RP Capital Advisors Limited which acted as the lead transaction adviser to the Governmen of Zambia in the partial privatisation of Zamtel says it is shocked that they were not allowed to be heard by the Commission of Inquiry.
The Zambian government is extremely likely to reverse the sale of Zamtel to LAP Green Network after a commission of inquiry led by Justice minister Sebastian Zulu found that the sale was fraudulent.
But RP Capital adviors, an independent financial advisory firm focused on providing advice to public bodies, private clients and corporations in emerging markets told the Watchdog that it appears that the Commission’s process and findings have been conducted with wholesale disregard for due process, fairness and natural justice.
The RP Capitla advisors have also disclosed that they have sent a letter to the Minister of Justice Sebastian Zulu expressing concerns in more detail.
Justice minister Sebastian Zulu was also the commission chairperson and will sit in the cabinet that will decide the matter.
RP Capitla advisors also said recent statements in the media are misleading and distorted.
‘We wish to express our grave concerns about misleading statements regarding the transaction which have appeared in the press, some of which are attributed to members of the Government. These provide a distorted account of our involvement in the process and the results thereof and suggest, entirely without any factual basis, a failure by us to discharge our obligations.
‘In sum, we would like to set the record straight with regard to the quality and integrity of the services we have provided to the Government and the people of the Republic of Zambia,’ reads a statement sent to the Watchdog.
Part of the statement sent to the Watchdog by Peter Nemeth of RP Capital advisers said:
We deeply regret that, despite our offer to do so, we have not been given an opportunity to make our representations to the Commission of Inquiry. We were unable to address the allegations made against us. Thus, it appears that the Commission’s process and findings have been conducted with wholesale disregard for due process, fairness and natural justice.
RP Capital Advisors Limited has sent a letter to the Honourable Minister of Justice of the Republic of Zambia expressing our concerns in more detail
RP Capital Advisors Limited provided services in connection with the privatisation of ZAMTEL pursuant to the terms and conditions of a legally binding agreement with the Government. This agreement was signed following a procurement process conducted by the Zambia Public Procurement Agency
The process of ZAMTEL privatization was designed to be open, competitive and transparent to afford the Government to select the best and highest bid
More than 30 parties showed initial interest in the privatization process and raised inquiries on ZAMTEL, 8 of which also made initial submission and prequalified in the process. After a lengthy period of due diligence of ZAMTEL by the prequalified bidders, 4 non-binding and subsequently 3 binding bids were received. The 2 highest and best bidders in the consideration of the Government were invited to the final round of negotiations. The aggregate consideration paid by the selected best bidder, LAP Green, amounted to total of USD 257 Million.
The composition thereof was as follow
(1) USD 97.7 million to be paid on behalf of the Government to employees of ZAMTEL to settle redundancy liabilities
(2) USD 20 million to be paid on behalf of the Government to settle historic pension liabilities
(3) USD 42.6 million to be paid to the Government;
(4) USD 32.7 million to be paid on behalf of the Government to settle historic Zambian state supported Chinese bank loans; and
(5) USD 64 million into ZAMTEL to re-capitalize the company
In addition the winning bidder has assumed more than USD 70 million worth of guarantees previously provided by the Government to ZAMTEL’s suppliers, eliminating any further need for financial assistance by the Republic of Zambia to ZAMTEL. To the extent of our knowledge, at closing of the privatization process in July 2010, all these payments were duly made by this bidd
The foregoing sets out the entire immediate monetary benefit to the Republic of Zambia at the time of partial privatization of ZAMTEL. Further, this process had subsequent positive impact on the telecommunication sector in the country and resulted in the decrease in prices for telecommunication services for the benefit of the people and businesses in the Republic of Zambia
In summary, a company on the verge of bankruptcy with declining customer base and number of subscribers (a distant 3rd place in terms of number of subscribers for mobile services in a market of 3 participants) and negative book equity value was sold to a telecommunication operator with significant means. Thus, creating value for the Government and the people of the Republic of Zambia. What is more, the result of privatization still leaves the Republic of Zambia with a blocking minority stake in the re-capitalized company and right to IPO the Company on the Lusaka Stock Exchange. In addition, the Government stands to gain an additional payment from the investor based on the financial performance of the company in the future
The price achieved for a controlling stake in the company was one of the very best among privatizations of telecommunication assets on the African continent. Thus, the results of the privatization were exceptional given the state of ZAMTEL. This would not have been possible without high level of commitment of all stakeholders involved namely the Government ministries; ZDA; and ZAMTEL management and trade union leaders in the process of restructuring the company leading into the partial sale of ZAMTEL
We regret having to make a statement in this manner, in particular because the information furnished in this statement is readily available from public sources. The circumstances however, leave us with no other choice in order to protect our integrity.