Building a Kingdom - Case Study of Kingdom Financial Holdings Limited

Article Source: http://EzineArticles.com/4198650

This article presents a case study of sustained entrepreneurial growth of Kingdom Financial
Holdings. It is one of the entrepreneurial banks which survived the financial crisis that started in
Zimbabwe in 2003. The bank was established in 1994 by four entrepreneurial young bankers. It
has grown substantially over the years. The case examines the origins, growth and expansion of
the bank. It concludes by summarizing lessons or principles that can be derived from this case
that maybe applicable to entrepreneurs.

Profile of an Entrepreneur: Nigel Chanakira

Nigel Chanakira was raised in the Highfield suburb of Harare in an entrepreneurial family. His
father and uncle operated a public transport company Modern Express and later diversified into
retail shops. Nigel's father later exited the family business. He bought out one of the shops and
expanded it. During school holidays young Nigel, as the first born, would work in the shops. His
parents, particularly his mother, insisted that he acquire an education first.

On completion of high school, Nigel failed to enter dental or medical school, which were his first
passions. In fact his grades could only qualify him for the Bachelor of Arts degree programme at
the University of Zimbabwe. However, he "sweet-talked his way into a transfer" to the Bachelor
in Economics degree programme. Academically he worked hard, exploiting his strong
competitive character that was developed during his sporting days. Nigel rigorously applied
himself to his academic pursuits and passed his studies with excellent grades, which opened the
door to employment as an economist with the Reserve Bank of Zimbabwe (RBZ).

During his stint with the Reserve Bank, his economic mindset indicated to him that wealth
creation was happening in the banking sector therefore he determined to understand banking and
financial markets. While employed at RBZ, he read for a Master's degree in Financial Economics
and Financial Markets as preparation for his debut into banking. At the Reserve Bank under Dr
Moyana, he was part of the research team that put together the policy framework for the
liberalization of the financial services within the Economic Structural Adjustment Programme.
Being at the right place at the right time, he became aware of the opportunities which were
opening up. Nigel exploited his position to identify the most profitable banking institution to
work for as preparation for his future. He headed to Bard Discount House and worked for five
years under Charles Gurney.

A short while later the two black executives at Bard, Nick Vingirayi and Gibson Muringai, left to
form Intermarket Discount House. Their departure inspired the young Nigel. If these two could
establish a banking institution of their own so could he, given time. The departure also created an
opportunity for him to rise to fill the vacancy. This gave the aspiring banker critical managerial
experience. Subsequently he became a director for Bard Investment Services where he gained
critical experience in portfolio management, client relationships and dealing within the dealing
department. While there he met Franky Kufa, a young dealer who was making waves, who
would later become a key co-entrepreneur with him.
Despite his professional business engagement his father enrolled Nigel in the Barclays Bank
"Start Your Own Business" Programme. However what really made an impact on the young
entrepreneur was the Empretec Entrepreneur Training programme (May 1994), to which he was
introduced by Mrs Tsitsi Masiyiwa. The course demonstrated that he had the requisite
entrepreneurial competences.

Nigel talked Charles Gurney into an attempted management buy-out of Bard from Anglo
-American. This failed and the increasingly frustrated aspiring entrepreneur considered
employment opportunities with Nick Vingirai's Intermarket and Never Mhlanga's National
Discount House which was on the verge of being formed - hoping to join as a shareholder since
he was acquainted with the promoters. He was denied this opportunity.

Being frustrated at Bard and having been denied entry into the club by pioneers, he resigned in
October 1994 with the encouragement of Mrs Masiyiwa to pursue his entrepreneurial dream.

The Dream

Inspired by the messages of his pastor, Rev. Tom Deuschle, and frustrated at his inability to
participate in the church's massive building project, Nigel sought a way of generating huge
financial resources. During a time of prayer he claims that he had a divine encounter where he
obtained a mandate from God to start Kingdom Bank. He visited his pastor and told him of this
encounter and the subsequent desire to start a bank. The godly pastor was amazed at the 26 year
old with "big spectacles and wearing tennis shoes" who wanted to start a bank. The pastor prayed
before counselling the young man. Having been convinced of the genuineness of Nigel's dream,
the pastor did something unusual. He asked him to give a testimony to the congregation of how
God was leading him to start a bank. Though timid, the young man complied. That experience
was a powerful vote of confidence from the godly pastor. It demonstrates the power of mentors
to build a protégé.

Nigel teamed up with young Franky Kufa. Nigel Chanakira left Bard at the position of Chief
Economist. They would build their own entrepreneurial venture. Their idea was to identify
players who had specific competences and would each be able to generate financial resources
from his activity. Their vision was to create a one - stop financial institution offering a discount
house, an asset management company and a merchant bank. Nigel used his Empretec model to
develop a business plan for their venture. They headhunted Solomon Mugavazi, a stockbroker
from Edwards and Company and B. R. Purohit, a corporate banker from Stanbic. Kufa would
provide money market expertise while Nigel provided income from government bond dealings as
well as overall supervision of the team.

Each of the budding partners brought in an equal portion of the Z$120,000 as start-up capital.
Nigel talked to his wife and they sold their recently acquired Eastlea home and vehicles to raise
the equivalent of US$17,000 as their initial capital. Nigel, his wife and three kids headed back to
Highfield to live in with his parents. The partners established Garmony Investments which
started trading as an unregistered financial institution. The entrepreneurs agreed not to draw a
salary in their first year of operations as a bootstrapping strategy.
Mugavazi introduced and recommended Lysias Sibanda, a chartered accountant, to join the team.
Nigel was initially reluctant as each person had to bring in an earning capacity and it was not
clear how an accountant would generate revenue at start up in a financial institution. Nigel
initially retained a 26% share which assured him a blocking vote as well as giving him the
position of controlling shareholder.

Nigel credits the Success Motivation Institute (SMI) course "The Dynamics of Successful
Management" as the lethal weapon that enabled him to acquire managerial competences. Initially
he insisted that all his key executives undertake this training programme.

Birth of the Kingdom

Kingdom Securities P/L commenced operations in November 1994 as a wholly owned subsidiary
of Garmony Investments (Pvt) Ltd. It traded as a broker on both money and stock markets.

On 24th February 1995 Kingdom Securities Holding was born with the following subsidiaries:
Kingdom Securities Ltd, Kingdom Stockbrokers (Pvt) Ltd and Kingdom Asset Managers (Pvt)
Ltd. The flagship Kingdom Securities Ltd was registered as a Discount House under Banking
Act Chapter 188 on 25th July 1995. Kingdom Stockbrokers was registered with the Zimbabwe
Stock Exchange under ZSE Chapter 195 on 1st August 1995. The pre-licensing trading had
generated good revenue but they still had a 20% deficit of the required capital. Most institutional
investors turned them down as they were a greenfield company promoted by people perceived to
be "too young". At this stage National Merchant Bank, Intermarket and others were on the
market raising equity and these were run by seasoned and mature promoters. However Rachel
Kupara, then MD for Zimnat, believed in the young entrepreneurs and took up the first equity
portion for Zimnat at 5%.

Norman Sachikonye, then Financial Director and Investments Manager at First Mutual followed
suit, taking up an equity share of 15%. These two institutional investors were inducted as
shareholders of Kingdom Securities Holdings on 1st August 1995. Garmony Investments ceased
operations and reversed itself into Kingdom Securities on 31st July 1995, thereby becoming an
80% shareholder.

The first year of operations was marked by intense competition as well as discrimination against
new financial institutions by public organisations. All the other operating units performed well
except for the corporate finance department with Kingdom Securities, led by Purohit. This
monetary loss, differing spiritual and ethical values led to the forced departure of Purohit as an
executive director and shareholder on 31st December 1995. From then the Kingdom started to
grow exponentially.

Structural Growth

Nigel and his team pursued an aggressive growth strategy with the intention of increasing market
share, profitability, and geographic spread while developing a strong brand. The growth strategy
was built around a business philosophy of simplifying financial services and making them easily
accessible to the general public. An IT strategy that created a low cost delivery channel
exploiting ATMs and POS while providing a platform that was ready for Internet and web-based
applications, was espoused.

On 1st April 1997, Kingdom Financial Services was licensed as an accepting house focusing on
trading and distributing foreign currency, treasury activities, corporate finance, investment
banking and advisory services. It was formed under the leadership of Victor Chando with the
intention of becoming the merchant banking arm of the Group. In 1998, Kingdom Merchant
Bank (KMB) was licensed and it took over the assets and liabilities of Kingdom Securities
Limited. Its main focus was treasury related products, off-balance sheet finance, foreign currency
and trade finance. Kingdom Research Institute was established as a support service to the other
units.

The entrepreneurial bankers, cognisant of their limitations, sought to achieve critical mass
quickly by actively seeking capital injection from equity investors. The aim was to broaden
ownership while lending strategic support in areas of mutual interest. An attempt at equity
uptake from Global Emerging Markets from London failed. However in 1997 the efforts of the
bankers were rewarded when the following organisations took up some equity, reducing the
shareholding of executive directors as shown below: ïEUR Ipcorn 0.7%, ïEUR Zambezi Fund
Mauritius P/L 1.1%, ïEUR Zambezi Fund P/L 0.7%. ïEUR Kingdom Employee Share Trust 5%,
ïEUR Southern Africa Enterprise Development Fund - 8% redeemable preference shares
amounting to US$1,5m as the first investee company in Southern Africa from the US Fund
initiated by US President Bill Clinton, ïEUR Weiland Investments, a company belonging to Mr
Richard Muirimi, a long standing friend of Nigel and associate in the fund management business
took up 1.7%, Garmony Investments 71.7% -executive directors. ïEUR After a rights issue
Zimnat fell to 4.8% while FML went down to 14.3%.

In 1998, Kingdom launched four Unit Trusts which proved very popular with the market.
Initially these products were focused at individual clients of the discount house as well as private
portfolios of Kingdom Stockbroking. Aggressive marketing and awareness campaigns
established the Kingdom Unit Trust as the most popular retail brand of the group. The Kingdom
brand was thus born.

Acquisition of Discount Company of Zimbabwe (DCZ)

After a spurt of organic growth, the Kingdom entrepreneurs decided to hasten the growth rate
synergistically. They set out to acquire the oldest discount house in the country and the world,
The Discount Company of Zimbabwe, which was a listed entity. With this acquisition Kingdom
would acquire critical competences as well as achieve the much coveted ZSE listing
inexpensively through a reverse listing. Initial efforts at a negotiated merger with DCZ were
rebuffed by its executives who could not countenance a forty year old institution being
swallowed up by a four year old business. The entrepreneurs were not deterred. Nigel
approached his friend Greg Brackenridge at Stanbic to finance and effect the acquisition of the
sixty percent shares which were in the hands of about ten shareholders, on behalf of Kingdom
Financial Holdings but to be placed in the ownership of Stanbic Nominees. This strategy masked
the identity of the acquirer. Claud Chonzi, the National Social Security Authority (NSSA) GM
and a friend to Lysias Sibanda (a Kingdom executive director), agreed to act as a front in the
negotiations with the DCZ shareholders. NSSA is a well known institutional investor and hence
these shareholders may have believed that they were dealing with an institutional investor. Once
Kingdom controlled 60% of DCZ, it took over the company and reverse listed itself onto the
Stock Exchange as Kingdom Financial Holdings Limited (KFHL). Because of the negative real
interest rates, Kingdom successfully used debt finance to structure the acquisition. This
acquisition and the subsequent listing gave the once despised young entrepreneurs confidence
and credibility on the market.

Other Strategic Acquisitions

Within the same year Kingdom Merchant Bank acquired a strategic stake in CFX Bureau de
Change owned by Sean Maloney as well as another stake in a greenfield microlending franchise,
Pfihwa P/L. CFX was changed into KFX and used in most foreign currency trading activities.
KFHL set as a strategic intention the acquisition of an additional 24.9% stake in CFX Holdings
to safeguard the initial investment and ensure management control. This did not work out.
Instead, Sean Maloney opted out and took over the failed Universal Merchant Bank licence to
form CFX Merchant Bank. Although Kingdom executives contend that the alliance failed due to
the abolition of bureau de change by government, it appears that Sean Maloney refused to give
up control of the extra shareholding sought by Kingdom. It therefore would be reasonable that
once Kingdom could not control KFX, a fall out ensued. The liquidation of this investment in
2002 resulted in a loss of Z$403 million on that investment. However this was manageable in
light of the strong group profitability.

Pfihwa P/L financed the informal sector as a form of corporate social responsibility. However
when the hyperinflationary environment and stringent regulatory environment encroached on the
viability of the project, it was wound up in early 2004. Kingdom pursued its financing of the
informal sector through MicroKing, which was established with international assistance. By
2002 MicroKing had eight branches located in the midst of, or near, micro-enterprise clusters.

In 2000, due to increased activity on the foreign currency front within the banking sector,
Kingdom opened a private banking facility through the discount house to exploit revenue
streams from this market. Following market trends, it engaged the insurance company AIG to
enter the bancassurance market in 2003.

Meikles Strategic Alliance

In 1999 the entrepreneurial Chanakira on advice from his executives and the legendary corporate
finance team from Barclays bank led by the affable Hugh Van Hoffen entered into a strategic
alliance with Meikles Africa whereby it injected some Z$322 million into Kingdom for an equity
shareholding of 25%. Interestingly, the deal nearly collapsed on pricing as Meikles only wanted
to pay $250 million whilst KFHL valued themselves at Z$322 million which in real terms was
the largest private sector deal done between an indigenous bank and a listed corporate. Nigel
testifies that it was a walk through the incomplete Celebration Church site on the Saturday
preceding the signing of the Meikles deal that led him to sign the deal which he saw as a means
for him to sow a whopping seed into the church to boost the Building Fund. God was faithful!
Kingdom's share price shot up dramatically from $2,15 at the time he made the commitment to
the Pastor all the way to $112,00 by the following October!

In return Kingdom acquired a powerful cash-rich shareholder that allowed it entrance into retail
banking through an innovative in-store banking strategy. Meikles Africa opened its retail
branches, namely TM Supermarkets, Clicks, Barbours, Medix Pharmacies and Greatermans, as
distribution channels for Kingdom commercial bank or as account holders providing deposits
and requiring banking services. This was a cheaper way of entering retail banking. It proved
useful during the 2003 cash crisis because Meikles with its massive cash resources within its
business units assisted Kingdom Bank, thus cushioning it from a liquidity crisis. The alliance
also raised the reputation and credibility of Kingdom Bank and created an opportunity for
Kingdom to finance Meikles Africa's customers through the jointly owned Meikles Financial
Services. Kingdom provided the funding for all lease and hire purchases from Meikles'
subsidiaries, thus driving sales for Meikles while providing easy lending opportunities for
Kingdom. Meikles managed the relationship with the client.

Meikles Africa as a strategic shareholder assured Kingdom of success when recapitalisation was
required and has enhanced Kingdom's brand image. This strategic relationship has created
powerful synergies for mutual benefit.

Commercial Banking

Exploiting the opportunities arising from the strategic relationship with Meikles Africa,
Kingdom made its debut into retail banking in January 2001 with in-store branches at High Glen
and Chitungwiza TM supermarkets. The target was principally the mass market. This rode on the
strong brand Kingdom had created through the Unit Trusts. In-store banking offered low cost
delivery channels with minimal investment in brick and mortar. By the end of 2001, thirteen
branches were operational across the country. This followed a deliberate strategy for aggressive
roll-out of the branches with two flagship branches ïEURïEUR one in Bulawayo and the other in
Harare. There was a huge emphasis on an IT driven strategy with significant cross-selling
between the commercial bank and other SBUs.

However, it was further discovered that there was a market for the upmarket clients and hence
Crown banking outlets were established to diversify the target market. In 2004, after closing
three in-store branches in a rationalization exercise, there were 16 in-store branches and 9 Crown
banking outlets.

The entrance into commercial banking was probably held at the wrong time, considering the
imminent changes in the banking industry. Commercial banking does provide cheap deposits,
however at the price of huge staff costs and human resource management complications. Nigel
concedes that, with hindsight, this could have been delayed or done at a slower pace. However,
the need for increased market share in a fiercely competitive industry necessitated this. Another
reason for persisting with the commercial banking project was that of prior agreements with
Meikles Africa. It is possible that Meikles Africa had been sold on the equity take-up deal on the
back of promises to engage in in-store banking, which would increase revenue for its
subsidiaries.
Innovative Products and Services

KFHL continued its aggressive pursuit of product innovation. After the failure of the KFX
project, CurrencyKing was established to continue the work. However this was abolished in
November 2002 by government ministerial intervention when bureau de change were prohibited
in an effort to stamp out parallel market foreign currency trading.

Sadly this governmental decision was misguided for not only did it fail to banish foreign
currency parallel trading but it drove underground, made it more lucrative and subsequently the
government lost all control of the management of the exchange rate.

In October 2002, KFHL established Kingdom Leasing after being granted a finance house
licence. Its mandate was to exploit opportunities to trade in financial leases, lease hire and short
term financial products.

Regional Expansion

Around 2000 it became evident that the domestic market was highly competitive, with limited
prospects of future growth. A decision was made to diversify revenue streams and reduce
country risk through penetration into the regional markets. This strategy would exploit the
proven competences in securities trading, asset management and corporate advisory services
from a small capital base. Therefore the entrance had low risk in terms of capital injection.
Considering the foreign exchange control limitations and shortage of foreign currency in
Zimbabwe, this was a prudent strategy but not without its downside, as will be seen in the
Botswana venture.

In 2001, KFHL acquired a 25.1% stake in a greenfield banking enterprise in Malawi, First
Discount House Ltd. To safeguard its investment and ensure managerial control, an executive
director and dealer were seconded to the Malawi venture while Nigel Chanakira chaired the
Board. This investment has continued to grow and yield positive returns. As of July 2006
Kingdom had finally managed to up its stake from 25,1% to 40% in this investment and may
ultimately control it to the point of seeking a conversion of the license to a commercial bank.

KFHL also took up a 25% equity stake in Investrust Merchant Bank Zambia. Franky Kufa was
seconded to it as an executive director while Nigel took a seat on the Board.

KFHL had been promised an option to gain a controlling stake. However when the bank
stabilized, the Zambian shareholders entered into some questionable transactions and were not
prepared to allow KFHL to up it's stake and so KFHL decided to pull out as relationships turned
frosty. The Zambian Central Bank intervened with a promise to grant KFHL its own banking
license. This did not materialize as the Zambian Central Bank exploited the banking crisis in
Zimbabwe to deny KHFL a licence. A reasonable premium of Z$2.5 billion was obtained at
disinvestment.

In Botswana, a subsidiary called Kingdom Bank Africa Ltd (KBAL) was established as an
offshore bank in the International Finance Centre. KBAL was intended to spearhead and manage
regional initiatives for Kingdom. It was headed by Mrs Irene Chamney, seconded by Lysias
Sibanda with the concurrence of Nigel after managerial challenges in Zimbabwe. Two other
senior executives were seconded there. She successfully set up the KBAL's banking
infrastructure and had good relations with the Botswana authorities.

However, the business model chosen of an offshore bank ahead of a domestic Botswana
merchant bank license turned out to be the Achilles heel of the bank more so when the
Zimbabwe banking crisis set in between 2003 and 2005. There were fundamental differences in
how Mrs Chamney and Chanakira saw the bank surviving and going forward.

Ultimately, it was deemed prudent for Mrs. Chamney to leave the bank in 2005. In 2001 KFHL
acquired the mandate as the sole distributor of the American Express card in the whole of Africa
except for RSA. This was handled through KBAL. Kingdom Private Bank was transferred from
the discount house to become a subsidiary of KBAL due to the prevailing regulatory
environment in Zimbabwe.

In 2004 KBAL was temporarily placed under curatorship due to undercapitalisation. At this stage
the parent company had regulatory constraints that prevented foreign currency capital injection.

A solution was found in the sourcing of local partners and the transfer of US$1 million
previously realised from the proceeds of the Investrust liquidation to Botswana. Nigel Chanakira
took a more active management role in KBAL because of its huge strategic significance to the
future of KFHL. Currently efforts are underway to acquire a local commercial bank licence in
Botswana as well. Once this is acquired there are two possible scenarios, namely maintaining
both licences or giving up the offshore licence.

The interviewees were divided in their opinion on this. However in my view, judging from the
stakeholder power involved, KFHL is likely to give up the off shore banking licence and use the
local Kingdom Bank Botswana (Pula Bank) licence for regional and domestic expansion.

Human Resources

The staff complement grew from the initial 23 in 1995 to more than 947 by 2003. The growth
was consistent with the growing institution. It exploded, especially during the launch and
expansion of the commercial bank. Kingdom from inception had a strong human resourcing
strategy which entailed significant training both internally and externally. Before the foreign
currency crisis, employees were sent for training in such countries as RSA, Sweden, India and
the USA. In the person of Faith Ntabeni Bhebhe, Kingdom had an energetic HR driver who
created powerful HR systems for the emerging behemoth.

As a sign of its commitment to building the human resource capability, in 1998 Kingdom
Financial Services entered a management agreement with Holland based AMSCO for the
provision of seasoned bankers. Through this strategic alliance Kingdom strengthened its skills
base and increased opportunities for skills transfer to locals. This helped the entrepreneurial
bankers create a solid managerial system for the bank while the seasoned bankers from Holland
compensated for the youthfulness of the emerging bankers. What a foresight!
In-house self-paced interactive learning, team building exercises and mentoring were all part of
the learning menu targeted at developing the human resource capacity of the group. Work and
job profiling was introduced to best match employees to suitable posts. Career path and
succession planning were embraced. Kingdom was the first entrepreneurial bank to have smooth
unforced CEO transitions. The founding CEO passed on the baton to Lysias Sibanda in 1999 as
he stepped into the role of Group CEO and board deputy chair. His role was now to pursue and
spearhead global and regional niche financial markets. A few years later there was another
change of the guard as

Franky Kufa stepped in as Group CEO to replace Sibanda, who resigned on medical grounds.
One could argue that these smooth transitions were due to the fact that the baton was passing to
founding directors.

With the explosive growth in staff complement due to the commercial bank project, culture
issues emerged. Consequently, KFHL engaged in an enculturation programme resulting in a
culture revolution dubbed "Team Kingdom". This culture had to be reinforced due to dilutions
through significant mergers and acquisitions, significant staff turnover because of increased
competition, emigration to greener pastures and the age profile of the staff increased the risk of
high mobility and fraudulent activities in collusion with members of the public. Culture changes
are difficult to effect and their effectiveness even harder to assess.

In 2004, with a high staff turnover of around 14%, a compensation strategy that ring fenced
critical skills like IT and treasury was implemented. Due to the low margins and the financial
stress experienced in 2004, KFHL lost more than 341 staff members due to retrenchment, natural
attrition and emigration. This was acceptable as profitability fell while staff costs soared. At this
stage, staff costs accounted for 58% of all expenses.

Despite the impressive growth, the financial performance when inflation adjusted was mediocre.
Actually a loss position was reported in 2004. This growth was severely compromised by the
hyperinflationary conditions and the restrictive regulatory environment.

Conclusion

This article shows the determination of entrepreneurs to push through to the realisation of their
dreams despite significant odds. In a subsequent article we will tackle the challenges faced by
Nigel Chanakira in solidifying his investments.

Article Source: http://EzineArticles.com/?expert=Dr_Tawafadza

Article Source: http://EzineArticles.com/4198650

INTRODUCTION
FDH Financial Holdings Limited was established in November 2007 as part of the group
restructuring to
replace First Discount House as the holding company of the group.
First Discount House was incorporated in accordance with the Companies Act on 8 March 2000.
It
obtained its Discount House license under the Banking Act on 20 July 2001 commencing
operations on 8
April 2002. The company was established by a partnership that included Mr. Thomson
Mpinganjira
(24.9%), a respected local businessman and the first Managing Director of the Company, Press
Corporation Limited (30%), Old Mutual (Malawi) Limited (20%) and Kingdom Financial
Holdings Limited
(25.1%). On 4 August 2006 Press Corporation was bought out as part of the strategic
repositioning that
has seen the current structure and expansion of the group.
FDH Financial Holdings wholly owns the following subsidiaries:
o First Discount House Limited – commenced operations April 2002
o FDH Stockbrokers Limited – commenced operations January 2007
o FDH Bank Limited – licensed 27 November 2007, operations commenced on 15 July 2008
o FDH Money Bureau Limited – Acquired 100% effective 1 February 2009
FDH Financial Holdings current Shareholder structure is as follows:
o Kingdom Financial Holdings Limited (Zimbabwe) : 40.16%
o Thomson Frank Mpinganjira Trust : 39.84%
o Old Mutual Life Assurance Company (Malawi) Limited : 20.00%
TOTAL : 100%
FDH Profile – 6 April 2009 P a g e | 3
FDH FINANCIAL HOLDINGS
SHAREHOLDERS PROFILE
1. KINGDOM FINANCIAL HOLDINGS (ZIMBABWE) LTD – 40.16% OWNERSHIP
� Kingdom Financial Holdings is wholly owned by Kingdom Meikles Africa Group – this
comprises the
businesses previously known as Meikles Africa Limited, Kingdom Financial Holdings Limited,
Tanganda Tea Company Limited and Cotton Printers
� Kingdom Meikels Africa Group is currently registered on the London Stock Exchange and
Zimbabwe
Stock Exchange
� Kingdom Financial Holdings Limited (KFHL) is a Zimbabwe based holding company for a
group of
financial services companies dedicated to serving clients in the areas of money, capital, equity
and
foreign exchange markets, commercial and investment banking, portfolio management,
economic
research and advisory services
� The group is made up of the following subsidiaries: Kingdom Bank Limited, Kingdom
Stockbrokers,
Kingdom Asset Management, MicroKing Finance, Discount Company of Zimbabwe, Kingdom
Bank
Africa Botswana Ltd
� The diversity of KFHL has not only made KFHL a unique “one stop shop” financial
institution, but
has allowed the group to effectively maximise group synergies and cross selling of products for
the
benefit of both clients and shareholders
FDH Profile – 6 April 2009 P a g e | 4
2. THOMSON FRANK MPINGANJIRA TRUST – 39.84% OWNERSHIP
� The settler and founder trustee of the Thomson Frank Mpinganjira Trust is Mr. Thomson
Frank
Mpinganjira
� This is a Private Trust with interests in real property holdings, on the Malawi Stock Exchange
and
money market investments in addition to equity in FDH Financial Holdings.
� A Trust Deed dated 28 January 2000 established the Trust under the Laws of Malawi
� Mr. Thomson Frank Mpinganjira is the founder of the FDH Group
FDH Profile – 6 April 2009 P a g e | 5
3. OLD MUTUAL LIFE ASSURANCE COMPANY (MALAWI) LIMITED – 20%
OWNERSHIP
� Old Mutual Plc, together with its subsidiaries Nedcor, Mutual & Federal and Skandia is an
international financial services group, whose activities are focussed on asset gathering and asset
management
� Its operations in Africa are only part of a global presence. While the bulk of its business is in
South
Africa in the rest of Africa the group has operations in Malawi, Zimbabwe, Namibia, Kenya,
Botswana, Swaziland and Mauritius. The group’s operations outside Africa cover UK, Bermuda,
Hong
Kong, Ireland the United States and Sweden
� Old Mutual is listed on the London, Stockholm, Johannesburg, Malawi, Zimbabwe and
Namibian
stock exchanges
� The Old Mutual group’s businesses comprise life assurance (including retirement savings),
asset
management (including unit trusts, portfolio management and stockbroking), banking and
general
insurance
� Old Mutual Life Assurance Company (Malawi) Limited is a local company fully owned by
Old Mutual
Malawi Limited and whose ultimate shareholder is Old Mutual Plc

KMAL EGM Faces

Roadblock
Thursday, 02 October 2008 22:31 Zimbabwe Independence
THE proposed extraordinary general meeting (EGM) by Kingdom Meikles Africa shareholders led by chairman John
Moxon on October 23 to fire CEO Nigel Chanakira and two other board members could hit a snag as minority
shareholders of the conglomerate are set to launch a massive legal challenge against attempts to remove the
directors.

The Zimbabwe Independent can reveal that the small shareholders were this week seeking legal counsel from lawyer
Addington Chinake of Kantor & Immermann to stop Moxon from calling an EGM to remove Chanakira and directors
Callisto Jokonya and Rugare Chidembo from the board.
Moxon is proposing that the trio be replaced by Marilyn Hugill, his sister, and South African-based Ashwin Mancha,
Jack Mitchell, Fiona Silcock and Carl Stein, all linked to his family.
The Moxon-linked companies in KMAL include ACM Investments, JRT M Investments, ASH Investments, FPS
Investments and APWM Investments. They jointly hold 43% of the total issued share capital of KMAL. Econet
Wireless holds 10%.
Information to hand shows that the minority shareholders who are expected to file an urgent High Court chamber
application today were also lobbying the Reserve Bank to intervene because they assert KMAL is a holding company
for a financial institution — being Kingdom Bank — which is governed by the Banking Act.
They therefore want the High Court to issue a declarator to this effect. This would mean that no board member of
KMAL can be removed without approval of the central bank, neither can new board members be appointed without the
RBZ’s nod.
The minor shareholders also want Moxon to publish a circular to all shareholders explaining the nature of the conflict
in the board. They are also questioning the appropriateness and impartiality of Muchadeyi Masunda who has been
retained as chairman of the EGM.
KMAL board chairman Moxon is temporarily relinquishing the position for the EGM to avoid a conflict of interest.
The minor shareholders want the court to stop Masunda from chairing the EGM because they believe that he has had
a long relationship with Moxon as board member of Meikles before the merger with Kingdom Financial Holdings,
Tanganda and Cotton Printers to form KMAL.
They will also argue that Masunda is an inappropriate chair by virtue of being mayor of Harare. Masunda is a board
member of at least a dozen companies quoted on the Zimbabwe Stock Exchange.
But it is the quest to remove the directors that has set Moxon and the minority shareholders on a collision course. The
smaller shareholders this week told the Independent that they had not been furnished with information on the nature of
the conflict between Chanakira and Moxon. They have also said that they have not been served with the notice for the
EGM.
"Other than what we saw in the newspapers, there has been a paucity of information on what is actually happening in
the company in which we are shareholders," said a CEO of a listed company which holds shares in KMAL.
"We cannot go into the AGM blind and take a decision which could hurt our businesses. What corporate governance
are we talking about here?"
By Vincent Kahiya
Unholy alliance forms around KMAL carcass
By Mutumwa D. Mawere
(www.mmawere.com)
Posted to the web: 27/10/2008 16:23:21
NO CASE captures the Zimbabwean mind more than the present debacle in Kingdom Meikles Africa
Limited (KMAL), not only because it pits first generation black entrepreneurs against inheritors of colonial
economic power, but also exposes the government’s opportunistic approach to economic empowerment.

The characters and institutions involved in the KMAL saga from Messrs. Nigel Chanakira, Pattison Timba,
Strive Masiyiwa, George Charamba, Phillip Chiyangwa, Super Mandiwanzira; and John Moxon,
representing the black and white faces, respectively, to Econet, Kingdom, Renaissance; and Meikles
reveal the madness and complexity of the Zimbabwe indigenisation debate.

The connection between race and economic success has been clouded by the unique colonial experience
of many former colonies like Zimbabwe to the extent that a discussion of the poverty that still pervades
Africa will always take a racial tone.

An interesting subtext of the KMAL affair is that the black protagonists are generally regarded as honest
businessmen less tainted by political patronage and yet when one looks closely at the road to fame of the
characters involved in this saga it becomes important to broaden and deepen the debate beyond a
superficial level.

While the road to political fame is better understood because of the role of citizens in shaping it, the road
to economic stardom is relatively less understood, as are the critical requirements for business success.

Nigel Chanakira, the key black actor in the KMAL drama and has positioned himself as a victim of some
white conspiracy, is no stranger to the practice of scape-goating. Whenever he finds himself in a corner,
he has been able to use scapegoats to distract attention from the core issues at play.

Unlike Chanakira who established a greenfield financial services company, I rose to prominence through
the acquisition of SMM Holdings (Private) Limited in 1996 at a time when there were few black generals in
the economic arena. I recognised then as I still do that Zimbabwe required black public faces to be
custodians of economic change.

Over the years, I must admit that my own personality has been distorted by the events of the last 12 years
since my foray into business.

As a pioneer of black controlled business in Zimbabwe, I was acutely aware of the fact that no effort was
made by political actors to think about business development issues and historically disadvantaged
persons in the post-colonial era and hence my decision to invest in bridging the knowledge, capital and
execution gaps that manifested themselves in the mistrust between state and non-state economic actors.

I chose then to invest in an outreach programme that saw state actors accompanying as well as
empowerment activists attending some of the road shows I conducted not only in Zimbabwe but in South
Africa, Botswana and the USA.

My belief then was that empowerment could only be successful if it was at the center of economic policy
thinking and that it was necessary for state actors to better appreciate business issues and what
successful enterprise required.
There are many people who still believe that being white is sufficient to guarantee business success while
forgetting that without customers who buy the product and services produced by enterprises, success
cannot be assured. State actors believe that they are the fountain of wisdom and rarely pause to think
about what is required to drive the economic engine and what kind of ideology is necessary to inspire
human creativeness and ingenuity.

In my business journey, I have learned a lot and believe that it would be neither in my interest nor national
interest to deny the public and future generations my take on issues I regard as in the national interest.

It would be irresponsible for me not to seize the opportunity presented by the KMAL saga to clarify and
expose the true facts so that the public can draw its own conclusions. As we try to shape the future, it is
important that we better understand the fallacies of the Zimbabwe business indigenisation programme.

After my first article entitled: “Chanakira: Unlikely foot soldier for expropriation” and the accusations that
followed about my motives in intervening, I was fortunate to receive from one of the readers an important
documents that I attach to this article that expose the real reasons why Chanakira was arrested by police
in 2000.

As part two of this installment, I set out the history and background leading to the arrest of Chanakira and
the parties involved in the saga. What will emerge is certainly an unholy alliance, which needs attention of
every caring Zimbabwean.

The following facts are from a court record that explains the circumstances that led to the arrest of Nigel
Chanakira.

The arrest of Nigel Chanakira

On August 2, 2000, A. M. Takawira, in his capacity as the Acting General Manager of NSSA sought a
legal opinion from the lawyers of the organisation, Messrs. Sawyer and Mkushi Legal Practitioners,
regarding the purchase through Kingdom Stockbrokers of shares that were owned by Dr. Daniel Shumba,
one of the founding shareholders of Econet Wireless Holdings Limited (Econet).

According to the court documents in Case No. HC3919/2001 involving NSSA and Kingdom Stockbrokers
(Private) Limited (KS), in or around June 2000, a dispute arose between Dr. Shumba and KS as to the
amount that he should have been paid for 43.5 million Econet shares that he sold to NSSA through KS.

Following a complaint to the police by Dr. Shumba; Nigel Chanakira, Solomon Mugavazi, as well as
former General Manager of NSSA, Mr. Chonzi were arrested on 11 July 2000.

The public has never understood why Chanakira was ever arrested and his involvement in the share deal
in Econet. It is important, therefore, to set out the correct facts as presented in the court proceedings.

Econet was the brainchild of Strive Masiwa and according to the records; the company had no white
shareholder. Econet was listed on the ZSE in September 1998 following the decision by the Supreme
Court of Zimbabwe to grant the company a GSM Cellular license.

The company was controlled by TS Masiyiwa Holdings (Private) Limited (TSM), a company incorporated
under the laws of Zimbabwe that owned 60% of the shares of the listed company. Strive Masiyiwa and his
wife held 67.5% of the issued share capital of TSM while Dr. Shumba held 10% of the shares of the
company and Nigel Chanakira held 2.4% of the shares.
In total, six individual shareholders i.e. Strive and Tsitsi Masiyiwa (his wife), Jeffrey Mzvimbi, Daniel
Shumba, Chanakira, and Professor Nyazema were the founding shareholders of TSM with the balance of
the shares – 5% held by an employee trust.

In terms of a shareholders agreement, the shareholders of TSM were barred from selling their shares in
TSM for 3 years i.e. from September 1998 when Econet was listed to 30 September 2001 to protect the
controlling pool represented by TSM.

TSM was structured as the indigenous controlling pool of Econet in compliance with the licensing
requirements.

According to Dr. Shumba, he became a shareholder of TSM as a consequence of the finances that he
had advanced to TSM as well as in lieu of services rendered to Econet. Sometime in December 1998, Dr.
Shumba met with his fellow TSM shareholders to express his intention to dispose of his shareholding in
order to pursue other business interests and this was followed by an emergency general meeting held on
15 January 1999 where a resolution was passed for his exit and for the disposal of his shares in the
company through an agreed mechanism.

The said resolution authorised Dr. Shumba to disinvest in January 1999 by 16 March 1999 when he
ceased to be a director of TSM. Only two institutions were authorised to handle the disposal of the shares
i.e. Continental Securities, a stock broking company controlled by NMB, a bank that was involved in the
listing of Econet where Mr. P. Timba also worked; and KS, a stock broking company in which Nigel
Chanakira had a substantial interest.

Pursuant to this agreement, Dr. Shumba represented that subsequent to the EGM, he instructed
Chanakira to find a purchaser for all his 43.5 million shares at a an acceptable price. Chanakira reverted
to Dr. Shumba on 16 March 1999 at a meeting attended by Solomon Mugavazi, MD of Kingdom
Stockbrokers, informing him that a transaction had been concluded with NSSA at a price of Z$1.50 per
share. However, Dr. Shumba declined the deal indicating that he wanted a price of not less than Z$2.00
per share.

At a subsequent meeting, Mugavazi informed Dr Shumba that a deal had been secured with NSSA for the
disposal of 50% of Dr. Shumba’s shares at a price of Z$1.80 per share and the remainder at a price of
Z$2.20 per share effectively giving an average price of Z$2.00 per share.

Dr Shumba agreed to the transaction and was then informed that NSSA had purchased the shares but it
would take some time for NSSA to settle the deal, as it had to fulfill some internal procedures.

The shares in question were TSM shares that were subject to a 3-year restriction in terms of disposal
given the need to keep the controlling pool under indigenous control. From March 1 to June 1999,
negotiations were held between KS and NSSA on the conditions of the shares that were to be purchased.

An agreement was then signed on 23 June 1999 for the purchase by NSSA of 35 million and not 43.5
million shares on offer for a price of Z$4.25 per share compared to the price of Z$2.00 that Dr. Shumba
had agreed to. Dr. Shumba was not informed of the deal variation and continued to be under the
impression that the deal with NSSA was at an average price of Z$2.00 as previously agreed.

On 25 June 1999, Kingdom Stockbrokers issued a broker’s note to NSSA quoting a price of Z$4.25 per
share for the 35 million shares against which NSSA made a payment of Z$150,238,270 to Kingdom
Stockbrokers in four tranches on 12, 19, 23, and 27 July 1999.
On 28 June 1999, Kingdom Stockbrokers made out a cheque for an amount of Z$16,494,748.91 to Dr.
Shumba and a sum of Z$19,318,845.50 on Dr. Shumba’s behalf in settlement of the purchase price of the
shares.

Dr. Shumba was advised by Mugavazi that the deal with NSSA had gone through at a price of Z$2.00 per
share.

Dr. Shumba only discovered in 2000 that NSSA had purchased 35 million shares from KS leaving a
balance of 8.5 million shares under the control of Kingdom Stockbrokers. He had only received Z$87
million from Kingdom Stockbrokers as they had represented that the deal was concluded on the same
terms agreed with Chanakira on 16 March 1999.

Chanakira sought to distance himself from Kingdom Stockbrokers arguing that KS is a separate legal
entity notwithstanding the fact that at all material times it was he who represented the company in its
dealings with Dr. Shumba.

When Dr. Shumba uncovered the fraud, he reported the matter to the police leading to the arrest of Nigel
Chanakira. Subsequent to the arrest, Kingdom Stockbrokers paid to Dr. Shumba the difference between
the amounts received by KS and the payment made to him as well as the value of the 8.5 million shares
that remained in the hands of Kingdom Stockbrokers.

Having admitted to the unjust enrichment, NSSA then sought through a civil action as well as criminal
proceedings to recover an amount of Z$449,387,520 representing the financial prejudice to the institution
from the fraud and to deliver the 8.5 million Econet shares. The court ruled in NSSA’s favour, ordering
Kingdom Stockbrokers to make the payments with interest and the costs of the legal action.

The TSM history is one of many attempts by indigenous businesspersons to enter the mainstream
economy. This was done through licensing and the beneficiaries of such enterprise were the six
individuals. However, of the founding shareholders of Econet, it may be Strive and Nigel who still remain
as shareholders of TSM notwithstanding the attempt by government to use state action to promote broad-
based empowerment.

The failure of the founding shareholders of TSM to stick together goes a long way to demonstrate that
empowerment cannot be successful if it is engineered. Notwithstanding the intention of government policy
to promote sustainable black ownership, the real practice has shown that it is difficult for blacks to work
together.

Dr. Shumba sought to dispose of his shares to his best advantage, only to find that his fellow black
shareholders thought otherwise by deciding to short change him. The theft of his shares and the unjust
enrichment did not involve any white person.

The attached information will allow readers to better understand the complexity of the indigenisation
debate and the manner in which certain people have chosen to selectively benefit from it.

It is common cause that Strive was a founding member of the Indigenous Business Development Centre
(IBDC). Most of the original drivers of the empowerment agenda are now missing in action.

I do hope that our dear Comrade George Charamba on behalf of the government will take time to read
the court papers before opportunistically trying to poke his nose in the KMAL affair.

If it is correct that Shumba was a victim of fraud perpetrated by his fellow black colleagues, then there is a
need for introspection. Given the information we now have regarding the Shumba saga, are we not
witnessing another fraud, this time aided by the government?
With respect to Shumba’s credibility as a witness in the NSSA litigation, this is what the judge had to say:
“Shumba is a neutral witness. He was paid his asking price and moved out of the picture. He does not
stand to benefit in any way from the outcome of this case. He struck me as an honest and credible
witness who had absolutely no motive to misrepresent facts. I, therefore, believe his evidence wherever it
contradicts any evidence.”

The transformation of the economy and the role of blacks in shaping the future cannot be overstated.
However, it is important that before any adventure is undertaken in the name of indigenisation and
empowerment is embarked upon, a serious evaluation be undertaken of the experience so far with a view
to properly locating the real and fake role models.

Now that the same Nigel Chanakira has problems with Meikles, he has now forged ‘unholy” alliances with
characters like “Comrade” Charamba, Chiyangwa, Mandiwanzira and Gideon Gono to again grab shares
and interest in violation of individual and private company rights.

Should we sit and cheer these violations merely because a black flock stands to benefit? If we condone
this model of business ethics, what are we saying as a society and what are we telling our children?

Mutumwa Mawere's weekly column is published on New Zimbabwe.com every Monday. You can contact
him at: mmawere@global.co.za
JOIN THE DEBATE ON THIS ARTICLE ON THE NEWZIMBABWE.COM FORUMS
newsdesk@newzimbabwe.com