Masawara pins hope on Uganda
MASAWARA, a Zimbabwe-focused investment outfit, is banking on timeous disposal of its holding in Ugandan insurance firm, Lion Assurance Company, to defray its US$11 million longterm debt, part of which is due on August 18.
The acquisitive group — which has a sprawling empire that covers hospitality, property, agrochemicals and information communication technology — plans to use part of the US$5,7 million from LAC to repay US$1,1 million in the next 12 days and “early settle a significant portion of the same loan which matures in February 2018”.
Masawara has a 87,4 percent stake in LAC after shoring up its shareholding from 32,4 percent on January 24, 2016.
Foreign currency shortages, driven by under-performing exports, weak FDI and a disproportionately high import bill, are making it increasingly difficult for businesses to make overseas payments.
The Reserve Bank of Zimbabwe has had to ration foreign currency through Exchange Control Operational Guide 8, which ranks foreign payments based on the central bank’s prioritisation criteria.
“As a consequence of these controls over foreign payments, the group is reliant on cash inflows from outside of Zimbabwe to meet certain non-Zimbabwean liabilities.
“There is therefore material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern,” said Masawara in a recent statement accompanying its yearend financials to December 31, 2016.
About US$15 million held in cash and equivalents is presently trapped in Zimbabwe.
The group, as a result, has had to resort to proceeds from the disposal of its shareholding in the Ugandan business to meet its obligations.
An agreement on the sale of the unit was entered into on May 22, 2017.
Though the money from LAC was expected by Monday last week, there were fears delays in getting regulatory approvals could lead to default.
“The timing of the receipt of the regulatory approvals will have an effect on the timing of the receipt of the sales proceeds that will be utilised to settle the Group’s longterm loan facility.
“The Group is reliant on outside Zimbabwe cash flows to extinguish this facility due to the uncertainty of the timing of dividend remittances from Zimbabwe,” added the company.
Masawara’s long-term loan — which attracts interest of 10 percent and has declined to US$6,6 million from US$11 million in 2015 — is secured by Masawara Zimbabwe (Private) Limited’s shareholding in Melville Investments (Private) Limited, including Masawara’s shareholdings in TA Holdings, Masawara Investments Mauritius Limited, Masawara Hospitality Mauritius Limited and Masawara Industries Mauritius Limited.
TA Holdings, wholly owned by Masawara, has controlling interests in Sable Chemicals, ZFC Limited, the Cresta hospitality group, Sovereign Health and Zimnat Asset Management.
This adds to an established portfolio in the insurance industry which includes Zimnat Life, Zimnat Lion Insurance, Grand Reinsurance and Minerva Risk Advisors.
Market watchers say the illiquidity of Zimbabwe’s equity and capital markets could affect valuation of the group’s investment portfolio in the short to medium-term.
Though LAC recorded a profit of US$1,6 million in the year ended December 31, 2016, it is the group’s Zimbabwean portfolio that remains the mainstay.
In the review period, Zimnat Lion Insurance’s profits rose to US$2,5 million from US$194 000 a year ago, while net income for Zimnat Life came in at US$4,7 million from US$3,3 million in 2015.
Net profit for Grande Reinsurance and Minerva Risk Advisors reached US$1,6 million and US$1,9 million respectively.
Mounting credit risks are driving local companies to invest in the region in order to service foreign debt, import raw materials and underwrite foreign obligations.
Reinsurers FBC Re, a subsidiary of FBC Holdings, and Baobab Re, recently said they were considering setting up regional units to minimise exposure to the local market.
The RBZ said last week that it would establish a US$600 million nostro stabilisation facility with the Egypt-based African Export-Import Bank to help settle foreign payments.