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Thursday, July 20, 2017

Capital flight out of dictator regimes in #Africa is about to get worse - #Corruption


ZIMBABWE’s economic situation is unsettling and a fortnight ago, the International Monetary Fund (IMF) warned that the embattled economy was still “facing difficulties”.
The difficulties are glaring: Cash shortages, blamed on an expansionary fiscal stance, curtailed net capital flows, and declining investor confidence.
These factors have led to a foreign currency crisis, which has resulted in a foreign payments backlog that has resulted in manufacturing entities, mining firms and other commercial concerns failing to pay for raw material imports and other critical services offshore.
Even airlines, seen as critical in the revival of the country’s tourism sector, have failed to repatriate cash from ticket sales.
Thanks to the auditor-general, it is now very clear that ruling party politicians and top civil servants are unconcerned, and are on an unrelenting looting spree that is only making the situation worse.
The last time this happened, during an unprecedented economic crisis that ended with dollarisation in 2009, local firms extended their interests outside the country, seeking to hedge themselves against the free-falling economy.
During that period, the economy was heavily battered by a hyperinflationary crisis and widespread commodity shortages.
The hard currency regime immediately stabilised the economy, and took it on a path to recovery after sustained and broad-based contraction led to a cumulative decline of nearly 50,3 percent in real gross domestic product (GDP) between 2000 and 2008.
But recent developments appear to have triggered fears of a déjà vu, with foreign investors looking for the exits, while local firms are again looking for opportunities in neighbouring countries to hedge themselves from the Zimbabwe risk.
Seed manufacturer, Seed Co, is seeking a listing on a regional bourse for its operations outside Zimbabwe.
This, said finance director, John Matorofa, will help the company “to raise capital for expansion and to fund growth opportunities”.
A circular to shareholders was expected at the beginning of this month giving shareholders details of the plan, but equities analysts said outstanding regulatory approvals had delayed the release.

Seed Co has operations in 13 countries on the African continent, and is planning to extend its footprint to India and Pakistan.
In India, the company conducted pilot seed production which showed a lot of promise, said group chief executive officer, Morgan Nzwere.
Market sources said the seed company was likely to seek a listing in Botswana, where it already has its unit, Seed Co International, operating since 2000.
Another firm, Zimre Holdings Limited (ZHL), is planning to list its subsidiary, Emeritus International Reinsurance Company (Emeritus), in Botswana.
Chief executive officer, Stanley Kudenga, said exchange control approvals for the listing had been received from the Reserve Bank of Zimbabwe (RBZ)
Currently, said Kudenga, a restructuring of the group’s shareholding, which will result in all reinsurance operations being owned by Emeritus, already incorporated in Botswana, was in progress.
Emeritus is expected to help the company mobilise international capital to strengthen regional operations, enhance credit ratings and advance its domestic and regional footprint.
ZHL is a diversified conglomerate with units in Zimbabwe and Africa. However, its core business is insurance.
It is currently in the process of divesting from Continental Re Nigeria and is planning to use proceeds from the sale of its stake in the Nigerian business to recapitalise Mozambique Reinsurance Company.
Yet Zimbabwean firms’ regional forays to escape a domestic crisis have not always had pleasant outcomes.
For example, Zimbabwe Sun dropped its Zimbabwean identity in its pursuit for continental glory, which saw the firm embarking on expansion projects across Africa after it was renamed African Sun.
But it later beat a retreat back home after several of its foreign businesses bled the firm and almost led to insolvency.
The continental forays were led by The African Sun Limited, a 100 percent-owned subsidiary registered in Mauritius, which operated The Grace in Rosebank, South Africa, and a timeshare in Mozambique.
The now insolvent Kingdom Financial Holdings Limited opened or bought into companies in Botswana, Zambia, Malawi and South Africa. Many of these units have collapsed.
Other firms that joined the scramble for Africa include NicozDiamond and Dairibord, both of which recently withdrew from Uganda.
The Rainbow Tourism Group took flight from its foray into Mozambique.
Fidelity Life Assurance, a ZSE-listed insurance business in which ZHL has a significant interest, had gone to South Sudan but withdraw due to the volatility caused by civil war.
Another ambitious outfit, Africa First ReNaissance Corporation, which had been renamed from First Mutual Limited (FML) after banker, Patterson Timba, took over control of the firm, had also targeted acquisitions on the continent.
Its plans were cut short by domestic problems, which resulted in Timba losing control to compulsory pension fund, the National Social Security Authority (NSSA), which rebranded the group First Mutual Holdings Limited.
Timba is currently in court to reclaim the asset.
FINANCIAL GAZETTE

Firms eye region to escape Zim crisis

ZIMBABWE's economic situation is unsettling. A fortnight ago, the International Monetary Fund (IMF) warned that the embattled economy was still "facing difficulties". The difficulties are glaring: Cash shortages, blamed on an expansionary fiscal stance, curtailed net capital flows, and declining investor confidence.

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