How Lazarus Zim came back from the collapse of Afripalm

Lazarus Zim was the most visible casualty of black economic empowerment before he became one of its more durable survivors.

He runs Zanozi Properties & Commodities as founder and chairman, a business covering real estate and commodity trading, and he has chaired Northam Platinum, Kumba Iron Ore, Telkom and Zambezi Platinum. Before any of it he was chief executive of Anglo American South Africa.

The thing that separates him from most of his generation of empowerment dealmakers is that he went bankrupt in public and came back.

Fort Hare to Anglo American

Zim trained as a chartered accountant and studied at Fort Hare, the university that educated much of South Africa’s post-apartheid leadership.

He worked as an executive at MTN before moving into mining, and in 2005 Anglo American appointed him chief executive of its South African arm, making him the first black South African to run the local operations of one of the world’s largest mining houses. He was voted African Business Leader of the Year the same year and served as past president of the Chamber of Mines.

He lasted twelve months. People inside the company later described the position as a non-job, with the real decisions taken elsewhere, and Zim left in 2006.

That departure is when his own business began.

Afripalm and the Mvelaphanda takeover

Zim had founded Afripalm Resources in the 1990s as a vehicle for empowerment opportunities in mining, media and property, and he turned to it full time after Anglo.

In 2006 Afripalm drove the reverse takeover of Mvelaphanda Resources, the mining company Tokyo Sexwale had built into the leading black-owned resources business in the country. Zim paid roughly 1.5 billion rand for a 19.3% economic interest carrying 31% of the votes.

What that bought was a position across three commodities at once. Mvelaphanda held stakes in Gold Fields, the diamond producer Trans Hex and Northam Platinum, and the company grew into a 5 billion rand enterprise.

Anglo American had already handed the partnership something substantial. In 2004 it offered a controlling 63% of its Booysendal project to Mvelaphanda Resources, which Sexwale’s Mvelaphanda Holdings and Zim’s Afripalm controlled between them.

Zim was being described as the new Sexwale.

How it came apart

The financial crisis arrived in 2008 and took commodity prices with it.

Northam Platinum’s share price fell sharply, and those shares were the collateral Zim had pledged to the banks that financed his Mvelaphanda position. When the price dropped through the covenant thresholds, the banks called the shares in.

Afripalm Resources shut down. Zim withdrew from public life entirely.

The damage extended well beyond him. Northam’s empowerment credentials collapsed from 26% to well under 10%, and the Department of Mineral Resources responded with a decision that set a precedent, ordering the company to rebuild its black shareholding regardless of what it cost.

Empowerment deals of that era were almost all built the same way. A black partner borrowed against the shares being acquired, the shares serviced the debt, and the structure worked as long as the price held. Zim was the highest-profile person to discover what happened when it did not.

The structure that could not be called

He returned as chairman of Northam Platinum and set about designing the replacement.

Northam shareholders approved the issue of 159,905,453 shares to Zambezi Platinum on March 19, 2015, and the transaction was implemented the following day, leaving Zambezi holding 31.4% of the company. Zim participated through a vehicle called the BVI 1841 Consortium.

The financing is the part that matters. Zambezi Platinum raised the money by issuing preference shares listed on the Johannesburg exchange rather than by borrowing against the Northam stock. Investors bought a listed instrument with a defined return, and no bank held a covenant over anyone’s shares.

Nothing in that arrangement could be margin-called.

The structure ran for six years and was finalised on Sept. 21, 2021.

The Kumba conflict

Zim’s other chairmanship produced a different kind of problem.

He chaired Kumba Iron Ore in 2010 when a company called Imperial Crown Trading 289 won prospecting rights over part of the Sishen mine, the asset Kumba operates, in an application that competed directly with Kumba’s own. The award was worth billions and commentators questioned how Imperial Crown had assembled the technical data as quickly as the mine’s operator.

Zim was connected to Imperial Crown’s main shareholder.

He said he had no advance knowledge of the application and learned of it only from Kumba’s chief executive, then declared the association to Kumba and to Anglo American. Mindful of a potential conflict, he said, he offered to recuse himself from all board and management discussions on the matter, and in every instance the company decided its interests were better served by his continued participation.

A Kumba spokesperson confirmed his account and said there was no conflict because Zim was not involved in Imperial Crown itself.

The lawsuit

A former stockbroker is suing him for 123.7 million rand plus interest.

The claim concerns an oral agreement the broker says he reached with Zim in March 2014, when Northam Platinum no longer complied with the Mining Charter requirement to hold at least 26% black ownership and needed the deal that became Zambezi Platinum.

Zim has said through his attorneys that he will defend it.

What he holds now

Zanozi Properties & Commodities is the current vehicle, built on real estate and commodity trading.

Afripalm Resources still appears in company records with interests across platinum, gold and diamonds, though the business that carried the name into the Mvelaphanda deal was wound up after 2008 and what survives of it is not clear from the public record.

He has also collected chairmanships across sectors with no obvious connection to each other. Telkom, the state-linked telecoms operator. Kumba Iron Ore. Northam Platinum, where he oversaw the acquisition of Eland Platinum and the development of Booysendal, the project Anglo had handed his partnership a decade earlier. And Orlando Pirates, the Soweto football club, which he left in 2011 after supporters turned on him over results.

He had ties to the Gupta family and distanced himself from them in 2010, years before the state capture inquiry made that association ruinous for other businessmen.

What Zim represents in South African business is not a fortune on the scale of Patrice Motsepe’s or a political network like Cyril Ramaphosa’s. It is a demonstration that the first generation of empowerment financing was structurally unsound, and that somebody who lost everything to it could design the thing that replaced it.