Econet bails out Afre

US$10 million rights issue.
This follows reports that the mobile telecommunications operator had already sanctioned a US$3 million loan to Afre to support the insurer’s operations.
Econet moved to curtail a crisis at Afre after recent reports of shady inter-company financial transactions rooted in a US$12 million loan to an associate.
Market reports claimed the inter-company exposure originated from a US$12 million loan that former Afre chairman Mr Patterson Timba received from business tycoon Mr Jayesh Shah and allegedly failed to repay at the agreed time.
Econet holds a 20 percent stake in Afre, gained after the two joined forces to offer a mobile insurance product, Ecolife.
Sources dismissed reports Econet had upped its shareholding in Afre. Instead, it was said shareholders would consider directors’ request for the rights issue through which the mobile operator is expected to significantly raise its stake.
“Afre wanted to raise US$10 million through a rights offer, but this has not happened. The matter will come up for discussion at the AGM in May,” the sources said.
“Econet agreed to underwrite the rights issue and will inject capital. As underwriters they will exercise rights to shares not subscribed for.”
Econet chairman Mr Tawanda Nyambirai confirmed that Econet had sanctioned a US$3 million loan to Afre in response to a request from the latter.
“The main reason for our intervention was to protect our subscribers,” he said. “Afre covers 1,6 million of our subscribers under the Ecolife life assurance scheme and it was appropriate that we show interest to protect them.”
Mr Nyambirai said the US$3 million was not in exchange for equity, but was purely a loan the multi-faceted insurance product provider would have to repay.
The loan was meant to ensure stability at Afre, he said, pointing out that in terms of Renaissance Financial Holdings, Econet only extended US$1 million loan, which he said the financial group had repaid.
Mr Timba received US$12 million from Mr Shah to recapitalise Renaissance Merchant Bank. Afre, in which Renaissance holds a 30 percent stake, was offered as security.
Mr Timba failed to repay in time. When he eventually repaid, there was suspicion he could have used depositors’ funds, prompting a three-week-long investigation of the financial services group by the Reserve Bank of Zimbabwe.
Econet, TN Bank, Metropolitan and Kingdom Bank bailed out Mr Timba, who has since been replaced by Econet chief operating officer Ms Tracy Mpofu as the chairman of Afre, as the heat from the US$12 million loan increased.
Econet has since scrapped the post of executive chairman at Afre Corporation and made more board appointments, bringing in financial director Mr Krison Chirairo and Econet Wireless chief executive Mr John Gould.
Sources also said Mr Timba had hoped to quickly clear his liabilities with Mr Shah from massive returns expected from Renaissance’s US$1,5 billion fund.
The fund allegedly did not perform as expected while beneficiaries of the fund are said to have failed to repay, throwing Mr Timba’s plans into disarray.
Unconfirmed reports say Mr Shah has moved to take over Renaissance Merchant Bank amid disclosures that he owns 60 percent of the bank.