Cassava Smartech like the rest of the Zimbabwe Stock Exchange listed stocks, has continued to record significant gains, shrugging off serious allegations and litigations levelled against its biggest subsidiary and cash cow, Ecocash.
Since the release of the Financial Intelligence Unit (FIU) letter addressed to Ecocash chief executive officer Natalie Jabangwe, in which she and Cassava chief executive Eddie Chibi, are facing possible charges against money laundering, Cassava has gained 12,5 percent as at Wednesday last week.
In a letter to Jabangwe, the FIU said it plans to impose administrative penalties against her and Chibi under the Money Laundering and Proceeds of Crime Act.
So damning was the FIU in its letter to Jabangwe, which said the former and her boss Chibi showed “incompetence, ineptitude and unprofessionalism in the execution of duty”.
The two could be charged for their failure to comply with a directive to suspend and re-register all Ecocash agent accounts with transaction limits above $100 000.
This was after the FIU had noted the ongoing abuse of Ecocash agent lines for foreign currency parallel market activities, which Ecocash had failed to curb despite persistent engagement and requests by the FIU.
The FIU said Ecocash defied the directive by failing, refusing or neglecting to suspend and freeze the accounts of the high threshold agents that fell under the categories referred to by Ecocash as bulk payers.
The directors could also be charged with failure to comply with any obligation relating to customer identification and or verification or alternatively failure to maintain books and records as required under section 24 of the Act, according to the FIU.
“Ecocash’s brazen defiance of a regulatory directive calls into question the suitability of Natalie Jabangwe and Eddie Chibi to hold prominent positions in a financial institution of the size and status of Ecocash or for that matter any regulated financial institution,” the FIU said.
An attempt to stop the RBZ from suspending Ecocash agents was also unsuccessful with the High Court ruling that it cannot “interdict a lawful act” adding that an interdict will prevent the RBZ from “performing its functions in terms of the law”.
In addition to the charges that could be levelled against its directors, the Ecocash business is under serious threat according to a statement issued by the company itself.
The company said the directive to freeze the said lines will not only impact the affected agents but also the transactions they do with over 53 000 other Ecocash agents and consequently its 11 million customers who rely on the Agent network.
The Ecocash platform is responsible for close to 20 percent of all transactions in the country by value and more than 88 percent by volume.
Ecocash also contributes 75 percent of Cassava’s income.
But since the directive to freeze agent lines on May 4, 2020, Cassava has gained by more than 90 percent on the ZSE.
Normally, such serious allegations and the description of directors as incompetent, inept and unprofessional, would have seen the share price plummet, but the Zimbabwean context seem to be different.
Analysts at independent research consultancy firm, Sidewaos, said the current macroeconomic environment had forced investors to consider broader economic issues at the expense of company specific fundamentals.
“It’s a currency issue again ahead of fundamentals. So many companies have volume declines of circa 20 to 40 percent but their share prices go up because in US dollar terms the asset value of the company becomes cheap as the Zimbabwe dollar loses value.
“And this will continue so long as money is printed and a dodgy fixed exchange rate exist.”