Wednesday, October 3, 2007

Recapitalization without subjugation.

Related to this is the argument that modern science and technology were bound to convert the whole world into a global village. Twentieth – century science and technology had become too expansionist to have left Africa untouched. If this body of expertise could reach the moon without colonizing it, why could it not have reached Africa without subjugating it?
What follows from this is the conclusion that European colonization of Africa was not the only way of Africa’s entry into the global system of the twentieth century. Africa could have made such an entry without suffering either the agonies of the slave trade, or the exploitation of colonization or the humiliation of European racism.
(Ali A Mazrui The Africans -a tripleheritage).

The Bemba have a proverb mumbwe pakubosa nishi pali uko ashintilile (implies people don't always make empty statements)

And so, do those us that espouse economic policies that seek the recapitalization of our bankrupt companies without the subjugation of national interests have a leg to stand on?

When Mr. Agarwal the majority shareholder of Konkola Copper mine Plc, through his parent company Vedanta - founded the company in 1979 he was a scrap-metal merchant with ambitions to own a cable-making company. By the early 1990s, when India embarked on the liberal reforms that were to enable him to make his fortune, he was battling to establish a modest copper smelter. But in the past two years the market capitalization of Vedanta—named after Mr. Agarwal's mother—has increased fivefold to $10 billion. Recently 20% of the group's flagship company, Sterlite Industries, one of India's biggest producers of zinc, copper and aluminum, was floated on the New York Stock Exchange for over $2 billion—the biggest overseas sale of shares by an Indian company. Vedanta has turned over $6.5 billion, an increase of 76% on the previous year, and nearly half of it profit through is operations of assets in India, Australia and Zambia. Agarwal plans to build Vedanta University, India's answer to Stanford, in eastern India; he has pledged $1 billion.

If a scrap metal merchant found options on the international money market, to recapitalizie his family business to extent that he now owns Zambia's most productive mine;
The Zambian government should have and must now, begin to examine the options for transitioning ownership through the use of leveraged recapitalizations, typically referred to in industry parlance as a recap. Many business owners and their professional advisors often overlook this viable alternative when considering a transition in ownership. With today's improved merger and acquisition market and increased valuations for privately owned companies, many business owners are considering selling their companies to gain liquidity for the asset that usually represents the majority of their wealth.
In Zambia today, the most successful state owned companies like Zamtel or Zesco may have a near equivalent worth of their book value. This higher value or "going concern" value is attributable to a company's ability to generate consistent earnings and cash flow growth over an extended period of time. A recap can be a feasible alternative in the right circumstances to access this value. A recap can be a very attractive option for Zambian owners ( the people thru GRZ) who are bullish on the future of their businesses and want to retain a meaningful ownership interest with the opportunity to receive yet another payoff in the future when the financial sponsor (private equity firm) sells its position. The proceeds from the recap and subsequent sale can often exceed the value obtained through a sale. In addition to obtaining substantial liquidity to diversify investment, the business owner (the Zambian people) will continue to operate the business with considerable autonomy (many sponsors will even accept minority ownership positions) and gain access to capital needed to support future growth. Simply put, a recap is a restructuring of a company's balance sheet. The financial sponsor will arrange new senior bank debt and perhaps subordinated debt in addition to providing the bulk of the equity to consummate the transaction. The owner's stock will be exchanged for cash and a portion of the capital stock of the newly capitalized entity. The end result is a substantially different capital structure for the company going forward.

Tuesday, October 2, 2007

Crimes Against Humanity?

A few months ago a Caucasian workmate, who holds very strong conservative views expressed what I thought was a really extreme ideology- he thought the situation in Africa where the weakest in society are disposed of by the mightiest in the battle for survival is an ideal condition, necessary for the long term wellbeing of the human specie. He wished also, the western society would stop extending welfare benefits to members of society that would, otherwise develop the capacity to meet their own needs or succumb to the inevitable consequence of their weakness. He further stated that the weak in society always threaten the general welfare of the whole society by drawing the energy and resource to sustain their lives from, the strongest members of society instead of adding to the capacity of the whole.
And so, as I learned of the slaughter of UN peace keepers in Darfur by Sudanese rebels, I wondered if the initial slow response by the west; to the killing of thousands of helpless and weak members of the Darfur society was, some how or in part rooted in this extreme view.

The US state department had the following response to the recent killings in Darfur.

State Department spokesman Sean McCormack said the punitive measures could include travel bans and financial restrictions on individuals.
Human Rights Watch has described the killings as a war crime, and has called for an immediate investigation by the AU and UN.

Sudanese rebels have killed thousands of innocent civilians, more than killed in Lockerbie and 9/11 events put together, so why are the Janjaweed and their sponsors (Sudanese Government) not on the US state department terrorist list?

How long will it take, for a travel ban and financial restrictions to curtail the ability of these rebels to kill and displace the weak and helpless in Darfur?

Sunday, September 30, 2007

The quest for Virtue

Since that day, when the earliest man eat the fruit of the tree of the knowledge of good and evil, men have sought virtue. And for loss of virtue, man gained that day the insatiable quest for knowledge; and to recognize those that achieve a certain level of knowledge and expertise in a field of study, universities have bestowed a very special recognition.
President Mwanawasa having already received, such recognition from the University of Zambia is perhaps the most deserving Zambian leader, to ever receive an honorary degree.

More noble and virtuous however, is the promise Dr. Levy Mwanawasa made to Zambians in New York, to leave no stone unturned in the quest for a people driven constitution in Zambia.

And thus Kashikulu congratulates our most learned leader on the occasion of this new recognition and his promise of a good constitution for the people of Zambia.

"The president said he is aware that in his quest to give the people a good constitution, some sections of society will throw spanners but such actions will not stop him from bringing a good and people driven national law.

"Even if some people might think that I am trying to bulldoze the constitution making process, I will not stop doing that which I think is good for the people," Dr. Mwanawasa said. "