HomeBusiness DigestMind: Fragile Zim Investment Package!

Cafca set to clear debts by end of quarter

“FRAGILE — handle with care!” This is what would possibly be written on a container if Zimbabwe’s potential for investment were to be packaged and exported to foreign suitors.

This is so because despite the expectations shown by the country following the political settlement in February, many deals just petered out without coming to fruition, leaving the market wondering what should have been done.

Zimbabwe’s political stage, despite the establishment of the inclusive government, continues to be fragile and this has been worsened by unclear or contradictory policies, especially on indigenisation as well as the threat to investments as was the case with Nestlé in September.

A solution to the country’s political problems was found at a time when globally, governments had started to act on the effects of the financial crisis and the country was expected to join the train at that crucial time.

A tourism conference was held in March with enquiries being made and this was followed by an investor’s conference in July as well as a mining conference in September, which were expected to attract investment.

This, the market thought, would be a harbinger of more businesspeople coming to invest in the country that had so much potential, but in retrospect, one would reckon that this was a false start.

Throughout the year, everything worked to the advantage of foreign investors as the adoption of multiple currencies meant that companies had to source funds for capital investment which were non-existent in the country because of a liquidity crunch.

There were no lines of credit ready for local businesses and the few local institutions which were lending were doing so on a short-term basis and at prohibitive rates.

Foreign investors were then expected to come in with millions of dollars and this would boost capacity utilisation which was then at a paltry 10% on average, with government through its policy document, the Short-Term Emergency Recovery Programme, targeting 60%.

Negotiations were said to have started with many companies working on capital-raising initiatives. Listed entity OK Zimbabwe led the pack, opening talks with South Africa’s Shoprite.

This is a deal which was expected to change the country’s retail sector and at the same time boost OK Zimbabwe’s dominance on the local market with the injection of R167 million.

Midway through these negotiations, Shoprite announced that it was pulling out and while the retail giant was mum on the reasons, it was clear that the threat that had been posed to Nestlé Zimbabwe at that time made it illogical to make a move.

Nestlé Zimbabwe had bowed to pressure and refused to accept milk from Gushungo Holdings, a firm that is owned by First Lady Grace Mugabe.

This led to fallout with authorities and the milk-processing firm had its accounts frozen by the Reserve Bank and there were people who threatened to take over Nestlé.

It is still not clear how far this deal has gone because despite the announcement of Shoprite’s pullout, OK has continued to issue cautionary statements saying it was still in negotiations.

Another deal involved CFX Financial Services and a Zambian investor before it was blocked by fugitive businessman Gilbert Muponda who argued that he still had an interest through Century Bank which was incorporated into the former.

CFX could not meet the central bank statutory reserves requirements and it was only rescued by Interfin which has since taken over the financial institution.

This means that the two potential deals involving local companies and foreign investors had fallen through, raising questions if the country had the lustre which many talked about at the beginning of the year.
Economist Emmanuel Chinyaukira said the glitter was still there if things were put in order.

“Globally, there are indications that economies are recovering, thus this will trickle down to Zimbabwe,” said Chinyaukira. “The companies which are expanding may want to invest in Zimbabwe and what they look for is a stable environment and currency. The potential is still there in Zimbabwe but we should also remember that investors may want to know what the actual position on indigenisation is.”

International investors have shown preference for mining companies with Mwana Africa managing to get US$10 million for the second-phase refurbishment at Freda Rebecca Mine.

Another mining company, African Consolidated Resources, raised US$16 million for the expansion of its mining business in the country.

Another analyst said there was a mismatch between what foreign investors wanted and what the locals asked for.

“There is a perception that Zimbabwean stocks are cheap and the businesspeople are very desperate,” said the analyst who requested anonymity. “On the other hand, the local businesspeople are arguing that what they are being offered on the table is too low and given that they have been holding on at the most critical time, then they would not let go their stock for a song.”

This explains why deals involving local businesses have been successful.

An example is CFX which, despite failing to enter marriage with a Zambian investor, found a ready suitor in Interfin. Another successful deal involved Agricultural and Rural Development Authority (Arda) and Billy Rautenbach for its estates in Middle Sabi and Chisumbanje.

Other companies such as NicozDiamond, Fidelity and African Sun have managed to raise capital through private placements and rights offers.

State-owned enterprises and parastatals which include Ziscosteel, NRZ, Hwange Colliery and Zesa have been wooing investors over the last 10 months but not much has been achieved.

 

Leonard Makombe

Recent Posts

Stories you will enjoy

Recommended reading