PROMOTION // ECONOMIC DEVELOPMENT
SADC
PART III OF A SERIES
SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
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CREATING A FOUNDATION FOR THE FUTURE
ccording to Rob Davies, South Africa’s Trade and
Industry Minister, the Southern African Development
Community (SADC) will fully implement the SADC
Free Trade Area (FTA) by the end of the year. The FTA
will eliminate most tariffs among its 15 member states, with a
total population of about 277 million and a combined GDP of
more than $471 billion.
While this will be a major accomplishment for African commerce, it’s just the first step in a plan to create a tripartite FTA
(TFTA) by 2014, uniting the SADC with two other regional
trade blocs: the Common Market for Eastern and Southern
Africa (COMESA) and the East African Community (EAC). The
collaboration will create a 26-nation market, including 530 million Africans—more than half the continent’s population—and
worth $630 billion.
Within that context, this report offers a look at three SADC
nations with very different histories, but an increasingly intertwined future. By far, the Republic of the Seychelles is the
smallest member of the SADC, with a population of fewer than
90,000 people, spread over an archipelago of 115 islands in the
Indian Ocean, north of Madagascar and more than 900 miles
east of the African mainland.
Seychelles aims to capitalize on this strategic location. Due in
part to the recent arrival of the Seychelles East Africa Submarine
A
(SEAS) cable project, the country is well positioned to bridge
the gaps among African, Asian and Middle Eastern markets.
The time zone difference is also beneficial since Seychelles is
four hours ahead of Greenwich Mean Time, enabling it to have
24-hour financial services.
Landlocked Zimbabwe, bordered by South Africa, Botswana,
Zambia, Namibia and Mozambique, covers almost nine times
Seychelles’ land area. Famous for Victoria Falls, the country’s
vast savanna is home to rich flora and fauna, as well as massive
mineral wealth, including platinum and diamonds.
After a difficult decade fraught with economic upheaval and
political strife, Zimbabwe’s economy has emerged from recession and hyperinflation to post stronger economic growth during
the past few years. While forecasted results for 2012 point to a
slowdown, the country’s 12.7 million people are beginning to see
a brighter future.
Malawi, the “Warm Heart of Africa,” is located in southeast
Africa, surrounded by Zambia, Tanzania, and Mozambique. The
Great Rift Valley runs north to south along its length, and Lake
Malawi, the world’s eighth largest lake, occupies three-quarters
of its eastern border. Led by Joyce Banda, who became its first
female president in April, and with a population of more than 16
million, Malawi remains a largely rural and agricultural nation. Y
PROMOTION 2 // SADC
SEYCHELLES
SEYCHELLES
MEANS BUSINESS
Extensive reforms and enhanced
communication aim to attract
international investment
MAKING
CONNECTIONS
Where Africa, Asia, and the
Middle East meet, Seychelles
is the perfect location to do
global business.
Now, since August 2012,
the Seychelles East Africa
System (SEAS) submarine
ƤbreǦoptic cable lins the
islands to marets in real time.
Seychelles is committed
to putting in place worldǦclass
connections and legislation
to transform the nation into
a leading oơshore Ƥnancial
destination.
Ministry of Finance,
Trade and Investment
Liberty House
P.O. Box 313, Victoria
Mahé, Seychelles
The Republic of the Seychelles’
economy has long been founded on
the twin pillars of its tourism and fishing industries, but since the 1990s, the
country has also earned a reputation
as an offshore financial center. More
than 100,000 international business
companies (IBCs) have commenced
operations in Seychelles since 2004,
benefiting from competitive setup
costs and zero taxation on foreign
earnings. The country’s banking sector provides comprehensive services
for both local and overseas clients.
In May, the 1,200-mile Seychelles East
Africa Submarine (SEAS) fiber-optic
cable reached Seychelles’ shore at Beau
Vallon, and it will greatly improve the
country’s ability to communicate with the
FINANCIAL
SECTOR GENERATES
INTEREST
Cooperation with multilateral
lenders fuels confidence in ‘white
list’ destination, helping banking
and insurance industries prosper
In March 2007, President James Michel’s
administration presented Strategy 2017, a
plan to ensure sustained growth for Seychelles over the next decade. Since its
independence from Great Britain in 1976,
successive governments have supported
state-led economic management models,
favoring social programs as opposed to
more free market measures.
The goal of the new strategy is to
double GDP over the next decade,
diversifying the economy beyond tourism and fishing industries into sectors
with potential for sustainable development, such as financial services. The
government aims to open the economy
to new entrepreneurial initiatives, and
act as a facilitator rather than a generator of development.
rest of the world. “This cable represents
a key piece of national infrastructure
that will support our development,” says
Seychelles Vice President Danny Faure,
who oversaw the $27 million project.
The economy registered GDP
growth of 4.9% in 2011, on the back
of 6.7% in 2010, but in September,
the International Monetary Fund (IMF)
lowered its forecast for 2012 to 2.8%,
citing a downturn in tourism due to
the economic crisis in Europe and the
increasing risk of piracy from Somalia,
which forced cruise ships to sail in
other regions.
Since a balance of payments crisis in
2008, the administration of President
James Michel, who was elected to a
third term in 2011, has committed to
wide-ranging reforms, including liberalizing the exchange mechanism,
tightening fiscal policy and increasing
austerity measures. In September, the
World Bank approved a $7 million loan
to Seychelles in order to improve the
business environment and enhance
public finance management. Y
By the start of 2008, the economy
made significant progress. The government eliminated universal subsidies and
introduced fiscal adjustment measures;
privatization of state-owned companies
was under way; and the exchange rate,
pegged to the U.S. dollar, decreased
from 5.5 to 8 rupees in one year.
But in July 2008, a spiraling balance of
payments crisis came to a head, as international reserves ran dry and the country
missed a debt payment. The government
reacted rapidly, and current Vice President
Danny Faure, who was then Minister of
Finance, negotiated a two-year $26 million standby agreement with the IMF.
“The benefit of restructuring after 2008
is that we now have an economy based
on rock rather on sand,” says Faure.
“From an economic perspective, it was
necessary, to regain international credibility. We managed to tackle our debt,
and this was important for institutions
like the World Bank and the IMF.”
Seychelles’ debt-to-GDP ratio peaked
at 160% soon after the crisis, but stands
at 75% today. The goal now is to reach
50% by 2017. While Strategy 2017’s
objective of doubling GDP now looks
“very ambitious,” says Pierre Laporte,
the country’s finance minister, the payoff
PROMOTION 3
The Unity Monument represents the four pillars of
Seychelles’ economy: tourism, agriculture, fisheries
and small business.
of tighter fiscal management has wide
support from multilateral lenders.
“Since I took office [in March 2012],
Seychelles has embarked on an important partnership with the World Bank,
which will help the country achieve its
development goals,” Laporte says. “It
is a new phase of our relationship with
the World Bank. It brings us to the next
level, as it moves from pure reform to
developing businesses, where the private sector is key.”
In April, the World Bank signed a
three-year Country Partnership Strategy
(CPS) with Seychelles, the first in two
decades. This came just weeks after
Caroline Abel was appointed the first
female governor of the Central Bank of
Seychelles, following Laporte’s departure for his current government role.
“The new $21 million CPS helps get
resources from overseas,” says Abel. “But
the private sector still needs to access
credit from commercial banks in the
country. Interest rates declined from 2009
to 2011, but lending [rates] did not. Banks
kept them between 10% and 11%, so this
made access to credit difficult.”
There are seven commercial banks
currently operating in the jurisdiction,
but Abel says she believes new investment would infuse fresh energy in the
sector and add a business-friendly
approach to what remains a traditional
marketplace. A new single-licensing
regime, introduced this year, for onshore
and offshore banking should help attract
new operators.
“The banking sector is healthy, but they
can do more,” Abel says. “Newcomers
will challenge those already here and
create competition. There is room for
private sector banks in the market, and
we would welcome other international
banks.”
CONTACTS COUNT FOR LOCAL LEADER
Some local banks, like Nouvobanq,
have risen to the challenge. A joint venture between the Seychelles government
and Standard Chartered Bank, it was
established in 1991 and today employs
more than 100 people and maintains
a network of branches on Seychelles’
Mahé, Praslin and La Digue islands.
Since 2008, the bank has increasingly
become more innovative by updating
product offerings and establishing a new
IT system that offers online banking for
its clients, according to Ahmad Saeed,
Nouvobanq’s CEO. The bank has
always been a technological pioneer in
the financial sector: it was the first in the
Seychelles to introduce Western Union
money transfers and wireless point-ofsale technology.
Saeed says he believes Nouvobanq’s
commitment to customer service has
been key to its success: “In this business, it is your contacts that count,” he
says. “Other banks have been around for
50 years, but we have only been here for
21 years. We are ahead of them, so we
must be different. And we are different.”
In addition to Barclays Bank Seychelles,
Nouvobanq is the only other local institution active in the offshore banking
industry. Nouvobanq holds a 50% share
in BMI Bank Seychelles, in a joint venture
with BMI Bank Bahrain. Within its first year of operation, BMI
Bank Seychelles was already profitable,
and Saeed is bullish about the potential
for banks serving non-domiciled clients
ATTRACTING
ATTENTION
Tourism and Ƥsheries have
long formed the foundations
of the Seychellesǯ economy,
but diversiƤcation will be ey
to development in the future.
Now, infrastructure is being
moderniœed, free œones are
open for business, and Port
Victoria has been upgraded to
handle increased global trade.
Seychellesǯ strategic location
and investment incentives
create the ideal environment
for companies to add value to
highǦend products for export to
Africa, Asia, and the Middle East.
Ministry of Finance,
Trade and Investment
Liberty House
P.O. Box 313, Victoria
Mahé, Seychelles
PROMOTION 4 // SADC
CENTRAL
BANK OF
SEYCHELLES
&
counting
On December 1, 2012,
the Central Bank of
Seychelles will celebrate
34 years of existence.
Since our inception, we
have worked hard to create
DVROLGÀQDQFLDOV\VWHP
and sustainable economic
growth for the nation.
Now, we are working to
attract international banks
to develop the country into
DUHJLRQDOÀQDQFLDOKXELQ
the years to come.
For more information,
please contact the Director,
Financial Services
Supervision Division
P.O.Box 701, Victoria,
Mahé, Seychelles
Tel.: +248 428 2000
Email: enquiries@cbs.sc
www.cbs.sc
or residents currently living in the United
Kingdom with origins in other countries,
“Offshore is limitless,” Saeed says.
OFFSHORE INDUSTRY IS BOOMING
Seychelles began to develop its offshore banking industry in 1994, when
the administration of former president
France-Albert René passed a raft of new
legislation, modeled on similar initiatives
in the Bahamas and the British Virgin
Islands. At the same time, it created
the Seychelles International Business
Authority (SIBA) to oversee the sector, acting as registrar and regulator
for international business companies
(IBCs), offshore trusts, banks, mutual
funds, insurers and the Seychelles
International Trade Zone (SITZ).
The Organisation for Economic Cooperation and Development (OECD)
added Seychelles to its “white list” of reputable offshore jurisdictions in 2009, and
the country signed its first Tax Information
Exchange Agreement with the Netherlands in 2010. Ensuring that it maintains
a positive working relationship with the
OECD is vitally important, says SIBA’s
CEO, Wendy Pierre.
“Reputation is everything, especially
in this sector,” Pierre says. “Now we are
going through peer review. We have the
regulatory and legal framework in place,
which meets international standards set
by the OECD. This is very good for us,
but the challenge lies in maintaining that
position.”
To date, SIBA has registered more
than 100,000 IBCs, which benefit from
zero taxation on income and profits,
fixed registration fees and the absence
of minimum paid-up capital requirements. In March, minor amendments to
the 1994 IBC Act tightened corporate
governance, which affected accounting
records; shareholder, director and officer
registers; and the location of registered
offices. The legislation aims to ensure
that the jurisdiction continues to comply
with global best practices.
SIBA licenses companies like All
About Offshore (Seychelles) Limited
(AABOL) to provide international corporate services. With a multilingual team of
financial, legal and investment professionals, led by highly experienced senior
management, AABOL offers sound
advice about Seychelles and other offshore jurisdictions. Its clients are mainly
high-net-worth individuals from Europe.
AABOL specializes in fixed-price, all-
The Victoria Clocktower or “Lorloz,” as it is better
known, is the most prominent landmark of Seychelles’
capital, and has been a focal point for nearly 100 years.
inclusive IBC formation packages.
Business is booming and AABOL
manages close to 4,000 companies.
According to AABOL Managing Director
Peter VanderValk, the company is growing sustainably by 23% to 24% per year
and opens between 20 and 25 new offshore bank accounts every month.
Confidentiality and efficiency are key
to AABOL’s success, says VanderValk,
something he says “did not come by
chance.” In December 2010, the company won the International Platinum
Technology Award for Quality and Best
Trade Name, presented by France’s
Otherways International Research and
Consultants (OIRC), winning the honor
over 53 other offshore service providers.
OPPORTUNITIES IN ISLAMIC BANKING
The next sector for growth is Islamic
banking, according to Steve Fanny,
Seychelles’ Principal Secretary of Finance,
Trade and Investment and former CEO
of SIBA. As one of the fastest-growing
financial practices worldwide, Islamic
banking adheres to the ancient principles
of sharia law, which prohibit interest and
fees for loans.
Due to its proximity to the Middle
East and African countries with large
Muslim populations, as well as the practice’s growing popularity, Seychelles is
attempting to implement Islamic banking in its banking sector in the next few
years. By 2013, Fanny says, the government will devise a plan that goes
PROMOTION 5
beyond compliance to create an innovative framework that supports Islamic
banking, which he says he hopes to see
launched by 2014.
In the insurance sector, eight providers
—four domestic and four offshore—
operate under provisions of the 2008
Insurance Act. The leading local player is
SACOS Group Limited, formed following
the privatization of the State Assurance
Corporation of Seychelles in 2005.
The group is comprised of three wholly
owned subsidiaries: SACOS Insurance
Company Ltd., which sells non-life
policies and handles general claims;
SACOS Life Assurance Company Ltd.,
which underwrites life insurance and
extends loans to policyholders; and Sun
Investment Seychelles Ltd., which provides property management services.
By the end of 2011, SACOS posted
profits of $2.57 million, a jump of 24%
year-over-year. It announced dividends
of $4.60 per share at its general meeting
in July, a 20% increase over 2010, representing a 34%-plus return on investment.
Shareholder funds totaled almost $9 million after the payment of dividends.
According to SACOS CEO, Antonio
Lucas, the group’s target is “to grow
about 10% to 15% a year” in the future,
as it develops new ventures. These will
include equipment and vehicle leasing
through a new division called SACOS
Finance Company, which Lucas expects
to begin operating within the next five
years. The company is also exploring
new investments at home and overseas,
and already has a financial advisor in the
island nation of Mauritius.
In July, SIBA licensed Trop-X, the country’s first multi-asset, multi-currency
securities exchange, which is scheduled
to start operations by the end of the year.
Trading debt, derivatives, equities and foreign exchange products, Trop-X aims to
serve both the Seychelles and regional
markets, with a focus on Southern African
listings.
“This is a very good thing for us in terms
of opening our shores for investment,
even domestically to get our people
involved in the economy,” SIBA CEO
Wendy Pierre says. “The licensing of the
securities exchange is a very important
development for the Seychelles.” Y
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business
All About Offshore (Seychelles) Ltd.
is a licensed and regulated provider
of international corporate services,
including, but not limited to:
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Suite 15, Oliaji Trade Centre, Victoria, Mahé, Seychelles
Tel: +248 432 2622 Fax: +248 432 2667 Email: info@aabol.sc www.aabol.sc
PROMOTION 6 // SADC
ADDING VALUE
TO PARADISE
Local tourism authorities and
operators aim to offer visitors
more than just beautiful beaches
Search for “Seychelles” on the Internet,
and you’ll see images of what could
be considered paradise. Coco de mer
palm trees cast shadows over pristine
beaches, where sand practically glows
in the sunlight. An iridescent sea, so
transparent that the water seems to go
on forever, shimmers against the shore.
But there’s more to the island nation than
meets the eye, says Minister for Tourism
and Culture Alain St. Ange.
“Sun, sea and sand are our natural
assets, but it is not enough,” St. Ange
says. “We have entered the world of
events and need to focus on niche markets, like island-hopping, diving, sailing,
tourism and fly-fishing. There is so much
more to Seychelles.”
Elsia Grandcourt, CEO of the Seychelles
Tourism Board (STB), echoes this sentiment. “We have geared ourselves to be
more of an event-based destination,” she
says. “We started off with the Seychelles
International Carnival of Victoria, where
we invite the world to showcase their culture. Seychelles is a mix of cultures and
Carnival is the melting pot.”
Seychelles is an archipelago of 115
islands, covering about 175 square miles.
It’s scattered across some 530,000 square
miles of the Indian Ocean, and lies more
than 900 miles from its nearest neighbor,
the French region of Mayotte.
The inner group of islands, which
include the most populated, Mahé,
Praslin, and La Digue, are the only oceanic islands formed from granite. The
others are coral atolls and cay islands,
mostly in the Aldabra, Amirantes, and
Farquhar groups.
Tourism began to develop in 1971
after the Seychelles International Airport
opened. By the end of the decade, more
than 77,000 people, most from Western
Europe, had vacationed in the country’s five-star resorts. Last year, nearly
195,000 people visited Seychelles, an
11% increase over 2010. According
to the Ministry of Tourism, the sector
accounts for 25% of GDP and employs
15% of the workforce.
Despite economic worries in the
European Union (EU), and citing figures
released by the Seychelles National
Bureau of Statistics, 75% of arrivals
still come from the EU, and 12% from
African neighbors, but new markets are
providing tourism opportunities. The
number of visitors from China grew 97%
year-over-year, while more than 10,000
people, a 44% annual hike, came from
the Middle East.
Vallée de Mai, a UNESCO World Heritage site, is one
of only two places in the world where one can find
the rare coco de mer.
PROMOTION 7
Giant tortoises benefit from conservation programs
carried out by the Nature Protection Trust of
Seychelles (above).
Private islands like Desroches offer exclusive living
and investment opportunities (left).
“Our strategy is twofold,” St. Ange says.
“We need to consolidate Europe—our key
market. But we need to go beyond this
as well. We are looking at the Americas,
China and India as our next key markets.”
The trend toward developing new
markets is likely to continue, particularly since Air Seychelles, the country’s
national airline, ended all flights to
Paris in the first quarter this year, due
to restructuring. In January, Etihad
Airways, the United Arab Emirates’
national airline, acquired 40% of Air
Seychelles in a $20 million deal that will
support the local carrier’s development.
“Today, Seychelles is more accessible
than it was a couple of years back,”
Grandcourt says. “Even if it is through
a hub, you have more frequency and
more airline companies servicing the
destination.”
Travelers have a variety of options
for accommodation. Global hospitality
brands, like Banyan Tree, Four Seasons,
Hilton, Kempinski and Raffles, all operate
high-end resorts in Seychelles, mainly in
Mahé and Praslin, while boutique hotels
on the coral islands, like Desroches
Island Resort and Fregate Island Private,
offer the chance to really get away from
it all.
Le Domaine de L’Orangeraie, on La
Digue, boasts 55 luxury villas and is just
steps away from Anse Severe beach
and its Eden Rock Wellness Centre &
Spa, which is perched atop a granite
peak. It is among the unique properties
owned by Joe Albert, one of the country’s most successful entrepreneurs.
The resort is testament to Albert’s desire
to retain Seychellois hospitality, nature
and heritage in a destination designed
for peace and tranquility.
Albert believes that rather than equating big with beautiful, the best things
come in small packages. As a proud
Seychellois, Albert is committed to preserving the islands’ natural environment
and traditions, while working to develop
some of its most stunning settings into
world-class destinations.
Albert is now looking for partners to
co-develop Cap Lazare Nature Reserve,
which is spread across 160 palm-filled
acres on Mahé and houses a luxury,
Creole-style village, overlooking a private beach and lagoon. Albert acquired
the land 20 years ago, but has yet to find
a partner who shares his vision for the
Seychelles. Y
of
source tranquility
In the heart of the Seychelles archipelago lies the island of
La Digue, home to the famous Anse Source d’Argent beach,
where a tropical Zen paradise awaits you.
Pedal around tranquil car-free roads and trails. Harmonize body and soul
with a massage in the wellness spa, or soak up the majestic panoramas of
the Indian Ocean from your own private infinity pool.
Le Domaine de L’Orangeraie
reservations@orangeraie.sc
www.orangeraie.sc
PROMOTION 8 // SADC
Photo: Sea Harvest
In Seychelles,
thereǯs only
one name
in insurance,
whatever
your needs.
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WEALTH
UNDERWATER
AND OVERHEAD
Sustainable fisheries and
petroleum potential fuel growth,
while wind and solar power
begin to take off
With a land area equivalent to just
0.03% of its exclusive economic zone
(EEZ) in the Indian Ocean, it’s not surprising that most of Seychelles’ natural
resources lie under the sea.
The archipelago lies on an important
migratory route for tuna, including the
yellowfin, skipjack, and bigeye varieties
sold commercially worldwide. According
to the National Bureau of Statistics,
Seychelles shipped more than 30,000
tons of tuna in 2010, making it the
second-largest export after tourism.
“The fishing industry is the second
pillar of the economy. We like to call
it the ‘blue economy’ and it has the
potential to be the first,” says Peter
Sinon, Seychelles’ Minister for Natural
Resources and Industry. “We have the
largest tuna plant and are the busiest
port in the Indian Ocean. The importance of marine life in the ocean, which
is our best natural resource, is huge.”
Sustainability will be key to long-term
prospects, and local fishermen, with
Photo: The Seychelles Fishing Boat Owners Association
life
motor
travel
marine
property
business
healthcare
engineering
the support of the Seychelles Fishing
Authority, have been helping to manage
stocks by returning to traditional line
fishing methods.
The Seychelles Hook and Line
Programme, an initiative managed by
Beatty Hoarau and Virginie Lagarde,
of the Seychelles Fishing Boat Owners
Association, focuses on origin, quality, traceability, and sustainability to
promote responsible fishing practices.
Fish carry labels that identify by whom,
where and how they were caught, which
adds value and creates a link between
consumers and producers.
Petroleum is another valuable resource
found readily in Seychelles. Australia’s
WHL Energy is carrying out exploration
work, having completed seismic data
acquisition in May 2011, and this past
April, it announced that it had raised
PROMOTION 9
$7.9 million to fund the program.
According to an independent 2011 report
from Netherland, Sewell & Associates,
Inc. (NSAI), a company providing reserve
reports to the petroleum industry, WHL
Energy’s 21 most advanced leads contain a total mean prospective resource of
more than 3.4 billion barrels.
“The fishing industry is the
second pillar of the economy.
We like to call it the ‘blue
economy’ and it has the
potential to be the first.”
Peter Sinon, Minister for
Natural Resources and Industry
Onshore, the government is pursuing
sustainable energy generation, in line
with the Energy Policy of Seychelles
for 2010-2030, which aims to reach
15% reliance on renewable energy by
2030 and 100% reliance on it in the
long term. Rolph Payet, the Minister
for Environment and Energy, is leading the country’s efforts to become
self-sufficient.
Work began on the country’s first
large-scale green energy project in
March. The United Arab Emirates’
Masdar, with backing from the Abu
Dhabi Fund for Development, is overseeing a six-megawatt wind farm, set to
provide 11% of the electricity required
to power the main island. The facility
comprises eight turbines, which Unison
Co. Ltd., a power company based in
South Korea, will install on Romainville
Island and Ile du Port.
In September, the Ministry of
Environment and Energy signed an
agreement with the United Nations
Development Programme (UNDP) to
install grid-connected, rooftop photovoltaic, solar power systems. The $1.16
million project will generate solar energy
in Mahé, Praslin, and La Digue, as well
as selected outer islands. Y
SADC 3 Section Project Managers:
Sheila O’Callaghan, Lynsey Elston, Rosie Venn,
Dominic McWilliam and Mauro Perillo
For more information, contact:
Gabriel Gutierrez – g.gutierrez@forbes-cm.com
www.forbescustom.com/economicdevelopment.html
ECO-SMART
MANAGEMENT
FOR
S U S TA I N A B I L I T Y
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Ministry of Natural Resources and Industry
Caravelle House, Victoria, Mahé, Seychelles
Tel: +248 467 2306 | Fax: +248 461 0127
The one-stop shop
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PROMOTION 10 // SADC
ZIMBABWE
Robert Fried / Alamy
REFORMS SPEED
UP RECOVERY
Closer relations with BRIC
countries aim to attract new
investment
After spectacular GDP growth of 9.6%
in 2010 and 9.4% in 2011, Zimbabwe’s
economic expansion is expected to
slow to 5% this year, according to IMF
forecasts. The IMF nevertheless praised
efforts to turn around the economy, while
urging the government to implement
additional reforms to speed up recovery,
including enhancing fiscal management,
reducing financial sector risk, and
improving conditions for business.
Dollarization, one of the first measures
the power-sharing government introduced in 2009, ushered in a new era of
stability after a decade of recession and
hyperinflation. By June, inflation had
been reined in to 4%, and it is expected
to close out the year at 6.5%.
Zimbabwe’s debts remain a concern
for long-term prospects, with $10.7 billion, around 113% of GDP, owed at the
end of 2011, and almost two-thirds in
arrears. Late this year Finance Minister
Tendai Biti said Zimbabwe would seek
help from SADC members, such as
Angola and South Africa, to help finance
its budget.
The country is also looking to develop
closer relations with new markets,
including the fast-growing BRIC economies of Brazil, Russia, India, and China,
to boost income from exports and attract
new investment, according to Economic
Planning Minister Tapiwa Mashakada.
The volume of trade with Russia alone
increased from $1.5 million to $5.5 million between 2009 and 2011. Y
ENSURING
DOLLARIZATION
PAYS OFF
Banking sector may benefit
from a bailout, while insurance
industry diversifies risks
The dollarization of Zimbabwe’s
economy has worked wonders for
macroeconomic indicators, slashing
inflation to single digits and contributing to the recent GDP growth. But
it has shaken confidence in the financial sector, which faces a liquidity
crisis in addition to concerns about
weak regulation and poor practices.
In January 2012, six of Zimbabwe’s
26 banks failed to meet minimum capital requirements, and four—including
the country’s biggest, CBZ—have
sought government help in the last
two years. In July 2012, the Reserve
Bank of Zimbabwe (RBZ) announced
an 800% increase, to $100 million, in
minimum capital by 2014.
In September, Finance Minister
Tendai Biti put forward a plan for
a $1 billion bailout funded by the
Zimbabwe Resolution Corporation
(ZRC) and backed by a Dubai private
equity firm and a bond issue. The
ZRC would purchase bad loans from
banks, giving them time to merge and
strengthen the sector.
At the same time, the Insurance
and Pensions Commission (IPEC)
announced a tenfold increase to
$3 million in minimum capital requirements for insurance companies by the
end of 2013. The sector comprises 26
companies, all fighting for a share of a
$180 million market.
Among them is Fidelity Life Assurance, active in Zimbabwe since
1936, listed on the Zimbabwe Stock
Exchange in 2003 and ISO certified since 2005. According to Simon
Chapereka, Fidelity’s CEO, it wants
to become the country’s preeminent asset manager by continuing to
develop business, and promote consumer lending and microfinance. Y
PROMOTION 11
DIVERSIFIED
GROUP KEEPS
GROWING
Demerger of TN Holdings sets
the stage for development of
banking and lifestyle subsidiaries
Over the past few years, Tawanda
Nyambirai has been a busy man. As
group CEO of TN Holdings, incorporating TN Bank, TN Medical and TN
Harlequin Luxaire, as well as many other
interests like TN Grill fast-food outlets
and TN Mart supermarkets, he has built
one of the fastest-growing business
empires in Zimbabwe.
Educated as a lawyer, Nyambirai acted
on behalf of African telecommunications entrepreneur Strive Masiyiwa in his
legal battle to win a license for Econet
Wireless Zimbabwe in the 1990s, and, for
the last eight years Nyambirai has served
as the company’s chairman. Together,
Econet and TN Bank operate EcoCash, a
Tawanda
Nyambirai,
Group CEO,
TN Holdings
mobile money-transfer service launched
in 2011, which already has more than
one million customers nationwide.
TN Holdings has been listed on the
Zimbabwe Stock Exchange since
January 2010. In July 2012, TN Holdings
decided to demerge TN Bank from its
nonfinancial interests to form Lifestyle
Holdings and list both companies separately. TN Bank had an initial market
capitalization of over $44 million, based
on the $20 million that Econet paid
for 45% of its shares, while Lifestyle
Holdings posted a market cap of $18.7
million.
TN Medical helps clients create insurance funds to cater to their own as well
as their employees’ medical expenses.
The funds are administered through
trusts, which TN Medical manages and
invests on behalf of clients. The company issues members and beneficiaries
with a TN Medical card, which is widely
accepted by health providers and does
not require co-payments.
TN Harlequin Luxaire is Zimbabwe’s
premium retailer of fine home furnishings, with a network of 28 stores, and
is the largest manufacturer of beds,
chairs, sofas and wooden furniture in
the country, with four factories in Harare
and Bulawayo. Exports to South Africa
and Zambia are projected to account for
20% of the company’s income by the
end of this year.
In August, the group launched TN
Livestock Trust, a new subsidiary
of Lifestyle Holdings, which aims to
develop a $1.3 billion “cattle bank.”
Zimbabwe’s smallholders own about
90% of the country’s five million cattle,
each worth $400. TN Livestock Trust
aims to recognize that value by providing cash for cows, allowing farmers to
“deposit” a steer and apply for a loan. Y
PROMOTION 12 // SADC
SERVING EVERY
FINANCIAL NEED
From retail banking to
life insurance, from asset
management to securities,
Old Mutual does it all
Old Mutual Zimbabwe is part of
the Old Mutual Group, a diversified
financial services conglomerate that
provides insurance, banking, and assetmanagement services. Founded in
South Africa in 1845, Old Mutual Group
serves more than 12 million clients today.
Listed on the London, South Africa,
Malawi, Namibia and Zimbabwe stock
exchanges, at the end of 2011 the group
declared pretax profits of $2.4 billion and
managed funds worth $430 billion.
The Group’s Zimbabwean operation
has been in business for over 110 years
and was named Top Employer in Africa
in 2012 according to the Corporate
Research Foundation (CRF) Institute’s
annual Best Employers Certification
Index. Through specialized subsidiaries,
the group offers individuals, multinationals and institutions a comprehensive
range of financial products, including life assurance, asset management,
unit trusts, property development and
management, short-term insurance and
banking services.
Old Mutual Life Assurance Company
is Zimbabwe’s leading life insurance
company in terms of premium income,
and it handles life, retirement, savings
and funeral policies, as well as offering one-stop-shop services to pension
funds that outsource administrative,
insurance and actuarial functions.
The company’s asset-management
arm is also the nation’s largest investment manager, offering retail and
wholesale clients an unrivaled choice
of boutique options, such as alternative
investments, select equity investments,
core equity investments, interest-bearing
investments and property investments.
CABS, the biggest banking society
in the country, oversees Old Mutual’s
Zimbabwe banking operations. CABS
delivers innovative financial services
and products such as EasyBank, which
lets people bank almost anywhere via
retail point-of-sale networks, and its
exclusive Platinum Club for clients who
demand world-class services.
Established in 2010, Old Mutual
Securities is a member of the Zimbabwe
Stock Exchange and offers confidential,
ethical and professional trading services
to high-net-worth individuals and institutions. Old Mutual Custodial Services,
set up in 2011, provides custody and
settlement of bonds, equities and other
financial instruments.
Old Mutual aims to invest $200 million in
private equity and infrastructure in 2013,
and will be looking at opportunities in the
mining, agriculture, tourism and service
sectors. The company is also committing millions to its social responsibility
mission, including a $15 million housing
scheme to build 3,000 low-income units
in Harare. In 2011, it endowed a youth
empowerment program with $11 million,
which CABS will administer. Y
PROMOTION 13
MAKING MORE OF
MANUFACTURING
The lack of liquidity in Zimbabwe’s
financial sector has had an amplified
effect in production sectors such as
agriculture and manufacturing, making
it harder for local industries to sustain
the economic recovery that began in
2009. Local companies face a challenge
in raising capital to expand domestically
while reaching out to export markets.
Manufacturing accounts for 12% of
Zimbabwe’s GDP and 15% of exports,
but the government believes it has the
potential to more than double both
shares in the next five years. According
to the President of the Confederation of
Zimbabwe Industries, Kumbirai Katsande,
industrial capacity utilization has almost
tripled since 2008, to 57% as of July 2012.
The introduction this past March of a
new Industrial Development Policy for
2012–2016 aims to transform the nation
from a producer of raw materials into
a processor of value-added goods for
national and overseas consumption.
INVESTING IN
INFRASTRUCTURE
A modern infrastructure is fundamental for any country’s growth, but
this is one of the sectors that has
suffered most in Zimbabwe in recent
years. According to the African
Development Bank (AfDB), $14 billion is needed for rehabilitation and
expansion over the next 10 years.
Only 60% of Zimbabwe’s roads
are in good condition; freight uses
just 15% of railroad capacity; a mere
41% of the population has access to
modern sanitation; and the country
generates less power today than it did
30 years ago.
Zimbabwe relies on thermal energy
for most of that power, and Hwange
Colliery, its biggest mine, supplies almost two-thirds of current
demand—between 4.5 million and
5.4 million tons per year. According
to Farai Mutamangira, Hwange’s
chairman, production averages three
million tons, but, with new investment,
that figure could reach nine million and
eliminate dependency on imports. Y
One company investigating new
sources of income and opportunities, at
home and abroad, is Turnall Holdings, the
Southern African market leader in highquality fiber-cement roofing and water
and sewerage conveyance products. A
subsidiary of FBC Holdings Group, it has
been in business for more than 60 years
and recently invested millions to upgrade
its manufacturing facilities in Bulawayo.
The company posted profits of $3.9
million in 2011, a jump over 2010’s $3.4
million, on a turnover of almost $52 million, which represented a 49% increase
over the previous year. Exports accounted
for just 3% of that growth, but the commissioning of its non-asbestos Newtech
Plant last November should see its exports
to South Africa and Mozambique expand
in 2013. The company already exports
to SADC countries such as Botswana,
Zambia and Malawi.
“We have a vision in this business that
by 2015 we will turn over $300 million,”
says John Jere, Turnall’s managing director. “We want to be a dominant player
in the Southern African Development
Community.” Y
MALAWI
GROWING FROM
THE GROUND UP
Agriculture forms the bedrock of
Malawi’s rural economy, accounting for more than a third of its GDP,
employing three-quarters of the population and representing over 80%
of exports. Coffee, cotton, sugar,
and tea are among the leading cash
crops, but tobacco is king, contributing 70% of export earnings.
Premium TAMA Tobacco Limited is
a subsidiary of the Tobacco Association of Malawi (TAMA), which produces
70% of the country’s tobacco. The
company acts as an intermediary
between many of the two million
tobacco farmers and international
manufacturers.
“We export almost 100% of what
we grow,” says Tom Malata, Premium
Tobacco’s managing director. “We
are in the global market and have to
move with it. We have to drive ourselves by the world’s requirements of
supply and demand.” Y
Q
Money Market
Q Unit
Trusts
Management
Q Advisory Services
Q Fund
+263-4-750927-34
+263 772262373
www.fidelitylife.co.zw
HWANGE
COLLIERY COMPANY LIMITED
www.hwangecolliery.net
From one plant to another
Tobacco production employs two million people
and contributes $400 million to Malawi’s GDP.
Premium TAMA Tobacco Limited purchases
Tobacco Association of Malawi (TAMA) farmers’
leaves at premium prices and processes them
to add value to exports, turning tobacco
into something that feeds families.