The Zambia Privatisation Agency (ZPA) is pleased to announce that the Minister of Finance Honourable R D S Penza has signed the Agreement for the sale of ZIMCO's 51% shareholding in National Milling Company Limited (NMC) to Erabas BV and Namib Mills Pty. ZIMCO's shareholding has been sold for US$ 400,000 in addition to taking over all of NMC's liabilities of approximately US$10.6 million.
Erabas BV of Netherlands is a wholly owned subsidiary of Anglo American Corporation (AAC) Limited South Africa Limited. Namib Mills Pty of South Africa is major player in the milling industry in Southern Africa with milling operations in Namibia, Botswana, Mozambique, Malawi etc.
NMC is Zambia's largest maize, wheat and stockfeed milling company headquartered in Lusaka, with operations in Kabwe, Livingstone and Lusaka. The privatisation of NMC hopefully heralds a new era for the company and offers relief from its severe financial losses and operational problems.
The new financing required to augment the current operations of the company is in the region of US$ 2 million. NMC is now positioned to become a major regional competitor and re-establish its market position as Zambia's leading milling company.
It is also hoped that the management initiatives of Erabas BV and Namib Mills will increase the production and profitability and thereby increase GRZ's future tax revenues.
Erabas BV and Dalgety Spillers of the United Kingdom were the minority shareholders of the company each with a 24.5% shareholding giving them a joint 49% shareholding and had pre-emptive rights over ZIMCO's entire shareholding which meant that the GRZ shares had to be first offered to the minority shareholders.
Dalgety opted not to exercise their preemptive rights over their portion of shares and will continue to hold 24.5% shares in NMC. Erabas BV brought Namib Mills as their technical and equity partners to manage the operations of NMC.
We understand that negotiations are currently on-going between Erabas, Dalgety and Namib Mills for the purchase of Dalgety's 24.5% shareholding in the company in this is expected to be completed by the end of December 1996.
NMC was in Tranche 3 of the privatisation programme and negotiations with the minority shareholders commenced in mid 1995. The length of time taken to complete the transaction reflects the complexity of the issues that had to be resolved and the corporate procedures normally followed by international companies of AAC's size.
Additionally, the requirements for transparency required the review of the sales agreement by the Attorney General in his capacity as the GRZ's Chief Legal Advisor. The outcome has been a carefully structured deal capable of standing the test of time.
The price of ZIMCO's shares is within the valuation range conducted by independent valuers Coopers and Lybrand.
In accordance with the transparency procedures laid down by the Privatisation Act 1992 and the ZPA Board, the negotiation of the transaction was undertaken by Price Waterhouse represented by Mr Nick Allen as independent negotiator.
Mr Allen relied extensively on the valuation conducted by independent valuers and their own independent reviews of the business. The ZPA extends heartfelt thanks to the efforts put in by Mr Allen and his team. The company's turnover and loss for the financial year ended 31 March 1996 amounted to K43.1 billion and K 2.1 billion respectively.
The company had run up liabilities exceeding K 13.3 billion and as at
that date was rapidly losing its market share to cheaper & lower quality
domestic & international competition. NMC's board of directors elected
to place the company under a management contract with Namib Mills to manage
the company prior to privatisation and forestall a possible closure of
the business by its creditors.
At the time of the management contract, the company was technically
insolvent and unable to meet its obligations. The changed financial situation
of the company required the ZPA to engineer an optimum sale which avoided
a much deeper crisis.
Due to deepening financial losses and increasing operating costs, a post-privatisation rationalisation of labour will be conducted and will initially result in a reduction of jobs. Employees declared redundant, will be paid their rightful benefits by NMC.
All the employees that continue in employment will carry forward their service contracts on conditions of service which are substantially the same and will receive their future benefits as they qualify.
However, the ZPA is confident that there will be a substantial increase in Zambian employment, management and technical opportunities over the next 5 years. Erabas and Namib Mills intend to operate the company in a manner that will lead to increased capacity utilisation, improved market share and promotion of exports.
Zambians will be proud to note that the milling industry has recently opened up to competition and a number of competitors to NMC have recently been privatised and transferred to private ownership.
Additionally, the increase in the productive capacity of these mills will increase demand for maize thereby reinforcing the necessary backward linkages with agriculture and assisting in its continued development.
AAC's continued participation in the privatisation programme and the emergence of Namib Mills as investors in the country demonstrates the continued interest foreign multi-nationals continue to have in Zambia as a progressive country in the sub-region.
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