In the wake of the controversial termination of the US$400 million National Railways of Zimbabwe (NRZ) recapitalisation deal last year by cabinet, Attorney-General (AG) Prince Machaya reportedly wrote to Transport minister Joel Biggie Matiza advising him on the dire legal implications of cancelling the project, fresh details have emerged.
The Diaspora Infrastructure and Development Group (DIDG), which won the tender to recapitalise the moribund rail operator in 2017 before the deal was overturned by cabinet at the behest of Matiza, is on the verge of suing the NRZ for US$215 million.
In October last year, cabinet abruptly terminated the DIDG bid, nearly two years after the government had awarded the group the tender to recapitalise the state-owned rail operator.
Prior to the cancellation of the DIDG bid, which had attracted the interest of various regional banks with a US$1 billion war chest to finance the project, the deal was stalled by legal and technical hurdles, which Matiza leveraged on to muscle out the consortium.
In his latest spirited manoeuvres to bury the DIDG bid, Matiza this week ordered the NRZ board to fire the management at the parastatal and inject the entity with “fresh blood” by October, in a move he said would revitalise the embattled rail operator.But the board and management, mindful of the costly legal consequences that would arise from terminating the DIDG bid without following due process, are both opposed to implementing Matiza’s directive, which entails re-tendering the deal.
Machaya confirmed to the Zimbabwe Independent this week that he wrote to the minister, but owing to “confidentiality” issues, would not disclose the finer details of the advice he proffered Matiza.
“I remember writing something to him about the NRZ contract. What I communicate with him is confidential,” Machaya said. “I confirm that Minister Matiza is my client and consequently my communications with him are covered by the privilege which exists between lawyer and client. I therefore cannot disclose to you the content of whatever advice I gave to him.”
Sources close to the botched multi-million-dollar transaction told this newspaper that in November Machaya wrote to Matiza allegedly cautioning him of the costly legal consequences the NRZ would bear if he forged ahead with his plans to torpedo the DIDG bid, which had already been given the nod by Treasury before it was abruptly terminated.
“In November last year, after cabinet terminated the DIDG bid, Attorney-General Machaya wrote to Minister Matiza advising him on the legal pitfalls that would arise if the DIDG bid was reversed in an unprocedural manner.
“In the correspondence, the AG basically underscored that if DIDG were to sue, the NRZ, which is already saddled with an unsustainable debt, would sink further and would not attract the interest of investors. It appears the NRZ board and management are mindful of these consequences,” a source told the Independent this week.
As reported by this newspaper on November 29 last year, DIDG approached its lawyers in Harare, Atherstone and Cook, instructing them to sue the NRZ for US$215 million and also seek an injunction if the multi-million-dollar deal was re-tendered as per the cabinet directive.
At that time, Atherstone and Cook managing partner Innocent Chagonda told the Independent that DIDG would proceed to sue for opportunity costs, while the impending lawsuit would prolong the process of turning around the moribund parastatal.
“My client has been trying to make the NRZ board see the consequences of re-tendering the deal. Re-tendering the deal will expose NRZ to a huge and embarrassing lawsuit and the possibility to put an injunction on any future tenders and therefore scaring away potential suitors. If they (government) make good their threat, there will be room to file for damages,” Chagonda said.
This week, DIDG chairperson Donovan Chimhandamba singled out Matiza, among government officials, angling to scuttle the deal, which had sailed through decisive phases.
He said: “The illegal instruction by Minister Matiza to fire NRZ general manager Lewis Mukwada and do a wholesome restructure of the senior management and board is a desperate attempt to bully and cow NRZ leadership into implementing his botched attempt to cancel the NRZ tender awarded to DIDG. Matiza is acting with absolute impunity and ultra vires of the powers of a minister.
“How can he blame management and board for not concluding the DIDG deal when he is the very same person who blocked it hoping he can parachute his own non-indigenous investors through the backdoor? We have continuously put it on record that Matiza’s actions are very suspicious and over-reaching for a minister.”
At the time of going to print, Matiza had not replied questions from the Independent on the legal advice given to him by Machaya on the ramifications of cancelling the DIDG-NRZ. He was not answering calls on his mobile phone.
In a letter dated June 24 to NRZ board chairperson Martin Dinha seen by the Independent, DIDG highlighted “procedural irregularities” related to the cancellation of its bid, underscoring that Matiza was acting outside the tenets of the law.
The letter reads: “We would like to place it on record that there are numerous procedural irregularities which have been committed by the parent ministry in this matter. With greatest respect, the minister has no power to direct the NRZ to unlawfully terminate an agreement against the interest of the nation.
“It is not in the interest of NRZ and the nation for the minister to instruct you to do an unlawful act. Ultimately, if this were to happen, significant damages will have to be paid by NRZ.”
The troubled DIDG bid had also attracted the interest of the African Import and Export Bank which was tasked with mobilising funding for the multi-million-dollar project to revamp Zimbabwe’s decaying railway network.