IN January, former Reserve Bank of Zimbabwe governor John Mangudya (JM, pictured) began the important task of building an important sovereign fund — the Mutapa Investment Fund (MIF), which presides over an empire of 66 state firms and their subsidiaries worth billions of United States dollars. Last week, our senior reporter Freeman Makopa (FM) caught up with the MIF CEO to understand what the fund’s top priorities are, and why. Below are excerpts of the interview:
FM: You were allocated about US$1,9 billion Treasury Bills (TBs) as capital. Where has it been deployed?
JM: The US$1,9 billion is a 10-year Treasury bond. Most of that paper was used to purchase 35% of management in Kuvimba. We now have 100% in the entity. We now have the asset. It means we can now sweat it.
But the debt needs to be paid after 10 years because it is a 10-year paper. The question now is: What are you doing with that asset that you purchased? Our strategy is to sweat that asset; the assets that we purchased using the Treasury bonds. All things being equal, we might even get more money before the maturity of the paper.
FM: That will require efficient management.
JM: We are trying to be smarter in the process of managing this. We are happy with the US$1,9 billion. But we are putting in place measures and strategies so that at least it does not impact on the fiscus. We believe that we need to sweat it, create value, wealth and then pay back this paper before it matures.
In the market, people are discounting Treasury bonds of three years at 60%, some at 50%. These are some of the things that we are doing. What makes us comfortable is that it is a 10-year paper.
FM: Tell us about the Invictus deal.
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JM: We need to show our commitment to the energy sector. And that commitment to the energy sector is our conviction. We are convinced that there is plenty of gas in Muzarabani. So by underwriting US$5 million, it shows that we are committed.
We have hope and confidence that there is gas, which is going to be used as a game-changer in this country in terms of supply of energy in this country. They are now going to do the allotment, but currently we have 10% of that Invictus in Muzarabani.
There was a claim that belonged to government, which is under Sovereign Wealth Fund and a claim which was also under this company. So those two claims are now being mined by Invictus. This money is required for them to continue the exploration.
FM: Which of the 30 companies that you invested in need your immediate attention?
JM: That is a good question. If you look at National Railways of Zimbabwe (NRZ), it is an enabler. For us to be competitive, we need a reliable, competitive mode of transport, which moves bulk. And that is the NRZ.
FM: How strategic is NRZ?
JM: Zimbabwe is supposed to be the hub of the region. Our rail line moves into Botswana and into Mozambique to Beira and Maputo. It move through Livingstone and Victoria Falls into Zambia. This is supposed to be the centre hub and also up to Beitbridge, going to Durban, for example.
It means we need to ensure that the company operates efficiently and it becomes competitive so that the prices of goods and services that you are either importing or exporting are good prices. You need, therefore, a running railway system. That becomes a priority because we are looking at its impact not only in Zimbabwe, but also in the region.
FM: What are you watching closely at NRZ?
JM: Right now we need to ensure that we work on the locomotives, on the wagons, and on the track, on the train — those four items. If you work on the track it increases the speed of trains moving on the line and if you work on the locomotives and the wagons they increase the capacity which they will be able to carry to go with the goods to the ports and within the country.
FM: What else are you doing?
JM: The second company that is an enabler is Zesa. We need to say which the key focus areas for increasing electricity are.
Obviously — firstly — we need to increase alternative sources of energy. We need to work on these Independent Power Producers (IPPs) to ensure that they also increase the generation of electricity. Others are now speaking about floating solar panels at Kariba because there is too much sun, there is too much space, and there is no shade.
FM: Great innovation
JM: And we still have plenty of land in Zimbabwe where you can have panels. If you look at the electricity, if you spend on average, say US$100 million, without batteries, you can produce 200 megawatts. The sun is not in short supply.
So as a Mutapa, we are encouraging our entities — in this case Zesa — to ensure that we increase (electricity) supply in Zimbabwe through those things. We look at the other partnerships that we can do with the rest of the region, with Mozambique, with Angola, whatever. Some countries have more electricity than what they demand.
FM: Are you happy with Zesa’s smart metering technology?
JM: Locally in Zimbabwe we also need to ensure that we improve on the smart metering. Our conviction is that if you have pre-paid meters and smart meters, people use electricity that they have effective but demand for.
So we need to synchronise effective demand for electricity and supply. If you have a prepared meter, if you do not have money, it means electricity also switches off. If you use conventional meters some people might end up consuming electricity which they have not paid for. Right now, Zesa is owed money by some debtors.
FM: And how is Zesa faring in debt payments?
JM: It also owes money to the suppliers of electricity. So, prepaid meters and smart meters are low hanging fruits that we need to expedite. Once we do that, it means we are now improving the efficiency of the utility.
Resources, as we know in economics, they are scarce. We need to ensure that we do improve the efficiency. And improving efficiency of utilisation of electricity is through putting in place these prepared meters and these smart meters. Net metering is also very critical because many people have electricity from solar. During the day, at noon time, no one is using it.
Most people are at work, but the sun is still there. It means that we now need to take that electricity, which is excess, bring to the grid. Then it reduces our imports. It also reduces the load shedding.
FM: Which other areas are you focussing on immediately?
JM: The third one there is your Zupco (Zimbabwe United Passenger Company).
Zupco is supposed to move people from point A to point B. Over a period of time, there has not been too much capitalisation. What you require are buses so they can move intercity and within the urban area.
It means you also remove the pressure that you find today on roads in terms of transportation. That becomes also a priority area. The rest of the other companies…they need to continue to do what they are doing but with more aggressiveness.
If you look at telecommunications, again it is critical that we need to ensure we expand coverage.
It is very important that NetOne does that and the payback period on such investment is shorter than in most projects. We need to increase our base stations, improve your internet system — the likes of PowerTel.
Data is very important nowadays. So as you go to artificial intelligence, you need more data. So they are also critical and they are also important. It is achievable.
FM: Zimbabwe is pursuing Vision 2030. What is Mutapa’s role?
JM: We are part of the Vision 2030 DNA because the fund should, as you put initially in your first question, about increasing gross domestic product (GDP) from the activities of entities under Mutapa.
The whole idea of Vision 2030 is that Zimbabwe needs to grow and to improve our people and the prosperity of Zimbabwe so it becomes a prosperous nation in 2030.
We need to increase our GDP. Mutapa has a big role to play in contributing toward the aspiration of Vision 2030, which is in line with the National Development Strategy.
Formation of Mutapa Investment Fund and the way it has been remodelled is an aim, a strategy towards meeting Vision 2030, which is good for the people of Zimbabwe.
FM: What is the whole objective of this vision?
JM: The whole idea is to ensure that we have sustainability in Zimbabwe in the fiscus and monetary affairs of the country. When Mutapa is working well, it reduces the dependency of those companies on the fiscus. So it means it is a saving on the fiscus. It means there will be enough foreign currency in the economy.
FM: Any plans for the Industrial Development Corporation (IDC) of Zimbabwe?
JM: IDC is under Mutapa and a number of companies there, including Chemplex and Dorowa, which has got phosphate.
If you look at phosphate, it is required in agriculture and it is also required in the food industry. We need to exploit that resource.
We are working with IDC to ensure we find investors who will come to exploit that resource either on a joint venture or any other form of concessions that we can talk about.
FM: You met the Afreximbank president this week (last week). Can you share with us some of the takeaways from your meeting?
JM: We met the visiting Afreximbank president, and his team and we discussed a number of areas that they are supporting us on … that they intend to support us on.
You are aware that they have all given a line of credit of US$10 million to AFC and they have also given a line of credit of US$10 million to POSB.
