CAPS Holdings (CAPS) is a pharmaceutical and health-care company that engages in manufacturing, wholesale and retail of pharmaceutical, consumer products and also the provision of general and medical care services in Africa. CAPS manufactures generic pharmaceutical products and at its prime it used to manufacture approximately 200 products in the form of solids, liquids, injectables, ointments and creams. The group incorporates Caps Pharmaceuticals (manufacturing), QV Pharmacies (retail), Geddes (wholesale) and St Anne’s Hospital (healthcare).
CAPS delisted from the Zimbabwe Stock Exchange (ZSE) in 2011 after a 42 year presence on the local bourse. After some interviews with former executives and market watchers it was a general consensus that the demise of this former monolithic pharmaceutical giant was orchestrated by non other than the former Executive Chairman Fred Mtandah. This man deserves an accolade for corporate governance evasion. He has managed to dribble past the tenets of corporate governance with such dexterity and temerity to an extent that he would leave even Bernard Madoff (former stock broker who ran one’s of the biggest ponzi scheme’s in history, only that he got caught and was sentenced to 150 years in prison) green with envy
In violation of Zimbabwe Stock Exchange (ZSE) rules; Fred Mtandah owned an estimated 80% of the company and was the executive chairman. Basically there was no checks and balances in terms of his executive decisions. He set up a head office that would levy extortionate management fees to all subsidiaries. Subsidiaries were forced to declare dividends despite the fact that they were loss making. Fred is also the owner of FCM which used to have sole distributorship of Volkswagen (VW) motor vehicles in Zimbabwe. Subsidiary companies were forced to purchase these vehicles at 100% mark up of the market value and were also forced to pay cash upfront. All the company vehicles were forced to refuel at his Total Greencroft service station purchasing the fuel at premiums; way above fair market value. All this prejudiced the minority shareholders of CAPS as Fred milked CAPS whilst financing his businesses that he owned 100%.
The executive chairman also had unfettered individual access to all the group company accounts. He could make withdrawals and transfers without consulting any of the general manages manning the subsidiaries. They would at times find out that there are no funds in their accounts after trying to process payments and withdrawals. In one case the wholesale arm was asked to move to one of his properties in Workington, Harare where $100k was spent refurbishing the land and buildings. Instead of offsetting that amount with rentals as is the norm with such transactions the ailing subsidiary was given only one month rental holiday.
The former executive definitely has a plethora of enemies in the form of former employees. He was known for firing employees on the spot, his catch phrase being: ” you are fired pack your stuff now and I will pay you now from my own pocket!” A number of executives would find themselves locked from their offices with their service cars recalled, only to be told by junior staff that they had been fired. These odd cases would normally happen to those who had been promised houses for completing a certain number of consecutive years of service. His mafia tactics were not successful all the time as he would lose a good number of legal cases and pay an arm and a leg to the aggrieved parties.
It seems Mr Mtandah had the last laugh as government took over CAPS and just last week it was confirmed a suitor had been found to take over the drug company. An undisclosed amount was paid to Mtandah by the Reserve Bank of Zimbabwe (RBZ). This was a case of adding insult to injury to the various creditors of CAPS, as the former chairman was paid for plundering the company to its knees. It seems he is an expert at amassing wealth at the expense of the companies he owns, he is an expert at asset stripping. Look at what he did New Africa Securities (relegated to the corporate graveyard) and Lobels (luckily a consortium of bankers who were owed by Lobels revived it)