Liquidity crisis bites local firms

raise for working capital.
Recently, regional mining group Mwana Africa said the company was considering a number of options to finance the restart of production at Bindura Nickel Corporation, including debt.
However, this exhibits the scarcity of cash on the market, locally and regionally, posing a serious threat to local industry that requires an estimated US$8 billion to operate at optimum levels.
Investment inflow to Zimbabwe since 2009 has not changed much either and further straining all sectors of the country’s economy.
If big companies such as Mwana Africa are struggling to find cash it means smaller companies, some listed on the Zimbabwe Stock Exchange, might never be able to raise meaningful funds for recapitalisation.
RioZim also has plans to raise US$40 million through a rights offer for a number of projects and expansion of existing operations.
There is also an indication that if companies fail to raise funds, our local market will soon experience a number of mergers and acquisitions.
Probably, this is what is needed if one is looking at some of the companies listed on the local bourse with very little values of less than US$1 million.
Last week, another Zimbabwe-focused investment company, Masawara, indicated plans to raise US$23,5 million via a share placement, which awaits shareholder approval at a May 9 general meeting.
This is going to be another litmus test – as one of the biggest investment companies goes on the market to look for the scarce commodity.
Meanwhile, Masawara announced a proposal to place 24 102 564 new ordinary shares at a price of 97,5 cents per share raising approximately US$23,5 million (£14,5 million) before expenses. The company said the funds would be used in a proposed acquisition of an interest in a chrome mining and smelting operation in the country.
The operation also has extensive mining claims in Zimbabwe, predominantly in the chrome belt, and it is intended to surface mine viable claims.
Masawara says the total investment is not expected to exceed US$12,1 million.
The investment vehicle also said part of the funds would be used to increase its interest in its already existing investments and drive value enhancing restructuring and re-organisation strategies within these projects.
Masawara said its recent Internet Service Provider acquisition, Terelix Communications, intended to expand its services in accordance with this licence, to include the wholesaling of international bandwidth to corporate customers and other Internet service providers in Zimbabwe. It also plans to establish fixed, nomadic and ultimately fully mobile broadband services via fibre optic and WiMAX network architecture.
In January, the group acquired 50 percent of Terelix, which holds a licence to construct, operate, develop and maintain a public data Internet access and Voice over Internet Protocol (VoIP) network in Zimbabwe.
In addition, Terelix has a 20-year capacity purchase agreement with a local long distance dark fibre operator, to connect in Mutare its network operations centre in Harare to the SEACOM East African fibre optic cable that terminates on the Mozambique side of the Forbes Border Post
Telerix also plans the rollout of a Fourth Generation (“4G”) network to provide a “last mile” solution for Internet customers initially in Harare and then to other main centres in the country.
In its results for the year to December, Masawara recorded a loss of US$2,2 million.
The company said its performance was adversely affected by the imputing of interest on shareholders’ loans that were capitalised prior to listing, along with a poor performance by its associate company, TA Holdings.
Last month Masawara successfully completed the acquisition of BP Zimbabwe (Pvt) Ltd and Shell Zimbabwe (Pvt) Ltd.
Collectively, BP Zimbabwe and Shell Zimbabwe own some of the largest petroleum product infrastructure in the country, with one of the widest distribution networks comprising in excess of 70 retail sites and 10 depots.
The acquisition was financed through a combination of internal cash reserves and third party structured funding arrangements.
Masawara will hold an effective economic interest of 51 percent.
With the underlying infrastructure of BP Zimbabwe and Shell Zimbabwe remaining largely intact, the directors believe that a significant recovery in the underlying businesses is achievable in the short term, and the acquisition will provide considerable additional value to Masawara shareholders as the business regains its leading position.
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