Faced with liquidity problems and low productive capacity, local companies look for salvation beyond the country’s borders, offering potential investors varying stakes in the firms.
However, the negotiations have yielded nothing to date.
At times negotiations start but mid way through it is announced that the deal has fallen through or in other cases it has taken until forever to conclude the deals.
Three of the high profile deals which surfaced this year include the R167 million worth of stake that South Africa’s Shoprite wanted in OK, the sale of Ariston by Delta and the upping of investment levels in TM Supermarkets by Pick n Pay.
These have been on the table for some time and in some instances there is confusion as to where the negotiators are heading as the case of OK and Shoprite where what is said in South Africa is different from what is said in Zimbabwe.
An analyst with an investment bank said while there are many factors inhibiting the conclusion of the deals, political risk remains the biggest threat to any meaningful progress.
“There are many guys who are interested in investing in Zimbabwe but the question which they always ask is how long would the Government of National Unity last.
“Their fear is that if the GNU fails, then we may be going back to the Zimbabwean dollar era and all those things related to that period of time,” said an analyst from an investment bank.
This has been made worse by recent developments when MDC-T, a partner to the Global Political Agreement, “disengaged” from government three weeks ago.
Apart from the political risk, there are other factors which have also contributed towards the breakdown of negotiations or lengthy discussions.
There is what analysts have called the ownership and control factor, where managers of some of the business courting possible suitors are also the owners of the firms and are not prepared to have their shareholding diluted to an extent where they do not have a say.
“In terms of the modern corporate structures, there are institutional investors who come into a company and buy a stake. By agreement these investors may let the managers continue running the business but when relations turn sour they may decide to call the shots and this is what local managers do not want,” added the investment analyst.
As such the local managers-cum-owners are prepared to part with only a fraction of their stake so that they remain in charge of the decision-making in the business, but this would not be enough to spur the business.
At times the stake these managers-cum-owners dangle is not attractive enough for the investor to take the risk.
This has been the case with most of the smaller transactions which have been going on since the beginning of the year.
Negotiations have also stalled over the proper pricing of local assets as the international investors say the value has dropped significantly while shareholders think otherwise.
Most foreigners are attracted to the local assets because they think they have been run down and are now very cheap.
Local shareholders, on the other hand, argue that they have held on to the assets at a time when the country was going down and thus are not prepared to part with them for any value which is lower than what they think they are worth.
“In some cases, negotiations have stalled over prices and we have to be honest, there are managers who are not correctly pricing their assets and that is why it takes so long to conclude,” added the analyst.