IDC grapples with $14m diaspora bond

IDC grapples with $14m diaspora bond
Published: 25 April 2014
THE Industrial Development Corporation of Zimbabwe (IDC), a commercial arm of government, has failed to repay CBZ Holdings Limited, through which it raised $13,5 million in diaspora bonds two years ago. The funding was used for the upgrade of its subsidiary, Surface Investments in Chitungwiza, which is the largest multi-oil seed plant in Zimbabwe.

A bond is a debt instrument issued for a period of more than one year with the purpose of raising capital through borrowing. Bonds, which are normally structured over long periods, are particularly useful locally where short-term funds are available but at punitive interest rates.  IDC's group chief executive officer, Michael Ndudzo, told the Financial Gazette that they were unable to repay the amount in question, due this month end. IDC had, therefore, engaged in talks with a potential suitor to pay off the debt.

"In 2012, we raised $13,5 million through CBZ from a Diaspora bond for the upgrade of our subsidiary, Surface Investments, of which we promised to repay as soon as we were  done with retooling of the firm. Now we are struggling to pay it by the end of this month (April 30, 2014).

‘We are, however, in negotiations with a potential FDI (Foreign Direct Investment) partner who we hope will assist to pay CBZ which we were not able to do ourselves," said Ndudzo.

The development is yet another sign the State-owned conglomerate is suffering a cash crisis as it struggles with a sharp decline in revenues and heavy losses. For the year to December 31, 2012, IDC incurred a loss of $20,8 million against a loss of $10,7 million the previous year. The group had significant borrowings amounting to $78 520 434, of which $42 318 704 was due in 2013.

Surface Investments is a joint venture between  IDC, with 26 percent, and an Indian firm, Midex Global which holds 74 percent. The company also manufactures soyabeans meal, high protein cottonseed meal, and cottonseed cake and hull pallets. It exports crude oil to Malawi as well as cotton linters and hulls to South Africa and Europe.

IDC controls more than 15 companies with interests across different industrial sectors.

Besides partnering the Indians in the agro processing firm, Surface Investments, IDC partnered the Japanese in the motor industry (Willowale Mazda Motor Industries, Amtec, Deven, Autologistics), the Italians in granite (Stone Holdings and Zimrock) and the Iranians in textiles (Madzone). IDC is also into partnership with the South Africans in aluminium extrusions and castings (Almin Metal), the Chinese in cement (SZCC), the Malaysians in industrial real estate (Sunway) and the French in horticulture (Bonnezim - now liquidated).

It also partnered local conglomerates TA Holdings in fertilizer manufacturing (Zimbabwe Fertilizer Company (ZFC) and Sable Chemicals), Treger Group of Companies in Zimbabwe Grain Bag and Olivine Industries.

Recently, Ndudzo told Fingaz that IDC was courting suitors for $140 million to recapitalise its ailing subsidiaries, a move meant to stimulate production in these subsidiaries. One of only a few State-owned firms to have consistently declared dividends since independence in 1980, IDC's fortunes were affected by an unprecedented economic crisis that swept  through the country during the decade to 2008, dealing a body blow to industry and ravaging the economy, now without a domestic currency and grappling with a liquidity crunch. Government, the sole shareholder in IDC, has been unable to bail out the investment company with cash to allow it to recapitalise a number of its subsidiaries.
- fingaz
Tags: Diaspora, Bond, IDC,


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