14 Aug

Kenya: Buy-Out Plans Boost Uchumi Shares Despite Drop in Sales


Shares of Uchumi supermarket continued an upward rally at the bourse this week following revelations of possible cash injection by a strategic investor.

While other counters suffered a lull or no-show performance, the retailer shrugged off post-poll jitters to post an impressive Sh4 per share sale for 937,700 shares, up from last Monday’s 3.70 price when it moved 514,100 shares.

On Friday, the government-owned listed firm issued a statement exuding confidence of a impending deal between it and a strategic investor who had pledged to pump in Sh3.5 billion to acquire a stake.

This, they said, would help them settle debts owed to suppliers and property owners in Kenya, Uganda and Tanzania, with part of the proceeds to be used in replenishing stocks.

The announcement on August 5 elicited positive interest in Uchumi shares that witnessed a sharp rise in trading from the 35,300 shares sold on August 3 to August 5’s close of day price of Sh3.45, where 828,400 shares were dealt.

Uchumi’s chief executive Julius Kipng’etich said the cash-strapped chain was seeking between Sh3.5 billion to Sh5 billion of debt capital through issue of convertible debt instrument or outright purchase of equity or a combination of both.

On Friday, Uchumi said the process of bringing on board a new investor would take four months or less, adding that the funds realised would help revamp its operations, stock up shelves, pay suppliers and rebuild customer confidence.

“The transaction process will come to a conclusion within the stipulated time or less, marking the last mile of Uchumi’s recovery,” said the CEO.

While auditors blamed Uchumi’s woes on mismanagement and abuse of office, the retail sector’s market leader Nakumatt has been suffering financial woes that saw it announce plans to bring in an investor to inject an undisclosed sum of money for a 25 per cent equity.

The firm has sought court intervention to avert seizure of its assets to repay rent arrears for two of its stores while workers have been going without salaries, raising fears on its preparedness to handle expansion into East Africa.

The regional operator with 65 stores across Kenya, Tanzania, Uganda and Rwanda has expressed optimism of returning to profitability, but emerging details show all is not well with suppliers, workers and property owners who remain unpaid.

Suppliers Association chairman Kimani Rugendo said talks were ongoing over unpaid deliveries.

In its rescue plan, Uchumi saw Dr Kipng’etich move in, closed its Uganda and Tanzania subsidiaries, as well as several branches in Kenya, and got a not from shareholders to seek injection of fresh capital.

It also sold its Ngong Hyper and Lang’ata Hyper properties on a buy-lease back arrangement.

Source from allAfrica

11 Aug

Zimbabwe: ‘$300m Bond Notes Also Destined for Black Hole’

bond notes

Barclays Bank of Zimbabwe managing director, George Guvamatanga, says the $300 million new set of bond notes to be introduced by the central bank will not help reduce the current cash shortages.

“I think the reality of it is that if we don’t address the fundamental problems in the economy, the new bond notes will just disappear to where the other $200 million went,” he said.

“Even if we have $1 billion in United States dollars and $1 billion in bond notes, they will still continue to disappear if we don’t address the economic fundamentals and people’s rent-seeking behaviour,” Guvamatanga told delegates attending a mobile money and digital conference held in the capital last week.

His comments came a day after the Reserve Bank of Zimbabwe announced that the central bank would soon release $300 million in bond notes, under a facility funded by Egypt-based lender the African Export-Import Bank (Afreximbank), bringing the total value of bond notes in circulation to $500 million.

Market experts, however, say the increase would bring the amount of bond notes in circulation to more than half the physical United States dollars left in the country, raising fears that the bond notes are paving the way for the return of the Zimbabwe dollar, which was withdrawn in 2009 after hyperinflation rendered the local currency useless.

According to central bank statistics, Zimbabwe has about $800 million in physical United States dollars and other foreign currencies in circulation, but the International Monetary Fund estimates that the number of United States dollar notes could be as low as $600 million.

The country has been losing the greenback at an alarming rate since May 2016 to imports, illicit financial outflows and general hoarding of the currency due to its strength against depreciating regional currencies.

In an effort to stimulate production and encourage exports, the central bank late last year introduced the bond notes. The currency — pegged at par with the United States dollar — is now circulating and trading in neighbouring Botswana, Mozambique, Malawi and South Africa’s black markets.

Guvamatanga said the bond notes are “foreign currency” due to their artificial value which is equitable to the greenback and people in neighbouring countries were using them as a store of value.

“Until such a time when we can export more and have the correct pricing or valuation of money, we will continue to have cash crisis,” he added.

An NMB Bank executive, Lloyd Kazunga, concurred with Guvamatanga and said Zimbabwe is suffering a confidence crisis.

“The value of what we are purporting to be money has to be stable. The real value of bond notes must be proven in terms of how they behave when buying in the shops,” he said, giving reference to the current three-tier pricing system of real time gross settlement (RTGS) credit cards and cash.

According to the central bank, the discrepancy or mismatch between the supply and demand for foreign exchange is causing cash shortages, resulting in a thriving parallel market.

“The scarcity premiums or discounts are thus a symptom of excess demand for foreign exchange. It is, therefore, not the mediums of exchange — Unites States dollar cash, bond notes, plastic money or the RTGS — that cause premiums in the parallel markets or the multi-pricing system,” RBZ governor John Mangudya said.

“It is the disequilibrium or mismatch between the domestic quantity of money (local dollars) and the supply of foreign exchange (foreign dollars) that cause cash shortages and, resultantly, the scarcity premiums and the multi-pricing system.

“This means that the market views the intrinsic value of the dollar in Zimbabwe being lower than the foreign dollar. In coming up with solutions to cash shortages, focus should therefore be on the sources of money creation and its utilisation and not on the mediums of exchange,” the central bank chief said.

A CABS executive Godwin Kanongovere said the country’s academia must develop permanent cash solutions that are relevant to the current situation.

“The present cash crisis presents opportunities for us as a nation to utilise technology and find ways to develop appropriate applications to meet our needs,” Kanongovere said.

via allafrica