Zim News Blog -NEWS NETWORK

Business Reporter

Zimbabwe could see a rise in mergers and acquisitions (M&A) activity this year, driven by increased foreign investor interest exploring opportunities under the African Continental Free Trade Area (AfCFTA) and the attractiveness of mergers for firms seeking to adapt and remain competitive within this integrated trade environment.

With Zimbabwe’s post-election period underway, a slight increase in local mergers is expected, according to an analysis by the Competition and Tarriff Commission (CTC). 

This follows a period of foreign investor caution, but with the political landscape clearer, they are now poised to explore acquisition opportunities.

“With the commencement of the post-election period, it is expected that there will be a slight uptick in local mergers,” said CTC. 

“Foreign investors, who were previously adopting a ‘wait and see’ approach, are now poised to explore opportunities for acquisitions. Businesses believe that merger transactions in many cases are the best way to keep up with the ever-changing market developments and allow them to transform faster than otherwise feasible,” the commission added.

“Also, as firms continue to realise the changes that are going to come through the African Continental Free Trade Area this can also render mergers attractive for firms to reinvent themselves to stay ahead and relevant in this trade integration agenda.”

According to PwC (2024), global mergers and acquisitions outlook, mergers are anticipated to increase in 2024, signalling an end to one of the worst bear markets in a decade.

This optimism is based on the recent improvement in the global financial markets and the pressing strategic need for companies to adapt and transform business models.

Analysts view mergers and acquisitions as a strategic response to the ever-evolving market.

The transactions can expedite transformation and enhance competitiveness within the AfCFTA.

As firms grapple with the upcoming changes brought by trade integration, they argue mergers are an attractive option for reinvention and staying relevant on the global stage.

However, some analysts, citing a United Nations Conference on Trade and Development (UNCTAD) assessment of nations likely to benefit from AfCFTA, argue that economies like Zimbabwe might require investment in greenfield projects (entirely new businesses) instead. They express skepticism about M&A’s ability to make local firms competitive. Concerns include a potential lack of flexibility in pursuing regional goals due to entrenched, old business management styles.

They suggest newly formed M&A entities might inherit these outdated practices. On top of that, the relatively small size of local companies raises concerns about their ability to compete effectively even after merging, according to these analysts.

A UNCTAD study highlights that Egypt, South Africa, Nigeria and to a lesser extend Algeria are projected to capture around two-thirds of the benefits from AfCFTA.

M&A activity can also be hampered by legacy issues that can cast a long shadow over the merged entity’s operations. These issues can encompass a variety of burdens, such as outstanding debts, unresolved legal issues and a tarnished brand image.

Merging with a company struggling with high debt can strain the new entity’s financial health. Legal entanglements also lead to costly distractions and delays. Similarly, a negative brand reputation can be difficult to shake off, potentially impacting customer perception.

“While mergers and acquisitions are expected to increase, we should not rely on it to boost Zimbabwe’s competitiveness within AfCFTA,” said, an economist specialising in regional trade. “Greenfield projects that embrace innovation and modern management practices could be a more effective strategy in the long run.

“For instance, I see the Manhize steel plant in Chihvu a better investment than ZISCO.”

Dr Charles Rugeza, a trade policy expert, said AfCFTA presented a tremendous opportunity, but for economies like Zimbabwe, it might not be about mergers and acquisitions.

“Instead of simply combining existing companies, we should consider fostering entirely new businesses that embrace innovation and modern management practices from the ground up. This approach could be more effective in creating companies that are truly competitive within the AfCFTA framework. Otherwise, we risk simply perpetuating outdated business models that hinder regional integration efforts.

Currently, the biggest trading partner for Zimbabwe’s trade is South Africa, constituting about 45 percent of the Zimbabwean exports while the country imports about 41 percent of its imports from South Africa. Some of the Zimbabwean exports go to United Arab Emirates (UAE), China and Mozambique.

For Zimbabwe to benefit from the AfCFTA, the country should diversify its trade and markets within the region, according to CTC. This involves identifying target markets, understanding tariff elimination, adapting to trade preferences and diversifying products.

In addition, the country should ensure quality compliance, improving infrastructure, promoting trade facilitation, conducting market research, building stronger trade relations, participating in trade exhibitions, investing in digital platforms and seeking government support.

“By implementing these strategies, Zimbabwe can enhance its competitiveness, reduce reliance on a narrow range of commodities, and capitalise on the opportunities offered by the AfCFTA for economic growth and  sustainability. Africa as a whole should also work on removing non-tariff barriers to trade to ensure goods can move smoothly in the region.

The CTC has identified a key challenge for Zimbabwe as lack of diversification in its export base.

The CTC notes that exports are concentrated in just a few product categories and markets.

To address this, it recommended a strategic shift towards product and market diversification.

Currently, Zimbabwe’s reliance on exporting unprocessed commodities like minerals and agricultural produce contributes to a negative trade balance. To achieve a positive trade balance within Africa and regional economic communities, the CTC emphasises the need for continued import substitution policies.

The strategy should be coupled with efforts to increase exports of value-added and manufactured goods.

By empowering SMEs, Zimbabwe can explore new markets and unlock its full export potential.

Ashton Mutyavaviri

THE current drought has heightened prospects of drinking water shortages for livestock. with the Department of Livestock Production and Development (DLPD) urging farmers to construct watering points at all existing boreholes.

DLPD chief livestock officer Mr Wisdom Gunzvenzve said the move was meant to cut the distances which animals move to get water.

“El Nino is likely to cause water shortages for livestock. We should move to construct watering holes at all boreholes to prevent animals from moving to muddy ponds that might act as death traps.

“The response in terms of water availability might differ from area to area but generally we urge farmers in conjunction with other stakeholders like the Ministry of Lands, Agriculture, Fisheries, Water and Rural Development to work closely,” said Mr Gunzvenzve.

Additionally, Mr Gunzvenzve challenged livestock producers to identify relief grazing sites in their localities, adding that this should be done in conjunction with the veterinary services department to avoid the spread of the diseases.

He also encouraged farmers to harvest and preserve crop residues for future use.

“Let’s harvest and preserve residues for crop like maize, sorghum and all others in the cereal bracket for strategic feeding of livestock during the time of need,” he said.

The Government is also embarking on urea treatment of crop residues and hay. Farmers must take advantage of the process and consult their extension officers for assistance in improving the quality of livestock feed.

He further observed that farmers must avoid feeding their animals with wilting crops, especially sorghum, as they might be dangerous because of nitrate or prussic acid poisoning caused by the premature drying due to wilting.

Meanwhile Government  is  going on with the programme of hay baling with the objective of producing hay bales for needy areas.

Joseph Madzimure-Senior Reporter

THE Zimbabwe Election Observer Mission to the 2024 Presidential Elections of the Russian Federation has declared the election free, fair and credible.

The delegation was led by Zimbabwe Electoral Commission chairperson Justice Priscilla Chigumba.

The observer mission commended the people of the Russian Federation for exercising their right to vote in a peaceful environment. 

The Mission also commended the Central Elections Commission of the Russian Federation (CEC) for managing the election in an efficient and professional manner.

According to the Mission’s report, the Presidential Elections in the Russian Federation observed the basic tenets of democratic elections especially observance of Article 21 of the Universal Declaration of Human Rights which gives people the power to decide on the leadership of the country through periodic elections that are guided by the principles of universal and equal suffrage. 

The Zimbabwean delegation also observed that the general atmosphere was very conducive for elections.

According to the Zimbabwe Election Observer Mission, the general atmosphere was very conducive for elections. The mood was relaxed and cheerful as people were exercising their right to vote. 

“This is a clear sign of a mature democracy in which elections are not perceived as a life and death activity,” reads the report.

The Zimbabwe delegation was in Russia last week to observe the Presidential Elections where incumbent President Vladimir Putin won the elections with a landslide.

Turning to the media, Justice Chigumba said the media played an important role by informing the electorate on electoral processes and activities. 

The mission was satisfied with the conduct of the local media in as far as reporting of elections was concerned.

“Apart from reports by some external media organisations, there is evidence of objective reporting of the activities by the local media that was observed. Our mission is impressed by the steps that the CEC took to ensure that all eligible voters are given an opportunity to exercise their right to vote. The mission takes note of the extended period of voting,” Justice Chigumba said.

 The atmosphere, she said, was conducive for elections. 

“The mood was relaxed and cheerful as people were exercising their right to vote. This is a clear sign of a mature democracy in which elections are not perceived as a life and death activity,” said Justice Chigumba.

She also applauded the CEC for the use of schools and other existing infrastructure which significantly reduced the cost of the election but more importantly made it easy to direct voters to the relevant polling stations. 

The 2024 Russian Presidential election was held over three days from March 15 to 17.

Most polling stations that the Observer Mission visited had high security with security personnel in the vicinity of the polling station and cameras in the polling stations.

 “Polling stations opened at 8am and closed at 8pm for the three days of the election. 

 “While the ballot paper did not have photos of the candidates, every polling station had a poster introducing the candidates. Additionally, every polling station had posters of regulations on the conduct of voters and observers. The posters are a summary of the electoral laws and regulations, and penalties associated with violation of the same,” Justice Chigumba said. 

While actual statistics on voter turnout would be announced by CEC in due course, she said the mission noted that electronic voting appears to be more popular than manual voting. 

In terms of population demographics, Justice Chigumba noted that the elderly appeared to prefer manual voting and most of the youths preferred online voting.