Regional seed producer, Seed Co, is awaiting exchange control approvals to proceed with plans to list the group’s external business, aimed at raising funding to finance growth, chief executive Morgan Nzwere has said.
Seed Co intends to list its growing external business in various markets on the continent to raise $30 million to fund further research, build regional offices and ward off completion, allowing it to consolidate its footprint.
According to Nzwere, SeedCo is working from rented premises on the regional markets and needed to move to own properties. With growing competition on the African seed market, Nzwere said the Seed Co needed to invest more in tailor-made research to meet specific ecological climates.
One of Africa’s biggest seed houses has external operations in 12 countries including Zambia, Malawi, Mozambique, Botswana, South Africa, Tanzania, Kenya and Nigeria.
The group also has a footprint in the Democratic Republic of Congo (DRC), Swaziland, Ethiopia and Angola.
Nzwere said that Seed Co was working on additional exchange control regulatory issues that the central bank had demanded that be addressed first before the leading seed producer’s external listing plans were proved.
“We are still working on the RBZ conditions that they want us to meet. We cannot go ahead without the RBZ’s exchange control approvals.
“The ZSE application should not be a problem, all they want to see is activity on the stock market (ZSE), but the key regulators have to agree. Once we get the approvals, we want to undertake the listing as soon as is possible.
“The Reserve Bank of Zimbabwe came back to us in December 2017 with additional requirements that we have to work on. We thought we had done enough, but are things exchange control authorities want us to address,” said Nzwere.
Seed Co group develops and markets certified crop seeds, mainly hybrid maize seed, but also wheat, soya bean, barley, sorghum and groundnut seeds.
Seed Co has 11 research centres across the African continent for testing and breeding for different ecological climates. Zimbabwe, however, is the biggest producer, including contribution to revenue, which stands at about 37 percent.
Nzwere would not say where the external business would be listed, as the group had not yet been given the permission by ZSE, but speculation in the market suggests that Seed Co wants to list the business in Botswana.
Botswana also happens to be the headquarters of Seed Co Holdings, which holds 100 percent stake of Seed Co International, an arm of Seed Co Group with predominantly controlling interests in its operations across Southern and West Africa.
The regional expansion, Nzwere said, comes as Seed Co earlier said that the performance of the external operations showed strong potential for further growth opportunities, but also had palpable signs of competition hotting up.
“If you look at business performance this year, it did very well and we are seeing further growth opportunities, particularly in the region. What we are also seeing is competition hotting up so we need to be investing more to make sure that we protect our markets against this competition,” he said earlier.
Nzwere is on record saying while the group was making phenomenal progress in growing its footprint in Africa, major competitors such as DuPont and Pannar were not resting on their laurels, but working to counter the growth.
Seed Co International registered strong performance in 2017 with turnover of $14million, which was 40 and 54 percent higher than budgeted revenue and prior year out-turn, respectively.
In its 2016 results, Seed Co achieved turnover growth of 40 percent to $135million compared to last year. Profit after tax grew by 41 percent to $20,7million driven by strong demand for and superior performance of its products.
For 2016, the group’s reported financial performance showed that operating profit increased by 86 percent to $29,1 million from $15,6 million achieved in the prior year despite a 22 percent increase in operating costs.
Revenue increased by 40 percent to $134,6 million from $95,96 million previously.
Although Seed Co witnessed solid demand for cereals in 2016, the group witnessed a decline in maize seed sales volumes from 34 220 metric tonnes in 2015 to 31 745 metric tonnes.
The total value of the seed market in sub- Saharan Africa is estimated to be worth around $800 million, which is less than 2 percent of the global total. Maize is the single biggest market, thought to be around $500 million, followed by horticulture at $250 million.