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Indigenisation puts companies under spotlight

WHEN government gazetted the indigenisation regulations compelling foreign-owned companies to cede 51% stake to native Zimbabweans, blue chip counter, Old Mutual and a few other listed companies came under the spotlight.

Zanu PF sharks are reportedly eyeing the group and could be imagined salivating for a stake.
Owning such a conglomerate whose life assurance arm is an active player on the bourse and has varying interests in most listed companies was simply irresistible for many. 
The January 29 regulations required all foreign-owned businesses with assets valued over US$500 000 to declare their shareholding to government and present an empowerment plan to indigenisation minister Saviour Kasukuwere by mid-April.
Opportunists must have already been targeting chairing the board of the conglomerate and calling the shots at a company that owns prestigious shopping malls such as Borrowdale Brooke, High Glen, Chitungwiza and Nkulumane.
But reported “covert plans” by Zanu PF sharks to seize control of Old Mutual are unlikely to be a walk in the park.
Stock market sources say the empowerment regulations may prove difficult to implement on fungible stocks.
The regulations require companies to fully comply within the next five years.
Some players also argue that ownership of companies should be on the basis of who has the deepest pockets.
Analysts say the controversial indigenisation regulations which came into force this month will have less impact on companies whose primary listing is outside Zimbabwe. 
Primary listing refers to the main exchange on which a stock is listed.
Apart from Old Mutual, cement manufacturer PPC and ABCH have primary listings on the JSE and Botswana bourse respectively. Old Mutual is fully fungible being listed in London, JSE and ZSE. BancABC shareholders include among others Old Mutual, Botswana Insurance Fund Managers (BIFM) and the International Finance Corporation.
“It is difficult for government to apply the regulations on companies with primary listings outside Zimbabwe,” said a veteran stockbroker. “Such counters should be governed by the laws of countries where they have primary listing.”
ZSE sources also said the Securities Commission of Zimbabwe is organising a meeting where the local bourse, the ministry of Indigenisation, treasury and the commission would clarify the fate of listed companies likely to be affected by the regulations.
For Old Mutual, its demutualisation has been the “biggest empowerment exercise” the company has undertaken.
Old Mutual is often viewed as a very influential investor both on the stock market and in the real estate sector.
“Its investment activity is often labelled ‘foreign’…We believe that the demutualisation of the old society is probably the biggest empowerment exercise in this country. Main beneficiaries were ordinary people such as workers and policyholders,” reads the company’s prospectus.
In 2007, the company offered a fifth of its business to employees as part of its empowerment drive.
Critics also criticised the regulations for granting Indigenisation minister carte blanche over companies. This, they argue, could prejudice Zimbabwe’s economic growth plans.
Market watchers also said the indigenous regulations would also see major shake-ups in companies that have in the past failed to comply with ZSE regulations on ownership.
At least 30% of shares of listed companies should be in the hands of the public, or rather no individual or corporate investor is supposed to have more than 70% scrip in a listed company.
But a look at a handful of listed companies tells a different story. 
Cafca, a manufacturer of electrical cables, is one company that is likely to have a major shake-up unless it gets some form of reprieve.
The London Register has a controlling stake of 74% in Cafca followed by Edwards Nominees. Business magnate Nicholas van Hoogstraten, through his Messina Investment, is third accounting for 4,65% of issued shares.
Cement producer Lafarge is also in breach of the ZSE regulations. Associated International Cement Ltd has a scrip that is above the threshold, accounting for at least 76%. CFI Holdings and The Farlow Trust placed second and third on the register account for just over 5% of Lafarge. Colcom Holdings is 80% owned by Innscor Africa, followed by Old Mutual Life Assurance and Zesa Staff Pension Fund.
Market players also say the ZSE already has regulations that economically empower locals. Listing regulations dictate that 30% of companies’ total issued share capital should be in the hands of the public.
Efforts to get comment from ZSE chief executive officer, Emmanuel Munyukwi, on the fate of companies that are in breach of the regulations were in vain as he was out of the country.


Bernard Mpofu

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