Acquisition of Diaspora Kapita on course, says Bri...

Acquisition of Diaspora Kapita on course, says BridgeFort Capital

Zim Now Writer

Private equity company, BridgeFort Capital Limited has revealed that the group is continuing to work on the acquisition of Diaspora Kapita and are optimistic this will be concluded within the next few months.

The acquisition would include the disposal of the MedTech business and a transfer of the listing to the Victoria Falls Stock Exchange.

The company said the largely untaxed informal sector continues to negatively impact the formal sector and on government revenues as well.

The group experienced a decline in sales values in the first quarter ended March 2024 compared to the same period last year.

The first quarter sales values decreased by 8% from US$1.07 million last year to US$990 thousand for the period under review.

First quarter volumes declined by 1.25% compared to the same period last year from US$470 816 units in the first quarter last year to US$464 940 units for Q1, 2024.

Chicago, the manufacturing business, experienced an increase in turnover of 5% while MedTech Distribution sales declined by 30% compared to the same period last year.

“The MedTech business remain significantly exposed to the potential devaluation of the local currency due to the bulk of sales being to supermarkets, in ZiG, which take extended periods to pay. Sales to supermarkets have declined significantly largely due to competition from the informal sector, uncompetitive pricing and customers frequently on stop supply for non-payment.

The largely informal sector continues its strong growth trajectory, which is having a negative effect on much of the formal sector:

“… and one assumes, also on government revenues. The result of the above is likely to see an increasing percentage of government revenue being spent on the civil service wage bill with less available for capital expenditure and debt servicing.

“The risk is emanating from this scenario is possibly an increase in money supply in ZiG or Nostro USD or both, if shortfalls in the fiscus are funded through the Reserve Bank.

“The development of the country is dependent on strong fiscal revenues from all sectors and we urge the authorities to focus on the significant non-taxpaying informal sector,” BridgeFort chief executive officer, Vernon Lapham said in a report.

Lapham noted that the operating environment for the period in question was substantially more unstable than it has been for a long time with significant uncertainty prevailing.

“Interbank exchange rates moved from 6 105 on December 31, 2023 to 22 055 at the end of March 2024, an increase of 26%. The same period saw the unofficial rates move from about 10 200 to 26 000, an increase of 155%.

“The reduction in the unofficial market premium was a welcome development as this makes formal businesses more competitive against informal market participants.

“With the significant devaluation experienced during the quarter, tight ZWL liquidity and low confidence in the local currency, the USD is increasingly the currency of choice”.