Maverick Citizen

ZIMBABWE CARTELS REPORT Right of Reply

Adam Molai of Pacific Cigarette Company: Maverick Citizen’s report ‘vindictive and without foundation’

Adam Molai of Pacific Cigarette Company: Maverick Citizen’s report ‘vindictive and without foundation’
Illustrative image | Zimbabwean President Emmerson Mnangagwa and controversial business mogul Kudakwashe Tagwirei. (Photos: Waldo Swiegers / Bloomberg | Getty Images / JEKESAI NJIKIZANA | EPA-EFE / AARON UFUMELI | Flickr / Alvaro Martinez)

On 11 February, Maverick Citizen received the following statement issued by the Conversations group on behalf of Adam Molai. In the report we published on 9 February Molai is mentioned (on pages 28 and 29) in a case study looking at the cigarette cartels. The following is said:

“Under the Mugabe administration, the majority of cigarettes smuggled to South Africa, i.e. the Pacific Cigarettes [and] Gold Leaf Tobacco brands (Ref: Atlantic Council. 2019. The Illicit Tobacco Trade in Zimbabwe and South Africa: Impacts and Solutions. Atlantic Council), were produced by members of Mugabe’s patronage network. Pacific cigarettes are the most seized brand by South African law enforcement agencies (Ref:  Moses Mutsvandiyani v. The State, CRB B 719/05 (ZWHHC 1, 2005). Pacific Cigarette Company (PCC) is owned by Adam Molai, Robert Mugabe’s nephew-in-law and a Chinese state-owned cigarette manufacturing company (Ref: Nyayaya, K. 2018. “Chinese tobacco giant enters Zim market”, The Standard, December 9). In 2012, President Mugabe accused British American Tobacco (BAT) of spying on PCC and hijacking its trucks, stating: “If this is what you are doing in order to kill competition and you do it in a bad way, somebody will answer for it”. (ref: Rees, M. 2013. “Mugabe link to illegal cigarette trade”, Sunday Times, December 23).

“The cigarette cartels and key players in them survived Mugabe’s fall. Under the Mnangagwa administration, cigarette smuggling has continued to thrive and the operations of the aforementioned money-men have been unhindered. The ban on the sale of cigarettes during the Covid-19 pandemic in South Africa significantly increased the market and prices for smuggled cigarettes (ref: Chingono, N. 2020. “South Africa tobacco ban greeted with cigarette smuggling boom”, The Guardian, June 26). While in 2015, Mnangagwa, like Mugabe, “declared that he would personally ensure that [PCC] was protected from what he called international mafia that he accused of sabotaging Molai’s company”,(ref: “Questions over Mnangagwa involvement in Savanna”, The Zimbabwean, March 31, 2015) Adam Molai has been under investigation by the Mnangagwa administration for a US$304-million state contract he won without going to tender as required by law (Ref: The Zimbabwean. 2015. “Questions over Mnangagwa involvement in Savanna”, The Zimbabwean, March 31).”

***

We reprint Molai’s response in full below, followed by a response to the complaint compiled by the authors of the report.

***

Media statement by Adam Molai and Pacific Cigarette Company (12 February 2021) Released on behalf of Adam Molai by Conversations Media and Communications

Maverick Citizen’s false allegations about Pacific Cigarette Company in their Cartel Power Dynamics in Zimbabwe “exposé” are vindictive and without foundation  

I have noted with extreme dismay Maverick Citizen’s references to Pacific Cigarette Company and myself in its Cartel Power Dynamics in Zimbabwe “exposé”. 

The allegations are completely untrue and without foundation. We would have made this clear had Maverick Citizen afforded Pacific Cigarette Company or myself the opportunity to respond, as required by the press code and good journalism practice. In fact, the “note from the editor” which precedes the report asserts: “Maverick Citizen provided prior notice and the opportunity for those referred to in the report to respond to its findings before publication.”  

This is false – there was absolutely no attempt made to contact me or Pacific Cigarette Company. This fundamental flaw in its process taints the credibility of the report. 

I have been resident in South Africa for years and have been openly engaged on several South African media platforms in the last six months – so it is not as if the report’s authors could not find me.

We demand that Maverick Citizen retract its baseless allegations as it pertains to Pacific Cigarette Company and me, and tender an apology to us.

Should Maverick Citizen refuse to do so, we reserve the right to pursue all the legal avenues available to us.

The facts of the matter are these – which we would have gladly explained had we been approached for comment:

False Claim 1: Pacific cigarettes has a Chinese state-owned entity as a shareholder 

The ultimate beneficial shareholders in Pacific Cigarette Company are Adam Molai, Gerrit de Jong and Christopher Sambaza through their family trusts. All three shareholders are Zimbabwean citizens.

Pacific Cigarette Company has a manufacturing agreement with China Tobacco Shaanxi Industrial Corporation, a subsidiary of the Chinese National Tobacco Company, to manufacture cigarettes for the Chinese diaspora in Africa. The contract was a first of its kind to have Chinese brands licensed to an African entity; something that should be celebrated, not maligned.

False Claim 2: The majority of cigarettes smuggled into South Africa are Pacific cigarettes

No such proof has ever been furnished and we are not and have never been the subject of any investigations.

Cigarette smuggling is a global phenomenon which has been in existence since the advent of the industry and long before Pacific Cigarette Company came into being to challenge the monopoly that existed. 

Pacific Cigarette Company has never been involved in nor in any way condones cigarette smuggling. Our company is proud of its history of democratising the Zimbabwean tobacco industry through introducing contract farming that increased participation to over 85,000 families.  

False Claim 3: Pacific was a part of a “Mugabe patronage system”

I married President Robert Mugabe’s niece in 1998 and that is my only “crime”. 

I come from a business family and am 3rd generation in business, something that less than 1% of Africans can profess. Long before I met and married my wife, I attended the best private schools in Zimbabwe, the UK’s most expensive and only private university and one of Canada’s leading business schools, as my father was a pound sterling millionaire before the advent of Zimbabwe’s independence. 

I have never bid for a tender anywhere in the world. My businesses were generally started from scratch, or I have taken stakes in existing enterprises.

Contrary to benefiting me, building brands with a Mugabe relationship has been the biggest challenge. This difficulty continues to be perpetuated by stories like Maverick Citizen’s, long after his demise.

False Claim 4: Adam Molai is under investigation for a state contract that at law was required to go to tender 

I am not under investigation nor was this a procurement contract. 

One of our investments, Housing Corporation Zimbabwe, approached the National Social Security Agency (NSSA), as the largest Zimbabwean pension fund, for investment, not for a contract. NSSA then informed us of their off-take scheme, which they had launched with other development entities.

It was ventilated in court that NSSA’s procurement policy provisions clearly differentiate between off-take agreements, which are investment decisions taken differently from the procurement of services in the ordinary course of organisational operations.

This matter has gone to arbitration in Zimbabwe, and even to the High Court and we have a US$22-million award in our favour which is an order of the court.

We have also been awarded a temporary injunction from the Supreme Court of Mauritius against the assets of NSSA held in Mauritius.

The Zimbabwe High Court has also found that a forensic audit report on NSSA was biased, inaccurate, untrue and incompetent.

In its report, Maverick Citizen ascribes my business success and acumen to political patronage. This is insulting and offensive. It ignores the reality that, together with the many competent, multinational professionals who make up my various teams, I have built and bought more businesses and grown our balance sheet more since President Robert Mugabe was removed from office than whilst he was in office.

I am incredibly proud of our collective achievements which have been the result of vision, hard work and grit.

I am happy to defend myself and my and Pacific Cigarette Company’s business track record in any court of law on any of these malicious allegations.

***

Response to media statement by Adam Molai and Pacific Cigarette Company by the report’s authors

The aforementioned media statement does more to prove the points raised in the “Cartel Power Dynamics in Zimbabwe” report than it does to disprove the report’s findings.

On page 28, the report states that Adam Molai was a member of Mugabe’s patronage network. 

As the press statement admits, Molai was Mugabe’s nephew-in-law. Patronage is privileged support provided by a political leader to an individual or company. As stated in the report, Mugabe publicly threatened BAT Zimbabwe for allegedly blocking Pacific cigarettes from accessing the market. This was privileged support as Mugabe did not provide such support for other companies that had equally complained about BAT Zimbabwe.

When a relative of the president owns a relatively young company which is awarded a contract worth US$304-million by a state-owned entity without competitive bidding, due diligence or financial appraisal done, one is persuaded to believe that this is due to the privileged support that such an individual enjoys and the institutional weakness of the state entity.

The report notes on page 53 that rule of law is weak in Zimbabwe. The press statement underlines this. 

Zimbabwe’s Constitution states in Section 315 (1) that “procurement of goods and services by the State and all institutions and agencies of government at every level” must be “effected in a manner that is transparent, fair, honest, cost-effective and competitive”. In Section 315 (2) the Constitution states that “contracts for the construction and operation of infrastructure and facilities” must be conducted in a manner that “ensures transparency, honesty, cost-effectiveness and competitiveness”. Likewise, the Public Procurement and Disposal of Public Assets Act (PPDPA), which applies to all stages of the payment for construction works by public entities, requires competitive bidding and that bidders demonstrate “experience” needed to deliver on the contract.

Molai can call the contract by any name he likes, but the supreme law of the land states unequivocally that this contract should be awarded transparently after an assessment of its cost-effectiveness and after a competitive process. The press statement admits this was not the case and that the contract was awarded in an unconstitutional manner. 

The PPDPA does not condone the awarding of such a contract to a company with limited to no experience. We call on constitutional lawyers in Zimbabwe to challenge the high court decision to award HCZ US$22-million of Zimbabweans’ pensions and the constitutionality of the NSSA procurement policy provisions cited in the press statement. As per the Financial Gazette, Molai and the HCZ cannot deny being investigated over the NSSA contract as the Financial Gazette (May 17, 2018) reported that they sued a Zimbabwe Anti-Corruption Commission (ZACC) official for announcing that Molai and HCZ were under investigation (“ZACC boss sued for $200k”, May 17).

On page 28, the report states that “the majority of cigarettes smuggled to South Africa [are the] Pacific Cigarettes [and] Gold Leaf Tobacco brands” and that “Pacific cigarettes are the most seized brand by South African law enforcement agencies”. 

These are not statements that we make lightly – these are the findings of (i) the Atlantic Council, a distinguished think tank; (ii) the Tobacco Institute of Southern Africa and (iii) law enforcement agencies in neighbouring countries that have on numerous occasions intercepted Pacific cigarettes being smuggled into their countries – as far back as 2009, the Botswana Police Service seized 66,500 cartons of Pacific cigarettes (The Independent, 2009) “Botswana Seizes US$3,1 million Zim Cigarettes”, December 3); last April, it was reported in the media that the South Africa Police Service intercepted R900,000 worth of Pacific cigarettes (Bulawayo24 (2020) “Zimbabwe made cigarettes smuggled into SA, trio arrested”, April 17). 

Nowhere in the report is Pacific Cigarette Company accused of smuggling its cigarettes, a false claim made in the press statement.

On pages 52-53, the report describes how lack of transparency and weak enforcement of legislation drive the activities of cartels. 

On 1 January 2020, a new Companies and other Business Entities Act came into effect in Zimbabwe. The act, developed with support from the World Bank, has progressive clauses around transparency of beneficial ownership. The act, in section 72(1), requires that every company “maintain an accurate and up-to-date register of the beneficial owner or owners of the company” and unequivocally states (section 72(6)) that this information is public information.

When the act was passed, companies had until this past Saturday, 13 February 2021 to declare their beneficial ownership. This law has been enforced poorly – first the Registrar of Companies unilaterally decided that beneficial ownership information was not public information but only available to law enforcement agents, and then in October 2020, the government postponed the deadline for companies to declare their beneficial ownership by two years to 13 February 2023. 

However, there is no law today that prevents Pacific Cigarette Company from publicly declaring who its beneficial owners are on its website as is done by well governed companies across the world and in the spirit of the new Companies and other Business Entities Act. That is something that will be celebrated – not the public declaration of beneficial ownership in press statements. DM/MC

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