20 December 2012

Zimbabwe: 2013 a Mixed Bag

AS the year 2012 draws to a close, a number of major economic and corporate issues that characterised it will certainly remain in people's minds for a long time. Mergers and acquisitions,

indigenisation and empowerment, executive resignations, recapitalisation and corporate disputes, fall- outs and, of course, the poor performance of the economy are some of the issues that charecterised the year.


This year, the economy experienced significant vulnerabilities with gross domestic product expected to decelerate from the 6,8 percent growth registered last year to 4,4 percent.

The economy was characterised by an excessively high current account deficit, increasing trends of corporate bankruptcy, weakening Government revenue and tightening liquidity conditions that are stifling efficient credit and jobs creation.

Key sectors, particularly agriculture and manufacturing, underperformed and as a result, Finance Minister Tendai Biti was forced to cut growth forecasts from the initial 9,4 percent to 4,4 percent this year, the slowest rate since the dollarisation.

The projected growth in agricultural production of 11,6 percent this year had taken into account a number of financing facilities and favourable weather conditions.

The manufacturing sector remained depressed with capacity utilisation reported at 44 percent from an average of 57 percent, according to the latest survey conducted by the Confederation of Zimbabwe Industries.

Both private and public sector wage growth seem to have hit a plateau, dealing a "worrying blow" to domestic demand. The "weak and misdirected" domestic demand is a huge cause for concern for the Government that finds itself with a population that has no capacity to drive growth. The options to boost domestic demand are also limited.

The huge trade imbalance remains a major concern.

Presenting the first annual Medium Term Plan review Economic Planning and Investment Promotion Minister Tapiwa Mashakada said a number of the economic targets set in the blueprint were missed although progress was noted.

He noted challenges around limited fiscal space, low levels of investment, late disbursement of budgetary funds, policy inconsistencies and international isolation as some of the constraints.

The MTP missed targets in terms of economic growth rates, power generation, investment inflows, balance of payments ratios, current account deficit and employment creation.

While targets have largely been missed, progress has been noted in terms of rehabilitation of key infrastructure such as energy, road networks, supporting SMEs growth, availability and affordability of education and health services.

However, it was generally agreed that the biggest challenge to the country's efforts at realising targets set in the US$9,3 billion programme remain the shortage of funding and power.

Recapitalisation, mergers and acquisitions

Diversified resource firm RioZim completed a private placement of ordinary shares worth US$6,6 million to Raintree Investments, a rights offer of US$5 million and issue of convertible debentures to GEM Raintree in March. The drawdown of the convertible debentures was to provide the company with access to a further US$45 million over a period of five years for its future funding requirements.

Zimplow acquired a 57 percent stake in Tractive Power Holdings, previously owned by the Reserve Bank of Zimbabwe. Zimplow limited acquired 88 526 968 Tractive Power Holdings shares at US$0,11. Subsequently, Zimplow floated a rights offer to raise approximately US$11,2 million for the purchase of the Tractive Power stake.

ABC Holdings floated a US$50 million rights issue, fully underwritten by its majority shareholder, the African Development Corporation. The funds were meant to recapitalise the group's regional operations in Botswana, Zimbabwe and Zambia.

TN Bank got an injection of US$20 million from new shareholders Econet, paving way for a demerger of the bank from the group to create TN Bank and Lifestyle Holdings.

BNC raised about US$23 million through a rights offer and the company is in the process on restarting Trojan Mine which was put on care and maintenance in September 2008.

The National Social Security Authority increased its direct shareholding in Afre Corporation to 51 percent after underwriting the group's US$8,6 million rights offer.

Before the transaction, NSSA had a 21 percent shareholding in Afre. Indirectly, NSSA also holds some shares in Afre through Capital Bank, previously known as Renaissance Merchant Bank.

Prior to the rights issue, NSSA directly and indirectly owned 54 percent of Afre.

NSSA bought Econet's 19,7 percent stake in Afre in February this year through a special bargain involving 42 798 497 shares at a price of US18,42c per share, reflecting a premium of about 514 percent. The deal came a few days after NSSA took over an 84 percent stake in RMB in a deal worth more that US$24 million.

A local consortium led by Mr Paddy Zhanda gained control of Murray & Roberts Zimbabwe after acquiring a 46,6 percent stake from M&R South Africa and Trinvest.

The deal was concluded through a special bargain on the Zimbabwe Stock Exchange with 99 792 515 shares valued at US$1,4 million changing hands at US1,47c a share.

This represented a huge discount of 79 percent on the last traded price of US7c, raising questions on why the SA investors were exiting at such a heavy loss.

Ariston Holdings concluded a US$8 million rights offer, which saved the group from a going concern crisis. South Africa-based Afrifresh, the underwriters of Ariston rights issue, became the major shareholders after the capital raising exercise

PG Industries Limited shareholders this week approved the disposal of Manica Boards and Doors to Old Mutual Zimbabwe and sale of the group's other non-core assets.

PG's stake had been diluted from 60 percent to 27 percent during the recapitalisation of MBD and the building materials supplier felt the investment was no longer of strategic importance.

Hotels group African Sun Limited acquired an extra 12 percent interest in Dawn Properties for about US$3,7 million taking its interest in the company to about 29 percent.

Altiwave, an investment vehicle controlled by five banks owed US$14 million by Lobels Bread, gained full control of one of the country's oldest bakeries and injected US$4,5 million. FBC Bank, CBZ Bank, NMB Bank, Metbank and Capital Bank make up Altiwave.


Reserve Bank Governor Dr Gideon Gono in June raised minimum capital thresholds for banking institutions. Commercial and merchant banks are required to have minimum capital of US$100 million from US$12,5 million and US$10 million respectively.

Minimum capital requirements for building societies were also raised from US$10 million to US$80 million, finance and discount houses from US$7,5 million to US$60 million and US$1 million to US$5 million for micro-finance institutions.

These should be fully compliant by June 2014, but should meet 25 percent of the new capital levels by the end of this year.

Commercial banks will have to raise their minimum capital requirements by US$12,5 million by this year. The financial institutions are required to be 75 percent and 100 percent compliant by December 31, 2013 and June 30, 2014 respectively.

The fragility of the financial sector was also exposed following the collapse of three banks -- Interfin Bank, Genesis and Royal Bank.

New Brooms

Former Hwange Colliery managing director Mr Fred Moyo left the company at the end of September this year following the expiry of his contract, Mr Moyo had served the mining giant for five years. The company is in the process of recruiting a new MD.

Starafricacorporation appointed Dr Samuel Mwadai Mushiri as its new chief executive. The appointment was effective September 1. He replaced Mr Patison Sithole who left the company on August 31.

Mr Pearson Gowero was appointed Delta Corporation chief executive with effect from June 1 this year, taking over from Mr Joe Mutizwa, who left the company on May 31.

Mr Mutizwa was appointed CEO in April 2002, having joined the group in March 1983.

Old Mutual appointed Mr Jonas Mushosho who succeeded Mr Luke Ngwerume as group chief executive of its Zimbabwe operations. Mr Ngwerume served OM for 22 years.

Econet chairman Mr Tawanda Nyambirai stepped down from his position after selling his entire shareholding in TN Bank to the mobile phone operator. The buyout deal is such that Mr Nyambirai becomes a minority shareholder in Econet Wireless while TN Bank becomes a subsidiary of the mobile company group.

Standard Chartered chief executive Mr Washington Matsaire stepped down from his position to pursue personal interests after serving the bank in that capacity for 13 years.


There was a fallout between former ZSE chief executive Mr Emmanuel Munyukwi and his board with the latter alleging that the former was incompetent.

Mr Munyukwi and Ms Eve Gadzikwa, who led board, later agreed on an exit package.

Last month, conglomerate Innscor Africa Limited announced the appointment of Mr John Koumides as the group's new chief executive, taking over from Mr Tom Brown who will be retiring with effect from December 31 this year. Mr Brown decided to step down following a fallout with one of the founders, Mr Zed Koudounaris.


Several big companies have submitted acceptable plans to comply with the indigenisation law.

These include Mimosa Mining Company, Unki Platinum Mine, British American Tobacco, PPC Zimbabwe, BNC and Old Mutual among others. Much progress was made on the mining sector which also saw the establishment of various community share ownership trusts.

Diamond trade breakthrough

Marange diamonds were finally cleared when the Kimberly Process took a landmark decision last month to withdraw monitors and allow unhindered exports.

In a major victory for the nation's quest to harness the mineral, the Kimberly Process' Working Group on Monitoring said Zimbabwe had fulfilled all the requirements to certify its own diamond exports. WGM said the Government had shown full transparency and accountability by ensuring that 15 percent of royalties in Marange were being directly channelled to the Zimbabwe Revenue Authority.

Sad losses

Renowned economist and former Zimbabwe National Chamber of Commerce president Mr Danny Dube died in July. Mr Dube died of acute renal failure after battling against the disease for over a year. The untimely death of Herald Senior Business Reporter Bright Madera also left the media fraternity in a state of shock.

Madera drowned in a swimming pool in Kariba while covering a ZB Bank functionin the resort tonne.

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