ZAMBIA Sugar PLC with its major shareholder Illovo Group along with their subsidiary companies have been accused of working at reducing profit margins in a scheme that is meant to reduce the dividends of minority shareholders.
And now, a minority shareholder in the Zambia Sugar plc Lewis Mosho has written to the Security and Exchange Commission and the Lusaka Stock Exchange demanding that the company should explain nine percent drop in profits when the revenues had increased to 16 percent among other issues.
But Zambia Sugar has said the financial position of the company was fully explained at the annual general meeting by various directors and has denied reports that 400 hundred minority shareholders walked out of the meeting.
Both the Securities and Exchange Commission and the Lusaka Stock Exchange have confirmed receiving a complaint letter from Mr Mosho and that the two institutions were giving the complaint the attention it deserved.
Securities and Exchange Commission legal counsel Michael Phiri told the Daily Nation that as soon as the commission completed its investigations, appropriate steps would be taken.
And Lusaka Stock Exchange chief executive officer Brian Tembo said there were listing regulations that governed compliance on the stock market and that if there were breaches, corrective measures would be taken.
Mr Tembo said LUSE was reviewing the complaint from Mr Mosho and that as soon as the matter would be dealt with, corrective measures would be taken.
Mr Mosho has revealed that Illovo group through its subsidiaries was using Zambia Sugar to disadvantage the minority shareholders who are now demanding that the sugar company should explain how there was a 16 percent increase in revenue but had an ironical decrease in profit margins of nine percent.
In an exclusive interview, Mr Mosho disclosed that there were concerns that Zambia Sugar was being non-compliant with the securities laws and that the 52nd annual general meeting held at Pampdzi Hotel last week was botched because the minority shareholders were gravely aggrieved with the manner the majority shareholders were behaving.
About 400 minority shareholders who attended the meeting walked out after they realised that the annual report that was being presented was not speaking to them but the majority shareholders. He said the schemes of reducing the dividends of were not only meant to frustrate local investors but were also defeating the government policy of wealth distribution among citizens. Illovo Group has 81 percent shares in Zambia Sugar.
“These related party deals between Zambia Sugar and its major shareholder Illovo Group along with its subsidiaries are affecting our exchange rate. Most of the money Zambia Sugar is making is in fact moped up by the related party transactions and this is reducing foreign exchange on the market with a net effect of weakening our Kwacha. This is at national level but as a minority shareholder, reduced net profits means reduced dividends on my part and the resultant effect is that I will fail to invest. These people are robbing us and I have written to the Securities and Exchange Commission and the Lusaka Stock Exchange over these issues,” Mr Mosho said.
In his analysis of the 2014 Zambia Sugar PLC annual report Mr Mosho warned that Zambia Sugar risked landing itself in problems at competition law and has called on the minority shareholders to thoroughly investigate the matter.
Mr Mosho has demanded the relationship between a foreign company called Mitra Sugar and Zambia Sugar and how much sugar was being sold to Europe through the company. In his letter to Securities and Exchange Commission as well as to the Lusaka Stock Exchange, Mr Mosho has proposed that Zambia Sugar should issue a cautionary announcement following recent developments where the Drug Enforcement Commission (DEC) raided the companies offices to search its records. He explained that the search of Zambia Sugar records by DEC was a price sensitive issue for the shareholders as searching a listed company brought to the fall whether the financial statements so forcibly presented could be taken as gospel truth. But Zambia Sugar corporate affairs manager Doreen Kabunda said allegations that related party transactions were being used to reduce dividends were false but that such transactions had improved the financial position of the company. Ms Kabunda also denied allegations that minority shareholders were being denied the right to have representation on the company’s board of directed stating that all directors were entitled to nominate persons for appointment as directors at the annual general meeting.