By Funny Hudzerema

HARARE – Government has released $500 000 to facili-tate the hosting of this year’s Sanganai/Hlanganani World Tourism Expo.

Earlier indications from the Zimbabwe Tourism Authority (ZTA) was that the tourism expo could be postponed or even cancelled if the body failed to access funding.

This year’s edition of the Sanganai/ Hlanganani World Tourism Expo is going to be hosted in Bulawayo from June 16 to 18, 2016.

Addressing a press conference today, acting ZTA chief exec-utive Mr Givemore Chidzidzi

News Update as @ 1530 hours, Friday 03 June 2016

Feedback: bh24admin@zimpapers.co.zwEmail: bh24feedback@zimpapers.co.zw

Government rescues 2016 Sanganai/Hlanganani World Tourism Expo

said all the resources for the expo are now in place with a number of institutions having confirmed participation.

“Government has injected $500 000 to support the San-ganai/ Hlanganani expo for the event to be a success after we faced some finance chal-lenges,” said Mr Chidzidzi.

“Since 2008, when Sanganai/ Hlanganani expo was adopted as a national event it has been largely funded by the Govern-ment. Indeed at some point the Authority was contemplat-ing postponing the event if not cancelling it indefinitely but gladly our continued engage-ment efforts with the Gov-ernment (Ministry of Finance) have yielded positive results,” he said.

According to the ZTA, 163 tourism companies have registered to participate as exhibitors an increase from last year’s edition where 128 companies participated and 19 international journalists from

countries such as Nigeria, South Africa, USA, and the United Kingdom and Spain have registered to cover the event.

“The exhibitors are in various categories such as accom-modation, tour operations, airlines, publicity associa-tions, NGOs and Government institutions among others. So far we have 28 foreign exhib-itors from countries such as Botswana, SA, Uganda, Kenya, India and Indonesia,” he said.

He added that so far 128 international buyers from countries like Europe notably UK, Spain and Germany have

confirmed participation, while others will come from markets in the Americas, China, Asia & Pacific, Africa and the Middle East, first group of buyers is expected to jet in on 06 June 2016.

Mr Chidzidzi added that the showcase will allow small travel and tour operators who are unable to go outside and market the country at various travel shows, a chance to do it from their own backyard.

He said small scale operators in Bulawayo would be allowed to exhibit at Sanganai/Hlan-ganani at no cost.●

2 NEWS

Mr Chidzidzi

BH243

BH244

BH24 Reporter

HARARE - Farm implements manufacturer, Zimplow Holdings Ltd (Zimplow)’s operating loss for the first four months of the year worsened to $1,68 million from a loss of $1,24 million dur-ing the same period last year.

Group CEO Mr Mark Hulett told the company’s shareholders yesterday that the depressed performance was due to a decline in revenues during the period under review as most of the firm’s strategic business units (SBUs) recorded lower business during the period.

“The drought has weakened demand in the region and the late start of the tobacco market-ing season led to our revenues falling by 40 percent to $4,6 million from $7,7 million which was achieved the same period last year.

“With a generally subdued per-formance in volumes the group’s operating loss for the four months increased by 36 percent

to a loss of $1,68 million from a loss of $1,24 million during the same period last year,” said Mr Hullet. In terms of the respec-tive performances of Zimplow’s SBUs during the period under review, the CEO said Farmec was affected by the delay in the opening of the auction floors, the drought and the fact that the big tobacco companies are not giving capex to growers this year.

As a result of this volumes for Farmec were down 40 per-cent compared to the same period last year. In respect of the future prospects of the Farmec business Mr Hullet said a number of strategies already in place would put the busi-ness in good stead as the year proceeds.

“Despite the poor performance we have got some turnaround strategies; firstly the renewal of the Massey Ferguson deal-ership for next five years as new management in the group reviewed that the idea is a

positive idea for the group going forward. Secondly the more food programme is moving positively this is the programme between the Government and the Brazil-ian government,” he said.

He added that the appointment of the new Massey Ferguson qualified parts and service man-ager to the Zimplow head office is a positive move.

“The centralisation of operations which reduce costs and increase efficiencies in the business all of these strategies will play a big role in our turn around strate-gies which we believe will bring positive results in the second half. The generator power business recorded a significant drop in volumes during the first four months, largely due to the fact that electricity supply has unexpectedly stabilised to April 2016.

“Fortunately the units and parts division has performed very strongly above budgets and ahead of last year’s numbers….

the unit has recorded a profit of $100 000 as at the end of April,” he said.

In terms of the Mealie Brand division, Mr Hullet said animal drawn implements continue to record poor performance with volumes falling 47 percent com-pared to the same period last year. At Barzem, earth-moving and handling equipment volume continue to be depressed again due to lack of liquidity in the country, depressed commodity prices.

“It’s very apparent that these two factors has influenced our customers to choose fleet main-tenance over fleet replacement and as a result volumes have declined by 60 percent com-pared to the prior period last year,” said the CEO.

Going forward the group is look-ing to restructure to a “much leaner model”, and management is working hard to extract cash tied up in debt and invento-ries.●

Zimplow operating loss worsens in 4-months to April

5 NEWS

BH246

BH247

By Funny Hudzerema

HARARE – First Mutual Wealth Management - a new subsidiary of First Mutual Holdings – says it is targeting savings from the informal sector and small and medium-sized enterprises (SMEs) by encouraging savings from as little as $20.

First Mutual Wealth Management general manager Mr Max Ncube said the company was cognisant of the fact the economy was now largely dominated by the infor-mal sector.

“The economy has been infor-malised; in other words we used

to have big business now we have smaller business and we believe that this our big market.

“We believe that these smaller markets have individuals who are doing their small business and they can save their contri-butions as low as $20 per month which is really meant to ensure that even a person who sells bananas can decide to save,” he said. He was speaking at the launch of the First Mutual Wealth Management Company this morning.

“The conditions of saving are very flexible to an extend that a person can access the savings

within 24 hours and through that way it will encourage people to save. “We are going to create awareness through advertising, door to door campaigns, mar-keting to companies and we are also targeting groupings which include churches and burial soci-eties where people are groupings and this will reduce the costs than addressing people individ-ually,” he said. The First Mutual Wealth Management Company has a shareholder capital of $663 000, total asset base of $834 000 and funds under manage-ment of $124 million.

Speaking at the same event, Securities and Exchange Com-

mission of Zimbabwe chairper-son Mrs Willa Bonyongwe said there is need to create a culture of savings in the country despite economic hardships the country is experiencing.

“While as a country we are facing economic challenges we still need to plan for the future and promote a culture of savings through asset manage-ment companies. There is need to create products which can assist towards economic growth through assert management from all sectors of the economy through creating saving plat-forms,” she said.●

8 NEWS

First Mutual Wealth Management targets informal sector, low income earners

BH249

BH24 Reporter

HARARE-Tobacco farmers have so far accrued $312 million from the sale of 107, 8 million kilogrammes of Virginia tobacco since the tobacco selling season began on March 30, latest Tobacco Industry and Marketing Board (TIMB) statistics show.

The 107, 8 million kg of tobacco were sold both on the auction and contract floors.

The TIMB statistics show

that a total of 21 million kg of tobacco worth $53 million was sold at the auction floors while 86, 8 million kg worth $259,1 million was sold at the contract floors.

The tobacco sold is 20, 79 percent more than what was sold during the comparable period last year.

A total of 89,3million kg worth $258 million had been sold during the same period last year.

The average price of tobacco

at auction floors is currently $2, 52 per kg while the con-tracted crop is being bought at an average price of $2, 98 per kg reflecting an increase of 0, 12 percent from the prior comparable period.

TIMB said the top price for the contract floors is cur-rently $6, 25 per kg while at the auction floors it was $4, 99 per kg. The lowest price that has been recorded so far is $0, 10 per kg.

A total of 6,09 bales have so far been rejected due to poor

quality and poor packaging this season, compared to 9 percent rejected the same period last year.

This season tobacco volumes are expected to decline by 20 percent due to the El Nino induced drought which affected the crop.

Meanwhile the 2016 tobacco marketing season is at its peak with the number of bales coming to the auction floors is expected to decline in the upcoming weeks.●

10 NEWS

Tobacco farmers sell $312m worth of golden leaf

02 03

ADD TO CARTSave big on selected

Products of your choice

PAYMENTYou can purchase

whenever, wherever using:

DELIVERYSpend $30 or moreon your purchases

and get freedelivery

01 Hello Convenience

www.hammerandtongues.com

BIG CONVENIENCE+BIG SAVINGS+BIG OPPORTUNITIES = BIG HAPPINESS

SHOP ONLINE!!

HARARE -The mainstream industrial index dropped 0.13 (or 0, 12 percent) on a week-on-week basis, despite trading unchanged today.

The industrial index stood at yesterday’s 104.30 points.

On the upside giant insurer Old Mutual and Meikles rose $0, 0101 and $0, 0003 to close at $2, 2351 and $0, 078, respectively.

But beverages giant Delta, telecoms giant Econet, Simb-isa, PPC, Hippo, Dairibord and starafrica corporation all traded unchanged at $0, 7000, $0, 2300, $0, 1400, $0, 6500, $0, 2000, $0, 0550 and $0, 0085 respectively.

Willdale was the only faller, down $0, 0003 to close at $0, 0015.

The mining index gained 0.23

to 25.77 in today’s trades as RioZim rose $0, 0030 to close at $0, 1640.

Bindura, Falgold and Hwange maintained previous price levels at $0, 0120, $0, 0050 and $0, 0300 respectively.

On a week-on-week basis, the mining index gained 0.23. (or 0,90 percent).

. BH24 Reporter ●

Industrials unchanged

11 ZSE

MovERS CHANGE TodAy PRICE USC SHAKERS CHANGE TodAy PRICE USC

RIOZIM 1.86 16.40 WILLDALE -0.03 0.15

OLD MUTUAL 0.45 223.51

Meikles 0.38 7.80

INdEx PREvIoUS TodAy MovE CHANGE

INDUSTRIAL 104.30 104.30 +0.00 points +0.00%

MINING 25.54 25.77 +0.23 POINTS +0.90%

12 ZSE TABlES

ZSE

INdICES

Stock Exchange

Previous

today

13 dIARy oF EvENTS

The black arrow indicate level of load shedding across the country.

PoWER GENERATIoN STATS

Gen Station

02 June 2016

Energy

(Megawatts)

Hwange 302 MW

Kariba 285 MW

Harare 0 MW

Munyati 30 MW

Bulawayo 23 MW

Imports 0 - 400 MW

Total 1205 MW

9 JUNE -- First Mutual Holdings Annual General Meeting; Place: Royal Harare Golf Club, Harare; Time: 14:30hrs

15 JUNE 2016 -- Rainbow Tourism Group 7th Annual General Meeting; Time: Jacaranda Rooms 2 and 3 at the Rainbow Tour-ism Hotel and Conference Centre, 1 Pennefather Avenue, Samora Machel Avenue West, Harare; Time: 1200 hours...

16 JUNE 2016 -- RioZim 60th Annual General Meeting; Place: No. 1 Kenilworth Road, Highlands, Harare; Time: 10.30 hours...

22 JUNE 2016 -- Zimre Holdings limited 18th Annual General Meeting; Place: NICoZdIAMoNd Auditorium, 7th Floor Insur-ance Centre, 30 Samora Machel Avenue, Harare; Time: 1430 hours...

22 JUNE 2016 -- GB Holdings limited Annual General Meeting; Place: Cernol Chemicals Boardroom, 111 dagenham Road, Wil-lowvale, Harare; Time: 11.30 hours...

23 JUNE 2016 -- Zimpapers 89th Annual General Meeting; Place: Zimpapers ltd Boardroom, Sixth Floor Herald House, Cnr. G. Silundika/Sam Nujoma Street, Harare; Time: 1200hrs…

THE BH24 dIARy

JoHANNESBURG - I l lovo Sugar reported a 36,5 per-cent drop in fu l l -year prof i t on Fr iday as lower export pr ices of the sweetener and a severe drought in south-ern Afr ica weighed on i ts per formance.

Headl ine earn ings per share (EPS) for the year to March fe l l to 113,6 cents in the year to the end of March, f rom 179 cents a year ear l ier.

Headl ine EPS is the main prof i t measure in South Afr ica and str ips out cer-ta in one-of f i tems.

"Direct and ind i rect drought impacts across a l l s ix countr ies of oper-at ion, currency vo lat i l i ty and h igh interest rates in var ious jur isd ic t ions, and reduc ing domest ic sa les demand in Malawi , as wel l as on-go ing pressure on sugar export revenues, combined to weigh heav i ly on the group's resu l ts ," the company sa id.

I l lovo, which operates in South Afr ica, Mozambique, Tanzania, Malawi , Zambia and Swaz i land, sa id the prof i t drop was wi th in gu id-ance. – Reuters●

14

Rand steady, but rating review poses risk

Illovo Sugar FY profit drops 36,5 pct as drought hits earnings

REGIoNAl NEWS

JoHANNESBURG - South Africa's rand was flat against the dollar in early Friday trade, with dealers and analysts expecting caution to prevail ahead of a rating review by Standard & Poor's which could result in a sub-investment rating if unfavourable.

The JSE securities exchange's Top-40 futures index was up 0,42 percent, suggesting the local bourse would open a touch firmer at 0700 GMT.

The rand traded at 15,5750 versus the dollar by 0646 GMT, unchanged from Thursday's New York close.

Government bonds, how-ever, edged slightly higher, and the yield on debt maturing in 2026 fell 3 basis points to 9,29 per-cent.

Investors were bracing for a verdict from S&P, which has expressed concern about its dismal growth outlook and

heavy reliance on capital flows.

The review is expected after South Africa's bond and stock markets are closed for the day, although the rand will stil l be trading on the global arena.

"Risk is for an adverse reaction in the currency market in a very il l iquid time of day/week," Stand-ard Bank trader Oliver Alwar said in a note to clients.

"I would advise caution today. There may be oppor-tunities, but be aware of the large risk."

Investors also awaited US jobs data later on Friday which could add pressure on high yielding but riskier emerging market assets if it backs the case for interest rates to rise in the world's biggest economy.

- Reuters●

Brent crude held its gains near $50 a barrel as inves-tors shrugged off OPEC’s decision to stick to its policy of unfettered output amid signs the global market is re-balancing.

Futures were little changed in London after closing above $50 for the first time in almost seven months. While members of the Organisa-tion of Petroleum Exporting Countries rejected a proposal to adopt a new production ceiling, ministers were united in their optimistic outlook for markets. US output declined for a 12th week and crude stockpiles dropped, according to a report from the Energy Information Administration.

Brent has surged almost 80 percent from a 12-year low in January amid disruptions from Nigeria to Venezuela and as US output declines under price pressure from OPEC’s policy of sustain-ing production. The group needs more time to come up with a new output ceiling, outgoing Secretary-General Abdalla El-Badri said after

the meeting in Vienna, add-ing that it ’s hard to find a target when Iranian supply is rising and significant Libyan volumes are halted.

“The consensus in the market is that we will see balance sometime before the end of 2016,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, said by phone. “Although no agree-ment was reached by OPEC, they’re edging toward being able to have a civil discus-sion again. The ongoing evi-dence that demand is picking up in the US and that there is a supply side response, is

keeping the market sup-ported.”

output Ceiling

Brent for August settle-ment was at $50,11 a barrel on the London-based ICE Futures Europe exchange, up 7 cents, at 8:13 a.m. in Lon-don. Prices closed Thursday above $50 for the first time since Nov. 3. The contract is up 1,6 percent for the week, heading for a fourth weekly advance. The global benchmark crude traded at a premium of 42 cents to West Texas Intermediate.

WTI for July delivery was at $49,21 a barrel on the New York Mercantile Exchange, up 4 cents. The contract rose 16 cents to close at $49,17 on Thursday, the first increase in five sessions. Total volume traded was about 45 percent below the 100-day average.

Before the meeting, Saudi Arabia had floated the idea of restoring a group pro-duction ceiling as a gesture to show it had no plans to flood the market and it was

serious about making the gathering a success. Iran has rejected any cap on output as it restores volumes follow-ing the removal of sanctions in January.

“This re-balancing is already under way,” John Driscoll, chief strategist at JTD Energy Services Pte in Singapore, said in a Bloomberg Tele-vision interview. “We are entering the peak summer demand season. There are some supports for this $50 level at the present time.”

oPEC and oil-market news:

• OPEC appoints Nigeria’s Mohammed Barkindo new secretary-general.

• Prices will keep recovering and the market is in good shape, Saudi Arabia’s Oil Minister Khalid Al-Falih said in Vienna.

• US crude stockpiles dropped by 1,37 million bar-rels last week, the EIA said Thursday.

– Bloomberg●

15

oil shrugs off oPEC decision to skip curb as US output shrinks

INTERNATIoNAl NEWS

By Ceri Jones

For most of this decade, Africa has displayed similar charac-teristics to China and India in the run-up to their boom years with several countries achieving multi-year spurts of growth of in excess of 7 percent. Many countries possess abundant natural resources and have young and rapidly urbanising populations with rising purchas-ing power. African countries, in the main, are also more politically stable than in living memory and there have been sustained improvements in cor-porate governance.

For the most part, however, the high expectations for the conti-nent’s growth have so far failed to materialise. From a relatively low aggregate level of eco-nomic development (from which rapid growth is achievable) the average growth rate of African countries was 4,4 percent over the past 10 years, according to African Economic Outlook.

For the most part, however, high expectations for the con-

tinent’s growth have failed to materialise. Growth in Africa is at its slowest for sixteen years, and the IMF recently cut its growth forecasts by more than any other country bar Brazil. For sub-Saharan Africa it fore-casts growth of 4 percent and 4,7 percent for 2016 and 2017 respectively, and for South Africa 0,7 percent and 1,8 per-cent. This primarily reflects the adjustment to lower commodity prices and higher borrowing

costs, which are weighing heav-ily on small and large nations alike.

Nonetheless, Africa remains one of the preferred frontier markets for investment oppor-tunities – at least according a PwC report, The Africa Business Agenda, based on the insights of 153 CEOs and public sector leaders across the continent. The 2016 report, published in May, reveals the huge efforts

African businesses are putting into ramping up their strategies to stimulate growth in a difficult global environment.

Regulatory support

Governments have also been looking at ways of generating alternative revenues to com-pensate for drops in crude oil and other commodity prices. Prominent among these are initiatives to promote best prac-tice in asset management and financial product distribution which, especially in the context of flat global investment mar-kets, are designed to encourage foreign inflows.

For example, South Africa’s Financial Services Board (FSB) has extended the Collective Investment Scheme Control Act (2002) to hedge funds. The legislation beefs up compliance and safeguards for hedge funds such as requiring a trustee on either side of a transaction and for every hedge fund to be reg-istered with an objective, simi-lar to the Key Investor Infor-mation requirements for UCITS

16 analysis16 ANAlySIS

Africa's untapped potential

17 analysis17 ANAlySIS

funds. The move is expected to encourage pension funds and others to invest.

Applicants were initially slow to apply, but in April the FSB announced that 188 hedge fund portfolios had received collective investment scheme approval and a further 31 portfolios had obtained provi-sional approval. Additionally, a number of unit trust funds are expected to register so they can operate as so-called hedge funds lite.

There is also pressure on fees. Regulators are driving down charges on retail financial products. Likewise, wealth managers and pension funds are looking at collective invest-ment structures as platforms to deliver lower fee levels.

The continent’s $1trn pension fund market has been par-ticularly criticised for its high charges, complex policy condi-tions and exit penalties. In July 2015 South Africa’s National Treasury responded by issuing

draft regulations encouraging boards of trustees to consider low-cost passive funds as the default choice.

This has given rise to renewed interest in ETFs in South Africa, according to Duncan Smith, senior sales and relationship manager, emerging markets at Societe Generale. He says the firm’s Johannesburg branch, as a trustee for various ETF man-agement companies, has seen some providers using broad-based indices while others are manufacturing their own, often adopting a socially responsible investment (SRI) overlay.

Market initiatives

Stock markets across the region, of course, vary enor-mously. The $100bn South African stock market dwarfs its neighbours, while second-tier markets such as Egypt, Nigeria and Morocco fall in the $30-100bn range, while third-tier ones such as Uganda, Kenya, Botswana and Zambia, at $1-6bn, have scarcely begun to

be exploited.

The larger markets are leading the way in making themselves more attractive to international investors. The Johannesburg Stock Exchange is migrating to T+3 mid-year, and is also reshaping the bond platform of its CSD, Strate.

A collaboration between the London and Nigerian markets should boost liquidity and turnover. Africa’s most popu-lous country also implemented securities lending regulation, in January, and launched its first sovereign sukuk.

Countries such as Ghana, the Ivory Coast and Morocco are also trialling securities lending with local investors, ahead of opening up the practice for foreign participants.

Specialist Africa asset manag-ers that would not typically be considered retail are looking at setting up UCITS vehicles in Luxembourg and Dublin to attract international money, but many firms are watching and

waiting before committing to UCITS platforms as this is not a cheap exercise, says one local banker who preferred to remain anonymous.

As confidence grows, though, foreign investors are pushing deeper for opportunities. "Local regulation in Africa is evolving and encouraging pension funds and institutions to look beyond the usual oil, gas and bank stocks, and is opening up mid-cap stocks such as consumer staples as well as less con-ventional finance and resource stocks," says Steven Shultz, head, investments and savings marketing at Momentum.

Favoured assets

Several firms are also launching niche funds in private equity, property, IT, and renewables as well as infrastructure, where there is typically a particu-lar focus on power, energy or transport.

Agriculture is a particularly hot sector. Half of the world's uncultivated land suitable for

18 analysis18 ANAlySIS

growing food crops is in Africa but the continent generates only 10% of global agricultural output – but with annual pop-ulation growth of 2,7 percent food demand is expected to double every 30 years. Aurorae, an agri-focused fund backed by Axa Ventures, announced a $10m fund in the first quarter.

Fixed income has also seen a massive uptick, partly because raw returns are attractive com-pared with other markets but also because they are not par-ticularly correlated with other sources of bond returns.

"African fixed income markets are certainly not perfectly cor-related with those in developed markets," says Mr Shultz. "In terms of returns, there is a massive variance with South African government-issued bonds yielding around 9.3% on local currency denomi-nated ten-year bonds, against an inflation backdrop of 6,2 percent.

In the case of US dollar-denom-inated debt, annualised returns

of around 4,9 percent are achievable over a similar ten-year term. Investor motivation varies but is primarily a combi-nation of attractive returns and diversification at a time when broad asset classes are increas-ingly correlated."

As the continent’s investment markets mature, western insti-tutions are increasingly invest-ing in the region’s financial services firms. In January, for example, Prudential Financial expanded its footprint in Africa with a $350m partnership with LeapFrog Investments, target-ing life insurance companies in larger economies on the conti-nent, including Ghana, Kenya and Nigeria.

Credit downgrade

Short term, the biggest blot on the landscape is the potential downgrade of South African debt, possibly as early as June, and its impact on South Afri-ca’s inclusion in bond indexes around the world. The top 40 stocks in Johannesburg are also traded in the UK so a down-

grade might encourage inves-tors to trade offshore rather than onshore.

"It is particularly dangerous as many global institutions and hedge funds have mandates stipulating investment grade holdings, and it is just at the time we should be ramping up investment," adds Shultz. "The ratings agencies have been exceptionally patient and level-headed, but they are now looking for plans to be imple-mented.

If plans such as fiscal consoli-dation and proactive measures to encourage economic growth are successfully implemented, it may allow us to escape the downside, however any slipping could be perceived negatively and would certainly contribute to a downgrading of South Afri-ca’s credit rating."

Certainly, foreign investment flows have not proven sticky to date – as Thomson Reuters data (see graph) shows.

"Private wealth funds investing

in Africa tend to be tacti-cal and will typically be an all-benchmark bet, very often as a satellite to a core port-folio, and this makes these allocations inherently volatile," says Peter Preisler, director of investment services, head of Europe, Middle East & Africa at T. Rowe Price. "But there is no doubt that government and big pension funds want to diver-sify. Some of the newly created sovereign funds from nations such as Rwanda and Ghana will almost be development funds to support infrastructure build, which is attractive."

The flipside is that "local institutional investors such as pension funds are looking to invest a portion of their portfo-lios out of the country and this shift will help to stabilise the market," adds Preisler. "Apart from improving diversification, in recent months investing outside the country has also been highly beneficial in terms of currency movements."

– GlobalInvestor●