MUTAPA Investment Fund (MIF) is poised to generate wealth for Zimbabweans across generations, both current and future, according to its chief executive officer (CEO), John Mangudya (JM). Additionally, the CEO told our group business editor Mthandazo Nyoni (MN) that MIF seeks to reduce the reliance of State-owned enterprises on government funding. Find below excerpts of the interview:
MN: What are the objectives of the MIF?
JM: Mutapa is a wealth creation entity formed by the government to ensure that we create intergenerational wealth for Zimbabweans - current and future generations. That is the purpose of a sovereign wealth fund. Our vision is to safeguard Zimbabwe's financial future through the creation of wealth. The wealth will be created from enterprises that the government has put under MIF. So the 30 companies that we have put under the Fund, are the base on which we are supposed to sweat their assets to create value and wealth.
MN: We had the Sovereign Fund of Zimbabwe but it failed. What made it fail?
JM: The fund did not take off because we did not have sufficient fiscal and balance of payment surpluses to kick start the sovereign fund. That is why in September 2023, the government then refined the sovereign fund. It amended its Act by giving it a new name and by putting in place the number of entities under Mutapa.
MN: What is the first thing you need to do?
JM: Our first thing is to do what we call diagnostic assessment to assess the nature of these entities, so that we see what they need to make them commercially viable.
MN: What is the role of MIF in these companies?
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JM: The companies are run by their boards and management. Our role is to supervise.
We set the strategy, we supervise them, and we ensure that they go by what we believe is right for the country. So, for example, the objective of NRZ (National Railways if Zimbabwe) is to provide trains in Zimbabwe, because it is cheaper to move goods by rail than road.
We need to assess what is the requirement of NRZ. We need to fix the track, we need locomotives, and we need wagons with the signal. So in the assessment we now say ‘but why are they not able to do that?’ They lack capital. There is a requirement for the capital to do that. So it means that we need to raise funding for them. We can either raise debt finance or non-debt financing because we also do not want to raise too much debt. We now need to leverage on the balance sheet. That is why we put them together. We now need to leverage on the balance sheet either by going into joint ventures with other entities or build own transfer, whatever so we can look for money. When that money comes as a non-debt, we will spread it to NRZ to buy what they want. Or we go to Afreximbank.
MN: Alright, so that is the strategy?
JM: Going forward, we now want to ensure that when we get funding as debt finance, it needs to be used for where there are off-takers, so that we do not burden the government of Zimbabwe. We want to ensure that the debt becomes self-liquidating debt. So we are identifying the niche area, the corridors where there is business activity.
Then we can expand to other areas after we are sure that this loan is paid from traffic from exporters or from users of the rail. That way we minimise the burden on the fiscus. If you look at CSC (Cold Storage Company), we have identified that we need to deal with the joint venture, which is not functioning the way it was expected and then we put in place some funding structures.
CSC is a low hanging fruit because it owns beef and the markets are there and we need to do that again. The key focus area at Zesa (Holdings) is to ensure that there is electricity in Zimbabwe. Therefore, we need to identify their requirements.
MN: What have you done so far?
JM: In the immediate short term it was assessment and putting together the strategies of where to go. In the short term, we identify the type of funding that is required, whether it is debt financing or non-debt financing. Once we combine those two, we find the capital for these companies to take off. Once they take off, they produce value and create a stabilisation fund in the process.
MN: What are these entities’ requirements?
JM: If you look at NRZ it wants a track, wagons and locomotives. We know that we need about US$450 million. CSC requires ensuring that we pay the creditors and it needs some money to ensure we spruce up those abattoirs. If you look at the likes of Zesa, we need to secure batteries for electricity generation to supplement our hydro and thermal power, while we are looking for long-term solutions because water levels are low in Lake Kariba.
If you look at Air Zimbabwe, our strategy is we need to fly. If you look at the route between Harare and London, that is a lucrative route. We need to say, ‘what are the ways and means that we can put in place?’
So we are looking at those. We do believe that Zimbabwe is a regional hub; we can make use of rail, air or road traffic. We want to take advantage of that. Mutapa has plenty of mining assets to leverage on. For some of them we might go into joint ventures, which is non-debt financing.
MN: How much in total do these entities need?
JM: Some of them do not need money, some need it. For others, we need to sweat their assets so they can help others. We have pluses and minuses. So I cannot give you one figure that says this is what is required.
MN: What is the value of these assets?
JM: What we are also doing right now is to do the evaluation of all the assets that are under the fund. Many people always ask the value of the assets. We need to do a valuation of those assets. Right now we are in the process of valuing all those assets. We have outsourced some financial companies that are helping us to do that valuation.
MN: Do you have any plans to list some of the entities on the stock exchanges?
JM: Listing is a process. In our strategy, we need first of all, as I said, to identify the requirements, and then move to say at what point (can) we list a company. Once it is ripe enough, we can obtain value then we can list.
MN: Some have raised concern about the exemption of entities under MIF from procurement regulations.
JM: I do not know why people look at the wrong side of life. They are just being negative, because you know that you are supposed to compete. Does Econet go to Praz (Procurement Regulatory Authority of Zimbabwe)? But then you want NetOne to compete with Econet but they go to Praz. It means we are tying these companies from fully exuding themselves. They cannot exude themselves.
Mutapa is supposed to strengthen the good corporate governance of these entities. Mutapa is supposed to strengthen their performance. And we want to ensure that what is true for the companies that we are competing with is true for our companies. That is my job to ensure that the core governance is adhered to. I am not saying the tender process is bad, but the process.
We want to look at the bigger picture, not the smaller picture. We are answerable to the people of Zimbabwe and we are answerable to the government of Zimbabwe. We want Mutapa to be transparent, accountable, and to have commitment with integrity to run this business. With a set of values, we want minimum disruptions when it comes to Mutapa entities.
MN: What is going to happen to underperforming management?
JM: We signed performance contracts with all the companies under Mutapa through their chairpersons, with me. So it means if you are not performing well, you will need to tell us why you are not performing. The role of Mutapa is to ensure that the boards are performing.
And therefore their management is also performing. Not only performing, but also they are performing in line with our strategy. I have confidence in the management of these public enterprises. We need to give them a fair chance to do what is right. We do not want to always condemn people. We need to look at why they are not able to perform. We need to remove those obstacles.
MN: When are we likely to start seeing the fruits?
JM: Right now we are busy working with the NRZ on this facility with the Afreximbank for NRZ. We want to ensure that as quickly as possible this rehabilitation of the railway lines is done. In the medium term, by the end of this third quarter, we should be able to know exactly what facilities are available to do this. So definitely, by the third quarter, we need to be able to see exactly which one we are starting with.
MN: How far are you with this facility?
JM: I am supposed to meet with the Afreximbank team to finalise this term sheet so that NRZ can sign it. This term sheet is about US$431 million. We want to ensure that off-takers who are using the line should be able to pay for this facility. We need to draw down, not to draw down the whole US$431 million one time, but to draw down in line with the business plan of NRZ.
MN: What is the tenor of this facility?
JM: This is a 12-year tenor facility. We are still negotiating the interest rate.
MN: Your parting shot?
JM: We want to make sure that the entities under Mutapa are competitive and commercially viable. Those who are in a competitive environment or industries, like NetOne, need to compete with Econet on a level playing field. If you look at Powertel, they provide internet services just like Liquid.
