THE seizure of Interfresh Holdings Ltd’s Mazoe citrus estate, the group’s prime land asset, by President Robert Mugabe’s wife Grace has blocked external lines of credit to the firm as it emerged traditional financiers, including Industrial Development Corporation South Africa (IDCSA), now fear their investments are at risk as the company struggles for survival.
By Chris Muronzi
Grace’s land grabs have left Interfresh tottering on the brink of collapse, while investors are scurrying for cover fearing their money will sink in an increasingly unviable enterprise being destroyed by the unceasing land confiscations.
Documents seen by the Zimbabwe Independent show Interfresh has total land holdings of 3 800 hectares. Grace has taken 870 hectares (23%), leaving Interfresh with 2 930 hectares (77%).
Of the 3 800 hectares, only 1 067 hectares is arable. Grace grabbed 414 hectares (39%) of arable land, leaving Interfresh with 653 hectares (61%).
This latest land acquisition by the First Family effectively renders Interfesh unviable, compromising its ability to pay back IDCSA its loan administered by the state-owned Agribank.
Documents show that after the second land grab last December, Interfresh’s total budget revenues plunged to US$8,7 million from US$10,4 in December 2012 after the first seizure. The actual turnover dropped to US$3,1 million compared to the budgeted turnover of US$10,4 million.
“The business started facing working capital constraints and operated at less than 30% capacity utilisation throughout 2013,” documents say. “As a result of these developments, Interfresh fell behind in terms of its loan repayments to IDCSA.”
IDCSA last year in March sent a delegation to Zimbabwe to protest against escalating political or country risk hitting Interfresh. Since then things have been going horribly wrong, particularly after Grace’s second wave of land seizures.
As a result this has unsettled financiers currently bankrolling the country through lines of credit to banks and institutions of national interests such as PTA Bank, Development Bank of Southern Africa (DBSA), Afrexim Bank, African Development bank (AfDB) and IDCSA.
IDCSA was on the verge of finalising a line of credit to a local institution, but has now frozen the facility as sovereign risk rose in light of the Interfresh problems. Zimbabwe continues to experience a liquidity crunch that has hampered government’s efforts to resuscitate the ailing economy, amid indications that macro-economic fundamentals are on the slide.
DBSA and IDCSA share the same shareholder — the South African government — and this is causing grave concern in Pretoria.
Interfresh assets funded by the IDCSA include irrigation equipment such as underground main lines, micro jets, filtration systems, pump houses, dripper lines as well as fertiliser and chemicals used for the rehabilitation of the estates’ orchards and cropping programmes.
Documents, which include letters, show that Agribank is concerned by the land confiscations after it had on-lent US$5 million it got from the IDCSA.
According to the documents, AfDB, International Fund for Agricultural Development (IFAD), IDBSA, Agence Francaise de Development (AFD) and the Overseas Private Investment Corporation (Opic), IDCSA and Proparco have taken great exception to the occupation of Mazoe citrus by the First Family.
The seized land housed 52% of the assets, both biological and immovable, leaving the total assets of US$11,7 million, suffering a US$5,7 million impairment on the balance sheet.
After the new occupation of the land, Interfresh is said to have fallen behind in terms of the repayment of the US$5 million IDCSA loan advanced to Agribank under a US$30 million line of credit in March 2011. The funds went into working capital and capital expenditure.
IDCSA sent a delegation to Harare and indicated to Agribank and Reserve Bank of Zimbabwe that the institution wanted to reconsider its local investments.
According to documents, Agribank continued engaging IDCSA and remained up-to-date with all repayments, including the Interfresh portion amid indications the corporation mulled possible restructuring of the outstanding Interfresh debt until fresh land grabs. It also planned to award a capital repayments moratorium while the agricultural group readjusted its business model post the December 2012 land reallocation exercise.
Prior to the first land reallocation exercise two years ago, Interfresh is said to have been on the market seeking to raise additional capital injection and had secured an investor — African Agriculture Fund (AAF) who also became an equity partner.
AAF is a US$243 million fund focused on SMEs. Its shareholders are the AfDB, Alliance for a Green Revolution in Africa International Fund for Agricultural Development, DBSA, AFD, Opic and Proparco.
An investment agreement was signed in early December 2012 for a US$4 million recapitalisation programme. AAF is said to have disbursed US$1,2 million in mid-December 2012 before the land reallocation exercise was implemented. This loan was earmarked for working capital purposes and partly to reduce the exposure of Interfresh with Agribank.
Two weeks after this initial US$1,2 million investment had been released to Interfresh, the first batch of land was seized. Another US$1,7 million rights issue followed in 2013.
As part of the AAF deal, the local community would have benefitted after the fund set aside €500 000 in technical assistance to small scale farmers.
Interfresh also raised US$3 million through a rights issue last year, which got a subscription rate of 57,73%. The rights issue was underwritten by MetBank.
Parts of the funds were used to refurbish Mazoe citrus juicing factory as well as for working capital requirements for the current cropping season. After the rights issue, the business was a going concern and the AAF SME fund was willing to pursue further capital raising programmes, the documents read.
According to the documents, the company’s remaining assets are only US$4,6 million against US$11,7 million liabilities.
“In its current form the business of Interfresh is therefore not viable. The remaining business operations which are Mazoe Citrus juicing factory and the citrus plantations, though viable as stand-alone business units, cannot carry the total liabilities of the entire business pre-December 2012 period,” the document reads. The land-grabs have also ruined the group’s planned capital raise as it emerged that an additional US$2,5 million in working capital from AAF that was due by January 31 2014 has now been frozen.
Investigations show that IDCSA is planning to call on its facilities in the economy. The institution has advanced facilities running into several millions of dollars in sectors such as banking and infrastructure. On top of that, the investment committee members of AAF are now viewing their Interfresh investment as risky.
According to documents, AAF is under pressure from its shareholders who are now mulling possible legal action in terms of Bippa to protect the investment.
A visit to Mazoe yesterday showed the Mugabes have turned a once productive farm into largely derelict land. For instance, lemon orchards on the land they occupied two years ago are now virtually rundown. Only part of the land is being used.
The Interfresh fiasco could have serious negative consequences on Zimbabwe’s image and investment prospects.
“The investors are considering legal action and this will seriously damage the image of the country as an investment destination and worsen the current liquidity crunch and the general situation unless corrective measures are taken urgently,” an investor said. “The trouble is that this case involves the president’s wife and for that reason it is a very serious issue.”'