Tuesday, September 22, 2020

BEDIA caught in Chinese company’s shady web

A decision by Huabao International Holdings Limited, one of China’s largest flavour and fragrance companies, to use Botswana as its first front in expanding multi-billion dollar business operations into Africa has backfired.

The little-known Anonymous Analytics report released last week alleges that the company involved in shady business deals. A network of individuals investigating corporate mismanagement by international companies, Huabao is using Botswana for fraudulent business operations.

An investment holding company with subsidiaries mainly producing, distributing and selling flavours and fragrances and tobacco leaves, Huabao set up a Botswana subsidiary through the Botswana Export Development Investment Agency (BEDIA) in 2008.  Last week, according to Anonymous Analytics, the company used illegal means of raising cash through the back door, listing on the Hong Kong Stock Exchange, before providing capital to acquire and finance the BEDIA assisted subsidiary, F&G Botswana.

Anonymous Analytics investigations have revealed that investment bankers and outside consultants in China were not given an opportunity to vet the company operations before it listed on the stock exchange. Huabao is also accused of fabricating and inflating financial figures and its stock performance in order to attract investors.

In the company’s interim 2006 report, Huabao indicated that its subsidiaries achieved gross margins of 74 percent, but Anonymous Analytic investigations established that the figures were embellished as the subsidiaries experienced gross margins of about 40-50 percent.

It indicated that Huabao provides country and city locations of all their facilities, including the German Research & Development base.

“However, they make no mention of the city where F&G Botswana is located. Management went through the unusual step of photoshopping the only publicly available picture of the Botswana facility (shown in the 2009-2010 annual report). This photoshop job removed the address of the facility. The network stated in the report that the cagey facility, which management had hoped to keep secret, was located after an extensive investigation.”

On Friday, BEDIA distanced itself from Huabao. This came after its Public Relations Officer, Kutlo Moagi, said, “BEDIA has provided services to F&G Botswana only and has no other dealings with Huabao.”

Sunday Standard investigations have revealed that in 2007, BEDIA wrote an urgent letter to Registrar of Companies requesting for a quick incorporation of F&G in Botswana.  According to the letter, BEDIA wanted the process to be expedited in order for Huabao to provide capital for funding F&G facility.  

It has also turned out that the facility is not used for intended purpose of providing Huabao with natural extracts for tobacco production. During the time of going to the press, the Public Relations Officer for Francistown City Council said they are not aware that F&G could be violating its licence of production of extracts for tobacco production. However, she could not confirm when the council last visited F&G facility to confirm if they were compliant.

“If there are problems of non compliance we will report the matter to the police,” she said.

The Director of Financial Intelligence Agency, Jackson Madzima, could not be drawn into the matter, saying his organization does not reveal any information on companies under investigation.  

Meanwhile, the Deputy General Manager of F&G, Steven Zui, said they are aware of Anonymous Analytics report but declined to be engaged in further discussion.

Subsequently, the manager referred this newspaper to a press statement which was released on Friday by the parent company. In the statement, Huabao admitted that it has kept secret the location of F&G, citing commercial reasons.

Last year a report by Tax Justice Network ranked Botswana high in secretive financial deals.

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The Telegraph September 23

Digital edition of The Telegraph, September 23, 2020.