Country risk, perception major weakness for Zimbabwe

THE Cold Storage Company (CSC) has been in the news recently following the announcement of its new partner by the government. Boustead Beef was recently unveiled as the new partner for the state-owned meat processor.

Zimbabwe Independent correspondent Nkululeko Sibanda (NS) this week spoke to Boustead Beef chief executive Nick Havercroft to shed light on issues around the company and its plans for the revival of the CSC. Below are excerpts of the interview:


NS: Who is Nick Havercroft and what is your role at Boustead Beef?

NH: Nick Havercroft is an English businessman who has lived in Zimbabwe since 1980 when my father came to live here.

Then he was working at Ziscosteel. I left school at the age of 16 because I struggled at school. I started my career in farming as an assistant at one farm. I put myself through Blackfordby Agricultural College. I left to work in Canada and America where I worked at some tobacco farms there. I then came back to the same employer whom I worked for before I left again. I felt the operation was too small and I relocated to Marondera to work for a farmer who had moved from Gweru and was doing dairy production.

I was involved in many other projects where I took over some farms that were going under at the time — more than three farms. I took over their debt and developed their models into successful businesses.

Within five years, using that model, I became one of the biggest tobacco farmers in the Marondera area. One of the facts that aided my modus operandi was the fact that with the weakening of the Zimbabwean dollar at the time, farms were becoming cheaper and cheaper which made it easy for us to acquire them.

I also ventured into tobacco value-addition as I realised there was a loophole in the whole value chain which showed I could also process my own tobacco since the other players were not processing that tobacco. This then led to the emergence of Savannah Tobacco, a company that I formed. There are other details about me but, in short, that is who I am. With regard to Boustead Beef, I set up the company and I am the current chief executive or director if you want to put it that way.

NS: How have been the interactions outside Zimbabwe in your efforts to raise capital to inject into the CSC?

NH: People who have the capacity and potential to invest in any meaningful business are scared of Africa. I have always favoured doing agricultural business in Zimbabwe because you have the land, the soils are fit for agriculture, the expertise and the personnel. To raise money for Zimbabwe on the international market is almost impossible.

NS: Why is it difficult?

NH: Country risk and perception is the major undoing for Zimbabwe. When you mention Zimbabwe on the international front, people are thinking of burning tyres and demonstrations on a daily basis. You can go to London and invite donors to come and invest in Zimbabwe, they will probably shut the doors in your face.

For us, it's been a 10-year journey where we have been trying to raise money for agriculture and we have not been successful in our endeavour.

NS: But you are in Zimbabwe trying to do business with CSC against that ugly background? How are you doing this?
NH: For us as Boustead Beef, we told ourselves that we needed to try and find some space to do business in Zimbabwe when there was a change in government.

That is when I thought to myself that we had a window of opportunity where we would need to engage with the government and find each other in as far as what we were proposing to do in Zimbabwe.

NS: You seem to have more knowledge of tobacco farming than beef production as your history would show. Why venture in this sector?

NH: I got a passion for beef while I was in the United States. There they serve tender beef and I got interested in establishing how they went about it to end up having this product they served so well. I have looked at many options. I did read about the CSC as part of that research and that is where we convinced ourselves we needed to come to Zimbabwe and work on CSC.

NS: Obviously, when venturing into such deals, one has to have a sound financial footing to be able to run the business. How much did Boustead Beef raise?

NH: We did raise, initially, capital to the tune of US$15 million five years ago. Our plan was to invest the money in Chinhoyi and Darwendale operations. Unfortunately, the investor we had wanted to work with in the end pulled out of the deal. We have had several engagements with various institutions and people to try and raise more money for this. I have even been called by the World Bank to see how they can be part of this.

NS: Getting this deal must not have been easy, how did you end up landing the CSC deal?

NH: I have to be honest and say that Mr Basil Nyabadza (former Agricultural and Rural Development Authority chairperson) did help us a lot in putting this deal together. We started discussions around September last year. We realised the discussions were gathering steam and that is when we fully committed to serious engagement.
From his initiative, we were able to meet all the relevant stakeholders in the government and we finally met the Minister of Agriculture, Retired Air Marshall Perence Shiri, and we showed him the interest in the business. We have met the Agricultural Marketing Authority (Ama) as well as other institutions. It has been 14 months of intense engagement over this deal.

All along, we had full government support. There is a hell of lot of people who tried to throw spanners in the works to stop the deal but we are happy that we have managed to move to another level, and we would like to thank the government for the support all the way.

NS: What has been the status of the CSC at the time you took over operations?

NH: Very clearly, we have taken over a company that has been insolvent. Completely insolvent! And this means that we have taken over a massive risk. I have the guts to do it.

I have done a lot of research and I have convinced myself that we can turn this company around and we are hopeful that we will succeed in our endeavour. We are thankful to our farmers who have expressed willingness to work with us to make this thing succeed.

NS: How would you rate the staff that is currently in the employ of CSC?

NH: I am very pleased with the experience and skills of the employees we have here. There are people whom we can depend on to run this company. We have the right people. I do not have the experience to run this since I told you I dropped out of school. But I believe that the people I have here will be able to help us realise the dream of turning the CSC around and making it what it should be.

NS: You told government you have investors to aid your plans. Who are these investors? Can you shed light on this?

NH: Absolutely not. I am unable to share with you and your readers these investors. I have a reason why I can not do that. It has taken me about 20 years to build my base of investors and I need to protect them. Government officials seized with this matter know the investors and who they are. If I dared say who these investors are, I know there would be problems of people bombarding them with e-mails and phone calls asking them to consider two-page proposals. I will not be at such liberty to reveal those investors at the moment.

NS: Agreed, you will not divulge the identity of the investors. Let us talk about their commitments to financing the project. How much money have they put on the table?

NH: I can only say they have put enough money to finance the programme of making the CSC work again.

NS: Let us talk figures. How much money is involved in all this?

NH: It is confidential information. We have a lot of discussions around these issues and it is not a good thing for me to disclose those details at the moment. All I can say is that we will be able to put over US$100 million in the next four to five years at CSC.

That is a small indicator but there is more to be expected in this whole transaction.

NS: It is common knowledge that the CSC owes many creditors a lot of money. Local authorities form the greatest chunk of creditors. How have you proposed to deal with those that the CSC owes money dating several years back?

NH: I have taken over the debt. I think we will have a scheme of arrangement. We will need to verify who is owed what and, once we have verified, we will also ask government to come through and assist verify these creditors. It is then that we will make arrangements to clear what is duly owed by CSC.

NS: You stand accused by some sections of the business community of using title deeds that belong to the CSC to raise money that you intend to then "invest" in CSC. What is your response to this?

NS: It is absolutely not true. We have raised our own money that we intend to invest in the business. We would not have signed the deal if we did not have the money in the first place. So, there is no element of truth in that allegation.

NS: Would you confirm that there are title deeds that were given to you which belong to the CSC?

NH: Yes, there were some that came to us for verification and investor security. We have since returned some of them back to government. That verification was very important in as far as understanding the entire situation. But, like I said, those were merely title deeds we used to verify certain things and most of them have been returned to government.

NS: In terms of the outlook, where do you see the CSC in the next five years?

NH: We are seeing a bright future ahead of us. We are confident that we will be able to break even in the very near future. We need to put our house in order, sort out our equipment and you shall see the pieces falling into place.
We are looking at being able to satisfy the demand that we shall have as we go. Already, we have some orders from within Africa. We are hopeful that we will be able to satisfy all our clients and that we will be able to increase our capacity utilisation levels to beyond 60%. Once that happens, we will be able to take the CSC to its good old days.