Zimbabwe tycoons sink into oblivion

via Zimbabwe tycoons sink into oblivion – The Zimbabwe Independent March 27, 2015

SWEPT by the economic tide that has hit the Zimbabwean economy since around 2000, numerous high-flying indigenous entrepreneurs who were the country’s flag-bearers for black economic empowerment have sunk into oblivion after their businesses spectacularly failed or collapsed.

Fidelity Mhlanga

Many local businesspeople who carved out a niche for themselves in the 1990s as leading entrepreneurs in various sectors of the economy such as telecommunications, finance, including banking, transport and manufacturing have failed to last the distance after benefitting from the liberalisation of the economy and government empowerment policies, entailing patronage.

Their demise has been blamed on lavish lifestyles, the harsh economic environment, cheap imports, unavailability of long-term credit and poor policies by the government as well as mismanagement and corruption.

There is widespread belief that if these businesses had flourished, they could have helped ease the country’s unemployment crisis, added much-needed revenue to the fiscus, as well as contribute to Zimbabwe’s economic growth.

Official statistics released by government last year show that more than 4 600 companies shut down since 2011, resulting in the loss of more than 55 400 jobs.

When the economy was liberalised in 1991 through government’s Economic Structural Adjustment Programme (Esap), a new crop of indigenous entrepreneurs emerged and formed organisations such as the Indigenous Business Development Centre (IBDC) to push black empowerment.

IBDC was established in December 1990 to help broaden indigenous participation in the mainstream economy. Its objectives were to work towards achieving sustainable economic growth and stability, expand the economy and create employment opportunities, mainly through the promotion of small-to-medium-sized enterprises (SMEs).

This platform created a solid foundation of success for a group of entrepreneurs such as Mutumwa Mawere, Nicholas Vingirayi, Shingi Mutasa, Delma Lupepe, Daniel Shumba, Ben Mucheche, Nigel Chanakira, Chemist Siziba, Strive Masiyiwa, James Makamba, Jane Mutasa and the late Roger Boka, among others.

Another organisation, the Affirmative Action Group (AAG) was formed in 1994 out of frustration by young black businesspeople who included the late Peter Pamire and Philip Chiyangwa over what they described as the IBDC’s failure to bring a significant increase in the participation of black indigenous businesspeople in the country’s economy.

However, most of these nouveau riche were soon to be swept away by the tide of an imploding economy characterised by hyper-inflation. Only a few of these indigenous entrepreneurs still have thriving businesses — the likes of Masiyiwa and Mutasa have excelled. Other entrepreneurs sunk due to poor corporate governance, mismanagement and corruption.

Masiyiwa’s Econet wireless was the top ranked Zimbabwean company and came 197th in a recent survey of Africa’s top companies by Africa Report. Econet recorded a turnover of close to US$752,7 million, which translated to a net profit of about US$119,4 million for the reviewed 2013 period. Masiyiwa — one of the richest Zimbabweans — featured in Forbes magazine last year as Africa’s 41st richest person with a net worth of US$600 million.

Mutasa owns TA Holdings — the brains behind Joina City — a modern office building in Harare metropolitan area. Like Econet, TA Holdings is listed on the Zimbabwe Stock Exchange with net value of over US$100 million. But most of other entrepreneurs who emerged in 1990s and early 2000s are singing the blues.

Once the envy of many, Ben Mucheche, like other prominent transport operators, is struggling. Mucheche was once the president of the Zimbabwe Rural Transport Operators and boasted of a large fleet of buses, with luxury coaches that have since disappeared from the nation’s roads.

Shumba, TeleAccess owner, was first in Zimbabwe to be awarded a licence to operate a fixed telephone network. His fixed line company was licensed in January 2003, but in December 2005 the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) revoked the licence after it failed to roll out its network.

Shumba blamed the stillbirth to funding problems and the economic downturn experienced in early 2000.

Another big local investor who suffered a huge setback is South African-based Mutumwa Mawere whose businesses were controversially seized by government.

In 1996 he acquired Zimbabwe’s sole asbestos mining company, Shabanie Mashaba Mines, from an English firm, Turner & Newell Plc, based in Manchester. SMM benefitted various sectors of Zimbabwe’s economy, but in 2004 Mawere’s business empire came under government scrutiny and seizure amid allegations he had prejudiced the state of more than Z$300 billion.

ENG Capital’s flamboyant youthful owners, Gilbert Muponda and Nyasha Watyoka fell from grace when they were arrested in 2003 after their asset management company failed to pay creditors. The firm was placed under voluntary liquidation in 2003, while Muponda — who had fled the country — was specified in 2004 before he was de-specified in 2011. He has since returned home.

Economic analyst John Robertson said it was unfortunate that the Zanu PF-led government frustrated indigenous businesspeople by confiscating their investments.

“The party (Zanu PF) took over the mine and threatened to arrest him (Mutumwa) and he responded by leaving the country. The mine was shut down and yet it used to earn the country US$100 million per year. Right now we import asbestos from Brazil,” Robertson said.

Indigenous banks also feature prominently on the scrapyard of failed businesses, mainly due to corporate governance shortcomings, mismanagement and economic problems.

Jeffrey Mzwimbi’s Royal bank surrendered its licence in July 2012 to the central bank after realising it was no longer in a safe and sound financial position as proved by a worsening financial performance.

Nicholas Vingirai, who owned Transnational Holdings, including Intermarket Holdings (IHL), was brought down for allegedly externalising foreign currency.

Farai Rwodzi’s Interfin Bank Limited, Nigel Chanakira’s Kingdom Bank, William Nyemba’s Trust Bank, Patterson Timba’s Renaissance Bank and Obert Mpofu’s Allied bank all crumbled amid allegations of poor corporate governance, among other factors.

Consequently more than 1 000 jobs have been lost in the banking sector alone with the Zimbabwe Banks and Allied Workers Union saying bank closures have become a national crisis requiring urgent attention and action.

Head of EconometerCapital Global (Econometer), Takunda Mugaga, said bank closures were largely attributable to the harsh economic environment buffeting the economy.

“After the liberalisation of the economy, the banking sector was opened up, but the environment is now difficult. The way the economy has melted down has not spared anyone,” Mugaga said, adding: “We cannot blame bank closures on poor corporate governance alone.”

However, reports say banks have choked on loans extended to serial debtors and top executives, with AfrAsia, Allied bank, Interfin and Tetrad’s top 20 debtors owing a combined US$206 million.

Once a service provider to government-controlled mobile network operator NetOne, Chemist Siziba’s Cosmos Cellular is now moribund.

When Siziba formed Cosmos Cellular in 1996, many were of the impression that this was a business for the future. Unfortunately his business fell out of favour with NetOne due to its failure to remit funds, plunging the entrepreneur into bankruptcy.

Delma Lupepe’s business empire has also been decimated, with his Merlin clothing company under provisional judiciary management since 2011. Most of his assets are constantly placed under the hammer as banks stampede to recover their money. Lupepe also used to own flamboyant local premiership side Amazulu Football Club.

David Govere of Harambe Holdings had his property auctioned last year for failing to service a debt of US$112 000.

There are many other local entrepreneurs who have sunk.

Mugaga said competition and stringent loan facilities from banks had also posed a great threat to the sustainability of local companies.

“Zimbabwe is now open to foreign goods, especially from China, which are cheap. This is crowding out the potential market of local companies. Also entrepreneurs find it difficult to get loans from banks unlike before when it was easy to get loans when starting a business,” he said.

Robertson blamed government’s disastrous policies, which he said were hostile to promoting business growth and were suffocating local entrepreneurs.
Government’s claims the informal sector is the “new economy” have been widely dismissed as a desperate attempt to rationalise failure and to find a silver lining in a cloud of economic disaster.