Lesotho Flour Mills bosses in trouble

Lesotho Flour Mills bosses in trouble

MASERU – THE Public Accounts Committee (PAC) will grill the Lesotho Flour Mills managers over the company’s failure to pay dividends to the government. The government owns 49 percent of the company while the United States’ Seaboard Overseas Management Company Limited controls 50 percent. Malchy Grain, a United Kingdom company, owns the other one percent.

For years the Lesotho Flour Mills has failed to pay dividends to the government while pleading poverty and blaming viability problems.
Yet the company has religiously paid millions of maloti in management fees to Seaboard.
Since the deal that privatized the milling company was signed in 1999 Seaboard has been paid over M40 million in management fees.
Now the PAC has had enough. The government is also clamouring for a return on its investment.

PAC chairman Selibe Mochoboroane says the committee will soon call the managers to explain why the company has failed to declare dividends.
“We are aware that Lesotho Flour Mills does not pay dividends,” Mochoboroane said.
“We were looking into the Auditor General’s report when we found out that there are many other companies that do not bother to pay dividends.”
“There are companies in which the government has shares and they choose not to declare dividends and the challenge now is how we are going to solve the problem. These companies do not benefit Basotho.”

The committee’s new zest to demand dividends comes a few weeks after Finance Minister Dr Moeketsi Majoro raised similar concerns in his budget speech. Majoro named the Lesotho Flour Mills, Econet Telecom Lesotho and Avani Lesotho as companies he said were not declaring dividends.
Avani Lesotho, previously called Sun International Hotels Lesotho, recently paid a M7 million dividend to the government but Mochoboroane said it is because the PAC had started asking questions.

“That is to say as a country we have a lot of money somewhere that we have to collect with all structures like PAC,” Mochoboroane said.
Majoro also pointed out that “it is also notable that companies that have struggled with profits happen to extensively use management contracts and buy services from their holding or sister companies”.

Seaboard has a management contract to run the Lesotho Flour Mills. The government is allegedly in talks with Seaboard over the contract which expires in July this year. Seaboard is seeking a third ten-year contract.
By 2015 the Lesotho Flour Mills had paid about M32 million to Seaboard, almost M4.4 million annually, in management fees.
That contract has however been the subject of contention in the Lesotho Flour Mills board, with directors appointed by the government complaining that the deal favours Seaboard.

The directors said Seaboard continued to get the management fees while the government is starved of dividends.
This, they said, means that even if the company does not make a profit Seaboard will still make its money from the management fees.
The management fees are paid in full even when the company has performed dismally, they said.
They say because of the management fees, Seaboard is technically paying itself dividends while the government gets nothing.
However, the noises from the government’s representatives on the board could not amount to much because they are non-executive directors. Seaboard’s representatives hold the executive powers.

The directors who kept pushing against the Seaboard contract were fired, or were replaced when their tenure ended or resigned.
One of the directors, Ramahooana Matlosa, a political activist, resigned in August last year after a bruising boardroom fight with Seaboard over the contract.

Matlosa says he is likely to testify before Mochoboroane’s committee to show “the extent to which this contract is dirty”.
He said the PAC has already asked him to give it documents.
“I don’t think these directors appointed by Seaboard, all of whom are executive directors while the government has no executive director in the company, are interested in this company making a profit,” Matlosa said.

“Seaboard is making a lot of money from the management fees and the supply of grains to the company. They are making money irrespective of whether this company is making profit or not,” he said.

Matlosa, who was on the board for almost two years, said he tried his best to argue government’s case but was stonewalled until he resigned.
He said after resigning he warned Majoro about the Seaboard contract.
He also said he showed him that although the agreement “is technically tricky, the good thing is it does not say anything about extending it beyond two terms – which gives the government an option not to renew it”.

A former director who spoke on condition of anonymity said “the best option the government has, if it is difficult to terminate Seaboard’s contract, is to buy them out”. “Former Finance Minister Timothy Thahane had proposed to buy these people out and I think that was a good idea,” he said.
“This is a bad story.”

Lesotho Flour Mills’ managing director Ron Mills asked for written questions on Tuesday but had not responded at the time of going to press last night. (EDITOR’s note: Given the seriousness of the matter and in the spirit of fairness, thepost will publish Mills’ response if he answers the questions).

Staff Reporter

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