9 May 2016
His Excellency, Cde. R. G. Mugabe
The President of the Republic of Zimbabwe
AN UPDATE ON THE ON-GOING NET*ONE CELLULAR (PVT) LTD SAGA AND APPEAL FOR THE INTERVENTION OF YOUR EXCELLENCY.
Your Excellency, this document serves to inform and clarify certain averments of improprieties and malfeasance leveled against NetOne management, through various press articles and press statements by the Minister of Information Communication Technologies, Postal and Courier Services, the Hon. S.C. Mandiwanzira, MP and the NetOne Board Chairman, Mr Alex Passmore Marufu.
Your Excellency, I also submit my humble appeal to you for your intervention on my continued and unwarranted victimization by the above-mentioned officials, which has gone unabated since December 2014, culminating in my forced leave for 3 months from the 14th March 2016, as highlighted by the below-mentioned chronology of events. As was stated by the Board Chairman, the forced leave was to ‘pave the way for a forensic audit’.
Following the establishment of NetOne as a division of the former Posts and Telecommunications Corporation (PTC) in 1996, NetOne has faced a number of challenges. The nascent entity was soon confronted with the impact of illegal sanctions, thwarting all efforts to raise the much needed capital for investment in the mobile telecommunications infrastructure, which is inherently highly capital intensive.
As a result of the illegal sanctions imposed by Western countries on Zimbabwe, Siemens which had won the tender for providing the network infrastructure for NetOne, withdrew all its support manpower from Zimbabwe, including its Project Manager in year 2000. NetOne was left to fend for itself and had to develop a spirit of self-sufficiency. As if that was not enough, Econet who had just come out victorious in a legal battle against the Government of Zimbabwe, went on a massive staff poaching exercise, which saw some 20 highly skilled engineers and technicians being taken for the Econet operations in Nigeria and Zimbabwe. NetOne had invested heavily in the training of these personnel, using the much-needed foreign currency. NetOne management, had to find survival strategies under those circumstances. There was no equipment available for the expansion of the network and staff were leaving NetOne in droves for ‘greener pastures’ in Econet and other operators outside Zimbabwe.
Further to all that, the operating environment of NetOne was heavily stacked against it, as this was the time soon after the formation of opposition parties and this so-called victory by Econet against the Government of Zimbabwe, in its litigation case, wherein they challenged the PTC monopoly in the provision of telecommunication services. The anti-Government hype that had been created by the illegal sanctions and propagated by the above developments to incite public opinion against the ruling party, had a serious knock-on effect on the operations of NetOne, which is wholly Government owned.
The unbundling of the PTC in 2001, also created new challenges for the new NetOne. The PTC debt had to be taken over by the successor entities of the PTC, namely NetOne, TelOne and Zimposts. The PTC debt was made up of foreign and local components. The foreign debt was allocated to the successor entity that had benefited from that foreign debt. Thus, NetOne took over the foreign debt that was used to purchase equipment for its initial set-up, namely from KfW of Germany, ING Bank of Tokyo and Standard Chartered, UK amounting to almost US$16 million. By 2012, the foreign debt had ballooned to US$30 million due to unpaid interest and penalties.
The local debt was allocated to all three successor companies on a pro-rata basis, premised on the number of employees in each successor company who had taken voluntary exit packages, as the voluntary exit packages were largely responsible for the local debt. Soon after the local debt allocation, Zimpost General Manager appealed to the then Minister, to have Zimpost’s local debt allocation taken over by NetOne and TelOne, arguing that Zimpost could not sustain it and the Minister concurred. Thus, NetOne ended up being saddled with an additional Z$600million debt from Zimpost in 2002, over and above its foreign debt of about US$16 million and its own local debt of about Z$600 million. This was quite a heavy burden on the operations of a nascent NetOne. On the other hand, Zimpost left PTC completely debt-free but with a massive infrastructure of Post Offices, largely built with funding from the Telecommunication side of the PTC.
Also, in 2002, the foreign lenders threatened legal action against the Government of Zimbabwe, who had guaranteed the NetOne loans, as the debts were not being serviced due to the acute shortage of foreign currency in the country. The Ministry of Transport and Communications then pledged to use its foreign currency to settle the NetOne foreign debts but requested NetOne to pay the local currency equivalent. Accordingly, in 2003, NetOne paid Z$633 million into Treasury (equivalent to about US$11 million), which money would have almost cleared the foreign debt. Unfortunately, that money was neither paid to the foreign lenders nor returned to NetOne and the foreign debt remained unpaid.
In the meantime, whilst NetOne was grappling with these foreign and local debts, Econet had listed on the Zimbabwe Stock Exchange (ZSE), raising critical capital for the expansion of their network, through an Initial Public Offer (IPO), which saw a number of institutional investors, which also ironically included the PTC Pension Fund, now Communications and Allied Industries Pension Fund, pouring money into the Econet share stock. Indeed, Econet was thus set to go, whilst NetOne was saddled with huge foreign and local debts.
On the recommendation of the then Permanent Secretary in the Ministry, Rtd. Col. C.Katsande, an approach for a foreign loan for NetOne’s expansion, was made to Afrexim Bank. After having spent some hard-earned foreign currency to prepare the funding proposal, which had to be done by an International telecommunications consultant as required by Afrexim Bank, Afrexim Bank turned down our application, citing financial instability following the collapse of a number of banks. Interestingly, Econet submitted their application soon thereafter and obtained a loan of US$ 20 million from the same Bank. It is that loan that turned the market in favour of Econet.
In fact, prior to that, a contract had been signed with Siemens for the Phase 4 network expansion and a financial advisor in the name of Safika Financial Services (Pvt) Ltd, had been appointed to raise money for financing the project. A financier in the name of Investors Resources Inc., was identified in the USA for an amount of US$50million, but the Reserve Bank of Zimbabwe, under Dr Leonard Tsumba’s Governorship, turned down the loan application, even after an appeal by the then Minister, Dr Swithun Mombeshora. The ZDERA sanctions soon followed, dealing a fatal blow towards any opportunity to raise funding from the United States of America. The European Union soon followed with its own cocktail of illegal sanctions against Zimbabwe, rendering it impossible to obtain funding from the West for NetOne.
Following a miraculous revelation and wisdom on your part, Your Excellency, over the need for Zimbabwe to adopt the Look East Policy, NetOne under the Ministry of Transport and Communications, then led by the late Dr Witness Mangwende, started engaging Huawei Technologies of China. Previous efforts on the Look East policy had resulted in the PTC signing an agreement with ZTE of China for the manufacture of telecommunications equipment at the PTC Msasa Factory for the supply to TelOne, NetOne and the region, but they failed to perform. Incidentally, ZTE has now become a supplier of choice to the competition, Econet. It should be noted at this juncture, that they have been instrumental in the sabotage of subsequent NetOne capitalization initiatives involving Huawei Technologies, as will be highlighted in this document. (The ZTE connection).
There were several visits to China by the Minister Dr Mangwende, NetOne Board and management and later with Minister, Dr C.C.Mushohwe to engage Huawei for supplying equipment to NetOne. Approaches to China Exim Bank were made for commercial loans, which required a 15% down payment. The then Governor of the Reserve Bank of Zimbabwe, Dr G.Gono availed US$1 million to NetOne, which enabled the 15% down-payment to unlock the loan facility in 2005. China Exim Bank did not however provide the commercial loan and in the end, Huawei Technologies provided a Supplier’s Credit facility for NetOne in 2005. This facility resulted in NetOne providing its second Mobile Switching Centre (MSC) in Bulawayo and some 50 base stations in the Western part of Zimbabwe. The system was commissioned in February 2007. Bulawayo residents woke up on one Sunday morning, to witness an excellent network, where NetOne to NetOne calls were going through on the first call attempt, something that had not been experienced hitherto. Unfortunately, given the little money invested, the Bulawayo MSC capacity was very small, limited to only hold 60 000 subscribers. The Harare MSC was also limited in its capacity due to years of lack of capital investment. Despite the Harare MSC being the gateway, it could only support 500 000 subscribers.
Thus, NetOne went into the multi-currency regime in year 2009, with this limited network capacity, yet Econet had expanded its network on the back of the $20million loan from Afrexim Bank and additional funding from the disposal of Strive Masiyiwa’s shareholding in Mascom, Botswana. This was therefore a sure way for NetOne to lose market share, being caught up in a situation where it had no capacity, when demand was very high and yet its competitor had abundant capacity.
Prior to the introduction of the multi-currency era in year 2009, the period 2007-2008, was characterized by hyper-inflation. The subscriber base for NetOne was mainly post-paid (customers consume the service and get billed a month later). In 2008, Econet forced all its customers to go on the pre-paid platform and that move, removed the risk of cash being eroded by hyper-inflation. Econet hoodwinked POTRAZ by suggesting that the move was prompted by a faulty post-paid billing system and POTRAZ swallowed it, bait, hook, line and sinker. I knew at the time that it was a bluff, as Econet did not stop offering International roaming service to foreign visitors to Zimbabwe, which service earns foreign currency and yet uses the same billing platform, which Econet had mis-represented to the regulator, POTRAZ, as faulty. This was amongst many strategies that Strive Masiyiwa chronicles in his document entitled ‘Why we listed our Zimbabwe business’, where he lays out some of the ways that Econet undertook to remain inflation-proof, such as buying unrelated businesses, land, buildings, insurance companies, banks, bottling companies, hotels etc. Econet SIM cards were mostly sold outside Zimbabwe, to raise foreign currency. At the time he made these moves, such speculative initiatives and overtures could not be undertaken by a Government-owned entity like NetOne by virtue of its mandate and stringent bureaucratic procedures. In fact, there was even a directive from the Central Bank to accept cheque payments for post-paid bill settlements, whose value was immediately wiped out in that hyper-inflation environment.
Even if NetOne had wanted to force all its customers to go on the Easycall pre-paid platform in order to shut out all risks associated with post-payments in a hyper-inflation environment, NetOne’s Mobile Switching Centres and the Easycall pre-paid platform were already full to capacity, thus making it impossible for NetOne to take that route.
After the hyper-inflationary period, Econet monetized (sold) most of the non-core businesses it had speculatively acquired during the hyper-inflation period and henceforth re-built their balance sheet, resulting in a network investment of $1.2 billion by 2012, compared to just under $200 million investment by NetOne at the time.
Your Excellency, needless to mention that NetOne, through the Board led by Dr Callistus D. Ndlovu and deputized by Mr Mazwi F. Dandato, former Senior Deputy Postmaster General responsible for Telecommunications in the PTC, steered NetOne through the stormy waters of hyper-inflation, characterized by massive flight of staff and inability to attract skilled workforce. It is also important to highlight that during the period 1999 to 2010, there were no major foreign currency inflows made into the capitalization of NetOne. From its inception to-date, NetOne has depended on debt financing for its capitalization.
We want to thank the Government of Zimbabwe, particularly Your Excellency, as indeed the Look East Policy adopted earlier, resulted in NetOne obtaining a loan of US$45 million in year 2010 from China Exim Bank, setting the pace for NetOne’s turn-around. Your Excellency, commissioned Phase 1 of the China Exim Bank funded project on the 7th December 2011 at the NetOne Ascot station, Bulawayo. A further loan of US$218 million was secured in August 2014 from China Exim Bank, during Your Excellency’s State visit to China, Zimbabwe’s ‘All weather friendly State’. The project funded by that $218 million, which we dubbed the National Mobile Broad-Band (MBB) Project is now nearing completion, helping NetOne to meet its obligations towards the ZIM-ASSET programme.
As narrated above Your Excellency, the NetOne journey has not been a walk in the park, but has been long and arduous. In brief, the major milestones to date, have been the following:
• NetOne has unparalleled network coverage in the rural areas, providing an important platform for Government programmes to be provided, such as e-Government, e-learning, mobile health etc. In the rural areas, NetOne is now poised to provide broad-band connectivity using 4G/LTE in the 700 MHz frequency band, following the Digitalisation of Television broadcasting. The above developments enable NetOne to be the catalyst for the accelerated implementation of ZIM-ASSET.
• In the urban areas, seamless network coverage has been achieved, with the provision of high speed broad-band technologies such 3G and 4G/LTE. These new data services have proved to be popular with universities and academics, thus providing an important educational development tool.
• NetOne has provided seamless coverage for most of Zimbabwe’s highways, thus providing communication means during emergencies etc.
• As of 2013, the legacy debt which had been a major millstone around NetOne’s neck, has been significantly restructured to pave the way for a more profitable business. Indeed, the ING Bank loan amounting US$7 million was re-negotiated and paid off and the Standard Chartered Bank loan of a similar amount, was also re-negotiated and removed from NetOne’s balance sheet. The only remaining legacy debt is from KfW of Germany, which NetOne management had intended to re-negotiate and pay it off, thus cleaning the Company’s balance sheet. NetOne management failed to get support from the current Board to undertake this exercise, yet the previous Board led by Dr C.D. Ndlovu, had given its full blessing and support.
• NetOne pioneered Mobile Money in Zimbabwe, providing financial services to the previously unbanked populace.
• In response to the need to preserve our environment, NetOne pioneered environmentally friendly base stations that maintain the beauty of our cities and tourist resort areas by providing towers that blend well with our Eco systems.
• NetOne is the only mobile network operator in Zimbabwe that has undertaken educational campaigns to allay public fears on perceived health risks from radiation from cell-phone towers.
• NetOne pioneered the provision of mobile telecommunication services to the rural areas of Zimbabwe, in line with Public Policy, under the realization that, as an arm of Government, we had to forego certain commercial considerations and avail our services to the marginalized communities.
• NetOne grew significant market share, which has been disproportionate to its capital investment, relative to its main competitor, i.e. $400million by NetOne vs $2billion by Econet to-date and yet market share is about 30.7% or 3.8 million subscribers for NetOne against 53.9% market share or 6.6 million subscribers for Econet and 15.4% market share or 1.9 million subscribers for Telecel, according to POTRAZ third quarterly sector performance report of 2015. It is paramount to note that this report alludes to the fact that whilst privately-owned companies dropped their market share, NetOne is the only telecoms operator in Zimbabwe to have gained market share of 2.4% during the period under review. These statistical results, independently published by POTRAZ, attest to the value created by NetOne management.
• NetOne is now an employer of choice as demonstrated by the fact during the recent so-called re-structuring of NetOne management, prospective job applicants were literally falling over one another to join NetOne. This is in striking contrast to the situation in the past, where employees were leaving the company in droves, despite all persuasive efforts by management for them to stay and turn NetOne into a National champion. I recall the statement made by the late vice-President, Joseph Msika at the time, when many Zimbabweans were leaving the country in search for ‘greener pastures’, when he said: ‘Why don’t you create your own greener pastures at home?’. We effectively created greener pastures at home, as NetOne is now an employer of choice, as the re-structuring exercise not only saw some of the former NetOne employees coming back to NetOne, but also Chartered Accountants, Lawyers, Enginneers and other professionals from various organizations trooping to join NetOne family, something that has been unprecedented.
• Following the Supreme Court landmark judgement in July 2015, NetOne is the only mobile operator that did not dismiss its employees on 3 months notice, thanks to the NetOne Management’s solid Human Resource Policies.
The above indisputable milestones were achieved by what the current Board Chairman calls ‘the former NetOne management’ without the current Board’s input, let alone the newly appointed management who only joined in October 2015, a period that is clearly outside the period reported by POTRAZ above. Thus, the current Board cannot take credit for these achievements. A lot more could have been achieved, had the Board Chairman not scuttled some of the key projects proposed by the so-called former NetOne management. Much of the year 2015 was not fully productive, due to the anxieties on the part of staff and management brought about by that hurried restructuring exercise, which was not preceded by any staff engagement, job evaluation and other allied processes that would normally precede such a process. Over and above that, there was a 30% cut in staff salaries by the Board to justify a bloated new management structure they had created. Even the World Bank has raised concerns on such a top heavy organisational structure. Notwithstanding all these set-backs, the above independent reports by POTRAZ on NetOne’s performance results in third quarter of 2015, are in stark contrast to the NetOne Board Chairman’s averments that there was no commercial acumen in the running of the business. This is a very serious shortcoming on the Board Chairman, as he fails to recognize that NetOne, being an arm of Government, carries certain non-commercial obligations which it must discharge, in order to support Government programmes in the sector. The Board Chairman, Mr Alex Marufu has even rebuked the China Exim Bank loan that was signed on the 25th August 2014, no doubt, after rigorous considerations on the part of the Government that you lead, Your Excellency and yet, Mr Marufu claims that it was ill-thought out, as contained in a copy of an e-mail in Annexure 1a attached hereto. This has been the most mind boggling aspect of this Board Chairman; completely devoid of the knowledge of the difficult path trodden by NetOne as outlined herein earlier. In fact, in his maiden presentation to the Minister in early 2015, he stated that the 1st August 2014, the date on which the current Board was appointed, marked the ‘Re-birth of NetOne’. This shows a total disregard to all previous efforts made towards building a success path for NetOne under very difficult circumstances and the callous wickedness of wanting to take credit for something he had no part in. This Chairman has continuously challenged Government policies, as will be shown later on the issue of Firstel. In my opinion, the whole Board lacks institutional memory as required in the Corporate Governance framework that was crafted recently. This situation was occasioned by the failure to appoint some of the Board members from the previous Board, to allow institutional memory to be passed on. This major handicap on the Board has been exacerbated by an overly powerful and arrogant Chairman, who bulldozes his way over the rest of the Board. Most of the controversial decisions by the Board, in most cases, would have come as ‘directives’ from the Minister through the Chairman and therefore thwart any meaningful Board debate and hence compromising the Board’s effectiveness in its oversight function. The decisions to undertake a forensic audit of NetOne and for the CEO of NetOne to be put on forced leave, were not Board decisions but directives from the Minister after resistance by the CEO to make un procedural payments to a bogus entity operating under the style, Megawatt Energy. In fact, the owner of Megawatt Energy, Mr Li Xiaodong, is a business partner with the Minister, as will be shown later in this document. On the forensic audit issue, the Chairman had attempted to get the Board to appoint a hand-picked forensic auditor in the name of BCA Forensic Auditors (Pvt) Ltd, the same auditors previously used by Ozias Bvute on Air Zimbabwe, the same Ozias Bvute, who had been heard commenting that ‘Kangai is troublesome, we must find a case for him’. (Tinoda kumutsvagira mhosva).
Going to the Board composition, it is also important to note that whilst the Minister did not appoint the current Board, his relationship with Mr Alex Marufu, goes back in time, before the appointment of the Board. Mr Marufu sold a top of the range BMW X5 model to the Minister some time back and they have maintained a long standing relationship which casts aspersions on the Board Chairman’s independence and objectivity when it comes to the Minister’s directives. It will be clear from the chronology of events later in this document, that the two have literally ganged together to push their hidden agenda in NetOne by supplanting NetOne management with their own select, linked to Mr Ozias Bvute of MetBank and also their relatives. Indeed, the Chairman in his much publicized Press Conference referred to NetOne management as the ‘former NetOne management’ before the forensic auditors had been appointed, let alone having undertaken the audit and presented their findings, clearly demonstrating that the forensic audit is an orchestrated plan to remove the NetOne management (Kutsvagirana mhosva kwaOzias Bvute).
Having provided this background Your Excellency, I now go into the chronological events leading to my forced leave as follows:
On the 31st December 2014, the Chairman of the Board, Mr Alex Marufu sent me a text message, stating that he was going to ‘destroy empires’ in NetOne and I was surprised by that message, as I was not aware of the existence of such ‘empires’. In January 2015, there began the talk of ‘restructuring of NetOne management’.
THE METBANK CONNECTION
1. In early 2015, after the appointment of the current Minister, the CEO was summoned to the Minister’s office, to find Mr Ozias Bvute of MetBank, with the Minister. Earlier on in 2012, NetOne had deposited some $700 000 of its cash with that bank and was now failing to withdraw from its account. Efforts to get MetBank to avail the funds had been exhausted until NetOne management decided to take legal action against MetBank for the recovery of the funds. The summoning of the NetOne CEO by the Minister to discuss this issue in the presence of Mr O Bvute, without any prior warning, was clearly intended on intimidating or cowering the CEO into accepting access of the money after a period of 3 years; and all this coming at a time when NetOne needs cash urgently for its development programmes. In fact, Mr Ozias Bvute was brazenly arrogant throughout the meeting, leaving both the Acting Permanent Secretary, Mr Cosmas Chigwamba and I perturbed as to why he carried that disposition. Despite this meeting which called for negotiations to resolve the matter, MetBank failed to come forward for those negotiations leaving NetOne with no other choice but to pursue the legal option in compelling MetBank to sign a ‘Deed of settlement’. This Deed provided for the repayment of the debt over 6 months, starting May 2015. However, the debt remains outstanding to date, some 10 months later. Annexure 1 shows the status of the MetBank debt to NetOne. After the Deed of settlement, Mr Bvute is reported saying ‘Kangai is troublesome, we must find a case for him’.
2. Interestingly, further developments as a result of the restructuring exercise, Mrs Sibusisiwe Ndhlovu, who was formerly employed by MetBank as an Executive Director, Retail Banking, was appointed by NetOne as Chief Financial Officer. It is the same Mrs Ndhlovu who has been carrying out some clandestine audits at NetOne and feeding the ‘findings’ to the Minister and the Chairman of the Board to broadcast in the press, without any regard to professional ethics expected of a Chartered Accountant. Whilst Mrs Ndhlovu excelled in the interview above all other candidates ( I also scored her high), unofficial complaints have indicated that the Board Chairman, single-handedly short-listed the candidates, and then availed interview questions to his candidates of choice. The unofficial complaints seem to gain support from my experience during Mrs Sibusisiwe Ndhlovu’s interview, wherein the Chairman asked how she would would handle a situation where she would be cast in between a Chairman who is a ‘bully’, according to his wife and a CEO who is a ‘donkey’. I was completely shocked and utterly disturbed by this apparent familiarity between an interviewee and the Board Chairman, let alone the vitriol and unwarranted attack on my person but I remained composed. Upon being appointed to the position, Mrs Ndhlovu went about conducting clandestine audits of NetOne and feeding the results to the Chairman and the Minister. These audit ‘findings’ have been publicized in the press, without first seeking verification with the Executive Management Committee, as would be normal practice for any audit. Her attitude since her appointment on 1st October 2015, has been that of insubordination towards her controlling officer, the Chief Executive Officer, CEO. Further to that, she contravened the Labour Relations Act, Section 18 by failing to disclose her expected date of delivery and failed to take the mandatory 21 days maternity leave prior to the expected delivery date of a child. Over all, she has exhibited an attitude of total disregard to the NetOne Executive Management Committee and reports directly to the Chairman. All this circumstantial evidence builds up to a confirmation of the unofficial complaints that the selection and interviews were stage-managed and the whole process manipulated to achieve a predetermined outcome, that is the appointment of individuals already known to the Chairman of the Board.
3. After the C- Level interviews in the restructuring of NetOne management, the former CEO of Telecel Zimbababwe was recommended for the position of Chief Operating Officer by Mr Alex Marufu, despite my objection to his appointment due to negative background information I had on him. Again the MetBank connection was apparent in this recommendation because Francis Mawindi is related to the MetBank owner. Mr Mawindi had also deposited Telecel monies in MetBank without Board approval and Telecel failed to withdraw the money, resulting in their failure to meet their licence obligations to POTRAZ. He was, however, unsuccessful in the security vetting process and I was thus vindicated.
OFFER LETTERS TO SELECTED CANDIDATES
4. On the 4th September 2015, the Chairman threatened the CEO with suspension and disciplinary proceedings for not making offer letters to candidates who had been selected to fill the positions, following the restructuring exercise and yet the candidates had not been security cleared by the President’s Department. Annexure 2 shows a copy of the letter, signed by the Deputy Chairman on behalf of the Chairman, who is based in South Africa, since August 2015. The hurried appointments of selected candidates without following the due process resulted in one of the candidates being appointed without proof of relevant qualifications. There was also no background checks with former employers of the candidates. This hurried approach can best be explained by an earlier comment by the Chairman in passing, that his appointment was not permanent and hence the restructure needed to be completed before he was possibly fired.
THE ZTE CONNECTION WITH MEGAWATT ENERGY
5. On the 21st May 2015, unbeknown to NetOne Management and Board, the Minister wrote a letter to Huawei advising them that he had appointed Megawatt Energy to re-negotiate the pricing of the NetOne-Huawei contract for the National Mobile Broad-Band (MBB) project. It is assumed that discussions and a subsequent contract to perform certain work had been agreed upon between the Minister and Megawatt Energy. A copy of the letter to Huawei is shown in Annexure 3 attached hereto. NetOne Management has neither seen a written Contract between the Ministry of ICTPC and Megawatt Energy nor the Terms of Reference for this assignment been availed to NetOne.
6. On the 30th October 2015, I was summoned to a meeting called for by the Minister at the Ministry’s Boardroom, along with the Deputy Chairman of the Board, and the then Finance Director. The meeting also included representatives of Huawei and a Company called Megawatt Energy, which company had been contracted by the Minister to undertake an audit on the pricing of the current Mobile Broad-Band (MBB) project, a project approved by the State Procurement Board. The implementation of the Project has been going on very well and is due for completion soon. At the meeting, the Minister indicated that the matter concerning the pricing of the MBB project was to be kept confidential, as its divulgence could scuttle the signing of agreements contemplated during the visit by the Chinese President in December 2015. The Minister emphasized that should the matter go into the public arena, the CEO and the Chief Technical Officer (CTO) of NetOne would have to resign. Annexure 4 shows a copy of the letter by Megawatt Energy outlining the issues discussed at the meeting of the 30th November 2015, together with an invoice in the amount of $4million presented for payment by NetOne to Megawatt Energy’s account in Mauritius. A copy of the invoice is attached hereto as Annexure 5. An earlier meeting had been held at the Ministry in mid-October 2015, where NetOne was represented by the Deputy Chairman of the Board, the Acting CEO on the Megawatt Energy issue.
7. The Minister requested NetOne to pay $4million to Megawatt Energy for their ‘consultancy services’ priced at $1million and a 10% success fee on $30 million. A check with Internationally reputable Telecommunication consulting companies like DETECON of Germany and SOFRECOM of France, priced the consulting work at $500 000 and $300 000, respectively!
8. A further meeting between Megawatt Energy and NetOne was arranged by the Chairman, Mr Alex Marufu on the 11th December 2015 to start at 09:00 am. Prior to that, a meeting was scheduled at 08:00 am for NetOne Management and Chairman to discuss the Megawatt Energy issue and to come up with a common strategy. It was at that meeting that I outlined the procedures that needed to be followed before such an external payment of $4 million could be approved by the Reserve Bank of Zimbabwe (RBZ) and it is at that point that the Chairman realized that the Minister had breached procedures and he then said that the ‘Board needed to protect the Minister’. He indeed proceeded to take certain actions to protect the Minister, as will be demonstrated by the events later on. The meeting with Megawatt Energy later on agreed that the parties would re-consider their positions by mid-January 2016.
9. Megawatt Energy on the 3rd February 2016, wrote to the Minister making a follow up of the payment of $4million and also insinuating that NetOne management did not want to do the payment. A copy of the letter is attached hereto as Annexure 6.
10. A meeting with Megawatt Energy, NetOne and Huawei was again arranged by the Minister to take place on the 11th February 2016.
11. In preparation for the 11th February 2016 meeting, the Chairman wrote an e-mail on the 6th February 2016, requesting among other things, whether procurement procedures had been followed in the Megawatt Energy issue and whether NetOne stood to get value out of the payment. I responded indicating that procurement procedures had not been followed in the selection of Megawatt Energy. I believe that what precipitated my suspension from NetOne by the Minister, is that, I stated in the e-mail that continued meetings with Megawatt Energy, would be deemed as ‘tacit approval’ for the arrangement to pay Megawatt Energy, as three meetings had already been held with Megawatt Energy and it would be difficult for NetOne to ‘wriggle out’ of that arrangement. Copies of those e-mails are attached hereto as Annexure 7 and 8, respectively. I also advised the Chairman of the Board, Mr Alex Marufu, to consult the two lawyers on the Board before responding to e-mails from the Daily News on the issue in order to protect NetOne’s interests against any claims by Megawatt Energy on the basis of our apparent ‘tacit approval’ of the Megawatt Energy un-procedural contract. A copy of that e-mail is attached hereto as Annexure 9.
12. I believe that the Chairman forwarded those e-mails to the Minister, thereby triggering the Minister’s anger towards me. I could see the build up and simmering of anger and tension between my principal and I, but I continued with my stance of non-negotiating with Megawatt Energy for the above stated reasons. The most intriguing aspect of this deal was that there was no contract between NetOne and Megawatt Energy, there was also no Report of Findings to justify value to NetOne, and above all Huawei was non –committal to what Megawatt energy was presenting. In short, Huawei was submitting that they would give NetOne upgraded equipment, and yet this was already part of the requirements of the MBB project contract, hence adding no value to NetOne as per the Chairman’ s fears. Up to now I can not pin point exactly what I was being asked to pay for in this verbal gentlemen’s agreement. Maybe, if issues had been reduced to writing by both Megawatt Energy and Huawei Technologies, it could have helped the situation.
13. The meeting of the 11th February 2016 did take place but without the presence of Megawatt Energy and Huawei Technologies, as had been previously indicated.
14. During that meeting, the Minister indicated his displeasure with NetOne management and alleged that management had complained to the Office of the President and Cabinet that he was abusing NetOne facilities through a vehicle that had been availed to him by NetOne last year. He went on to state that the CEO must leave the operations of NetOne to the newly appointed Chief Operating Officer (COO), Mr Brian Mutandiro, who was only 11 days old in the Company. The CEO was to open up new networks in the DRC, Mozambique and South Sudan. He went on to state that he had the prerogative to direct the Board to fire the CEO. He left for what he said, ‘to attend another meeting at NSSA’, before the issues he had raised could be responded to. The Deputy Minister was left to chair the meeting.
15. The anger by the Minister ostensibly over the vehicle issue was simply a diversionary tactic, as NetOne management never made such a report to OPC over the vehicle. CIO officials came to NetOne and simply requested confirmation that we had provided the Minister with a vehicle and I confirmed, stating that it was done on the basis of a request letter from the Ministry’s Director of Finance. See Annexure 10.
16. As we left the venue of the meeting of the 11th February 2016, the Chairman, Mr Alex Marufu, approached me saying that the Minister was ‘livid’ with me over what he stated, I had reported to OPC, the fact that the Chairman was now based in South Africa. I never made such a report to OPC but was requested for confirmation by the CIO as to whether it was permissible in terms of the governing legislation for the Chairman of a State-Owned Entity like NetOne to be ordinarily resident outside Zimbabwe and I advised that the Company law which governs NetOne, allows for at least one director of a company to be ordinarily resident in Zimbabwe. It is not possible that the Minister could have been ‘livid’ over a matter which had been in the public domain since August 2015. This was clearly a diversionary tactic from the real issue of concern to the Minister i.e. the Megawatt Energy scandal. The Chairman had already written to the Minister in September 2015, advising him of the fact that he was now resident in South Africa, as shown by the copy of letter attached hereto as Annexure 10a. The situation that the Chairman was now resident in South Africa, has been well known since August 2015, to the extent that the Board was last year requested to pass a resolution authorizing for his travel expenses to and from South Africa for NetOne issues, to be met by NetOne.
17. In my view, all this was aimed at diverting attention from the fact that the real reason why the Minister was angry with the CEO, was on the Megawatt Energy issue, particularly the resistance by the CEO to make a payment for a transaction that was clearly un-procedural and not adding value to NetOne. The $4million payment to Megawatt Energy would be treated as an expense in NetOne’s books of accounts, resulting in losses for the Company.
18. The following day, 12th February 2016, a front page article with the headline ‘Scandals cost NetOne millions‘ appeared in the Herald newspaper and on that same day, the Chairman called for an Emergency Board meeting to discuss the newspaper article. Annexure 11 hereto, shows a copy of the Herald newspaper article. It is at that Emergency Board meeting that Chairman requested the Board to suspend the CEO on the basis of the Herald newspaper article. The Board refused. The CEO was never requested by the Chairman to give his side of the story on the Herald newspaper article. In fact, the Chairman requested the CEO and Company Secretary to leave the Board meeting, when the Herald newspaper publication came up for discussion. A forensic auditor, BCA previously used by Ozias Bvute on Air Zimbabwe, had been brought by the Chairman to the meeting, to be appointed as the forensic auditor for NetOne. The MetBank connection is clear from all this. The Board refused the appointment, choosing instead, to let the State Procurement Board (SPB) undertake the selection. The matter was later referred to the Comptroller and Auditor General, as SPB indicated that the Audit function is not under their purview.
19. A further article was published by the Herald newspaper on the 11th March 2016, as a continuation of the same assault on NetOne management by my principals. An Emergency Board meeting was again called by the Chairman on the 14th March 2016, at which meeting the Chairman told the Board that the Minister had directed the Board to suspend the CEO, to pave way for a forensic audit, arising from the Herald newspaper publication. The Board succumbed and finally decided to put the CEO on forced leave for 3 months. During that period, the CEO was not to communicate with the Office of the President and Cabinet (OPC), Central Intelligence Organisation (CIO) or any Government official concerning the forced leave. I found that restriction ridiculous, as it was designed to put the Board of NetOne above the Government as shareholder and even the Presidium; and was clearly unconstitutional in its attempt to gag me in that manner. Three days later, common sense must have prevailed or someone must have queried that provision and it was rescinded.
20. The Chairman has been frustrating efforts to raise additional funding from China for the capitalization of NetOne and implementation of critical projects that would see diversification of revenue sources, whilst providing improved services and security to the Cities of Harare and Bulawayo, initially, through implementation of SMART Cities technologies. Econet obtained an additional funding of $500million in December 2015, following the Chinese President’s visit and this effectively would bring Econet’s total investment in Zimbabwe to almost $2billion, whilst NetOne is still below $400 million.
21. The recent restructuring exercise of NetOne has not been transparent at all. The short-listing of candidates was done by the Chairman of the Board, Mr Alex Marufu, alone, most likely in consultation with the Minister, a clear case of jobs for their people. The Chief Operating Officer, recruited recently, resigned from his position as POTRAZ Board Chairman, to take up the position at NetOne, despite the fact that he did not meet the minimum qualifications specified for the position. The vacancy notice attached hereto as Annexure 12 had a minimum qualification requirement of a BSc degree in Information Systems, Computer Science, Electronic Engineering, Telecommunications Engineering or equivalent. He doesn’t hold any of those qualifications as shown by his curriculum vitae, attached hereto as Annexure 13. He has already been made to act as CEO, whilst still on probation. He is related to the Minister through marriage. Mr Mutandiro was previously fired by the PTC Board for incompetency.
22. The former Marketing and Sales Director at NetOne was last year requested by the Minister to remove Jericho as the Advertising Agent and instead appoint, Visual Point Contact Group (VPCG), whose CEO, Mr Reg Makuchete, is close to the Minister.
23. A company called Blue Sea Technologies, of which the Minister, according to a copy of the draft Shareholder Agreement, is a concealed shareholder through a proxy, wanted to undertake a joint venture project with NetOne for providing an aggregator platform for vending ZESA pre-paid electricity vouchers but this was rejected by the Finance and Audit Committee of the Board as they saw no merit in undertaking the project as a joint venture, when NetOne could do it on its own. Blue Sea Technologies later took the project to TelOne, with the support of the Minister and is currently under consideration by the State Procurement Board. The project sponsors for Blue Sea Technologies had previously approached the NetOne CEO and offered him shares in the company but concealed through a proxy and I refused. A copy of the draft Shareholder Agreement for Blue Sea Technologies is attached hereto as Annexure 14. The list of registered shareholders from the Registrar of Companies for Blue Sea Technologies is attached hereto as Annexure 15. A comparison of the names on that list with those on the Draft Shareholder’s Agreement in Annexure 14, would indicate that Tendai Gambe and Raphael Tirivanhu are proxy shareholders for ‘Supa’ and ‘Reward’. As I refused to be part of that arrangement, it can only mean that the above-mentioned individuals are shareholder proxies for ‘Supa’ and someone else. Tendai Gambe is most likely the proxy shareholder for ‘Supa’, the two being in the same media industry.
24. The Chairman, Mr Marufu has made serious allegations about the ‘former NetOne management’ as siphoning NetOne money through Firstel, a former Service Provider of NetOne, yet the so-called former NetOne management obtained indirect shareholding in Firstel, through a company called Fonedex in year 2005. This was facilitated by a Government appointed Administrator, Mr Afaras Gwaradzimba to restructure companies under SMM Holdings and the acquisition of the Fonedex shares by Management was duly declared to the NetOne Board in year 2005. The details on the Firstel shares are explained in Annexure 16 hereto.
25. ZTE is linked to Megawatt Energy: The NetOne Mobile Broad-Band project suffered a delay of almost 2 years due to various sabotages associated with ZTE. They had, for instance fronted a Zimbabwean businessman in the name of Tafadzwa Muguti, to lodge a frivolous appeal to the Administrative Court against tender award to Huawei Technologies for the MBB project, which lawsuit caused delays in finalizing the project. ZTE is a Chinese rival telecommunications equipment manufacturer to Huawei Technologies. It turns out that the Chief Executive Officer of Megawatt Energy, Mr Li Xiadong worked for ZTE. Please see Annexure 21. ZTE is already under probe by the Government of Zimbabwe on the Solar Tender for ZESA. The Sunday Mail Business, 27th March 2016 article entitled ZTE solar tender ‘under probe’.
26. Megawatt Energy was hand picked by the Minister to audit Huawei’s pricing for the NetOne MBB project, a clear case of getting Huawei’s rival to audit them. Megawatt Energy did not supply NetOne with a report detailing how they arrived at the so-called saving of $31 million. Without such a detailed report, it is impossible to determine the authenticity or otherwise of that so-called saving of US$31 million. As indicated earlier, the price for their ‘consultancy fees’ at $4million is 8 times higher than the fees quoted by DETECON at $500 000, whilst SOFRECOM’s quoted fees were only $300 000. Furthermore, the Minister has a South African registered Company, trading as Blue Nightingale Trading. This company jointly owns a property in South Africa bought at a cash price of 4.5million Rands, with three of Mr Li Xiaodong’s companies, namely C SEEC South Africa, LXD Group and Megawatt Energy PTY Ltd. Incidentally, Mr Li Xiadong has 19 companies registered in South Africa. The cash purchase of a property at such value, raise issues of money laundering. Please see Annexures 17, 18 and 19 respectively. I regret that the copies are not very clear.
27. Megawatt Energy had also been unleashed on TelOne to undertake a similar ‘audit’ on the recently signed contract with Huawei Technologies. The Minister only backed off after seeing the NetOne management resistance to pay that bogus entity.
28. In January 2015, Mr Li Xiaodong of Megawatt Energy had also been proposed by the Minister to be an intermediary between Zimposts and Union Pay of China in the negotiations held in China to introduce the Union Pay system in Zimbabwe, but Union Pay refused as they saw no value from that proposed arrangement of an intermediary, when they could deal directly with Zimposts.
Conclusion:
In conclusion, the proposed forensic audit at NetOne is a witch-hunt, coming as it does, after my principals hit a brick wall in trying to coerce management to make an illegal and un-procedural payment to Megawatt Energy and I turned down their offer for shares in Blue Sea Technologies through a proxy shareholder arrangement. It is clearly meant to victimize and to hit back at the CEO for standing his ground and provide them with an excuse to fire him and bring the Minister’s proxies to take over the affairs of the Company and direct various projects to Companies in which they have an interest, like Blue Sea Technologies and Megawatt Energy.
When it became clear that I was not budging on the Megawatt Energy payment, a barrage of defamatory articles attacking my person have found themselves in the press. On being asked to ‘respond’ to the newspaper articles, the Chairman of the Board has made reference to a forensic audit that is underway but with the help of the newly appointed CFO, has not spared a chance to make pronouncements on certain findings by the CFO. It then brings to question and casts aspersions on the objectivity and more, the purpose of this so called ‘forensic audit’ whose findings are already making headlines before it has begun. The recent press statement by the Chairman of the Board, Mr Alex Marufu, only confirms that the forensic audit results are a foregone conclusion. When one considers the circumstances under which NetOne has been operating since its inception, its performance has actually been exceptional. NetOne has over the years, suffered from under-capitalisation, flight of skilled manpower, the impact of the illegal sanctions and yet with relatively much less investment, it holds significant market share. The recent press statements attributed to the Minister are either an indication of lack of appreciation of the NetOne business environment or an attempt to paint a negative perception of NetOne management to achieve his goal of firing the CEO and other key members of management and supplanting them with his proxies. The CEO is effectively being punished for standing in the way between Megawatt Energy and the $4 million, which clearly is intended to be shared between Mr Li Xiaodong and the Minister, given their irrefutable business partnership through joint ownership of a property in Woodmead, Johannesburg, South Africa.
If the Minister was willing to have me as part of a shareholding in Blue Sea Technology as per the attached proposed shareholders agreement, what has changed so much to warrant my venomous attack in the paper and my ejection from NetOne in the manner I was, solely at the behest of a newspaper article? Further more, it is actually unprecedented that based on a newspaper article an employee can be sent on forced leave, without even being given the opportunity to respond. It brings to question the basis for finding such authority in a newspaper article and whether the person who put the article in the newspaper in the first place and the person acting upon it so authoritatively, is not one and the same. It is unimaginable indeed that a major decision like that can be taken based on a newspaper article founded on an ‘anonymous source’. The convenient presence in Zimbabwe by the Chairman, Mr Alex Marufu, who is supposed to be based in South Africa, at each time the articles on NetOne appeared in the Herald newspaper, to be immediately followed by an Emergency Board meeting, supports the belief that the Minister and the Chairman of the Board, are the ones who placed the newspaper stories on NetOne. In fact, the whole saga started when the Herald published an article on the 11th February 2015 entitled ‘Chinese firms ‘fleece’ parastatals. The same people planted that story in the Herald, much the same way they did with the 12th February 2016 and 11th March 2016 publications in the Herald. The whole thing was a plan to force a ‘re-negotiation’ of the Huawei MBB contract and benefit themselves through ‘consultancy fees’ to be paid to that bogus Megawatt Energy company, fronted by Mr Li Xiaodong, a business partner with the Minister. Annexure 20 shows Mr Li Xiaodong’s details.
Your Excellency, the issues surrounding the whole ‘NetOne saga’, cannot be untangled from the proposed forensic audit. Accordingly, Your Excellency, I respectfully request that a Commission of Inquiry be set up urgently to look into all the above issues, as the proposed forensic audit is a witch hunt, a fight back against those standing in the way of corrupt activities. That forensic audit indeed, is a fight back, as former Zimbabwe Anti-Corruption Commission spokesman, Goodwill Shana once stated: ‘Corruption, when it is embedded, strikes back and it happens everywhere in the world. Where there are cartels or cabals, especially when they feel cornered and at risk, they don’t go down quietly, they fight back’.
Your Excellency, I have devoted my entire career to serving the former PTC and now NetOne spanning close to 35 years for the development of telecommunication and ICT services to the people of Zimbabwe and indeed, visitors to our beautiful country.
Yours faithfully,
Reward Kangai
Like this:
Like Loading...
By Dr Masimba Mavaza| Keith Guzah has engaged the act of saying insulting or unfair things about someone else, especially to damage that person’s reputation:
A woman whose hand had to be amputated following a crocodile attack while canoeing on the Zambezi River five days before her wedding last week, has been discharged from hospital.
