Massmart selling off Zimbabwe stores
MASSMART CEO Grant Pattison yesterday gave a stern warning to Zimbabwean authorities that a proposed law compelling all companies to hand over 51% equity to local owners would force the retail giant to pull out.
However, his threat to exit ' at a time when other South African companies are moving back into Zimbabwe ' is tempered with a heavy dose of pragmatism, as the company is already planning to sell its small Zimbabwean operation, receiving an offer for it as far back as July.
"The thing we need from Zimbabwe is for them to agree whether it's law or not.
"I would say, ultimately for Massmart, if the indigenisation act is left where it is, we will have to pull out," he said at the Consumer Goods Council of SA's annual conference in Sandton.
Mr Pattison made the comments after giving a talk about doing business in Africa, in which he said the company would not do business in any country that demanded a level of local ownership from foreign investors.
However, Byo24 has learnt the company has for some time been in talks about selling the operation ' just two Makro stores that it does not include in its financial reporting ' to OK Zimbabwe, a Harare-listed retailer.
Massmart spokesman Brian Leroni yesterday confirmed the sale talks, but would not name the potential buyer, or the price Massmart was hoping for.
"Massmart has received an offer from a respected Zimbabwe retailer to purchase our interest in Zimbabwe and we are currently considering that offer.
"It's a combination of the fact that we have a policy that we prefer 100% control of assets in foreign territories, together with pragmatic business considerations," he said.
At the time of going to press OK had yet to respond to a request for comment.
A lack of clarity about the Zimbabwean government's plans to force all companies to give a controlling stake to local investors has tempered much of the appetite for the country that has grown with the introduction early last year of a multi-currency regime to replace the worthless Zimbabwe dollar.
Poor levels of savings and a lack of capital from external investors are hampering the ability of businesses to invest as the economy struggles to emerge from a decade of contraction.
While some companies see Zimbabwe as an attractive prospect ' Pick n Pay is reportedly looking to increase its stake in Harare-based retailer TM Supermarkets to 49% from 25% at present ' the long road to recovery is putting others off.
The International Monetary Fund expects growth of 2,5% this year and zero growth next year. Without significant changes to economic policy, it predicts growth from now to 2030 to average just 3%.
Massmart received the purchase offer in July, but there is no certainty yet when, or whether, the deal will go ahead, Mr Leroni said. Massmart owns 85% of Makro Zimbabwe, and shareholder C Peach Investments has the remaining 15%.
The sale of its Zimbabwean business is unlikely to be related to the fact that Massmart is the subject of takeover talks with US retail giant Wal-Mart.
US companies are prevented from doing business with certain Zimbabwean nationals and companies on the US Treasury's list of "specially designated nationals", but there is no blanket restriction on American companies trading in Zimbabwe.
In fact, between 2003, when the US government first put Zimbabweans on its sanctions list, and 2008, the nominal volume of trade in goods between the two countries doubled.
In his comments about warnings for doing business in Africa, Mr Pattison said a further consideration was the security offered over property rights.
"We use property as the benchmark as to whether the country is ready for us. If we can't negotiate commercial terms, if there aren't locals prepared to put money into their own property, don't go there," he said.
