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Econet Wireless Zimbabwe Limited (Econet), a leading telecom company controlled by Zimbabwe’s richest man Strive Masiyiwa, has disclosed plans for a substantial restructuring endeavor in collaboration with EcoCash Holdings Zimbabwe Limited (EcoCash).
This strategic move seeks to fortify Econet’s foothold in the financial technology sector and streamline operations to bolster value creation. The proposed Scheme of Reconstruction, valued at $58.97 million, entails the transfer of pivotal financial technology (fintech) assets from EcoCash to Econet, marking a significant milestone in the evolution of both entities.
In line with the recent move, Econet is set to acquire several subsidiaries of EcoCash, including EcoCash (Private) Limited, VAYA Technologies Zimbabwe (Private) Limited, Econet Insurance (Private) Limited, Econet Life (Private) Limited, MARS Zimbabwe (Private) Limited, and Maisha Health Fund (Private) Limited. This transfer entails a total consideration of ZWL509 billion ($58.97 million), equivalent to 521,861,057 Econet Shares, to be disbursed partly in cash and partly in Econet Treasury Shares.
Consolidation to boost Econet’s efficiency
The rationale behind this transaction stems from Econet’s strategic initiative to fully unleash the potential of its financial technology ventures, which have flourished autonomously within its Mobile Network Operation (MNO) business framework. Following the demerger of EcoCash Holdings from Econet in 2018, the company has identified a convergence of interests among its shareholders, culminating in the proposed consolidation of assets under Econet’s purview.
Moreover, the current economic environment in Zimbabwe has presented obstacles in attracting foreign investment to the financial technology sector. Consequently, Econet and EcoCash Holdings, both sharing a common pool of controlling shareholders, have encountered resource duplication and limited value creation. By amalgamating the financial technology enterprises into Econet, the company aims to capitalize on synergies, harness its subscriber base, and expand delivery channels to foster sustainable growth.
The proposed transaction is contingent upon regulatory approval and adherence to the listing requirements of the Zimbabwe Stock Exchange (ZSE). Based on the company’s evaluation, the transaction does not meet the threshold for a Major Asset Transaction under the Companies And Other Business Entities Act, given that the book value of the financial technology businesses falls below 50 percent of Econet’s total assets.
Reunification strategy aims for Econet growth
Econet Zimbabwe, a subsidiary of the Econet Group, stands as a diversified telecommunications conglomerate with a rich operational history spanning over two decades. It boasts an extensive subscriber base exceeding 14 million, with a presence spanning across Africa, Europe, South America, and East Asia.
Strive Masiyiwa, with an estimated net worth of $1.9 billion, owns a substantial equity holding of 52.85 percent in Econet Zimbabwe, solidifying his position as Zimbabwe’s wealthiest businessman and one of the world’s most affluent Black billionaires.
The decision to reunify entities is anticipated to bolster operational efficiency and furnish customers with an expanded array of products and services. The telecommunications group has underscored a concerning decline in the combined net asset value of the entities, plummeting from over $810 million pre-demerger to a present value of less than $450 million.
Econet Wireless Zimbabwe’s strategic restructuring with EcoCash signifies a pivotal step in consolidating its position within the financial technology sector. With regulatory approvals pending, the envisioned integration aims to unlock synergies, enhance operational efficiencies, and drive sustained growth, poised to reshape the landscape of Zimbabwe’s telecommunications and financial services industries.
