Barloworld’s termination of distributorship of heavy mining and construction equipment to Zimbabwe has left Zimbabwean Stock Exchange-listed Zimplow in a big financial loss despite expected recovery of the two sectors in the country.
Zimplow controls Barzem and is now negotiating with other suppliers to sustain supplies to local miners and construction companies. Industry sources say Barloworld is now distributing Caterpillar heavy equipment in the Zimbabwean market on its own.
To counter the effects of the termination of distribution agreement with Barloworld, Zimplow is buying out Barloworld’s 49% stake in Barzem, the distributor of Caterpillar equipment in Zimbabwe. On the positive side, there has been an improvement in demand for solar and battery products under the company’s energy solutions division.
The board has determined that it will “protect shareholder value by acquiring Barloworld’s 49% shareholding in Barzem at a discount in line with the remedies provided” in Barzem’s shareholder agreement.
Godfrey Manhambara, the board chairman for Zimplow said, “The full year to end December 2022 had been projected to be a strong year before the termination of the Caterpillar distributorship by Barloworld given the strong metal and mineral prices.”
Zimplow is now transitioning the Barzem subsidiary to a new company, after securing “affiliations and accreditations with key suppliers to be able to continue looking after our major customers’ huge fleet from an earth moving equipment” perspective.
“This has assisted the business unit to secure service level agreements, repair and maintenance contracts with some of the huge fleet operators – amassing the scale in short space of time, required to provide effective supply chain solutions and cost effective maintenance strategies,” said Manhambara.
Construction industry players told Business Report that they were facing a backlog of delivery of heavy equipment. Some of them are having to incur extra expenses on importing earthmoving equipment through smaller agencies and distributorships for other brands.
“There is now mostly Chinese heavy equipment whose reliability is still questionable because these are new brands. We expect supply to pick up as the industry also gathers momentum,” said one construction industry manager.
For Zimplow, 2022 started on a positive note, with strong demand being experienced across all segments. The current year appears to be better on the back of a better rainy season and ramping up of mining output across key minerals such as gold, lithium, coal and platinum among others.
“The operating environment remains unpredictable. However, with the growth being experienced in the mining and agricultural sectors, our anchor segments, augmented by the team’s new look, there is belief that the Group will continue to deliver strong performances,” noted the company.
Barloworld has also been facing problems in Russia, one of its major markets – accounting for more than 20% of revenues – for heavy earthmoving equipment. Ratings agency Moody’s said in April that Barloworld’s Russian business could be “severely disrupted and in worst case, cease operations completely, on a temporary or permanent” basis.
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