Experts to advise Government on disposals… Government targets investors with strategic fit
There is a stampede by investors to take up stakes in Zimbabwe’s most profitable state companies, which the government has earmarked for full or partial privatisation, a top industry official said.
The rush comes despite revelations that 38 out of 93 State-owned enterprises (SOEs) audited in 2016 incurred a combined $270 million loss, as weak corporate governance practices and ineffective control mechanisms took their toll.
State entities used to contribute over 40 percent to the country’s Gross Domestic Product before their performance plummeted due to financial challenges and poor management, putting dent on the performance of private companies given the centrality of their services to economic development.
The Government has since identified several state entities for full or partial privatization and or restructuring to address poor performance of State entities.
The worrying fact was also that of the 93 entities, 70 percent of them that were ‘technically insolvent,’ or ‘illiquid’, presenting an actual or potential drain upon an already overburdened fiscus.
Transaction advisors for Agribank, Petrotrade
To that end, public tenders for expressions of interest have since been sent out for Agribank and Petrotrade while a transaction advisor to assist partial disposal of Government shares in Chemplex Corporation has already been engaged.
Targeted investors into Petrotrade and Agribank are expected to inject an unspecified amount of fresh capital, bring in new technologies and access to wider markets for their products.
Similarly, enquiries and investor interest have been high in NetOne, TelOne, Zimpost, Infrastructure Development Bank of Zimbabwe (IDBZ) and Zimpost.
The Government is not seeking to enlist investors anyhow, but scout for technical or equity partners with strategic fit to either inject fresh capital or transform operations of targeted entities, according to the State Enterprise Restructuring Agency (SERA).
Interest high in profitable firms
SERA executive director Edgar Nyoni told Business Weekly interest was high across State enterprises targeted for disposal or partial privatisation, particularly those that have been making profits or declaring dividends.
Some state entities will only be restructured or merged to improve their performance.
“Interest is very high, especially in most of the companies that have been profitable or giving dividends,” Nyoni said in an interview.
“We want investors who can recapitalize these companies. The types of investors we want are those with strategic fit who are able to recapitalize or transform the companies,” he said.
It was not immediately clear who wants to buy shares where, but Government wants to either divest or sell part of its shares in a number of State enterprises that include the National Railways of Zimbabwe (NRZ), Tel-One, NetOne, Telecel, Air Zimbabwe, Zimpost, POSB, Agribank, Industrial Development Corporation (IDC), Powertel, ZUPCO and Chemplex.
Some State companies will be disbanded and others restructured or recapitalized as in the case with NRZ, which secured a $400 million recapitalisation deal with South Africa’s Transnet.
The Government has also already secured an investor for Zisco in the mould of Chinese firm, R and F, which will inject at least $1 billion to revive the company.
Zisco, previously a leading producer of steel on the continent, closed shop in 2008 as it buckled under pressure from lack of funding to recapitalize its operations.
Poor performances by most state owned enterprises and parastatals have seen public entities’ contribution to the economy drop from 40 percent to 2 percent.
That, despite the underperformance; management at most State enterprises continue to enjoy huge salaries and other benefits, which continue to breach Cabinet’s directive for the packages not to exceed 30 percent of total revenues.
A procurement committee has been established by SERA to handle the transaction advisory services procurement processes for all public entities the Government has earmarked for either complete or partial disposal.
The committee will draw up terms for the public entities and request for proposals (RFP) on the privatisation or partial privatisation.
Nyoni said so far only Chemplex Corporation, Agribank and Petrotrade had costs for transaction advisory approved for incorporation in their 2018 budgets.
“We sent out the notices on July 13, 2018. What we are essentially doing is a public procurement,” he said.
The tender processes for transaction advisory services are being handled in line with the framework provided by the Public Procurement Authority of Zimbabwe.
“We want to avoid abuse of office when doing the transactions. So we will engage financial people who will help with the process coming up with prospectus and valuations. They will also help do the bidding; these are transactions for public assets so we want to give everyone an opportunity,” Nyoni said.