PIC to decide on $5.3 billion Africa investment plan by April

2011-Nov-24

South Africa’s Public Investment Corp., Africa’s biggest money manager, will decide by April where to spend the 45 billion rand ($5.3 billion) it has allocated to investments in other countries on the continent.

"We are finalizing the asset allocation plan together with the Government Employees Pensions Fund,” said Chief Executive Officer Elias Masilela in an interview from Pretoria, where the company is based, yesterday. The PIC manages about 1 trillion rand in government employee pensions and the GEPF accounts for about 90 percent of the funds under the PIC’s management.

The PIC wants to invest elsewhere on the continent to take advantage of a growth rate that has been more than double that of South Africa over the last decade, according to International Monetary Fund data.

The PIC will prioritize equities, private equity and development projects such as dams and roads, said Masilela.

Another 45 billion rand will be invested in assets outside the continent, he said. "There are many spin offs for the PIC and for South Africa in this decision to invest in Africa,” said Masilela. In addition to the obvious need for diversification, the 100-year- old money manager will help facilitate economic growth, he said.

Anglophone, Lusophone: The PIC will prioritize Anglophone countries with growing economies and transparent regulatory environments, said Masilela. Political and social stability will also play a major role in attracting investments, he added. Nigeria, a former British colony, has the biggest stock exchange in sub-Saharan Africa outside South Africa.

"We will be guided by opportunities that present themselves in the Francophone and Lusophone countries,” Masilela said. Ivory Coast and Senegal in West Africa are among former French colonies while oil producer Angola and Mozambique were colonized by Portugal before winning independence in 1975.

As part of its centenary celebrations on Nov. 25, the PIC will host a summit with major finance and investment institutions that do work in Africa, including the World Bank’s International Finance Corp., which said on its website that its investments in Sub-Saharan Africa have topped $2 billion for a second consecutive year during financial 2011. The summit will discuss ways to accelerate investments into the continent, said Masilela. "We’ll use that summit as a sounding board to finalize our strategy.”

At least 20 African countries will achieve an annual 3 percent to 4 percent economic growth during the next 10 years, the IFC said in its Africa 10-year vision report on its website.

Source: Bloomberg

Kenya starts FTSE-based stock indexes. Next.. bonds

2011-Nov-09

 

Nairobi Securities Exchange has launched two stock indexes in conjunction with FTSE Group, and said on Tuesday 8th November 2011 it planned to start one for Treasury bonds next year.

The FTSE NSE Kenya 25 Index will comprise the bourse's 25 most liquid stocks, while the FTSE NSE Kenya 15 Index will be made up of the exchange's 15 largest stocks by market capitalisation.

The two tradable indexes, which went live on Tuesday, will be priced in dollars and Kenyan shillings, and will initially be based on the NSE-20 Share Index and the NSE-All Share Index.

"They reflect the growing interest in new domestic investment and diversification opportunities in Kenya," NSE chief executive Peter Mwangi said.

The top five constituents of the FTSE NSE Kenya 25 Index are alcoholic drinks group East African Breweries Ltd, telecoms operator Safaricom, Equity Bank, Kenya Commercial Bank and Barclays Kenya. They have a total 69.19 percent weighting.

The five firms are also the top on the FTSE NSE Kenya 15 Index and have a total of 71.91 percent weighting. Both indexes have January 1, 2008 as their base date and their composition will be reviewed every June and December.

FTSE operates such indexes as the FTSE 100 in Britain. In Africa, it runs indexes in Morocco and South Africa. It also operates ETFs in countries including China, Germany, Japan, and the United States.

NSE and FTSE plan to launch a Treasury bond index in 2012.

"It is something we are working on. I hope we will make an announcement very early next year about that index," said Jonathan Cooper, FTSE Group managing director for Middle East and Africa.

The Nairobi Securities Exchange has said the FTSE indexes were meant to pave the way for products like exchange traded funds.

An ETF comprises a basket of assets, usually the main constituents a major share market index, and can be traded on an exchange, sold short or bought on margin. ETFs trade like stocks and allow investors to diversify risk over a spread of assets.

"The regulatory framework for issuing exchange traded funds domestically is not ready. So, we are working with the authority to have those regulations in place next year," said Donald Ouma, NSE head of market and product development. "However, with FTSE, one can get a licence to issue exchange traded funds offshore."

Reuters

Okonjo-Iweala aims to diversify Nigeria's economy

2011-Aug-12

Ngozi Okonjo-Iweala departs the World Bank as managing director on Friday and said her biggest challenge as Nigeria's new economic chief will be to develop an economy that is less dependent on oil and gas.

Okonjo-Iweala, who will take up the role of Nigeria's Coordinating Minister for the Economy and Minister of Finance next week, has been a steady hand at the world's largest development institution since 2007, where she has had unique insights into the growing role of developing nations in the global economy.

Nigeria is one of Africa's most dynamic economies but it has enormous problems, including an over-reliance on commodity exports, mismanagement, low investment and a history of powerful vested interests.

"Nigeria has to make some fundamental changes, it has to really diversify its economy," Okonjo-Iweala told Reuters in an interview on Thursday. "The time is now because investors are interested in the country," she said.

She said the country's manufacturing sector had lost competitiveness due to increasing power shortages and bureaucratic hurdles, while its agriculture and services sectors had a lot more room to grow, and a flourishing entertainment industry held great potential.

One lesson Okonjo-Iweala takes with her is that consistent policies and a stable political environment are essential for any economy to flourish.

"We have to show policy consistency in all kinds of ways. It builds trust in the economy, it builds a resilience and that helps enormously," Okonjo-Iweala said.

It is the second time in eight years that Okonjo-Iweala has left a World Bank job to return to Nigeria to help transform the huge oil-rich nation's economy.

In 2003 she shook up the country's finances, fired corrupt officials, boosted transparency and negotiating the cancellation of nearly two-thirds of Nigeria's $30 billion Paris club debt.

"Why am I going back? I ask myself that question too. I'm passionate about my country and if you have skills and your country calls on you to come and help, at the end of the day it's very difficult to say no."

Okonjo-Iweala said she was encouraged by President Goodluck Jonathan's political commitment to reform Nigeria.

Source: http://af.reuters.com/article/investingNews/idAFJOE77B03V20110812?sp=true

Essar to spend as much as $4bn on zimbabwe iron ore plant

2011-Aug-05

India's conglomerate Essar Group plans to spend up to $4 billion dollars in developing an iron ore processing plant in Zimbabwe within five years, Industry and Commerce Minister Welshman Ncube said yesterday, in what is the single largest foreign investment since the country's 1980 independence.

Some 500 jobs would be created -Essar last year agreed to buy 54 percent in ZISCO with the government keeping 36 percent and 10 percent owned by minority investors.

Essar went on to form a mining company, NewZim Minerals, in which it owns 80 percent and the remainder is owned by the government. NewZim Minerals owns the Mwanesi resource in Chivhu.

"The creation of NewZim Minerals will see the development of the Mwanesi resource. It's a vast resource, which will provide iron ore for a 25 million tonnes per annum plant to be constructed to beneficiate the ore," Ncube said.

The ore from Mwanesi would then be fed into NewZim steel plant in Kwekwe to produce steel.

When asked at a press conference where the $4 billion would come from, Essar Group vice chairman Ravi Ruia said the group was still at the exploratory stage and would determine final cost and how it would be funded at a later stage.

The Essar deal has raised hope among foreign-owned mining companies that the government could relent on its demand for miners to sell at least 51 percent shares to locals by September 30.

Mugabe said Essar had managed to buy 54% of NewZim Steel because it had agreed to inherit the steelmaker's debt amounting to nearly $300 million.

Ruia also told journalists that Essar was negotiating with minority shareholders to shore up its interest in NewZim Minerals to 60 percent, with government set to own the remainder.

Ruia said ZISCO would undergo refurbishment at a cost of $115 million to produce 500,000 tonnes of steel within 18 months while the second phase would see output surge to 1.2 million tonnes annually within three years at another cost of $275 million.

"This is a win-win transaction for both Government of Zimbabwe and Essar. We view this as a long-term partnership with Zimbabwe and its people. I'm sure the success of this venture will attract further foreign direct investment in other sectors too," Ruia said when asked if the company was not afraid of the southern African country's high political risk.

ZISCO shut down in 2008 at the height of Zimbabwe's economic crisis. -- ZimOnline

Source: http://www.zimonline.co.za/Article.aspx?ArticleId=6769

GDP growth: Zimbabwe's economy is on course to grow by 9.3% in 2011, up from 8.1% last year, mainly on the back of a continued recovery in the key mining and agriculture sectors. Agriculture is expected to grow 19.3% while mining is expected to grow by 44%.

Revenue: ZIMRA has collected $1.352 billion with the bulk coming from VAT 32%, PAYE 20%, Customs 12% and corporate tax down to 10%.

Inflation: Zimbabwe is expected to achieve a year-end inflation rate of 4.0%, which is lower than the initial forecast of 4.5%. Annual inflation rose to 2.9% in June from 2.5% in May. Annual inflation reached 500 billion at the peak of Zimbabwe's economic crisis in December 2008, according to IMF figures. Formation of a unity government that ditched the local currency in favour of U.S. dollars and South African rand, brought stability to the economy once crushed by hyperinflation. Consequently, the country has experienced single-digit inflation since 2009.

Growth in Agriculture: Also helping to keep inflation in check was higher maize output, which is anticipated to rise to 1.45 million tonnes in the 2010/11 season from 1.32 million tonnes in 2009/10. Of the 1.45 million tonnes communal farmers accounted for 43% of the crop while peri-urban farmers contributed 2%. The agricultural sector has started to recover after years of food shortages that were blamed on input shortages as well as production disruptions caused by land redistribution programmes which fragmented large commercial farms into smaller communal plots.

Mining sector performance: 18% of the diamonds at Marange are of gem quality. The phenomenal growth in the mining sector was not commensurate with the growth in output and international prices.

Manufacturing sector performance: In manufacturing sector companies average capacity utilisation remains at between 40-50% with certain industries like beverages and tobacco doing very well.

Tourism sector performance: Tourism Industry is doing well with arrivals up 14.3% in 2011 but the bookings and arrivals are not translating into real value .

Banking sector: Deposits stood at $2.85 billion as at May 31. 22% of the loans went to manufacturing, agriculture 19% and mining 6%. Loans to deposits ratios were too high and a minimum of 25% was proposed.

Source: 2011 National Budget Review

Allen & Overy leads legal 'scramble for Africa'

2011-Jul-25

Allen & Overy has become the first of Britain's so-called "magic circle” law firms to open an office in Africa after launching in Morocco.

The London-based firm has pipped to the post its rival, Clifford Chance, in establishing a presence in the north African country.

Law firms are leading a new scramble for Africa as they position themselves to win deals stemming from China's thirst for natural resources in the continent. Until now South Africa has been the focal point of interest, with Norton Rose announcing a merger with local firm Deneys Reitz last November.

While a pro-democracy movement has taken root in the country, Morocco's uprising has not been on the scale of those in other North African nations. A referendum was passed on July 1 allowing for more power to be devolved from the king to parliament. Mr Dejonghe said he was optimistic that the relative stability of Morocco would attract more work to the country.

While it was reported in April that Clifford Chance was interested in opening in Morocco, the magic circle – the UK's four biggest and most profitable firms – has thus far been content to advise on African deals from other offices.

A&O has advised on £12bn worth of mergers and acquisitions since 2009, Mr Dejonghe said, including Shell's $1bn disposal of assets to Vitol and Helios Investment Partners. Its lawyers have advised clients such as TAQA and Societe Generale on work in north Africa.

Morocco is the second launch in as many weeks for A&O after it announced earlier this month that it would be opening an office in Washington DC.

Source: http://www.ft.com/cms/s/0/fb2c2ab0-b2ef-11e0-86b8-00144feabdc0.html#ixzz1T6AYTZ2w

Sichuan Hongda May Spend $3 Billion on Tanzanian Coal

2011-Jul-15

Tanzania said Sichuan Hongda Co., a Chinese minerals company, may agree to invest $3 billion in iron ore and coal projects in the African nation in an accord that may be signed next month.

"We are going to have the second round of negotiations later this month,” said Mlingi Mkucha, secretary of the state- run National Development Corp. No management personnel at Chengdu, China-based Sichuan Hongda were available to comment, according to an employee at the security department. Calls to the public relations department of the company weren't answered.

Sichuan Hongda beat 47 rivals to win the contract to develop the Mchuchuma coal and Liganga iron-ore mining projects in southern Tanzania, according to Mkucha. Under the terms of the joint venture to be set up, Sichuan Hongda will provide the funds for the projects.

"The biggest pending issue on the agreement is the shareholding structure,” Mkucha said in a July 8 interview from Tanzania's commercial capital of Dar es Salaam. "Whereas the government is supposed to be a minority shareholder, we aim for

49 percent, although they agreed to 20 percent only.”

The Liganga iron ore project is located in the district of Ludewa, about 900 kilometers (559 miles) from Dar es Salaam. It has estimated reserves of 200 million to more than 2 billion metric tons, according to NDC.

"The iron ore project involves mining the ore, and building an iron smelter,” Mkucha said. "These two components of the project are estimated to cost $1.7 billion.”

Mchuchuma Capacity

The venture will also mine coal at Mchuchuma, which will have annual production capacity of 3 million tons a year, to fire a 600-megawatt power plant, Mkucha said. "These components are estimated to cost $1.3 billion,” he said.

"We aim to begin producing 300 megawatts of electricity from coal in the first three years after signing the agreement,” Mkucha said. "This power will be used for the iron project.”

Some of the power to be generated after the first 300 megawatts will be sent to the national grid using a 249- kilometer transmission link that will be built.

"The amount of power we generate to be sent to the national grid will be determined by the needs of Tanzania Electric Supply Co.,” Mkucha said referring to the state utility. "We may also consider exporting some extra power to Malawi.”

The Mchuchuma mine has enough reserves to last as long as 50 years, pending further tests to be carried out by Sichuan, Mkucha said.

Tanzania's biggest mineral export is currently gold.

Source: Bloomberg News

Southern Sudan officially becomes the world's newest state

2011-Jul-05

The independence on July 9 2011 of South Sudan is seen by analysts as possibly the most significant development in modern African history since the end of apartheid nearly two decades ago. It will be a symbolic turning point and will result in the breakup of Africa's largest country and significantly alter the political and economic boundaries of the East African Community, the continent's most cohesive regional bloc.

"This is a truly historic moment," said Vice-President Kalonzo Musyoka, one of the key mediators during talks in and near Nairobi that resulted in an agreement on a referendum for self-determination. "Not many generations live to see the birth of a new nation. It is a delight for Kenya to welcome the new state to the East African Community." Head of Southern Sudan mission in Kenya Michael Majok Ayom will be one of those celebrating the new dawn.

The economic potential of the new state is immense. Southern Sudan holds the bulk of oil deposits in the country.

According to the North, the revenue from oil in the last six years has been on average about US$2 billion per year (about Sh172 billion) although the South insists those estimates are routinely revised downwards to deny them their rightful share of oil revenue. Southern

Sudan also abounds in untapped natural resources.It has significant gold deposits and is traversed by a large section of the White Nile. It also has some of the best unexploited tourist attractions in Africa and has a great wildebeest migration similar to the one that draws thousands of tourists to Kenya and Tanzania every year.

The country has rich agricultural land that, according to estimates, could feed most of sub-Saharan Africa if properly exploited. Its agricultural resources are also being eyed by international investors seeking to engage in the bio fuel industry. This unexploited economic potential is seen as likely to have a huge effect on the economies of neighbouring countries. This is a potential game changer, and Kenya is well positioned to benefit. Kenya's economy rides on the coattails of its neighbours. The independence of Southern Sudan coupled with the discovery of oil in Uganda means the economy will never be the same again.

Bloomberg news

Nigeria’s Bourse Targets $1 Trillion Market Value in Five Years, CEO Says

2011-Jul-01

The Nigerian Stock Exchange, whose index has tumbled 67 percent from its March 2008 peak, is targeting a market value of $1 trillion in five years as it attracts companies and plans to give shares to members through demutualization, Chief Executive Officer Oscar Onyema said.

"Our goal is to grow our market capitalization from $74 billion to $1 trillion in five years,” Onyema said in an interview in Moscow today. "If we can attract the oil and gas sector, if we can attract the telecoms sector and power sector then we should be able to hit those numbers.”

The bourse, whose index is sub-Saharan Africa's third-worst performer over the past 12 months after Kenya and Botswana's, is the second-biggest by market capitalization after South Africa's, which has a value of $494 billion, according to data compiled by Bloomberg.

Nigerian President Goodluck Jonathan has asked the nation's Securities and Exchange Commission to get oil exploration and telecommunications companies to trade their shares on the exchange, Arunma Oteh, the regulator's head, said on Feb. 7.

Oil exploration, power and telecommunications companies aren't represented on the bourse and "would be totally new areas for the exchange,” said Onyema. Agriculture is "another area where we will be making a push” as it's underrepresented on the bourse and makes up 40 percent of the West African nation's gross domestic product, he said.

Nigerian Petroleum Listing

"We really want them because we believe a well functioning capital market is a good barometer for the economy,” Onyema said. "So where these major sectors are not represented in our capital markets today we are not giving you an accurate picture of the economic potential of Nigeria.”

Nigerian National Petroleum Corp., the state-owned oil company of Africa's top oil producer that holds an average 57 percent stake in joint ventures with companies including Royal Dutch Shell Plc, Total SA and Exxon Mobil Corp., may list after lawmakers pass a bill to regulate the oil industry, Oteh said June 23.

Onyema is "implicitly saying that NNPC is going to get listed and hurray, let's pop the champagne corks and get the ball rolling,” Christopher Hartland-Peel, a London-based Africa equity analyst at Exotix Ltd., said by phone today. "It's perfectly feasible” to reach the market-value target "and great news because it means the listing of NNPC with its approximately 1 million barrels a day oil production and reserves that go with it,” he said. All the cement companies, breweries and banks "of any significance” are already listed, said Hartland-Peel.

Demutualization Plan

The exchange of Africa's most populous country has no time frame for its plans to demutualize and a committee focusing on the process is scheduled to start next month, Onyema said.

"We want to do it right, we don't want to do it in a rush,” he said. "We want to make sure we take into consideration all the stakeholders and we address all the key questions that need to be addressed as part of the demutualization process.”

The Nigerian Stock Exchange All-Share Index fell for the second day, declining 0.6 percent to 25,023.84 by the 2:30 p.m. close in Lagos, according to an e-mailed statement from the bourse.

Onyema, who started work in April, replaced Emmanuel Ikazoboh who was appointed in August as interim administrator after the Securities and Exchange Commission removed former head Ndi Okereke-Onyiuke, as part of measures to address "inadequate oversight of the exchange,” it said.

Onyema joined the Nigerian bourse from the American Stock Exchange, where he was a senior vice president and chief administrative officer.

Bloomberg news:

http://bloom.bg/mzrZuP

Chabvonga gears up for growth as Zimbabwe moves forward

April 21, 2009

Ronald Chabvonga believes Zimbabwe’s "decade of destruction” is truly at a close and has teamed his Gondo Capital firm with Patrice Moyal’s Visio to take advantage of impending change.

Ronald Chabvonga is, at last, seeing exciting signs of change in his homeland, Zimbabwe.

"We call it the decade of destruction,” he says of the past 10 years, during which the market capitalisation of the Zimbabwe Stock Exchange withered from US$9.7 billion in 1997 to $1.2 billion as of the end of 2008. "I speak as a Zimbabwean and understand how the environment works. When you begin to see certain things happen, then you know the wheels are beginning to turn. These developments paint a picture of change.”

Speaking from his Johannesburg office on the eve of a roadshow to visit prospective investors in Europe, Chabvonga notes several key changes since Morgan Tsvangirai was sworn in as prime minister in February, after his Movement for Democratic Change formed a government of national unity with Robert Mugabe’s incumbent Zanu-PF.

The Ministry of Finance has reinstated fungibility on dual-listed shares (such as Old Mutual, which is listed in London, Johannesburg and Harare), meaning shares can again move between exchanges. Used as a way to take money out of the country, this had been deemed in breach of exchange controls.

The country’s new finance minister Tendai Biti announced a revised budget in late March (following on from February’s Zanu-PF budget), outlining new government policies.

And with rands and US dollars now in use, the Zimbabwe dollar is defunct, meaning that the Central Bank is no longer able to ‘print cash’. That minimizes exchange-rate risk, and points to hyperinflation becoming less of a problem. In fact, inflation in February 2009 stood at just 3.1%.

"There is now food in the supermarkets, as local retailers are able to settle in US dollars. Salaries and allowances are being paid,” says

"There are still issues, and we won’t gloss over those, but there is a realisation that we cannot dwell on the past; that we need to move forward and build the country – and that this is a massive opportunity”.

Chabvonga. "These are basic things that outsiders take for granted. But the fact that they are happening – that the budgets are being revised, that the Ministry of Finance is asserting its authority – indicates change. There are still issues, and we won’t gloss over those, but there is a realisation that we cannot dwell on the past; that we need to move forward and build the country – and that this is a massive opportunity.” In preparation for impending developments, last year Chabvonga teamed up with Patrice Moyal at Visio Capital, one of South Africa’s most respected hedge fund firms, forming a joint venture with his own firm, Gondo Capital (see AfricaHedge, September 2008).

Visio is already allied with Malungelo Zilimbola of Mazi Capital, managing over R2 billion in South African equity-based strategies. The partners are preparing to launch two Zimbabwean funds on 1 May – one investing in listed shares and the other in unlisted opportunities, with Chabvonga as CIO.

Raised in Karoi, northwest of the capital, Chabvonga completed his A-levels at Churchill High School in Harare. He then finished his articles at KPMG, where he spent nine years, covering a variety of sectors and specialising in banking and finance for the last few years.

In 2000, he joined Stanbic Bank as CFO, before moving to South Africa in 2002 with Century Holdings, which was aiming to develop an Africa-wide international money transfer business. When that struggled to get off the ground in the aftermath of the 9/11 terrorist attacks, he rejoined Standard Bank for a further three years, before joining Anglo Plat’s corporate finance team in September 2006, where one of his briefs was to manage and negotiate the company’s $400 million investment in Unki Mines in Zimbabwe.

"I have a good understanding of companies in Zimbabwe and access to management and leadership is made easier for me because of my background,” he says. "Many of the leaders in these companies are my peers. I have had access to government officials and regulators. These people remain just a phone call away.”

Chabvonga travels to Zimbabwe every couple of weeks, doing his own research and building models in conjunction with the Visio/Mazi team, which totals seven investment professionals known for their value-driven, bottom-up research and execution skills. The listed equity fund will be known as "Takura”, the Shona word for "we have matured”.

While there have been some delistings, new listings and consolidation over the past decade, Chabvonga notes that little has changed materially in the composition of the index – other than the destruction of value brought about by the country’s political and economic debacle. "There has been an enormous loss of value for companies and there has been minimal foreign investment,” he says. Growing from a low base, Zimbabwe is expected to be decoupled from international trends.

"Currently, most companies are using just 20-30% of installed capacity, even in the listed space,” says Chabvonga. "We need to ramp that up to 80-90% before the full benefits are realised. There is an immediate need for working capital.”

The fund will be predominantly long (shorting is not an option within Zimbabwe) but external hedging opportunities are available via instruments listed elsewhere, leaving scope for both correlated and uncorrelated shorts.

The funds also have both rand and US dollar classes, with currency risks hedged where necessary. While the listed fund has a broad mandate, Chabvonga notes that hyperinflation has killed off most fixed income opportunities, although the switch to a dollarised economy means there is an opportunity for the development of the country’s capital markets.

The private equity "Dura” fund takes its name from the Shona word for a traditional granary – a pole and dagga structure with a small opening via which one can enter and retrieve as much grain as one needs.

"Dura could potentially be a series of funds,” says Chabvonga. "It could reach $200 million to $500 million. That’s how huge the opportunities are in the unlisted area. The types of opportunity we choose to take will impact the size of the fund.

"That said, we don’t want too many opportunities in the portfolios. We will focus on the sectors we are interested in. If we raise $200 million, ideally we wouldn’t want more than 10 opportunities to invest in. That’s a large amount in the current context – you can do a lot with it.”

While the team has access to a range of potential opportunities, each will be appraised on a case-by-case basis and in sectors of particular interest.

"It takes somebody with a bit of vision to appreciate what we are trying to do here. We need to be invested for the long haul. There might well be down moments during the tenure of the investments, but the opportunity is massive”

"We may inject straight equity, or we will provide loans with conversion options,” he says. "It will be a combination of listed, unlisted and delisted companies – in some cases we might be looking to take a company off the exchange, fix it and then re-list as a way out of the investment. We will interact closely with management and may appoint people to company boards.” Among the subtle changes Chabvonga is beginning to see in news reports are a recent commitment from the South African government to grant an R800 million loan to its northern neighbour – the first financial assistance in many years to a country that was once South Africa’s largest trading partner.

"Zimbabwe could end up being a predominantly rand-based economy – simplistically, it could become the 10^th province of South Africa. It only makes sense for there to be a stable and developing Zimbabwe,” he says. Despite the eyes of the international community being on the beleaguered nation, Chabvonga is a firm believer in increased dependence on private-sector funding.

"Meaningful aid is probably two to three years away,” he says. "While it would be a ‘nice to have’, it shouldn’t be what Zimbabwe depends on.”

Now that the wheels have begun to turn, Chabvonga believes the country needs stability for the new government to succeed. "It would be good to have the political status quo in place until change reaches a level where there is no going back,” he says.

While the rest of the world faces contracting growth, as the financial industry crisis takes its toll on the rest of the global economy, Chabvonga sees outsize opportunities in his homeland in the short term, where the economy has contracted 80% over the past nine years against strong growth around the world. He expects the country to evolve as a recovery play over time, as did Brazil, Israel or Poland, which went on to generate exceptional returns. In addition, the country – previously one of the largest exporters of tobacco and agricultural goods on the continent – already has installed (albeit neglected) capacity, and underutilised intellectual capital (its literacy rate at 90% is one of the highest on the continent).

"Typically we are looking at a three year horizon, although we think there are opportunities for significant value accretion over the next 18 months, which will allow for disposal or exit of some investments,” says Chabvonga. "We anticipate a steep growth period over the next 24 to 36 months and then returns may normalise somewhat.” For now, Chabvonga is well aware that finding investors who share his vision is key to success.

"This is not a short-term game,” he says. "We need to match the profile of the investment with the right investor. It takes somebody with a bit of vision to appreciate what we are trying to do here. We need to be invested for the long haul. There might well be down moments during the tenure of the investments, but the opportunity is massive.”

Visio teams up with Gondo Capital for Zimbabwe - focused launches

April 25, 2009

Johannesburg-based Visio Capital, one of South Africa’s most established hedge fund firms headed by Patrice Moyal, is preparing to launch two Zimbabwean funds, set to go live on 1 May, in a joint venture with Ronald Chabvonga of Gondo Capital.

Visio currently has more than R2 billion under management, the bulk in South African equity hedge funds, including a joint-venture with Malungelo Zilimbola of Mazi Capital. The first fund, Takura, will invest in shares listed on the Zimbabwean Stock Exchange, while the Dura Fund is a private equity closed-end fund investing in unlisted opportunities. Chabvonga will be the CIO on both funds, supported by the respected Visio and Mazi team.

A Zimbabwean, he was most recently on the corporate finance team at Anglo Platinum/Anglo American, overseeing its $400 million investment in the country, and has also worked previously with Standard Bank and KPMG.

Chabvonga, who commutes to Zimbabwe every two weeks, says the country offers the potential for exceptional returns over the medium to long term with a risk profile uncorrelated to global markets. The Takura fund will focus on listed Zimbabwean companies. The stock exchange currently has a market capitalisation of $1.6 billion, down from the highs of $9.7 billion in 1997.

The Dura fund will target a limited spread of unlisted local opportunities, some of which have been already identified. The investments will take the form of direct equity stakes and/or convertible loans. The funds are available in US dollar or rand share classes.