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Published On: Fri, Jul 24th, 2015

Parly committee grills mining firms over payments to Brainworks

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by The Source

The parliamentary portfolio committee on indigenisation on Thursday quizzed three mining firms about their dealings with advisory firm Brainworks Capital in controversial indigenisation deals, most of which failed to succeed.ZIMPLATS-01

Brainworks worked as the government’s consultants in several major but eventually abortive transactions under Zimbabwe’s Indigenization Act — enacted in 2008 — which requires foreign owned companies valued at over $500,000 to cede 51 percent to black locals. By its own admission and that of the National Indigenisation and Economic Empowerment Board (NIEEB), Brainworks was hired without going to tender, in violation of the law.

Indigenisation transactions have come under scrutiny from the committee and on July 9, former indigenisation minister, Saviour Kasukuwere — who superintended over the transactions — accused its chairman and fellow ZANU-PF lawmaker, Justice Wadyajena, of conducting a politically-motivated witch hunt.

Caledonia Mining South Africa chief executive officer, Steve Curtis who was representing Blanket Mine in which the Canadian firm holds a 49 percent stake — the only company whose indigenisation transaction has been consummated — said they were introduced to the firm by the youth ministry but were happy with its work.

“We had extensive negotiations with the ministry of indigenization and towards the end of the process, Brainworks was introduced to us as an advisor for the ministry,” he said, adding that the firm assisted them with four transactions.

“The transactions were quite complicated in terms of understanding the valuation and the methodology of the repayment by the indigenous partners for their shares in Blanket Mine. Brainworks were very helpful in helping communicate the commercial aspects of those agreements which had been agreed with each individual party.”

Wadyajena queried why Caledonia agreed to engage Brainworks when it was already close to the conclusion of its indigenization transaction.

“Did NEEB fail to explain that they had to contract another company to do the explanation?” he asked.

Curtis maintained that the service of the firm had been useful and that the company agreed to pay the $250,000 they were billed.

“As a banking transaction, we were comfortable that the fee was reasonable,” he said.

Another legislator, Jasmine Toffa (MDC) asked: “You had gone about 90 percent of the way and suddenly Brainworks comes in. Did you feel that Brainworks was necessary to have been introduced at that stage?”

Curtis replied: “We were not unhappy that there was a professional advisor who came in to have discussion with us about the contracts, the method of repayments, conditions precedent which required Reserve Bank approval.”

Asked whether they were given a breakdown and details of what they were paying for, Curtis said the invoice referred to professional services provided in the implementation of indigenisation of Blanket Mine.

Addressing the same committee earlier, Anglo American unit, Unki Mine chief financial officer, Colin Chibafa told the committee that the firm were billed by Brainworks but refused to pay as they had not contracted for its work.

The company started work towards compliance in March 2008 and the company ceded a third of its mineral rights to government in return for empowerment credits and its plan was approved in 2012.

“All our negotiations were largely through NIEEB and the ministry. Our understanding in terms of financial advisors was that Brainworks were appointed by NIEEB. We were not privy to how they were appointed. As is common in all transactions, each party to the negotiations appoints their own advisors and pays them,” he said.

Chibafa said in January 2013, the company received a request from NIEEB to pay fees of $3,2 million to Brainworks, which it declined.

Wadyajena read the firm’s response.

“This matter has been discussed internally and I regret to advise that these costs cannot be for Unki’s account. Brainworks Capital was not contracted by Unki as its advisors neither was the scope of works to be carried out or fees to be charged agreed upfront. This cost will not pass our rigorous governance and internal control procedures,” read the letter written by the Anglo American unit to NIEEB.

Responding to whether the company had been given a breakdown of the invoice, Anglo-American country representative, James Maposa said there was none.

“We question the basis in the calculation. Common courtesy would have dictated them to say this is how we have reached this calculation,” said Maposa.

Mkoba MP Amos Chibaya (MDC-T) called Brainworks’ invoicing of the firms a ‘criminal’ act.

Zimplats, which sent its company secretary Garikai Bera and head of corporate Affairs Busi Chindove,

failed to produce documents on its dealings with Brainworks. The committee ordered the company to bring the documents at its next meeting and that chief executive, Alex Mhembere should attend the sitting.

“It’s difficult for us, we want to get to the conclusion of this matter but it’s a problem when there are no documents,” said Wadyajena.

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