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Farirai Machivenyika Senior Reporter
GOVERNMENT could be losing millions of dollars in potential revenue as its impasse with Macdom has stalled indigenisation of Green Fuel.
Green Fuel is a joint venture between Macdom and Government through Arda, with the former holding 90 percent of the shares. Arda holds the remainder.
The company was awarded a licence to blend fuel on the understanding that it would comply with the Indigenisation and Economic Empowerment Act that requires indigenous Zimbabweans to own at least 51 percent of any venture valued at US$500 000 or more.
Minister of Energy and Power Development, Dzikamai Mavhaire, yesterday confirmed the company was far from being indigenisation compliant.
“On the basis of a written assurance from Green Fuel that they were agreeable to the setting of 51-49 joint venture with Government, a mandatory blending licence was issued by Government. This formal undertaking by Green Fuel constitutes the basis for the current and future relationship between Green Fuel and Government.
“The challenge that has arisen is how to realise the 51/49 equity shareholding in the joint venture. Whereas Government is insistent on equity cede, Green Fuels prefers a progressive process based on asset evaluation,” Minister Mavhaire said.
He said negotiations were ongoing although Government insisted that 51 percent of the shares be ceded.
Appearing before the Portfolio Committee on Youth Development, Indigenisation and Empowerment yesterday, Green Fuel officials said Government had to pay commercial value for the shares.
Cde Justice Mayor Wadyajena chairs the committee.
Green Fuel general manager Mr Graeme Smith said, “In 2012 the Government of Zimbabwe directed Arda to convert the Chisumbanje build, operate and transfer into a joint venture and to include Green Fuel within the joint venture. Government directed that the joint venture should be on 51/49 percent basis with Government holding 51 percent. This is despite the fact that Macdom and Green Fuel are wholly-owned Zimbabwe companies.
“Macdom and Green Fuel agreed to enter into a joint venture with the Government of Zimbabwe on commercial terms so as not to prejudice the shareholders and put the financiers at risk. This commitment has been communicated to the Government through the Ministry of Agriculture, Mechanisation and Irrigation Development.
“In line with such directives, Green Fuel, Macdom and Arda – who represent the Government of Zimbabwe – entered into a joint venture based on commercial value of contribution brought to the project to date,” he said.
“At present and in consultation with the Minister of Agriculture the parties are exploring various commercial and substantive options to increase Arda shareholding in the joint venture. Depending on the commercial value of these options to the project Arda may attain 51 percent.”
According to Arda’s acting general manager, Mr Willard Mbona, Government’s contribution to the project is US$36,7 million, inclusive of land, while Green Fuel’s contribution was valued at US$331,8 million.
“The company valuation is not based on actual contribution per se but on the market value of the company in terms of the discounted cash flow method. Macdom and Green Fuel market value is placed at US$331 809 251. Now it is the comparison of these two that you then come with a 90 and 10 percent shareholding,” he said.
Negotiations to resolve the impasse involve Green Fuel and the ministries of Agriculture, Energy and Power Development, and Youth Development, Indigenisation and Empowerment.
Meanwhile, there was drama at the commencement of proceedings of the committee yesterday.
Chipinge South representative Cde Enock Porusingazi (Zanu-F) recused himself saying he had worked closely with Green Fuel from its inception.
Makoni West representative Cde Kudzanai Chipanga (Zanu-PF) then asked Cde Wadyajena to recuse himself since he was in the fuel business.
“Mr chairman I understand you are also into the fuel industry so you must recuse yourself. Are you not in Sakunda?,” Cde Chipanga asked.
Cde Wadyajena, however, shot him down saying, “I advise you to stick to what we are doing, let us not bring trivial issues.”
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