Gilbert Muponda reveals all about ENG

I am a founder and former director of ENG Capital PVT LTD (ENG). My company was the first casualty of the so-called Anti-Graft war launched by RBZ Governor Gideon Gono in December 2003. I have had to field questions about the nature of ENG?s problems and what led to its closure and current status .

I had to respond .I will try to limit response to the immediate business case of the Group the politics of the matter will be subject of another writing .It should be noted ENG Capital Group was placed into liquidation at the request of the Directors as a way to secure the firm?s creditors and investors. ENG has fully repaid all claims against it. All the creditors and investors have been fully repaid .This can be confirmed with the Liquidators at CAMELSA .Based on independent valuations and estimates ENG had assets of Z$ 180 billion against liabilities of $ Z 85 billion. ENG was a solid business model and had a strong asset position and this point has been proven beyond any doubt given that All creditors have been fully repaid despite ENG assets being looted and deliberately undervalued.

The direct role of the RBZ led by Dr Gono was in creating a smoke screen and an atmosphere that paved the way for the elimination and externalization of all persons deemed to be undesirable by the government of Zimbabwe in the quest to silence all existing and potential pockets of resistance to bad policies which Gono was about to implement. Dr Gono was appointed with a specific political mandate to deal with the financial services industry that was perceived at the time to undermine the regime and hitherto the government had no specific strategy to intimidate the private sector into compliance with bad policy formulation strategies. The belief then and now was that the financial sector should be a tool for the ruling party and any participant un-affiliated with the ruling party has to be closed down or cowed into submission.

There is need to understand ENG Capital?s ability to mobilize Zimbabwe dollars. At its peak ENG was peerless and unrivalled in the Zimbabwean financial market in its ability to raise and access Zimbabwe dollars.

The ENG Capital Group treasury was made up of the following individual units Century Bank, Century Asset Management, Century Discount House, Leasing Company of Zimbabwe, ENG Asset Management and Hybri Micro-Finance Institution. ENG Capital group had a market capitalization of US$ 175 million, just before the RBZ descended on the Institution. This made ENG one of the single biggest combined treasury units in the Zimbabwe Financial market.

Below is a brief ENG Group Structure

ENG HOLDINGS GROUP STRUCTURE

– SUBSIDIARIES

– ENG CAPITAL INVESTMENTS PVT LTD

– ENG ASSET MANAGEMENT PVT LTD

– ENG REAL ESTATE

– ENG NOMINEES PVT LTD

– ENG PRIVATE EQUITY (PVT) LTD

– ENG CAPITAL ADVISORY SERVICES

– ENG STRUCTURED FINANCE

ADDITIONAL MAJOR ASSETS OWNED

– Century Bank Holdings (now CFX bank)

– Leasing Company of Zimbabwe, Century Asset Managers)

– Century Discount House

– Hybri Micro-Finance Institution

– Care Insurance PVT LTD

– RestCel Insurance PVT LTD

– Amalgamated Health Services ? (Harare West Hospital )

– 15% of OK Zimbabwe Limited

– 15% of Zimplow Holdings Limited

– 20% Medtech Holdings Limited

– Hornet Re-Insurance PVT LTD

– Pearl Pension Fund Management

– 25 % Clan Holdings Limited

– 15 % Zimpapers

– Allied Conveyor Belts PVT LTD

– Real Estate including (Anastasia Court, Belgravia House, Thaine Building)

– Various Listed ZSE Listed shares

– Treasury Bills

– GMB Bills

– Cargill Commercial Paper

– $ 4 billion – Alliance Capital Debenture (representing 123 million First Mutual Life shares)

– 23 Million First Mutual Life shares

The installation of RTGS immediately allowed the Authorities to trace which Institutions were the biggest movers of money and the money market. The authorities were alarmed to learn that ENG (an unknown firm to them) and which didn?t have a political ?Godfather? was allowed to control such resources. A further study was made to trace the political inclination of the shareholders and directors. ENG was not well represented in the political ladders. The belief was that any independent financial resources could be used and was being used to clandestinely support the opposition or politicians deemed undesirable. In addition business owners were supposed to show gratitude by donating and financing the political set up. Any meaningful business group was supposed to be well known and its owners be vetted by the authorities? political process. Any business which didn?t fit that bill had to be either closed, nationalized or shareholding restructured. (By any means necessary).

Through extra-judicial and judicial measures pressure was brought to bear on selected individuals and institutions by the state machinery with the sole objective of punishing the designated persons. The allegations were that ENG Asset Management (PVT) LTD and not the directors had failed to pay Z$61 billion allegedly owed to investors.

Clearly if such amount was due and payable to creditors or investors, there were other legal remedies available to such investors but in the interests of political expediency, the state arrogated to itself the role of custodian investor with no legal foundation and proceeded to attempt to assert purported rights of private sector investors. The ENG matter was extensively covered in the media and careers were destroyed as thriving institutions controlled and managed by indigenous business people were systematically targeted. The same media has failed to follow up and highlight that in fact ENG has managed to repay creditors and investors despite assets being looted .

Banks and Asset management companies because of huge profits were generally reported to be the source of the problems in the financial services industry and causing economic meltdown facing the nation.

Against this background, there was a need to identify and punish the alleged culprits and ENG provided a convenient scapegoat, visible and the high profile victim needed to capture the imagination of the general public that Zimbabwe had a new no-nonsense boss in RBZ Governor Dr Gono. Dr Gono blamed Financial Institutions for fueling inflation and currency depreciation Dr.Gono closed down or nationalized the following institutions ; Trust Bank, Royal Bank, Barbican Bank, Rapid Financial Holdings, Sagit, ENG Capital,Intermarket and many others.

Dr Gono promised the nation that economic recovery was now certain and failure was not an option. Inflation was then at 200% and now its at least 13,4 billion %.Zimbabwe dollar was exchanging at Z$6000 = US$ 1,and now its Z$ 4,000,000,000,000 for each US$. Shops are empty.

Banks have no cash. Parliament has no running water .Harare has no water .No electricity. This is despite all the fanfare that came with the anti-graft crusade that all will be perfect and well if we get rid of profiteering Banks and Financial Institutions. This just proves scapegoat mentality does not solve national problems. What is required is a national vision that taps into all Zimbabweans? best talent and ability rather than some party or patronage based allocation of responsibilities not matched by ability to deliver .

In 2002, ENG Capital applied for a banking license. The application was quickly dismissed .Due to this failure, in April 2003 ENG acquired Century Discount house as a strategy to enter the Banking sector. A cash consideration was paid. ENG then applied to the Registrar of Banks for the approval of change of shareholding structure. The approval was denied .On further enquiring about the approval denial the Registrar?s officers mentioned that the approval will not be for the coming mainly because of ENG Directors age and unknown political background and views. They advised us to restructure our shareholding to accommodate politically acceptable individuals in addition to start being active in funding political activities that would maintain the status quo. This situation spelled a disaster for ENG as I was of the view that we should not be part of any arrangement that could compromise our reputation, image and market perceptions.

In the meantime the seller (Century Holdings) of Century Discount House was not in a position to refund ENG Capital of the purchase price paid. This forced ENG Capital to acquire a controlling stake in Century Holdings, which was listed on the Zimbabwe Sock Exchange. This at least limited the potential loss since the purchase of Century Discount House was now an inter-company transaction. Obviously the refusal to restructure the shareholding to accommodate those politically correct and the refusal to being active in funding political activity didn?t please those who felt it was their God given right to receive support from any and all companies operating in the country. This independence was viewed as being lack of gratitude.

On 31 December 2003 at the instigation of the RBZ (using military and security officers), ENG Capital was placed under voluntary liquidation to secure and repay investors and creditors. Although the creditors and investors, whose rights the government sought to assert without their consent, have now been fully repaid the media has not covered this aspect of the story .Covering the full repayment exposes the hypocrisy of the RBZ and the unwarranted and draconian actions that against private individuals in a manner that violates their constitutional rights. On July 31 2006 more than two and half years after the arrest my co-accused who remained in Zimbabwe was removed from remand and the clerk of court ordered to return his $ 150 million bail and $ 700 million surety.

The media including but not limited to the state media ran grossly inaccurate and biased attack articles on my character and reputation.

Articles without any back up of facts were printed deliberately understating ENG assets simultaneously magnifying liabilities . Many articles misrepresented ENG financial position and activities .Most newspapers refused to publish a rebuttals or give them equal exposure as their initial, false and malicious articles .

This is the kind of hostile environment that faces a normal business in the current Zimbabwe. How can foreign investors come if the local ones are routinely victimized as a matter of policy? Given the above facts and order of events it is small wonder that the country has been experiencing unprecedented levels of capital flight and brain drain.

Considering the wide media publicity the ENG Capital matter received one would think the same media would have followed up and highlighted the fact that ENG Capital managed to repay all creditors and investors. The lack of such reporting only serves to show how far Zimbabwe has to go in terms of creating level business playing field and fair media coverage of critical events affecting the nation .

Gilbert Muponda is a Zimbabwe born Entrepreneur; he can be reached at gilbert@gilbertmuponda.com