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 2012-01-17 04:42 am Back to NEWS
‘Rupiah influenced Zamtel sale'
Ex-President Rupiah Banda allegedly abused his authority to ensure Libya's LAP Green Networks bought Zamtel, the Zambia Telecommunications Corporation.

Rupiah Banda’s influence in abusing and circumventing set government institutions and procedures aided RP Capital to ensure LAP Green Networks bought Zamtel despite not being fit to run the company.

This is according to the commission of inquiry set by President Michael Sata to investigate the sale of Zamtel.

The report gives a lowdown on Dora Siliya’s antics and manoeuvres which saw her disregard legal advice of the Attorney General’s chambers and often chased top government and quasi government officials who disregarded her sworn trajectory over the sale she orchestrated.

The report revealed a deliberately complicated transaction to siphon money from Zambia and stated that despite the government selling Zamtel to LAP GreenN for US $257 million, prior to privatisation, Zambia paid US $120 million for tax shares in Zamtel, and a further US $214.45 million for investment shares.

“GRZ effectively paid Zamtel US $334.45 million to retain 100 per cent of its shareholding in Zamtel immediately prior to privatisation,” the report read in part. “It is most perturbing that the GRZ decided to pay for the 25 per cent shareholding it already owned in Zamtel and paid a total US $334.45 million in what was termed as Tax Shares and a Subscription Amount. On the other hand Lap GreenN only paid US $257 million for 75 per cent shareholding of which GRZ was only entitled to US $42.6 million about 16.6 per cent of the value. The net effect of this deliberately complicated transaction was that Lap GreenN took over Zamtel as a debt-free company with US $64 million sitting in its bank account, with the US $64 million having been provided by the GRZ and equivalent to the exact sum of money required for the newly privatised company’s capital expenditure for its first year of operations.”

The report stated that the sale of Zamtel was fraught with irregularities in the tender processes, coercion in the acquisition of Zesco’s assets, bad faith with the selection criteria, negligence in the management of the account of GRZ net proceeds, and a failure to monitor post-privatisation.

The commission of inquiry led by justice minister Sebastian Zulu revealed that RP Capital was so powerful that it used to draft speeches for former president Banda made on Zamtel as well as ministerial statements on the US$257 million sale of 75 per cent of Zamtel to Lap GreenN.

The report detailed that key government institutions like Zambia Development Agency (ZDA) and Zesco made decisions and abrogated their normal tender procedures as well as normal way of doing business because they ‘may have been under duress.’

The report revealed that in some cases, officials who resisted the influence from Banda’s aides were dismissed from their positions rampantly.

Among the key advisors of Banda who were mentioned in the transaction to have been exerting immense pressure from the powerful position of State House included Dr Richard Chembe, economic advisor to former president Banda, and Joseph Jalasi, who was legal advisor.

The report indicates in some cases severe resistance to uphold professionalism by some top officials like Cyprian Chitundu, who resisted the ceding of the Zesco optic fibre network to Zamtel to feed into the directive by RP Capital and was consequently fired and instantly replaced by Ernest Mupwaya.

Chitundu has since been reappointed Zesco managing director in the aftermath of President Sata’s victory.

According to the detailed 112-paged report, RP Capital, single-sourced to valuate Zamtel before privatisation and subsequently hired as transaction advisors for ZDA by clandestine collaboration between former president Rupiah Banda's son, Henry and former communications minister Dora Siliya, was in the “driving seat” for the controversial transaction.

“This committee categorically and unequivocally states that our investigation clearly found that the manner in which the Zamtel sale was conducted was as follows: The Zamtel sale was driven by unreasonable sense of urgency and haste with no consideration, no regard for normal and expected deliberations, consultations and reviews,” according to the report.

“The committee has covered numerous email correspondence from RP Capital’s Peter Heilner issuing directives to high-ranking and senior GRZ, ZDA and Zamtel officials, set timetables and tasks, drafted ministerial and even Presidential speeches and letters for Banda and orchestrated the deployment of personnel to strategic positions and departments. It is clear from the outset, RP Capital, through Peter Heilner, single-handedly planned, managed, drove, controlled and executed the entire process. The GRZ, ZDA, ZICTA (Zambia Information Communications Technology Authority), State House staff, Zamtel and all other such were reduced to the role of mere spectators with little or no input and control over the process.”

According to the report, the government paid US$ 334 million about K1.7 trillion to purchase its own 25 per cent shares in Zamtel during privatisation, according to a highly placed government source.

LAP GreenN, which bought 75 per cent shares in Zamtel last year, has only paid US$ 15 million about K 76 billion to the Zambian government out of the purchase price of US$257 million about K1.3 trillion while RP Capital Advisors—the advisors in the transaction—received a cash payment of about US$ 12.6 million or about K 64 billion from the transaction.

The source familiar with the findings of the Sebastian Zulu-led commission of inquiry into the sale of Zamtel’s 75 per cent shareholding said it was disturbing that the government paid US$ 334 million, about K1.7 trillion, for the retention of the 25 shareholding it already owned in Zamtel in what was termed tax shares and a subscription amount.

The report revealed that Lap GreenN made a number of hefty concessions from Zambian government despite not qualifying to be the preferred bidder for the majority stake in Zamtel.

“The original LAP GreenN non-binding was based on 70 per cent staff redundancy. This committee notes that the final binding bid allowed for 100 per cent staff redundancy as a consequence of the negotiating process, perhaps as a result of Luwani Soko,” revealed the report.

“The negotiating team conceded several incentives that were not part of the original LAP GreenN non-binding bid: The inclusion of the Zesco Optic Fibre Network valued at approximately US $20 million; GRZ paying US $120 million (K557.9 billion) tax liabilities, and operators and service licences given for free valued at approximately US $150 million market value, barring a fourth mobile operator from the Zambian market and PSTN Public Switched Telephone Network exclusivity.”

Prior to his appointment to the Ministry of Communication, Soko was technical director of Zamtel, and in an email to Jalasi, copied to Chipwende, and Dr Chembe, Heilner of RP Capital stated that: “Luwani Soko’s move from Zamtel to MCT (Ministry of Communications and Transport) needs to be delayed until 21st October so he can participate in labour negotiation process in interim he should be required to report to licensing and regulation committee.”

The report of the inquiry concluded that “Clearly, Mr. Soko, having participated in labour negotiations at Zamtel was not a member of the negotiating team.”

The committee stated “with authority” that all procedures relating to the sale were not complied with.”

“On particular note, however, are the following: The arbitrary appointment of RP Capital Partners Cayman Islands by Dora Siliya for the valuation of Zamtel assets with no thought given to their terms of reference. Whether the direct selection of RP Capital Advisors as transaction advisors by ZDA was based on Mr. Chipwende’s assertion to ZPPA that they had previously executed a related assignment to the satisfaction of the ZDA board (which was at best misleading), or as he stated to this committee that RP Capital refused to hand over their valuation report unless they were appointed transaction advisors, their appointment was at the very least highly irregular. Neither of the above reasons advanced can form the basis for appointment of an unknown and unproven consultant for such an important assignment.”

The report revealed that the decision by Cabinet to sell Zamtel was made without an asset valuation report, and LAP GreenN ought to have been disqualified at the pre-qualification stage, and the negotiating team was not independent as required by law.

The ZDA negotiating team comprised former Attorney General Abyudi Shonga, ZDA director general Andrew Chipwende, Transaction Advisor, RP Capital Advisors Peter Heilner, legal counsel Simmons & Simmons, Ministry of Communication director for telecommunications Luwani Soko.

The report also revealed that Zambia’s interpretation and implementation of United Nations resolution 1970 on freezing assets belonging or linked to the fallen regime of late Colonel Muammar Gaddafi was decided by RP Capital in an emailed directive on May 6, 2011.

“An announcement be made to the public by GRZ through ministerial statement or otherwise outlining the new board composition to be headed by (now judge) Dominic Sichinga and making clear the steps by the government in order to comply with the sanctions and further highlight that there should be no impediment to Zamtel proceeding in the ordinary course of business,” read the excerpts of the email Heilner sent to Jalasi and copied to Chipwende and a Peter Nemeth.


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