Online Reporter
Business Reporter
DIVERSIFIED listed resource firm RioZim is facing widespread allegations of financial misconduct, asset stripping and systematic fraud, sources familiar with the developments have said.
Inside sources claim these activities, including the alleged illicit diversion of company funds, non-payment of salaries for months and the theft of statutory and pension contributions are causing severe hardship for the workforce.
Most of the allegations have surfaced in High Court papers where the workers are seeking to place the company under corporate rescue.
Hundreds of employees are reportedly struggling to afford necessities like food, rent and school fees due to the alleged fraudulent activities.
Some workers claimed to have been evicted from their homes while others are saying they cannot access healthcare services due to unremitted medical aid deductions.
“The employees are hopeless,” said one anonymous source, emphasising the urgent need for intervention.
“Workers are crying out for someone to listen to the voice of the Zimbabwean people being exploited.”
The allegations paint a grim picture of a company in distress, with its assets reportedly being systematically stripped and sold to “shelf companies” or external entities. The proceeds from these sales are purportedly not returning to official company bank accounts, according to sources.
It is further alleged that the company’s official bank accounts have been blocked by Zimra. In response, management is reportedly conducting business through undeclared accounts to avoid tax authorities, allegedly diverting income that would otherwise appear on financial statements.
Sources further claim the company sold coal reserves in Sengwa, Gokwe, despite knowing the Government had reclaimed the land due to inactivity with the full proceeds believed to have been diverted.
Similarly, One Step Mine was reportedly sold for US$6,3 million, but sources allege the declared sale price was significantly lower, with the difference hidden. Assets like Dalny Mine and Palatial are also alleged to have been sold for undervalued sums and are now operated by the company’s directors.
Furthermore, alleged fraudulent, backdated tribute agreements with unsuspecting tributors are cited, with money from these deals allegedly not reaching company accounts due to the lack of operating bank accounts.
Group chief executive officer Mr Swami Rajgopal had not responded to a request for a comment by the time of going to print.
“The employees are appealing for urgent intervention and protection from what they describe as ‘severe exploitation and financial abuse’,” said one official. They are urging authorities to investigate the allegations of theft from both the company and the Zimbabwean State.”
Last month, RioZim workers filed a High Court application seeking to have the company placed under corporate rescue to avert potential liquidation. Represented by the Zimbabwe Diamond & Allied Minerals Workers Union (ZIDAMWU) and joined by two other employees from RioZim subsidiaries, the workers argue that failure to implement remedial measures like corporate rescue will lead to the undesirable liquidation of the company.
Corporate rescue is a process aimed at reviving a financially distressed company. The process provides a temporary moratorium on legal proceedings against the company, allowing a business rescue practitioner to develop and implement a plan to return the company to solvency.
Court documents reveal that RioZim, listed on the Zimbabwe Stock Exchange (ZSE), faces severe liquidity issues, with current liabilities exceeding current assets by approximately ZiG 1,04 billion and total liabilities surpassing total assets by ZiG149,2 million as of June 30, 2024.
The company is struggling to meet financial obligations including US$5,5 million and ZiG9 million in regulatory and contractual commitments.
This has led the Zimbabwe Revenue Authority to suspect financial impropriety and demand the company’s asset register. Critical services like electricity have been cut off at the Renco Mine due to a US$4,7 million debt.
Furthermore, RioZim owes US$5,6 million in outstanding salaries and faces numerous labour disputes.
Given the company’s negative equity of ZiG149,2 million and declining performance including a drop in gold production despite global price increases, the situation is unsustainable and necessitates intervention to prevent collapse.
RioZim also faces significant legal challenges, including criminal charges from the tax authority and the Mining Industry Pension Fund, in a US$30 million commercial dispute and a dispute over a US$55 million debt to an associate company.
RioZim’s financial statements, audited by Forvis Mazars in Zimbabwe, also highlight a material uncertainty that casts significant doubt on the group’s ability to continue as a going concern.
This is not a new issue as the company’s previous auditors, Ernst & Young Chartered Accountants, also raised concerns about the company’s going concern status and significant compliance issues with International Financial Reporting Standards as far back as December 2021.
