Investors eye Zim despite the gloom
ZIMBABWE’s economy continued in the doldrums during 2015, but there was no ‘complete blackout’ on investment inflows.
Many foreign investors warmed up to opportunities in the country, but take up on projects remained very slow.
The investments came in dribs and drabs, making very little impact on the frail economy.
The extent of the damage on the economy inflicted by 15 years of crisis were such that the country required real significant capital inflows before it could start counting on smaller deals, analysts said.
The bigger inflows could be as much as US$8,3 billion, as indicated at the beginning of the inclusive government in 2009.
This year, several big deals were signed, although many of them are yet to kick off.
In September, Nigerian billionaire, Aliko Dangote, announced bold plans to invest in the country.
This was despite concerns in the investment community that Harare’s restrictive laws that limited foreigners to a maximum of 49 percent shareholding were not friendly.
“We are looking at a couple of things, power generation, coal mining and also putting of the cement plant,” Dangote told reporters.
Not less than US$400 million will be invested on these projects.
“We are sending our team and hopefully if things go well, we would be ready to put the biggest cement plant, which is a million and half tonnes, so we will look into this. We have already decided to invest into Zimbabwe. That is why we are here. Any country were you see us visiting it means, yes, we have decided to invest,” said the Nigeria businessman, whose net worth is estimated at about US$17,2 billion by Forbes magazine.
In November, the American multi-national food and beverages giant, PepsiCo, launched a project that would see it open a multi-million dollar plant in Zimbabwe early next year.
PepsiCo would be investing up to US$30 million in the business, with up to 500 direct jobs created and 3 000 more in downstream industries.
Like in the Dangote case, Ravi Jaiparu, one of India’s wealthiest individuals with a net worth estimated by Forbes magazine at US$1,67 billion, is the man behind the deal.
PepsiCo is the world’s second largest food and beverages business by net revenue.
At the beginning of this month, the State visit by Chinese President Xi Jinping unlocked deals worth US$4 billion, spanning sectors such as energy, mining and agriculture.
Government said these deals were ready to take off after years of stunted growth.
“As we are aware, President Mugabe visited China last year and concluded a number of agreements, memorandums of understanding. Now the visit by President Xi is going to consolidate and cement some of the agreements and, in fact, to further co-operate with respect to those agreements which are not yet mature for signing,” said Finance Minister, Patrick Chinamasa.
He said the country had a strong political and diplomatic relationship with China.
“As we speak, the Chinese are becoming quite strong in terms of their investments in Zimbabwe. We already have more than 100 Chinese companies who have invested in Zimbabwe and there is a lot of interest in all sectors of the economy from Chinese investors,” he added.
The fact that dealmakers of Dangote and Jaiparu’s stature could show interest in Zimbabwe was almost unimaginable until recently.
Investments into the country have mostly come from South Africa and China, which has dominated the majority of government-sanctioned transactions, although there has also been a significant presence of Indian investors.
Zimbabwe has been battling to stop an economic meltdown that has sparked capital flight and resulted in company closures and job losses.
Government has indicated that a raft of laws that made the country less attractive to investors would be reviewed to make them investor-friendly.
As firm closures mount, authorities are now eager to find a solution to a crisis that was precipitated largely by a liquidity crunch in a hard currency economy dominated by imports.
Analysts see the sudden interest by businesspeople like Dangote and Jaiparu as a positive signal.
The two billionaires joined several others who trooped into the country during the year.
In September, the Tanzanian headquartered giant, Bakhresa Group was given the nod to pour US$18,3 million upfront for a transaction to take over Blue Ribbon Foods, with an additional US$40 million expected to be injected in the next five years.
In August, French firm, Société Industrielle Lesaffre, acquired a 60 percent stake in Anchor Yeast (Private) Limited in a deal worth US$11,5 million.
According to a statement from the French embassy, the transaction is expected to improve the standard and quality of yeast products produced in Zimbabwe, with the long-term goal of generating regional exports for the business.
“Following the consummation of this acquisition we introduce Lesaffre Zimbabwe (Private) Limited as a new corporate identity in the yeast industry in Zimbabwe and beyond,” the statement said.
In September, South Africa’s Legacy Hotels and Resorts entered the Zimbabwean market through a management contract of five of African Sun Limited’s hotels.
The South African management company promised to immediately inject up to US$60 million to refurbish African Sun’s assets.
The hotels under the management contract are the Elephant Hills, the Kingdom Hotel, Hwange Safari lodge, the Monomotapa Hotel and Troutbeck, while the parties also agreed they could extend the deal to Caribbea Bay and Fothrgill Island.
“Bringing the Legacy of Africa’s leading Hotel and Lifestyle Group into Zimbabwe will be a major boost for tourism in our country. Today (September 20) we announce the roadmap that will steer the company to greater heights through our new hotel investment model,” said African Sun chairman, Herbert Nkala.
Many investors have not yet committed to real investment in the country, but still others have snapped assets in the banking, mining, telecommunications, petroleum, hospitality and other industries.
There was also significant consolidation of the Nampak Zimbabwe business this year after multinational firms assumed control of the Zimbabwe Stock Exchange-listed packaging giant, Hunyani Holdings Limited.
The deal, which garnered an emphatic nod from Hunyani shareholders, saw Nampak consolidating a cluster of its interests in the country’s packaging sector into a single, well-capitalised and efficient unit.
Last year, Hunyani was rebranded Nampak Zimbabwe, and the South Africans pledged to pour in cash to drive expansion programmes, and raise working capital.
Nampak, South Africa’s largest packaging business with a footprint in several African markets, emerged majority shareholder in the rebranded Nampak Zimbabwe Limited with 51,4 percent shareholding.
Vice President Emmerson Mnangagwa has said Zimbabwe is now ready to sit down with investors even beyond the much favoured east and negotiate win-win deals that could help rebuild the country’s battered economy.
Commenting on Dangote’s planned investment, economist, Kingstone Khanyile, said: “It is a sign of improvement in confidence on Zimbabwe. It shows there is a policy shift and there is an impetus towards attracting foreign direct investment.”
Analysts said big investors coming into Zimbabwe would help boost confidence that would attract other investors.
In July 2013, Kansai Paint, the Japanese outfit, swooped on 63,25 percent shareholding in Astra Industries Limited, the Zimbabwean paint producer, in a US$5,5 million transaction that would bankroll expansion plans.
“The acquisition will allow (the company) to focus further on its expansion plans and its aim to continue leading the industry,” Kansai Plascon Africa chief executive officer, Nauman Malik, said then.
Prosper Chitambara, chief economist at the Labour and Economic Development Institute of Zimbabwe, said there were several factors driving interest on Zimbabwe.
“It is natural for investors to scout for opportunities. There are opportunities in Zimbabwe under the adversities. This is why even the richest man in Africa is coming here. We see a combination of scouting and taking positions. But they can be buying assets at a discount. The climb down on indigenisation is also giving investors some incentives,” Chitambara said.
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