Zimbabwe’s potential should not be ignored: Analysts
24/03/2011 00:00:00
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INVESTORS should not ignore Zimbabwe’s economic potential following the
announcement of the $30 million facility agreement between the IDC and the
Agricultural Bank of Zimbabwe, the founding partner of SA-based Musa
Capital, Antoine Johnson has said.
Along with Zimbabwe’s Neverseez Capital, Musa Capital was a co-adviser for
the deal, as well as the lead arranger.
The transaction was the first of its kind since the signing of the Bilateral
Investment Promotion and Protection Act between SA and Zimbabwe in 2010.
AgriBank intended to use the six-year term facility from the IDC to on-lend
to its blue-chip and medium-sized clients, some of which were listed on the
Zimbabwean Stock Exchange – with a focus on increasing their production
capacity.
“The deal has a couple of different influences,” Johnson said.
“Firstly, it’s an endorsement – albeit a cautious one – of the recognition
of some of the efforts both government and the commercial sector of Zimbabwe
have made over the past 24 months or so.
“So, at the macro-level, I see the deal as a signalling device,” he added.
At the micro-level, he noted that the AgriBank played an important role in
the economy, particularly in funding the agricultural sector.
“It also plays a role in the development of SMMEs (small, medium and micro
enterprises) as well as light manufacturing and light mining.”
According to Johnson, the IDC/AgriBank loan deal must be seen as a win-win
situation for both SA and its neighbour.
“The deal has been structured to ensure that a large portion of the funding
will be used by Zimbabwean companies to purchase South African goods and
services.
“This is an important aspect as the IDC has a lot of issues at home and
people will ask how the loan to Zimbabwe will help SA.”
Johnson hoped that the existence of the Bilateral Investment Promotion and
Protection Act would lead to a realisation that there was a law in place
that provided security of tenure to South African investors.
Turning to the various sectors in the Zimbabwean economy, he said that
mining had first place on the list. “The country probably has 90 percent of
all its resources still in the ground. There are diamonds, but less
controversially there is platinum gold and coal. In fact, the most
profitable platinum mine in the world is in Zimbabwe.”
Agriculture was another important sector as the country had a long history
of providing food in the region and could do so again. “The tobacco industry
has already started to recover.”
There were also “huge” opportunities in the financial services space,
Johnson said. “As a result of hyperinflation, consumers have had to survive
without liquidity – you couldn’t get a home loan in Zimbabwe in the last
decade, so people with houses are unleveraged and have a 100 percent equity
position in their homes.
“If only a 20 percent loan to value was given, you’d be unlocking a lot of
capital.”
Johnson added that the Zimbabwean telecoms sector had shown phenomenal
growth. “In fact, in the past 24 months, it has grown three times, mainly
because of dollarisation and some limited liquidity.”
He forecast that internet penetration would skyrocket in the country because
of its high literacy rate. “Zimbabwe has some of the best human capital on
the continent.”
Johnson confirmed that Musa Captal was looking at private equity investments
in Zimbabwe, particularly in the mining sector.
Asked about the Zimbabwean government’s policy of so-called indigenisation,
whereby the government intended to nationalise more than half its mining
resources sector by setting up a sovereign wealth fund that would own 51
percent of all mining companies, Johnson said he was more concerned about
stability.
“If there is clarity and stability, I think as a financial services firm we
know how to structure a win-win deal for all parties in that capital comes
in and gets the return it’s looking for and local entrepreneurs gain the
opportunity to benefit.
“If the government of national unity that exists now continues to deliver
positive results and if dollarisation continues then indigenisation becomes
a restructuring question.”
Musa Capital has been operating in Africa since 1994 and Johnson said its
first investment had been in real estate in Zimbabwe.
Turning to the present $30 million deal, he paid tribute to the parties
involved. “A deal of this nature can be difficult to transact, but we had
the help of local advisers and I’d like to acknowledge their assistance.”
He added that it was also helpful in that the government was a shareholder
of AgriBank. “The government’s commitment to this agreement was part of the
reason that the deal was done and despite political differences in
government, all players seem to be on board when it comes to improving
Zimbabwe’s economic climate.”
Johnson quipped: “Zimbabwe on a bad day is better than the rest of Africa on
a good day!”