Mgt Buyout only option for NCZ, FDD official

1. Management buyout have failed to most companies what makes you think it will work for NCZ? Waste time let just the GRZ pump in more resources this is life or death for the country.

2. GVT should help to empower local investors instead of being too linient and being biased towards Zambians.There are dedicated Zambians who can run the company but GVT shoud assist both through training and financially-at least one company could be run by locals

3. Give the company to competent Zambian investors.

   OR

   Consider putting it on the LUSE.

4. The GVt should take respomsibility of dealing with NCZ.There are a lot of competent Zabian investors who could re vitalise the company.Its customers are ever there hence the GVT should do something about it.Why keeping quiet about the issue.

5. NCZ is a very Capital Intensive company to run. My take is that not even the Zambian govt can manage to keep running the company. We all knw tht the govt, every year, pumps in huge amounts of money into the NCZ but NCZ still fails to break even.
   To ensure profitability, NCZ needs to (1) Invest in the latest technology (2) Replace old machinery and (3) Attract the best talent thru better packages.
   I doubt it if GRZ or any local investor for tht matter can manage all three pre conditions.
   The solution to this could be:
   (1) Public – Private partnership
   (2) Consider Foreign Investors
   (3) Consider a LuSE listing (as suggested by no. 3). Tho i doubt the success of such a listing.

6. For a management buyout to work one needs to conduct a thorough research of the companies operations. It usally involves a lot of borrowed money which has to be repaid from the companys cashflow while maintaining operational capability.

7. I think management buyouts are MASSIVELY preferrable over ‘privatisation’, which is just a transfer of Zambian assets to multinational corporations.

   At least this way, the company stays in Zambian hands.

8. …listing on on the LuSE may just turn out to be another waste of resources in terms of time and money for the IPO, as we know that stocks are mainly sentiment driven. NCZ has had a bad investment reputation and i highly doubt if there’s any zeds who can gamble their meagre resources there. the government shd carry the entire weight for the time being, pump in enough funds first of all to clear the salary arrears of the workers,then look at the prospects of upgrading the plant with modern machinery to lower costs of production and have it produce competitive products on the market.

9. …. and then privatise it at a far much better par value.

10. #7 MrK: Kindly provide with an example of a management buyout that has worked in Zambia. I am afraid a lot of our people inspite of high academic qualifications are just technical grunts and lack the cultural traits necessary to run business. They are used to receiving handouts from GRZ. They know that farmers will complain about fertiliser availabilty/prices.They know that the unions will protest for them by blocking Lusaka road and GRZ will release cash. It happened this year, it will happen again next year and the year after and so on and so forth.

11. A MBO would require large financial commitments from the management of NCZ to buy the firm from its owners (in this case GRZ). As most companies’ management are not in the position to make such a purchase, MBOs are usually financed by financial institutions such such as investment banks and private equity funds. This results in a MBO taking the broader shape of a mangement backed Leveraged Buyout. Consequently, ownership will not solely rest with management because the financiers of any such deal will definitely demand a controlling stake. This mean may place the company in foreign hands anyway. It’s not that easy.

12. #11 Mwana: Good points. I like to read posting that are written by people who know what they are talking about!! Even this LUSE listing idea? Who would buy share in NCZ in it current state? Would the listing regulations/guidlines allow to list such a sick enterprise? Someone with answers please I need your guidance. Mwan would you be kind enough to explain?

13. Thanks for your kind comments Theoretician. You hit the nail on its head by referring to the company as ‘sick’. The other situation is that we don’t know exactly how sick this company is as we haven’t seen its audited financial statements. The LUSE regulations would permit any company to list provided it followed the regulations required during a public listing. There are a number of corporate governance issues to be addressed. As you correctly stated, no one would buy shares in a company that performs so poorly. The most important thing to do would be to determine the viability of the company. There are other ways of raising capital such as issuance of corporate bonds and commercial paper..

14. …lines of credit, grants, venture capital, joint ventures, leasing etc. For any of these to be successful, one would require a strong management team with a good corporate governance record. Measures requiring the participation of external sources of finance (such as Leveraged Buyouts and outright privatisation) would probably involve the external party conducting due dilligence. This is a very costly exercise as it involves hiring professional services firms such as accountants, corporate lawyers etc. Many active investors usually seek out opportunities to invest in potentially lucrative deals of the nature described. If no one is interested then it will take a lot to turn it around.

15. Thanks Mwana. It is good to know that we have people who know how to make things right. Only problem is whether GRZ has the guts/sense to hire such men/women and use their skills/tactics.

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