Shoprite pursues Zimbabwe deal despite Meikles drama

The KMAL saga shows that despite a 280% rise in the Zimbabwe Stock Exchange (ZSE) this year, the risk of government expropriating assets remains high. It also casts doubt on President Robert Mugabe’s claims at last week’s Harare mining indaba that “property rights are sacrosanct”.

However, Shoprite chairman Christo Wiese (pictured) told Business Times this week that while the KMAL case “does make investors wary, we’ve never had any threats ourselves”. Wiese also chairs Pepkor, which has an established Zimbabwean business.

“We’re like good Africans: we’re confident a solution will be found, and we believe the whole of southern Africa will enter a new era over the next five to 10 years.”

A team of Shoprite advisors has been in Harare in recent weeks to negotiate with OK Bazaars.

OK is valued at $45-million (R334-million) on the Zimbabwe Stock Exchange according to Harare-based Renaissance Capital. Shoprite would need to pay R167-million (plus a small sweetener) for control. On Friday, OK renewed its warning to investors that it was still in “negotiations” with an unnamed party.

Wiese said he “cannot comment” on the OK negotiations.

Shoprite operates in 16 countries, including a small operation in Bulawayo. Any purchase of OK would throw it into competition with South African rival Pick n Pay, which has a 25% stake in TM Supermarkets – which, ironically, is controlled by KMAL.

This week, the drama around KMAL, suspended from the ZSE last Tuesday, took a new turn.

KMAL was formed by the 2007 merger of the 117-year old Meikles group with Kingdom Financial Holdings. Its assets include the Meikles Hotel and the Greatermans stores. But it has been crippled by a wrangle between CEO Nigel Chanakira and John Moxon, whose family owns 43% of KMAL.

In January, Chanakira – who is close to the ruling Zanu(PF) and a former executive of the Zimbabwe Reserve Bank – convinced government to “specify” Moxon’s family. This effectively puts Moxon’s assets under the control of two government-appointed inspectors.

Chanakira argued that Moxon illegally “externalised foreign currency” of 10.3-million. However, Moxon has letters from Zimbabwe’s Reserve Bank in 2002 authorising the transfer of cash to South Africa.

Tensions mounted last week as Mugabe’s government widened the “specification” of KMAL, putting most of its assets under the control of government inspectors. Rattled investors read this as the first steps towards outright nationalisation of KMAL.

On Thursday, angry KMAL investors were due to hold an “extraordinary meeting of shareholders” to vote on whether to boot out Chanakira and other directors.

But when shareholders arrived at the conference centre at Harare’s Meikles Hotel for the meeting, they were barred from entering by Zimbabwe’s police and Mugabe’s Central Intelligence Organisation, who claimed the meeting had been postponed.

“This meeting has been postponed for two weeks, but it seems Chanakira wants to delay this as long as possible,” said Moxon. “This debacle shows that property rights aren’t respected in Zimbabwe, which will make it hard for it to attract foreign investment.”

In legal papers lodged in SA in a separate case, Moxon claims his ”specification” is a case of Chanakira “abusing Zimbabwe’s state machinery to bring police (and) other authorities” down on him to resolve a corporate spat.

Chanakira is apparently ill, and Business Times was told that he was “not available to talk”.

Moxon now lives in SA after fleeing Zimbabwe last year when warned he was to be arrested.

KMAL’s value on the ZSE plummeted from $500-million in 2008 to $90-million when it was suspended last week. Moxon’s share is worthless until the “specification” order is lifted.

“All our wealth is tied up in the company, so we don’t have a choice but to fight to the end,” he said.

Gilbert Muponda, the former head of Zimbabwe’s Century Holdings, who was arrested under the Prevention of Corruption Act, said the tactic of “specifying” assets is meant to “criminalise and scandalise entrepreneurs whose political views are perceived to be at variance with their own”.

In an advert in Zimbabwe’s Telegraph newspaper, Muponda said politicians do this to ”embark on unjust self-enrichment by misappropriating businesses using draconian legislation”.

He said his own business was effectively expropriated by a front company for reserve bank governor Gideon Gono, called Network Investments.

Concerns over KMAL could act as a brake on the recovery of the ZSE, which re-opened in February this year when the US dollar was chosen as the currency of choice.

Since then, the ZSE has surged from $1-billion to about $3.8-billion, Renaissance Capital believes the exchange could hit the $5-billion mark before the year is out. By contrast, SA’s JSE exchange has gained 16% this year.

ZSE CEO Edward Munyukwi said the recovery is due to foreigners buying shares from Zimbabweans. Until the US dollar was introduced in February, Zimbabweans put cash into the ZSE as the only way to “retain the value” of their Zimbabwean dollars.

“There has been a lot of interest this year from European, US and South African investors,” he said

Dzika Danha, analyst at Renaissance Capital, said the value of the exchange could hit $7.4-billion within two years, “provided there are no economic policy inconsistencies that emerge from government”.

Sunday Times (SA)