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Downturn only a hiccup.

BARNABAS THONDLANA talks to Mr John Mkushi, chairman of one of Zimbabwe's most dynamic companies, T.H. Zimbabwe.

The country's leading construction and industrial group, with an annual turnover of more than $600m, T.H. Zimbabwe Ltd., is exploring opportunities to strengthen its operations through strategic and technical alliances, said the group's chairman John Mkushi.

The group, listed on the Zimbabwe Stock Exchange (ZSE) after its reverse takeover of the agro-industrial group Acacia Holdings Ltd. in November 1997, is looking for considerable growth. "Our businesses have very strong technical links with international suppliers of raw materials and technologies, and it is our plan to build on these strengths even more to ensure that the businesses are technology-driven and deliver first-class service," Mr Mkushi said.

The T.H. Zimbabwe chief was upbeat about his group's future, projecting a healthy performance during the financial year ending December 31, 1998. Last year the group made an operating profit of Z$118.9m, which outstripped forecasts.

T.H. Zimbabwe is part of the SMM Holdings (Pvt) Ltd., previously owned by T&N (plc) of the UK African Associated Mines. AAM is one of the largest mining companies in Zimbabwe and the third largest exporter of chrysotile asbestos fibre in the world. It is also part of the SMM Group.

Rationalisation

"Right from the time of localisation, it was the group's plan to list its operations on the ZSE. We took a policy decision not to list the group as a single entity but in units that would be made up of core businesses," he said. "The most obvious listable core businesses were the two industrial companies, Turnall Fibre Cement (TFC) and Tube and Pipe Industries (TPI). As we were considering various ways of listing these operations, Acacia Holdings presented itself as a good opportunity for us as it was already listed, and also because it was a diverse group made up of industrial manufacturing operations and agricultural services companies," he said. He added: "When we looked at the group closely we found out that Acacia's manufacturing operations were very strong with great potential for growth but more importantly to us, these businesses had a lot of synergies with TPI and TFC. On the other hand, Acacia's agricultural services companies were experiencing some difficulties; they were not generating cash.

"The proposal to acquire Acacia was then structured on the basis that we would retain those businesses that would fit with our existing manufacturing operations and that we would dispose of the businesses which were struggling to generate cash. The proposals were put to Acacia shareholders and they received 96% acceptance, resulting in T.H. Zimbabwe being the successor to Acacia," he said.

T.H. Zimbabwe, which has 422m shares in issue, is made up of the SMM group with 78%, and former Acacia shareholders with a 22% stake. The process of disposing of non-core businesses, namely Flowrite, Agriquip and Formscaff, is now complete following management buyouts which have realised more than Z$70m.

Former Acacia Holdings businesses that were retained include: General Belting, Pigoff Maskew and BMA Fasteners, all based in Bulawayo; as well as Hasif, based in Norton. The Bulawayo businesses now form the group's industrial and rubber division, and Hastt has been merged with TPI, giving the new T.H. Zimbabwe three operating divisions - a building and construction materials division, a steel products division and an industrial and rubber division.

"The new divisional structure is a reflection of the core businesses that T.H. Zimbabwe is in, which are construction materials' manufacture, where Turnall is the dominant player in the economy; and the steel manufacturing industry with TPI and Hastt as the biggest processors of rolled flat steel in the country. Our industrial and rubber division is the biggest supplier of industrial and mining rubber products in Zimbabwe," Mr Mkushi said.

While the listing of T.H. Zimbabwe on the ZSE coincided with the stock market crash, Mr Mkushi said he considered this "a temporary setback that does not deter us from giving value to our shareholders. We ask that we be judged by our performance.

"We recognise the difficulties that the Zimbabwe economy is going through at the moment, but we in business operate on the basis that these problems will be addressed and that measures will be taken to restore confidence and encourage growth in the economy. Under these circumstances, we see potential for growth in the group and our strategy is to be a dominant player in the businesses which we operate," he said.
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Title Annotation:Special Country Report: Zimbabwe; T.H. Zimbabwe Ltd.'s plans for growth
Author:Thondlana, Barnabas
Publication:African Business
Date:Jul 1, 1998
Words:754
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