By Tonde Maruke
Econet Wireless Zimbabwe’s proposed transaction to delist from the Zimbabwe Stock Exchange and list its infrastructure arm, Econet InfraCo, on the Victoria Falls Stock Exchange was always going to provoke debate. In a market where everyone has a view, that much was inevitable.
What was less expected, however, was the degree of confusion reflected in a recent statement by the Zimbabwe Association of Pension Funds (ZAPF). The statement, signed by Director General Sandra Musevenzo, contains several fundamental misunderstandings that may cast a side-eye on investment decisions within the pension fund sector.
First, and most notably, ZAPF implies that shareholders stand to lose their Econet shares through a dividend in specie. A dividend in specie is a standard and well-understood corporate finance mechanism. It is simply a dividend paid in shares rather than cash. It does not cancel, replace, or dilute a shareholder’s existing shares in the distributing company.
Under the proposed transaction, if exiting shareholders elect to take up only 20% of InfraCo shares instead of the 30% minimum required by the VFEX, the remaining 10% will be distributed free of charge to shareholders who choose to remain invested in Econet. These shareholders retain full ownership of their Econet shares, receive additional InfraCo shares at no cost, and are free to hold or sell those InfraCo shares as they see fit.
Against this backdrop, ZAPF’s claim that shareholders are being “compelled” into an unwanted asset reallocation is grossly misplaced. Shareholders who do not wish to retain InfraCo exposure have clear options, including selling their InfraCo shares once listed. Those who remain invested in Econet do so voluntarily, and retain their Econet shares in full.
It is difficult to reconcile ZAPF’s position with its fiduciary duty to members. Here is an association of pension funds publicly advising shareholders to reject a transaction that offers the prospect of receiving additional shares at no cost, while preserving their existing holdings. Such advice surely demands a firmer factual foundation than has been presented.
As Econet approaches its Extraordinary General Meeting, one can only hope that shareholders — including pension funds — will engage directly with the Circular to Shareholders and seek independent professional advice. Investment decisions are too important to be shaped by misunderstandings of basic corporate finance principles.
