RBZ in $450m gold row

An explosive row has erupted between the Reserve Bank of Zimbabwe (RBZ), Saudi Arabian mineral and jewellery dealer Sulaim Al Othaim and local tycoon David Butau over a controversial $450-million deal designed to rescue government from bankruptcy at the height of the economic meltdown.

The dispute over the 2006 deal has been running for five years but has now exploded into the public domain as Al Othaim and Butau demand payment from the RBZ, which is refusing to pay up, saying it was not implemented as originally agreed.

There have also been allegations of fraud and betrayal.

In terms of the agreement, Al Othaim was supposed to buy gold from the RBZ for its factories in Riyadh, the Saudi capital. The company is involved in wholesale distribution of jewellery, precious stones and watches. There was also a plan to create a strategic partnership between Al Othaim, which also owns shopping malls, retail outlets and colleges, and the RBZ's subsidiary Aurex Jewellery.

Al Othaim was supposed to provide the RBZ with a multi-draw letter of credit for the delivery of 200000 ounces of gold, a cash deposit for 315000 ounces and a bank guarantee for $150-million. The Central Bank was supposed to supply 515000 ounces of gold within nine to 12 months at London Metal Exchange-fixed prices and at a 34% discount. In total, the deal was valued at $450-million.

Butau was involved as facilitator through Dande Capital Holdings where he is executive chairman. SA's Rand Merchant Bank was to provide structured finance, including handling cash deposits and cash guarantees.

Local bank CBZ, together with its clients, Dande Capital, played a facilitation role and was to be paid for that.

It was agreed that any disputes would be dealt with in accordance with the laws of the UK, Switzerland and Netherlands, not Zimbabwe or Saudi Arabia. Some parties involved in the deal now claim it was "a scandal wholly prejudicial to government". Documents show there are allegations of fraud and siphoning-off of gold proceeds.

"The unfortunate thing about this deal is that in effect it amounted to direct fraud through under-pricing of gold deliveries by the RBZ to Al Othaim. The extent of prejudice was 34% of the gold parcel delivered. How can a precious metal like gold be sold at 34% discount when we all know gold is just as good as hard currency," says one of the documents seen by the Sunday Times.

"Besides, there was an impression created that President Robert Mugabe had authorised the deal when he had not. How would the president allow gold to be sold at 34% discount? In the end total gold delivered amounted to $5.072-million and applying the 34% discount, there was a total prejudice of $1.6-million."

To exacerbate the situation, Butau has been demanding $1.5-million from the RBZ in "facilitation fees".

In a letter dated February 16 to RBZ governor Gideon Gono, Butau demanded $800000. The RBZ paid him $200 000.

However, in another letter dated November 2, Butau demanded his balance of $1.3-million, threatening legal action to recover the money.

The RBZ is also in another dispute with Al Othaim over a $1.6-million debt.

But on Friday Gono's office hit back, saying those claiming fraud and demanding payments were misrepresenting facts and had hidden agendas "bordering on extortion and rent-seeking".

"The governor is aware that life without money is hard these days and times are difficult. This is made worse by the fact that Christmas is around the corner," Gono's spokesman Alson Mfiri said. "Unfortunately, the RBZ does not play the role of Father Christmas as some of these demands suggest through ridiculous claims.

"Several letters of demand have been written to the bank, laced with threats and loaded with political overtones, but the governor will not entertain such frivolous claims. All those aggrieved must approach the courts for remedies," Mfiri said.