First it was Philip Chiyangwa. Then came James Makamba. Followed by Jane Mutasa. Some might say these are small fry in ZANU-PF. The big fish are getting away. But the amounts involved are not small. Chiyangwa, Makamba and Mutasa are not small either, unless one says only those in Mugabe’s cabinet are the big fish.
Chiyangwa is party chairman of Mashonaland West, one of the party’s most powerful constituencies after Mashonaland Central. Although most people dislike him because of his arrogance and showing off Chiyangwa has been instrumental in getting back some seats lost to the Movement for Democratic Change in the 2000 Parliamentary elections, such as the Kadoma urban seat. He is also a member of the party’s central committee.
Makamba is former chairman of Mashonaland Central, the ZANU-PF stronghold. He is a member of the party central committee. Once considered to be former army commander Solomon Mujuru’s front man, Makamba built a business empire of his own after Mujuru retired from the army. He is the majority shareholder in the third mobile cellular network Telecel.
Though an indigenous consortium, the Empowerment Consortium, owns 40 percent of Telecel, Makamba’s Kestrel Corporation owns 82 percent of the local shares. Other members of the Empowerment Corporation are the Zimbabwe Farmers Union representing small-scale farmers, the National Miners Association of Zimbabwe representing small-scale miners, Magamba eChimurenga representing war veterans, Integrated Engineering Group owned by Leo Mugabe, President Mugabe’s nephew, and the Indigenous Business Women’s Organisation represented by Jane Mutasa.
Jane Mutasa is one of the most outspoken businesswomen and is a senior member of the ruling party. She heads the indigenous businesswomen’s organisation.
People are only calling the three small fry because corruption is reported to be rife in Zimbabwe and reportedly involves top political as well as police and military leaders.
Observers say the government had to start somewhere. Chiyangwa, for example, is perceived, and perhaps believed himself, to be untouchable. Which is what landed him in trouble after he threatened police officers who were investigating his involvement in the ENG saga in which investors had been swindled out of $61 billion.
His arrest on January 10 sent the right signal. No one was above the law. People started asking themselves: “If Chiyangwa could be arrested and denied bail, how about those with no political connections?”
The arrest of Makamba was even more devastating. Just a couple of days before his arrest vice-President Joseph Msika had officially opened his supermarket and showered Makamba with praise as an outstanding new farmer and businessman.
Mugabe sounded the warning on corruption more than a month before the present financial scandal unravelled first in his state of the nation address on December 2 and at the party annual conference in Masvingo on December 6. Mugabe said he was going to crack down on corruption and would want to find out how some of the party cadres had acquired so much wealth in such a short time.
Most people brushed off Mugabe’s comments as the old rhetoric, but cracks opened when new central bank governor, Gideon Gono, announced his five-year monetary policy on 18 December in which he clamped down on the financial sector and insisted that asset management companies should invest 40 percent of their portfolios into the productive sector.
The sector had been dabbling in speculative investments. ENG, which was one of the fastest growing indigenous asset management companies, managed by 28 to 32-year olds, was the first to collapse when it could not raise depositors funds amounting to $61 billion. The figure has since gone up to $74 billion. Two directors Nyasha Watyoka (28) and Gilbert Mponda (32)were arrested.
The central bank withdrew the licence of ENG subsidiary Century Discount House. There was panic in the market. Too many companies, financial institutions, organisations and individuals were exposed to ENG.
Gono stood his ground. Several banks, mostly the indigenous-owned banks faced a financial crisis and imminent collapse. Schools, companies and established banks began refusing cheques from mostly indigenous banks such as: Trust, Century, First Bank, Metropolitan, Royal, Barbican and Time. Even the government-owned Agribank was also affected.
Gono came to their rescue through his Troubled Banks Fund but this was under strict conditions. Directors had to step down. The organisational structure under which most banks were under a holding company had to be changed. Management had to be changed.
The first major casualty was William Nyemba who had won several awards for his management skills. He founded Trust Bank and saw it blossom into the fastest growing financial institution whose assets has ballooned from $80 billion to over $800 billion.
Trust, which is listed on the ZSE, together with Century, were suspended from the stock market. Century Holdings was fighting a largely credibility crisis because it no longer owned Century Discount House as it has sold it to ENG for $1.5 billion but ENG had not yet changed the discount house’s name.
There was also wide speculation that ENG had been working on taking over Century Holdings and had acquired a controlling interest. But Century said ENG had only acquired a 16.8 percent stake through its various investment vehicles.
First Mutual which was demutualised last year and listed on the stock exchange was also suspended from the ZSE. It is Trust Bank’s strategic partner and holds 25 percent of Trust’s shareholding. The company was also heavily exposed to ENG. It had invested $39.8 billion with ENG, the principal amount being $29.6 billion with $10.2 billion being interest.
Three First Mutual executives, managing director Godfrey Jowa, treasury executive Simba Dodzo, and finance executive Oliver Kamudimu were arrested in connection with the investment into ENG . Though they were charged with siphoning out $42 billion, they are currently on remand.
Chiyangwa is reported to be a shareholder in First Mutual and was linked to the arrested ENG directors. Most people believe the directors are too young to be controlling such a big operation. They believe they were fronts for senior politicians.
Initially some cars that had been bought by the ENG directors were found at Chiyangwa’s home. He tried to interfere with police when they came to impound the cars claiming he was holding them on behalf of shareholders.
ENG directors had been investing clients’ cash into luxury vehicles for speculative purposes. Police have so far recovered 37 vehicles but it turned out that 13 of the poshiest vehicles were stolen from South Africa. They have to be returned to that country and therefore cannot be sold to pay back some of the investors.
ENG liquidator Reggie Saruchera said ENG had liabilities totalling $120 billion and assets amounting to only $63 billion.
ENG is also reported to have externalised US$300 700 as well as 19 000 pounds sterling. The directors were said to have opened accounts in South Africa, United Kingdom and the United States. The state has ordered that these accounts be frozen.
The externalisation of money, including Zimbabwe dollars, which the country ran short of for five months last year creating a crisis that sent jitters in Mugabe’s government as at one time it seemed to have run out of ideas on how to solve the local cash crisis now seems to be eclipsing the ENG saga.
And that is where James Makamba comes in. The arrest of Makamba on February 9 opened a Pandora’s box. According to initial police investigations Makamba externalised US$716 000, together with 63 650 pounds sterling, R1.8 million and $1.1 billion. His company Telecel is said to have externalised 1050 pounds sterling, R2.1 million and $1.5 billion.
Whispers say Makamba is being incarcerated because the figure he is said to have externalised runs into millions. Some say it is enough to meet the country’s fuel requirements for nearly six months. The country has been virtually dry for nearly two years.
Under the tough new laws promulgated by President Mugabe on 13 February, anyone charged with corruption, money laundering, laundering proceeds of crime, externalisation of foreign currency whether directly or through transfer pricing, sale or removal of products controlled under the Grain Marketing Board Act ( maize and wheat), unauthorised disposal or dealing in gold or precious stones, or contravening the exchange control regulations, may be detained for seven days before appearing in court.
Previously a person could not be detained by police for more than 48 hours. A judge or magistrate can order further detention for 21 days if he or she is satisfied there are prima facie grounds for the charge. No court shall admit such a person to bail for 14 days from the date the further detention is issued.
The regulations allowing the state to detain people for up to a month without trial have incensed human rights activists as they believe this can be used against Mugabe’s opponents. The directors of NMB Bank, formerly National Merchant Bank, Julius Makoni, James Mushore, Otto Chekeche and Francis Zimuto have disappeared following allegations that they externalised $30 billion.
The net is closing in. The Cotton Company of Zimbabwe is being investigated for externalising funds and so are a number of companies and individuals including the Treger group of companies in which ZANU-PF had a shareholding.
Jane Mutasa was the first person to be convicted under the new regulations of dealing in foreign currency. She is said to have changed US$10 400 on the black market. She sold the money to Telecel, where she sits on the board, at the black market rate of $6 000. She sold US$2 000 on 13 November last year and US$8 400 on 6 January this year.
What makes the case a bit bizarre is that according to her lawyer Walter Chimwaradze, Mutasa had been paid the money by Telecel as board fees. Mutasa pleaded guilt but the magistrate referred her to a higher court for sentence. She is due to be sentenced on April 29.
What makes the cases of Chiyangwa, Makamba and Mutasa interesting is how they will or may be viewed by the two key players, Gideon Gono as governor of the central bank and Mugabe as president.
Gono is clearly on a mission to clean up the mess and turnaround the country’s economy. And he was blunt when he took on the post. In a crisis, he said, at times you have to be dictatorial. He has also said failure was not an option. Given his way, he does not care who goes.
But sources say Gono is not being vindictive. His primary aim is to get back money that had been siphoned out of the central bank system back into the system. He is therefore prepared to turn a blind eye if the culprits give him back the money they stashed away. And reports say people and companies are doing so.
Gono’s operation is more transparent. He has, for example, started publishing names of all companies that have not surrendered their exports proceeds on time and the action that is being taken, whether they are negotiating with the central bank or they have been referred to the police or the national economic conduct inspectorate.
The public exposure seems to be working. At the end of January companies had not surrendered US$174.6 million. By the end of February this was down to $132.6 million. It may not be much but it is a start. Gono seems to have made it a point that he is going to publish the list of culprits every month end.
Gono’s crackdown has not endeared him with those who were making money. There has already been a report that some people were plotting to discredit him by claiming that he gave $20 million to the MDC ahead of the 2002 presidential elections when he was chief executive of the Jewel Bank. They also claimed Gono had sponsored journalists from the private media including those from The Daily News, Jonathan Moyo and Mugabe’s archenemy.
Some are trying to play the indigenisation card. The financial sector had been hailed as one of the success stories of indigenisation. Now everything is crumbling. Some people are therefore claiming that Gono’s purge is destroying indigenisation.
Indeed indigenous banks had cracked the financial markets. A study last year showed that established banks such as Standard Chartered, Barclays and Jewel Bank in which South Africa’s Absa Bank is the majority shareholder, only controlled 52 percent of the market.
Barclays’ market had dropped from 25 to 19 percent. Standard Chartered was 5 down to 18 percent. Jewel Bank was down 2 to 15 percent. Zimbank had gained 2 to 10 percent, Trust 3 to 8 percent, Kingdom was at 7 percent, NMB at 7 percent, Stanbic at 7percent, Century at 3 percent, Agribank at 2 percent, Time at 1 percent, and Metropolitan at 0.6 percent.
Mugabe’s agenda on the other hand is not so clear. Indeed he wants to cleanse the country before he retires. But people are asking, how far he can go? Can he really keep his word that everyone would be brought to book regardless of their political status?
Some observers say people are underestimating Mugabe’s resolve. He is determined to get rid of anyone who has been destroying the economy because as far as he is concerned these people were trying to “overthrow him”.
Mugabe has demonstrated that he has no mercy on anyone who tries to pull him down. No one knows this better than Grace’s cousin (brother) Takaruza Lazarus Marufu who was jailed for stealing $12 000 at Mugabe’s wedding with Grace. Reports say Mugabe made sure no one employed Lazarus after his release.
Mugabe still has four years in office, but next year’s elections are critical. He wants to make sure ZANU-PF wins them so that he can retire quietly assured no one will be after him. Unlike previous speculation about succession, this year is crucial because the party will be holding its five-year congress at which leadership and even the party constitution can be changed. The annual conferences are just review conferences.
This year’s congress provides a unique opportunity for Mugabe to step down as party leader. He could remain State president. This would allow him to groom his successor by letting the new party leader dictate policy and run the government from behind the scenes.
This would allow the new party leader to build his own constituency over three years and with the present economic reforms which should see inflation down to single digits by the end of Mugabe’s term of office, Mugabe’s successor could easily win, especially if the new era is accompanied by greater political tolerance and lesser harassment of people with different opinions. Some people believe that the very indication that Mugabe will be on his way out could assure ZANU-PF another victory.
There could be a crisis within ZANU-PF if Mugabe does not step down as party leader this year. It will be more difficult to change things as the next congress would be in 2009, a year after his current term of office has ended. Mugabe himself has pointed out that this is his last term. The only other option would be to hold a special congress in between.
Mugabe could therefore use the current purge on corrupt leaders to weed out those lieutenants he no longer trusts and leave his preferred successor with no serious challengers. The current purge has actually strengthened his position as he will have something on almost everyone.
Though he is disliked within the party, Emmerson Mnangagwa is increasingly becoming the front-runner, that is, if he survives the current purge. Mnangagwa has slowly been sneaking in his people into the party leadership. Mashonaland West chairman Phillip Chiyangwa is said to be his man.
Mnangagwa has a lot of clout on all former military leaders. This should give him another advantage as Mugabe has appointed military people into key positions including the chairman of Masvingo( Daniel Shumba), the governor of Manicaland (Mike Nyambuya).
Mnangagwa tried to sneak in his protege Mutumwa Mawere as chairman of Masvingo but Mawere declined. Mawere later made a terrible blunder when he told the media that he was not even a member of the ruling party. This is said to have incensed Mnangagwa as well as Mugabe himself as Mawere is reported to have benefitted tremendously from the indigenisation programme which is meant really for loyalists first.
Mnangagwa also failed to sneak in Andrew Langa as chairman of Matebeleland South. He lost to Lloyd Siyoka after word spread that Langa was Mnangagwa’s man. Mnangagwa is one of the most hated men in Matebeleland because of his role in the massacre of thousands of Ndebeles during the first decade of independence.
But he had a major coup when Jabulani Sibanda was elected national chairman of the War Veterans Association, the association which delivered the 2000 and 2002 elections to Mugabe. Sibanda is said to be Mnangagwa’s man.
The young war veteran is very popular among the youths but is hated by the ZAPU old guard because of his forthrightness. Sibanda could deliver for Mnangagwa. He gets his facts right and can easily win an election if he receives the full backing of his deputy Joseph Chinotimba, the self-proclaimed commander of farm invasions.
Chinotimba bulldozes his way into anything. He even managed to get his way to the African Cup of Nations in Tunisia.
Whispers say though Mnangagwa is being investigated for corruption, he is likely to get away with it because of his clout in the central intelligence organisation. The United Nations failed to get him prosecuted for his dealings in the Congo. He can only be prosecuted at home if Mugabe gives the go-ahead.
In fact there appears to be no serious challengers for Mnangagwa at the moment. Lately there have been reports that former defence forces chief Vitalis Zvinavashe was aspiring for political office and was eyeing the post of vice-president.
Zvinavashe is in Mnangagwa’s camp and there is no way he would eclipse Mnangagwa. Some analysts believe the reports could have been engineered by Mnangagwa to test waters. He probably wanted to put pressure on Mugabe to name his successor or to get the people’s opinions about his own position.