There are speculations that the Zimbabwe Defence Forces which own Fernhaven Investments could have threatened the National Social Security Authority (NSSA) from taking over Longchen Shopping Mall over a US$15.8 million debt default.
According to the recently released audit report, NSSA should have taken over Longchen Shopping Mall from Fernhaven since it was pledged as security in guaranteeing a loan that Africom (Private) Limited had contracted but was failing to repay.
However, in a surprise turn of events, NSSA opted to ignore taking over the shopping mall (Longchen) which has left some people concluding that it might have been bullied off.
The background of the matter is that Africom (Private) Limited had a loan with Afreximbank, where it was failing to meet its repayment obligations.
The capital amount outstanding was US$15.8million, with interest at 6.5% per annum. The lender then demanded that shareholders should give a guarantee on the outstanding balance.
Fernhaven Investments own 51% shareholding in Africom while NSSA has 4.5% shareholding.
A board (NSSA) resolution passed 14 October 2013 authorised management to issues a guarantee to the extent of its 4.5% shareholding in Africom.
However, the audit report said “we noted that on 12 December 2013, NSSA having a shareholding of 4.5% in Africom became the sole guarantor to the loan. This action was contrary to the board resolution.
“We also noted that Fernhaven Investments which had 51% shareholding in Africom indemnified NSSA and provided its property Longchen Shopping Mall as security,” said the report.
The approval for NSSA to become a guarantor was signed by former Public Service, Labour and Social Welfare Minister Nicholas Goche on 4 December 2013.
NSSA failed to comply with their board approval which resulted in it becoming the sole guarantor of the full debt of US$15.8 million when it only had a shareholding of 4.5%.
“In September 2015 after Africom had persistently defaulted on servicing the debt, payment was demanded from the guarantor (NSSA).
“As per the indemnity agreement, NSSA should have foreclosed on the Fernhaven pledged Longchen property in order to raise the money to settle the debt.
“We were not availed with evidence of the authority (NSSA) making efforts to foreclose on the pledged property. Instead, NSSA approached Zimbabwe Asset Management Company (ZAMCO) to take over the debt,” said part of the report…..
The NSSA Audit Report added that “a board resolution dated 26 September 2017 gave instructions to pay ZAMCO a transaction cost of $600 000 provided that management engaged the Ministry of Defence with the hope of getting them to pay part of the amount, Ministry of Defence is the parent company of Fernhaven.
“ZAMCO subsequently took over the debt on January 2018 after NSSA had paid a transaction cost of $606, 279.
“The Ministry of Defence is repaying 50% of the transaction cost ($303,140) over an agreed period. This means the financial loss to NSSA on the transaction has been reduced to $303,140.