Here’s an excerpt from the NSSA audit report that explains the matter:

7.1.2 Transactions with Africom

Background

• Africom (Private) Limited had a loan with Afreximbank, where it was failing to meet its repayment obligations.
• The capital amount outstanding was US$15.8 million, with interest accruing at 6.5% per annum. The lender then demanded that shareholders should give guarantees on the outstanding balance.

Requirement

• A Board resolution passed 14 October 2013 authorised management to issue a guarantee to the extent of its 4.5% shareholding in Africom.

Findings

• 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, Longcheng Shopping Mail as security.
• The approval for NSSA become a guarantor was signed by the former Public Service, Labour and Social Welfare, Minister (Nicholas Goche) on 4 December 2013.
• The authority failed to comply with the Board approval, as it became sole guarantor of the full debt of US $15.8 million when it only had a shareholding of 4.5%

Financial prejudice resulting from the guarantee

• 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 making efforts to foreclose on the pledged property. Instead, NSSA approached Zimbabwe Asset Management Company (ZAMCO) to take over the debt.
• A Board resolution dated 26 September 2017 gave instruction 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 for Fernhaven.
• ZAMCO subsequently took over the debt on 16 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.