Zimbabwean listed company executives are desperate to share the fact that they are bullish about the future of the Zimbabwean economy. Yes things are not normal at the moment, they are in fact very challenging (given the shaky state of the banking sector and the political environment etc). Equities are generally “undervalued” or, their prices reflect the risk of doing business in Zimbabwe. So why not share a little of the upside with your shareholders in an analyst meeting?

Because in most cases the CEO is wrong. In Zimbabwe, this penchant for talking up the future without considering exactly what they are saying, CEOs are destroying their credibility. From an investor relations perspective I would deliver ACTUAL good news with gusto, deliver only facts at present and warn and disclaim the future. Executives mix up all three so as to confuse investors. The result is that any good news about the future is ignored and investors are left to work out for themselves what the risks are.

In the US there are requirements for disclosure committees and warning language such as forward looking statements. Like this:-

Statements on this website (including fact sheet, presentations and all other media) that are not historical facts or information may be forward-looking statements.

These forward-looking statements are based on information available at the time the statements are made and/or management’s belief as of that time with respect to future events and involve risks and uncertainties that could cause actual results and outcomes to be materially different. Important factors that could cause such differences include, but are not limited to the loss of key customers, the disruption to business and reductions in capacity and in demand.

While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, and therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to today.

Listening to executives in analyst presentations and assessing what they are saying about the future makes one realise that regulation is not a bad thing. “Do the right thing” they say. But executives don’t learn it appears. To be fair though the market in Zimbabwe is very difficult to read and directors do have an obligation to provide some guidance to shareholders. Its a delicate balance but one that does not have the spectre of litigation hanging over its head.

I replicate below an article from www3.cfo.com on the risks of litigation in US markets. Again, as I have said before, the gap between corporate communications governance in US markets and sub-Saharan markets could not be wider. I think there is significant scope for African companies to adopt best practice internationally and set their governance way above their peers. Just finding these companies is a challenge.

Upbeat Words in Earnings Statements Can Get You Sued, Research Shows

Companies that use overly optimistic language in earnings releases are 75% more likely to get sued after their stock performs poorly than companies that use more moderate language.

Sarah Johnson

CFOs should carefully vet the words their companies use in earnings releases and other publicly disseminated documents about financial results — or those words could come back to haunt them.

Academic researchers recently concluded that companies that use overly optimistic language in earnings releases are 75% more likely to be sued after their stock performs poorly than companies that used more moderate language before a stock dip. Shareholder lawsuits following negative stock returns that cite CEOs, CFOs, and the company as defendants will often quote text in quarterly updates to back up the claim that the executives used materially misleading statements.

The researchers based their conclusion on a review of 165 companies that were accused of securities fraud in federal court. The cases alleged that the companies made material misrepresentations and omissions about their financial health and their future prospects. The academics compared those firms to another 165 companies with similar characteristics and economic declines that were not sued. Those that were hit with court documents had used more upbeat language in their earnings releases. “The results suggest that executives’ optimistic language can result in them getting sued,” says Jonathan Rogers, an associate accounting professor at the University of Chicago. His paper appeared in the American Accounting Association’s Accounting Review.

Although the researchers didn’t break out which words in particular kept cropping up in the suits they reviewed, “strong” did seem to be used frequently by the sued firms to describe how some areas were performing. Other examples could be an executive quoted as saying he is “very pleased” with the company’s historical results or a company mentioning customer-satisfaction scores that are better than those of its competitors.

While such derivative lawsuits are unlikely to reach the trial stage, they create a distraction for the CFOs and other managers cited in them, and can cost a company in terms of time, legal fees, and, possibly, settlement agreements, Rogers notes.

To lessen their risk, the researchers suggest managers “dampen the tone of their earnings announcements either by decreasing their use of positive language or by tempering their optimism with statements that are less favorable.” They don’t suggest that companies eliminate optimistic words altogether.

Many derivative suits will cite phrases pulled from these publicly available documents as a way to support the argument that a company and its managers were misleading. However, attorneys representing companies are usually able to get the courts to disregard such statements by calling them “puffery” and insisting the language should not be considered a material statement of fact. That doesn’t always happen, though, causing some uncertainty over how these cases will play out, the researchers note.

Another way to lessen the risk of litigation, the researchers suggest, is to make sure that company insiders are not selling their company stock in a way that would contradict any optimistic tone used in company releases. Insider sell-offs don’t necessarily raise a company’s litigation risk but could help fuel arguments used in shareholder litigation, they note.

Another defense, of course, is truth. Truthful, honest executives are less likely to be sued. Executives always need to be careful of the tone they use, whether in written form or in their talks with investors. And consistency may be key for expressing the truth to investors, some of which are more likely to notice a shift than others.

Hedge-fund managers, for example, will go to every sell-side conference to see if a certain CFO’s body language changes, looking for hints as to where the company is headed, says Beth Saunders, Americas chairman of FTI Consulting’s Strategic Communications practice. Her company helps executives prepare for interactions with shareholders. “A really good CFO shows believability,” she says. “Whether you are saying good or bad things, the only way you can be believable is to be who you are.”

Email the author of this article Sarah Johnson 

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Unlike Admiral Nelson, see the extract of the story below from Wikipedia, I have two eyes through which to assess the landscape, the corporate governance and communications landscape in Zimbabwe. And, unlike him, I am not ignoring what this investor relations landscape is telling me. In fact I am absorbing the fact that very few listed companies in Zimbabwe, if any, have disclosure committees. This can be attributed to the fact that that

• legislation does not exist that requires them and
• that listed company executives do not have to worry about this area of corporate governance because there is an absence of investors or stakeholders demanding accountability in this respect. Furthermore there is little or no commercial value to be had from taking an altruistic view.

So a recent study by Corporate Counsel.net was interesting to me because it highlighted the extent to which our African markets differ from those in First World markets. Here is the brief overview from Corporate Counsel.net:-

Survey Results: Disclosure Committees

We have posted the survey results regarding the latest disclosure committees trends, repeated below:

1. Back in mid-2008, we conducted a survey on disclosure committees (here are the results) – we are now canvassing to see if practices have changed. Our company:
- Has a disclosure committee – 96.7%
- Doesn’t have a disclosure committee (if you check this box, you are done) – 3.3%

2. Our disclosure committee has:
- More than 10 members – 32.1%
- Between 8-9 members – 39.3%
- Between 6-7 members – 21.4%
- Between 4-5 members – 7.14%
- Has less than 4 members – 0%

3. Our disclosure committee has the following types of members:
- CEO – 27.6%
- CFO – 75.9%
- Controller – 86.2%
- General Counsel – 86.2%
- Securities Counsel – 82.8%
- Compliance or Risk Management – 41.4%
- Investor Relations Officer – 72.4%
- Internal Auditor – 55.2%
- Officer from a Business Unit – 55.2%
- Other – 55.2%

4. For our disclosure committee:
- Someone takes minutes of meetings – 72.4%
- We don’t keep minutes of our meetings – 27.6%

I fail to see on the horizon a catalyst that will enable us to catch up with the First World in this key area. Disclosure Policies need disclosure committees to manage them. This issue matters because in the absence of checks and balances on proper communications practices investors raise their risk profile of investing, require a higher return and this increases the cost of raising capital.

On a slightly different note, In South Africa there is supposed to be a direct communications channel between investors and Disclosure Committees, by law. I don’ t see these channels. A secure website link to the Chairman would be way forward I guess.

Thanks to Wikipedia.org for the text below. Please donate to them….

On the morning of 2 April 1801, Nelson began to advance into Copenhagen harbour. The battle began badly for the British, with HMSAgamemnon, HMS Bellona and HMS Russell running aground, and the rest of the fleet encountering heavier fire from the Danish shore batteries than had been anticipated. Parker sent the signal for Nelson to withdraw, reasoning:

I will make the signal for recall for Nelson’s sake. If he is in a condition to continue the action he will disregard it; if he is not, it will be an excuse for his retreat and no blame can be attached to him.^[170]

Nelson, directing action aboard HMS Elephant, was informed of the signal by the signal lieutenant, Frederick Langford, but angrily responded: ‘I told you to look out on the Danish commodore and let me know when he surrendered. Keep your eyes fixed on him.’^[171] He then turned to his flag captain, Thomas Foley and said ‘You know, Foley, I have only one eye. I have a right to be blind sometimes.’ He raised the telescope to his blind eye, and said ‘I really do not see the signal.’^[171][172] The battle lasted three hours, leaving both Danish and British fleets heavily damaged. At length Nelson despatched a letter to the Danish commander, Crown Prince Frederick calling for a truce, which the Prince accepted.^[173] Parker approved of Nelson’s actions in retrospect, and Nelson was given the honour of going into Copenhagen the next day to open formal negotiations.^[174][175] At a banquet that evening he told Prince Frederick that the battle had been the most severe he had ever been in.^[176] The outcome of the battle and several weeks of ensuing negotiations was a 14 week armistice, and on Parker’s recall in May, Nelson became commander-in-chief in the Baltic Sea.^[177] As a reward for the victory, he was created Viscount Nelson of the Nile and of Burnham Thorpe in the County of Norfolk, on 19 May 1801.^[178] In addition, on 4 August 1801, he was created Baron Nelson, of the Nile and of Hilborough in the County of Norfolk, this time with a special remainder to his father and sisters.^[179][180] Nelson subsequently sailed to the Russian naval base at Reval in May, and there learned that the pact of armed neutrality was to be disbanded. Satisfied with the outcome of the expedition, he returned to England, arriving on 1 July.^[181]

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Many of the more established listed companies in the First World have mandatory director induction programmes. Ones designed to ensure that directors understand their fiduciary duties in the context of corporate governance. It beggars belief that a public article of the nature below can state ……

” When first appointed members had been of the view that the dismissed Board members were familiar with their fiduciary duties in terms of the law and in terms of the articles of the company (NOTE: no mention of the Zimbabwe Code on Corporate Governance), regrettably it has turned out that they were not fully conversant with the above resulting in uninformed decisions for the detriment of all shareholders”

Where is the Institute of Directors when you need it? Where’s oversight from the shareholders about the capabilities of their board. In the 21st century there is actually no excuse for this sort of failure. It seems that the authors of this notice, “the members”, have shot themselves in the foot. Members are responsible for appointing directors (or ratifying the appointment) so they should put in place measures to ensure that educated and honest members are appointed to the Board. Its always someone else’s fault isn’t it. It’s just like dealing with teenage kids.

“Comply” or “explain” Mervyn King recommends in his approach to applying corporate governance vs the alternative of legislating compliance. Corporate governance is not about “checklists” he says. Its about the integrity of directors. Well, what should one do when there is little shareholder oversight (or activism) of their Board? When legislation is not prescriptive enough? Well this is where African corporate governance is not understood. Generally the absence of critical mass in investor numbers, in regulation, in shareholder education, in all stakeholders being informed about shareholder rights etc. is a recipe for ensuring that something different needs to be done.

The difference needed is to “create lists”. Lists of clear corporate governance deliverables making it mandatory for listed company executives and the Board to sign them off in public in front of shareholders. Every year at the AGM. Hold all directors accountable for the performance of all directors, not come up with excuses like “they did not know what their fiduciary duties were”.

The wishy washy corporate governance codes language is NOT appropriate for governance in African markets. It’s not that Africans are more dishonest than others. Its just that the environment we find ourselves in is more conducive to no-one paying attention to corporate governance – the levels of oversight on all levels are not as high so abuse can slip in. And it does.

The solution is so simple. Create a list, tell the directors to swear on their mothers death that they carried out an appraisal of the things in the list and disclose the results. Ticking off things on a list will create the basis upon which directors can become more aware of what integrity means because they will be reminded of it. What is this “list” you may ask?  Well, one form is the Institute of Directors South Africa’s Governance Assessment Instrument – this is what their website says….

As part of our efforts the Centre for Corporate Governance has established the Governance Assessment Instrument (GAI), a web-based tool with modules catering for all business sectors, including listed companies, SMEs, state-owned entities, medical funds, pension funds, NPOs, etc.

The GAI facilitates the implementation of good governance structures and practices. It also serves as a rating mechanism of governance.

To login or to view the GAI click here

You probably find that there are not more than 12 statements that need to be read out to directors at an AGM that cover everything that shareholders need to know about how their board is responsible for their own behaviour. Jointly. If the Board fails in part, the whole Board should go. Mix “lists” with the “comply or explain” mantra and we will be one step ahead of where we are now.

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It’s not often that one gets to launch an online investor relations initiative and new website for a company that’s over 100 years old. Well that’s what we have done for CFI Holdings. That’s cool!

CFI is a Zimbabwean vertically integrated conglomerate predominantly involved in poultry, agro-industrial processing, irrigation, retailing, and property management and development.

CFI Holdings’ investor relations section and IR initiatives is not a world trendsetter – it does not have to be – the company offer the basics to their shareholders (and customers) as required by good corporate governance practices. Merging investor relations initiatives with being more competitive in the commercial space online just builds overall corporate reputation. It’s a fact that is lost on many corporate executives: except those at CFI of course – and a handful of others.

CFI is an interesting investment opportunity given its asset base and vertically integrated structure and the group has struggled post “dollarisation” in Zimbabwe as have all companies. For international investors looking at Zimbabwean listed companies it’s tempting to dismiss the efforts of small listed companies (as measured by market capitalisation). But when measured by the efforts these companies are making to engage shareholders directly and to showcase brand online they ARE leaders in Africa – just look at how other corporate websites fair in African markets – particularly listed companies. Now appreciate a company like CFI.

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Investor relations practices in Zimbabwe are subject to stresses and strains not seen in other markets anywhere else in the World. It was only a few years ago that Directors were being jailed for communicating their strategies to “protect shareholder value” in a hyper-inflationary environment. For example just putting up prices was a criminal offence. I am not joking.

In order to survive companies had to break the law and not communicate this to the market. This was to “protect shareholder value”. Many executives could not handle it and left. Post-dollarisation (post the chaos of hyperinflation) the Zimbabwean economy is now strewn with under-capitalised businesses that now have to deal with the Government’s objective to “empower the people”.

It’s complex, its political. It is again challenging executives. Get it out of the way and opportunity awaits you.

One company that has overcome this threshold before others is Meikles – check out an extract of their latest interim statement below.

Access full information on this dual-listed company on www.meiklesinvestor.com and their latest statement here.

MEIKLES releases 2011 interim results

The Meikles Limited Board of Directors is pleased to announce the release of the 2011 interim results for the six months ended 30 September 2011. Below are a few extracts from the Chairman’s review.

Group review

Indigenisation
After meeting the various requirements set by the Ministry of Youth Development, Indigenisation and Empowerment, the Company was accorded its indigenous status and is now in compliance with the Empowerment Act…

Pick n Pay investment into TM Supermarkets
Save for the Competition and Tariff Commission, the regulatory authorities have now approved the Pick n Pay investment into TM Supermarkets…

Disposal of the Cape Grace
The disposal of the Cape Grace Group is expected to be completed in the second half of our financial year.

Employee Share Trust (“Trust”)
As stakeholders will remember, on 18 August 2011 the shareholders approved the allocation of 24 million Meikles shares into the Meikles Limited Employee Share Trust…

Executive share scheme
The Group executives together with an indigenous consortium have set up a special purpose vehicle to acquire shares in the Company through the Zimbabwe Stock Exchange…

Ex-Cotton Printers equipment
Following the conclusion of the liquidation of Cotton Printers, the spinning and weaving equipment remained unsold. The Company subsequently entered into an agreement to dispose of this equipment to the former workers of Cotton Printers…

Funds held at the Reserve Bank of Zimbabwe
Negotiations with the RBZ for the repayment of our deposit of US$37 million are still continuing. We remain confident that the deposit, that is accruing interest, will be repaid. Shareholders are advised that there are no further outstanding issues with the RBZ.

Group results
The Group has continued to make progress under very difficult conditions, with high borrowing costs and inadequate capitalisation. Revenues from continuing operations increased by 39% compared to the same period in 2010…

TM Supermarkets (“TM”)
Revenues increased by 36.4% to $136.6 million (2010: $100.2 million). The EBIDTA for the 6 months ended 30 September 2011 was $3.5 million (2010: $2.1 million)…

Thomas Meikle Stores
The revenues increased by 114.9% to $12.2 million (2010: $5.7 million). The gross margin was 32% (2010: 33%). The EBIDTA for the 6 months ended 30 September 2011 was $234,000 (2010: loss of $579,000)…

Tanganda Tea Company
The peak season for tea remains November to March in any given year and is heavily influenced by the rainy season. Therefore, in the 6 months ended 30 September 2011, the company’s main focus was plantation development and diversification into other crops…

Meikles Hospitality
The tourism sector in Zimbabwe continues to recover due to the relative political and economic stability. The tourist arrivals have increased by around 16% this year according to the Zimbabwe Tourism Authority…

Directorships
The Company announced the resignation of the then Group CEO Mr. B Beaumont with effect from 30 September 2011. The Group has reorganised its management structures to cover the gap left by Mr. Beaumont who will not be replaced in the short to medium term. The Meikles Limited board which is made up of 4 indigenous and 2 non indigenous members is in compliance with the empowerment laws of the country.

Outlook
The success achieved in obtaining most of the requisite approvals for the PnP investment into TM Supermarkets and of the company being accorded its indigenous recognition all augur well for the future. These recently acquired approvals have had no impact on the results for the first half of the financial year…

For and on behalf of the Board

J R T Moxon
Executive Chairman
24 November 2011

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They are setting a trend. AICO Africa;, the Zimbabwe Stock Exchange listed seed, cotton and FMCG group podcast its analyst presentation for the half year results to 30 September 2011. The is the second time AICO has podcast its full investor presentation and the company is setting the lead in Zimbabwe in consistently applying investor outreach initiatives.

The company is under-capitalised and has significant operational challenges, but their investment story is positive in the short-term, and exciting in the long-term given the profile of agriculture and food globally. Seed Co, also listed, is the Group largest asset and is also applying progressive investor outreach initiatives through their website and communication practices.

Some key stats from AICO’s presentation:-

1. Revenues up by 117% to US$m
2. PAT growth in Cotton up by 183% – recorded profit of US$4.6 m
3. Growth in Group sales volumes up by 19%

So does the investment story of a company determine whether the management adopts progressive online communications practices? Clearly not. Management, or the Board does. This quote from Standard Boardroom Practice, prepared by the Institute of Directors, London, revised 1971 is still appropriate (or perhaps more appropriate) in modern times:

“Although the process of encouraging shareholders to take an interest in the affairs of the company may be a rather slow one, directors should not be discouraged. It is their duty to make the maximum use of the methods open to them of keeping the shareholders informed.”

The “methods open to them”: a website, Twitter, Facebook, RSS feeds, Linkedin, SMS, emails, podcasts, conference calls, webcasts…….none of these applied in 1971, but they do now and they provide companies the opportunity to build brand and corporate reputation by forming and retaining relationships with stakeholders individually. At low cost. How? Technology.

With the slackening off of global markets and the withdrawal of foreign demand for securities in emerging African markets companies feel that they need to go “the extra mile” to seek and retain investors’ attention. There are two aspects of this “extra mile” that are disturbing. The first is that the “extra mile” should be the “norm” in these markets, as they are elsewhere and secondly, the number of companies not adopting the basic tenets of online disclosure (timely and comprehensive info) is high. My favourite quote above has been lost in time. Lost to the regulators and lost to directors because they are stuck in their past ways. But times have changed.

My experience with our clients is that the core decision makers know that “it is the right thing to do” but do not necessarily understand how or why – which is fair game. I make the mistake trying to promote these practices by  jumping up and down and waving my hands because I’m so excited. But life is not like that. Learning happens slowly. Confidence building takes time, as does seeing the benefits of how online communications benefits companies in areas other than investor relations.

The fact is that in the absence of prescriptive regulation, proactive adoption of good corporate governance it is only the commercial imperative that remains as a key motivator to promote progressive online investors. This message is not lost on AICO and Seed Co and they are building now for the future. Others are following too.

Ironically, when the world is embracing technology because of the opportunity to link directly with people at zero or almost zero cost, Africa is going in the opposite direction. Regulator’s dropping of the requirement to send annual reports (and proxy voting material) to shareholders (Kenya is one example of where this has been entrenched in law) is evidence of this. As is the absence of technology being adopted by Africa’s regulators.

Dominic Jones , a world leader in online investor relations, has this opinion about the trends in African markets regarding de-linking the direct communications channel with shareholders:

“Scrapping requirements for companies to mail printed disclosure documents to investors is a global trend, but it has exacerbated shareholder apathy in every jurisdiction where it has been implemented. This is largely because regulators have failed to replace printed disclosures with suitable standards of online disclosures. Apathy and an uniformed investing public is, to my mind, the single worst thing that can happen in any market. It ultimately will lead to market abuses.”

Brokers are realising the opportunity to link with investors too and the recent launch of the Lynton-Edwards website ( a Zimbabwe Stock Exchange registered stockbroking firm) shows how investment data can be used to reach out, identify investors and create a secure two way communications channel with them.

Sounds so airy-fairy doesn’t it? Consultant’s or marketing speak. But its not.

• Listen to the AICO business overview podcast here
• Listen to the AICO financial overview podcast here
• Listen to the AICO “Q & A section” podcast here
• View the latest AICO investor presentation here
• Sign up to AICO investor alerts here
• Sign up to Seed Co investor alerts here
• Visit the Seed Co investor relations website here

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With the political heat being turned on Zimplats, one of the largest platinum mines in the World, 10 per cent of the company was pledged to the “local community” according the local press here today (The Herald). This falls far short of the majority stake sought by the politicians, but that’s not my concern and I certainly do not condone what is going on on the broader political stage regarding indigenisation in Zimbabwe.

Employee share schemes in listed companies in sub-Saharan markets are usually immaterial financially, to the beneficiaries. There may be good reasons for this but I also suspect that it’s bit of a “smoke and mirrors trick” sometimes by managements to “tick a box” for political reasons. Executives can say that they have an “employee share ownership” scheme in the annual report and on the website, but actually there’s no material substance to it. Accordingly its generally forgotten in day to day shareholder communications and staff (or stakeholders) are the last to receive, or don’t receive shareholder communications. They are alienated and because the sums are small it does not matter.

Having been involved in a number of IPOs and employee “empowerment” schemes there is a trend in corporate Africa to pay lip service to stakeholder share schemes and so, from my perspective, if a community share scheme is to be put in place it should be done properly.

Take the Implats website as an example of online communications to shareholders (stakeholders) of Implats, the 87% shareholder of Zimplats. Here is the Zimplats website as a comparison. Zimplats is not listed on the Zimbabwe Stock Exchange. You can’t help get the feeling that a World class organisation such as Implats should possibly take its Zimbabwean corporate communications a little more seriously. Why the fancy website overseas and the basic one locally?

Zimplats is different.

There is big money involved in addition to the political agenda. There are serious sustainability issues involved here and the rest of the country and the World is watching. Whatever the outcome of the Zimplats empowerment saga, there should be tangible and modern and transparent communications tools to enable all recipients to actively play a role as shareholders. If not, the political rhetoric can be accelerated exponentially, on account of a few grumpy individual shareholders, who may feel that they are not being engaged appropriately. Perception is reality – so Zimplats needs to manage it down to every last shareholder. Peasant or not, illiterate or not.

Shareholder education programmes should accompany Zimplats‘ initiative to the extent that all of the beneficiaries understand fully their rights as shareholders. The Zimplats website should have an online investor relations section specifically for its community shareholders.

You may ask what use is a website to an employee or farmer in the community? Well there’s something call social media and mobile internet and many more things that make it easy to engage stakeholders – one-on-one.

With modern day communications tools it’s possible to convert an emailed shareholder notice into an SMS for onward transmission to any member of the Zimplats community share ownership scheme with a cell phone. This should be part of a proactive shareholder engagement policy of Zimplats. Such smss could be used to solicit feedback from the community at all times to understand their needs and concerns. Small cost, huge impact, positive perception. Get this sponsored by Econet.

The typical attitude of African executives is that peasant shareholders don’t count for much (they have the vote don’t they – just like you and me – we are equal?) and if an organisation is going to give (or have taken away) millions or billions of US$ worth of shares, then a few thousand dollars should be spent on ensuring that those peasant shareholders (or employees) are treated equally to any other shareholder. Through sms or otherwise, it does not matter: good corporate governance requires “reasonable efforts” to be made to engage shareholders. This quote from Standard Boardroom Practice, prepared by the Institute of Directors, London, revised 1971 is still appropriate (or perhaps more appropriate) in modern times:

“Although the process of encouraging shareholders to take an interest in the affairs of the company may be a rather slow one, directors should not be discouraged. It is their duty to make the maximum use of the methods open to them of keeping the shareholders informed.”

I do not want a community shareholder scheme to be part of a political game (which unfortunately it is) but whatever is put in place, should abide by the principles of the King III Report on Corporate Governance on sustainability in the community. And then have added to it progressive IR practices of the USA – to result in a progressive shareholder communications strategy, where every shareholder is treated equally.

It’s good corporate governance and it will ultimately add value to Zimplats and its community in the long run.

I do acknowledge that its early days for Zimplats and they could have plans on the communications side but I have no reason to believe that my ideas herein are going to be actioned. I hope they are.

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Lynton Edwards Securities, (“LES”) a Zimbabwe based stockbroker is using data direct from corporate investor relations websites to service its clients information needs on listed companies in Zimbabwe. This entails directly linking corporate investor relations website data, news and corporate actions from listed company websites to and through their own website.

This model avoids the pitfalls of having to re-process investment data for brokers, who in Zimbabwe, have traditionally struggled with ensuring that the Internet is used to efficiently disseminate data to investors. A review of a few Zimbabwe based broker websites shows out of date and incomplete information and the new LES website is a win-win situation for brokers and the listed companies covered.

In the face of growing Government pressure for indigenisation of Zimbabwean companies, this sort of retail shareholder strategy should be on the agenda for every listed company. Firstly, it makes commercial sense, it makes sense from a governance perspective and lastly, it’s a means of mitigating political risk. Oh, I forgot, it also makes sense for brokers as they are seen to be responsive to their client needs.

I believe that this model is going to grow as a tool for listed companies in Zimbabwe to spread their investment story as widely as possible- think of it – every pension fund – every broker website – leading investors directly to the listed companies in which they invest. No middle men – the investor hears it from the horse’s mouth as they say.

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Olivine Industries Private Limited launched its new website: www.olivine.co.zw today and I was thinking how important it is for investors to know how strong a company’s brands are. In Zimbabwe, Olivine has been through the worst of the hyperinflation and judging from the AICO analyst presentation podcast, is about to emerge strongly as a strong FMCG player in Zimbabwe. Whether or not this happens is an interesting conundrum for investors in the AICO Group, but the message from AICO is bullish. The fact is that AICO is communicating its investment story effectively in clearly in challenging times. Investors receive this information and then decide.

In the meantime there are millions of Olivine customers in Zimbabwe, some with grey hair, that have enjoyed Olivine products over the years ( I personally have a weakness for their chicken soup) and also enjoyed their old television adverts of yesteryear .YouTube videos of these historical 90s advertisements provide Zimbabweans with nostalgic journeys into growing up in Zimbabwe.

Big Law Management Consultants (“Big Law“), whose services in Zimbabwe are supported by African Is Cool was responsible for this website and the commencement of the online communications outreach initiative of Olivine Industries Private Limited, a subsidiary of the AICO Africa Limited Group.

Showcasing brands that Zimbabweans of all ages have come to know and adore, Olivine Industries’ new website provides full information, corporate, aesthetic and technical, on their product range. Management contacts, email alerts of special offers, online order forms and overall corporate information, for example, quality and assurance standards, are provided in a content rich and interactive website. In a country with 1.4m Internet users and an ever- growing Internet penetration rate a commercial website like this can only add value.

Farayi Mtangadura, Olivine’s Sales & Marketing Director provided insights into Olivine’s online communications strategy:-

“As Olivine emerges from strength to strength, we invite our partners in business and stakeholders to visit www.olivine.co.zw, register to receive email alerts on products, email updates on Olivine recipes and to contact us at any time. We value your feedback and invite you to be part of our next 80 years in Zimbabwe.”

View Olivine Industries’ website here.

Register to receive email alerts from Olivine Industries here.

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We are proud to announce that we have podcasted the full investor analyst presentation of AICO Africa Limited. AICO Africa Limited is our 22nd listed company client and the 5th in the agricultural sector. To cater for slow internet links we have published a low resolution and a hi resolution version.

AICO is Zimbabwe’s leading diversified agro-industrial conglomerate (with a market capitalization of approximately US$96m) and owns dominant brands in the seed, cotton, FMCG industries in Zimbabwe and surrounding regions, and is the holding company of Seed Co Limited (market capitalization +/-US$252 million), Olivine Industries and the Cotton Company of Zimbabwe Limited.

AICO is the second company in Zimbabwe to professionally podcast their analyst presentation and is one of the few listed companies in Zimbabwe that is actively disseminating information on its long term investment story as its businesses emerge stronger from the hyper-inflation that ended in March 2009 when the Zimbabwe economy dollarised.

AICO’s new website and communications tools are designed to push information to investors and stakeholders as soon as it is released. AICO also actively solicits feedback of the recipient of their email alerts and the company has invited investors and stakeholders to register and communicate with AICO – you will be assured of a response.

You will also be interested to note that so far my survey on online investor relations practices in Africa reveals that 54% of respondents think that regulators should take the lead in using the internet to disseminate listed company information. Only 26% feel that listed companies should lead the way. AICO is a company that is leading the way –as their online investor relations practices are among the most progressive in sub-Saharan Africa and set a leading example for its peers.

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An article in the Zimbabwe press today (01 June 2011) announces Board changes to the ZSE listed Afre Corporation. Afre is significantly financially exposed and the problem appears to be related to bad corporate governance in related party transactions.  This is what the Afre 2008 annual report said about their commitment to corporate governance:-

“The group is committee to the principles of good corporate governance based on the King II report. The Directors recognise the need to conduct business of the Group with integrity and in accordance with generally accepted corporate practices in order to safeguard stakeholder interests”.

This is  part of the wording relating to the announcement of the corporate governance restructure (director changes were also announced):-

As part of the Board’s undertaking to ensure that corporate governance matters relating to the Group are reviewed and enhanced as necessary, the Board has set up a Related Party Transactions Committee consisting of independent non-executive directors…….This initiative is part of various measures taken by the Board to uphold shareholder and policy interests in all of the Group’s related business activities. The Board acknowledges its appreciation to all stakeholder for the support received to date.

I am a strong proponent of the IODSA’s online corporate governance appraisal tool for listed companies. This tool enables directors to check the substance and form of their corporate governance conformance to the King III Code on Corporate Governance in South Africa. The programme can be used by companies outside of SA as an immediate checklist and what is and what is not happening and provide a basis for directors to decide what they should do with regard to their corporate governance. The ZSE should make it mandatory for all listed companies to complete this and negotiate a bulk discount with the IODSA. But the ZSE has its own isssues at the moment…..so its up to listed company directors to decide……

In the post-dollarisation Zimbabwe economy listed company directors should be thinking seriously about providing substance to support the cliche commitments to corporate governance in their annual reports. Give shareholders facts. The wording in annual reports to describe corporate governance activities is passive, non-committal and vague. With so many Zimbabwe companies being in such a flimsy state financially don’t be surprised to hear of more instances where corporate governance fails investors. This at a time when Zimbabwe needs foreign investors. This at a time when corporate governance is added to other uncertainties such as indigenisation legislation etc. These things are simple and low cost and all they need is a decision from the Chairman of the Board.

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To invest or not to invest. That is the question. It’s difficult to get hold of meaningful information on the Zimbabwean indigenisation campaign. How listed companies are going to be affected within the corporate governance and takeover guidelines is an unknown. Either way the threat of indigenisation is enough to destroy value through increased uncertainty. GGG a legal firm in Harare has provided the following insights into the legislation proposed.

The Indigenisation and Economic Empowerment (General) Regulations, 2011 were published in General Notice 114 of 2011. The General Notice has been purportedly published “in terms of Section 5 (4), as read with Section 5A, of the Indigenisation and Economic Empowerment (General) Regulations …”. Section 5A of the Regulations however does not give to the Minister any power to publish a General Notice, but merely sets out certain steps which have to be followed by the Minister before he publishes any such notice. The power to publish a General Notice is exclusively contained in Subsection (4) of Section 5 of the Regulations, and the General Notice in question is not encompassed by this section. The General Notice is also deficient in that the Minister has not, as he is required to do in terms of Section 5 (4) of the Regulations, prescribed in respect of the Mining Sector what weighting is to be given to any of the factors set out in subparagraph (c). This issue is not touched upon at all.

The General Notice substantially deals with four issues which are of interest: first, the question of the “threshold” in terms of net asset value above which a business in the Mining Sector is required to submit an indigenisation implementation plan; secondly, the time frame within which such a plan is to be submitted; thirdly, the requirement that the indigenisation implementation plan is required to provide for the disposal of a controlling interest to a “designated entity”; and fourthly, the value to be ascribed to the interest which is required to be disposed of to the “designated entity”. These are dealt with in turn below.

1. Net Asset Value Threshold
   It is clear from an examination of Section 5 (4) of the Regulations that the Minister does not have the right to prescribe, by General Notice, that in respect of the Mining Industry a net asset value threshold of above US$1 shall result in a business having to submit an indigenisation implementation plan. That is simply not one of the three issues touched upon in the subparagraphs within Section 5 (4). Indeed, as far as the current legislative requirement is concerned, this issue is canvassed in Section 4 of the Regulations which deals with the requirement to submit a Form IDG 01, which will typically be accompanied by a provisional indigenisation implementation plan, and which sets a threshold on the net asset value of a business required to do this as being above US$500 000.

It is true that the amended Section 5 (5) of the Regulations talks in subparagraph (b) about a “non-indigenous business that was not required to submit an indigenisation implementation plan in accordance with [Section 4] but subsequently becomes liable to submit such a plan because [of the provisions of a General Notice issued in terms of Section 5 (4)]”, but this cannot alter the fundamental position. The Minister’s power to issue a General Notice stems from Section 5 (4) and from nowhere else. Accordingly, the purported fixing of a lower threshold in the General Notice is in our view, unlawful.

2. Time Frame
   • to the extent that the provision just quoted purports to imply that a business that has not met any target for indigenisation will have to cease to “operate”, it is certainly arguable that such a provision would be ultra vires the Act. There is certainly nothing in terms of the Indigenisation and Economic Empowerment Act which gives to the Minister the power to shut down the operations of a non-compliant business – indeed neither the Act nor the Regulations give any clear indication of the consequences should such a state of affairs come about; and
   • in any event it is clear that subsidiary legislation such as this may be challenged on the ground that it is grossly unreasonable. To even imagine that the mining industry in Zimbabwe could be required to indigenise itself within a period of six months is, indeed, grossly unreasonable.

The Regulations set out in Section 3 a “general objective” that every business of or above the prescribed value threshold must be indigenised within a period of 5 years. Section 3 of the General Notice purports to set out a requirement for the disposal of a controlling interest by a non-indigenous mining business within a period of 6 months. Bearing in mind that Section 3 of the Regulations sets out a “general objective”, and that Section 5 (4) of the Regulations talks about giving the power to the Minister to fix the “maximum period a business … may continue to operate with such lesser share until the minimum indigenisation and empowerment quota is achieved”, this provision of the General Notice on the face of it falls within the power to issue a notice set out in Section 5 (4). Having said that:

3. The Identity of the “Buyer”
   There is clearly nothing within the provisions of Section 5 (4) of the Regulations which permits the Minister to prescribe, with reference to one or more “designated entity”, to whom disposal of its interests by a non-indigenous business should take place. Indeed, apart from being unlawful, this provision of the General Notice is in clear contradiction with the provisions of Section 15 of the Regulations which, amongst other things, provide that the National Indigenisation and Economic Empowerment Fund shall only be the “purchaser of last resort”! For these reasons, it is our view that this provision of the General Notice falls outside the Minister’s power to prescribe matters granted by Section 5 (4).

We also express the preliminary view that, even were the Minister to amend the powers which he has granted to himself in terms of Section 5 (4) by amending the Regulations themselves, then it is certainly arguable that any such amendment would be ultra vires the regulatory powers granted to him in terms of the Act.

4. The Price
   Section 3 (2) of the General Notice is applicable in this regard. The Minister simply does not have the power to deal with such issues in terms of Section 5 (4) of the Regulations, and this applies to any possible amendment of the Regulations by the Minister to try and rectify the situation.

On a different issue, it is interesting to note the wording of Section 3 (2) of the General Notice when it talks about the valuation of the interest to be disposed of, requires to be taken into account “the State’s sovereign ownership of the mineral or minerals exploited or proposed to be exploited by the non-indigenous business concern.” We would guess that this wording is intended to convey that not only are any mining claims owned to have a nil value for the purpose of the valuation, but that there is also to be set off against any remaining asset value, the value of “minerals exploited” to date!

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