The Herald (Harare)

Zimbabwe: Boardroom Row Rocks Cimas

Leading medical aid society, Cimas, is embroiled in a nasty boardroom wrangle stemming from the alleged flouting of its constitution through the illegitimate appointment of some directors, some of whom work for related companies.Board chairperson Mr Mordecai Mahlangu admitted last week that matters were not handled well in aspects of their operations.

Questions have also been raised about a plan to give a South African company a US$15 million contract to install an IT system at Cimas.

It is further alleged that Cimas offered shareholding to the South African firm, but was not eager to comply with Government's indigenisation law.

In addition, Gill Godlonton and Gerrans law firm, where Mr Mahlangu is a partner, was given a contract to work for Cimas.

The issues could affect service delivery for members who contribute millions of dollars monthly in subscriptions.

Board member Mr Chester Mhende questioned during a board meeting of September 19, 2012 why the medical aid society wanted to engage South African health insurance company, Medscheme, to install an IT system at a cost of US$15 million over five years.

"At current rates, the society needs to earn US$3 million per annum just to break even," the minutes say.

"The cost of the new system will most likely become a heavy burden for the society."

Mr Mhende, in a letter to Mr Mahlangu - which The Herald is in possession of - said the society was not following its constitution, citing the "irregular" appointment of three board members.

Mr Mhende claimed that Mr Matts Valela, Mr Bart Mswaka and Ms Emma Fundira were nominated to sit on the board, but were never endorsed by Cimas members until a year had already lapsed.

He said the board then tried to make fresh nominations ahead of the 2013 annual general meeting in a bid to regularise the anomaly.

Mr Mhende said at one of the AGMs, the three participated in endorsing Mr Mahlangu and his deputy Mr Eben Makonese.

"The question then is, how does the board seek to now correct the irregularity of the appointment of the chairman, and in the process make fresh nominations?" asked Mr Mhende.

"I believe that if my concerns are correct regarding the legality of the board, the decisions of the board since the last AGM may be illegitimate."

In the same letter - dated February 19, 2014 - Mr Mhende claimed that seven of 12 board members were representing the same interests since they came from related companies - Delta, Old Mutual and CABS.

Old Mutual has significant shares in Delta, while it owns CABS.

"This means the board has seven members who come from the same stable, compromising rational debate and decisions, placing at issue fair play and good corporate governance," said Mr Mhende.

Mr Mhende further said hat board member Mr Tim Johnson, who is the chairman of the medical aid board, also chairs the audit committee, creating a scenario where he audits himself.

In his response last week, Mr Mhlangu said there was oversight in Cimas' operations, including in appointment of board members.

"When you pointed this out after the AGM of 2013, the board acknowledged the error and rectified it by once again nominating the three individuals to the board, as it was entitled to do," he said.

On the shares offered to South Africa's Medscheme, he said the deal was still in the pipeline and that Cimas was aware of the country's 51/49 indigenisation law.

"We will have to be satisfied also that any proposal we place before our members and the transaction that we may propose will not violate the laws of Zimbabwe, including any indigenisation and empowerment legislation," he said.

Cimas is Zimbabwe's second-largest medical aid society and is owned by its members, handling millions of United States dollars monthly.

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