Surface Wilmar eyes Cottco
SURFACE Wilmar Group Zimbabwe is set to acquire a 50 percent stake in the Cotton Company of Zimbabwe (Cottco) and has plans to immediately invest $100 million in the agro -industrial firm.
Surface is a joint venture between the Singapore head-quartered agribusiness group, Wilmar and Midex Global of India.
The group currently owns a 49 percent stake in Olivine Industries, which it bought from Cotton Holdings Limited (formerly AICO Holdings) in 2015.
Cotton Holdings is the parent company of Cottco.
Surface Wilmar chief executive officer Sylvester Mangani, told the Parliamentary Portfolio Committee on Agriculture that the group would be seeking management control of Cottco in respect of the proposed acquisition.
“We are proposing to be an equity partner in Cottco, which means we will become part of Cottco itself, but with management control. Cottco will be the one selling the crop helping the farmers, but we will be part of that with a 50 percent equity in it. This is the nature of our proposal.
“We have asked for management control, so that at least we are controlling the issues that are affecting the performance of the company,” he said.
“Creating new infrastructure in a country where there is no cotton crop will not be a judicious decision. Today if we start afresh to create seven ginneries, 30 buying points infrastructure, extension officers it will not be the right solution for the country or the company. When the infrastructure is there but is not being run professionally, we can put it back together. For instance, when we acquired Olivine Industries we had a very easy turnaround,” said Surface Wilmar chairman Norattam Somani.
According to Surface, there is no joint venture agreement that has been agreed with Cottco.
“We have made a preliminary proposal to takeover Cottco. We will have to do a due diligence on Cottco and at the moment we have no access to the books of Cottco so we cannot comment on their debt,” said Mr Mangani.
“If there are debts in Cottco, we are proposing that the debt be nested in ZAMCO (Zimbabwe Asset Management Company). This allows for fresh capital to be used to resuscitate the company. One way of using the money that we will inject is to pay the creditors, but if you do that you won’t have enough money to develop the company.
“So our proposal is to ring - fence whatever debts there are, then all this $100 million new capital that we are proposing to put in can then be used to start building up the infrastructure for Cottco to be viable.”
Surface Wilmar is one of the largest cooking oil refinery companies in Zimbabwe, utilising soya beans and cotton seeds for its cooking oils, soaps and oil refinery by-products.
The propositioned acquisition of Cottco appears to be aimed at securing its key raw materials.
Cottco is a ginner and marketer of cotton and is involved in cotton production and sales, including the provision of agronomic advisory services, and production and merchandising of planting seed.
Cottco has over 20 outlets in cotton producing areas, with ginneries located in Chiredzi, Chinhoyi, Gokwe, Kadoma and Muzarabani.
According to Mr Somani, last year Surface Wilmar secured a $10 million local bank guarantee for Cottco for the supply of 50 000 tonnes of cotton seed, which has been rolled over to the current season after Cottco failed to supply the agreed upon amount of seed.
“We gave a bank guarantee for $10 million with an understanding that whatever they supply that will be paid immediately to them. The total seed supply that came from them was short by 9 600 tonnes approximately amounting to around $2, 5 million,” said Mr Somani.