MEIKLES LIMITED | Chairman's Views
The Chairman of Meikles Limited ("Meikles") expressed recently his views on
events that have, and continue to have, an effect on the Group. These views are
now further updated. This is not a Statement to Shareholders, but it is an
attempt to place matters in a proper context to anyone who is interested in the
progress of the Group, its employees, its shareholders and other stakeholders.
The Chairman has been closely involved personally and through the efforts of
lawyers and others to secure the return to Meikles of its deposit held by the
Reserve Bank of Zimbabwe ("RBZ"). His involvement over time in this effort has
been very intense.The sum on deposit with the RBZ was placed with the Bank
under duress in 1998 and the funds are on deposit and are subject to call by
Meikles. The origin of the funds has been clearly communicated to stakeholders
in a variety of communications. Suffice to reiterate that these funds arose
from the proceeds of foreign investment received in Zimbabwe in what was, at
the time, believed to be the largest single foreign investment of new funds
into Zimbabwe on the Zimbabwe Stock Exchange ("ZSE"). These funds are therefore
unique relative to other debts or deposits that the RBZ has on its books.
The RBZ has, for a long period, been a delinquent debtor to Meikles as it has
failed to perform in terms of returning the funds owing to Meikles despite
demands appropriate to the return of a call deposit.
In 2013 Meikles, represented by its Chairman and its Company Lawyer, Mr
Sternford Moyo, a Senior Partner in the Law Firm Scanlen and Holderness, met at
the RBZ with the then Governor, Dr Gono, and an official of the bank, Mr
Saburi. The purpose of the meeting was to agree the methodology of calculating
the quantum of sums due to Meikles. Agreement was reached. The sum due to
Meikles was to be calculated by accruing interest to the capital sum
outstanding from time to time at a rate of 8 per cent per annum compounded
back-dated to the date when the deposit was made. This arrangement although
accepted by Meikles in fact accrues interest to Meikles at a lesser rate than
the cost of borrowing to the Company.
A calculation of the sum, together with documentation from the Chairman, Mr
Sternford Moyo and Dr Gono, all of which are substantive at law, served to
satisfy Directors and External Auditors, who were all involved in the
finalization of the Group financials for the year ended 31 March 2014, that the
financials were prepared on an accurate basis. The sum due to Meikles had
indeed increased to US$90 million due to the agreement on interest referred to
above. It is stated that this is a simple mathematical calculation, not a
fabrication.
In recent weeks the Member of Parliament for Bikita West, Dr Kereke, a man
unknown to Meikles and who has never had any interaction with Meikles, saw fit
to publicly accuse Meikles and, by default, all those mentioned above as guilty
of fraud due to his personal but uninformed opinion of the Group financials.
In October 2014 another Member of Parliament, in this instance the Member of
Bulawayo South, Mr Cross, who is a Shareholder of Meikles, addressed
Shareholders who attended the Meikles Annual General Meeting. He proceeded to
advise Shareholders of matters that had taken place and decisions made by a
Parliamentary Committee of which he is a member, despite a general belief that
only confidential deliberations take place in this Committee. He has
understandably been reported to the Speaker of Parliament and as a result he
may have abused Parliamentary privilege. Mr Cross referred to the sum due to
Meikles by the RBZ and advised Shareholders not to count their chickens. Some
Shareholders thought he was making reference to the sale of chickens in the
supermarkets and others thought the Group had embarked on a chicken farming
project. In fact it is an expression in the English language, do not count your
chickens before they hatch and Mr Cross was conveying the message that
Government, with his participation, were not going to pay to Meikles the full
sum agreed upon in negotiations. In other words he was suggesting there was to
be reneging on commitments made in good faith
We now know that the Securities and Exchange Commission initiated a process
which culminated in the ZSE suspending trading in Meikles shares, presumably
because they place credibility in the statements of the two individuals
referred to above. This being of more importance to these two institutions than
the discussions held with the ZSE and Meikles towards the end of 2014 which
were positive in their entirety. During this meeting the Chairman of the ZSE
raised various issues of mutual concern to the two parties and these were
concluded satisfactorily.
Irresponsible reference has been made in public to a so called lack of
Corporate Governance in Meikles. The comments being focused on the relatively
small number of Directors on the Meikles Board and by the presence of an
Executive Chairman which is not appreciated in Zimbabwe, but seems to be
acceptable on the New York Stock Exchange, the world's largest stock exchange.
The discussions held with the ZSE towards the end of last year, in fact,
reached an amicable agreement including timing of when and how these issues
would be resolved in conjunction with some very substantial investment
strategies that the Group planned to implement, which include a restructuring
of the Board of Directors. The action of the ZSE has now possibly put this
reconstruction on hold for the time being.
The latest action of the ZSE was implemented without any interaction with
Meikles and does not comply with its own rules of engagement.
There is now uncertainty as to whether the Group's planned strategy will be
feasible and, if so, when. The ZSE, the detractors mentioned above and perhaps
others have put in question an entire investment strategy for this Group and
perhaps for others who are interested in furthering the economic interests of
Zimbabwe. Meikles will be addressing the implications of the suspension, the
manner in which it has been implemented and whether there is any purpose to a
listing on the ZSE. Much debate will be necessitated with potential investors
to determine their attitude to these matters.
To clarify the current position, the RBZ has recently committed US$76 million
of treasury bills and other payments in writing, but they have not yet been
received in full by the Company. The interest rates and tenure are compatible
with treasury bill issues on the African continent outside of South Africa. The
acceptance to the market of the Zimbabwe treasury bills will depend on their
credibility and all Zimbabwe should be motivated to witness their success, even
the detractors mentioned above, as this is in the best interest of the nation.
There is still more negotiation to come on interest and possibly discount
implications. The Group has no intention of negotiating in the public domain
and will not do so. These matters are sensitive. There is also a debtor related
to this matter from which the Group also seeks a recovery. All in all, the
Group is within 90 per cent of achieving its targeted receipt. Put differently
the outstanding sum to be negotiated represents less than five per cent of
Group gross assets. It is interesting to note that based on the agreement
negotiated in good faith, the sum due to Meikles is now in excess of US$90
million due to interest accruing from the passage of time. Noise made by the
detractors has not been helpful to the conclusion of this matter.
It is recorded that schedules presented to Parliament on the extent of RBZ's
indebtedness to third parties, is completely inaccurate insofar as the sum
owing to Meikles is concerned. This comment is made in the knowledge that
whoever was responsible for advising Parliament of the sum due to Meikles
failed to provide Parliament with an accurate position on the matter.
The sum finalized to date will ensure that all short term borrowings in Meikles
as a Company will be eliminated or matched with an appropriate deposit.
However, the strategy announced to Shareholders, of which the ZSE Committee is
fully aware and which was aimed at further expansion in the subsidiaries, the
creation of further Shareholder value, the introduction of more investor
capital and possibly to even list one subsidiary on the ZSE, are on hold for
the time being, due to present uncertainty created by the detractors. This
strategy would have been beneficial to anyone interested in ensuring the
well-being of Meikles in Zimbabwe and in ensuring the success of the economic
future of the nation.
There are now too many bees swarming around the Meikles honeypot. Some of them
have negative agendas, which in the end will only damage Meikles, the
Securities and Exchange Commission, the ZSE, certain individuals and above all
Zimbabwe as a nation in its search for further investment.
JRT MOXON