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ZIMRA fleeced US$10 million dollars

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Zimbabwe - A company linked to embattled businessman and former Member of Parliament, David Butau, is at the centre of a controversial transaction in which the Zimbabwe Revenue Authority (ZIMRA) was prejudiced an equivalent of US$10 million, The Financial Gazette can exclusively reveal.

An audit into ZIMRA's books by the Comptroller and Auditor General has ratcheted up pressure on the revenue collecting agency to recover the US$10 million paid into Dande Capital Holdings' CBZ Bank account in 2006 as part of a three-way transaction involving China National Aero-Technology Import and Export Company (CATIC) .Investigations by The Financial Gazette revealed that while the payment into Dande's CBZ account was effected in Zimbabwe dollars amounting to $27 trillion, the money was enough to settle ZIMRA's US$10 million debt with CATIC at the time.
At the time of the payment an agreement had been reached between ZIMRA, CATIC and Dande in 2006 whereby the local company would use the $27 trillion to bolster its working capital requirements.

In return, Dande Capital, had committed itself to shipping chrome from its mines worth US$10 million to settle the CATIC debt on behalf of ZIMRA.
Further investigations revealed that similar deals were also entered in 2006 between Dande Capital and some of the country's parastatals namely, ZESA Holdings and the Agricultural Rural Development Authority (ARDA). CATIC had in recent years provided the country with passenger and military planes, electricity transmission equipment for ZESA and tractors for ARDA.

The Financial Gazette could not immediately establish whether ARDA and ZESA eventually concluded their agreements with Dande.CATIC had supplied scanners worth US$10 million to ZIMRA to facilitate speedy clearance of goods at major entry points.Due to the severe foreign currency shortages gripping the country the authority had struggled to raise the funds needed to offset the debt.But Dande Capital has since failed to honour its side of the bargain.Sources at ZIMRA told The Financial Gazette this week that a report had since been made to the police, who are now handling the case.

A report by the Office of the Comptroller and Auditor General dated May 29 2007 indicates that at the time of the audit, the agreed 100 days for the payment to China had lapsed with CATIC accounts reflecting no payment from Dande Capital had been made.The Comptroller and Auditor General warned that such transactions exposed ZIMRA to massive penalties and high interest rates from CATIC.

"I observed that during the period under review ZIMRA injected working capital amounting to Z$27 trillion to Dande Capital Holdings as part of its contractual agreement where ZIMRA was expected to supply working capital for the mining of chrome," the Auditor General's said in a letter to ZIMRA Commissioner General, Gershem Pasi.

"In return Dande Capital Holdings was expected to make a lump sum payment of US$10 million to CATIC China on behalf of ZIMRA to settle its foreign debts. At the time of my audit, on April 17 2007, Dande Capital Holdings had not yet honoured its obligation and the stipulated time of 100 days from the day of the last draw (down payment) that was 26/09/06 had already passed," the Auditor General's report added.

"If the arrangement does not materialise as planned the authority is at risk of penalty from CATIC China for failure to service the foreign debt timeously. In addition the authority might have suffered an opportunity cost associated with its capital at Dande Capital Holdings.

"I therefore suggest that the authority expedite the recovery process of either the amount advanced with interest or the agreed foreign amount in order to maintain its credibility with CATIC China," the report said.

CATIC is a leading trading corporation based in Beijing whose core business is aviation, defense products, export and imports.Established in 1979, the corporation has assets valued at RMB24 billion and accumulated imports and export volumes of US$24 billion thus far.The audit also revealed that during the period under review ZIMRA had a foreign debt of US$30, 3 million, or Z$6,5 trillion with US$27,3 million being a short-term debt that was expected to be settled within 12 months.About US$9,4 million was overdue but this foreign debt was not effectively hedged, a necessary action to guarantee the availability of foreign currency.

"The authority was therefore exposed to foreign currency risk that resulted in an exchange loss of $4 trillion," added the report.
This week, ZIMRA refused to shed light on the deal with Dande Capital.Commissioner legal and corporate services, Florence Jambwa, said:

 "We are unable to comment because the matters are sub judice."

Sources close to the authority said this week the ZIMRA board had not sanctioned the transaction and was anxious to conduct a forensic audit to establish if there were similar transactions that might have gone unnoticed.Dande Capital has seven subsidiaries - El'e Resources (Pvt) Ltd, Cynthesis Agriculture Pvt) Ltd, Cythensis Cotton (Pvt) Ltd, Tsakare Chickens (Pvt) Ltd, Timbsbury Timbers (Pvt) Ltd, Heldnet Enterprises (Pvt) Ltd and Telequip (Pvt) Ltd.

Its tentacles span across agriculture, mining and telecommunications with strong links with the Chinese market.Butau, who is facing charges linked to the Reserve Bank of Zimbabwe's farm mechanisation programme, chairs Dande. There have been reports alleging the former MP had been stripped of his directorship in the business.Dande was born out of efforts to economically empower the indigenous people in the north-eastern part of the country but in recent years some Dande Capital managers have courted controversy.

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