BSR: The Quiet Godfather of Sakunda

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Collapsing the tent

“I’m in ‘collapsing the tent’ frame of mind. I don’t care what happens, but Jozef, Ronell, and John Finlayson are going down,” wrote Christopher Fourie to David Brown on the first day of July 2020. 

The two men were senior executives of companies that were part of a corporate group. Fourie had fallen out with the group and was on his way out. But he was determined not to go down alone. Hence the ominous threat to “collapse the tent” and that the other directors would also “go down”.

A furious Fourie was pulling no punches. A week after the threat to “collapse the tent” he posted comments about one of the companies on social media. In response to a promotional post on Facebook by African Connection Logistics (ACL), Fourie remarked, “Zero integrity. Purely funds the lifestyle of owners and their friends. Very questionable business practices”

And to another social media post that claimed the company’s superior knowledge of the logistics business, Fourie had no kind words. After inserting two laughing emojis, Fourie wrote, “Zero knowledge and/or data. Just a game a transfer pricing and fraud” (sic). These were damaging blows from someone with intimate connections to the company.

Feeling the force of this barrage of attacks and unsure what else Fourie had in the tank, the corporate group scrambled to shore up its defence. It went into damage limitation mode and filed an urgent court application for a gagging order against Fourie. They wanted to silence Fourie, arguing that he was in breach of a confidentiality clause of his contract of employment.

Fourie had signed an employment contract with a South African registered company called Takutata Proprietary Limited on 7 June 2018. The man who signed on the behalf of Takutata was Kuda Tagwirei, probably the most talked about and most controversial business tycoon in Mnangagwa’s Zimbabwe. Intriguingly, Tagwirei signed the employment contract as the CEO of Sakunda Holdings, one of the tell-tale signs of the integrated character of the business empire that he has built. The contract was between Takutata and Fourie, and while Tagwirei was signing it on behalf of Takutata, he signed off as the CEO of Sakunda. The companies may have had separate legal personalities, but clearly, the business lines were blurred. Maybe when one has so many corporate vehicles under his control, it is easy to forget the capacity in which one is acting in the various transactions.  

News of dubious business dealings around the Mnangagwa era’s most prominent business tycoon and his companies is not new. The Daily Maverick published an “explosive report” early this year which showcased the extent of “state capture” by business elites where Tagwirei appears as a central character. Back in 2016, when Robert Mugabe was still in power, Sakunda Holdings was corruptly assisted by the Office of the President to leapfrog an American company that had won a multimillion-dollar power-generating contract. Then there is the controversy of the Command Agriculture program, where Parliament was told by Treasury officials that US$3 billion was unaccounted for. Sakunda was the chief beneficiary of that contract which was awarded without going to tender. Another of his companies, Landela has been flagged up by the central bank and had its accounts frozen on suspicion of money laundering. 

The Sentry

The latest revelations are contained in an investigative report published on 1 July 2021 by the anti-corruption watchdog, The Sentry. Its strength is that it has brought most of the pieces of the corporate jigsaw puzzle together to give a panoramic view of Tagwirei’s vast and complex business empire. It also shows the role of the empire’s political and professional enablers, and it is backed by credible documentary evidence. The report has revealed a can of worms, provoking several questions about state capture and the impact of corruption on public service delivery. It is an important contribution to the discourse on corruption, resource plunder, and state capture in Zimbabwe. 

The report confirms how corporate vehicles and offshore finance centres play a significant role in facilitating financial flows and obfuscating the identities of beneficial owners of dubious transactions. It confirms once again that while corruption takes place in poor countries, it is championed and facilitated in wealthy countries where banks are happy to accept proceeds of corruption while professional service providers are also pleased to facilitate the financial flows by creating a complex web of corporate vehicles.

Take Switzerland for example, where the Zimbabwean business mogul reportedly has an account. It is ranked at number 3 on Transparency International’s index of the least corrupt countries. It is a favoured destination of funds siphoned by African elites. Mauritius is ranked number 1 on the World Bank’s Ease of Doing Business Index. That is where Tagwirei took his business, through SOTIC International which he used to hoover several mining and industrial assets in Zimbabwe. How are these countries the least corrupt when they are all too happy to accept proceeds of dubious business dealings? When they have no qualms facilitating schemes that conceal business dealings? These are important questions but perhaps best left for another day. 

When the quiet man slipped

Quiet and publicity-shy, Tagwirei is an enigmatic character who is not known to give media interviews. A member of the Seventh Day Adventist, you would be hard-pressed to find any direct quotes attributed to him anywhere in the media. He has maintained a stony silence and that way, the puzzle around him has endured for some time. That was until last year when the guard uncharacteristically dropped, and the shield of opacity cracked. He authorized one of his companies to take legal action against Fourie.

The moment he did that he had to wash the corporate laundry in public, exposing what was previously hidden to the world. That is the unspoken price of taking legal action: everything you say will be on the public record. This is why sometimes even when one has been defamed, they would rather let it go than risk legal action which might lead to skeletons tumbling out of cupboards. This is precisely what happened when Takutata went for Fourie. Fourie had to be stopped lest he continued to drop missiles, but the world got to know more about Tagwirei’s business empire.

But even then, Tagwirei was careful not to play an active part in the litigation to stop Fourie from making further disclosures about the affairs of the business empire. Instead, he sent David Brown, the CEO of his companies, as the authorized representative of Takutata. Brown’s affidavit revealed more about Tagwirei’s empire than anything that had ever been disclosed up to that point. As an affidavit filed in court, it is the one time that Tagwrei has volunteered information about the structure of his empire.

Lifting the Corporate Veil

In it, Brown volunteered that although the different companies were separate legal entities, they were essentially a single economic unit operating as a group. Without prompting, Brown essentially lifted the corporate veil to use a metaphor that is familiar to students of corporate law. By lifting the corporate veil, one is ignoring the legal fiction of the company to see the real persons behind it. “It is convenient for the functional operation of the group to house employees in one company as their primary employer, but for them to render services to other companies in the group,” wrote Brown in the sworn statement. He went on to list several companies that are part of this integrated corporate group even though they are registered in multiple jurisdictions. They include SOTIC International (Mauritius), SOTIC South Africa, African Connection Logistics, Landela Investments, Landela Mining, Redfox Management, and many more.

This is significant because Brown was writing under oath, effectively confirming that all these companies in which Tagwirei has a significant stake are part of the same empire. It is therefore utterly futile to deny that Tagwirei is the man in charge. He is the ultimate beneficial owner and controller of the empire, despite the lengths to which they went to shield him from view. This is not unimportant. If Tagwirei’s method was designed to evade sanctions, it has been fatally exposed and he will have to find alternative methods. 

Meanwhile, companies like Kuvimba are now at serious risk of targeted sanctions. At the very least, there will be greater scrutiny in international financial transactions involving these corporate entities, and they are at risk of being red-flagged for money laundering. 

Why then the denials of Tagwirei’s role? 

The denial is part of the business model in which Tagwirei operates as a shadow director, a phenomenon that again is familiar to corporate lawyers. All companies have people who are formally appointed as directors. A shadow director is a person who is not formally appointed as a director but who in practice acts in the role of a director of the company. This person operates in the shadows but controls what the formally appointed directors do. His decisions direct and control the affairs of the company. The formal directors are accustomed to act in accordance with his direction or instructions. Metaphorically, this powerful figure is the “Godfather” who is the most influential person in the company although his name appears nowhere in the formal leadership structures of the company. On the evidence of The Sentry’s report and other reports, a shadow director is a role that Tagwirei appears to play in his empire. 

There are several reasons why a person might not want to be formally named as a director. It might be that the person has acquired a bad reputation which might damage the company if he were publicly associated with it as a director. It might also be that the person is disqualified from holding a directorship. It could also be that someone does not want to carry the legal obligations that come with being a director. The Sentry’s report and the court case against Fourie show Tagwirei as the quintessential godfather of the corporate group. Despite denials, nothing goes on in the companies without his authority. Directors refer to Tagwirei numerous times in ways that demonstrate that his word in the group is the law.

The godfather takes care of business

Tagwirei himself is self-assured, confident, and in control. The Sentry’s report has private email communications which demonstrate the power that he wields over the directors and employees of the company. He knows he has power and connections to get him through troubled waters. In one instance, after his lawyer had written a long advisory email about tax matters relating to a major platinum deal with the military and the need to avoid penalties from the taxman, warning the directors, “You shall not take the tax matter for granted”, Tagwirei simply answered with a single line, “Don’t worry I will resolve it myself”

Not the directors. Not the employees. No, he alone, the godfather, would resolve it himself. It is what you are likely to see in mafia movies, when the godfather ends a difficult discussion with his consigliere and capos with an assured, “I will take care of the business” – words of a man who is in charge. When it comes to the Sakunda empire, Tagwirei is clearly the Capo di tutti Capi (the boss of all bosses).   

The pebble in the godfather’s shoe

Tagwiei’s power on the Zimbabwean business landscape is not in doubt. He has friends in the highest places. He is a member of Mnangagwa’s Presidential Advisory Council. But for all his power in Zimbabwe, he has a pebble in his shoe. That pebble has been giving him extreme discomfort. If there was no obvious reason for him to lurk in the shadows before, it became an absolute necessity after he was placed on the list of targeted sanctions by the US in August 2020. When that happened his name became toxic to the companies and individuals with which he was associated. 

Global commodities giant Trafigura, which had a relationship with the fuel arm of Sakunda exited the joint venture in February 2020 when it sensed that sanctions against Tagwirei and his companies were looming. Trafigura bought the 51% majority stake that was owned by Tagwirei but the amount paid for the shares was not disclosed. Tagwirei must have racked in millions from the transaction. But he also picked up the threat of targeted sanctions which meant he had to retreat even further into darker corners where rays of light never shine. Targeted sanctions were the pebble in the godfather’s shoe. 

Kuvimba – to trust

It is in these circumstances that a hitherto unknown entity, Kuvimba Mining House emerged on the corporate scene. That was a way of shifting the pebble in the shoe, providing temporary comfort. The fear of sanctions provides a plausible explanation for the lateral switch from SOTIC International to Kuvimba Mining House, which instantly became one of Zimbabwe’s largest mining companies with its vast array of assets across the country. Before the arrival of Kuvimba (which is a Shona alluding to “trust”), SOTIC International and its subsidiaries had gone on an acquisition spree of mining companies across Zimbabwe. Tagwirei had made a lot of cash through Command Agriculture, the Dema Diesel Power Plant, and easy access to cheap foreign currency, all courtesy of the state. The sale of the fuel shares to Trafigura must have yielded a lot of cash.

SOTIC acquired controlling stakes in Bindura Nickel which also owns Trojan Nickel; Freda Rebecca, Mazowe, Shamva, Redwing – all gold mines. It also acquired several mines belonging to the state mining entity the ZMDC. These were Jena, Sabi, Sandawana, and others. Although SOTIC is a Mauritian company, the reports show that it was merely a vehicle for Tagwirei’s investments in the country. 

It is appropriate to pause here for a moment and reflect on how elites have taken advantage of the gaps that opened up after the departure of Mugabe. One of the first things the Mnangagwa regime did was to scrap the indigenization law which had required foreign companies to give up 51% of businesses to locals. Since SOTIC is a Mauritian company, these deals would not have been permitted. But here is the thing: SOTIC is a foreign company in name only because the beneficial owner is local. This begs the question: why would a local tycoon create a foreign company to hoover local assets, especially in the lucrative mineral resource sector? What is wrong with the Zimbabwean business environment that a local would prefer to set up shop in Mauritius to invest in Zimbabwe? What are the tax implications of these business arrangements?  

However, after the targeted sanctions, both Tagwirei and SOTIC became toxic, prompting the switch to Kuvimba. According to The Sentry report, on 10 December 2020, there was an announcement on the Zimbabwe Stock Exchange to the effect that “SOTIC and its associates” had “nominated” Kuvimba to own some of SOTIC’s assets. How much Kuvimba paid for the assets if at all, is unclear but investigations by the Financial Times show that SOTIC still retains legal ownership.

Incredibly, both the government and Kuvimba deny Tagwirei’s involvement in Kuvimba, even as the godfather’s footprint is everywhere and too indelible to be concealed. Even on the government’s and Kuvimba’s denialist accounts, they attribute 35% of the Kuvimba’s ownership to a company called Ziwa Investments and there is evidence that it is owned by companies that are associated with Tagwirei. First is a Cayman Islands-based company called Almas Global Opportunity Fund which was used by Tagwirei to invest in SOTIC and 35% is owned by Pfimbi Resources which is owned by Tagwirei and his wife. In any event, despite the complex web of corporate entities in the group, the common directorships and other linkages show that the only thing that has changed is the names of the companies and their legal identities. Otherwise, the godfather of the empire remains the same.  

Apart from the threat of targeted sanctions and the anti-money laundering rules, the empire seems to have hit troubled waters, ironically, at a time when Kuvimba surprised the market by declaring a US$5,2 million dividend last month. The CEO David Brown, a key character in the corporate structure, announced that he was leaving his executive role at the company. This is just a year after the legal battles with Fourie. Brown has said that there is nothing amiss with his departure and that it was pre-planned. However, the departure seemed abrupt. Perhaps the departure is as innocent as he says it is. Time will tell whether the departure was prompted by some discomfort.  

The Military connection

One of the issues flagged up in The Sentry Report is the inextricable bond between the political establishment, the military, and Tagwirei’s empire and this is an issue that has major political implications. One of Tagwirei’s companies, Landela Investments paid US$21,5 million for a 50% stake in Great Dyke Investments, a joint venture platinum project with Russians. The Sentry found that there was also another payment amounting to US$220 million made to a company called Pen East Mining, which is allegedly owned and controlled by Zimbabwe’s military. If this is accurate, this is a large amount that represents off-budget financing to the military. This is a serious structural weakness of the state. The danger of giving the security establishment direct access to funding outside civilian government control is accurately captured in the report:

“Civilian control of militaries requires civilian financial control so that the security sector cannot set and finance its own agenda”.  

Once the military has its own sources of income outside the civilian government’s control, a moral hazard arises: people with guns and ammunition already have power that is easily abused unless it is put under civilian control, and with independent sources of income, they become a threat to civilian government. These deals represent a significant structural weakness of the Zimbabwean state, in which the military is gaining a disproportionate amount of financial independence and power from the civilian government. There is no scrutiny by the Auditor General or Parliament, which are supposed to be the watchdogs in public finance management under the Constitution. In such circumstances, the risk of state capture – where public institutions and resources are diverted for private gain – by the military increases. The revelations are also significant for the electoral processes. If the military is so heavily invested in the economy, it has an interest in securing a political arrangement that protects its interests. 

Zimbabwe’s oligarch

To get a better appreciation of the rise of Tagwirei’s business empire and his symbiotic relation with the ZANU PF political establishment, it is important to look at the rise of oligarchs in one of Zimbabwe’s allies, Russia.

Most Russian oligarchs built the foundation of their extraordinary wealth in the period of social and economic uncertainty and chaos following the collapse of the Soviet Union. It was then that in the wave of liberalization and privatization, the Soviet Union’s mining and industrial assets were carved up among the few who were in the right places. State assets were sold on the cheap and the few who were well-placed grabbed the lucrative deals and made billions. They were able to convert political capital into enormous wealth. In a country where private enterprise was once considered criminal, those who got in first took full advantage of a state that was weak and unsure.

However, this accumulation of wealth comes at a price: you cannot oppose or challenge the political establishment. If you do, there is always some kompromat that can be used against you and there is always some evidence of a criminal offence that you committed. That way there is a mutually reinforcing relationship between the oligarchs and the Kremlin: the oligarchs are free to make their money and enjoy lavish lifestyles, but only if they do not interfere in the Kremlin’s politics.

The playbook seems to apply to the relationship between Tagwirei and the ZANU PF political establishment. His companies have amassed enormous assets from the state or through the state and he has made billions but he must keep the establishment sweet. In one email there is an almost casual reference to President Mnangagwa’s moniker, “HE”, which refers to “His Excellency”. ZimAlloys in the Midlands is a company that has long been dear to Mnangagwa. He fought battles with the late Solomon Mujuru who wanted to acquire it two decades ago. It was said to be one of the points of bitter friction between the two men. Tagwirei’s empire could not have bought it without Mnangagwa’s consent.

The estranged wife of Vice President Chiwenga, Mary, alleged in court papers that Tagwirei had bought a brand new Mercedes Benz for the VP’s children. Such lavish gifts cannot be free lunch and they demonstrate the personal relationships between Zimbabwe’s most powerful PEP and the establishment. 

Going forward, it should not be surprising if Tagwirei’s empire will be one of the most significant funders of Mnangagwa’s and ZANU PF’s electoral campaigns in 2023. They will be securing their power, and he will be securing his influence in the corridors of power – in business terms, it will be a worthwhile investment for the empire.

His supporters point to the response to the COVID-19 pandemic last year, when he poured resources into establishing a top notch medical facility in leafy Arundel and helped refurbish other public healthcare facilities in Harare and Bulawayo. But even mafia godfathers are known to have a “soft” side for their communities, helping the desperate from time to time, something that buys them public sympathy and even admiration. In any event, that rush in 2020 was motivated by self-interest at a time when the rich and poor alike faced an existential threat. The rich knew they could not fly out for medical tourism. But they knew the health system was decrepit after years of looting and neglect. They needed a facility at home. And so they built one that would meet their needs, but it would have been embarrassing to ignore the public healthcare facilities altogether.

Benefits of proximity to power

Proximity to power has been handy in the construction of the empire. Command Agriculture was one of the most lucrative deals for Tagwirei’s empire. His company, Sakunda, was said to be the financier of the program, although details of the deal remain murky. The Auditor General’s report of 2018 referred to the program, stating that a “private lender” had agreed with the government to finance an agricultural inputs program. Under the arrangement, the “private lender” would provide loans to farmers in the form of inputs to be collected from Grain Marketing Board depots across the country. The government issued treasury bills to the “private lender” but it also made an advance payment of US$182.5 million to the private lender in 2018. The AG does not state in clear terms but evidence suggests that this was the Command Agriculture program and Sakunda was the “private lender”.

The AG concluded that there were serious transparency and accountability problems with his deal. There was no evidence that the agricultural inputs procured were disbursed to the farmers and there was no reconciliation with the loan amount. There was no evidence that the inputs were delivered to the GMB for onward distribution to the farmers. The program raises fundamental questions about the relevance of the private lender since the government was providing funds to the lender in advance to procure the inputs and then distribute them to the farmers. What was the point of the “private lender” other than as a conduit for receiving money from the government, procuring the inputs, and then distributing them to farmers? The private lender was just a middleman that made money through rents charged for the service that is performed. There is no evidence that this was put to tender or that the government could not have done it through its many entities.

In any event, when the Public Accounts Committee of Parliament carried out investigations, it was told by Ministry of Finance officials that US$3 billion could not be accounted for under the Command Agriculture program. It was a scam of significant proportions. There was no evidence that the government had floated a tender before awarding the multi-billion-dollar contract to Sakunda or that Sakunda was well-placed to be a financier of such a project.

Then there was the Dema Diesel Power Plant, another multimillion-dollar contract awarded to Sakunda in 2016. The tender was originally awarded to APR, an American company. It was taken away and given to Sakunda, even though Sakunda had not participated in the tendering process and had no experience or capacity to perform the contract. It was just handed to Tagwirei’s company on a silver platter together with tax exemptions on the importation of diesel for the project. This was incredibly handy for Sakunda whose core business was importing and selling fuel. Sakunda sub-contracted Aggreko, a British company that had lost the bid to APR. It is one of the openly corrupt deals of the last decade in which Sakunda was a key beneficiary.

Last year, one of the gold mining companies in the godfather’s corporate group was granted a licence to buy gold from artisanal miners. Fidelity Refineries and Printers used to have a monopoly. The grant of such a licence is another instance of favour by the state – another tell-tale sign of state capture – when public institutions, rules, and licensing authority are diverted for private gain.

Some of the Sakunda Group’s subsidiaries like Landela have been named by the central bank as dabbling and fuelling the parallel market in foreign currency. Even though bank accounts have been frozen in some instances, the cases have not gone anyway suggesting backroom deals or that the asset freezes were merely acts of tokenism to give the impression that the authorities were doing something. It is also likely that the powerful Tagwirei was able to exert his influence to get his companies out of trouble. It is common knowledge that he has powerful friends in high places; friends who are probably the shadow directors in the empire behind him.

At the start of the year three lads in the music industry were arrested and detained for breaching lockdown rules when they hosted a large party in Mbare, the crowded high-density residential area in Harare. Over at the other end of town, the leafier end, Kuda Tagwirei hosted a similar party to celebrate the new year. In a classic case of selective application of the law, the law enforcement authorities never touched Tagwirei. Who dares to go after the godfather? The corona virus, however, could not be corrupted. Some VIPs who attended the high-end party succumbed to the pandemic not long afterwards.

Shadowing white South African males

However, for a man who has perfected the art of going about his business quietly and never responding to the numerous allegations against him, it is ironic that the great exposure of his business empire has come about because of bitter fights among his group of white South African businessmen which he hired in the belief that they would provide better cover. It is also ironic that a man who is hailed by his Zimbabwean supporters as a symbol of indigenous entrepreneurship under the Mnangagwa regime surrounded himself with a group of foreign business executives. Two of them have now left. Fourie decided he had had enough and ratted on him. David Brown says it was always part of the plan, but leaving a powerful role during troubled times is not exactly a vote of confidence.

Tagwirei was probably not comfortable with fellow black executives in his native Zimbabwe and thought his business was in safer hands with the white South African men. He probably thought they would provide a better camouflage, using their whiteness and foreignness to present a different face and hoodwink international regulatory authorities and other watchdogs. But now, on reflection, what he thought was a strength might turn out to be his great undoing. It was the lawsuit against Fourie that gave an authentic view of his business empire. It was coming from the source. For their part, the South African businessmen have been the quintessential enablers. They cannot plead that they were not involved. They knew what they were getting into, and they were happy to do it for a tidy fee. One contract shows a basic wage of more than 2 million rands per annum. The same applies to the Mauritian and Caymanian professional services providers who established complex structures of corporate vehicles to help move and obfuscate the assets.

Conclusion

The coup in November 2017 was welcomed by many people who thought it would herald a respite for a broken nation. Mnangagwa himself talked a good game. But when it came to implementation, he fell far short of expectations. The biggest losers have been the long-suffering Zimbabweans. The biggest winners have been the few PEPs that are close to the centre of power. While many people steal from the state and have amassed huge pockets of wealth, none of them has built an empire quite as large and influential as Tagwirei. None of them has as much power and influence over the political and military establishment as Tagwirei. His silent disposition makes him enigmatic, but recent slip-ups have led to leakages of information that have provided a more authentic picture of his business empire, well beyond the conjecture of the past.

The strategy is simple: getting hold of as many resources from the state as possible to have a steady, reliable, and lucrative stream of income and to have influence over the political and military establishment, creating a structure and conditions that make him indispensable to the holders of political and military power. Tagwirei has learned the three most important customs in opaque authoritarian systems: First, when you are eating, you must leave a share for the political and military elites. Second, it is bad manners to talk while you are eating. Third, never do or say anything that might upset the political and military godfathers and even if they are wrong and you are right, accept the blame. The godfather of Sakunda has had a good ride so far. He has built a huge empire and if reports are to be believed, he has his eyes on more assets. State capture is when public assets, institutions, and processes are diverted to benefit private interests. It is not a single-day event. It is a process. That process is in motion, and one day Zimbabweans will wake up from their deep slumber to raise that most of the national assets and institutions are in the hands of very few men.

WaMagaisa  

wamagaisa@yahoo.co.uk