THE Zimbabwe Manpower Development Fund (Zimdef) could have lost millions of dollars after a bank (name withheld) in which it invested $5 million offered to settle the debt with a piece of land comprising 85 undeveloped stands in Crowhill, Harare. This was after Zimdef failed to retrieve the $5 million investment from the bank.
Documents in The Herald’s possession show that the Zimdef management, which was sent on forced leave by new Higher and Tertiary Education, Science and Technology Development Minister Professor Amon Murwira pending a forensic audit, agreed to the barter deal.
They cited approval by then Higher and Tertiary Education, Science and Technology Development Minister and the Fund’s trustee Professor Jonathan Moyo.
The bank owed Zimdef $5,086,307.00. Zimdef has been holding the bank’s property deeds ceded by the bank as security. The bank has agreed to transfer the property, Lot J of Borrowdale in full settlement of the debt owed to Zimdef. The bank claims Lot J of Borrowdale is valued at $4,187,704.00. The bank proposed to settle the difference using similar properties within Lot J of Borrowdale.
In valuation of the stands, the bank engaged Green Plan Private Limited, while Zimdef engaged Entredev Valuation Surveyors. Valuations by Green Plan and Entredev differ significantly. Entredev argues the market value of Lot J of Borrowdale is $1 135 400. Green Plan pegged the market value at $7 365 000.00
“The first and notable difference between the two valuations by Green Plan (Pvt) Ltd and Entredev Valuation Surveyors are the derived market values as instructed by their respective clients. Green Plan (Pvt) Ltd stated a market value of $7 365 000.00 while Entredev had a market value of $1 135 400.00 giving a big variance of $6 229 600.00 between the two valuations . . . I wonder why a huge disparity in value arises,” reads an arbitration report by Mr Tomson Makuyana of Amazon Real Estate Agents.
Amazon was appointed arbitrator after the bank and Zimdef failed to agree on the value of the stands. Green Plan evaluated the stand on December 31, 2014 while Entredev did the same on February 24, 2015. Entredev argued the stands fall under Goromonzi Rural District Council zoned residential.
Green Plan says the stands were formerly under the jurisdiction of Goromonzi Rural District Council designated Commercial or Agricultural land but now fall under City of Harare. The stands are shares held by Letstry Investments (Pvt) Ltd.
The difference in jurisdiction implies a different view in valuation as status and demand in City of Harare and Goromonzi are different.
“Entredev did well in giving a clear property market review which was or is necessary under which it was working on. This may come from its own assessment or derived from monetary policy statements from relevant authorities mainly the Reserve Bank of Zimbabwe governor or data or information from Government central statistical offices,” said Mr Makuyana.
The arbitrator said Entredev also picked the under-performance of the property market value due to liquidity challenges with mortgage finance marginally available. Generally, price recalculation of anything in the market in line with market capacity and therefore properties have seen downward trend in values,” said Mr Makuyana.
Entredev used comparable market evidence in its valuation and provided empirical evidence and sources of the comparable evidence with a selling price upper limit of $25 000.00 and an average rate of $20 per square metre, assuming a stand size of 1 250 square metres.
Green Plan argued that Lot J of Borrowdale has a potential to be granted a development permit with similar permitted land uses (being a residential housing scheme) in a gated community complimented by commercial developments like retail recreational and institutional developments, compared to Beverly Hills Golf Estate and Borrowdale Brooke.
“It appears Green Plan is not privy to the full appreciation of fact that the subject properties are situated in various locations or sections on a large scale layout with nine blocks of minimum two stands up to 20 stands. How can this be a secluded gated community? This cannot form a secluded gated community compared to Dandaro Village and Borrowdale Brooke unless if the whole Crowhill Views is developed into a gated community, which is impossible given the layout design, extent of land and the number of units which are over 3000,” said Mr Makuyana.
He said Green Plan was over ambitious and its proposal falls away. “The elaboration and benefits of such gated lifestyle and prestige communities proposal could have misled the analysis of market value by merely building castles in the air,” added Mr Makuyana.
He also dismissed attempts by Green Plan to match Crowhill with Borrowdale Brooke saying, “Borrowdale Brooke is an established successful gated sizeable community more appealing in the market as compared to the subject properties.”
Mr Makuyana also noted that Green Plan took developments envisioned by the bank in arriving at market price “even without a development permit” adding that the valuer “could have taken the idea as a proposal”. He said it was also not proper to value the undeveloped area as if it had been developed.
“In tradition and practice, we are not encouraged to sell chicks before they hatch,” said Mr Makuyana. He rejected the two valuation reports by Green Plan and Entredev.
“I have the honour to include in my analysis the sale I was personally involved with in January 2015 of a portion of Lot H of Borrowdale Estate with a few improvements of dotted homes on over 20 hectare piecse of land within 3km radius to East of Crowhill Views. The land has been bought in anticipation for development. The price achieved on raw land was around $10 per square metre,” added Mr Makuyana.
He also noted that the going price for serviced land in different suburbs from Sunway City (Ruwa) to Mt Pleasant in 2015 ranged between $22 per square metre and $40 per square metre. It is only in Borrowdale Brooke where the price was pegged at $150 per square metre. Mr Makuyana ruled that “the total fair market value for Lot J of Borrowdale of $4 184 704.00 be awarded”.
Zimdef has since agreed to the deal citing approval by Prof Moyo. “Please find attached the authority granted to the Zimdef CEO by the Minister and Trustee of Zimdef, the Minister of Higher and Tertiary Education, Science and Technology Development regarding the transfer of the 85 Crowhill stands,” reads a letter from Zimdef Project Manager Mr D. Maringa to lawyers Dube-Banda Nzarayapenga and Partners.
Efforts to get a comment from Zimdef chief executive officer Mr Fredrick Mandizvidza were fruitless yesterday.
In an interview yesterday, Prof Murwira said his ministry was taking action as evidenced by the sending on forced leave of the Zimdef management and the institution of a forensic audit at the organisation.
“Why we are doing forensic audit is exactly to find out what is the state of transactions in the organisation. We really want to go to the bottom of the matter. We are carrying out a forensic audit so that we do not accuse someone without getting the facts.
“I am hoping we will get as much as possible. We want Government to function properly and be able to account for national funds. One of the President’s top priority is to fight corruption not by word of mouth but through action,” said Prof Murwira. The Herald