ZHL has already found new investors for Fidelity and Nicoz Diamond and a similar strategy has been proposed for CFI and Genesis as the market is priming itself towards sustainable capital positions through rights issues.
Analysts this week said the group’s subsidiaries needed capital and ZHL could not provide that at the moment.
“They can choose to maintain their shareholding but the subsidiaries will continue to struggle and worse still collapse,” an analyst said.
ZHL is still on the US sanctions list and that could be hampering direct capital investment.
ZHL operations director Solomon Tembo told businessdigest yesterday that the group was anticipating the changes that had occurred in the market place and took a proactive research driven approach well ahead of time.
“Our findings confirmed that adequate capitalisation (as opposed to control) is a key business driver; in particular in competitive markets. Accordingly, ZHL management sought and obtained shareholders and board endorsements in respect of the proposed strategies to cope with the anticipated market challenges,” Tembo said.
He said ZHL believed in strong and well capitalised companies that are able to compete effectively in an increasingly competitive environment to the benefit of its shareholders.
“ZHL will soon be releasing its year-end results to the market. While it is too early to show the impact of that strategic decision; we remain convinced that the strategic decisions taken will in the long run reward our shareholders handsomely,” Tembo said.
He said ZHL was actively scanning the environment and the market for value adding opportunities for its shareholders.
“Once we have identified these opportunities, management will announce to the market in line with the prescribed market practice for a listed entity,” he said.
Asked if the group was in a position to capitalise all their subsidiaries, ZHL group CEO Albert Nduna said: “We need recapitalisation of all our units. We know that size matters and we will not stand in the way of new investors. Where we have the capital, we will put in. Where we need strategic investors, we will allow for that.”
“Yes, we will get dilution, but we are prepared for that. We are finalising the recapitalisation unit by unit. But I can also say that everyone in the family will remain in there, although our shareholding may be lower. We are looking for people who add value, who are like minded,” he said.
During the group’s last financial results group Finance director Timothy Nyika noted that Zimbabwean operations had recorded strong growth in revenues, now accounting for 43% compared with only 10% last year. Malawi accounted for 42%.
He said the reason for the little change between quarters when it came to revenue was because most premiums were collected in Malawi and Zambia in January.
Nyika said because of the tight liquidity prevailing in Zimbabwe, insurance would be the last sector to fully recover.
Some analysts however said the dilution strategy was meant to decimate exiled businessman Mutumwa Mawere’s empire, reducing his influence in some of the group’s subsidiaries in the event he gets ZHL back.
“The shares that he is likely to get will be the 43% held by government. In fact one would theorise that ZHL is being deliberately tunneled,” said the analyst.
So in the event that Mutumwa gets ZHL back it will be an investment company without any subsidiaries, but with only associates.
Fidelity and Nicoz will be accounted for as associates going forward, leaving only Boabard Re and ZPI as direct subsidiaries.
“Bringing new shareholders dilutes them but the new capital can improve the viability of the subsidaries which will benefit shareholders including ZHL itself. ZHL does not options; they just need to get new capital through dilution,” added the analyst.