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Zimbabwe: Metallon outsourcing lawsuit to continue

Zimbabwe’s leading gold producer Metallon Gold is now on trial on six counts of outsourcing a total of US$31 million between 2009 and 2015 after the High Court dismissed a request to quash the indictment and authorized the prosecution to amend the charges to comply fully with the provisions of the law.

Metallon is accused of paying dividends to shareholders when he realized a loss, making payments to outside companies and claiming they were loan repayments, when he did not there were no loans, and to have canceled a loan to its parent company in South Africa.

While companies can quite legally pay dividends to outside shareholders and service foreign loans, the dividends must be backed by profits and the loans must actually exist.

Otherwise, the payer is in violation of exchange control law.

After reviewing the charges, Metallon went to the High Court seeking the indictment to be quashed arguing that the charges as framed did not constitute an offense and that in any event cause, the manner in which the charges were framed could prejudice the company in its defence.

But Judge Tawanda Chitapi ruled that the court had the discretion to vary the charge since a defendant cannot be allowed to avoid having to stand trial for an alleged crime simply because the charge suffers from a defect that can be corrected.

“Ultimately, the accused must not be allowed to avoid trial based on a technicality in the drafting of a charge,” he said.

“The criminal justice system would lose respect in the eyes of society where the accused should be allowed to avoid being tried on technicalities.

“Thus, rather than allowing a crime to go unpunished by simply quashing a charge, consideration should be given to ordering a variation which would have the effect of enabling the accused to understand and appreciate the charge to which the accused must respond. .”

In that case, the judge said the proper procedure was to allow the prosecution to amend the indictment and thus allow the trial to continue.

Charges against Metallon were laid in 2010 after he allegedly paid a dividend of $51,000 despite posting a loss for the year and also reportedly declared a dividend of $25 million in 2012, but the profit of operation of the company was less than the amount declared as a dividend.

In doing so, according to the state, the company would have financed a dividend from non-distributable reserves without exchange control approval.

Metallon, which is owned by South African business tycoon Mzi Khumalo, is represented by the secretary general, Hapson Makotore. This is the second such case for Mr Khumalo, as he had to give up R1 billion worth of shares and assets after losing a case in South Africa over allegations he breached the exchange control laws while negotiating a R760 million loan with Deutsche Bank for his Mawenzi Resources and Finance Company. .

Failure to comply with laws related to how Mr. Khumalo pledged shares he had purchased from Harmony Gold as part of a black economic empowerment program at Deutsche Bank.

In Zimbabwe, the turning point came in 2015, when the National Economic carried out an inspection into the business of Metallon Gold following reports alleging a breach of exchange control regulations. It was discovered that Metallon allegedly outsourced $31 million.

It is alleged that during the period from January 2009 to December 2013, Metallon Gold Zimbabwe outsourced $9.9 million to Red Wing United Kingdom Limited Ltd, under the pretext that it was a payment for the management and services rendered to it by a company based in the United Kingdom.

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From June 2011 to January 2012, the gold miner allegedly paid $5.8 million to Stonhage Trust via Mtetwa and Nyambirai Trust, disguised as loan repayment although no such obligation existed.

Between June 2011 and January 2012, Metallon Gold allegedly paid $87,871 to First Atlantic, a company outside Zimbabwe, through Mtetwa and Nyambirai Trust disguised as loan repayment, but the South African miner owed nothing to FirstAtlantic.

A $12.2 million dividend to shareholders, but Metallon failed to withhold tax payable on dividends paid to non-resident shareholders.

In 2012, without legal clearance from the Reserve Bank of Zimbabwe’s exchange control clearance, Metallon Gold Zimbabwe allegedly wrote off a loan amount of $7.72 million as uncollectible, thereby technically outsourcing the funds in question. . The amount was an advanced loan to its sister company in South Africa.