I was born in Zimbabwe and acquired South African citizenship in 2002 having been resident in the country since 1995.
I am a businessman and prior to my taking residency in South Africa, I was employed by the World Bank in Washington DC as a Senior Investment Officer in the Oil, Gas & Mining Department.
In March 1995, I founded Africa Resources Limited (ARL”), a company incorporated under the laws of the British Virgin Islands (“BVI”) that acquired in March 1996 the entire shareholding in the holding company of SMM, SMM Holdings Limited (“SMMH”), a company incorporated under the laws of the United Kingdom.
SMM was until 1 March 2004; a company controlled by its board of directors and was ultimately beneficially me.
I became a target of the Zimbabwe government following my decision to decline taking a position of an office bearer of the ruling party’s provincial committee in October 2003 after being elected in absentia and without being consulted.
Beginning in mid-December 2003 when the current governor of the Reserve Bank of Zimbabwe was appointed, a number of businesspersons were targeted for foreign currency violations and the law was changed to make failure to remit foreign currency proceeds from exports a criminal offence and investigations were commenced against selected exporters including the SMM.
Accordingly, foreign currency violations were described as externalisation and at the core of this matter is the attempt by the government of Zimbabwe to apply the Zimbabwean legislation extra-territorially in that the cause of action in this matter relates to a company, SAS, that is registered in South Africa and it is alleged that this company failed to remit foreign currency proceeds to Zimbabwe using a court order that had the effect of allowing the company to divert funds to a company, Petter, also registered in South Africa. However, for this law to be applied in South Africa, the control and management of the SMMf had first to be divested from its private shareholders to allow the government of Zimbabwe to superimpose itself in commercial transactions and approach this jurisdiction dressed as a normal company pursuing a bona fide commercial debt.
It is significant to state that during the material time, exporters were allowed to retain in foreign currency only a portion of the export proceeds that could then be used to procure inputs from external suppliers.
In December 2003, the Reserve Bank of Zimbabwe (“RBZ”) unilaterally and arbitrarily lowered the percentage that SMM could retain from 75% to 50% and this had the effect of reducing the amount of foreign currency available to pay to the company’s foreign creditors including Petter.
As a result, SMM could no longer timeously meet its obligations to Petter, a key supplier to the mines resulting in the disruption of mining operations.
Mr. Mariemuthu was then approached by the then Chairman and CEO of SMM to sit on the board of the holding company of SAS and Petter i.e. AR Projects Services (Pty) Limited (“ARPS”)(in liquidation) as it was felt that the it was in the best interests of the group that all directors representing the SMMf including Mr. Mawere resign from the boards of all South African registered companies in the group.
Consequently, he was appointed a director and Chairman of ARPS and subsequently a director and Chairman of SAS and Petter.
He was fully briefed about the challenges faced by the group in so far as the deteriorating relationship with the GOZ was concerned and the threat it posed to the continued viability of the mines and the South African companies associated with SMM.
In fact during May 2004, an investigation team from the RBZ visited South Africa to meet with Mr. Mariemuthu . The team demanded to see the books of SAS and was informed that there was no legal basis for a Zimbabwean investigating team to have records and documents of a South African company without a court order in South Africa. Threats were then made that action would be taken in Zimbabwe against SAS and all companies associated with me.
To confirm the deteriorating relationship between SMM and the GOZ, a dispensation granted in 1998 for the company to export its own asbestos was withdrawn with effect from 1 April 2004 and this had the effect of disturbing the business model that was in place whereby inter-company transactions would take place between the companies in the group.
The relationship between SAS and SMM’s wholly owned subsidiary, African Associated Mines (Private) Limited, evolved from that of an agent to a distributor in December 2002.
SMM was indebted to Petter at the time in the amount of R27 million far in excess of what SAS had paid to Petter prior to the cession court order that has been used over the past 8 years to justify the interference of the government in the affairs of SMM. Accordingly, SMM had constructive knowledge that SAS in the ordinary course of business had made payments to Petter to allow for the continued supply to the mines otherwise the suppliers to Petter and in turn to AAM would not have continued to support the mines without payments.
The cession court order was granted on 6 May 2004 and on 11 May 2004, Mr. Obed Dube. Managing Director of AAM wrote to me instead of the directors of SAS informing me for the first time after he had signed the cession agreement that that the agreement was unworkable fully knowing that I was no longer a director of SAS and Petter. It is submitted that for him to write the letter in the manner he did, he was already working with the authorities in Zimbabwe whose objective was to find a connection between me, the holder of the shares in SMM, with the alleged fraud. It took more than two years for this action to be instituted after the letter from Mr. Dube was written.
However, on 17 May 2004, a warrant of arrest was issued in terms of Section 33(1) of the Criminal Procedure and Evidence Act (CAP) 9:07 of Zimbabwe on the suspicion that I had committed a crime during 1 January 2000 to June 2003 of fraud or alternatively violating the Exchange Control Regulations of Zimbabwe.
On 25 May 2005, I was arrested in South Africa pursuant to an extradition application instituted by the government of Zimbabwe. It is ironic that SMM was not the complainant. None of the directors of SAS and Petter were mentioned in the extradition application notwithstanding the fact the alleged fraudulent cession agreement was duly signed by representatives of the companies concerned i.e. SAS, Petter and AMM by Messrs. Sanangura, Lovemore Dube and Obed Dube; respectively..
It was alleged in the extradition application that I and not SAS had amounts in my personal accounts held outside Zimbabwe and it was suspected that some of the export earnings allegedly owed by SAS to SMM went into these accounts:
US$18,464,595.27,
Can$ 628,071.84, and
ZAR4,515,367.48
It is significant that at the time, the authorities in Zimbabwe were operating on the assumption that I was still a Zimbabwean citizen in which case the alleged holding of foreign funds by a resident of Zimbabwe would have fallen within the ambit of the Zimbabwean exchange control regulations hence the choice of words above.
The extradition application was dismissed on 29 June 2004.
The board of SMM was then forced by the Reserve Bank of Zimbabwe to formally meet on 1 July 2004 for the sole purpose of passing a resolution that the company’s consent to the granting of the cession court order was unauthorised and, therefore, the court order was to be rescinded.
Immediately after the board meeting, the Chairman of SMM, Dr. William Mudekunye, left the country and has since not returned to the country for fear of being arrested by the authorities.
On 9 July 2009, I was specified in terms of the provisions of the Prevention of Corruption Act of Zimbabwe on the same allegations of causing SAS not to remit funds allegedly due to SMM. The same figures as mentioned above were used in justifying his specification.
On 13 August 2004, an Investigator was appointed in terms of the Prevention of Corruption Act of Zimbabwe to investigate my affairs and in particular my alleged role in respect of the cession court order. The effect of specification was to legally disable me from challenging the actions of the government of Zimbabwe and more significantly alienating me from the control and management of my Zimbabwean companies.
On 26 August 2004, SMM was also specified together with other companies deemed to be under my control.
On 3 September 2004, a decree was promulgated by President Mugabe using state of emergency powers to place SMM under the control of Mr. Gwaradzimba, as Administrator. It is on Mr. Gwaradzimba’s authority that these proceedings and others have been instituted in South Africa.
On 6 September 2004, SMM was placed under the control of an extra-judicially appointed Administrator on allegations that the effect of the cession court order was to divert funds allegedly due to SMM from SAS and, therefore, SMM was denied of working capital necessitating the government to intervene as a super creditor protected by the decree.
A copy of the Reconstruction of State Indebted Insolvent Companies whose application is retrospective is available should the JSC wish to review it. The law is a penal one and it is submitted that it offends the provisions of the South African constitution.
The fact that a number of litigations have been entertained in this jurisdiction based on the rights conferred on the litigants by this draconian law must be a cause of concern to all South African investors in Zimbabwe and no doubt a source of celebration and vindication in Zimbabwe that laws of this nature pose no real threat to the rule of law in South Africa.
- The facts of this matter will confirm that this matter goes beyond the pursuit of any normal foreign-based creditor for a bona fide monetary claim against a South African debtor. Rather the rights sought to be asserted in this jurisdiction arise from an act of a foreign state.
It is submitted that Mr. Mariemuthu was not cited as a Defendant in the original summons confirms that no facts existed linking us jointly to the allegations and more importantly the decision to join him in these proceedings were motivated simply by a recognition that the case against me was weak and more significantly was not supported by concrete evidence.
A reading of the particulars of claim will confirm that the cause of action is predicated on a link between the alleged fraud and the purported monetary loss of R18,043,373.21.
It is submitted that all that we expected would be evidence that such funds were in truth and fact diverted as alleged and more significantly that SAS had the funds to be so diverted as well as confirmation that such funds were solely dedicated for payment to SMM.
It is submitted that the particulars of claim were amended opportunistically to deal with the embarrassment of failing to join a director of SAS and Petter at the material time who would and should have known about the alleged payments that were made as a consequence of the cession court order. In the absence of concrete evidence supporting the connection between the alleged misrepresentation of facts in obtaining the cession court order and the purported monetary loss, it can be understood why Mr. Mariemuthu’s alleged utterances are now being used with the support of His Lordship Mr. Justice Willis as a substitute for concrete evidence of the manner in which the alleged payments to Petter by SAS to the cent were made and the timing of such payments.
As expected, no evidence was led confirming that payments were indeed made as alleged. During the trial, SMM’s witnesses confirmed that Petter was owed by SMM in amounts in excess of the alleged payments made by SAS to it, which would suggest that SMM couldn’t approach a court claiming a monetary loss caused by its non-payment to a South African company.
This is an unusual matter in which I am the primary target because I hold the shares that the government wanted to acquire without paying any compensation and hence the need to pursue this claim to complete the expropriation look as Section 12 of the Reconstruction Act provides for the forfeiture of the assets of a culpable and liable person to the government.
I was de-specified by the Ministry of Home Affairs that is now responsible for administering the Prevention of Corruption Act of Zimbabwe following investigations about the alleged fraudulent cession scheme. It is important to state that until January 2010, both the Prevention of Corruption Act and Reconstruction Act were administered by the Minister of Justice and Legal Affairs, Hon. P. Chinamasa, who has been the driving force of this matter.
It is ironic that one arm of the Zimbabwean government would come to the conclusion that the cession agreement was not fraudulent and more specifically that I committed no offence while another would hold a different view without the burden in this jurisdiction of leading evidence in support of the cause of action and pleadings.
adapted from http://www.saflii.org
Shabanie Mashaba Asbestos Mine
