HARARE – National Social Security Authority (Nssa) has increased its stake in Africa First ReNaissance Corporation (Afre) to over 70 percent following the under subscription of the latter’s $8,6 million rights offer.
The Zimbabwe Stock Exchange-listed Afre intended to use the proceeds from the fund raising activity to acquire investments that meet liquidity and solvency requirements, and also pay off owed policyholders.
However, the rights offer was undersubscribed with only 27,1 percent of the 162,8 million shares being endorsed by local shareholders.
Nssa, which was the underwriter of the transaction, was forced to snap up 118 737 045 unsubscribed shares, thus increasing its shareholding from 51 percent.
According to sources close to the developments, Capital Bank — which held 33 percent stake in Afre –— chose not to participate in the exercise and had its shareholding reduced to approximately 20 percent.
Consequently, Nssa is now the majority shareholder in Afre with 51 percent direct control and 20 percent indirect control through its stake in Capital Bank.
“This is a huge investment which is yet to be felt by the market, but figures will definitely show at the end of our financial year,” said Innocent Chagonda, Nssa chairperson.
The new shares rank equal to existing shares.
Afre’s Zimbabwean operations would get the lion’s share of the funds while some would be channelled to the group’s Casualty Botswana unit.
FMRE Life and Health is to be allocated $1,5 million while FMRE Property and Casualty Zimbabwe will receive $1,6 million and $1,65 million would be taken up by the capitalisation of Tristar Insurance.
Market experts said the under subscription of Afre’s rights offer is mainly attributed to the liquidity crisis in the economy.
“Under subscription usually happens if an institution seeks to raise money in a market with serious liquidity challenges. If you look at the profile of the local investors, most of them do not have enough resources to plough into companies,” said Ranga Makwata, an investment analyst.
Since adopting the multiple currency system in 2009, Zimbabwe has been battling an acute liquidity crunch which has forced several companies to either scale down operations or completely close shop.
Makwata said it would be difficult for local companies to raise cash internally due to depressed disposable incomes obtaining.
“For an institution to be in a position to raise adequate cash for recapitalisation they need to have a deep-pocketed underwriter. The trends of trade on local markets are clear testimony that markets are being driven by foreign investors,” he said.
“Since 2009, most companies that have embarked on a rights issue have had subscription rates of less than 50 percent simply because there is no money in the market.”
Gideon Gono, central bank governor recently said liquidity challenges were deepening even though the multi-currency system had brought exchange stabilisation and macro-economic stability. – John Kachembere