The amount of capital raised by companies listed on the Zimbabwe Stock Exchange last year plunged just over 50 percent due to the liquidity crunch pervading the economy. ZSE listed firms completed rights issues for just US$17 million in 2013 in NMBZ (US$14 million) and Interfresh (US$3 million) while capital raisings worth US$60,1 million were approved in the period but will be completed this year.
During the second half of the year, Aico and Seedco shareholders approved rights issues for US$15,1 million and US$40 million while Afdis will seek to raise US$5 million to fund its local production and repay shareholder loans.
This contrasts sharply with a total of US$124 million ZSE listed firms raised the prior year before the liquidity situation in the economy worsened as foreign investment remained sluggish while exports continued to seriously underperform.
In 2012, Ariston raised US$7,7 million (rights issue), RioZim US$11,6 million (rights issue and private placement), ABC US$50 million (rights issue), Zimplow US$11,2 million (rights issue), BNC US$37 million (rights issue and private placement), Afre US$8,6 million (rights issue) RTG US$4,5 million (rights issue).
While most companies went on an overdrive to raise fresh capital through cash calls post dollarisation of the economy in 2009 to address the impact of the battering they suffered during hyperinflation, most of such initiatives were not adequately supported due to the challenges in domestic and global markets.
Financial analysts said the huge difference between the amount of capital raised last year and compared to the year before was because the liquidity situation continued to deteriorate in 2013.
The fact that foreign investors are required to hold not more than 49 percent in indigenous firms in terms of the provisions of the indigenisation and economic empowerment law meant raising equity capital from foreign shareholders was not tenable.
If ZSE listed firms were to proceed with raising capital largely from foreign shareholders at a time locals are incapacitated due to the liquidity crunch they risked breaching the equity laws meant to ensure locals participate in the mainstream economy.
“It’s not like the ZSE listed companies do not want to raise capital but they cannot do that because of the liquidity situation.
“While the companies could approach their foreign shareholders with sizeable interests of 20 to 30 percent in the companies, they would be in breach of indigenisation laws, which generally limit foreign ownership to a maximum 49 percent,” said a Harare analyst who requested not to be named.
Severe lack of liquidity has left many companies listed on the ZSE struggling to fund operations with some including Cairns, Caps Holdings and Interfresh as the maintaining a public listing became an unbearable cost and hindrance to capital raising.
Capital raising in 2012 were underwritten by Afrifresh Group Limited, Gem Raintree, ADC Financial Services, Tetrad Management Company and Zimnick Limited while NMBZ, Afdis Holdings and MetBank support cash calls undertaken last year.