As we review the Safari Papers from Zambia, leaked to us by insider contacts, our researchers are continually amazed by the egregious examples of corruption and financial mismanagement they contain. ZCCM-IH, the parastatal company which holds the government's share of Zambia's mining industry, is the most conspicuous case showing just how mismanaged and corrupt a company — and a country — can become. The failing finances of ZCCM-IH have an impact on the national economy, "so bad that the IMF has turned down a bailout request", and on the ordinary residents of Zambia.
So why is there no great fuss over this waste of what should be a lucrative national asset? The Safari Papers show that members of the Zambian government and ZCCM-IH's managers are using the company to increase their own wealth and power — and are doing so with impunity. Here's another example — the odd case of ZCCM-IH buying the Zambian bank Investrust.
Investment in this bank has been a dubious proposition from the start, given its poor financial performance. ZCCM-IH first invested in the bank in 2011, when it bought a 10.6 percent shareholding. In April 2016, ZCCM-IH increased this share to 48.6 percent at a time when the bank had serious management and fiscal issues. Figures from October 2016 show that Investrust had an after-tax loss of ZMK 10.75 (about $2 million) in the first half of that year.
This purchase took ZCCM-IH's stake in the bank above the government-set 35 percent limit for shareholding and the company was instructed to decrease its ownership to that limit. ZCCM-IH sold a few shares, taking them down to 45.4 percent, still way above 35 percent. So, not only did ZCCM-IH invest heavily in a bank that was in financial straits, but it also broke the financial rules regulating share purchases.
In February this year (2017), ZCCM-IH decided to underwrite 100 percent of an Investrust Rights Offer to shareholders. According to documents we have, the Board Investment Committee of ZCCM-IH in May 2017 noted that the situation at Investrust was worsening and a run on the bank was possible, given its declining performance. Why then would the ZCCM-IH board approve the (unconditional) purchase of 4,458,730 shares — the 54.6 percent of Investrust not held by ZCCM-IH — from its minority shareholders for ZMK 11.44 a share?
Does the ZCCM-IH board lack the basic ability to count? Even for them, buying a bank on the verge of collapse seems a step too far. Of course, such idiocy could be outweighed by the advantages of simply owning a bank — bringing all those opportunities to move money and assets around without alerting the authorities.