Roy Cokayne

The government of Zimbabwe awarded an indigenisation certificate to Portland Holdings Limited (PHL), Pretoria Portland Cement’s (PPC’s) wholly-owned subsidiary incorporating all of its operations in Zimbabwe, after agreeing to sell an additional 29.6 percent equity in PHL to four indigenous parties at a cost of about $6.2 million (R55m), PPC said yesterday. The certificate opens the way for PPC to expand operations in Zimbabwe.

The cement and lime producer said the indigenisation certificate acknowledged PHL’s compliance with both the spirit and the letter of the Zimbabwean Indigenisation and Economic Empowerment Act. This act requires non-indigenous manufacturing companies operating in Zimbabwe to submit an empowerment plan to satisfy a 51 percent indigenous Zimbabwean ownership requirement by October 2015.

The PPCZ Special Community Trust (PSCT), which will benefit communities within the surrounding areas of PHL’s existing and future operations, will be issued with a 10 percent equity interest in PHL. The National Indigenisation and Economic Empowerment Fund (NIEEF), which has been established by the government of Zimbabwe to benefit all indigenous Zimbabweans, will be issued with a 9.7 percent equity interest in PHL.

A new employee share option plan to be established by PHL for the benefit of existing and future qualifying employees will be issued a 5 percent equity interest in PHL. Strategic Equity Partners (SEP), which will initially consist of three current non-executive directors of PHL who are indigenous Zimbabweans, will be issued with a 4.9 percent equity interest in PHL.

PHL will also make a further $3m cash donation to the PSCT to expedite urgent community development projects. It said the transaction was facilitated by PHL through a notional vendor facilitation (NVF) mechanism for a period of 10 years.

PPC said the economic cost of the empowerment plan would be fully expensed in PHL’s 2013 income report, adding that the facilitation mechanism would lower PPC earnings a share during the NVF period by a nominal value of about 2c a year.

The company said the award of the certificate followed a series of engagements between PHL and the Zimbabwe government, through the minister of youth development, indigenisation and empowerment, culminating in the approval of an empowerment plan that complied with the legislation.

PHL was deemed to have a pre-existing indigenous shareholding of 21.4 percent through PPC’s secondary listing on the Zimbabwe Stock Exchange and an existing PHL employee share option plan.

Paul Stuiver, PPC’s chief executive, said it believed the plan was both practical and in the spirit of true indigenisation and empowerment.

“We see the Zimbabwe market as an exciting growth opportunity and expect our operations to approach full capacity over the next two to three years. This opens up further investment opportunities for PPC in Zimbabwe,” he said.

Stuiver said last week when PPC released its annual financial results that there would be nothing stopping the company from expanding its presence in Zimbabwe once it obtained an indigenisation certificate. He added that the indigenisation policy was a lot less traumatic for PPC than for other companies it was reading about in the press because PPC had a secondary listing on the Zimbabwe Stock Exchange and an employee share scheme.

Stuiver indicated it had an agreement in principle with the Zimbabwe government.

“When discussions started about how we get to 51 percent local ownership, we did not start at zero. We found the process quite sensible and reasonable. The key issue is that PPC maintains control. We believe we have got a satisfactory outcome.”

PPC shares closed 0.25 percent lower at R28.39.