IN 2016, Radar Holdings Limited made a decision to delist on the Zimbabwe Stock Exchange (ZSE), citing continued underperformance. The company — which has interests aligned to the construction industry — has struck a deal with Cambria Africa which will see the latter snapping up a sizeable stake in the firm with its effective shareholding in Radar having been increased to 8,98% as at the end of 2019, up from 7,83%. In a new development, the company says it has discovered new clay deposits and is sitting on 70 years of the material. Business reporter Melody Chikono (MC) tracks how the company has fared to date with Radar CE Elias Hwenga (EH) saying shortages of electricity and foreign currency are taking a toll on operations. Below are experts of the interview:
MC: How can you describe the journey you have travelled so far since delisting from the ZSE?
EH: We have strategically achieved what we had planned to do. We paid off the legacy debt which was hanging on our neck. We have managed to monetise the land bank which was sitting idle in our balance sheet. We have, for the first time in the history of the group, paid a dividend to our shareholders. We have now started to embark on pursing our “value and growth strategy”.
MC: What is your comment on the prevailing economic situation in relation to your business?
EH: We are experiencing hardships due to mainly shortages of energy (electricity, fuel) and foreign currency. These two are taking a heavy toll on our production capacity utilisation.
MC: I understand you have sourced huge clay deposits. Kindly enlighten us on this development?
EH: We always had more than adequate clay deposits since 1984. Currently, we are sitting on 70 years of clay deposit at production levels, higher than what we are currently doing.
MC: What does this mean for Radar in the foreseeable future in terms of earnings?
EH: Our business model does not entirely depend on clay deposits in one city. Our growth model does take into account clay resources which are in other strategic towns and cities across the country. These strategic clay resources will ensure sustainable earnings for Radar through MacDonald Bricks.
We also have a huge property development business that has started and will earn sustainable long-term earnings for the group. The earthmoving division will also play its part in the growth of our business.
MC: I understand there has been inadequate disclosure on your part, according to Cambria Africa. What is your comment on this?
EH: We have maintained our reporting as a listed company and we shall continue like that. All our stakeholders have full disclosure of what is happening in the company. I have given you our latest annual report, did it show any deficiency compared to any listed company? Our governance is very professional and up to standard. We religiously do our AGMs, etc.
MC: I also understand that you have opened a new plant in Bulawayo with top technology. Kindly take us through this development, including the quantum of investment as well and the capacity utilisation?
EH: We have just completed the construction of a new mechanised brick plant in Bulawayo at a cost of US$2,5m funded from internally generated resources. The plant can produce 80 million bricks per year with a quality that matches regional products and exceeds local standards. The use of robots in the plant has enabled us to produce a high-quality brick at low cost. This is a real game changer. Through the plant we have created over 100 direct jobs.
MC: What other new initiatives are you are venturing into to improve your offerings on the market?
EH: Radar Holdings Limited (RHL) is an investment holding company with subsidiaries in the property and construction sector.
While the solution to access to affordable housing often focusses on provision of the finished product, Radar understands that in order to complete a home there is an entire value chain behind it and, as a company that owns some of the key components of the property and construction value chain, RHL is uniquely positioned to make a widespread impact in solving the challenge of sustainable urbanisation in Zimbabwe.
The company is in the process of implementing a project that will see to the provision of completed affordable housing through its Radar Properties subsidiary, and it also caters to other links in the value chain through MacDonald Bricks, which is a manufacturer of low-cost but high quality bricks and the organisation’s earthmoving equipment division, Replants Africa Investments (Pvt) Ltd.
RHL’s structure allows the company to leverage synergies among its subsidiaries by creating a mutually beneficial ecosystem for its operations and through its brick manufacturing and earthmoving equipment services the company is also able to supply other companies and projects with low-cost construction products and services, thereby expanding RHL impact and reach beyond its own property development projects.
MC: What have been the major problems you have been facing over the years?
EH: Despite the severe foreign currency shortages facing the country, Zimbabwe continues to import bricks from South Africa and Botswana. Local companies like Macdonald Bricks have been making investments that enable us to produce the same quality of product as the imports.
To allow the local industry to grow, we implore the authorities to act on this. The shortage of power has hampered production in our factories. Foreign currency shortages have delayed or stalled the expansion projects we had lined up as the investments require imports. Our businesses deal in capital goods that require consistent policies to enable decision making by customers. The frequent policy changes have made investment decisions by our customers very difficult.
MC: What is your comment on the overall existence and operations of your industry in Zimbabwe?
EH: Given that all of Radar Holdings subsidiaries operate in construction and property aligned sectors, the target markets for each are very similar with products and services offered appealing to both individual and institutional market segments. With regards to individuals, although everyone requires housing, not everyone can afford it.
Rapid urbanisation has resulted in local demand for decent housing outweighing supply especially in Zimbabwe’s major cities Harare, Bulawayo, Gweru and Mutare. The country’s housing backlog is estimated at 1,4 million with 500 000 of these homes required in Harare alone. With regards to the diaspora market, three to four million Zimbabweans reside outside the country and it is that about 60% of the population living outside Zimbabwe’s borders are interested in investing at home.
Housing prices have been on the rise due to the devaluation of the local currency with sellers preferring foreign currency as payment for their properties and alternatively accepting payment in RTGS dollars, but at steep exchange rates.
The brick market is also experiencing similar demand and supply gaps which has resulted in the import of bricks to cover the deficit, especially for face bricks.
Currently, the brick manufacturing plants are selling close to 100% of output, with a production buffer being strategically maintained. The housing backlog of 1,4 million is a clear indicator of the ready demand in the market.
MC: What else do you need to see in place for the viability of your operations?
EH: Support for import substituting capital investments and we need the basics for our operations, electricity, fuel, foreign currency and even general liquidity.