ZSE blocks Afre meeting

was scheduled for this Friday citing irregularities that could have an impact on policy holders and minority shareholders.

A forensic audit conducted by BCA Forensic Audit Services found that there were some irregularities that needed to be addressed first.
The shareholders meeting was meant to consider a proposal by directors for a US$15 million rights issue to recapitalise the group following financial irregularities at RFHL.
ZSE chief executive officer Mr Emmanuel Munyukwi on September 09, 2011 wrote to Afre chairman, Mr Tawanda Nyambirai informing him that the Insurance and Pension Commission wanted results from the audit to be implemented fully.

Mr Nyambirai had on September 05, 2011 written to ZSE articulating the urgent need for Afre to raise capital in order to address the solvency requirements of the company’s operating subsidiaries, procure an ICT system to enhance internal controls and settlement of inter-company investments.
Said Mr Munyukwi: “We accept and appreciate the company’s requirement to raise the capital. There are, however, certain concerns raised by the regulators which could have an impact on policy holders and minority shareholders.

“Afre Corporation Ltd engaged BCA Forensic Audit Services (Pvt) Ltd to conduct a forensic audit. We understand that the forensic audit unraveled, among other things glaring corporate governance shortcomings which are detrimental to policy holders and pension fund members.”
Some of the shortcomings included, domineering by the then executive chairman Mr Patterson Timba who wielded excessive power and influence on Afre management and board, and weak and dysfunctional subsidiary boards which allowed most of the critical issues affecting the subsidiaries to be decided at group level.

There was also abuse of group structures through payment of exorbitant head office fees and investment fees to the group by the subsidiaries.
“The same forensic audit reports findings that have implicated some board members and management rendering them not fit and proper to continue overseeing the operations of the group.
“Some of the board members are seeking re-election at the annual general meeting. It is the regulator’s view that the recommendations from the said report be implemented in full for the good of policy holders and pension fund members,” Mr Munyukwi said.

He said it was the regulator’s view that KPMG’s investigations which are still underway be finalised to enable consideration of the issues that may be raised as they could have an impact on policy holders and pension fund members.

“The regulators are also concerned that Afre was run in the interest of RFHL and Econet in view of the return agreement between the two parties and this interest could compromise the interest of other stakeholders particularly policy holders and pension fund members.

“Finally concern has also been raised on the correctness of the published accounts as the accounts of the insurance subsidiaries had not been audited when the Afre results were published.
“In the circumstances the regulators are requesting that both the annual and extra-ordinary general meetings be deferred until the recommendations by BCA Forensic Audit Services (PVT) Ltd are fully implemented and KPMG have finalised its investigations,” Mr Munyukwi said.