Innovative strategies key for companies to raise capital

TRADITIONAL methods of raising capital have their place, but in today’s dynamic landscape, companies need to embrace innovative strategies, unlock new opportunities and efficiently raise the capital needed to fuel their growth and success, analysts have said.

Several companies have been considering various capital-raising options that include disposing of assets, while some Zimbabwe Stock Exchange (ZSE)-listed companies have migrated to the US dollar-indexed Victoria Falls Stock Exchange (VFEX).

While the exchange offers incentives and trades in a stable currency, among the major reasons why companies migrated their shares was the ability to raise capital in hard currency and exposure to offshore investors.

Caledonia Mining Corporation raised US$5 million from VFEX, while Karo Holdings raised US$36.8 million through the USD-denominated structured debt instrument that was successfully listed on VFEX.

Investment and Business Affairs Consultant, Malvin Chidzonga, told Business Weekly that there are several innovative strategies that companies need to consider.

“For instance, partnering with larger companies can provide access to their resources, customer base and credibility, opening new funding avenues, while joint ventures and co-creation initiatives can also be mutually beneficial,” he said.

He added that building strong relationships with customers and local communities can lead to crowdfunding campaigns with deep engagement and loyalty, turning customers or clients into investors or shareholders.

“Building an active and engaged online or social media presence can also attract potential investors, generate interest and promote crowdfunding campaigns organically with less cost and minimal effort, especially by leveraging influencers in society,” said Chidzonga.

Listed brick manufacturer, Willdale Limited, recently said it is still negotiating for the disposal of certain idle assets to raise funds for capital expenditure.

In 2017, the company disposed of part of its land for US$11 million, with the proceeds utilised towards servicing of debt and settling preference share obligations.

The 190,1 hectares of idle land formed part of Swanwick, Teneriffe, and Kinavarra, and the land is located in Mount Hampden, adjacent to the land currently being utilised by the company. Chidzonga said that by embracing innovation and exploring unconventional options, companies can unlock new opportunities and efficiently raise the capital needed to fuel their growth and success.

“Regardless of the strategy, the core principle remains the same for both innovative and traditional ways to raise capital: the need to demonstrate a clear value proposition with strong market potential and a viable path to profitability,” he said.

Companies have also been scouting for investments in solar plants to offset the impact of load shedding. Investments in power are capital-intensive and hence require different sources of capital.

Investment analyst Enock Rukarwa, said efficiently raising capital is crucial for companies looking to fuel growth, undertake new projects, or navigate challenging economic conditions.

He said one of the innovative ways of raising funding without invoking the traditional vanilla bond or equity is through strategic partnerships with other corporations in the industry.

“This can involve joint ventures, collaborations, or co-development agreements, which bring in capital along with additional resources and expertise capabilities,” he said.

He noted that the VFEX platform continues to be a strategic market for capital raising, especially at a time when dollarisation penetration is northward of 85 percent transaction-wise.

“On the backdrop of increased dollarisation in the economy, listing arbitrage opportunities between ZSE and VFEX have reduced. For example, ZSE-listed companies can now publish financial statements in USD and also pay dividends in local currency,” said Rukarwa.

Economist Vince Musewe, said it is key for

companies to be able to convince long-term investors to come into the country and invest.

However, he said the current political landscape does not give any kind of certainty for foreign investors to come into Zimbabwe and make long-term commitments.

“This poses a serious problem for companies that may want to attract a foreign investor to come, and also, typically, the Zimbabwean banking sector has not had a venture capitalist attitude; it’s more like traditional banking.

“It is difficult for new innovative kinds of companies to come aboard. We need to seriously consider venture capital for the stock exchange, where small companies can go and get capital to fund startups,” he said.

Musewe noted that funding platforms in Zimbabwe are very narrow, making it difficult for entrepreneurs to access long-term capital, while banks are not willing to lend long-term as they are not sure what policy changes could come in the short to medium term.