Biti slams privatisation phobia

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Biti slams privatisation phobia
Thursday, 28 October 2010 19:07

FINANCE minister Tendai Biti has criticised a "phobia" within the coalition
government for stalling a proposed plan to list three parastatals on the
Zimbabwe Stock Exchange (ZSE).
Biti's remarks come eight months after he told market watchers during a
reverse listing of Tedco Ltd (now TNFH Ltd) that government would
recapitalise three state-owned enterprises by going public.
Although Biti did not name the parastatals, speculation was rife that mobile
phone operators NetOne, currently struggling to claw back market share since
the dollarisation of the economy last February, was one of the targeted
state firms.
This development extends the listing drought on the capital-starved exchange
that has to date seen only two reverse listings — Tedco and CFX (now
Interfin).
Biti was responding to a question from the parliamentary committee on budget
chairman Paddy Zhanda during the presentation of oral evidence to the
committee.
Zhanda, Goromonzi North MP, asked Biti why government was reluctant to wean
off perennial loss-making state companies.
The lawmaker cited the public listing of Cottco and Dairibord, formerly
state-owned entities, which became profitable after listing on the ZSE.
Among some of the state-owned companies in the red are Zesa, NRZ, GMB, Air
Zimbabwe, CSC and Agribank.
"Zhanda said: I don't think there is anything that you can salvage from Cold
Storage Company. When is the right time to privatise? I think it's not fair
to tax people earning as low as $180 to buy Mercedes Benz vehicles for
executives of struggling parastatals."
In his response, Biti said his counterparts in the inclusive government were
cautious to list or privatise parastatals despite enormous pressure being
piled by state enterprises on the fiscus.
Government is generating nearly US$140 million in revenue monthly and this
figure could increase when key utilities contribute a projected 40% to the
Gross Domestic Product.
"There is phobia in government of the word privatisation," Biti said. "I
personally hoped that there would be three listings on the ZSE of formerly
100% state-owned entities. It hasn't happened. We are in October and trust
me, it is not going to happen before the end of the year. I think it's a
tragedy as some of us have argued (that) I would rather own 10% of an
elephant than 100% of a rat."
In June, former Parastatals and State Enterprises minister Joel Gabuzza said
government was expected to privatise 11 state-owned enterprises. He said
"discussions were underway" to wean off Cold Storage Company, Grain
Marketing Board, Agribank, Ziscosteel, National Oil Company of Zimbabwe,
Allied Timbers, Air Zimbabwe, NetOne, TelOne, Infrastructure Development
Bank of Zimbabwe and ZIPAM. But to date discord within government has failed
to attract potential suitors of the state enterprises.

Bernard Mpofu

The return of foreign money to the bourse

THE ZSE has had a good run over the past fortnight with the week ending
October 22 recording a hefty gain of 5,53%. This was in addition to the 1,6%
recorded the previous week. On a month to date basis to 26 October 2010, the
industrials have amassed 7,6% in the process reducing the year to date
losses to just 2,97%.
The market capitalisation has also benefited from this bullish trend
advancing 10,81% for the month to settle at US$3,702 billion. To put this
into perspective, out of the 18 trading days in October so far only five
days have closed on the downside.
Market breadth for the month to date is also positive with 40 risers, 22
fallers and 14 static counters. Best five performers for the period were
Steelnet, which doubled to 0,2 cents, ZBFH, Hwange, Zeco and AICO. The
latter four had gains of between 34,7% and 53,8%. At the bottom of the
performance table were Interfresh, Ariston, Pelhams, PG Industries and
Interfin.
The bullish trading is being driven by the return of foreign investors to
the local bourse. Of the total turnover of US$24,1 million that was injected
into the market since the month began US$16,8 million, which equates to 70%,
came from offshore investors. Selective buying has been evident on the
market as most of these funds are favouring heavyweight counters
particularly Delta, Innscor, Econet and Hippo. Amongst the large caps, gains
in October alone ranged from 9.5% to 33,3%.
The current run is special because this year the market has generally been
quiet as it was being weighed down by negative developments like political
uncertainty and the policy that foreign companies operating in the country
should offer at least 51% of their shareholding to indigenous investors.
Many counters have been trading with Relative Strength Index (RSI) levels
below 30, which, amongst chartists, is seen as a strong indicator of being
oversold. A correction has been due for a long time but was delayed because
local investors do not have money to make new investments. So the return of
foreign funds is a big relief to the market.
If the upcoming results for the periods ending August/September come out
above market expectation then this positive run might well continue. In
normal economies positive results ideally drive up the markets. US markets,
for instance, that had been wobbly due to the effects of the Great Recession
came to life after the release of better- than- expected financial results
in the third quarter of 2010. The Dow Jones Industrial Average is so far up
3,5% since the beginning of October whilst the FTSE and Nikkei have put on
2,9% and 0,1%, respectively.
Locally, the market eagerly awaits the interim results from Econet, OK
Zimbabwe, Delta, Seedco and AICO to name but a few. Econet financials are
expected to be good as the company benefits from its expansionary programme
of increasing its network coverage and subscriber base. Average Revenues per
user which were US$17,97 in the full year to February 28 2010 are
nonetheless expected to come down to regional levels of below US$10. The
effects of the mobile broadband that was launched last week together with
the impact of per second billing will only be felt in the full year results
to February 28 2011.
On OK Zimbabwe, investors would want to assess the success management has
had in trying to turn around the fortunes of the company using the US$20
million it raised in March this year. Also under spotlight will be any
progress the company would have made in reducing shrinkage levels as well as
recovering the market share that is now in fragments due to increased
competition, a development that has put pressure on margins.
Delta is another counter whose results are keenly anticipated with sales
volumes projected to be higher as a result of the addition of new packaging
lines. The group embarked on an ambitious US$160 million capital expenditure
programme over three years. During the past six months, the company spent
US$30 million on upgrading its production lines. Major projects include the
installation of the PET line and two lager lines. The upward revision to the
GDP figures should also impact positively on company revenues as there is a
positive correlation between economic growth rates and the consumption of
beverages.
There is very little to look forward to on the mining counters as most of
them are struggling. However, the sector in general is tipped to grow by
more than 30% driven by increasing activity in gold, platinum and chrome.
The talk about large mining houses in the country mulling listing as a means
to comply with indigenization directives is generating some excitement on
the local bourse. This is because the available mining counters do not have
any exciting prospects.
Likewise, not much is expected from the pair of Seedco and AICO owing to the
seasonal nature of their business. The first half of the year is usually
cost accumulation for AICO as it will be distributing inputs to farmers.
Seedco, on the other hand, will have a high cost structure during the first
half as it acquires seed crops from the farmers.
Should the earnings season kick off with positive results at a time when
foreigners are still present in the market, then we could expect the firm
market trend to continue. Any positive improvements in sentiment on the
political front — though seeming largely unlikely at the moment — will be an
added bonus for equity investors.

Kumbirai Makwembere

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