HomeBusiness DigestZesa dilutes stake in Cell Insurance

Zesa dilutes stake in Cell Insurance

ZESA Holdings Ltd has diluted its stake in Cell Insurance (Pvt) Ltd to 40%, corporate affairs manager Obert Nyatanga has said.

The power company had a 60% shareho

lding in the insurance firm.

Nyatanga told businessdigest that Zesa had cut its stake in the Zimbabwean insurance company in line with the country’s investment regulations forbidding institutional investors to hold equities beyond certain prescribed ratios or thresholds.

“The threshold limit for institutional investors advocated by the authorities is a maximum of 40%,” Nyatanga said, adding that various insurers were already observing the move.

Although the legislated limit is 75% for institutional investors, insurance commissioner Lovemore Mafurirano has been enforcing shareholdings below 40%.

Cell was formed last year and it is a self-insurance mechanism launched by Zesa with the help of prominent South African-based insurer John Sibanda.

Despite cutting its stake in the insurance company, Zesa remains the single largest investor in Cell.

At the time of its launch, Zesa held 60% directly and through subsidiaries as well as its pension fund.

Sibanda, a local re-insurer, and other investors held 30% of Cell with South Africa’s Guardrisk owning 10%. The United States’ Alexander Forbes owns Guardrisk.

Guardrisk came in as a technical partner and is well-known for promoting the self-insurance concept worldwide.

When the issue of Zesa cutting its majority stake surfaced in late 2004, about four institutional investors were said to be interested in taking up the excess shareholding.

Among them were a building society, a local assurer, current shareholders and other undisclosed investors — potentially pension funds.

Company sources said at the time that the shareholding issue or dilution would be carried through a rights offer meant to raise Cell’s capitalisation to about $8 billion.

With insurance costs rocketing, Nyatanga said the Cell concept had helped “soften insurance rates in the market” and that it had helped dispel the perception that Zesa was uninsurable.

“It helped dispel the perception that Zesa was uninsurable (and a) bad risk, as Zesa is funding most of its losses,” he said.

The Zesa spokesman also said the venture helped to improve risk management, processing of claims and reduce premium outlays.

Upon Cell’s launch in October last year, officials said the power utility had outgrown “any” insurer’s capacity to cover its assets.

Sydney Gata, Zesa’s executive chairman, told businessdigest around the time that his company’s assets topped $1 trillion and that it “only made sense to put aside some money for insurance purposes”.

This culminated in the engendering of the highly-innovative self-insurance concept known as cell.

The single largest risk for the electricity company is fire and due to the nature of its business, Zesa has suffered often damaging outbreaks of fire that have disrupted operations at its countrywide plants.

Such a scenario has also eaten into national supply and exacerbated industrial woes and affected domestic consumption. — Staff Writer.

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