THE Zambia Privatization Agency (ZPA) is pleased to announce that the Minister of Finance, the Honourable RDS Penza has signed the Sale and Purchase Agreement with Mr. R Dhawan, Managing Director of Tata Zambia Limited. Tata Zambia Limited has purchased 100 percent of the shares owned by the Government of the Republic of Zambia (GRZ) representing Luangwa Industries Limited's operations for a total package value of US $1,679,876.20, inclusive of committed working capital expenditures.
Tata Zambia Limited is a subsidiary of Tata Exports Limited, a member of Tata Group of Companies. The Tata Group of Companies represent an aggregate of Indian industry with total assets of over US$3 billion, a complement of over 350,000 employees and an annual output of goods and services amounting to over US$8 billion.
The manufacturing companies in the group include Tata Steel, Tata Engineering and Locomotive Company, Tata Exports Limited, Tata BP Solar, The Indian Hotels Company Limited and Tata Zambia Limited.
Tata Zambia Limited is a holding company for such companies as Tata Farms and Foods, Townap Textiles Zambia Limited, Makumbi Agricultural and Technical Services Limited and Pamodzi Hotel which has recently been acquired under the Zambian privatisation programme.
Tata Zambia Limited is a leading name in the engineering, agriculture, hotels and textile industries. The acquisition by Tata Zambia Limited of the bicycle plant in Chipata and Lusaka marks the final stage in the Tata Zambia objective of establishing Luangwa Industries Limited as a major manufacturer of quality bicycles to cater for both domestic as well as export markets.
Tata Zambia Limited has managed Luangwa Industries Limited under an agreement between them and ZIMCO(in liquidation).
Under the terms of the Management Agreement Tata (Z) Limited has been responsible for:
(a) all cash losses incurred by Luangwa Industries Limited during the tenancy of the Agreement
(b) provision of "Know how" to Luangwa Industries Limited
(c) secondment, recruitment and training of personnel
(d) providing working capital as and when required by Luangwa Industries Limited at a commercial rate of interest.
The Management contract which has been renewed from time to time has been in place for the last 8 years. The posts of General Manager and Finance Manager are held by Tata (Z) Limited personnel on secondment basis. Other management team members are Zambian nationals with track records and experience in their respective professions. Tata Zambia Limited was the successful bidder in an array of two other aspirants which included FC Ndhlovu / Management Team and Mr. Goodward Mulubwa.
Tata Zambia Limited's bid was superior both in terms of payment as well as the qualitative factors relating to both relevant experience and ability to drastically improve the operations and capacity utilization of Luangwa Industries Limited. Tata Zambia Limited is also poised to improve the export earnings capacity of Luangwa Industries Limited.
The ZPA Board gave a negotiation mandate to the Luangwa Industries negotiation team aimed at ensuring that the company was sold as a going concern, with specific guarantees for reinvestment into the company to ensure that such a manufacturing resource was protected.
In addition to the purchase consideration, the guarantees include commitments for;
(i) working capital expenditure;
(ii) no major redundancies of non-managerial staff;
(iii) the Purchaser to use its reasonable endeavour to make appropriate assessment of the present management team before effecting any restructuring exercise;
The total package value of the sale is outlined below:
| Category | Amount in US$ |
|---|---|
| Legally binding working capital support | 1,000,000.00 |
| Legally binding capital expenditure pledge | 200,000.00 |
| Privatization Revenue Account | 479,876.20 |
| Total Package Value | 1,679,876.20 |
Luangwa Industries Limited is the sole manufacturer of bicycles in Zambia. The Company sells its products to private and state owned institutions and individuals throughout Zambia.
The negotiations were conducted by an independent negotiator appointed by the ZPA Board as required by the Privatization Act of 1992, and in the interests of transparency. Mr. Charles Sichangwa, Managing Director of Wits Limited was the Negotiation Team Chairman and Mr. Mutembo Nchito of Nchito and Nchito as Negotiation Team Lawyer.
The negotiation team is satisfied that the legally binding business plan and investment pledge of US $1,200,000 in addition to the cash consideration of US$479,876.20 submitted by Tata Zambia are reasonably achievable. As an additional measure of transparency procedures, the Sale Agreement was reviewed by the Attorney General in his capacity as Chief Legal Advisor to the GRZ.
The total package value agreed to with Tata Zambia Limited is in line with the value of Luangwa Industries Limited recommended by Contact Management Services as part of their formal analysis.
The ZPA is pleased with the increasing level of confidence being shown by local and international companies in the future of Zambia and hope this will go a long way in rejuvenating the growth of the economy of Zambia. Privatization is leading the investment surge and the ZPA is hopeful that this transaction will attract even more investment in Zambia.
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