Venture Financing in Zimbabwe - Tanaka Mudavanhu

Venture Finance In

Zimbabwe

By

Tanaka Mudavanhu

FIN6305 Fall 2015

Where is Zimbabwe?

Economic Trends

The 2008 global economic crises, an eye popping inflation rate of 25 billion percent in November 2008 and a land reform program created economic instability. By 2010, the Zimbabwean economy had shrunk by half.

In 2009 a basket of foreign currencies (Renminbi, Rupee, Rand, Pula, Pound, Euro and Dollar) became legal tender with the US dollar representing 90% of economic transactions by 2015.

Currency

The Reserve Bank of Zimbabwe’s discount rate is at 7.5% (2015). Interest rates on short term loans by commercial banks range from 20% to 40% (2015). The long term loan market has dried out due to high default rates. The current inflation rate is 3.5 % (USD) (2015).

Bank Lending

• Population 14m (2014), • GDP $15b (2014) • GDP Growth 4-6 % (2015 to 2010) • Per Capita Income $2100 (2014). • Literacy rate is one of the highest

in Africa at 90%. • Unemployment rate, 90% (2015).

Country Statistics

History of Venture Financing

Present day Zimbabwe came about from a venture financing transaction. Cecil John Rhodes’s mining company, DeBeers Diamonds received seed funding from N.M Rothschild’s & Sons in 1887. The success of his company (billions in current dollar terms) and the imperial factor that existed at the time, enabled him to collaborate with the British government to acquire mining concessions on whose vast lands Zimbabwe was founded.

Notable Venture Capital Firms in Zimbabwe

• Matamba Anonaka Technology Holdings • Takura Capital• GroZim • Venture Capital Company of Zimbabwe

Current Venture Financing Environment

Zimbabwean individuals and sovereign wealth funds from the Middle East and the Far East.Participation by Venture Capital firms in Zimbabwe is limited, less than 1% of GDP. Average Industry Targets • Target IRR 25%• Hurdle Rate 11%• Management Fees 2%• Carried Interest 20%• Executive Management Contribution 1%

Annual Investments Returns

Venture Financing Recommendations

The country has had an unstable regulatory political environment for the past 15 years. This instability is projected to come to an end in the next five years, creating conditions suitable for investors with a long term perspective.

Asset prices, financial and physical, are currently undervalued and provide potential for leveraged buyout companies. New ideas and technologies in the ICT sector, mining and agriculture present low hanging fruits for venture capital firms in Zimbabwe.

Low Hanging Fruit

Thank You !