The Zambia Privatization Agency (ZPA) is pleased to announce that the Minister of Finance, the Honorable RDS Penza has signed the Sale and Purchase Agreement with Mr. DP Kennealy, Chief Executive of Foodcorp Limited.
Foodcorp has purchased 100 percent of the shares owned by the Government of the Republic of Zambia (GRZ) representing Zambia Horticultural Products Limited's (Zamhort's) Lusaka operations for a total package value of US $3,565,000, inclusive of committed working capital expenditures.
Foodcorp is a leading South African food manufacturer with strong brand names such as Simba, Enterprise, Nola, Green Giant and Harvestime. They are also a major food supplier to many of the large South African supermarket chains such as Shoprite/Checkers, Pick'n Pay and Spar. The company has an annual turnover of US$1.8 billion and has factories in South Africa and South America.
The entry by Foodcorp into Zambia means that some of the brand names previously exported from the Republic of South Africa to Zambia will now be made locally, thereby saving valuable foreign exchange. Foodcorp has indicated that it is very much in their interest to vigorously explore the export market for Zamhort products and to pursue any such opportunities which may arise.
Foodcorp was the successful bidder in an array of 10 aspirants which included SMB Investment Group, FTP Italia, Dawoodjees/Mutukwa Group and Mr. EG Mumba. Foodcorp's bid was superior both in terms of payment as well as the qualitative factors relating to both relevant experience and ability to drastically improve the operations and capacity utilization of Zamhort.
The ZPA Board gave a negotiation mandate to the Zamhort negotiation team aimed at ensuring that the company was sold as a going concern, with specific guarantees for reinvestment into the company to ensure that such an important manufacturing resource with a wide linkage to other industries in Zambia, especially agricultural industries, was protected.
In addition to the purchase consideration, the guarantees include commitments
for;
(i) working capital expenditure;
(ii) no major redundancies of non-managerial staff;
(iii) an incentive scheme in which employees will share in the ownership
of Zamhort;
(iv) a small scale farming scheme;
(v) a donation of 2 percent of after-tax profits of Zamhort to socially
responsible programs within Zambia;
(vi) a formal training policy for all employees and;
(vii) the consideration of listing up to 25% of the equity of Zamhort
on the Lusaka stock exchange within six years from signing of the Sales
Agreement. The total package value of the sale is outlined below:
| Category | Amount in US$ |
|---|---|
| Legally binding investment pledge | 1,700,000.00 |
| Privatization Revenue Account | 1,100,000.00 |
| Liabilities taken over | 765,000.00 |
| Total Package Value | 3,565,000.00 |
A second plant is located in Mkushi but is non-operational awaiting supply of additional machinery and spare parts, and it will be sold by ZPA separately from the current transaction.
Zamhort is one of Zambia's five main suppliers of jams and marmalade, one of three producers of tomato products, and one of three major producers of soft drinks and juices.
The Company sells its products to private and state owned institutions throughout Zambia. With the restructuring and privatization of the Zambian economy, Zamhort's parastatal client base is declining in favor of private sector customers. The primary raw materials used are locally grown fruits and vegetables. Preservatives are imported.
The performance of Zamhort has been very erratic with losses occuring over the past three years. The lack of working capital has been the primary problem.
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. SM O'Donnell, Managing Director of Engine Reconditioners of Zambia (ERZ) and Chairman of the Zambia Association of Manufacturers acted as Negotiation Team Chairman and Mr. Mwila Chitabo of Chitabo Chiinga Associates acted as Negotiation Team Lawyer.
The negotiation team is satisfied that the legally binding business plan and investment pledge of US $2,465,000, in addition to the cash consideration of $1,100,000 submitted by Foodcorp 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 Foodcorp is in line with the value of Zamhort recommended by Coopers & Lybrand as part of their formal analysis.
Zamhort was a private, limited liability company wholly owned by ZIMCO. Zamhort was incorporated in 1978 as part of the National Agricultural Marketing Board (NAMBOARD).
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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