Barloworld has exited a Zimbabwean joint venture, and will now sell its Caterpillar earthmoving equipment directly to customers in the southern African country.
Barzem was established over 70 years ago as the Zimbabwean Caterpillar dealer, with ZSE-listed Zimplow as the majority owner.
Barloworld said it took the “strategic decision to remove itself” from the joint venture, meaning Barloworld Zimbabwe is now the sole distributor of Caterpillar equipment in the country.
All Barzem employees servicing Caterpillar customers were offered the opportunity to join Barloworld Zimbabwe, with more than 95% accepting the offer, said Andronicca Masemola, Barloworld Equipment’s Southern Africa CEO. “Barloworld has made significant investments in its wholly owned subsidiary, Barloworld Zimbabwe, in the form of new facilities and people.
“The board is following through on protecting shareholder value by acquiring Barloworld’s 49% shareholding in Barzem at a discount in line with the remedies provided in Barzem’s shareholder agreement,” Zimplow board chair, Godfrey Tsikai Manhambara, said on Thursday.
Zimplow now has find a replacement supplier of heavy equipment. The company has set up a new structure for heavy equipment and earthmovers, transitioning from Barzem to a new entity, TPS, which has started securing affiliations with key suppliers to be able to continue to serve customers.
Despite starting 2022 on a positive note, with strong demand being experienced across demand for equipment for mining, construction and agriculture, the impact of the dry spells experienced at the beginning of the year in the country “significantly slowed down demand of agriculture equipment” products, the company said.
Zimbabwe has also instituted various monetary and fiscal measures to contain an implosion in its currency. These included higher interest rates, curbing the amount of foreign currency earnings exporters can retain in hard currency, as well as directing companies to only use the Zimbabwe dollar for accounting and reporting purposes.
“The monetary measures and the general reduction in liquidity to tame the import inflationary pressures, caused demand for capital equipment, especially the agricultural segment, to dry up,” said the company.
Zimbabwe is not Barloworld’s only challenging market, and it also has a presence in sanctions-hit Russia, which accounted for almost a quarter of the group’s revenue in 2022. Ratings agency Moody’s said in April, while keeping Barloworld’s long-term credit rating unchanged with a stable outlook, that an upgrade is unlikely as long as uncertainty about the potential financial fallout from the Russian operation persists.