It is finally drawing to the end of our two months of travel in Mozambique, Zambia and Zimbabwe. Oh, how I still love Africa despite all its problems. Of course, this is based on all my happy, even unhappy memories, and how it was in the past. Just travelling over difficult potholed roads, seeing electric railway pylons with no wires, overgrown railway lines, filthy police stations at the roadside, abandoned farms with destroyed infrastructure enforces me to accept, “it ain’t what it was.”
It certainly is no place for the old unless very wealthy. I have noted it is not only expensive to live here with healthcare costs being prohibitive, it can also be a very lonely place in old age, especially if you are single or widowed. If you are young, entrepreneurially minded, have little moral care of the past and capable of surviving in an environment where, if there are any rules, rules can change at any time or even more concerning, are not meant for all, then for those not averse to risk it still offers opportunity.
“If you can disregard events of the past, work with the perpetrators, is that really forgiveness or the abandonment of conscience for personal benefit?”- Peter McSporran
On this final leg as I mentioned last week we stayed with Cedric and Gay Wilde in Bulawayo. I became friends with both in my CFU days where Gay represented the Sheep and Goat Producers and Cedric, the Matabeleland Branch of the Union. There was always a lot of agricultural politics between the Mashonaland Farmers, which in the eyes of the Matabele seemed to be all the other provinces, other than Matabeleland. From time to time they would consort with the Midlands. The Matabele called Salisbury, capital of Mashonaland and the country, Bamba Zonke (Take all) while the Mashona called the Matabele farmers Fona Zonke (want all). From time to time our meetings would allow animosity to bubble over into fiery exchanges. Cedric, Gay and I became great friends despite this verbal sparring. While Gay was one of, if not the leading sheep and goat producers in the country, Cedric was a cattle and game rancher. They also had lodges for tourism on the farm and through their daughters and sons-in-law established The Amelinda Group of Safari Camps and Lodges.
I spent many a happy stay at their farm, Paddy’s Valley in the Turk Mine area. The place was always a hive of activity with most farm animals and ostriches raised commercially along with wildlife conservation. I had to be reminded of his little yellow dog’s name, Mayelani, which carried stones the size of shot putts around much to my amusement. Having lost their farm, they moved to Bulawayo where presently Gay runs a large feedlot and procures sheep and goats for a local abattoir while Cedric looks after the maintenance of the lodges and their vehicles. May I add they are somewhat older than me, made of strong stuff!
“In present-day Zimbabwe, retirement is only considered once you can no longer work. It is not an age-related event, rather it is a physical impairment event.” - Peter McSporran
On arriving at the Victoria Falls Safari Club, we organized a helicopter ride and a zip-line descent across the gorge for Storm the following morning. I fancied the zip-line but Rozanne said no! That evening Chris and Butterfly Bishop came and joined us for yes, sundowners. Chris and I worked together at AgDevCo with him being yet another displaced Zimbabwean Farmer. Butterfly recently closed down her travel agency due to the pandemic, while Chris still does consultancy work. As I indicated, everyone does something in Zimbabwe.
First thing the next morning we had an early rise setting off to walk along the Victoria Falls. This is the end of the dry season so the water is low yet still impressive. When we looked at Livingston’s statue overlooking the falls, we mused about what he thought, not the imaginary lines put to print at a later date.
Normally it is such an enjoyable stroll. This time about halfway around I suddenly felt my lower stomach dissolve. One is never surprised on an African trip to catch some stomach bug. We, who have lived here know how sudden that feeling can arrive. For a further hundred meters, the question was, “will I make it around or should I immediately set off back to the entrance where the nearest toilet was?”
Despite advice from both Rozanne and Storm, I continued until the urge was no longer, rather it had become an immediate demand. So off I set at pace, red-faced, puffed cheeks and blind to all else except toilet signs. The final one read a further 300 meters, probably the longest and quickest three hundred meters I had ever encountered. If I had met any other tourists, I am sure they would have joined my dash fearing I was being pursued by some wild animal.
That was the sad part, I think we saw only three couples on our walk, our hotel had few guests and the positive atmosphere of the previous weeks was destroyed by the European and American travel bans from southern Africa.
From the Falls we set off to Little Makalolo in Hwange which I will tell you about next week. Tomorrow we set off on our 850 km journey home with the first 50km taking two hours on soft sand to reach the tar road at the park entrance. In fact, we reduced the distance by taking the dirt road from Lupane through Nkayi to Kwekwe. The dirt was fine but the 60 odd km of broken tar before Kwekwe was awful.
COIN (Counter Insurgency) Training
Our final weeks of training concentrated on COIN which was far more enjoyable than ‘spit and polish’ along with digging trenches. Trenches were exchanged for shell scrapes which after the first year of national service we abandoned digging anyway.
The Aide Memoir I believe was prepared following the only successful counter-insurgency war in Malay fought by the British. Of course, many of our senior army officers had served in Malay. Some as corporals were now generals.
We also learnt bushcraft to a certain extent, things like before bedding down, pee on any animal track coming into your proposed night ‘pozzie’ (position) to stop being disturbed by wild animals. Did this work? I do not know, I do know many years later in Gonarezhou the elephants seemed to think it was an attraction. On many occasions, they forced us into hurried retreat in the dead of night.
Exercises included lots of live firing, ‘jungle-lanes’* and learning how to get in and out of helicopters without being hit over the head with a spanner by the tech for pointing your weapon inwards on boarding. Much sneaking about silently at night, night marches and ambushes. We learnt how far you could smell soap or deodorant if worn in the bush and how far you could see a cigarette glow at night. Later in the war, I was to lose a friend who ignored this on being deployed to his great misfortune. It cost him his life. In those days nearly everyone smoked although I did not.
We also spent a lot of time on the battle march, as our training course participants were very fit. Our instructors and Bruce were determined we could break the record. Naturally, they were not stupid enough, nor were they allowed, to take part in this. Just order to do and offer encouragement. The closer we got to achieving the record, the more we did it. Talk about self-infliction. Anyway, a day was decided for an official crack at the record. On the specified day for our attempt, one of our team went down sick. After much discussion amongst the various course officers, it was decided to let us run one man short and share his ammunition among the team for the final shooting part. We achieved a good time and with the shooting, received a record-breaking score. To many a surprise. After a nights celebration in the cadets mess the next morning, following complaints from the regular cadet course, our record was rescinded as it was now deemed unfair since we gained the extra points through each individual having extra bullets in the shooting part. How could that change things? It did, and it put a slight dampener on our ‘passing out’ which was only days away.
The Challenges of Investing in African Agriculture Part II
Why is it hard to invest in small businesses? Firstly, it is often hard for them to produce a balance sheet that represents the company or family business. To access a loan or an investor’s capital from a bonafide investor, one must register as a company. Many small businesses often start as an extension of the backyard or farm. That is, it starts as a ‘cottage’ industry even if it is a farm or processing plant. It may even have been or still be run part-time with both income and capital coming from personal investment, including kind, such as sweat equity (no payment or value on personal or family time), salary from other employment supporting the business both in terms of operating costs and equipment purchase. All these make it hard to put a value on what the balance sheet should truly be. Meanwhile, expenditure may include living costs, school fees, holidays, even boats, all put down to costs included in the annual working expenses making any margin hard to define for multiple valuations on ratios. I have seen swimming pools recorded as irrigation reservoirs. Even state Presidents have been known to call them ‘fire fighting tanks’. Just as importantly capital items and improvements are often considered another working cost, especially when work in progress is over a number of years.
“Most businesses want cash for expansion. If generated organically the costs are less painful. If borrowed or third party investors capital is used, the real cost to many is only realised at repayment or exit.” - Peter Mcsporran
Hence the discovery of a true balance sheet is very difficult as is determining the true profit of the business. Included in this and not declared can be grants. Equally, the discovery of legacy debts, loans, taxes and legal disputes are very hard to find. In most countries, if the company is registered, ownership can be verified although you may well have to pay delayed company return payments. This is before you get onto the environmental issues and required licences. Title deed searches are also time-consuming.
Of course, unless the sponsor feels you are serious, he will be loath to pay for any of this unless given some assurance of your commitment, so like many things in life you are back to the ‘chicken and egg’ story.
Gross margins may be better or worse depending on the capture of costs. I have encountered management of large companies saying we need to increase production to carry our overheads, meanwhile, if they captured their costs correctly their overhead costs may well have been overstated while gross margins were non-existent. In those instances, every hectare or bag produced would add to losses, not profit.
In most cases, the sponsor’s balance sheet will not be in a position to take on the debt to further grow the company. No point in talking ratios to someone who does not or cannot understand a balance sheet or net profit. Of course, as we know in this world it is not just small businesses that botch their balance sheet, many listed companies have done the same. Some of the tricks are inflated land values after clearing or the value of irrigation. Livestock, especially cattle, can offer all sorts of opportunities to the opportunist.
Needless to say at the end of it all some value needs to be agreed on the capital worth of the company and its value on present or projected profits. A good place to start the possible bad blood between the sponsor and the investor or lender. Sometimes the investor will also provide debt to ensure the sponsor retains a worthwhile share, after all, it is often the track record of the business the investor is hoping to improve with capital either in equity or debt.
Once agreement is reached and a partnership or relationship is formed, that is the easy part. Recovery of debt or exit by the sponsor is difficult. Often the company may not be generating enough income that it will allow the payment of capital on one partner’s exit unless he is a minor shareholder. It may be that one of the parties does not want to exit. Yes, there are shareholder agreements but in Africa, they can be hard to enforce and law courts will be loath to take the side of a foreign investor against a local hero.
“Partnerships are like marriages. When both parties can only see benefit in the relationship they are easy to enter into. Once disagreement happens or one wishes to end the relationship things become messy, expensive with much recrimination.” - Peter McSporran
On exit or dissolution once again there is no doubt there will be an argument over value as in every likelihood sweat equity, equipment and other difficult to substantiate value figures will have little value on trying to sell the entity as a whole. The additional costs brought into the company related to governance are often the catalyst to bring around a breakdown in the relationship. Sponsors or lenders may be willing to extend timelines but will want to recover any annual costs incurred in managing their investment or loan. Talking about timelines, in agriculture, they are rarely long enough. Sometimes at a later date, the investors needs in regards to governance impact on the businesses viability even its survival.
“I often feel the use of international accounting firms, environmental consultants and legal advisers rather than local service providers is more about CYA (cover your arse) than for the good of the company.” - Peter Mcsporran
I have not given this subject enough time and therefore would like to come back to it in the future. My excuse, I have been on a wonderful African adventure and therefore too tired to focus. It looks like we will be getting out of Africa on Lufthansa this weekend, providing it is still flying and we pass our PCR tests. Storm will have to change her destination to the UK partly since Brexit she is no longer a European resident. So not only the departure country, but one’s passport can determine the rules pertaining to travel with Covid-19.
*Jungle-lane is a term used to cover the special techniques needed for military units to survive and fight in jungle terrain. In Rhodesia read bush for jungle.
Disclaimer: Copyright Peter McSporran. The content in this blog represents my personal views and does not reflect corporate entities.
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