Zimbabwe to pay Chinese company US$11m in botched housing deal

HARARE – A court on Tuesday ordered Zimbabwe’s government to pay US$11 million to a Chinese firm as compensation for loss of income following a botched deal for the construction of thousands of houses in Harare.

The High Court also ordered the ministries of local government and national housing to allocate land to the value of US$9,894,780 to the Chinese company, XGMA Zimbabwe.

According to a court filing, XGMA entered a joint venture agreement with the two ministries for the development of housing stands in October 2015.

Part of the agreement was that the government would provide 5,000 hectares of land for the pilot project in Pomona and Kuwadzana suburbs in Harare.

It was agreed that XGMA would provide equipment to be used in the execution of the project together with operators of the machines among other objectives.

The court heard they agreed that parties would also open a joint bank account for the deposits from the sales of the housing units.

XGMA was to be paid US$8,915,098 for its equipment plus interest, paid quarterly at a rate of US$1,227,511.11. Total repayment, including capital sum and interest, was agreed to be US$9,820,088.89.

The High Court heard that XGMA performed in terms of the agreement by supplying several earth moving and construction equipment and spares and also attended to the maintenance of the equipment. The company also paid advances for various expenses at the local government ministry’s specific request in order to start the joint venture project.

The Chinese company conducted the pilot project in Pomona, delivered the required equipment and constantly attended to the servicing and maintenance of the machines.

The deal hit an iceberg, however, when property developer Ken Sharpe – through his Augur Investments – took the government to court arguing that the Pomona land had been ceded to his company as collateral. He told the High Court that the two ministries had misrepresented their rights to develop and dispose of the land.

The court heard that following the impasse, the government confiscated and continued to use XGMA’s equipment without paying a cent. The equipment was transferred by the local government ministry from Pomona to its Norton site and other unknown places without XGMA’s authority.

In July 2018, the company was denied access to the equipment by security details guarding the Norton site.

XGMA took the government to arbitration and won its case on August 20 last year. It then approached the High Court seeking the registration of the arbitral award as a court order.

The order granted by Justice Gladys Mhuri said: “The land shall be allocated to the applicant on or before the expiry of three months from the date when the applicant uplifts the arbitral award from the arbitrator’s office. The land shall be located within Harare or the New City area in Mt Hampden, Zimbabwe.

“The value of the land stated above… shall be based on a valuation agreed to by the parties and failing such agreement, a value determined by a valuer who shall be appointed by the chairman of the Valuers Council of Zimbabwe whose valuation shall be binding on the parties. The valuer’s costs shall be shared equally by and between the applicant and respondents.

“In the event that the respondents fail to comply… the respondents shall return in good condition all the equipment… The respondents shall also pay US$11,174,885.00 to the applicant being the agreed amount for loss of income.”

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