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Zimbabwe Cricket mismanaged $6m ICC loan

ESPNcricinfo can reveal that one reason for the financial mess is that ZC's top leadership apparently used a $6 million loan from the ICC to enrich a bank on whose board they sit and ignored a key condition of the loan

Tristan Holme and Liam Brickhill
Peter Chingoka, Ozias Bvute and Wilson Manase on the Metbank's board of directors page

Peter Chingoka, Ozias Bvute and Wilson Manase on the board of directors page on Metbank's website

A protest over salaries by Zimbabwe's cricketers has again brought to the fore Zimbabwe Cricket's financial problems, which have continued despite at least US $9 million being loaned by the ICC to the board. ESPNcricinfo can reveal that one reason for the financial mess is that ZC's top leadership apparently used a $6 million loan from the ICC to enrich a bank on whose board they sit and ignored a key condition of the loan.
The issue also raises an apparent conflict of interest: ZC chairman Peter Chingoka, vice-chairman Wilson Manase and former managing director Ozias Bvute all sit on the board of Metbank, one of Zimbabwe's leading banks. While Chingoka is a non-executive director on the Metbank board, Manase is chairman of the board and Bvute is a major shareholder in the institution.
ZC said the main purpose for the ICC loan was to service the current facilities with local banks so that it could borrow again but the plan was upset by the status of the financial market. Chingoka also said it was "wrong and malicious" to allege loss of money when Metbank themselves were owed the most amount of money. The ICC, meanwhile, has declined to respond to specific questions.
Recent effects of that debt have been public knowledge: last September, ZC called off a proposed visit by Sri Lanka on financial grounds and the current domestic season was delayed by two months after players went on strike over unpaid wages. That matter raised its head again in negotiations over payments for the upcoming World Twenty20, which have been deadlocked but due to resume on March 3.
ESPNcricinfo has learnt that from 2009, ZC took out US dollar loans from Metbank at interest rates of more than 20% - and possibly as high as 24% - despite knowing the ICC could arrange loans at international interest rates far below those that Metbank was offering.
In December 2011, after learning of ZC's high-interest loans from Metbank, the ICC loaned the cricket board $6 million with one rider: the money should be used to immediately retire ZC's existing debt. Instead ZC deposited the money in a non-interest-bearing account with Metbank for more than five months. Metbank would have benefited from the interest accruing on their high-interest loan to ZC, as well as from having ZC's money in the non-interest-bearing account available to loan to third parties. ZC would, by the same deal, have lost out twice.
The ICC loan was received by ZC on December 14, 2011; on January 18, 2012, ZC repaid $75,000 to Premier Bank, and another $50,000 to the same institution on March 15. It then repaid $1,758,211 to Interfin Bank on April 23, 2012 and $829,167 to FBC Bank on May 3.
It was not until May 25 that $3,287,623 was repaid to Metbank. With that amount sitting in a non-interest-bearing account for five months and 11 days, Metbank could have earned in the region of $300,000 by loaning it out to third parties at an interest rate of 20%. ZC would have paid around the same amount in interest on its loan from Metbank, which was attracting interest of more than 20% over that time period. Metbank could therefore have benefited by more than $600,000 from the two effects.
The knock-on effect of those decisions was that ZC's debt spiral continued, to the extent that the board had to seek a second ICC loan last month, worth $3m, so that it could pay the money owed to its contracted players, umpires, scorers and other employees. It was also able to announce its squad for the World Twenty20 after receiving an extended deadline from the ICC, and domestic cricket resumed last weekend.
The ICC knew about these indiscretions since at least March 2013, but did not take any action against the individuals involved. However, its latest loan came with the condition that ZC move its principal accounts away from Metbank, which it has now done. Media reports suggest the ICC is preparing to pay off ZC's debts to Metbank; that money will then be deducted from ZC's annual benefits from the ICC, which could amount to $25m over the next three years.
The malaise in Zimbabwe Cricket's finances has been a feature of the last decade. When Bvute took over the organisation's reins following Vince Hogg's resignation in 2004, ZC was $10 million in the black. The 2012 audit of their accounts shows net liabilities of $14,267,152, and total liabilities of $19,081,421.
The exact cost of the financial mismanagement to ZC is difficult to calculate because it is unclear how much they owed Metbank when the $6m loan from the ICC was granted. Media reports in Zimbabwe estimated a further $15 million will be needed to erase the cricket board's bad debt to Metbank.
It is also not clear whether ZC explained the conflict of interests involving Chingoka, Manase and Bvute when that loan was agreed upon, although the ICC should have been aware of it since the trio are listed as directors on the Metbank website and the facts are also stated in ZC's annual audits. The ICC would not have known that Bvute was a major shareholder unless it had been informed as such by ZC.
Asked to explain the reason for the delay in paying off the loan, Chingoka told ESPNcricinfo: "Zimbabwe Cricket postponed utilisation of the ICC loan proceeds. Given the unstable financial market situation then, there was a risk that utilisation of the ICC loan proceeds was likely to result in ZC's bankers failing to finance the renewed bank facilities. Zimbabwe Cricket's main purpose for the loan was to service the current facilities with local banks so that ZC could borrow again. However, as a result of the status of the financial market then, such an initiative was no longer achievable. Meanwhile, temporary extension for the other bank facilities had been sought on the understanding that payment for the facilities will be done once the liquidity situation improved. So it is wrong and malicious to allege loss of money when Metropolitan Bank themselves were owed the most amount of money."
Chingoka did not, however, answer questions on why ZC borrowed money from Metbank when it could have borrowed from the ICC at lower interest rates, or why ZC did not deposit the ICC loan into an interest-bearing account.
He did answer a question on the potential conflict of interest involving its top officials. "Non-executive directors (including Chingoka and Manase) at ZC guide the organisation's strategy and policy whilst operational issues e.g. relationships with banks, are for the management of the organisation." Bvute was managing director of ZC until June 2012.
Asked about the misuse of the ICC loan, an ICC spokesman said only that the organisation does not comment on financial matters relating to its Full Members. A further request for comment on the latest $3m loan, and the prospect of ZC being bailed out of its debt, received the same response.
Were the ICC to pay off the debt to Metbank, it would likely be helping to bail out the bank as well as the cricket board. Metbank has faced mounting liquidity issues over the past five months, which came to a head towards the end of last year when many customers were unable to access the money in their accounts. According to one newspaper report in January, the Reserve Bank of Zimbabwe has been monitoring Metbank under the Troubled and Insolvent Bank policy since November 2013. The report said that ZC's outstanding debt to Metbank was $15m, and that this large exposure was a prime reason for the Reserve Bank's concern over Metbank.

Liam Brickhill is a freelance journalist based in Cape Town. Tristan Holme is a freelance cricket journalist who divides his time between South Africa and Zimbabwe.