Afre remains a walking textbook of pathology

Post Timba, most shareholders are quite concerned on whether it won’t be a typical Apple after Steve Jobs.
From the formative years of the Silicon Valley giant in the mid 1970s up to 1997, a tumultuous relationship existed between the then Apple boardroom and the founder.

This saw Jobs being pushed out due to what was alleged to be incompetence. The major highlights of his comeback included his transformation to Buddhism, the 4 000 percent share increase from Apple between 2001 up to date and the unprecedented success of the group’s products that included the ipod, iphone, itune and the ipad. Tim Cook just took over the reins from being a typical sidekick of Steve Jobs and who knows the next iwhat?
The departure of Patterson Timba following his failure to pay US$12 million to Jayesh Shah marked the turning point for the once rated deal-maker in Zimbabwe’s financial service sector.

Whether the empire can still hold onto their 65 percent stake in Pearl remains a mystery. It is certainly a do or die situation, for if their shareholding in the property concern crumbles, it will spell doom for the supposed shareholders. That his shadow is still significant at the Borrowdale domiciled conglomerate is certainly not in doubt.
What is facing a micro financial Amargedon is a one-stop financial service shop with cross selling opportunities. This was expected to create both marketing and financial economies of scale but it became a pathological condition that needs intensive care without any central bank assistance.

The recent action by the Zimbabwe Stock Exchange to block a shareholder’s meeting at the financial service concern is a welcome move. The prevailing boardroom morphology at Afre does not inspire in any way. The market strongly believes it is the same board which could have been aware of the irregularities which exposed the banking arm following a series of sub-optimal market moves to conceal the undercapitalised state of the group’s flagship.

Mr Nyambirai is not expected to seek an order for an urgent meeting to raise capital when the same shareholders were oblivious to the accounting gymnastics at group level. It might not be the right time to table an offer for a rights issue without a convincing proposal on the new capital structure. The new chairman’s language must not be an extension of Econet’s strategic policy to preserve their Eco-life interest but rather the philosophy of Afre as a stand-alone.

Problems at Afre might be deeper than what audited financial statements claim. The ephemeral resignation of Rachel Kupara, a successor to Timba just after the latter’s resignation must have sent adequate tremors before the real quake is calibrated.
The full year results for last year saw the balance sheet sitting at US$144 million, short-term loans at US$40 million and net premium earned above US$46,5 million. The cost to income ratio was at an unhealthy 86,5 percent with the net asset value at US26,9 cents.

Notwithstanding the rumoured default to honour the loan, the financials were generally a reflection of what an average Zimbabwean company was facing. This leaves all the concerned stakeholders with a question on whether other listed concerns are free of the same “economic crime” which Patterson Timba got entangled in or not.
Requirements for listing on the ZSE – a company must offer to the public a minimum of 10 million shares with a value not less than US$50 million, at least 30 percent of the issued equity capital for which a quotation is being sought must be offered to the public. There must be a comprehensive document detailing the share capital structure, loan capital and the borrowing powers of the company.

With such well laid out requirements, it ponders the mind to know how an individual would have a controlling stake which approaches 80 percent when a 25 percent ceiling is what is legally expected of an individual investor in a banking institution.
It might be due to such double standards that bad blood seems to exist between the Securities Exchange Commission and the Zimbabwe Stock Exchange. This is definitely the most awe inspiring SOS for shareholders, that is the postponement of the shareholder’s meetings. Mr Nyambirai and his team representing Econet’s interests cannot be allowed to unilaterally proceed with already ailing procedures of shareholder affairs.

It is indeed significant to see transparency in solving the Afre case, as it is one of the most significant players in the Zimbabwean market. The relationship with RTG cannot be discounted and the ever-strained relations with British tycoon Nick van Hoogstraten remains a thorn in the flesh. RTG’s desperate need to raise US$5 million through a rights issue resonates with events at Afre that also believes approaching the shareholders for their excesses is the solution.

Let the house be in order and then a shareholder s meeting can be reconvened, we can’t experience another Hwange AGM, it is too soon.
Thank you and God bless you.