Zim corporate finance activities pick-up

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CORPORATE finance activity has picked up in Zimbabwe, with private equity deals mainly involving the National Indigenisation and Economic Empowerment Fund leading the way in generating transaction flows.

Zimbabwe’s corporate finance activity had been subdued owing to domestic liquidity challenges and waning investor confidence largely blamed on indigenisation concerns. Ironically, it is the empowerment agreements that have led the way in reviving investment banking in the country.

This month saw the signing of what is now the largest equity transaction in Zimbabwe, the US$971 million empowerment deal struck between Zimplats and local empowerment partners.

After nearly 12 months of negotiations, an agreement for the sale of 51% shareholding to indigenous Zimbabweans led by the government of Zimbabwe was signed in Harare on the 11th of January, brokered by financial advisors Brainworks Capital.

Under the agreement, Impala Platinum Ltd, the world’s second largest platinum producer, which is listed on the Johannesburg Stock Exchange, will dispose of 51% of its shareholding in Zimplats to indigenous Zimbabwean entities led by the Government of Zimbabwe for a consideration of US$971 million.

Zimplats is arguably the largest mining company in Zimbabwe and is listed on the Australian Stock Exchange.

The deal dwarfed fundraising deals in Zimbabwe over the past 12 months such as the US$50 million African Banking Corporation rights issue underwritten by ADC, the US$20 million takeover of TN Bank by Econet, the US$11 million takeover of Tractive Power by Zimplow and the US$8 million deal between Afrifresh and Ariston.

Last year empowerment transactions worth US$750 million were concluded through Brainworks Capital alone, implying the total value of empowerment deals could be much higher.

Brainworks Capital managing partner George Manyere is optimistic more indigenisation pacts could be signed this year and through the Zimplats agreement alone, his company had already exceeded its target for 2012.

In its note on Financing Investment, the World Bank said the Zmbabwe government needed to refine its laws to enable an improved environment in investment financing, “for example by rendering agricultural land available as collateral on a long-term basis”.
More innovative financing techniques – such as structured trade finance, warehouse receipt finance and supplier finance – could also be introduced.

The International Finance Corporation currently operates a Global Warehouse Receipt Programme, which enables farmers to utilise produce stored in depositories as collateral for loans.

Last year, Essar Global’s resident director for the Middle East, Africa and Turkey, Firdhose Coovodia, said the business environment in Zimbabwe made 2012 a difficult year in terms of funding, adding that 2013 might also be difficult for both the global perspective, banks and other financiers because they would want to see how the election comes up.

The World Bank says the combination of limited corporate finance activity and recent disappointing investment returns impose a significant constraint on the ability of firms to generate sustainable profits, conduct long-term investment decisions and spur growth.

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