ASL retreats from African excursion
AFRICAN Sun Limited (ASL) has called off its ambitious regional strategy, confirming market fears dating back to 2008 that it lacked the stamina and expertise to mount a successful African occupation.
The ASL board, bolstered by a promising management contract deal with the South African headquartered Legacy Hotels & Resorts, announced last week that the deals executed by former chief executive officer, Shingi Munyeza, had paralysed the group.
The group, now under new management and shareholders, has been trying to arrest perennial haemorrhage at the firm that has posted a cumulative US$20 million in losses in six years.
“The regional expansion strategy, though a commendable initiative, unfortunately resulted in the company’s balance sheet being highly geared with no corresponding returns being realised,” ASL said in a joint statement with Lagacy, which takes over five ASL hotels from October 1.
“Resultantly, a decision was made to disinvest from all regional operations as the board made calculated, deliberate and significant strides to ensure a rectification of the unfavourable prevailing situation. Amber Hotel Accra, Ghana lease agreement was mutually terminated effective 31 August 2015 as a result of unsustainable cost structures and weak revenue performance. Management are in the process of engaging the West African Sun Hotels Limited, Nigeria, with a view to exit by 30 September 2015,” the statement said.
Under a new business model, ASL will refocus on its profitable Zimbabwean market, demonstrating how the African adventure is not for the faint hearted.
Undertaken by Munyeza to leverage on the bigger, higher spending African markets during political upheavals in Zimbabwe that triggered a blitz of bad publicity internationally, the African strategy is now blamed for a prolonged crisis now haunting ASL.
Cumulative losses at ASL since dollarisation in 2009 have reached US$20 million.
And the group, which aspired to list on the Johannesburg Stock Exchange and to reach a US$1 billion market capitalisation, is battling to repay debts and raise as much as US$60 million to refurbish ageing properties across the country including the flagship Crowne Plaza Monomotapa.
ASL operates the magnificent Elephant Hills Resort, the Kingdom at Victoria Falls, Hwange Safari Lodge, Troutbeck Resort, Holiday Inn Bulawayo and Great Zimbabwe Hotel among others.
In the region, Zimbabwe’s largest hospitality group had what looked like a captivating success story.
It was a calculated strategy, everyone reckoned, as it angled for the populous Nigerian market, which boasts of around 168 million people; the group also positioned itself for a booming oil industry in Ghana, where, after its Holiday Inn hotel hosted American President Barack Obama in 2008, the drums were beaten so loud everyone believed ASL had arrived.
There were also forays into South Africa, southern Africa’s largest economy with a booming black middle class.
Economically stable Botswana was among Munyeza’s targets — the strategy, apparently, was to grow the group’s rooms to about 5 000 by 2012, and eventually cap the conquest with a secondary listing on the Johannesburg Securities Exchange.
These were called off about five years ago.
While firms were shutting down in Zimbabwe, as inflation skyrocketed to unprecedented levels, ASL was moving north, while the rest were dragging south.
But last week, the ambitions of the man, who had generally become to be known as “Mr Tourism” in Zimbabwe, were set aside under a radical shift to the business model.
“In an endeavour to find a lasting solution to the company’s persistent loss position, the board deliberated on several possible solutions and it was finally agreed that there be a change of business model…the board would like to advise all stakeholders of the appointment of Legacy Group of Hotels to manage five hotels with effect from October 1, 2015. The management agreement shall be with respect the Elephant Hills Resort and Conference Centre, the Troutbeck Resort, Hwange Safari Lodge, The Kingdom at Victoria Falls Hotel and the Monomotapa Hotel,” the statement said.
The deal leaves ASL to manage its Holiday In brands under its own management.
In December 2011, about two years after kicking off, Munyeza had admitted that the continental venture had not only been sapping physically; it had become the single largest danger to the group’s going concern status.
During the presentation of ASL’s full year results to September 30, 2011, he indicated it was time to call off the battles for an African occupation before serious losses and return to the motherland.
“Our business model going forward is purely to mind the Zimbabwean operations and take advantage of management contracts (in Africa) and we definitely see a net profit this year,” he said.