LAST week, the Zimbabwe Independent reported the collapse of a five-year-old transaction aimed at reviving the Cold Storage Company (CSC).
The government, which held full ownership of CSC at the time, cancelled a US$130 million joint venture with Boustead Beef, a British investor, after the deal failed to meet the terms of the agreement, particularly the release of funds.
Despite promises of transformation and changing lives, Boustead Beef injected only a fraction of the capital, leaving CSC, once one of the region’s largest meat processors, in dire straits.
Court documents did not disclose whether Boustead lacked the financial capacity or simply lost interest.
However, it seems that when authorities approved the deal, they failed to conduct proper due diligence on the firm’s suitability.
Instead, there was a rush to parade the investor as a sign that, under President Emmerson Mnangagwa’s administration, foreign investors, including the British, were returning to Zimbabwe.
This oversight is now costing the country dearly.
As officials prepare to return to the drawing board, the taxpayer will once again foot the bill for their allowances and luxuries during the search for new investors.
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At the slightest sign of a potential investor, high ranking government officials will troop out, earning the usual allowances associated with such excursions.
Zimbabwe’s taxpayer will suffer.
The hope is that, with CSC now under the professionally-managed Mutapa Investment Fund, such mistakes will not be repeated.
Zimbabwe cannot afford another failure.
The longer it takes to secure a viable investor, the deeper CSC’s problems will become, exacerbating the challenges faced by the southern regions where beef farming is a crucial economic activity.
Thorough due diligence must be conducted before any new suitor is selected. Proper due diligence forms the bedrock of sound decisions in mergers and acquisitions.
The investigations, prior to signing any deal, give detailed overviews of the targeted assets, and also give shareholders earmarked for takeover adequate information to understand the profile of incoming investors.
This gives all parties the opportunity to reflect on their obligations and avoid costly litigation. When done right, it highlights potential risks and synergies, paving the way for a clean deal.
Although CSC may have legal protections against litigation, Zimbabwe cannot continue with deals that fail so spectacularly.
The nation is at a critical stage in its development, where successful deals are essential for economic growth. It cannot afford to waste money unnecessarily.
To avoid further setbacks, the government must be transparent when negotiating these transactions. It must be open when selling these state companies. If officials continue to obscure the facts, every deal risks ending in failure.
