Effort to fund the acquisition of 10 percent by Meikles employee share ownership trust has been affected by the failure by Government to settle the $90 million it owes the Meikles Group
Tendai Sahondo Business Correspondent—
Meikles says the $49,6 million worth of Treasury Bills (TBs) it received from the Government are unattractive as they offer a 2 percent yield over 5 years. Meikles received the TBs as part settlement of a $90,8 million debt owed by Government backdating to 1998. Speaking before a thematic committee on indigenisation and empowerment last week, Meikles executive director Mark Wood said the firm is struggling to find takers for the Bills due to liquidity challenges in the banking and investment markets.
“We were issued Treasury Bills by the Reserve Bank which attract interest at 2 percent, the first ones mature in three years, the second lot of $16 million in four years and the last lot of $16 million matures in five years.
“It is a difficult task to find people that can buy that paper and turn it into cash given the liquidity challenges in the banking and investment markets. In addition, there are a lot of these Bills out there with the same terms and conditions.
“We have received ridiculous offers such as 10c for every dollar because they did not have confidence in the paper.
“We have had better offers than that, but to convert them into cash is a difficult process because the yield is 2 percent over five years, that is not very attractive.
“People are really not attracted to the paper, which is why we are still engaged in talks with the Ministry of Finance to finalise the second part of the money and to make the settlement methodology more attractive so it will actually generate some cash for the company,” he said.
This comes as the Reserve Bank of Zimbabwe said it had issued a total of $406 million TBs since the beginning of the year with the bulk of the TBs pertaining to the RBZ debt takeover programme by the Government.
“It is pleasing to note that Government has been able to settle all TBs ($213,13 million since 2013) timeously on maturity including capital and interest on TBs that were issued in 2012 in lieu of statutory reserves,” the RBZ Governor Dr John Mangudya said in the Monetary Policy statement.
Some of the TBs issued by the RBZ went towards clearing FCA and tobacco retention balances.
Mr Wood said it is imperative that Government pays off the remainder of the debt as part of the money will be loaned to the Employee Share Ownership Trust for the purchase of 19 million shares to complete trust’s 10 percent equity in Meikles.
The trust currently holds 8,4 million purchased at 13c per share through a $1,4 million loan from the Meikles Staff Pension Fund which will attract a 10 percent interest on retention.
Once the trust has subscribed for the remaining shares, qualifying members will be allocated units which will entitle them to the equivalent number of Meikles Shares.
Mr Wood however, said management may not hold more than 5 percent shares in the trust. Exiting members will be paid the value of their shares and new members will take up the units.
However, Mr Wood said until such a time when the shares have been fully subscribed, exiting members will not benefit from the scheme.
Speaking in the same committee, members of the Schweppes Employee Share Ownership Trust said they are not benefiting from the trust as they are not entitled to individual share certificates and leave the company empty handed at the end of their service.
The trust which holds a 31 percent stake in the company has only benefited from two dividends in the last five years with employees benefiting $120 while middle tier managers earned an average of $500 per dividend declaration In stark contrast to Meikles, six directors at Schweppes hold a 20 percent in the company.