In a significant development in pursuit of justice and financial recovery, timber processor, Border Timbers Limited, has taken a proactive stance in opening settlement negotiations with the Government to ensure the long-awaited payment of an Arbitral Award.
The award, issued by the International Centre for the Settlement of Investment Disputes (ICSID) in November 2018, has been a subject of dispute and legal proceedings for several years.
“The company initiated discussions with the Government on the settlement structure and timing of the ICSID award. In the meantime, operations on the ground have continued smoothly,” said chairman Elias Hwenga.
The ICSID arbitration proceedings concluded in 2018 when the ICSID adhoc committee dismissed the Government’s annulment application and confirmed the final award. Subsequently, a prolonged dispute with a former shareholder over entitlement to the Final Award has been successfully resolved through a Settlement Agreement, which received shareholder approval at an Extraordinary General Meeting held on January 12, 2022.
As per the Settlement Agreement, Border Timbers Limited is entitled to 57,5 percent of the final award, totalling US$ 71 323 703, along with interest on this amount. Additionally, the company is entitled to 100 percent of the Border Claimants’ Costs, which amount to £621 685,81, US$143 378,35, and R52 991,49, plus post-award compound interest. Furthermore, Border Timbers is owed 100 percent of moral damages, amounting to US$1 million with post-award compound interest until the date of payment.
Despite these entitlements and the finality of the arbitration proceedings, the Government has yet to make any payment towards the award prompting the company to take proactive steps in negotiating a settlement with the Government.
In accordance with the Settlement Agreement, Border Timbers has initiated negotiations with the government, represented by the Ministry of Foreign Affairs and International Trade. Additionally, the company, in collaboration with the former shareholder, has launched its own separate negotiations with the Government to expedite the payment process.
Throughout the duration of the ICSID Arbitration, the company has continued to operate its forestry business on unaffected parts of its property. These operations have remained uninterrupted and the company retains the right to occupy and conduct business on the unaffected land.
According to the company, the Arbitration Award has been registered in Zimbabwe and is also in the process of being registered in Singapore, United Kingdom, and United States of America, and it is legally binding.
“The time stipulated in the award within which Government was to make restitution has since lapsed as at the date of the authorisation of these financial statements, making the Award a financial award.
“Legal counsel has, however, advised the directors that notwithstanding the lapse of the period, the passage of time does not in any way preclude the company from accepting restitution of the land, or damages in settlement of the award now or at a later date, nor does it detract from the Government of Zimbabwe’s obligations as provided for in the Award, “ said the company.
Meanwhile, revenue for the half year to June 30, 2023 was US$15,8 million, a 23 percent increase compared to prior year, primarily driven by improved product mix and consistent product quality of the Kiln Dried Timber resulting in better average selling prices.
Net profit before taxation was US$0,9 million from US$9,8 million recorded during the same period in the prior year. Hwenga said the FY2022 was mainly driven up by a non-cash gain on biological asset transformation of US$14,8 million.
According to the company, the harvesting operations performed very well with the plant optimisation broadly on plan.
Lumber sales volume was 38 792m3, which was a 10 percent reduction, mainly because of lower aggregate demand, primarily in the local market.
“Efforts are underway to expand the export market base with a focus on markets with better average selling prices,” said Hwenga.
During the period under review, 1,327 hectares were planted, a significant improvement compared to prior year’s 713 hectares.
Treated Poles sales volume was 7 297m3, a 28 percent decrease compared to the prior year’s 10 189m³.
According to the company, this is mainly because of timing differences, which is experienced in the acquisition of pole tenders, which is asymmetrical.
Since exiting from the Judicial Management, directors of the company have determined to embark on
a recapitalisation strategy, which will further strengthen its operations of the business.
Border Timbers has invested in new sawmills at both Sheba and Charter.
Charter sawmill was commissioned on the 18th July 2023 and Sheba is expected to be installed and commissioned in December 2023.