Greenbelt Authority ponders listing Salima Sugar Company
Greenbelt Authority (GBA) has hinted at listing Salima Sugar Company Limited on the 16-counter Malawi Stock Exchange (MSE) as one of the options to raise capital to expand sugar production.
The authority’s board chairperson Wester Kosamu said in an interview on Friday Salima Sugar Company has shown potential to contribute to the country’s industrial base through the sugarcane value chain.
But he said the firm is operating below that potential, having gone through some mismanagement under the previous partnership arrangement.
In April this year, Minister of Trade and Industry Sosten Gwengwe challenged the company to expand and increase production from the current 25 000 metric tonnes (MT) to 100 000MT annually.
Kosamu said the firm is in debt, with the principal amount at $18 million (about K31 billion) taken in two tranches in 2017 and 2020.
He said the loan is affecting its expansion drive as it absorbs a substantial amount of revenue and has to be cleared first before proceeding with some of the options such as issuing an initial public offering (IPO).
MSE chief operating officer Kelline Kondowe said the consideration to list on MSE is a welcome development.
She said Salima Sugar Company should be able to meet the listing requirements.
Said Kondowe: “We view Salima Sugar as a company with potential to list on the exchange. We believe the stock market is an ideal place for them to raise patient and affordable capital that is needed to expand their operations.
“We also believe that an IPO could be a strategic move to establish the company in the sugar sector and open it up to new partnerships and customers.”
She, however, said there is low awareness for local firms on the prospects of raising capital through listing, adding that one of the biggest hindrances they encounter is lack of knowledge of the process of listing as well as poor corporate governance practices in companies.
Financial market analyst Cosmas Chigwe said in an interview on Sunday that Salima Sugar Company has potential for borrowed capital or to find equity partner as long as there is an opportunity to make more profits and be able to service the loan.
He said: “It would be better to look at their balance sheet to make a better informed opinion, but looking at it, in general terms, finding an equity partner is a more viable option.
“Issuing a new debt is also viable, but it depends on the clauses in the previous debt, because sometimes there are restrictive causes on contracting new debt on top of the other.”
Greenbelt Authority has over 6 000 hectares (ha) for sugarcane production in Salima and also works with other producers, exposing it to over 10 000ha more that is yet to be fully utilised, according to Kosamu.
