Food processing companies and the fertiliser makers dominate the top ranks of successful bidders at the Reserve Bank of Zimbabwe foreign currency auctions, according to the list of published last week of the largest hundred entities allotted auction currency since the system started in late June last year.
Cangrow Trading, a cooking oil manufacturer better known as the maker of Raha, took the top slot with US$12 million, but Blue Ribbon was in third place with US$10,5 million, Surface Wilmar, maker of Pure Drop, in fourth place with US$9,2 million and National Foods, a major company making a wide range of products, fifth with US$8,3 million.
Willowton Group (Zimbabwe), a Mutare manufacturer that consumers know through Sun and D’lite cooking oils, although they make soap too, was ninth with US$5,7 million and United Refiners of Bulawayo (Roil cooking oil and soaps) was 11th with US$5,1 million.
The three major dairy companies, Dendairy in 13th place with US$4,9 million, Dairibord in 17th place with US$3,8 million and Prodairy in 19th place with US$3,6 million show just how reliant the dairy industry is on imports of raw materials.
Two major fertiliser companies joined these processors in the top 20, Sable Chemicals coming in at seventh place with US$7,5 million and Windmill in 10th place with US$5,5 million. Zimbabwe Fertiliser Company comes in at 21 with US$3,4 million.
In second place is Stanbic Investor Services (Nominees) with US$11,2 million, but there were no other details of what this money is used for. Zimbabwean Brands, who do not publish much detail, and as a private company need not although they are a food company, are in eighth place with US$6,2 million.
Industrial products such as tubes, engineering and steel come lower down the list although a reasonably well represented between 20th and 50th places, although NetOne at 20th is the leading communication company using the auctions.
We have Essar Tubes and Towers at 28, Africa Steel at 29, Craster International, just about the oldest company on the list since it started manufacturing in 1904 in lower Harare Street, at 30, and newer entry China Nanchang Engineering at 39.
Fuel companies tend to buy most of their needs using free funds, these days the money, minus taxes, that they collect from customers on the forecourt buying fuel for foreign currency. But Engen Petroleum Zimbabwe comes in at 51 with US$2,05 million as the leading oil company in the auctions. Zuva Petroleum is at 63 with US$1,9 million. But Oilmark is at 40 with US$2,3 million.
Considering the volumes of fuel over the last eight months, it is fairly obvious that these auction-funded imports, which have to be sold for local currency, are just a modest percentage of the fuel imports
While Cangrow, at the top, has been allotted 1,9 percent of all currency sold on the auctions, Innscor, whose constituent entities all bid separately, has received total allocations of around three percent when all the bits are added together and as expected as the largest food processing concern would probably be the largest single importer if it used central buying. One reason for the splitting is the fact that Innscor holds varying percentages of the equity of many of its subsidiaries, with total ownership of only a few.
The allotment list gives some idea of how big are some of the private companies. Companies listed on the Zimbabwe Stock Exchange have to publish their figures, but private companies do not have to publicise their results.
It is now possible to get some idea of which company and which brands dominate many markets, Now, in some sectors, we have an indication of who dominates which market.
The spread of allotments is very wide. The top 100 bidders between them account for just 45 percent of all allotments, but the rest, and the largest is less than 0,2 percent of allotments or less than US$1,43 million since June last year, make up the other 55 percent. This must come to many hundred companies, quite possibly well over 1 000, especially once the SME bidders are included.
Some have commented on the list, wondering about the criteria for allotments. But, for the first time since UDI in 1965, no official decides who gets what. It is now the markets that decide in a transparent and neutral process.
The one official input is the two priority import lists. Goods and services paid for from auction funds must be on these two lists. But after that a bidder just has to obey the simple rules of making sure paperwork is in order and that they have exhausted their own nostro accounts before seeking an auction top up.
So far 12 entities have been barred from bidding on the auctions and the RBZ’s Financial Intelligence Unit is watching another 62 very closely. The Governor did not name the companies barred or being watched and it is not known whether any in the top 100 are in either group.
While Dr Mangudya did not list the malpractices, those serious enough to get barred or those suspected that meant placement on the watch list, he has in the past complained about companies not exhausting their own nostro accounts, which suggests that they might keep their foreign currency hidden at another bank than the one they use for bidding, or trying to be middlemen without their own factory, and other practices that distort the auctions.
The Governor was concerned that some bidders borrow to buy foreign currency, and that some commercial banks were granting instant overdrafts to some customers if their accounts did not have enough money to meet their bids. The rules state that a bidder must have enough Zimbabwe dollars in their account to meet their bid since the RBZ does not sell foreign currency on credit.
Dr Mangudya felt that this sort of recklessness by banks and bidders could damage the economy by boosting money supply without accompanying economic growth to back that, So he now insists that at least half the Zimbabwe dollars for a bid must be the bidders own funds, with borrowing only allowed for up to half. And even then he does not appear to be an enthusiast for even that level and wants banks to play a stronger role in gatekeeping by knowing their customers better.