$130m CSC deal backfires

Published: 07 December 2018

THE decision by government to go it alone in negotiating a US$130 million Cold Storage Company (CSC) deal with a foreign firm without involving the meat processor's board in scrutinising the package has backfired, it has emerged.

Government, through Lands, Agriculture, and Rural Development minister Perence Shiri (pictured), last month announced that a partner for the once vibrant meat processor had been found.

Shiri said the CSC would work with the United Kingdom-based Boustead Beef (Pvt) in a deal that would see the company use CSC infrastructure dotted around the country to process beef for export. Boustead Beef (Pvt) would also, under the deal, finance the rehabilitation of some CSC farms where cattle fattening used to take place.

The Zimbabwe Independent is reliably informed that the CSC board has referred back some terms of the deal to the Agriculture ministry for refining as the agreement was littered with a litany of glaring shortcomings that even the government's lawyers, from the Attorney-General's office, could not stomach.

"We were summoned to Harare last month where government was to announce the new CSC partner. However, the meeting did not yield the desired results since there were a lot of issues that needed to be attended to on the primary document that should be the basis of the working relationship," a highly-placed CSC source said.

Information at hand suggests the first sticking point was the state of the meat processor, with officials from the AG's Office querying whether the CSC's name should read Cold Storage Company or Cold Storage Commission.

"When drafting agreements, there should be clarity as to things such as names. As for CSC, there was a problem because in some quarters, it is regarded as a company while others say it is a commission. We were advised by the AG's Office to clarify that point and, in the final analysis, we were able to explain that CSC is a company with its own board and not a commission. We did explain that the board holds regular meetings as per the dictates of corporate governance frameworks," one of the sources added.

Another issue that emerged was how the CSC would ring-fence and protect the intended investment by Boustead Beef (Pvt) given that there were companies and institutions that were eager to recover what they are owed by the meat processor. The sources indicated that they were apprehensive about the deal.
Their worry was that the investment would go to waste if the money was used to only off-set CSC's debts. The meat processor's debt, as reported by the Independent a fortnight ago, stands at over US$40 million.

"It was explained that there is a scheme of arrangement that is in place and registered with the High Court. Under that scheme, creditors are expecting to get their first payment in March next year. We did explain this position to government and cleared the air that the investment would be used to finance the things that have been listed as imperatives in the revival of CSC, mainly equipment rehabilitation," another source said.

Other sources who attended the meeting said CSC board members were also concerned that the deal appeared to benefit more the foreign investor.

The sources said it was unclear how the CSC would benefit from the deal in the long run.

"We have a situation where this company is coming in and saying for the next 25 years we will use your equipment, use your farms, labour, and produce meat that we will export. After that 25-year period, it is now like we are saying this company will pack its bags and go. Our question is what will we benefit, as CSC, from this deal because it looks like it's a deal that will only benefit Boustead Beef (Pvt) and leave the CSC in the same old state," one source said.

The issue of funding, sources added, was another issue raised in the meeting. It is alleged the agreement allows Boustead Beef (Pvt) to show the availability of the funds it intends to invest in the CSC four months after the signing of the agreement. "We were of the opinion that Boustead Beef (Pvt) was supposed to show us the proof of funds first as per the norm. But it appears government had things its way. Boustead Beef (Pvt) is now supposed to show proof of its funds four months after the deal has been signed. It was quite a queer arrangement for some of us, but given that government has moved way ahead of us as the board, we will have to live with that queer arrangement," the source said.

The CSC is angling for a return to the international beef market. At the attainment of independence, the company exported beef to the European Union, a business that earned the country the much-needed foreign currency.
- the independent

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