US$130m CSC deal collapses into asset stripping

The NewsHawks

The  US$130 million Boustead Beef deal to take over the now defunct state-owned Cold Storage Company (CSC) has deteriorated into an asset-stripping scandal in which purported investors approved by cabinet have delivered nothing, but gained huge residual value.

This comes as the Joint Operations Command (Joc), which brings together police, army and intelligence chiefs, has been drawn into the controversy over the deal. Joc, through its Bulawayo structure, tried to visit the project, but was blocked by the new owners who claim the CSC is now private property.

After promising in 2019 to invest at least US$130m over five years, Boustead Beef, a British-registered shelf company with a nominal balance sheet of £1, has invested little into the operation despite seizing control of its vast assets countrywide – with staggering salvage value – only to collect rentals from the properties without injecting capital.

The meat processor’s properties now being leveraged for borrowings and rentals include large farms and cattle ranches, houses, abattoirs, and distribution centres dotted around the country. This has put the CSC properties at risk of being sold off separately for profit for equity investors who have put nothing into the deal – asset-stripping – since they are now deemed as private belongings.

Despite its US$42.5 million debt, CSC assets still have massive latent or residual value individually.

After cabinet made all the noises about the deal, three years down the line the CSC is still mothballed, with the investors having injected little or no capital despite controlling the company’s assets and collecting rentals.

This galvanised government officials, particularly in Bulawayo where the company is headquartered, into action to intervene. Authorities have initiated an investigation under Joc to establish whether a major state asset like CSC has been sold off for a song, or can still be revived.

CSC corporate rescue practitioner Vonani Majoko said Boustead Beef has been collecting rentals from properties, but without capitalising the business.

The looting of the CSC forced Bulawayo minister of State for Provincial Affairs and Devolution Judith Ncube and Joc to set up an inter-ministerial team to the investigate goings-on at the company.

However, the Joc team was denied entry into some sections of CSC by investor Nick Havercroft and his team.

“Pursuant to the Joc Taskforce team appointment on the 9th May 2022 after Joc was briefed by the corporate rescue practitioner, the taskforce team undertook to complete its mandate on Thursday 19th May by visiting the CSC facility,” reads a report prepared by Cornelio M Sunduza, a Joc team member.

“The team initially visited the canning factory and successfully completed its assessment of the facility to establish its readiness to resume operations. The conclusion is that the company is not ready to open as there has not been any repair of the equipment which in some important parts is showing signs of rust and the walls are showing strips of water leakage from the roof. The rest of the facility requires servicing and there are signs of electrical cable vandalism. 

“Over and above that, there are four major heavy duty boiler feed pumps which were stripped and removed from the boiler rooms and they need to be replaced. Four ammonia pumps were also stripped and removed from the cooling facility. Electrical cables are cut from two distribution centres.”

The country’s biggest meat processor was set to re-open last month under a new name, CSC-Boustead Beef Zimbabwe, but remains shut down while its new owners collect residual revenues.

According to the livestock joint farming concession agreement, in the first year Boustead was expected to invest US$45 million, with US$10 million set to be channelled towards the purchase of cattle to replenish the stock.

The other money was supposed to be invested into abattoir refurbishment, canning factory, plant equipment and working capital, among other areas.

Sunduza said despite its state of disrepair, CSC is still intact and could be revived if capital is injected.

The Joc team, which also visited Wet Blue Industries Tannery, said Havercroft was hostile to certain members of its delegation and blocked them from coming through to the facility.

“Havercroft didn’t want to see Zee Sibanda and Raphael Mapondera whom the JOC delegation drafted in as they had information on the whereabouts of some equipment and would help identify it,” Sunduza said.

Efforts to get a comment from Havercroft were fruitless.

In a bid to turnaround the CSC, the government signed an agreement for a joint-venture lease with Boustead Beef in March 2019 for 25 years. The authorities and state media branded the shelf company that has taken over the CSC a “British beef giant”.

Checks done at the time revealed the purported beef-processing behemoth was only an agriculture start-up company with a small balance sheet. Verification by The NewsHawks this week shows that nothing has changed.

In fact, Boustead Beef UK Limited is described by the UK Companies House as a dormant firm and its balance sheet as of November 2020 had net assets of only £1, while total shareholder funds also amounted to £1.

This makes the deal a major fraud or scandal.

In May 2019, Information minister Monica Mutsvangwa said during a post-cabinet Press briefing: “Cabinet was informed by Finance and Economic Development minister Professor Mthuli Ncube that the CSC is to be revitalised through a concession agreement under Rehabilitate, Operate and Transfer terms. Boustead would raise and invest a minimum of US$130 million into CSC over five years.”

Mutsvangwa said the funds would be used for capital expenditure and working capital.

The funds were also meant to pay off the CSC’s debts totalling US$42 530 597 and foot the bill for rentals of US$100 000 per annum during the first five years of the concession agreement.

Boustead was also given the green light to take over and manage CSC ranches in Maphaneni, Dubane, Umguza, Chivumbuni, Mushandike, Willsgrove and Darwendale for an initial period of 25 years.

In addition, Boustead Beef was granted permission to take over CSC abattoirs in Bulawayo, Chinhoyi, Masvingo, Marondera and Kadoma for an initial period of 25 years. The company would also run the CSC’s distribution centres and residential properties in Harare, Gweru and Mutare for the same period.

Some of the CSC’s most productive ranches include Maphaneni Ranch, Dubane Ranch, Umguza, Chomfukwe, Dubane, Umzingwane-Railway Block, Gwanda Ranch, Chivumburu, Mushandike Ranch (Meyers Rust), Zeederberg Belingwe, Willsgrove Feedlot and Darwendale Ranch.

CSC’s Bulawayo complex is the largest meat-slaughtering facility in Africa and is second only to the Botswana Meat Commission in terms of the latest technologies.

Some of the CSC farms are being rented out to Zanu PF bigwigs like Obert Mpofu who are paying next to nothing for the properties.

At Independence in 1980, the CSC was part of the motive forces of Zimbabwe’s economy and a major foreign currency earner as it exported thousands of tonnes of beef to the European Union (EU).

At its peak, the beef processor and marketer used to handle up to 150 000 tonnes of beef and associated by-products annually, and export to the EU where it had an annual quota of 9 100 tonnes of beef.

The NewsHawks.

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