Brainworks Capital Management’s bid for 40% in Telecel Zimbabwe challenged in court

11 Feb 2015

Zimbabwean businesswoman Jane Mutasa has filed an application with the High Court requesting an interdict to stop an extraordinary general meeting seeking to endorse the disposal of 40% of Telecel Zimbabwe shares owned by the Empowerment Corporation, a consortium of domestic investors, to private equity firm Brainworks Capital Management and the appointment of president Robert Mugabe’s nephew Patrick Zhuwawo as chief executive officer of the cellco, AllAfrica reports. In the papers deposited with the court, several Empowerment Corporation shareholders – Mrs Mutasa, the Indigenous Business Women’s Organisation (IBWO), Selpon Investments and Magamba eChimurenga – argue that the sale of the 40% Telecel stake without their knowledge or consent will be illegal. ‘As shareholders in Empowerment Corporation, the applicants have a prima facie right to participate in each and every activity … That right is to be encroached upon by the acts of the respondents who have proceeded through unrecognised persons acting without authority to enter into a share purchase agreement as at 25 January 2015 purportedly disposing of a 40% of the issued and outstanding shares of Telecel Zimbabwe for the cash consideration of USD0.25 per share.’ Mrs Mutasa, IBWO, Selpon Investments and Magamba eChimurenga go on to say that they never consented to the sale of such shares, neither were they part of a meeting selecting Zhuwawo as the chief executive officer; the applicants demand that the court cancel the new extraordinary general meeting, scheduled to be held on 20 February 2015.

As previously reported by TeleGeography’s CommsUpdate, Zimbabwe’s telecoms regulator POTRAZ is threatening to withdraw Telecel’s licence unless it moves to restructure its ownership. The operator’s concession was renewed in August 2013 on the condition that it met the empowerment requirements, but the watchdog is said to be becoming increasingly exasperated by the firm’s failure to comply. In late January 2015 Brainworks Capital Management offered around USD20 million to acquire the 40% stake in Telecel that is currently held by the Empowerment Corporation. Brainworks is reportedly interested in entering Telecel alongside Russia’s Vimpelcom, which currently has a 60% holding but is looking to sell its interest. Local media reports claimed that Brainworks may go on to buy some or all of Vimpelcom’s stake itself in order to meet indigenisation laws which restrict foreign investors to a maximum 49% shareholding.

Zimbabwe, Postal & Telecoms Regulatory Authority of Zimbabwe (POTRAZ), Telecel Zimbabwe