The Zambia Privatisation Agency is delighted to announce the sale to Kembe Estates Limited of the Lusaka Plant of Zambia Cold Storage Corporation Limited (ZCSC), a 100% State-owned enterprise whose main line of business included procurement, slaughter and processing of livestock (primarily cattle) for sale in wholesale or retail outlets.
The sale includes the assets under the Lusaka operation of ZCSC and heralds the dawn of a new era of a private sector driven development of Zambia's livestock processing industry.
Kembe Estates Limited, which specialises in cattle rearing, slaughtering and selling, and tannery operations, is owned by Mr Chris Spyron, honourary Consul of Cyprus to Zambia for the past seven (7) years.
The sale marks the conclusion of a contested public tender which produced three bidders for the Lusaka plant. In addition to Kembe, the other bidders were Galaunia Farms (private) Limited and the Management Buyout Team of ZCSC in Lusaka.
The heads of agreement with Kembe was signed in November 1995. However, the sale could not proceed following a legal battle involving a court injunction restraining the ZPA from selling the plant to Kembe Estates, which was obtained by Galaunia Farms. However, the ZPA mounted a successful defence against Galaunia Farms.
The Lusaka Plant has been sold as a going concern for a cash price of K850 million. The price consideration consisted of an immediate payment of K165 million paid on signing of the heads of agreement; a further K100 million on signing of the sale and purchase agreement, and the balance of K585 million to be paid on completion within 90 days from the date of signing the agreement.
Additionally, Kembe Estates Limited has taken over selected employee liabilities of K90 million and trade liabilities of K200 million. The transaction package value of K1,140 million is in line with the valuations conducted by The Property Partnership of South Africa for plant & equipment, Anderson & Anderson for land & buildings and the business valuation conducted by Coopers & Lybrand which yielded a value range of between K 700 million and K1,074 million.
In addition to the purchase consideration, Kembe has undertaken to invest at least K250 million on plant rehabilitation in the initial year and a further US$600,000 of capital expenditure on new technology in the next five years.
A company privatisation study funded by NORAD and conducted by Coopers & Lybrand recommended that the units of ZCSC and their associated assets and liabilities be sold as going concerns in separate units while emphasising and ensuring that the eventual buyers fully satisfied the objectives of ZCSC privatisation, primarily to develop and expand Zambia's beef, mutton, lamb, pork rearing and processing sub-sectors; to increase competitiveness and export potential; to provide higher prices and better service to farmers thereby greatly expanding smallholder incentives, incomes and development of the livestock sub-sector.
The sale to Kembe has created a strategic vertical integration between the livestock production & marketing expertise of Kembe, a top class company with commercial and market power in livestock rearing, processing and tannery, and Zambian livestock producers and is set to create an expansion of opportunities to the Zambian livestock sector, which for years has been in a state of decline.
The sale excluded the residential properties of ZCSC which will be sold separately within the context of a wider plan for settling ZCSC's liabilities.
Because of the important role that ZCSC plays in the development of the beef industry, the privatisation of ZCSC units was a complicated one, which was more than just a sale of assets and involved a careful analysis and consideration of the intricacies of ensuring the expansion and development of the livestock industry.
The outcome has been a carefully structured deal, hopefully, capable of standing the test of time and bringing a dawn of new and energetic life to Zambia's beef industry. The ZPA is confident that the sale to Kembe of the Lusaka plant will contribute to the development of the Zambia's agricultural sector.
The Lusaka plant was the largest plant in the country owned by ZCSC, having a capacity of 300 cattle per 8 hour shift. The original slaughtering unit was constructed in the 1940s. A new 2-storey slaughtering and by-product processing unit was constructed with cold storage/freezing facilities in 1972.
The old slaughtering facility was refurbished and converted to a small processing facility in 1984. Currently, most of the process equipment and services are out of date and require to be replaced. Of the 512 tonnes refrigeration capacity, only 95 tonnes i.e. 18 percent is currently functional.
The current capacity utilisation of the Lusaka plant is around 20 cattle per day. Kembe Estates Limited envisage a capacity utilisation of about 125 head of cattle per day representing an increase in the plant utilisation rate to about 40%.
In addition, Kembe Estates envisage an increase in the quantity of hides to be supplied by the Plant to the Company's own tannery located in Chisamba.
With the increase in the quantity of cattle being slaughtered and an increase in the utilisation of the rendering plant's capacity will result in the increase of sale of blood and carcass meal, bone meal, horns, offals etc. The increased capacity utilisation will increase revenues to about K2 billion in the first year which in turn will increase GRZ's tax revenues.
As part of the transparency procedures laid down by the Privatisation Act 1992 and the ZPA Board, the negotiation of the transaction was undertaken by an Independent Negotiation Team headed by Mr Edgar Lungu, a renowned Lusaka lawyer, as Chairman and assisted by the ZPA professional technical staff. The Sale Agreement was also reviewed and approved by the Attorney General in his capacity as chief legal advisor to Government.
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