CEOs fall as crisis deepens

NMBZ Holdings Limited dispatched a shareholder notice announcing the departure of long-serving chief executive officer (CEO), James Mushore, one month after chairman Tendayi Mundawarara said he would exit the banking group’s chair even after his re-election at an Annual General Meeting in September. That Mushore, who was the deputy managing director when NMBZ secured Zimbabwe Stock Exchange and London Stock Exchange listings, was leaving could have been sad news for those close to him and the entire market.

But the news of his departure sent little or no shivers at all to the markets, which gives an insight into the global perception about the NMBZ CEO. The NMBZ share price remained static at US4 cents on Monday, after trading at the same level on Friday last week. It is possible that the market was prepared for the news, and had developed shock absorbers, following reports of serious complications with Mushore’s eyesight.

It is also possible that those making the big decisions on which shares to buy, or which stocks to snub, saw no danger in his departure to the extent that it was business as usual on the capital markets. But NMBZ, in spite of reports of sharp rifts between its executives and one shareholder, said it was regrettable that Mushore, a founder, was leaving.

“We are tremendously saddened by the resignation of Mr Mushore as CEO and director of NMBZ Holdings and NMB Bank,” said Mundawarara. It had become clear that since the marathon AGM in September where shareholders had to demand a ballot, that all was not well at NMBZ. Mushore missed the AGM, which is extremely unusual given his commitment to the group.

Several top bankers have told the Financial Gazette that some key shareholders have been calling for “transformative” change at NMBZ. But the fact that Mundawarara was re-elected and immediately threw in the towel could give a glimpse into the magnitude of the crisis at NMBZ, which returned to profit during the half-year to June 30, 2014, following a US$3,3 million loss during the full-year to December 2013.

Mushore joins at least 15 other CEOs in Zimbabwe’s leading firms who resigned, or have been frustrated and exited under acrimonious circumstances, as sparks fly in boardrooms amid purges. Shareholders, the majority of whom have never had a dividend in many years, have been enraged by the massive losses that have continued to shake industries and have been redirecting their anger at CEOs.

A survey of leading firms revealed that at least 16 CEOs and chairmen have left in the past two years. But the circumstances behind their departures have been kept closely guarded secrets. It is a bit awkward for Zimbabwean CEOs to leave firms at this rate, given their history of clinging onto power even when their abilities begin to indicate otherwise.At the heart of the ongoing reshuffles, resignations and forced exits is the extensive diminution of shareholder value in once thriving firms as CEOs struggle to find profitable formulae under a hard currency regime.

Old guards have bowed out, new brooms have been replacing them, but they have also found the going tough, triggering the fresh wave of exits witnessed in the past two years. Market watchers said most CEOs dug their own graves after effectively slamming the door on good corporate governance, ruined profitable entities and triggered a fall in share prices. This provoked widespread shareholder revolts and disquiet in tottering companies.

At the Zimbabwe Newspapers Group (Zimpapers), the country’s largest media house, firm handshakes were paraded a few weeks ago amid smiles to the cameras as CEO, Justin Mutasa announced his departure. He was joined by finance director, Adolf Majome, who also refused to renew his contract. What was clear was the fact that like other firms that have seen CEOs leave, Zimpapers had staggered to a US$1,9 million pre-tax loss during the half-year to June.

Other firms that have seen the departure of CEOs for various reasons include agro-dealer, Cottco, National Foods Limited, Pioneer Africa Corporation, African Distillers, mining giants Bindura Nickel Corporation and Hwange Colliery Company Limited, Metallone Gold, Border Timbers, Dawn Properties Limited, the Zimbabwe Broadcasting Corporation, Telecel Zimbabwe and radio station, StarFM.

Struggling banking group, AfrAsia Bank has seen the departure of managing director, Tineyi Mawocha. “The problems here are too big,” said economist, John Robertson.

“CEOs are fighting against abnormally high odds. A lot of the CEOs have been discouraged by the extensive difficulties they face, which need money. They know they can’t get the money. So they get discouraged because they know that if they don’t leave, their careers are affected by lack of progress,” he says.

The debt situation among top listed firms worsened during the first half of this year, as the working capital strain deteriorated, raising fears of a sharp economic contraction.  This has triggered instability in industries. It may be the sharpest contraction since a devastating liquidity crisis hit firms in late 2011, with a telling diminution of shareholder value reported by firms like mining giant, RioZim, during the half-year to June 2014.

RioZim extended pre-tax losses to US$8,1 million during the review period, from US$2,8 million last year, after sinking deeper into debt.  Interest bearing loans and borrowings climbed to US$38 million in the first half of 2014, from US$30,8 million during the six months to December 2013. The gold miner, whose interest extends into nickel processing, fell to a US$4,6 million operating loss from US$2,2 million last year.

It announced the departure of CEO, Ashton Ndlovu last month, just about two years into the demanding job. Ndlovu’s task involved mending, and even carrying out extensive surgery, on the systems of an outfit that was paralysed by an expensive debt. The announcement of his departure was camouflaged in diplomatic dialect. “Mr Ndlovu has resigned to pursue personal business interests,” the RioZim board said.

Although there have been smooth exits, most CEOs have been expelled, resigned or fired for alleged delinquency, with the often cozy “to pursue private interests” line being given where delinquency might be an underlining factor. Plumbing materials producer, Turnall Holdings, saw the exit of its long serving managing director, John Jere, on the week the listed firm reported a US$3,5 million loss before tax during half year to June 30, 2014.

The language of a visibly fade up FBC CEO, John Mushayavanhu, whose group controlled a major stake in Turnall, summed up his feeling. “We did not buy into Turnall by choice,” he said at a presentation of FBC’s results for the half-year to June 2014.

“We found ourselves into Turnall because of a loan that was not serviced.”

“Having done our community service in Turnall,” said Mushayavanhu; “We are now going to distribute the group’s (FBC Holdings) combined shareholding in Turnall by way of a dividend in specie to the shareholders of FBC comprising 287 536 313 ordinary shares in Turnall as an interim dividend to FBC shareholders. I don’t see them declining a dividend. In fact, it is the biggest dividend since dollarisation with a combined US$8 million. We have taken your advice; you have said John Mushayavanhu is a banker; he must not be involved in Turnall. So we are going to do that.”

Another analyst argues that in cases where change was internal, not much should be expected.

“When change comes from within there is no change,” says the analyst.

“Outsiders bring new ideas,” he says. But change from within has its own strengths, which that include a rich institutional memory.

newsdesk@fingaz.co.zw