Home » Industry » Winds of Change Hit ZSE

Shareholders invest in companies for various reasons. Some focus on capital appreciation while others will be after dividend income. We then have a sect of shareholders that take positions in companies for different strategic reasons. The acquisition of a controlling stake in Innscor, for instance, might have been motivated by the need to have a reliable supply of chickens and eggs for its downstream operations such as fast foods and supermarkets. Recently Irvine’s Zimbabwe, another Innscor subsidiary, reportedly took up a stake in Pro Brands. The bottom-line from all investment decisions made is that respective shareholders expect something in return.

The adoption of multiple currencies has seen most shareholders becoming more vigilant towards the performance of their investments. This is contrary to the attitude of shareholders in the Zim dollar era. Focus during the Zim dollar days was on capital preservation as the stock market re-rated in line with inflation. As such individuals were not particular on the counters they invested in as all shares would go up in line with inflation. Priority now is being placed on investment performance over and above capital preservation especially when using the hard currency. In particular shareholders are now interrogating more on management competence, company’s strategy and how well it is sweating its assets. Shareholders are now demanding answers from management.

The past three years have seen management changes taking place in several listed counters with the latest one involving NMB. The banking group announced the stepping down of James Mushore on medical grounds to be replaced in acting capacity by Benefit Washaya who presently is the managing director. Rio Zim again now has a new CEO after Noah Matimba who replaced Ashton Ndlovu who took over the company’s leadership two years back when Josh Sachikonye left the mining entity. Cottco which recently voluntarily applied for judicial management also had a new CEO, Collins Chihuri who took over after the unbundling of AICO, and now they have made Douglas Dube the Executive Chairman, obviously to oversee Collins Chihuri or possibly replace him. Batirai Manhondo replaced a retiring David Murangari. John Mangudya left the CBZ group following his promotion. Justin Mutasa and his FD Adolf Majome left Zimpapers (although these are appointments largely influenced by politics) and now Doug Munatsi will leave the ABC group. However Munatsi left for the right reasons.

Innscor also restructured its management team roping in a South African, Antonio Fourie, to lead the company while John Koumides was assigned to corporate finance and Innscor International operations. Julian Schonken, previously the finance director, is now in charge of Light Manufacturing. On the manufacturing front, John Jere relinquished his post in Turnall to pursue personal interests.

Other management changes that took place over the period saw Chipo Mutasa being replaced by Tendai Madzivanyika at Rainbow Tourism Group. On the beverages front, Joe Mtizwa stepped down from Delta and was replaced by Pearson Gowero. Its associate company, Afdis, appointed Cecil Gombera to replace Malcom Hollingworth who was retiring from the group. Dr Sam Mushiri moved from the beverage producer, Delta, to take up a higher post at the sugar refiner, Star Africa after the departure of Patterson Sithole. His former boss, Joe Mutizwa, at the same time assumed chairmanship of the company’s board. Middleton Chikowore also left Pelhams.

Warren Buffet in one of his letters to shareholders wrote that it is only when the tide dies that you realise who is swimming naked. Can we safely conclude that the new landscape has exposed the under-performing executives? The rolling of heads within companies, can it be attributed to shareholders cracking their whips? Or possibly aligning certain interests to those of the company?

Change is inevitable and is bound to take place in all companies. What’s key is to prepare for the change and to manage it properly when it finally happens. More importantly are the replacements properly skilled or are they recycled failures? There is no company management team that can last forever hence nothing should be unusual or sinister when such changes occur. There are companies like Delta and Old Mutual that have good succession structures in place. While others have been found wanting, both large caps and small caps, with OK Zim being a classical case among the former.

Nonetheless, a closer look at companies that have had management changes over the past two years brings out a common trend. These companies are either struggling or have brought new shareholders on board. The struggling perspective emanates from the fact that current shareholders would be tired of the perennial losses and feel that company prospects can change with new leadership. On the other hand new shareholders will be looking for two key things. Firstly they want someone whom they can entrust with their money that they would have injected into the business. In addition, they want to clean old habits from the system. This is mainly common with banking institutions where new management is usually tasked with cleaning the legacy book of bad loans and to also plug any loopholes on corporate governance.

The actual reasons for the departure of these executives are never disclosed officially by companies as they always throw the statement that the executive in question will be going to pursue personal business. However, the beauty about the rumour mill is that it always plays a pivotal role in solving the information asymmetry on the goings on in the market place. The actual reasons precipitating the departure of these executives always filter on the market. It is encouraging to note that shareholders are finally acting by pushing out the non-performing executives. While this might come at a cost, it will benefit the company in the long run.

There are still other companies where shareholders, particularly institutional ones, should wake up and act. Media reports at one point alleged that NSSA forced ZB Financial Holdings to declare a dividend. It is true that shareholders are entitled to dividends but this is only when the company is performing well and does not have cash requirements in the short term. Not that we are saying that it was wrong for NSSA to press for a dividend, but the pension administrator should have done more. For a long time ZB Financial Holdings has continued to under-perform when matched with banks of similar size. One would expect NSSA as big shareholder in ZB holding a 37% stake to be more involved in the business. NSSA should set performance goals for companies in which they hold g stakes. Possibly our market while very much young, maybe we need proxy voting firms to remove the potential conflicts that usually exists between institutional investors and their board appointees. This usually is the reason why maybe local institutional shareholders like NSSA, Old Mutual and pension funds usually ignore certain issues at most of these listed companies. They have stood by while Rio Zim, AICO, and many others have nearly collapsed.

Management at CFI have failed to record a profit ever since the adoption of multiple currencies. They have also failed to raise the much needed capital to turn around the company’s operations. The same can also be said about its parent company Zimre Holdings Limited. At present it is contemplating de-listing from the bourse as the company’s share has continuously weakened. The company executives therefore feel that the market is failing to correctly value its shares! – Wires.

Source : The Herald