Businessman sucked into $6m NSSA scam

20 Dec, 2015 - 04:12 0 Views

The Sunday News

PROMINENT businessman Mr David Govere (pictured) allegedly used his position and influence in the National Social Security Authority (NSSA) board to prejudice the organisation of over $6 million in structured loan and money market deals.
NSSA is a parastatal established through an Act of Parliament which is the NSSA Act Chapter 17:04 whose main mandate is to provide social security scheme for the provision of benefits to or of all employees or such classes of employees as may be specified in the notice. After collection of contributions, NSSA invests the pooled funds in shares and equity market, money market and real estate.

A few months ago, the authority sacked five of its executives amid revelations that they were lining up criminal charges against former general manager Mr James Matiza, and directors Mr Shadreck Vera (investments), Mr Patrick Mupani (finance), Mr Tendai Mafunda (corporate services) and Mr Bright Chidyagwai (ICT), on allegations of corruption and mismanagement.

The organisation now has a new board. In the latest development, it is alleged Mr Govere — who is also a prominent economist — used his position as a NSSA board member and chairman of the board’s Investment committee between 2008 and 2009 to unscrupulously advance structured loan deals valued at $6,58 million to companies which he owned.

Structured loan deals are just like other money market deals with the exception that these are based on negotiating, sharing the proceeds between the bank representing the corporate customer, which needs the funding and NSSA that provides the funds.

Banks write requisitions to NSSA on behalf of different corporate customers who are in need of funding being working capital or capitalising funding. This is because NSSA does not extend direct funding to any company.

This was uncovered by a National Economic Conduct Inspectorate (NECI) forensic audit report that was instituted by the Ministry of Public Service, Labour and Social Welfare to look at allegations levelled against NSSA and its senior directors and management.

Mr Govere allegedly saw his company, Harambe Holdings being awarded various loan facilities, with one worth $3,58 million being classified by Reserve Bank of Zimbabwe examiners as a loss, meaning its recovery was doubtful despite being secured by a first mortgage bond on a property through guarantees by another of Mr Govere’s companies, Medworth Investments.

Harambe Holdings also owns the now defunct Downing’s Bakery which got a $1,5 million loan.
“Request for capital funding for this group of companies (Harambe) was also presented by Interfin Merchant Bank. The facility amount was $ 1,5 million with a 90 day tenor at 2,5 percent flat payable every 30 days.

“What makes interesting reading is that Mr C Makoni, the chief economist at NSSA queried on 31 July 2009 why for the same deal and same industry NSSA was to get 2,5 percent flat on Harambe yet Lobels with FBC Bank had been charged 3 percent. He thus proposed for NSSA to seek more information on Harambe, especially on the security which was felt to be less favourable,” reads the audit report.

The audit report further states that by virtue of Mr Govere’s portfolio at NSSA, he was in a favourable position as to know of the existence of the structured facility and to use his influence to access it.

“His competitor, Lobels had accessed the same facility on a three percent per month rate of interest. Both Interfin Merchant Bank and Mr Govere could be construed to have attempted to use the latter’s influence and position to land a deal favourable to their clients.

“While Mr Vera was alert to the interest rate disparity for players in the same industry, and brought this up, they should not have signed the term sheet prior to effecting the changes as this could have brought up legal challenges had Interfin insisted on the initial term sheet,” reads the report.

In another scam, Tacoola Beverages which is wholly owned by Harambe Holdings, was presented as “a diversified group of companies owned 70 percent by Noczim and 30 percent by management.”

“How Noczim could own 70 percent in Tacoola is baffling. The general manager in his comments stated that care though should be taken to make sure that NSSA is not seen to favour one group of companies using the reason that the owner is a board member.

“It was apparent that NSSA had already approved a second facility to the same player who exercised considerable influence over the strategic thrust on how the authority’s funds were to be invested. Not only is Mr Govere just a board member but is the chairman of the Investments Board Committee,” reads the report.

The audit further questions the reason why no one at NSSA had  raised a query on the alleged 70 percent ownership of Harambe by Noczim yet it was a known fact that Harambe was owned by Mr Govere.

In another instance, Harambe Holdings got a $3,58 million loan through Interfin bank; the loan was later classified as a loss, meaning its recovery was now doubtful.

“This loan was classified by RBZ examiners as a loss, meaning its recovery is doubtful despite being secured by a first mortgage bond on a property through guarantees by another of Mr Govere’s companies, Medworth Investments.

“What is interesting about this loan is that Mr Govere is a member of the same committee that presided over recommendations for the placement of the $16 million in deposits that NSSA eventually lost upon Interfin’s demise,” reads the report.

The investigations against NSSA were facilitated after the Ministry of Public Service, Labour and Social Welfare got receipt of information to the effect that at NSSA there was alleged massive fraud, corruption and abuse of power.

Efforts to get a comment from Mr Govere were fruitless. However, Public Service, Labour and Social Welfare Minister Cde Prisca Mupfumira said it was not for her ministry to intervene but all due diligence will be followed in handling the results of the forensic audit.

“What I can say is that every due diligence will be followed in handling the recommendations of that forensic audit,” said Minister Mupfumira.

Upon the proposed prosecution of the five NSSA executives, NSSA board chair Mr Robin Vela said: “To win back the confidence of members and the public, NSSA must hold itself up to the highest standards of corporate governance as outlined in the National Governance Code. There is a desperate need for realignment and restructuring of the organisation. For us, what’s important is not individuals; it’s all about the organisation. All we want is to give pensioners a living pension.”

This is not the first time NSSA was investigated; other law enforcement agencies such as Anti-Corruption Commission, Zimbabwe Revenue Authority (Zimra) and the office of the Comptroller and Auditor-General had previous done inquiries into its affairs.

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