Forex shortage grounds Rainbow Airlines

HARARE - Zimbabwe’s newest airline, Rainbow, has grounded its plane due to a scarcity of foreign currency and a deadly boardroom squabble.

A Reserve Bank of Zimbabwe foreign currency priority list has made it difficult to get the US dollars needed to buy jet fuel, almost all of which is imported, creating periodic fuel shortages throughout the country.

A deadly shareholding wrangle combined with the forex shortages have plunged the new commercial airline into crisis.

Rainbow is run by investment banker, Gilbert Muponda, who injected $600 000 into the low cost carrier through his investment vehicle, GMRI Capital, on behalf of AB Communications.

Mponda co-owns local media group AB Communications with ICT minister Supa Mandiwanzira.

The airline has been grounded after making just three flights, the inaugural Harare-Johannesburg and Harare-Victoria Falls flights in January and a charter flight to Lubumbashi in the Democratic Republic of Congo (DRC) when it flew local football club, CAPS United, which hired it to fulfil its Confederations of African Football (Caf) champions league fixture against Congolese football giants, TP Mazembe.

It intended to start servicing the Harare-Cape Town route in June but has failed.

Muponda, who is the AB chief operations officer, confirmed by email that operations have been affected by the lack of foreign currency.

“The cost structure of running an airline is 85 percent foreign currency and 15 percent local expenses,” he told the Daily News.

“Running an airline requires a lot of inputs and expenses that require foreign currency. Through the foreign currency regulations, AB Communications had to apply for foreign currency to inject into the operations and we are still waiting for allocation of the requisite foreign currency. The shortage of foreign currency in the whole country can’t be described as financial challenges facing the company. This is a national challenge.”

Documents in possession of the Daily News reveal a wrangle pitting majority shareholder, AB Communications (AB) and Day Investments, which has resulted in the airline failing to renew its Air Operating Certificate (AOC), which expired on July 27.

According to the Aviation Act, an airline should have a valid (AOC) before it can be allowed to operate commercially.

According to documents at hand, AB, which has a 70 percent shareholding, has been seeking to assume full control of the airline by purchasing the remaining 30 percent stake from Day Investments for $375 000.

Day Investments opted to sell the shares to a third party at a higher price after AB failed to buy the shares within a 30-day period ending September 12, 2016.

Documents further reveal a fight between Day Investments partners, Frank Humbe and Frank Maunganidze.

Humbe and Maunganidze were separately selling the same 30 percent shareholding to AB, albeit at different prices.

Humbe first wrote to AB on August 12, 2016 indicating that the shareholding was being disposed for $375 000.

But Maunganize wrote separately to AB on September 6, 2016, through his lawyers, offering to sell the same shareholding for $225 000, suggesting a $150 000 difference.

Maunganidze followed this up with another letter on September 22, 2016, advising AB that Humbe had no right to sell the shares.

“Our client stopped injecting capital into the company when he discovered that certain misrepresentations had been made to him by Humbe. At the time he stopped, our client had already acquired 30 percent of the issued shares in the company, which shareholding he still holds to date,” wrote Sibanda commercial lawyers on behalf of Maunganidze.

Mponda said:  “AB Communications was in the process of negotiating the take over from Day Investments the remaining 30 percent when they received a letter from Maunganidze’s lawyers stating that the shares that Day Investment was about to sell to AB Communications in fact belonged to their client and had no authority or right to sell them.

“But all the parties are in talks and indications are that they will be amicable. AB Communications and GMRI Finance are committed to make this project a success,” said Mponda.

“Besides its commercial prospects, it is important to us that a serious indigenous player takes a share in the important aviation of the country.

“When AB Communications took over Rainbow, the project was belly-up, and has so far pumped in nearly $2 million to resuscitate the project in partnership with GMRI Finance to the situation,” he added.

Information gathered by the Daily News also suggested that Rainbow cannot lease any aircraft due to the expiry of its AOC.

It also emerged that Rainbow’s contract with South African firm, CemAir, from which it leased the Bombardier CRJ 50 plane, was terminated because Rainbow could not raise the required foreign currency.

Muponda confirmed the development saying: “Please note that CemAir is a South African company that requires payment in foreign currency. We could not continue the lease without the requisite foreign currency being allocated to the company.”

Comments (3)

True - you normally need money to run a company - even if it is an airline. Maybe Rainbow airlines could merge with Air Zim - they sound as if they both have the same problem ?

Big Grinner Branson - 13 September 2017

Setting the record straight. 1. AB Communications paid $10,000 for the said 70% shareholding. The full price was over $300,000, and they did not have the money. 2. There is no person called Frank Maunganidze. This is a lie to hide a medical doctor behind the 30% shareholding. The said doctor partly paid for the 30% but cancelled the agreement before full purchase and demanded his money back. He was partly refunded. Therefore the 30% reverted back to the owner on cancellation. 3. Gilbert Muponda did not provide the fictional $600,000. This is a fallacy. You daily news know that AB Communications pay for anything through a "batter" system. They had no money to pay for anything. 4. This information, and more, is a matter of public record. The summons issued to AB Communications for failure to pay for the 70% clearly reveal some outstanding information. Daily News would do well to research. 5. The Regulators, including the national regulators of Zimbabwe, are aware that Gilbert Muponda, the once ENG Director who fled the borders after some misdeeds, and his cohorts are damn hell fraudsters.

Jourbert Dingritz - 13 September 2017

But this Gilbert Muponda is listed as an Investment banker - up there with all the worthies of the Zimbabwe banking industry - how can it be that he has run out of money ?

Midas Ndhlovu - 14 September 2017

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