THE book value of shares listed on the Zimbabwe Stock Exchange in which government is invested plunged 41% in the six months to June 30 2012 after the state continued to be diluted as a result of its failure to follow its rights in rights offers, a report compiled by the State Enterprises and Restructuring Agency (Sera), has revealed.
Gamma Mudarikiri/Herbert Moyo
The Sera report showed that the book value of the government’s shares in publicly-listed companies depreciated to US$37,3 million, from US$64,1 million recorded in January this year.
Sera has recommended that government should look at disposing of its shareholdings in listed companies, lest it is further diluted in the event of further rights issues and more importantly, as a means of unlocking value in the concerned entities.
A rights issue is where existing shareholders are offered new shares in proportion to their current holding for capital-raising purposes.
Government has a significant shareholding in nine publicly-listed companies — Astra, Cairns, Zimpapers, CBZ, ZB Holdings, Zimre, Rainbow Tourism Group and Hwange Colliery Ltd.
Government holds 66% in Astra and Cairns, 51% in Zimpapers, 45% in Zimre, 39,5% in Hwange, 26,5% in ZB Holdings, 16% in CBZ Holdings Limited and RTG 5,07%.
The drop in book value in the period under review was attributed to the generally poor performance of the local market. Quoted shares on the local bourse have been declining owing to bearish sentiment, weighed down by lack of liquidity. Government’s book value of listed shares was also dented by the divestiture of the state-owned Finance Trust of Zimbabwe (Private) Limited from Tractive Power Holdings (TPH). The 57,21% stake in TPH was snapped up by Zimplow Limited and transactions to the deal have been finalised.
“Government can also consider disposing of some of its shares and get proceeds from the sale because eventually the government shareholding is being diluted due to the inability by the Government to exercise its rights in cases of rights issues,” the Sera report said.
The report added that government’s failure to follow its rights was also hampering the capitalisation of the companies concerned. The report advised investors to remain cautious in their investments and to target companies with improved capacity utilisation, and high growth rate potential.
The ZSE industrial index closed at 131 points as at June compared to 144,1 points in January this year while the mining index remained virtually static, closing at 75,7 points in June, compared to 79,09 points in January. Market capitalisation in the period chipped off 4,3% to US$3,3 billion.The ZSE continues to be dominated by few blue chip counters such as Econet, Delta, Innscor and OK Zimbabwe, while the bulk of listed companies continue to struggle.
Sera said it was imperative for the country to improve its business environment to attract investment.