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Gold bars

Tendai Rupapa Senior Court Reporter
ZIMBABWE’s biggest gold producer, Metallon Gold is facing allegations of externalising over $30 million through dividends paid to shareholders without profits to back them and fictitious external loan payments.

This comes as the net is closing in on externalisers who, according to an exclusive report by our sister publication Business Weekly last week, have shipped out $3 billion since 2015.

In a matter which is now before the court for violation of the Exchange Control Act, Metallon is being accused of transferring huge amounts out of the country without exchange control approval on the pretext of servicing external loans, paying for services rendered or settling obligations to management.

State evidence alleges that sometime in 2010, Metallon paid a dividend of $51 000 despite having recorded a loss for the financial period and also allegedly declared a dividend of $25 million in 2012 yet the company’s operating profit was less than the amount declared as dividend.

By so doing, according to the State, the company allegedly financed a dividend from non- distributable reserves without exchange control approval.

In the matter before the court, Zimbabwe’s biggest gold producer, which is owned by South African business tycoon Mzi Khumalo, is being represented by company secretary, Hapson Makotore. Magistrate Ms Josphine Sande remanded the matter to August 30, 2017. Harare lawyer Mr Evans Moyo is acting on behalf of the company.

This is the second such case for Mr Khumalo as he had to forfeit R1 billion in shares and assets after losing a case in South Africa over allegations he violated exchange control laws when negotiated a R760 million loan with Deutsche Bank for his Mawenzi Resources and Finance Company.

The flouting of laws related to how Mr Khumalo pledged shares he had bought from Harmony Gold in a black economic empowerment scheme to Deutsche Bank.

In Zimbabwe, the turning point was in 2015, when the National Economic conduct Inspectorate carried out an inspection on the business of Metallon Gold following information alleging violation of exchange control regulations. It was discovered that Metallon allegedly externalised $31 million.

Prosecuting Sebastian Mutizirwa alleged that during the period extending from January 2009 to December 2013, Metallon Gold Zimbabwe externalised an amount totalling $9,9 million to Red Wing United Kingdom Limited Ltd, on the pretext that this was payment for management and services rendered to it by United Kingdom based company.

From June 2011 to January 2012 the gold miner allegedly paid out $5,8 million to Stonhage Trust through Mtetwa and Nyambirai Trust, disguised as loan payment although no such obligation was due to company.

Further, between June 2011 and January 2012, Metallon Gold is said to have paid $87 871 to First Atlantic, a company outside Zimbabwe, through Mtetwa and Nyambirai Trust disguised as loan repayment yet the South African owned miner did not owe First Atlantic. The State prosecutor told the court that the gold mining company also paid a dividend amounting to $12, 2 million to shareholders, but failed to withhold tax payable on dividends paid to non-resident shareholders.

In addition, sometime in 2012, without lawful authority from the Reserve Bank of Zimbabwe exchange control authorisation, Metallon Gold Zimbabwe allegedly wrote off a loan amount of $7, 72 million as uncollectable, thereby technically externalizing the funds in question. The amount was a loan advanced to its sister company in South Africa.

The role played by multinational companies (MNCs) in illegally moving funds in and out Zimbabwe is increasingly under scrutiny after a report indicated that the country could have lost billions of dollars through the practice.

According to the report, there is rampant misinvoicing particularly for minerals such as diamonds, gold and nickel between the country and its main trading partners.