Abuydi Shonga; As a consequence of his membership of the ZDA Board, the Attorney General cannot be considered an independent member of the negotiating team.
b. Director General ZDA – Mr. Andrew Chipwende; By virtue of his employment as Director General of ZDA, the Director General cannot be considered an independent member of the negotiating team.
c. Transaction Advisor, RP Capital Advisors – Mr. Peter Heilner By virtue of their employment as consultants to ZDA, particularly since their remuneration was a percentage based fee only payable if a sale occurs, and therefore in their interest to conclude a sale regardless of whether the terms were favorable to GRZ or not, Mr. Peter Heilner cannot by any stretch of the imagination be considered independent.
d. Legal Counsel, Simmons & Simmons; The purpose of appointing an independent negotiating team is to ensure that the negotiations are conducted in good faith and a transparent manner. Due to the strict rules regarding client confidentiality legal counsel cannot be considered independent as their professional duty lies with their client.
e. Director of Telecommunications, Ministry of Communication and Transport – Mr. Luwani Soko. Prior to his appointment at MoCT, Mr. Soko was Technical Director of Zamtel.
This Committee quotes from an email dated 21st of September 2009 from Peter Heilner to Joseph Jalasi – Special Legal Advisor to the President and copied to Andrew Chipwende – DG ZDA and Dr. Richard Chembe - Special Economic Advisor to the President:
“Luwani Soko’s move from Zamtel to MCT needs to be delayed until 21st October so he can participate in labour negotiation process (in interim he should be required to report to licensing and regulation committee)”.
Clearly, Mr. Soko, having participated in labour negotiations at ZAMTEL was not an independent member of the negotiating team.
This Committee then finds that the negotiating team appointed by the ZDA board to negotiate the sale of Zamtel was not an independent negotiating as required by Law.
7. The Negotiating Process
7.1 UNITEL – final binding bid.
Zambia Development Agency – Memorandum To The Agency Board Paper – Authorization of Final Transaction Structure for Zamtel Privatization 2nd June 2010 Zambia Development Agency Management
We quote from the above-captioned paper in relation to some of the criteria used by the ZDA Negotiating Team in assessing the two final bidders:
“It should be noted that UNITEL were asked to reconsider (a) their capital expenditure programme, which the negotiating team considered excessive (at US$ 426 million) and (b) their redundancy programme (which 67% of the workforce, was materially subordinate to LAP’s proposed 100% redundancy programme).”
This Committee noted with concern, that part of the final negotiation criteria that was used to the detriment UNITEL are criteria that should have worked in their favour – i.e. the retention of a larger Zambian workforce and the commitment to a greater Capex investment in the Zamtel network.
7.2 LAP GreenN – Final binding bid
i. The original LAP GreenN non-binding bid was based on a 70% staff redundancy. This Committee notes that the final binding bid allowed for 100% staff redundancy as a consequence of the negotiation process, perhaps as a result of Mr. Luwani Soko on the negotiating team.
ii. The negotiating team conceded several incentives that were not part of the original LAP GreenN non-binding bid:
. The inclusion of the Zesco Optic fibre Network valued at approximately US$20M;
. GRZ paying US$120M (K 557,948,972,876.00) tax liabilities;
. Operators and Service licences given for free valued at approximately US$150 M market value;
. Spectrum allocation valued at approximately US$150 M market value;
. Barring a 4th Mobile operator from the Zambian market;
. PSTN exclusivity.
This effectively means that the negotiating team cost the process in
excess of US$440 M.
7.3 The results of the Negotiations:
i. The negotiations started on the 11th of May, 2010 and the ZDA Board approved the selection of LAP GreenN as the successful bidder on the 2nd of June, 2010.
ii. The negotiations resulted in the selection of Lap Green Networks of Libya as the purchaser of 75% shares in Zamtel at a total consideration of US$257million.
iii. The transaction documents were signed on 5th June, 2010.
iv. The completion of the transaction took place on the 10th July, 2010 with the exchange of all legal documents between parties and the purchaser paid the final balance of the purchase price. Zambia Development Agency 23rd Special Board Meeting
2nd June 2010 Zambia Development Agency Board
We quote from the above-captioned Board Meeting in relation to some of the
observations made by the Board regarding the Zamtel privatization process;
“ (i) Whether or not the Zamtel Board had seen and reviewed the sale document before it was presented to the ZDA Board.”
“(ii) If the Zamtel Board had reviewed the document, were the minutes of the same Board meeting available?.”
“(iii) Ideally the draft sale agreement should have been availed to the ZDA Board for review before being forwarded to the Attorney General for approval.
“(iv) In future privatizations, there ought to be regular briefings on each stage of negotiations so that the Board would be made aware of what was going on.”
“(v) Mrs. S. Thole requested that she be recorded as having objected to clause 6.9(i) of the Board Meeting minutes (Sale of 75% equity stake in Zamtel to Lap Green Networks for a total consideration of US$256.5 million).”
This Committee notes that even the ZDA Board was not wholly satisfied with the conduct of the Zamtel sale.
Labels: CORRUPTION, DORA SILIYA, PRIVATISATION, RP CAPITAL PARTNERS, ZAMTEL, ZDA
Read more...
