Golden Sibanda Senior Business Reporter
BLUE Ribbon requires about $15 million to procure grains enough to set the company back on track to sustainable viability, highly placed sources said. The capital outlay required to purchase the grains shows the enormity of the overall capital amount required to turnaround the fortunes of the once vibrant milling company. This comes at a time when judicial manager Mr Reggie Saruchera of Grant Thornton Camelsa has secured Tanzania’s Bakhresa Group as the appropriate potential investor.
“The company is looking for a real miller, not cash-strapped investors because Blue Ribbon needs about $15 million, just to buy grain such as maize and wheat,” a source said.
The source said this was exclusive of general working capital and other obligations such as paying wages and clearing the company’s liabilities amounting to $30 million.
“Blue Ribbon prospective investor, Tanzania’s Bakhresa Group, has insisted on a lengthy indigenisation compliance period in what could delay recapitalisation of the local firm. Mr Saruchera could not be drawn into discussing intimate details about the company, only insisting that the investor was still negotiating its indigenisation compliance issue.
However, a local pressure group objected to lengthy period of control for Blue Ribbon by a foreign entity, which if successful could spoil its opportunity for fresh funding. It is understood that Bakhresa agreed to a 75 percent shareholding in Blue Ribbon, but the equity deal to recapitalise the distressed miller stalled over differences on the latter’s indigenisation.
The indigenisation approval has not yet been granted, as parties were still negotiating. They have not agreed on the compliance period because the investor wants a longer period.
The sources said Bakhresa Group submitted its proposal to Government regarding the period in which it was comfortable to regularise its equity in the milling company. And before parties to the deal reached consensus the Grain Millers Association of Zimbabwe petitioned Government to reject the investor’s proposed period of indigenisation.
This could drag recapitalisation process for Blue Ribbon, which once suspended operations due to funding constrains before resuming maize milling last year after a deal with a supplier.
Blue Ribbon, which is under the judicial management of Grant Thornton Camelsa, recently started testing its flour milling plant, prior to negotiating supply agreements.
According to GMAZ, the prospective investor has proposed to defer compliance until after 10 years. Zimbabwe’s equity laws require foreign shareholders to hold a maximum of 49 percent with the balance required to be in the hands of local investors or State institutions.
However, a foreign investor may hold more than 49 percent stake after obtaining special dispensation from the Government as happened with the Zisco deal.
The millers argued that Blue Ribbon operated in a sector reserved for locals and allowing Bakhresa to defer indigenisation for 10 years would send a wrong signal to other investors.
They said other investors in the industry would also seek to prolong their compliance periods in similar fashion while workers of the respective company’s would also not benefit.
The country’s equity laws require foreigners investing into local companies to set aside at least 5 percent stake to be allocated to an employees’ share ownership scheme.
However, the objection could stifle the company’s guilt edged opportunity to secure investment required to retire debts, raise production and rehabilitate old and idle machinery. This also comes against the background where no local investor can provide the funding required.
Mr Saruchera last year said the company required about $40 million fresh capital, with a significant chunk required to support working capital needs.
The company has been buckling under heavy liabilities and shortage of working capital to support operations, which at one time forced it to put workers on shifts to manage costs.
Blue Ribbon has five main divisions BRI Logistics, Blue Ribbon Foods, JA Mitchells and Nutresco Foods. It used to be one of the largest millers in the country prior to its problems.