Imara Holdings CEO Blog

IMARA: Corporate Zimbabwe planning mega charm offensive

noreply@blogger.com (Blog Administrator) — Wed, 23 May 2012 15:31:00 +0000

Corporate Zimbabwe is gearing up for one of the biggest 'charm offensives' since the dollarisation of the country's economy, according to Imara, the pan-African investment banking and asset management company.

The corporates will be looking to impress the many visiting international investors, fund managers and deal-makers who have confirmed their attendance at the Zimbabwe Investor Conference organised by Imara for May 23-24.

"Zimbabwean corporates have a compelling story to tell," says Tino Kambasha, head of sales and trading at Imara Zimbabwe, co-conference organisers with its Botswana-based parent, Imara Holdings.

Many of the incoming conference delegates are only too happy to listen.

Kambasha explained: "Some are jetting in from a Eurozone that this week reported zero first-quarter growth. They arrive at a time when Zimbabwe is looking forward to 2012 growth of 9,4%.

"This projection, made recently by Economic Planning minister Tapiwa Mashakada in the macro-economic framework for 2012, comes on top of 9,3% growth in 2011.

"Obviously, the Zimbabwean base is much smaller, but the stark difference in growth prospects will have a big impact nevertheless."

The corporates will look to build on the favourable macro picture by pointing to their own improved earnings and volumes, said Kambasha.

He added: "Many local companies have achieved impressive momentum since the return of currency stability. In the last week two substantial companies have reported full-year earnings growth of 20% and 38%.

"Double-digit earnings growth is a distant memory in some developed markets, suggesting that some conference attendees will be highly receptive to a message like this."

International investors from North America, Europe and the Middle and Far East also bring something tangible to the table – the prospect of direct investment and new partnerships.

"It takes two to form a relationship," noted Kambasha, "and some local corporates will also be eager to consider new partners as they are looking to recapitalise ahead of further expansion.

"So one party is looking for better returns while the other is extremely keen to attract growth funding. Our conference is a high-level forum for industry and company-specific information-sharing, but in view of special factors in 2012 it also has the potential to develop into the investment industry equivalent of a dating service."

Imara organised the first in-country investor conference in Zimbabwe following the creation of an inclusive government and has organised follow-up conferences every year since.

Up to 100 investors are expected at the 2012 event, including fund managers representing many different equity funds.

Corporate presentations will be made by senior executives from organisations across the Zimbabwean economy, including BAT Zimbabwe, the Chamber of Mines, New Dawn, Padenga, Zimplats, Dairibord Zimbabwe, Aico/Seedco, Mashonaland Holdings, Masawara Plc, Rio Zimbabwe, TA Holdings, OK Zimbabwe, Edgars Stores and Econet Wireless Zimbabwe.

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision-making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities. Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)

Corporate finance and advisory services

Securities

Trust and administration services

Imara Group subsidiaries are regulated by: NBFIRA in Botswana, the FSA (UK), the FSB, JSE, SAFEX (South Africa), SEC, ZSE and Reserve Bank of Zimbabwe, the FSC (Mauritius) and the Reserve Bank of Malawi.

www.imara.co

IMARA: GAP gathering a big opportunity for Zimbabwe business

noreply@blogger.com (Blog Administrator) — Mon, 14 May 2012 14:51:00 +0000

An unprecedented opportunity beckons growth-minded Zimbabwe businesses as executives from member firms of Global Alliance Partners (GAP) prepare to fly into Harare for the organization's first conference in Africa.

GAP's record of fostering entrepreneurial expansion in developing markets has been spotlighted by Mark Tunmer, Group CEO of Imara, the GAP partner for Africa and host of the Harare event on May 21-22.

He says 30 participants from the UK, USA, the Middle East and Far East are expected to attend, but even before their arrival they have sent a strong signal to Zimbabwe's private sector.

"By staging an Africa conference and selecting Zimbabwe as the location, GAP member firms have indicated that they see strong deal-making potential here," notes Tunmer.

According to GAP Chairman Robert W. McMillen, "GAP members are known for their deal appetite, especially in developing, emerging and frontier markets. They are a conduit to investment risk capital. They identify opportunities and build relationships between growing companies and new sources of funding".

"That track record will obviously be of great interest to Zimbabwean companies that have benefited from the dollarization of the country's economy and are now looking to achieve strategic growth," McMillen added.

Members of GAP have concluded 870 corporate transactions in 56 countries in recent years. Total transaction value stands at US$23 billion.

Imara, the Botswana-listed financial services group, has strong representation in Zimbabwe and is close to developments in the local corporate sector.

Tunmer believes that Zimbabwean companies in several industries may be interested in finding new partners or new providers of investment risk capital.

He points out: "We believe companies in the resources, retail, financial services, tourism and telecoms sectors are positioned for long-term growth.

"It will therefore be interesting to see if introductions to GAP conference delegates will lead to increased deal flow and set the scene for further international investment in the Zimbabwe economy.

"It is an unprecedented opportunity and some very robust and resilient Zimbabwean companies are well placed to take advantage."

Asset management (institutional and private client)

Corporate finance and advisory services

Securities

Trust and administration services

Timing drives big interest in Imara's Zimbabwe investor conference

noreply@blogger.com (Blog Administrator) — Wed, 09 May 2012 15:25:00 +0000

Imara's upcoming Zimbabwe Investor Conference is predicted to be the biggest yet as timing factors drive global interest in corporate developments and potential equity market upside.

The Harare event on May 23-24 is expected to draw in excess of 100 investors and fund managers representing many different equity funds, said Tino Kambasha, head of sales and trading at Imara Zimbabwe, co-conference organisers with SA based Imara Africa Securities.

"Timing helps drive worldwide interest," said Kambasha. "Our corporate reporting season will be drawing to a close. A lot of earnings numbers will be hot off the press, giving delegates an up-to-theminute insight into specific opportunities.

"Furthermore, many local companies are planning to re-engineer their businesses for success in our dollarised economy. It is more than three years since the multi-currency dispensation came in, more than enough time for companies to determine what it takes to succeed in the new environment.

"We therefore see strong focus on recapitalisation and restructuring by some of Zimbabwe's leading companies – creating direct investment opportunities for some astute international players."

Kambasha said the first wave of Harare restructurings was already under way and had confirmed the potential for foreign investor involvement in new rights issues, direct share placements and the negotiation of international credit lines.

"Further restructurings are imminent," he noted.

"In addition, many equity fund managers are eager to explore opportunities for strong capital growth and high equity yields. Zimbabwe's market capitalisation to GDP is less than 39%, but tops 50% in the wider region.

"This suggests our valuations are relatively cheap with scope for strong gains. At the same time, double-digit dividend yields can be achieved in some instances – an attractive prospect for fund managers from embattled economies."

Imara convened Zimbabwe's first in-country investor conference in 2009 and has organised investment indabas in Harare every year since.

The conferences are designed to act as catalysts for equity and direct investment by introducing delegates to senior executives from the country's top companies. Corporate developments and then discussed in depth.

Presentations are scheduled at the 2012 indaba by a host of blue-chip companies, including Barclays, Delta, New Dawn, Padenga, CBZ Holdings, Zimplats, Dairibord Zimbabwe, Aico/Seedco, Mashonaland Holdings, Masawara Plc, TA, Econet Wireless Zimbabwe and Pearl Properties/M&R.

A strong contingent of Asian investors is expected to complement strong representation from major financial centres in North America, Europe and the Middle East.

Growing Asian interest in Zimbabwe was recently spotlighted by visits by business delegations from India. Imara has therefore invited the Indian Ambassador to Zimbabwe, Shri Jeitendra Kumar Tripathi to open the conference and provide an external perspective on the Zimbabwe opportunity.

Asset management (institutional and private client)

Corporate finance and advisory services

Securities

Trust and administration services

IMARA: Surprise as dollarised Zim sets up monetary policy committee

noreply@blogger.com (Blog Administrator) — Thu, 12 Apr 2012 13:34:00 +0000

Zimbabwe's Reserve Bank has surprised the investment community by setting up a monetary policy committee (MPC) as the country's authorities no longer have a monetary unit to control.

The oddity is noted by Imara, the pan-African financial services group, in an analysis of dollarisation's effects on the Zimbabwean economy.

The assessment – part of Imara's information-led effort to attract continuing investment into Zimbabwe – is being circulated to international fund managers.

The Zimbabwe dollar became worthless more than three years ago and was abandoned by the authorities. The US dollar then became the nation's de facto currency.

John Legat, Harare-based director responsible for group asset management, confessed that Imara was "somewhat surprised" by the Reserve Bank's decision to form an MPC.

He told clients and international investment fund managers: "An MPC is now the norm in most countries around the world, BUT in countries that have their own national currencies.

"Zimbabwe does not have its own currency, but has in effect adopted the US dollar. The US dollar is managed by the US Federal Reserve which determines the monetary policy and hence interest rates.

"We are fascinated to know what Zimbabwe's MPC might discuss at their meetings since they will have no control over interest rates or US monetary policy." In Legat's view, the lack of government control over Zimbabwe's currency is one of the positives flowing from dollarisation.

He explained: "Indeed, it is for that reason that countries adopt the US or another country's currency, especially in times of economic meltdown or political uncertainty, as we had in Zimbabwe in 2008/09.

"In other words, the currency in use cannot be manipulated by the local government or monetary authority, thereby allowing private sector confidence to return to the economy and ultimately the banking system."

Government's inability to disguise economic problems through inflation and currency manipulation bestowed certain advantages on Zimbabwe.

Legat noted: "Because the Government cannot borrow, it has to run a cash budget, making it one of the few countries to do so, an enviable position indeed!

"What the Zimbabwe government can and should focus on, then, are the supply side reforms that would make the economy more efficient and attractive to the private sector – both domestic and foreign."

To do that, a different type of committee may be needed.

"Rather than establish an MPC," said Legat, "government should establish a committee of technocrats to work on supply-side reforms to the economy so as to allow the private sector to flourish in a full market economy.

"Unfortunately, it will likely take time for the Zimbabwean authorities to cede micro and macro management."

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision-making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities. Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
CONSULTANCY CONTACT:	Carol Dundas Tel: +27 11 444 0650 Tel: +27 83 447 6648 Email: carol@cleardistinction.co.za
IMARA CONTACT:	John Legat +263 4 72-9335 / 70-000 +27 72 312 5194

Economic reforms in Nigeria excite Imara market watchers

noreply@blogger.com (Blog Administrator) — Tue, 28 Feb 2012 08:39:00 +0000

Despite recent unrest and protests over higher fuel prices, pan-African financial services group Imara has told international investors it is ‘excited’ about long-term positives springing from Nigeria’s economic reforms.

Botswana-listed Imara monitors the West African markets closely as it markets a focused Nigerian investment fund to leading international asset managers and ‘frontier market’ investors. In addition, Nigerian assets are strongly represented in its Imara African Opportunities Fund, a product that covers a wide range of sub-Saharan investment markets.

Rishay Lalla, co-manager of the Imara Nigeria Fund, noted: “We are excited about the economic reforms being implemented in Nigeria. President Goodluck Jonathan now has four years to implement the key reforms in the power and fuel sectors.”

President Jonathan has already removed a significant portion of longstanding fuel subsidies and Imara expects remaining subsidies to be phased out in due course.

“This will result in huge fiscal savings and ultimately enable private sector players to enter the refining industry so that Nigeria no longer needs to import refined products.

“As we saw in Zimbabwe during the hyperinflation years, any internationally tradable good subject to price control will cost the country dear - and make the chosen few very rich.

“The passing of the Petroleum Industry Bill will be the next milestone to watch for.”

Imara investment researchers acknowledge that a new Islamist protest group has carried out a series of bombings, but add that the bombs had no effect on local equity markets so far.

The cutting of petrol subsidies and higher fuel prices also triggered unrest. However, the subsidy cut will boost government finances and seems to have reduced illegal round-tripping too (importing subsidized petrol and selling it in neighboring countries for the full price).

Imara’s Nigeria specialists note that “this subsidy soaked up 25% of total government spending so the tax rise represents a fairly significant structural reform”.

Furthermore, “running a tight monetary policy and a balanced budget should be currency positive” for the Nigerian Naira especially as the country also runs a large current account surplus.

The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities.

Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
CONSULTANCY CONTACT:	Carol Dundas Tel: 011 444-0650 Mobile: 083 447 6648 Email: carol@cleardistinction.co.za
IMARA CONTACT:	Rishay Lalla Tel: +263 4 700000, 790606/590/164 +263 772209252

Kenyan listings upsurge on the way – Imara

noreply@blogger.com (Blog Administrator) — Tue, 28 Feb 2012 07:47:00 +0000

A flurry of listing activity is expected in Kenya, according to Imara, the pan-African financial services group that publishes regular in-depth investment research reports on the East African region for the benefit of international investors and fund managers.

In its latest East Africa report, Imara says Deacons, Kenya’s leading lifestyle retailer, plans to list in the third quarter of this year. The business recently reported year-on-year earnings growth of 51%.

Another company on the growth path, Longhorn Publishers, also plans to list. The publisher reported 109% growth in last year’s earnings on the back of a Kenyan government programme that distributes free text books to all primary schools.

Also on the listings trail is insurer CIC Insurance, says Imara’s East Africa specialists, while Umeme, the Ugandan energy distributor owned by Actis Capital, has similar plans.

Recent developments underpin a positive Kenyan market view at Imara.

The Botswana-listed group notes: “With fuel and electricity prices declining as well as reduced political uncertainty and pessimism, prospects for the Kenyan market are improving.”

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision-making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai. The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities. Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
CONSULTANCY CONTACT:	Carol Dundas Tel: 011 444-0650 Mobile: 083 447 6648 Email: carol@cleardistinction.co.za
IMARA CONTACT:	John Legat Tel: +263 4 72-9335 / 70-000 +27 72 312 5194

Imara: Zim corporate restructuring spree on the way

noreply@blogger.com (Blog Administrator) — Tue, 28 Feb 2012 07:40:00 +0000

A spate of corporate restructurings is on the cards in Zimbabwe, predicts Imara, the pan-African financial services group with a strong operational base in the southern African nation.

Grant Flanagan, manager of Imara’s specialist Zimbabwean investment fund, has alerted international investors to the prospect of an upcoming ‘spree’.

In his last report to investors he said investment firm Lonzim Plc had announced it was now ready to operate without support from Lonrho Plc and “as such there will be four changes to the board at the AGM should all resolutions be approved by shareholders”.

The company is also likely to change its name.

In addition, said Flanagan, Ariston Holdings, the export-driven agri-business, had published a cautionary notice stating that a major transaction is being negotiated that could result in a change to shareholder structure and a recapitalisation of the business.

Furthermore, Riozim, the investment company with interests in mining and energy, has published a statement announcing that it has accepted an offer that would resolve its indebtedness and provide a way forward.

The statement follows an application by a consortium of banks for the company to be put into judicial management.

Flanagan commented: “This may have motivated management to accept the offer.”

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision-making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai. The Group is an active participant in Africa's financial markets and maintains extensive research coverage of regional equities. Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

Shareholders approve Farmers House merger – Imara

noreply@blogger.com (Blog Administrator) — Mon, 20 Feb 2012 06:33:00 +0000

The way is clear for the planned merger of Farmers House Plc, Zambia’s sole listed property company, and Arcades Development Plc, say the corporate finance specialists at Imara Botswana Ltd.

Farmers House shareholders approved the merger at a reconvened extraordinary general meeting (EGM) held in Lusaka on 27 January 2012. All other EGM resolutions were approved, including the issuing of new shares to Arcades shareholders, the authority for Farmers House to buy back its own shares, the change of name from Farmers House Plc to Real Estate Investments Zambia Plc and the election of two new directors to the Board.

The consideration for the shares in Arcades Development Plc, totalling $25 million, is to be settled partly in cash ($15 million), while the balance will be settled by way of a share swap for new Farmers House shares at the swap rate of one Farmers House share for every 1.69 Arcades shares.

The transaction enables strategic diversification of the property assets in the Farmers House portfolio. Arcades Development owns the Arcades shopping centre in Lusaka. Three additional developments are under way.

Grant Molyneaux, corporate financial executive at Imara Botswana, said finalisation of the merger was imminent, subject to regulatory approvals and formal approval by the Arcades shareholders.

Imara Botswana Ltd, assisted by Stockbrokers Zambia, holds the merger mandate.

The new Farmers House shares being issued are expected to be listed on the Lusaka Stock Exchange on or about 29 February 2012. Stockbrokers Zambia is the sponsoring broker.

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

The Group is an active participant in Africa's financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion.
Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
CONSULTANCY CONTACT:	Carol Dundas Tel: 011 444-0650 Mobile: 083 447 6648 Email: carol@cleardistinction.co.za
IMARA CONTACT:	Grant Molyneaux Tel: + 27 11 550-6002 +27 72 494 1725

Cape Town proving ground for Imara's CSI breakthrough

noreply@blogger.com (Blog Administrator) — Mon, 06 Feb 2012 07:30:00 +0000

Cape Town and Khayelitsha have become the proving ground for a unique approach to corporate social responsibility that assists creative photo-entrepreneurs from disadvantaged communities.

The Imara Lightwarriors photographic bursary-cum-mentorship programme is championed by pan-African financial services group Imara in partnership with the Cape Town-based brand art specialists at Pitchblack.

First beneficiary is Teddy Sambu (22), a start-up photographer from Khayelitsha who began his own micro-business without formal training, little equipment and zero capital. He was selected by Pitchblack and Imara and has now enrolled at Cape Town School of Photography. Imara meets tuition fees and living expenses.

Business skills are also developed while Cape Town photographers Athol Moult and Damon Hyland provide hands-on mentorship.

Pitchblack creative director, artist and photographer, Athol Moult, who developed the Lightwarriors concept, applauded Imara for supporting entrepreneurship in a creative niche.

He added: “The Lightwarriors vision calls for an integrated package of assistance covering education, on-the-job training, small business development and photographic commissions to assist the bursar. We simultaneously foster an Africa-wide vision of creative excellence.”

The Lightwarriors programme includes an annual photo-safari into Africa, giving Teddy Sambu a chance to work with Athol Moult while photographing subjects for incorporation in the Imara art collection. Selected work will be submitted for inclusion in Imara’s annual report.

David Stone of Imara noted: “Lightwarriors is an optimal CSI platform for Imara. We contribute to capital market development across Africa, but the starting point for economic progress is the one-man business. The start-up township photographer showcases the commitment, self-belief and sweat-equity valued by Imara.

“We also looked for a vehicle that reflects our love of Africa. A photographic scholarship is ideal as it enables disadvantaged young people to capture and celebrate the changes taking place across our continent.”

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
CONSULTANCY CONTACT:	Carol Dundas Tel: 011 444-0650 Mobile: 083 447 6648 Email: carol@cleardistinction.co.za
IMARA CONTACT:	Dave Stone Tel: (011) 550 6102

Key date set in ground-breaking Farmers House merger - Imara

noreply@blogger.com (Blog Administrator) — Thu, 24 Nov 2011 14:28:00 +0000

Farmers House Plc, Zambia’s leading listed property company, has set the date for the next step in its plan to merge with Arcades Development Plc, thereby achieving strategic diversification of its property assets.

Several shareholder approvals are necessary to facilitate the transaction, and to that end an extraordinary general meeting (EGM) is to be convened in Lusaka on December 16.

Shareholders at the EGM will be asked to approve the merger with Arcades, the issue of new shares to enable a share swap and the go-ahead for Farmers House to buy back its own shares. In addition, shareholders will be asked to sanction a change of name of the Company to Real Estate Investments Zambia PLC (REIZ) and the election to the board of two new directors.

Following approval at the EGM it is planned to carry forward the merger by purchasing 50% of the shares in Arcades Development for cash, and the remaining shares to be swapped for new Farmers House shares at a rate of one Farmers House share for every 2.46991 Arcades shares held.

The merger mandate is held by Imara Botswana Limited, assisted in the mandate by its Zambian associates, Stockbrokers Zambia. Stockbrokers Zambia is also the sponsoring broker.

Arcades Development PLC owns the Arcades shopping centre, a landmark Lusaka retail development with a gross letting area of 18 382m². Three additional developments are currently under way – the Parkway property on Kafue Road, Lusaka, the multi-use Solwezi property and a four-star boutique hotel at the Arcades shopping centre.

Grant Molyneaux, corporate finance executive at Imara Botswana, said the transaction was designed to add shareholder value by enabling Farmers House to diversify its portfolio.

Mr Timothy Mushibwe, Chairman of Farmers House, said that Farmers House has traditionally concentrated on office and commercial property developments. “The merger with Arcades will bring the first high profile retail centre into the Farmers House mix, with potential expansion in this area under consideration.”

Robin Miller, Managing Director of Farmers House, said “The transaction will add value to shareholders and the Board feels the merger fulfils the strategic vision previously presented to Farmers House shareholders.

“The transaction already has the approval of Arcades shareholders and directors, with a combined 78.9% shareholding in Arcades, and we anticipate that our bid will be welcomed by the Arcades minorities. Various regulatory approvals are also required, but we are confident the process will be finalised early in the New Year when it is expected that the new Farmers House shares will be listed on the Lusaka Stock Exchange.”

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

Laying the Track

noreply@blogger.com (Blog Administrator) — Fri, 18 Nov 2011 07:48:00 +0000

Imara's head of asset management John Legat tells Africa FM why Zimbabwe is well and truly back on the map, and how his firm's Africa Series of funds is laying the groundwork in preparation for a new era in Africa investment

"While there is a lot of interest in Africa, getting investors to actually commit money is very hard at the moment, particularly in Europe and the US," says John Legat, head of asset management at Imara Asset Management, an Africa specialist whose investor base primarily comprises clients from these troubled geographies.

"Generally speaking volumes have come off around Africa which tells you that there is not a lot of selling going on but also not a lot of buying," he says, although Legat adds that sentiment towards Africa remains strong, in spite of the liquidity squeeze.

"There is a lot of interest in Africa, because we saw in the global financial crisis that the region doesn't have the global links that other emerging markets tend to have, and so the growth we're seeing in Africa is driven much more by domestic demand and government reform. There are several factors at play that are less influenced by what is going on in rest of the world."

The bulk of Imara's $390 AUM is European money, typically from the UK, Switzerland and Netherlands, with the US a growing market for the firm and South Africa a new but increasingly important component of its investor base. According to Legat, the majority of investors still want pan-African exposure at this stage, although Scandinavian investors are showing an intrerest in country-specific allocations - the start of what Legat believes will be a trend that plays into the hands of his firm's Africa fund offering.

lmara, which manages money out of South Africa, Kenya, Zimbabwe and the UK. is well positioned to capitalise on interest from first-time or more sophisticated Africa investors, having established a broad suite of both regional and niche Africa products since the launch of its asset management business in 2003.

The firm's flagship fund is the $120m Imara African Opportunities Fund, a pan-African equalities vehicle launched in 2005 that scooped the Africa Equity Fund of the Year Over $50m award at October's Africa Fund Manager Performance Awards after achieving an outstanding 12-month return of nearly 26% to 30 June. But for those investors keen to access a more focused slice of the Africa story, lmara has also developed a range of equity funds under its lmara Africa Series umbrella.

"When we launched the umbrella fund we took the view that this was going to be a five- to 10-year product," explains Legat. "In the institutional investor space you need to build up a three- to five-year track record. A pension fund in Europe is not going to invest in a fund with less than a three-year track record, so we decided to build up that record so that when institutional investors decide they want to add, for example, some more Nigeria to their portfolio, we have got the fund, the manager and the track record."

The series, which Legat says has so far proved popular primarily with funds of funds, comprises Nigeria, Zimbabwe and East Africa regional funds, as well as an African Resources fund, which won the Africa Equity Fund of the Year Under $50m prize at the same ceremony after racking up a 42% return in the judging period. "The best performing fund [in the series] was the resources fund, which doubled in value from its launch in December 2008 to the end of June," says Legat.

"We launched the African Resources Fund close to the bottom of the financial crisis when resource stocks got pummelled as we felt it was too much of an opportunity to miss. We seeded the fund with our own money because it was hard to market anything back then and it has turned out to be a very good performance," he explains.

IMARA AFRICAN OPPORTUNITIES FUND

Imara's Flagship African Oppotunities is focused largely on sub-Saharan Africa ex-South Africa, with Zimbabwe (21%) its largest geographical exposure at 30 September, followed by Nigerra (20%), Zambia(15%). Kenya (13%) and Botswana (8%): and Egypt accounting for just 3%. 'Most of our Investors
don't want South Africa. We also don't have much exposure to North Africa says head of asset management John Legat pointing to historical expensive valuations, ongoing political risk and the fact that many of the firm's Investors access this region through Mena Funds. The fund Invests primarily in consumer sectors, with beverages the largest sector allocation at 30 September (23%) and tobacco accounting for 5% of the fund. Banking was the second biggest sector exposure at 18%. "The focus in Nigeria is in domestic demand, and In Zimbabwe again breweries are the biggest focus. While the Nigerian banking sector has got through its problems and is looking very cheap, the central bank is keeping a very tight monetary policy at the moment and bank lending is only just beggining to pick up, and our overweight remains consumer stocks," says Legat who describes Zambia's economy as not on the radar but pumping, not just in mining but also agriculture", and Botswana as a "market for 2012."

PERFOMANCE AWARDS

African Equity Fund of the year over $50M
Imara African Opportunities Funds

1 year Return: 25.87%
1 year Standard deviator (SD): 12.69%

African Equity Fund of the year under $50M
Imara African Resources Fund

1 year Return: 41.94%
1 year SD: 20.28%

Angola's investment case gets big response - Imara

noreply@blogger.com (Blog Administrator) — Mon, 07 Nov 2011 09:40:00 +0000

Angola is fast emerging as the next big sub-Saharan opportunity, judging by the response to the oil-rich nation’s upcoming investment indaba in London.

The event on November 8 is believed to be the first forum to be convened in a major financial centre to foster closer contacts between the international institutional investment community and Angolan corporates and public bodies.

It has attracted a Who’s Who of attendees from the fund management and financial service sectors, says Anthony Lopes Pinto, head of Angolan operations at Imara, the pan-African financial services group.

Imara and London-based asset management Group Fleming Family & Partners are co-hosts of the event.

Two years ago, the long-time associates launched a similar London investment day to showcase opportunities in Zimbabwe. The initiative helped free up investment flows and contributed to an international reappraisal of Zimbabwe’s post-dollarisation prospects.

“Response to our Angola conference has been overwhelmingly positive,” says Lopes Pinto. “We therefore believe we are well placed to repeat the success of the watershed Zimbabwe event.

“Angola has one of the fastest growing economies in sub-Saharan Africa. Some northern hemisphere economies may be struggling to cope with the continuing international financial crisis, but Angola is back in the black, foreign currency reserves are at an all-time high and government efforts are gaining traction to diversify the economy and reduce Angola’s dependence on oil.”

Delegates are expected from North and South America, Europe and the UK. Representatives of financial service companies significantly outnumber those from the energy and resource sectors.

Senior Angolan officials will present a strategic overview of national prospects, with a focus on opportunities for public-private sector partnerships. In addition, speakers from major corporates currently active in the Angolan market will address the conference on operational conditions and progress toward a business-friendly policy environment.

The Angolan government has publicly stated that next year it will develop its capital markets in Luanda, deepening the financial sector and creating new sources of funding for Angolan enterprises.

“The diverse mix of attendees confirms that international investors have picked up official signals that opportunities are not restricted to the oil industry. With the recovery of the oil price, wide-ranging investment possibilities are fast emerging; which is why the response has been so positive from so many quarters.”

Imara has been represented in Luanda for more than two years by Imara Securities Angola SCVM Limitada, a joint-venture with an Angolan conglomerate.

The Angolan JV launched corporate finance activities at the beginning of the year. Two deals are currently in the pipeline, a property project and a financial services transaction.

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

The Group is an active participant in Africa's financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion. Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)

Corporate finance and advisory services

Securities

Trust and administration services

Imara honoured at Africa Fund Manager Performance Awards

noreply@blogger.com (Blog Administrator) — Fri, 14 Oct 2011 12:34:00 +0000

Imara, the pan-Africa financial services group, has taken two of the top investment accolades in the first annual Africa Fund Manager Performance Awards.

Its Imara African Opportunities Fund won recognition as the year’s best Africa equity fund with a fund size of more than USD50 million while the Imara African Resources Fund claimed honours as the top Africa Equity Fund with a fund value of less than USD50 million. The Imara Zimbabwe Fund was also nominated for the same award.

The awards were presented at a gala dinner on October 11 in Cape Town.

Imara Group CEO Mark Tunmer commented: “It is an honour to feature so prominently in this inaugural awards programme for Africa fund managers.

“We’re delighted a well-established favourite like our African Opportunities Fund, with positions across numerous sub-Saharan jurisdictions, and a more focused specialist Resources Fund, a relative newcomer to our range, have done so well. We were also delighted that our popular Zimbabwe Fund made the short list for an award.

“Awards recognition has a wider significance for our continent and industry. By spotlighting superior investment returns out of Africa, awards such as this contribute to the global re-rating of sub-Saharan Africa as an investment destination.

“Strong performance by managers and markets will accelerate capital market development and help drive sustained progress by our continent.”

Harare-based John Legat, head of Imara’s asset management division, is manager of the Imara African Opportunities Fund while Bruce Williamson manages the Imara Africa Resources Fund.

John Legat noted: “We view awards recognition such as this as an endorsement of the Imara approach to equity investment in sub-Saharan markets. We have extensive on-the-ground representation across Africa and conduct in-depth research and face-to-face interviews to ensure portfolio construction is backed by thorough understanding of challenges and opportunities in all jurisdictions.”

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai. The Group is an active participant in Africa's financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion. Imara provides a range of specialised financial products and services that can be broadly categorised as:
Asset management (institutional and private client)

Corporate finance and advisory services

Securities

Trust and administration services

Imara Group subsidiaries are regulated by: NBFIRA in Botswana, the FSA (UK), the FSB, JSE, SAFEX (South Africa), SEC, ZSE and Reserve Bank of Zimbabwe, the FSC (Mauritius) and the Reserve Bank of Malawi.

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
CONSULTANCY CONTACT:	Carol Dundas Tel: 011 444-0650 Mobile: 083 447 6648 Email: carol@cleardistinction.co.za
IMARA CONTACT:	Mark Tunmer Tel: 083 788 9037

No rush to leap into Egyptian market after Arab Spring, says Imara

noreply@blogger.com (Blog Administrator) — Wed, 21 Sep 2011 13:44:00 +0000

Pan-African financial services group Imara has indicated to international investors there is no great need to leap into Egyptian equity markets following the ‘Arab Spring’.

Imara backs its range of Africa-focused investment products and in-depth investment research with on-the-ground investigation of key markets.

Its analysts have now returned from a study trip to Egypt and though they note substantial drops in share prices – hinting at value opportunities – they are happy to take their time before committing to this North African market.

In the past, Botswana-listed Imara had only limited exposure to Egyptian equities as it felt pre-revolution share prices failed to reflect the risks inherent in a market facing sizeable political, fiscal and social challenges.

John Legat commented: “These problems have bothered us for a good few years; hence our low exposure.

“The difference now is that most other investors are also aware of these issues. This gives us comfort as the Egyptian risk premium finally reflects the underlying problems.”

This year, many blue-chip counters on the Egyptian stock exchange halved in value while Imara analysts estimate that foreigners sold about US$6 billion in Egyptian treasury bills – believed to be more than half the foreign holding.

However, Imara says foreigners have largely held onto their Egyptian equities.

Imara notes that wages have gone up by about 30%, a boost for businesses geared toward consumer spending. . However, Egypt’s fiscal deficit may reach 10% of GDP this year.

Government is under pressure as 40% of its expenditure supports subsidies on key items like fuel. Any move to remove subsidies could provoke further unrest.

What’s more, the economy looks set to shrink by 3.5% in 2011.

Legat concludes: “We are evaluating the corporate fundamentals at the moment, but feel in no hurry to rush in.

“Zimbabwe, too, has its own political uncertainties, which, like Egypt, are well known. The difference is that dollarisation in Zimbabwe has removed the economic distortions and companies are in command of their own destiny.

“Good Zimbabwean companies are moving forward fast. That’s not yet the case yet in Egypt.”

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

The Group is an active participant in Africa's financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion.
Imara provides a range of specialised financial products and services that can be broadly categorised as:
- Asset management (institutional and private client)
- Corporate finance and advisory services
- Securities
- Trust and administration services
Imara Group subsidiaries are regulated by: NBFIRA in Botswana, the FSA (UK), the FSB, JSE, SAFEX (South Africa), SEC, ZSE and Reserve Bank of Zimbabwe, the FSC (Mauritius) and the Reserve Bank of Malawi.

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
IMARA CONTACT:	John Legat +263 4 729335/ 70000 +27 72 312 5194
CONSULTANCY CONTACT:	Carol Dundas Tel: +27 11 4440650 Mobile: +27 83 447 6648

Don't let your RAs disguise over-diversification (Imara)

noreply@blogger.com (Blog Administrator) — Tue, 02 Aug 2011 12:55:00 +0000

Dust off your retirement annuities (RAs), scrape away the wrapper and take a long look at the underlying investments. You may find yourself staring at costly over-diversification you could easily do without.

The consumer advice comes from Imara Asset Management, South Africa, a wealth company and advisory services provider that frequently 'unpacks' portfolios for clients hoping to achieve greater cost efficiency from investment and retirement products that have been accumulated over decades.

“Over-diversification can reduce returns while paying the higher costs of active management,” says Lara Warburton, managing director. “It's particularly important to scrutinise the investments driving the performance of preservation funds and RAs.

“A consumer might be paying for levels of equity diversification that are unnecessary from a risk management and portfolio balance perspective.

“This often happens with RAs as several might be acquired down the years while investors have only a vague idea about the funds they've bought into.”

To illustrate the challenge, Warburton pointed to a hypothetical case in which a client took out three RAs from different product providers, with the inflow into each RA spread across five funds or 15 unit trusts in all.

The 15 managers are paid for active management, with the danger that the shares sold one day by one manager will be bought the next by another manager at a different fund.

Transaction costs are picked up by the investor, whose net underlying position remains the same.

Furthermore, multiple fund managers trading across a limited marketplace will tend over time to deliver index-type returns rather than active management outperformance.

Active managers charge more for striving to beat rather than mirror the market. Passive, index-tracker products are cheaper.

“There are only about 180 actively traded stocks in South Africa,” says Warburton. “If you have hired 15 fund managers, they will almost certainly buy and sell across this 'universe'.

“Over-diversification like this creates the risk you will end up tracking the market for average returns that might have been delivered by more affordable passive investments. Paying for active management multiplied by 15 is hardly cost efficient.”

When costly over-diversification is uncovered, one solution is RA consolidation.

“In pre-retirement planning,” says Warburton, “we encourage our clients to demand hard-working investments without clutter and without undue costs.

“Diversification has a role across asset classes and across geographies, but over-diversification within a single asset class like domestic equities has to be questioned. Often, consolidation can improve cost efficiency without adverse effects.”

Regulatory changes mean punitive penalties no longer apply when an RA is transferred to another firm before retirement. However, surrender fees may accrue.

Warburton adds: “Paying for over-diversification is hardly prudent, but professional advice from an experienced financial planner is necessary to ensure the portfolio is positioned for best investment returns given the risk profile of the investor. Every case must be judged on its merits.”

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decisionmaking in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

The Group is an active participant in Africa's financial markets and maintains an extensive research coverage of regional equities. Funds under management exceed US$450m and assets under administration exceed US$1.77 billion.

Imara provides a range of specialised financial products and services that can be broadly categorised as:
- Asset management (institutional and private client)
- Corporate finance and advisory services
- Securities
- Trust and administration services
Imara Group subsidiaries are regulated by: NBFIRA in Botswana, the FSA (UK), the FSB, JSE, SAFEX (South Africa), SEC, ZSE and Reserve Bank of Zimbabwe, the FSC (Mauritius) and the Reserve Bank of Malawi.

ISSUED ON BEHALF OF	:	IMARA
BY	:	CLEAR DISTINCTION COMMUNICATIONS
IMARA CONTACT	:	Lara Warburton Tel: (011) 550-6196
CONSULTANCY CONTACT	:	Carol Dundas Tel: (011) 444-0650 Mobile: 083 447 6648

Pension changes to protect savers could backfire (Imara)

noreply@blogger.com (Blog Administrator) — Tue, 24 May 2011 13:07:00 +0000

Recent changes to Pension Fund legislation intended to protect savers might have the opposite effect on workers in the under-30 age bracket.

This alert has been sounded by Imara Asset Management South Africa, an investment company that advises many salary-earners on financial planning and the need to augment company-driven retirement provision through personal saving instruments like retirement annuities (RAs).

Regulation 28 of the Act was amended in February, requiring adherence at individual member level rather than overall fund level. The regulation specifies maximum asset allocation limits for pension-funding investments.

One provision limits equity exposure to 75%, property exposure to 25% and foreign exposure to 25%. Previously, these restrictions were applied across a fund.

To give one example, this meant that people planning to retire overseas could hold 100% of their assets offshore as long as the total fund of all member assets met Regulation 28 requirements.

"The intention of the change appears to be to protect pension fund members by controlling exposure to perceived higher risk asset classes like equities and offshore assets," says Lara Warburton, managing director of Imara Asset Management SA.

"The authorities should be applauded for steps to protect fund members, but these measures could backfire in the case of young employees with perhaps 35 years to go before retirement."

Warburton acknowledges that share markets have become increasingly volatile, especially measured over short periods of time. However, in the long term equities have the best record of inflation-beating returns and a proven capacity to build personal wealth – so much so that some young clients saving for retirement are advised to make a 100% commitment to equities.

She explains: "Perhaps no significant under-performance will result from a 25% portfolio allocation into cash and bonds for fund members over 45. But why would a 28-year-old with a 35-year investment horizon want to make a big commitment into bonds – especially right now?

"A 75% equity ceiling makes little sense in a case like this. A larger equity commitment is often recommended as younger savers have enough time to recover from cyclical market corrections.

"The individual ceiling envisaged by Regulation 28 could put a brake on upside without significantly improving investor protection as time in the market over a 35-year period normally provides built-in protection."

Warburton suggests the authorities monitor the long-term impact of the regulatory change; specifically the effect on a savings product like RAs.

"The RA's attraction as a supplementary savings tool could be affected," says Warburton. "Young clients may decide that as RAs carry an equity limit they should examine other options, notwithstanding an RA's tax advantages.

"Many alternatives to the RA, like unit trusts, are easily accessible. The danger is that young people may 'raid' their supplementary saving plans to buy lifestyle assets rather than commit to long-term saving.

"The net effect would be diametrically opposed to the regulator's intentions. Only 6% of South Africans make sufficient provision to enable a reasonable retirement. It would be a tragedy in a low-savings economy like ours if regulatory change made it even harder to achieve this goal."

Imara is an independent, Botswana-listed investment banking group that prides itself on objective decision-making in the service of its clients. The company is mid-sized and has offices in Angola, Botswana, South Africa and the UK and associate offices in Malawi, Mauritius, Zambia and Zimbabwe. Imara has also partnered with Chapel Hill Denham in Nigeria, NIC Capital in Kenya, Namibia Equity Brokers and Mac Capital in Dubai.

Imara provides a range of specialised financial products and services that can be broadly categorised as:

Asset management (institutional and private client)
Corporate finance and advisory services
Securities
Trust and administration services

ISSUED ON BEHALF OF:	IMARA
BY:	CLEAR DISTINCTION COMMUNICATIONS
IMARA CONTACT:	Lara Warburton Tel: (011) 550-6196
CONSULTANCY CONTACT:	Carol Dundas Tel: (011) 444-0650 Mobile: 083 447 6648

Imara Investment Notes for April-May 2011: "A Return of Legality"

noreply@blogger.com (Blog Administrator) — Fri, 29 Apr 2011 07:30:00 +0000

Zimbabwe's "Government of National Unity" (GNU), created following extended negotiations between South Africa and the main political parties in early 2009, has made positive progress despite media attempts to suggest otherwise. As we have seen elsewhere around the World and in Africa, a GNU is by no means a perfect solution to a political crisis and will only really work successfully if all the members of the GNU have the same goal and speak with the same voice.

This is clearly not the case in Zimbabwe and as a result badly needed reforms take time to be enacted, whilst Ministers within the GNU often contradict each other thereby bringing about confusion both domestically and abroad. In Zimbabwe's case it is not helped by the obvious splits within Zanu-PF as various factions attempt to gain the upper hand in the succession battle of a leader who is 87 years old and clearly mortal. It is further argued that one of those factions would like to bring about the demise of the GNU so that early elections can be called and, one assumes, rigged to allow a Zanu win, and hence to allow that faction to gain the upper hand.

As we wrote in our last Investment Notes, we believe that an election in 2011 is highly unlikely as the MDC parties, supported by South Africa and SADC will not sanction an election that has not been held under a new constitution that has itself been approved in a referendum, and under new electoral laws with an updated voters' roll. This was recently confirmed by the SADC sub-committee that met in Zambia earlier this month. Indeed recent reports following party negotiations with the SADC facilitators now suggest that elections will not be held until the end of 2012.

Despite all of this, the GNU is the Government of the day and business has to proceed as best it can with decisions on policy made at Cabinet level. The early adoption of the multi-currency system and ultimately the US dollar was perhaps the single most crucial decision that was made (although the free market had already made that decision when it effectively dumped the hyper inflating Zimbabwe dollar in 2008). We wrote in our last Notes how successful that has been in terms of killing inflation on the one hand and boosting rapid economic growth on the other (9-10% growth rates). Whilst the US dollar has been a weak global currency to adopt (for now at least), this has not been a negative issue by any means. Indeed, since Zimbabwe's primary exports (platinum, gold, tobacco and cotton) are all priced in dollars, and its main imports (energy) are also priced in dollars, there has been no currency risk for investors/businesses in those crucial sectors of the economy. A weak dollar against the South African rand has also helped Zimbabwe exporters to compete and has encouraged local producers to buy raw materials from China and India in dollars rather than from an expensive South Africa in rand.

We also mentioned in our last Investment Notes that a "hybrid" debt reduction programme had been approved by Cabinet last December. This was vital in terms of putting Zimbabwe on the right path to negotiate debt relief with the creditor nations and in particular the IMF. This is a process and not an event but we hope it will lead to an IMF sponsored programme being adopted in some form or other. A return to legality will be one key pillar in this process both from an economic but also from a human rights perspective. The latter issue however will be for the time being a major political obstacle as existing, and in some cases draconian laws, are used by individual political parties to pursue their own agendas. It is an issue that can be conquered quickly though if the political will is in place.

Economic rights are more difficult and at the moment are further complicated by the uncertainty surrounding the Indigenisation regulations that are being used by a faction of ZANU as a key ingredient of their election campaign or perhaps for self enrichment. Indigenisation is seen as a simple extension to the controversial land reform process that began in 2000. It is the land issue that will be the hardest nut to crack in the necessary return to legality. In order for the agricultural side of the economy to flourish, the use of land as collateral for loans will be essential whether in the form of leasehold or freehold title but one that will stand up in a court of law.

Following a Constitutional Amendment with regard Agricultural land in 2005, all title to agricultural land fell to the State. Most title deeds at the Registrar of Deeds have therefore been altered to reflect the Amendment and are of doubtful value under current law. Whilst this state of affairs could of course change under a new constitution at a later date, the current constitution allows farmers to be compensated for any improvements made to the land such as dams, tobacco sheds, irrigation systems, greenhouses, barns, plantations, pastures, roads, etc but not for the land itself or for moveable objects such as tractors. From 2002, the Government of Zimbabwe made it clear that it was willing to pay such compensation and a number of farmers took advantage of that scheme at the time. Hyperinflation however effectively led to the suspension of the scheme as the farmers and Government could no longer agree on a valuation that was changing by the day.

Post dollarization however, the Minister of Finance reintroduced the scheme in his 2009 budget and allocated $4.4 million for the purposes of compensating farmers. By October 2010, over US$900,000 had been paid out by Government largely due to the slow take-up of the offer by the farmers themselves. Since there was a short-fall in the 2009 budget, an additional $2.25 million was allocated for 2011, and a proposed $5million for 2012 and $7 million for 2013.

In order to benefit from this compensation, a farmer must first write to the valuation section of the Ministry of Lands inviting a valuation of the property concerned. The Ministry requires a letter from the Ministry of Labour stating that all employees were properly compensated at the time of eviction which assumes of course the farmer has kept those records as proof. The farmer will also have to show that any bonds attached to the property have been cancelled. The Ministry of Lands then invites the farmer to compile a detailed and comprehensive schedule of improvements, without a valuation, on the farm at the date he vacated it. Supporting documentation such as photographs are helpful. The valuation experts at the Ministry then compile a valuation report based on this information which is then reviewed by the National Agricultural Land Compensation Committee who will make a final recommendation to the Ministry of Lands. The farmer or beneficiary is then invited to discuss the offer of compensation which he or she is free to accept or reject. If the offer is accepted, then the Chief Valuation Officer invites the parties to lodge the farm's Deed of Transfer with the Ministry. The offer clearly states that the valuation is for improvements only. The US dollar funds are then paid out by Government to the farmer.

This process has worked and as such further farmers have submitted their documents for consideration in order to benefit from the compensation scheme. The funds are paid by the Government of Zimbabwe and not by an outside Government or agency. It is in the National Budget. In order to control what could be a huge number of applications, priority is being given to those farmers still resident in Zimbabwe and especially to elderly farmers who need the funds to live out their remaining years. Since compensation is being paid on a willing basis from both parties, there is no reason why in the future, the British Government or other agencies might not step in to support future payments alongside the Government of Zimbabwe or the GNU. As we understand it the CFU has not publically endorsed this scheme but it is being positively reviewed by them. Their preferred option up to now has been to fight for compensation for not just the improvements, but also for the land and loss of earnings. We suspect this to be unreasonable under the circumstances and would unlikely be considered by the donor nations.

A return to legality is ultimately essential if Zimbabwe is to be accepted back into the World's financial community to be free to borrow from capital markets, banks and multi-lateral agencies. The land improvements compensation programme is just one element in this process that the Government of National Unity has endorsed. There are many other measures that can and need to be adopted. The new Commissions for Electoral Reforms, the Media and for Human Rights can further improve Zimbabwe's status. It has been heartening to see the Zimbabwe Stock Market rally this year making it one of the better performers in Africa to date, driven not just by foreign investors, but more recently by domestic institutions as well.

John Legat, Chief Executive Officer
Imara Asset Management, Zimbabwe

Africa's investment comeback to gather pace in 2011

noreply@blogger.com (Blog Administrator) — Mon, 17 Jan 2011 12:45:00 +0000

Africa's great comeback as an investment destination is already under way and is set to accelerate in the year ahead, says Pan-African financial services group Imara.

The company has broad sub-Saharan representation and is well placed to judge investor interest as its range of investment funds takes positions in numerous markets across the continent.

Alun Thomas, CEO of Botswana-based Imara Africa Securities, an Africa-wide share-trading service, says trading volumes at African stock exchanges and international buying enjoyed a significant uptick in the final quarter of 2010 – stirring memories of 2007 when international fund managers took growing positions in Africa's so-called Frontier Markets.

He notes: "In October and November 2010, Imara Africa Securities had its best trading months since 2008. We topped the volumes we achieved that year before the international financial crisis prompted offshore investors to retreat from Africa.

"Africa's investment resurgence has begun. We see this in many jurisdictions and numerous sectors."

Upbeat sentiment has been fuelled by speculation that 2011 inflows could be swelled by yield-hungry private equity funds.

Low correlation with developed markets (and one another) is another plus for Africa as many investors prefer to avoid contagion risk. Demand is also supported by credible research from Africa-based investment professionals with an eye for long-term value.

Thomas says within Africa (ex-South Africa), market valuations often understate the true potential of listed companies with dominant market positions. Investors also look to exploit strategic themes such as infrastructure development.

He adds: "Africa's resource wealth is helpful, but the continent's status as a significant investment destination is much more broadly based than that."

Among developments attracting investor interest are cement-manufacture in Nigeria, brewing and banking in Zambia, micro-lending in Botswana, Tanzania, Swaziland, Uganda, Namibia and Zambia and a resurgent agricultural sector in Zimbabwe and neighbouring states.

Says Alun Thomas: "The breadth of outside interest is hugely encouraging and supports the Imara view that the African comeback has reached a tipping point with more investor interest to follow."

Botswana-registered Imara has offices and partners in Blantyre, Dubai, Edinburgh, Gaborone, Harare, Johannesburg, Lagos, London, Luanda, Lusaka, Mauritius, Nairobi and Windhoek. Activities include asset management, financial planning, stockbroking and corporate advisory services.

Issued on behalf of	: Imara
by	: Clear Distinction Communications
Imara contact	: Alun Thomas Tel: +267 319-1768 alun.thomas@imara.co
Consultancy contact	: Carol Dundas Tel: +27 11 444 0650 Mobile: +27 11 83 447 6648 carol@cleardistinction.co.za

Imara launches info blitz to bring investors to Africa

noreply@blogger.com (Blog Administrator) — Mon, 06 Sep 2010 12:15:00 +0000

Imara, the Pan-African financial services group, is launching an information onslaught to pave the way for a new wave of international investment into Africa.

The latest salvo in the group's info barrage is an authoritative, up-to-the-minute report on the state of the sugar industry in South Africa and other jurisdictions in sub-Saharan Africa (SSA) - the first appraisal of its kind.

Imara's sugar industry and sugar company assessment follows its comprehensive overview investment prospects in Angola and a notional valuation of the planned Angolan stock market.

The Botswana-registered group began its data drive earlier this year with another first - a comprehensive report on the financial service sector in SSA, with information on listed banks from Egypt to South Africa. The book, 'Banking on the Final Frontier' proved a huge hit with investment analysts worldwide.

Imara Group CEO Mark Tunmer commented: "We've always been known for the quality of our research - a direct result of our strong on-the-ground presence across Africa. As part of our service to investors we circulate reports from Imara asset managers working on various Africa-focused equity funds.

"We decided to give more formal structure to this research effort by compiling authoritative reports on national markets and key sectors.

"The success of our banking book was an eye-opener. We decided to maintain momentum by creating a continuing stream of authoritative reports. We knew there was great international appetite for reliable, up-to-the-minute data on African countries. That appetite may be even stronger than we first thought."

Imara is committed to the facilitation of investment into Africa and in the last 15 months has twice brought international fund managers to Harare for on-the-spot assessments of Zimbabwean opportunities. It frequently collaborates with officials from various SSA countries to give in-depth briefings to investors in major centres such as London.

Tunmer adds: "We plan to publish an ongoing series of investment books and reports on a wide range of national markets, key sectors and listed companies.

"Once the base is established, we will look at six-monthly updates. We also plan to produce national editions of sectoral reports that will put the spotlight on a particular jurisdiction."

The next Imara report - on the SSA brewing industry and listed breweries - is nearing completion.

Imara has offices and partners in Blantyre, Dubai, Edinburgh, Gaborone, Harare, Johannesburg, Lagos, London, Lusaka, Mauritius, Nairobi and Windhoek. Activities include asset management, financial planning, stockbroking and corporate advisory services.

Issued on behalf of	: Imara
by	: Clear Distinction Communications
Imara contact	: Mark Tunmer Tel: +27 11 550-6100 Mobile: +27 83 788 9037 markt@imara.co.za
Consultancy contact	: Carol Dundas Tel: +27 11 444 0650 Mobile: +27 11 83 447 6648 carol@cleardistinction.co.za

Angola looks like Africa's next big investment destination

noreply@blogger.com (Blog Administrator) — Wed, 18 Aug 2010 23:28:00 +0000

Fund manager response to comprehensive data on the Angolan market indicates that the once-devastated nation could soon emerge as Africa's next big investment destination.

The assessment comes from Pan-African financial services group Imara following hugely positive response to the company's 'Angola Country Report', an in-depth appraisal of investment opportunities in the oil-rich nation.

The report is part of an on-going information campaign on sub-Saharan nations and sectors in support of Imara's longstanding effort to encourage international investment in Africa.

Angolan data was compiled by Anthony Lopes Pinto, head of Imara's Luanda operations, and analyst Estefania Jover. It contains a notional valuation of the planned Luanda Stock Exchange and gives macro-economic data, political assessments, an overview of Angola's diplomatic ties and an in-depth appraisal of the banking, brewing and telecommunications sectors.

The oil industry is not a point of focus as it is thought unlikely that Angolan oil industry enterprises will feature in the first wave of initial public offerings on any future stock exchange.

Imara group CEO Mark Tunmer noted: "Response to the report from institutions and asset managers has been overwhelmingly positive. "We were already bullish about prospects in Angola – which is why we were one of the first international financial services company to achieve a direct presence in Luanda.

"Since receiving feedback on the report from international investment professionals, we are even more upbeat. All indications are that Angola could quickly become the next big African investment destination."

Imara believes that within five years the planned Luanda Stock Exchange could become the third or fourth largest bourse on the continent, excluding South Africa.

Tunmer added: "The exchange could be open by the end of this year or early in 2011, with some of the Angolan banks in the forefront of the first wave of listings. We're not the only ones to be impressed by Angola's potential ... so are the asset managers who've been reading our report."

Zimbabwe's economy may be much bigger than thought

noreply@blogger.com (Blog Administrator) — Tue, 17 Aug 2010 13:44:00 +0000

Just how big is the Zimbabwe economy and how upbeat should one be about growth prospects?

The questions are taking on growing importance for investors who have already bought into the Zimbabwean market and those thinking about it.

The IMF and the mid-term review of Zimbabwe Finance Minister Tendai Biti incline to caution. Yet local companies are much more upbeat, according to an assessment from Imara Asset Management Zimbabwe, a subsidiary of the Pan-African Imara financial services group.

Imara has given a lead with investment facilitation into Zimbabwe and provides regular updates to international investors.

In his latest analysis, John Legat, Chief Executive of Imara Asset Management Zimbabwe, notes: "We find it hard to understand why both the IMF and government are being as cautious as they are... Their views give a rather sobering view of the economy rather than an upbeat and exciting outlook for a country barely in its second year of reform."

The IMF believes Zimbabwe has an economy worth just over US$5 billion, though it admits supporting data has "serious shortcomings".

Legat thinks the IMF arithmetic does not add up and uses the neighbouring Zambian economy – worth US$14 billion – as a yardstick. The countries have populations of a similar size, but until its 'lost decade' Zimbabwe's economy was about 50% bigger.

Zimbabwe's agriculture, tourism and manufacturing sectors gave it the edge over its copper-rich neighbour. By some measures, Zimbabwe still outdoes its neighbour.

Zambia's two major breweries sold US$230 million worth of beverages last year while sales at Zimbabwe's Delta brewery totaled $324 million.

In 2010 Zimbabwe's Econet mobile phone service expects sales of about US$500 million while Zambians are expected to spend about US$280 million with Zain, their major network provider.

Significant Zimbabwean spending power is also indicated by food purchases from the Innscor fast foods business, Colcom, National Foods and the Spar retail chain. Imara estimates sales here at over US$1.1 billion a year.

Legat adds: "According to the IMF and government, Zimbabwe's gross national product per capita is US$450, which compares with Zambia at US$1,200 per head. Spending patterns in both countries suggest the opposite!"

Zimbabwean exports also appear buoyant.

Government's mid-term review estimated the half-year value of platinum, ferrochrome and gold shipments at US$550 million, suggesting that full-year shipments would run to US$1.2 billion – though Legat expects the figure to be higher.

He believes agricultural exports could top US$1 billion.

He adds: "Excluding manufacturing and tourism, exports from agriculture and mining might top $2.3 billion or higher in 2010. That's a bigger number than the IMF forecast that includes manufacturing exports."

Zimbabwe's mid-term review indicated that half-yearly tax revenues were 12% above target, VAT receipts were 9% above budget and PAYE was 22% higher than projected. Corporation tax was 54% above target.

Yet the mid-term review reduced government's economic growth forecast from 7% to 5.4% while the IMF revised its down to 2.2%.

"We remain unconvinced." Says Legat, "and further don't believe the underlying number used for the economy – US$5 billion – is correct.

"In last year's December budget, the Government revised up the size of the economy from $3.5 billion to $5.1 billion ... We would not be surprised to see a similar re-rating in future."

Imara stands by its 2009 assessment that Zimbabwe's formal economy is worth $8 billion to $10 billion.

Says Legat: "That makes the current stock market capitalisation of $3.0 billion look very cheap... The Zim economy is pumping!"
billion – is correct.

"In last year's December budget, the Government revised up the size of the economy from $3.5 billion to $5.1 billion ... We would not be surprised to see a similar re-rating in future."

Imara stands by its 2009 assessment that Zimbabwe's formal economy is worth $8 billion to $10 billion.

Says Legat: "That makes the current stock market capitalisation of $3.0 billion look very cheap... The Zim economy is pumping!"

World Cup winners will hit savings goals

noreply@blogger.com (Blog Administrator) — Mon, 14 Jun 2010 10:18:00 +0000

Real winners over the World Cup period will continue to hit savings goals rather than splurge on unnecessary items and jeopardise two years of good defensive work.

The call to 'keep your eye on the savings ball' comes from Mark Cunningham, head of financial planning at Imara Asset Management,
South Africa.

He loves the World Cup buzz, but warns that losing discipline now might be unwise for families that have been under pressure from high levels of debt.

"Macro economic indicators look good," says Cunningham, "but many families are only now beginning to get on top of credit-card debt and other obligations.

"Now's not the time to score an own-goal by renewed recourse to credit –
even though some financial institutions are today happy to loosen the tight
controls they've applied for the last two years.

"We advise clients from middle income groups and those with relatively high net worth and know that many families have reviewed their lifestyles and started to save because of the dramatic wake-up call they received during the financial crisis. In World Cup year and every other year, we advise clients to keep their eyes on long-term goals."

To highlight the consequences of a little backsliding, Cunningham considered an item of discretionary spending related to the World Cup – a R10 000 plasma TV. He looked at the real cost and then examined a sensible savings-based alternative.

His calculations showed:
R10 000 spent on a plasma TV, paid off over 12 months at 17%, would add
R900 to a family's monthly outgoings. Total cost would be R10 790. If the TV was paid off over four years, the monthly instalment falls to R285, but the total cost rises to R13 657.

By comparison, R900 invested for 12 months, assuming 10% growth, would
grow to R11 300 at the end of the first year.

Left to grow, without adding any contributions, the investment would be worth R18 592 after five years, R30 590 after 10 years, and R82 809 after 20 years.

If R284 (the approximate monthly instalment over four years) was put away each month for 20 years, the future value would be R217 458 after 20 years, at 10% growth.

"The scoreboard's clear enough," says Cunningham. "Splurge and buy that
fancy TV over four years and you'll be nearly R14 000 out of pocket. Save the R900 each month for a year, and at the end of five years you will have
R19 000 to play with. Any football fan would applaud a great save like that!"

Indigenisation Regulations: A Smokescreen or a Reality?

noreply@blogger.com (Blog Administrator) — Fri, 19 Mar 2010 11:51:00 +0000

February proved to be a very disappointing month with the Zimbabwe Stock Exchange Industrials index falling by 10% wiping out the gains of 2010 to date. We have not experienced such a fall since the last days of hyperinflation in January 2009. The culprit was once again politics. Out of the blue, to the surprise of the Prime Minister and his team and to the entire business community, the “government” gazetted the regulations that accompany the Indigenisation and Empowerment Act that was passed by Parliament back in 2007. The Prime Minister immediately declared it null and void as it had not been agreed by the current Cabinet, the Council of Ministers or himself, but of course by then it was too late, it was law. This needless to say rattled any buyers of the stock market and encouraged profit taking. The law itself requires that all companies should be 51% owned by “indigenous” Zimbabweans, the definition being those that were disadvantaged prior to Independence in 1980. The regulations and the law are inconsistent in a number of areas, and non binding in others. Whilst the lawyers could have a field day in the courts, the real issue is that political hard liners can use the Act when it pleases them, and especially in the run up to an election, whenever that may be.

To introduce such regulations thirty years after Independence may seem odd to a foreign investor especially as during that time, the economy has largely become indigenized on its own accord. Listed companies are barely affected as their major shareholders are local pension funds and individuals. Further, to introduce such a law now, at a time when the country has held numerous investment conferences promoting the country to foreign investors, makes little sense.

One can only speculate as to the real reasons for the gazetting of the regulations. Back in December, the UK’s Daily Telegraph exposed Nestle Zimbabwe as a buyer of milk from the farm belonging to the First Family. The pressure was so intense that Nestle in Switzerland instructed their local subsidiary to stop the milk purchases. This was red rag to a bull and no doubt reminded the hard liners that they had an instrument that could be used against such action. Other non-listed foreign multinationals apart from Nestle include Unilever, P&G, Standard Chartered Bank and Stanbic Bank. But Nestle will be the one to watch. The others we suspect will either list themselves on the local stock exchange or make another plan that can be agreed with the Minister responsible for Indigenisation. That assumes of course, that the current regulations stand as they are. Current negotiations between the Prime Minister and other interested parties suggest that they may be watered down, or even used as a bargaining tool for the removal of travel bans on certain members of Government and the armed forces. Very recent discussions with a variety of management from different industries, suggest that the Indigenisation Regulations are already being redrafted so we look forward to early clarity in this regard. For sadly the immediate effect of the announcement has been to put multiple domestic and foreign investments on hold until the picture becomes clearer, ironically to the detriment of the indigenous Zimbabwean.

If it wasn’t Nestle that was at the heart of the matter, it could be a classic political diversionary tactic. For also to occur in February were the gazetting of the Chairpersons and Committees for the new Electoral, Human Rights and Media Commissions. This effectively creates a more level playing field for the main political parties in key areas and especially in the run up to any election. Needless to say, this news received little publicity locally or internationally, as “indigenization” became the buzz word around town. A further newsworthy item was the agreement between the UNDP and the Management of the Constitutional Reform process which effectively has set the terms of reference and provided the funds to draw up a new Constitution that will be the basis for elections in 2011 in all likelihood. Finally, and from an economic perspective, the IMF restored Zimbabwe’s voting rights, a symbolic but also significant development.

Also of interest in February was the State Visit to the UK by President Zuma which largely seemed to focus on his marital affairs, Zimbabwe and football. On Zimbabwe, Zuma made it clear that he felt that “sanctions” (travel bans) on certain members of the Government was likely to provoke those people to use sanctions as an excuse to stall the fulfillment of the Global Political Agreement. We agree and the fact that he said it in public is important. As the chief negotiator between Zanu and MDC he wants to see any excuses squashed. But it also allows him to negotiate between the US/EU and Zimbabwe. No agreement - sanctions remain, versus remove sanctions and you have an agreement. The same day the BBC reported that President Mugabe had said that he would rather negotiate with a Conservative government than a Labour one, again potentially opening up the possibility for negotiations. Zuma has since travelled to Zimbabwe to meet the key negotiators. Whilst details have yet to emerge, Zuma has stated that all outstanding issues should be completed by the end of this month based on his discussions with the key players. Another positive.

Meanwhile back at the coal face where we prefer to reside, we have had some good news coming out of the companies who are taking advantage of the new and improved economic environment. Impala Platinum in SA gave an upbeat presentation on Zimplats and their forthcoming capex plans. Zimplats will be key to Impala going forwards. Angloplats also announced that they would be pressing the button on their further expansion plans suggesting that both companies are satisfied with the soon to be announced Minerals and Mining Act. Also from SA Tongaat Hullet, the sugar group, spoke of their Zim operations which they are currently rejuvenating and working with government to assist indigenous out growers (this also counts as “points” toward the Indigenisation Act). Locally Delta is investing in another new bottling line, ramping up production and expanding margins. Their year end is March and our forecast for March 2011 based on volume and margin growth puts them on 5x, which could be conservative. Innscor also reported upbeat earnings and announced an interim dividend. They too have seen an excellent few months as consumer demand has increased. Truworths, the clothes retailer, reported an excellent set of figures that puts the company on 6x June 2010 earnings. All of these businesses are coming from a low base; only one year ago the formal sector was all but finished.

Agriculturally, the tobacco floors have opened early with good prices achieved so far. The crop is expected to nearly double this year as more commercial farmers return to utilize the lands. The seed maize crop is expected to triple. With rural farmers now being paid in US dollars for their cotton, maize and tobacco, we suspect that disposable incomes in these areas could be significant, especially as the cost of living is negligible relative to the cities where rents, transport and utilities eats away discretionary spending power.

We therefore urge investors to talk to company management and the farmers to find out what they are thinking and doing and to downplay the media and the politicians. This makes the market a great buying opportunity in our view and one of the more exciting in Africa, even if the ride can occasionally be a bumpy one.

Emerging US interest in African markets – Imara

noreply@blogger.com (Blog Administrator) — Thu, 10 Dec 2009 09:28:00 +0000

AFRICA may have been forgotten by international investors since the equity recovery began ... but not for long. Expect a big uptick in investor interest in the coming weeks, with especially strong interest in Zimbabwe and Nigeria.

That's the word from the Botswana-registered Imara financial services group after its annual 'show-and-tell' safari to America.

Imara manages a suite of African equity investment funds and maintains an extensive Africa-based equity research capability. Every year, the group takes a fourth-quarter roadshow to major international centres and recently returned from the trek to the USA, where Imara executives encountered positive interest among professional investors.

Imara group CEO Mark Tunmer noted: "On average, equity values have doubled in emerging markets – except for Africa – since markets began to revive in March. It's starting to look like full value has been achieved elsewhere, which may explain the response.

"US investors had very few questions about North Africa or South Africa. Their interest was on all the markets in between, with Zimbabwe and Nigeria coming in for closest scrutiny.

"African markets have not shared in the general upward trend seen in other emerging markets. Yet the news out of Africa is generally good. Corporate earnings are strong. Recessionary pressures have not had nearly the same impact as elsewhere. Yet equity values have remained low – suggesting decent value opportunities for international investors."

Imara presented its African investment data, interpretations and projections to audiences in New York, Boston, Providence (Rhode Island), Washington, Philadelphia and Chicago.

For the third year running, the team was invited to New York's Columbia University to address MBA students on African opportunities and challenges.

Tunmer added: "Zimbabwe is interesting to Americans because the economy was assumed to have been ruined beyond repair by the country's lost decade. Yet dollarisation and the first stirrings of reform immediately triggered a big upsurge in economic activity – indicating that huge potential can be unlocked, even by quite limited initiatives.

"In Nigeria, the focus is on banking. They have had their banking crisis, forced banks to write-off non-performing loans and insisted that all banks now adopt the same financial year. Banking sector values have been in freefall, but a bottom seems to have been reached.

"Simultaneously, oil prices are back up again, with positive spin-off for numerous sectors in Nigeria – yet equity prices have been slow to revive. Again, the value opportunity is substantial."

A reassuring factor is the source of emerging interest in the last emerging markets to revive. Those making inquiries tend to be strategic players rather than fund managers known for tactical forays.

"Representatives of university endowment funds and foundations tend to take a long view," said Tunmer, "and these were among the most interested in the African opportunity. This is very encouraging."

Dollarisation and the case for Unbundling

noreply@blogger.com (Blog Administrator) — Tue, 01 Dec 2009 15:51:00 +0000

The only positive aspect of hyperinflation (if that is possible) is that if you, as a corporate executive, made the wrong business decision, rising prices would soon conceal that error. In the era of dollarization, that ‘get out of jail’ card has disappeared. Indeed in many industries, competition is leading to deflation making the task of management that much tougher. Further, businesses that suffered from stock theft during hyperinflation could also hide the problem. Once again dollarisation exposes such inefficiencies quickly. That stated, doing business operationally has become considerably easier under dollarization than before as we are learning from management reports and contacts. That implies that good management will quickly spot any inefficiencies in their business models and take appropriate action.

Indeed there will be many business models in Zimbabwe today that simply do not work in the new dollarized and competitive environment, but which managed to get by in a less competitive and inflationary environment. Such companies could well be those whose models were built on import substitution products. Such businesses need to be closed or remodeled so that they have a comparative advantage in the new environment.

Looking at the listed companies in Zimbabwe, there are a number of companies that are in effect holding companies of various different operations. Often there may be little synergy or correlation between each business largely because the structure of the group was a product of history, driven by former mergers or driven by economic imperatives. In Zimbabwe exchange controls and a lack of foreign exchange were such imperatives. A recent example would be Delta which acquired a controlling stake in Ariston in order to access much needed foreign exchange for their beverage operations. Now that the country has dollarised, there is no longer any need for Delta to own such a business and hence Delta management have rightly chosen to sell the company and utilize the proceeds for capital investment in their core business.

We believe that there is huge scope amongst the listed companies to undertake such restructurings especially given the need for capital and skills. One such mechanism is to issue shares in a subsidiary of the listed vehicle to a technical partner that has the capital and the skills. PGI undertook such an operation a few years back when it sold 40% of Manica Board to Steinhoff. The PG Board correctly took the view that PG’s strengths were in merchandising and distribution rather than in manufacturing. Should capital be required in Manica going forwards, a rights issue can be held at that level, which may or may not be supported by PGI itself. A similar option remains for them in PG Glass where capital could be extracted for the core merchandising business by bringing in a technical partner.

Where there is little or no synergy between the subsidiaries of a company, it makes sense to “unbundle” them. This is a great method to adopt should the major shareholders wish to remain invested in both businesses, whilst allowing the management of the ‘parent’ company to focus on the core business of the group. It further allows the management of the ‘spun off’ division to act independently. One of the largest examples of an unbundling internationally was in March 2007 when the US cigarette maker and food group Altria, unbundled their food division, Kraft in which they held 89%. A year later, Altria then spun off Philip Morris International which held the group’s global cigarette operations outside of the US. The original shareholders of Altria then owned a listed share in Philip Morris International, a listed share in Kraft and the remaining assets of Altria (being US cigarette operations and a 30% stake in SAB Miller). This had the effect of increasing shareholder value as the value of the three separately listed companies became more valuable than the original combined one. Kraft is currently bidding for chocolate maker Cadbury in the UK, since they can now raise capital by issuing shares, something that was not possible as part of Altria.

In Zimbabwe there are many opportunities for Group companies to unbundle a division (or divisions) that has little synergy with the core business of the group. One such way would be to issue the shares in that division to the shareholders of the main group in the form of a dividend in specie. That division could then be separately listed on the Stock Exchange so that the original shareholders can then decide whether they wish to retain or dispose of the division. Again, Delta did as much in 1990s when it spun out Pelhams, OK and ZimSun. Further, the management of that newly independent division can then act independently with regards seeking a technical partner or indeed look to make further acquisitions, as Kraft are doing with Cadbury. Such a strategy more often than not increases overall shareholder value, and especially if it is done in a tax efficient manner. It also serves to further deepen the Stock Market by adding a new listed company, that itself encourages trading activity and new investors.

Most Zimbabwean companies today require capital, either for working capital purposes or for long term capital investment. It makes little sense to shareholders for their management to issue shares for short term working capital needs, and one would hope that the boards of directors of companies, who represent the shareholders, understand these issues. Rather try to borrow or issue commercial paper (if its cheaper) or even a convertible bond instrument.

For long term capital, capital is available in the form of equity for listed vehicles, from existing shareholders and from new shareholders assuming the project makes sense financially. In addition private equity is available at a divisional level, which may or may not be in the form of a strategic partner as discussed above, or from foreign private equity investors. Imara has access to the necessary capital if the investment makes sense. Capital can also of course be raised by selling businesses or divisions which no longer fit the group business model as Delta has done with Ariston.

There is no doubt that shareholders will need to accept dilution if their businesses are to grow significantly from current levels through capital expansion. Rather have a smaller share of a much bigger pie!

John Legat

Chief Excecutive, Imara Asset Management