The Industrial Development Corporation is willing to be diluted in order to recapitalise its businesses, general manager, Benjamin Kumalo, who is three months into the job, has said.
Kumalo said as part of its recapitalisation strategy, the group continues to implement a “4 D” strategy which is as part of measures to refocus IDCZ’s activities and also for the group to attain profitability in its operations in the shortest possible time.
The 4 D strategy starts with “Dilution” of the group’s shareholding followed by “Disposal, Dissolution and Development.”
“Dilution will be achieved through identifying, inviting and raising additional equity from both local and foreign strategic investors,” said Kumalo in emailed responses to Business Weekly.
“We are for example currently working on various funding options for our operations including identification of local and external strategic partners for our businesses,” he said.
The initiative comes after Finance and Economic Planning Minister Patrick Chinamasa, in his 2018 National Budget, said government was not going to meet IDCZ’s request for an $83 million bailout to pay-off their debts.
“Given the precarious fiscal position, IDCZ is being required to develop bankable projects and programmes that can be funded from the market, through such market instruments as bonds,” said Minister Chinamasa.
In response Kumalo said the group will raise additional working capital by accessing long term; affordable local and foreign debt through various financial instruments including the floatation of IDCZ bonds to fund identified viable projects.
“The IDCZ subsidiaries are in dire need of recapitalisation to fund modernisation of plant and equipment and working capital,” he said.
Kumalo said IDCZ had requested the $83 million funding from treasury to enable it to clean up its balance sheet so as to attract lenders.
“For the IDCZ to be able to attract off-shore lines of credit, it needs to resolve its technical insolvency position in order for its balance sheet to be attractive to potential lenders hence the rights issue call of $83 million.”
“We are working on various options to fund our operations, identification of strategic business partners, resolution of the legacy debt and technical insolvency and mobilization of seed capital to revive the lending function to benefit the manufacturing sector at large.”
Kumalo noted that the IDCZ Head Office requires seed capital to revive its lending function as part of its contribution to the re-industrialisation of the Zimbabwe Economy.
He said the country can expect a new transformed IDCZ whose focus will be to promote economic growth and industrial development.
“I am working with my head office team to accelerate the implementation of the Cabinet and Board resolutions on the restructuring and turnaround of the corporation.
“Going forward we will promote the re-industrialisation of our economy primarily through development finance and effective participation in the chosen investments.
“The IDCZ intends to lend to export oriented entities that generate foreign currency and to those entities that benefited from Statutory Instrument 64 of 2016 as most of them are in need of working capital as they increase their production.”
Kumalo said in addition to the “Dilution” strategy, the group was also looking at disposing some of its investments.
“Disposals will target medium sized and mature investments such as Zimbabwe Grain Bag, Stone Holdings (Private) Limited and Ginhole Investments.
This is in addition to the disposal of Almin Metal Industries (Private) Limited, a medium sized and mature investment that was disposed of in January 2017.
The 4 D strategy will also result in the dissolution or closure of unviable operations.
“The Corporation has started the process of liquidating those of its investments which have been identified as having no prospects of future viability.”
Kumalo however said there are some entities which will be developed after they were identified as having future potential viability.
“Examples of such investments are Willowvale Motor Industries which has embarked on joint venture with BAIC of China for the local production of motor vehicles and Sunway City which has been identified as a Special Economic Zone for development of an ICT Hub.