‘I’ve no regrets over leaving Dawn’

from South Africa and the future of the company in view of its alleged “frosty” relationship with its major Zimbabwean landlord, Dawn Properties.
Question: Why is African Sun pulling out of South Africa?
Answer: Post-World Cup we have realised that supply of rooms in South Africa has exceeded demand coupled with the world recession and strengthening of the rand against major currencies. Of our seven properties we currently operate under management contract or leases, the ones in South Africa have been making losses and we don’t think the situation will improve in the next three years. This leaves the other five hotels in Nigeria and Ghana which are all under management contract, self-sustaining and profitable.

Question: Do you always have to close every hotel that is not making money?
Answer: No, not at all. We must look at the hotel’s full cycle and its ability to give us our targeted return over the period we are operating it. Only when we assess and deduce that the market conditions will not provide us the needed return do we exit from the agreement or if we find ourselves funding the operations, particularly in a lease arrangement over a protracted period as in the instance of the two hotels in South Africa. Both we and the landlords felt that there was need to reposition the hotels in order to match the change in the market so they can compete at a different level.

Question: What is the implication of this withdrawal on African Sun’s regional or continental expansion plans?
Answer 3: As has been highlighted in our half-year results that we are to open another 231 rooms before the end of the year, this continues as planned. We have since opened the Best Western Homeville in Benin City in Nigeria. The next opening is Holiday Inn, Gaborone, which is due to open by November in Botswana.
We also have a 201-room Amber Express Hotel in Accra, Ghana, under construction which is scheduled to open in the next 24 months.
Our business model should hedge us against market fluctuations in a particular market like what has happened in South Africa or even in Zimbabwe during the hyperinflation. We must therefore never depend on one market for profitability and viability because of the nature of our business which is very fickle to political and economic trends. You will see that this is the trend with all major hotel groups in the world and here in Zimbabwe all the major hotel groups now have operations outside Zimbabwe.
We therefore continue to look at management contracts in sub-Saharan African markets in line with our business model.

Question: This comes at a time when you have left the Dawn Properties board, which is an anchor landlord for your business? How do you see the future of your local operations as the two have traditionally been tied together?
Answer: One of the conditions for the listing of Dawn, which is of public knowledge, is that it must diversify its property portfolio from the current hospitality portfolio to other property sectors. This has been difficult during the hyperinflation era and it appears now is the time for them to deal with this.
However, Dawn’s fortunes are tied in with the performance of the tourism sector as well as the tenancy. African Sun is ready to co-operate with Dawn’s strategy because it also works in favour of African Sun particularly where the properties are not giving a good return to both entities.
This is also to the benefit of African Sun as the major shareholder in Dawn. African Sun has three other landlords in our hotel portfolio in Zimbabwe and we do not sit on their boards. It is the manner in which Dawn was conceived which resulted in my sitting on the board as one of the founding members.

Question: What then is your connection to Dawn and how do you view your departure?
Answer: My connection with Dawn goes back to 2002 when I took over the reins at the then Zimbabwe Sun and the dream I had was to unlock value by separating the properties from the operating business as is the trend worldwide. This resulted in the listing of the first property company on the Zimbabwe Stock Exchange in 2003, now Dawn Properties, through a dividend in specie.
My desire is to see Dawn give superior return to its shareholders by increasing and diversifying its portfolio.
My departure from Dawn was at my own volition after assessing that since I was one of the founding board members it was imperative that new board members be appointed as part of board renewal and injection of new ideas.
The other reason is that with the change in Dawn’s strategy, it was going to be difficult for me to sit on the board when discussions of tenancy were taking a different strategic direction. This also allows better corporate governance and an arm’s length relationship between African Sun and Dawn.
I have no regrets over leaving Dawn since this was my baby and vision and now needs to find its own new level without me on the board.

Question: While you talk about good corporate governance, it is said that you unsuccessfully attempted to register a bond on the Crowne Plaza Monomotapa Hotel for the IDC loan without Dawn board approval? Could you comment?
Answer: That is not true and I believe that it is malicious in its intent to say this because both Dawn and African Sun boards are aware of the facts regarding this matter. It is important to note that registration of a mortgage bond is done by authorised signatories of the company with a valid power of attorney otherwise the registration is illegal and fraudulent.
The registration of the said bond was done through the authorised signatories of Dawn and followed due internal processes which I was not part of as a non-executive director. Had it been proven fact that I had done so, it would have been deemed illegal and fraudulent.
It is imperative to note that the board had approved the support of the IDC loan to African Sun, and that is why the support was expressed in the Dawn 2010 Annual Report as well as in the agenda to the shareholders for approval.