Stanbic Bank just posted one of the strongest sets of results in the Zimbabwean banking sector.

The headline numbers are impressive. But what is more interesting is what these results tell you, not just about Stanbic, but about the Economy and the entire banking sector.

Let’s unpack!

Stanbic’s Year: The Numbers

A note upfront. Comparing 2025 to 2024 income statement figures is not straightforward because the ZWG wasn’t as stable in 2024.

The numbers below are for 2025 only, converted at 1 USD to 27 ZWG. Balance sheet comparisons to 2024 are valid.

• Profit after tax: ZWG 1.67 billion ($61.8 million)

• Total income: ZWG 4.88 billion ($180.7 million)

• Net interest income: ZWG 1.82 billion ($67.6 million)

• Operating expenses: ZWG 2.24 billion ($82.9 million)

• Total assets: ZWG 35 billion ($1.30 billion), up from $944.6 million in 2024

• Loan book (net): ZWG 13.2 billion ($489.7 million), up from $311 million in 2024

• Customer deposits: ZWG 20.9 billion ($773.4 million), up from $556.4 million in 2024

Strong numbers across the board. Two ratios bring the real picture into focus.

Cost-to-income ratio: 46%. This measures how much it costs a bank to generate a dollar of income.

The lower the number, the more efficiently the bank operates. Below 50% is considered very good. Standard Bank Group, Stanbic’s own parent and one of Africa’s largest banks, is around 50%.

At 46%, Stanbic is doing really well. This is also better than First Capital and much better than most banks in South Africa.

Return on equity: 32%. ROE tells you how much profit a business generates for every dollar shareholders have invested.

Think of it like the return on any investment. If you put $100 into something and earn $32 back in a year, that is a 32% ROE.

Now, a high ROE is not automatically a good thing. Sometimes you get a very high ROE because you are taking a lot of risk.

It’s like that cousin who always has a business idea that can double your money in a week. Technically, if it works, the ROE looks amazing. But the risks involved mean that in the long run, things usually go wrong.

Stanbic does not look like that cousin.

The Bank’s Stage 3 loan ratio, which measures the percentage of loans that are very risk, is just 0.64%. Less than 1 cent in every dollar lent is going bad.

Currently, CBZ Bank sits at 4.9%. First Capital Bank is around 5.2%. There are some reasons for the elevated levels at these banks, but Stanbic is generating a 32% ROE while maintaining a clean loan book and a strong balance sheet, is overall pretty good.

For further context on ROE, Standard Bank Group has an ROE of around 19%. So Stanbic is doing pretty well.

More lending, less fees

Here is an encouraging signal in the numbers. Net interest income, which is what banks make from lending money, grew from 29% of Stanbic’s total income in 2024 to 37% in 2025.

This means more money was made from lending than from fees compared to last year.

This matters for Zimbabwe’s economy. Lending creates economic activity; fees do not and Zimbabwean banks love fees.

The growth in Stanbic’s lending was driven primarily by agriculture, which grew 229% from $32.4 million to $106.8 million. That’s impressive.

Zimbabwe’s record tobacco season probably helped boost that.

But still a lot of fees

Stanbic was arguably the best-performing bank in Zimbabwe based on the 2025 numbers, and while the ratio of Net Interest Income has increased, 63% of its income still comes from non-lending activities, e.g., fees, trading.

In most mature banking markets, the ratio is the opposite. Typically, 60 to 70% of a bank’s income comes from net interest income. Standard Bank Group itself generates around 55% of its income from lending.

The fact that Zimbabwe’s top performer is still well below that benchmark tells you something about the environment. The fees model still dominates because it remains the most reliable way to make money in this market.

Below shows just how bad the split is, with fees and commissions making up 45% of income, even before factoring in FX trading

That is a problem for businesses.

Even if banks do want to lend more, if it's possible to do well from fees, there is less incentive to change the status quo.

There is another number worth paying attention to. Manufacturing loans at Stanbic fell from 32% of the loan book in 2024 to just 10% in 2025.

In dollar terms, that is a drop from $101.9 million to $49.2 million. Does this mean the manufacturing sector is also struggling?

We also saw that in First Capital’s results, their business banking loan book had the most issues. Could this be linked?

Some Interesting News On Property

Stanbic holds ZWG 1.85 billion ($68.7 million) in investment property, representing 34% of total equity.

I have covered this before in two previous articles, “Zim Banks Hold More Property Than SA Giants” and “Property Rich, Capital Poor.”

The short version: Zimbabwean banks hold more investment property than three of South Africa’s biggest banking groups combined, despite being hundreds of times smaller.

What is new here is that Stanbic created a brand new Board Properties Oversight Committee in 2025 to govern this portfolio.

This is interesting.

When a board creates a committee for a specific asset class, it means that the asset has grown large enough to require separate oversight

It will be intresting to see if this portfolio results in any changes in the portfolio.

Perhaps this is the beginning of a more active conversation about whether some of these properties should be unwound to free up capital into the productive economy.

Where’s the Money? What’s the Move?

Stanbic is not listed. You cannot buy shares in it directly. But its results are a useful benchmark to view every bank you can actually invest in.

Banking is one of the most represented sectors on the ZSE and VFEX. On the ZSE, you have CBZ Holdings, FBC Holdings, ZB Financial Holdings, NMBZ Holdings, and TN CyberTech Investments Holdings (TN CyberTech Bank).

On the VFEX, you have First Capital Bank.

Stanbic’s results raise one question every investor or management team in these listed banks should be asking: How efficient is my bank? As Stanbic and First Capital have shown, becoming more efficient can add a significant bump to profitability.

The other thing to look at is the shift from fees to interest income. While fees are the easy money, the growth is in lending.

To grow in this space, however, may require a lot of careful reworking of the balance sheet to meet statutory requirements, keep risk low while growing a loan book.

Let’s see what happens.

Which banks do you think are performing well or falling behind?

Thanks for reading. If you enjoyed this, please forward it to someone you know!

P.S. I am working with publicly available information, so I could be wrong or missing something. Thanks for reading!

First Capital Bank Zimbabwe just released its full-year results for 2025. The numbers are impressive. Profit after tax hit $30 million, up 52% from $20 million in 2024. Return on equity came in at 33%.

But not all numbers got a perfect score. Alongside the strong operating performance is one area of deterioration that deserves attention.

It does not change the overall picture of a strong year.

It does, however, change the question you should be asking going into 2026.

And it tells you something important about what is happening in the broader Zimbabwean economy.

Let’s unpack!

The Numbers

Let’s start with the headline numbers:

• Total income of $84.4 million, up 14% from $74.3 million

• Net interest income of $39.7 million, up 20% from $33.1 million

• Net fees and commissions of $33.2 million, up 16% from $28.6 million

• Profit before tax of $38.7 million, up from $24.9 million

Those are really good numbers across the board, and that Profit Before Tax number is even more impressive, considering that in 2024, $6 million of the bank’s profit came from foreign exchange revaluation gains.

In 2025, that FX gain fell to under $0.5 million, which means the profit in 2025 is driven by operational improvement.

What drove this?

First Capital’s Efficiency: Less Spent, More Earned

The number that best captures this year’s performance is the Cost-to-Income Ratio (CIR).

The CIR measures how much the bank spends in operating expenses to generate its income.

If the CIR is 63%, it means to make $100, the bank has to spend $63 in expenses. The lower the ratio, the more efficient the bank.

For First Capital, the CIR dropped from 63% in 2024 to 47% in 2025. That is a huge shift in a single year.

Total operating expenses fell from $47.4 million to $43.9 million while revenue grew 14%. Staff costs dropped from $20.3 million to $15.8 million, largely because of retrenchments the bank made in 2024 whose full savings flowed through in 2025.

That last point is interesting.

The bank cut staff, and income went up. That suggests there was a lot of excess headcount that may even have been net negative in terms of contribution to the business.

It raises a question about how many other Zimbabwean banks are carrying a lot of excess staff?

A 47% CIR is impressive for any bank on the continent, as you can see below, even in South Africa, most banks are striving to get under the 50% mark.

Keeping the balance sheet healthy

For a bank, it’s important to make profits, but if your financial health is not strong, profits mean nothing.

For this, we need to look at the balance sheet.

Customer deposits grew 12% to $200 million. The loan book grew 14% to $129 million, funded partly by offshore facilities from Afreximbank and the European Investment Bank.

Capital adequacy sits at 26%, above the regulatory minimum of 12%.

The Liquid Asset Ratio strengthened to 65% from 53%, and the Liquidity Coverage Ratio hit 212%. In plain terms, the bank holds more than twice the liquid assets it would need to cover a stress scenario.

This matters more for a bank than for almost any other type of business. Banks are unique in that a weak balance sheet can cause them to disappear almost overnight.

When depositors lose confidence, they withdraw funds simultaneously, and no amount of profitability can save you from a liquidity crisis. First Capital’s balance sheet does not have that problem right now.

Speaking of weakness, though, there is one number in these results that needs further scrutiny.

The Loan Book: The One Number That Deserves Scrutiny

First Capital’s core business is lending. So a critical part of the operation is making sure the loans they give are paid back.

Under Note 32.2 of the results, the bank discloses the quality of its loan book using a three-stage classification required under international accounting standards.

Stage 1 loans are “performing loans” where there is no significant concern. The borrower is current, and the risk of default is low.

Stage 2 loans are where the bank has identified a significant increase in credit risk. The borrower may not be in default yet, but the warning signs are there.

Stage 3 loans are the fully defaulted loans. The borrower is 90 days or more past due, or the bank has concluded that repayment is in serious doubt.

Stage 3 is where you want to pay attention.

Stage 3 loans grew from $1.285 million in 2024 to $6.857 million in 2025. That is a 433% increase in one year. The impairment charge in the income statement jumped from $156k to $3.35 million.

What makes this more concerning is where the defaults are coming from.

In 2024, the Stage 3 problem was almost entirely a retail issue. Individual borrowers, people like you and me.

The corporate and business banking books were essentially good, with Stage 3 exposures of just $5k and $74k, respectively.

By 2025, that picture had completely changed:

• Corporate Banking Stage 3: $2.735 million, up from $5k

• Business Banking Stage 3: $2.527 million, up from $74k

• Retail Stage 3: $1.595 million, up from $1.206 million

The retail book didn’t change much. The jump came from business and corporate lending. That is the more serious problem.

Corporate defaults tend to be larger, more concentrated, and harder to recover from than retail defaults spread across thousands of small borrowers.

The Business Banking situation is the most concerning data point in the entire set of results. Total business banking gross loans sit at just $5.6 million.

Stage 3 exposures within that book are $2.527 million. That means roughly 45% of the entire business banking loan book is now in default.

It also tells you something about the broader economy. SMEs in Zimbabwe are clearly under significant pressure. If nearly half of one bank’s SME business loans are in default, it is a reasonable assumption that other banks are seeing similar stress.

This area of concern doesn’t mean that the business didn’t do well. The impairment charge in the income statement already accounted for most of this; however, it does highlight one risk area that needs attention.

One could argue that the increase in stage 3 loans was just the degrading of loans that had already been flagged last year as stage 2; in other words, the bad loans just got worse rather than fresh issues in the loan book.

There is some data that supports this argument. When there are widespread issues across the entire loan book, you would typically see a gradual pipeline of loans migrating from Stage 1 into Stage 2 before eventually reaching Stage 3.

Instead, Stage 2 loans shrank from $7.6 million to $2.8 million while Stage 3 jumped, suggesting that a handful of borrowers who were already on the watchlist simply tipped into default.

Either way, any time there is an increase in impairment and stage 3 loans, it means there is an increase in credit risk, and credit risk is one thing a bank always needs to pay close attention to.

Overall, First Capital still posted a good set of numbers and has maintained its growth trajectory.

It’s also welcome that a bank is doing well from the core business of lending, which is not the case with most banks that rely on fees and charges.

Where’s the Money? What’s the Move?

At a trailing price-to-earnings ratio of roughly 7x, a 33% return on equity, and a 9% dividend yield, First Capital on paper still looks like a decent investment.

The tricky part is that the share price has already doubled in the last year, and so perhaps has already been rewarded for the strong performance.

But if the bank continues its efficiency gains, grows the deposit base, and manages the loan book stress, there is a case for further upside.

Overall, based on the 2025 results, First Capital looks like one of the better-performing banks in the country right now. The loan book issue is real and worth watching. But it does not, at this stage, undermine what is otherwise a genuinely strong year.

What do you think?

If this was worth your time, it’s worth sharing. Forward it; this may be the analysis that helps someone in your network make an important decision.

P.S. I am working with publicly available information, so I could be wrong or missing something. Thanks for reading!

In October, I wrote about Innscor’s results in “Money Never Sleeps.” The story was about incredible revenue growth. A billion-dollar company growing at 19%. But there was a problem. Profitability was slipping. Margins had fallen from around 15% a few years back to 9%.

Six months later, the margins appear to be coming back. EBITDA, a type of operating profit, grew 37%.

What changed? Over the past few years, Innscor has poured money into new factories, new capacity, and new products.

For a while, those decisions were hurting profitability. Now, those same decisions appear to be paying off.

Let’s unpack!

What Innscor’s numbers tell us about Zimbabwe

Before we get into the details, let’s think about what these results mean at a high level.

Innscor makes bread, flour, pork, chicken, snacks, and drinks. Basic consumer goods. People buy them because they need to eat. So when volumes are up 28% in bread, 71% in snacks, 32% in pork, and 33% in pasta, that is broad-based demand.

From a first principles perspective, you do not get that kind of volume growth unless there is more money circulating in the economy.

It may not feel that way, especially if it is not circulating into your pocket. But the trend we are seeing with companies like Delta, Econet, and others is that there is more economic activity than we would think.

So some of what is driving Innscor’s improvement is the environment. But not all of it.

The capital allocation payoff

A business is ultimately the sum total of every capital allocation decision it has ever made. Where, when, and how much you invest shapes a business’s future.

Innscor’s annual capex went from $8 million in 2020 to over $70 million by 2024. New bakery lines. New piggeries. New snack factories. New brewing capacity.

It takes money to make money.

But there is always a gap between spending it and seeing the returns. For Innscor, that gap appears to be closing, with EBITDA rising from $58.8 million to $80.4 million.

The Mill-Bake division, which includes National Foods, the Bakery division, Nutrimaster, and Profeeds, was the biggest contributor, adding $11.3 million of extra EBITDA.

The new automated bakery line in Harare, which was still under construction last time, is now running. Loaf volumes are up 28% with better efficiency. The Snacks division grew 71% on capacity that was already paid for. National Foods’ flour volumes grew 13%.

Yet again, increases in volumes across the board.

Protein was the turnaround story, adding $7.8 million. Two years ago, Innscor invested heavily in its piggeries at Triple C Pigs. That seems to be now delivering results.

Colcom’s volumes jumped 32% (people must have really been braaiing). More product through the same factories means fixed costs spread across more units. The segment’s margin doubled from 3.9% to 7.8%.

This is a big shift from last time, when Colcom’s volumes were actually down 3% after the reclassification of pork from VAT-exempt to standard-rated, which put formal operators at a disadvantage to non-compliant competitors.

Together, these two segments delivered $19 million of the total $21.5 million improvement.

Is this sustainable, and the Tanganda play

There should still be room for improvement.

As mentioned last time, the beverage business is most likely still not operating at full capacity. And with the potential of Tanganda being added to the books, there may be more opportunities ahead.

Innscor recently took up a 27% stake through its subsidiary Rutanhi Beverages, which underwrote Tanganda’s $8 million rights issue.

Now, Tanganda isn’t yet an Innscor subsidiary, but they have already indicated they plan to make an offer to minorities to buy them out. That 27% is like a deposit on a house. You don’t put it down unless you have serious intentions.

That said, Tanganda would be a turnaround case. It had to push for an $8 million rights offer, of which $6.4 million is for working capital.

The good thing is Innscor has always been excellent at generating cash.

If cash were the limiting factor, then Tanganda could get a real boost if Innscor were to go on to own it.

On the other hand, the record of working capital-related rights offers is questionable. Ask OK Zimbabwe and Truworths, who tried before and ended up broke.

However, neither of those companies had a “Big Brother”(a single dominant/controlling shareholder), and there are few better big brothers to have than Innscor.

Where’s the Money? What’s the Move? Is Innscor a good buy right now?

At a market cap of about $750 million and annualised profit of roughly $78.5 million going to shareholders of the parent, Innscor trades on a P/E ratio of about 9.5x. Tiger Brands, a similar business on the JSE, trades at about 11x.

That gap is narrower than you would expect given Zimbabwe’s country risk, although one must also factor in that Innscor is growing much, much faster.

However, we also have to consider that the share price has more than doubled over the past year.

At current levels, it is hard to say Innscor is still cheap. It still seems like a good business, but not as good an investment as it was a year ago when we first mentioned it.

This is also when you consider that Delta is trading at a P/E ratio of about 7-8 when you also annualise their half-year results, and Econet was at about 5-6.

It’s interesting that nearly all the Innscor and Excor businesses (former or affiliated Innscor companies) are trading at a bit of a premium right now.

A final point.

The big 3, Innscor, Econet, and Delta have all posted strong results over the past year.

That points to real economic growth in parts of the Zimbabwean market. But here is the funny thing.

This is also a period where companies filing for corporate rescue have been on the rise, and the confidence in Zimbabwean capital markets is at a low.

This highlights a key insight.

Where you play in the Zimbabwean market is critical. There are seas of opportunities, but there are also deserts.

But wherever you find yourself, one thing doesn't change: it takes money to make money.

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What do you think about Innscor?

P.S. I am working with publicly available information, so I could be wrong or missing something. Thanks for reading!

Meikles Limited, which owns Pick n Pay in Zimbabwe, reported using 3.76 million litres of diesel. At the new pump price of $1.77, this amounts to approximately $6.65 million annually. 

That $6.65 million diesel would be more than the total profit it made back in 2014 when retailers were thriving.

A lot of times, fuel costs are just an assumed cost of doing business that you just eat up, but the war in Iran and its impact will make these costs hard to ignore for any business owner, executive or investor.

What’s Happening with Oil?

On 28 February, the US and Israel struck Iran. Since then, oil has spiked from about $70 to around $100 a barrel. That’s a 40% increase in about two weeks.

The Strait of Hormuz, where about 20% of the world’s oil passes through every day, was effectively shut down by Iran.

And well, you know, demand and supply kicked in.

The Maths That Should Worry You

Let’s walk through what this means for a company like Meikles.

In its most recent interim results, Meikles reported revenue of about 6 billion ZiG, roughly $200 million for the half. Annualised, that’s about $400 million in revenue.

If Meikles targets a 2% net profit margin (which would be good in the current environment), that gives you $8 million in profit.

A 50% increase in diesel prices would add roughly $3.3 million to the fuel bill. That’s nearly half of the $8 million gone. On diesel alone.

And remember, Meikles wasn’t even profitable in its last reported half.

This is just to illustrate how much impact a fuel price increase that could be coming might have on a business, even if it's doing well.

Now imagine a business that is struggling. On that note, spare a thought for Tanganda, which has a fuel bill the 20% the size of its market capitalisation.

In some ways, this feels like the early days of COVID. A crisis that seemed far away and distance could very soon have massive impact around the world.

Fuel impacts nearly every price and is likely to drive inflation, potentially causing significant operating challenges for companies.

Where’s the Money? What’s the Move?

Watch out for companies that have big fuel exposure in their business. What was supposed to be a good year financially could end up much worse than expected.

One sector that just got a boost: solar energy. It should be easier now than ever to explain the business case for cutting generator use as much as possible and shifting to solar. No wonder part of the money Tanganda is planning to raise with its rights issue is being allocated to solar.

What do you think?

Sources: Company Annual Reports (FY2024/FY2025). Diesel cost estimates based on the latest price of $1.77/ltr.

P.S. I am working with publicly available information, so I could be wrong or missing something. Thanks for reading!

Recently we unpacked everything you need to know about Econet’s delisting. This week is the big day when shareholders must vote on which way to go.

Today, we tackle the more practical question: what moves can you make to navigate the delisting to make money?

But before we dive in, there’s an important idea worth establishing upfront, because it changes how you should think about everything that follows.

The Most Important Thing in Investing

Consider two investors.

Investor A takes US$1,000 and, in three years, turns it into US$3,000.

Investor B also takes US$1,000 and, over the same period, turns it into US$1,500.

On paper, Investor A wins easily. But what if I told you that Investor A got their return by buying lottery tickets, while Investor B bought high-quality blue-chip stocks?

Suddenly, the picture changes. Investor B is the better investor, not because they made more money, but because they took on much less risk to get their returns.

This is one of the central ideas in investing: what matters most is not just returns but risk-adjusted returns. If you miss this idea, you may make money in the short term through luck, but it usually doesn’t end well in the long run.

This brings us directly to the Econet delisting.

There are three paths available to you as a shareholder: take the exit offer, remain in the delisted Econet, or vote against the delisting entirely.

What presents the best risk-adjusted returns?

To work this out, we will do two things. First, we will calculate the baseline return for each option using numbers we can quantify. Then we will layer on the hidden risks and opportunities that the numbers alone don’t capture.

For all calculations, we will use the 30-day VWAP of US$0.20 as our reference cost price. The VWAP (Volume Weighted Average Price) is basically the real value Econet shares actually traded at before the talk of corporate actions and delisting started.

While everyone will have different cost bases, this is a comparable benchmark that helps to make an assessment.

Warning, this may get quite technical, but when you have potentially the most impactful corporate action in the country’s history, it’s worthwhile working through it.

Path 1: Take the Exit Offer

This is the simplest path to calculate, so let’s start here.

The headline offer is US$0.17 in cash plus US$0.33 in Econet InfraCo shares, a combined stated value of US$0.50.

Earlier, we laid out the data suggesting InfraCo is overvalued at the stated US$1 billion.

Last week, FBC Securities put out a note with their own range of scenarios — their most optimistic case came in at US$0.36 per InfraCo share and their worst case at US$0.18.

We will work with US$0.18 per share, as, from a risk management perspective, it makes sense to plan around the downside, and based on earlier analysis, this number looks more aligned to expectations.

Under this scenario, the real value of the exit offer looks like this:

Cash US$0.17 + InfraCo shares US$0.18 = real exit value US$0.35

What’s the return?

Starting from our 30-day VWAP of US$0.20, a real exit value of US$0.35 represents a 75% return.

What about tax?

This is where the exit offer has an advantage. Because of special rules for the VFEX and ZSE, the amount of tax to be incurred is negligible.

This means the after-tax exit offer return is still about 75%.

Path 2: Remain in the Delisted Econet

This path is more complex to evaluate.

The key mechanism here is the year-one share buyback. Econet has planned to repurchase up to 10% of outstanding shares after 12 months at a floor price of US$0.50.

So the question becomes: what is that US$0.50 actually worth in today’s money, after tax and after properly accounting for the risks involved?

Step 1: Tax

Once Econet delists, its shares become unlisted securities.

Under Zimbabwe’s Capital Gains Tax rules, unlisted shares attract a CGT rate of 20% applied to the capital gain.

Using our 30-day VWAP of US$0.20 as our assumed cost base:

Step 2: Discount rate

A dollar today is worth more than a dollar in a year’s time and so . We need a discount rate that reflects two things. First, the opportunity cost of waiting: if you put your money in a savings account today, you could earn about 12% per year in USD. We’re using the Omari savings account as a reference.

Second, the risk of holding an illiquid, unlisted security in Zimbabwe. To capture this, we can apply Zimbabwe’s country risk premium of 11.66%. PS, this is more subjective, but it was the best way to quantify the risks into a defendable number.

Combined discount rate: 23.66%

Discounting the after-tax proceeds:

US$0.44 ÷ 1.2366 = US$0.356

Step 3: Dividends

Econet paid a total of 1.76 US cents per share in dividends in FY2025 (year ended February 2025).

However, the business has experienced significant growth. Revenue for the most recent half-year increased by nearly 40%, with profits rising by over 300%.

That growth would normally mean a much bigger dividend.

However, Econet also needs to save cash to fund the exit offer and the year-one buyback, commitments that could require up to US$200 million in total.

Balancing these two factors, a dividend of approximately 2.00 US cents per share is a reasonable estimate for the coming year, an increase from 1.76c that reflects the earnings growth while acknowledging the cash preservation pressure.

It is also worth noting that Econet recently published an FAQ confirming they intend to continue paying dividends after delisting, which provides some additional comfort on this point.

Adding the present value of dividends (~US$0.018) to the discounted after-tax proceeds:

Total risk-adjusted present value of the remaining option: approximately US$0.374, call it US$0.37.

Return from the 30-day VWAP of US$0.20: approximately 85%.

On paper, this is better than the exit offer. But the gap is narrower than it first appears.

Path 3: Vote Against the Delisting

This is the hardest to quantify — and the highest variance of the three options.

The opportunity is that a “no” vote could force Econet back to the table with a better offer. The risk is equally straightforward: it might not. And unlike the other two paths, there is no defined timeline. There could be months of waiting before anything moves.

Rather than using a single reference price, we will model three scenarios explicitly and weight them by probability.

Scenario 1 — No new deal (25%): The board holds firm, no improved offer materialises, and the share price drifts back toward the US$0.20 VWAP — what the market priced Econet at before any of this began.

Scenario 2 — Minor renegotiation (70%): The most probable outcome (I explain more why in the next section using Dell Computers as a Case Study). The board makes slight adjustments, enough to get the vote over the line on a second attempt, but not enough to materially change the economics. Any revised offer would need to clear the exit offer’s risk-adjusted value of US$0.35 to be worth accepting, so we estimate this outcome at approximately US$0.37. This, however, would take a lot of time, which may see the real value of the US$0.37 being less.

Scenario 3 — Materially improved offer (5%): The board proposes a significantly better deal, say worth US$0.45. I would imagine this is the least likely scenario, as the board strongly believes that this is a fair offer and they probably could made strong arguments in this direction.

Probability-weighted outcome:

(25% × US$0.20) + (70% × US$0.37) + (5% × US$0.45) = ~US$0.33 which is about a 65% return.

Putting it all together

So, putting it all together, this is what the picture would look like based on our quantitative risk-adjusted returns.

However, even with that, there are more qualitative risks we need to consider.

The Hidden Risks and Opportunities That Are Hard To Quantify

The numbers above give you a framework. But there are some things the spreadsheet doesn’t capture.

Exit Offer: The Reinvestment Problem

When you accept the exit offer, you receive InfraCo shares that you can sell relatively quickly after the VFEX listing. From a liquidity perspective, the exit offer is far better than the other options.

But there is a practical question worth asking directly: if you take the cash, where does it go?

Last year, the VFEX had several obviously undervalued companies. Innscor, for example, when we first covered Innscor, it was trading below US$0.50 per share at the time.

Today it trades at approximately US$1.03 per share. This is the case with many stocks on the VFEX.

If you take the exit offer, you will be redeploying cash into a market that does not have many great options right now.

That is not a reason to stay in Econet by default, but it is worth factoring into the decision.

Remain Option: The Upside and The Real Risks

The upside: By remaining in the delisted Econet, you are staying invested in a fast-growing business with meaningful further upside. The fastest-growing part of the group is EcoCash. Mobile money revenues grew 102% last year, and the long-term potential of the business is substantial.

To put that in context: when the EcoCash business was separately listed on the ZSE as Cassava SmarTech, the market at its peak valued it at over US$1 billion on its own. That business is now back inside Econet, and at the current implied valuation, it is arguably not being fully credited for its growth trajectory.

As we have seen from Safaricom’s M-Pesa in Kenya, mobile money businesses in Africa can sustain strong growth for extended periods as financial inclusion deepens. This is a good business to be in.

The risk

The liquidity risk is not fully solved by the buy-back and the OTC market. In a listed company, you can sell your shares at any time, at a transparent market price, with settlement within days.

In the delisted Econet, you are dependent on the OTC platform, a board-approved buyer list, and ultimately the year-one buyback, which will only take 10% of all shares, meaning you may not be able to sell all your shares.

After delisting, transfers will no longer be automatic via the ZSE. Sellers will need to comply with CGT requirements directly and, where shares are sold to new investors, obtain board approval before the transfer is registered.

If your circumstances change and you need the money urgently, your options are limited. Even if you are happy to sell at a discount, you may not be able to.

Also, from a governance perspective, there is probably more risk in an unlisted public company than in a listed public company.

Vote No: The Opportunity and The Risks

The best case outcome for a minority shareholder is that the existing US$0.50 offer gets restructured into an all-cash deal.

That is theoretically possible, but genuinely unlikely.

The more probable outcome, if the vote fails, is a minor revision, an extra cent or two in cash, perhaps slightly improved OTC protections that do not materially change the economics.

The Dell Technologies take-private of 2013 illustrates what this dynamic looks like in practice.

Michael Dell owned just 16% of the company and wanted to take it private. He and Silver Lake offered US$13.65 per share. Carl Icahn, one of the most feared shareholder activists in Wall Street history, rejected the offer and launched a full-scale campaign of lawsuits, media pressure, and alternative proposals.

After months of fighting, minorities received US$13.88 in total cash, including a special dividend sweetener Dell added to get the deal over the line.

On the original offer of US$13.65, that is an improvement of less than 2%.

Dell changed the meeting date, adjusted the voting rules, and got his deal done. A 16% founder got his way despite facing one of the most feared activists in history, who, after months of fighting, moved the offer by less than 2%.

Now consider the Econet situation. The controlling shareholders have a larger ownership stake, the market is less mature, shareholder activism is limited, and there is no Carl Icahn (at least none I have heard of) waiting to pounce.

Also, the current offer, while imperfect, still compares well against peers in South Africa. For example, if we used our risk-adjusted returns and compare with similar offers in South Africa, the offer still seems competitive.

What are the realistic chances of forcing a meaningful improvement?

Also, in a failed vote scenario, the share price could fall, and that actually gives the controlling shareholders more leverage, not less. Without the announced deal anchoring the price, the share price could drift back toward pre-cautionary levels.

The controlling shareholders could then return with a revised offer that still represents a premium to the then-current price, but lower in absolute terms than the original US$0.50. Minorities who held out hoping for a better deal could end up accepting less than they would have received by simply taking the original offer.

Where’s the Money? What’s the Move?

The honest answer is that this is a closer call than the headline numbers suggest.

The exit offer delivers about 75% on a risk-adjusted basis with higher certainty, but leaves you redeploying cash into a market without many obvious opportunities right now.

The remain option delivers approximately 85% on a risk-adjusted basis, with exposure to a fast-growing business and real long-term upside from EcoCash. The higher return comes with a catch: illiquidity, governance risk, and the uncertainty that comes with holding an unlisted asset. The upside is higher, but so is the uncertainty.

Voting no is the most complex of the three. Our probability-weighted analysis puts it at approximately US$0.33 below the exit offer in expected value, and with significantly more variance around that number

The approach that produces the best risk-adjusted outcome across all three considerations is probably a hybrid — take the exit offer on a portion of your shares to lock in liquidity, while retaining the rest in the delisted Econet to participate in the year-one buyback and the long-term growth story.

The weighting between the two depends entirely on your liquidity needs. The less you need cash in the near term, the more you can afford to keep in the remain basket.

If you go this route, two things matter.

On the InfraCo shares, watch the market closely in the first week, the opening price will tell you a lot about whether holding or selling immediately is the right call.

On the remain side, be honest with yourself about your cash needs over the next 12 - 18 months, and consider whether there is an appetite among other remaining minorities to engage collectively with the board. Organised minorities are in a meaningfully stronger position than fragmented ones.

Worth noting: if liquidity matters more than returns for you (as it may for some individuals and institutions), then “voting no” could be an option for you, as it's the path that preserves the full liquidity that comes with being listed.

One final observation worth making: by my estimation, the delisted Econet will be one of the largest companies in Africa trading via OTC.

That scale trading on the OTC will inevitably create opportunities from market inefficiencies for the savvy trader. Who knows what manner of financial instruments and transactions can be created on the back of all these shares that may be illiquid?

This has been a complex topic that required a lot of judgment calls. Do your own research, and I would genuinely love to hear your views in the comments, especially if you think I have got something wrong.

There are genuine reasons to take each of the paths; it may end up coming down to preferences and circumstances.

As always, this is not financial advice — it’s analysis based on publicly available information for educational purposes. I may have missed things or got some things wrong, so please call it out in the comments. Do your own research and consult with a qualified adviser before making investment decisions.

This is a comprehensive deep dive covering:

• The exit offer: why InfraCo's $1 billion valuation appears inflated and may overstate the real exit value

• Remain in the delisted company: How this will work, and the benefits and pitfalls including the OTC mechanics, the year-one buyback

• How delisting creates a $1.5 billion valuation (up from $900m today)

• What major shareholders gain vs. the tradeoffs minorities face

• The “fair and reasonable” test: which path makes more sense for minority shareholders

Reading time: ~15 minutes

One of the fundamental ideas behind companies is that they exist to make the owners, also known as shareholders, money.

In private companies, the way this happens is that you put a management team in place, they sell things, make a profit and then pay a dividend to shareholders.

If the management team is not able to make profits, the board, which represents the shareholders, fires the management team and looks for a team that can.

In listed public companies, that is similar but also a bit different. While dividends are important, the primary way shareholders make money is through the share price of the company increasing.

Now, usually, if you make good profits, the share price does go up. However, sometimes it doesn’t, and sometimes this can happen for a long time.

Now, as the board, what do you do in this case? You can’t fire the management team because they made profits, they did a good job, so what’s your next move?

Well, one option is you can “fire the Stock Exchange” and delist the company, essentially saying this stock exchange isn’t working for us, let’s operate outside of it.

But another difference between a private company and a listed public company is that in a public company, there are many owners, and each owner may see things differently, and each owner is allowed to give their opinion.

One small shareholder may say, “You know what, as long as the profit is going in the right direction, I am happy to wait until later for the share price to go up. Also, I like being able to buy and sell my shares at any time. Let’s stay listed.”

Another major shareholder may say, “I have other plans and projects I need to do, and this low share price isn’t working for me. I would be better off having this company delisted, where I can make my own plans and execute strategies to increase the value myself.”

Now, as the Board, you need to find a way to be fair and reasonable to all shareholders, who are your bosses.

So what do you do? You set up a “family meeting” for shareholders and send out a plan, a “circular”, of what you are going to do.

This brings us to the circular that Econet published last week about their delisting.

The Exit Offer: Two Paths Forward

One of the important parts of managing different shareholder interests is providing options.

Usually, when a decision to delist is made, the major shareholders are already backing this idea. It wouldn’t have gained any traction otherwise.

The challenge is accommodating minority shareholders who may not like the idea of delisting.

Econet’s proposal offers two main paths for minorities:

Path 1: Take the Exit Offer - Get paid US$0.50 per share and walk away

Path 2: Stay in the delisted company - Remain a shareholder in the delisted company with certain protections

Let’s examine each path.

Path 1: The Exit Offer Structure

For shareholders who want out, Econet is offering US$0.50 per share. Currently, the share has been trading at about US$0.30 and in the recent past ranged at around US$0.17.

On paper, this looks attractive. A 67% premium to today’s prices and a 194% premium to prices before the board made their announcements. Not bad at all!

However, there is a catch. The offer isn’t all cash.

The Exit Offer Structure:

• US$0.17 in cash (34%)

• US$0.33 in Econet InfraCo shares (66%)

This complicates things a bit.

Most exit offers are all-cash deals. Here, two-thirds of your payment is in shares of a new company called Econet InfraCo that will be spun off from the existing Econet business.

The circular values this new company at US$1 billion.

This means the exit offer only makes sense if Econet InfraCo is really worth US$1 billion.

If InfraCo is actually worth significantly less, then your US$0.50 offer is worth significantly less. So let’s examine that valuation closely.

The InfraCo Valuation: How to Create a Billion-Dollar Company

There are two ways to create a billion-dollar company.

The first way is to start a business, solve customers’ problems, work for years to generate profits, and then finally you have a billion-dollar business.

The other way is to create it in Microsoft Excel!

The following could be a good example of that.

The two main methods used to value Econet InfraCo were:

1. A Discounted Cash Flow (DCF) analysis

2. A Comparable Multiples valuation

Let’s unpack this further.

The DCF Analysis: An Unusually Low WACC

A DCF is one of the most popular ways to value businesses. The concept is simple: you project future cash flows and discount them back to today using a rate that reflects the risks of the business.

One of the critical inputs in a DCF is the Weighted Average Cost of Capital (WACC). This represents the minimum return that investors and lenders expect given the company’s risk profile.

The lower the WACC you use, the higher the valuation you get.

In arriving at the US$1 billion value for Econet InfraCo, the independent financial adviser states in their report (Annexure B2, page 34):

“DCF Analysis: We stress-tested the 5-year projections, applying a Weighted Average Cost of Capital (’WACC’) of 11.79%”

I am sure this is not what happened, but I can’t help imagining an analyst running an Excel model for the valuation, continuing to adjust the WACC downwards until it gets to 11.79% and the cell labelled “valuation” says $1 billion.

A billion-dollar business created!

The main point here is that the WACC at 11.79% is incredibly low, which helps make the value incredibly high.

For context:

• MTN’s WACC: +/- 14%

• Delta Corporation’s WACC: 26.40% when evaluating its businesses (source annual report)

• Zimbabwe country risk premium: 11.66% (which is 7.76% above South Africa's 3.90%)

Could Econet InfraCo’s risk profile really be half that of Delta Corporation? Could it actually have a lower risk profile than MTN?

If we simply added Zimbabwe’s country risk premium to MTN’s WACC, we’d get roughly 22%.

What if the correct WACC is actually 20-25% instead of 11.79%?

At those rates, the DCF valuation would be dramatically lower. Half the US$1 billion figure or less.

The Comparable Multiples: The Wrong Peer Group?

The other valuation approach used for Econet InfraCo is called a Comparable Company valuation. With this technique, you find companies that are “comparable,” calculate their valuation multiples, and apply those to your business.

The circular uses an EV/EBITDA multiple approach, comparing InfraCo to Zimbabwe-listed property companies (page 16, Table 2):

• First Mutual Properties: 10.62x

• Mashonaland Holdings: 24.12x

• Tigere: 21.64x

• Revitus: 30.41x

• Weighted Average: 20x

Applying this 20x multiple to Econet InfraCo’s forecast FY2026 EBITDA of US$50.42 million yields the US$1.0 billion valuation.

But here’s the question: Is Econet InfraCo really a property company?

The circular itself describes InfraCo’s business model (Part D, pages 65-66), emphasising that the Tower Operations (TowerCo) division will be the “primary contributor” to operating leverage and incremental returns on invested capital.

By its own admission, Econet InfraCo is fundamentally a tower company, with the power business mainly existing to support the tower operations, and the property business being a smaller component.

So why use property company multiples?

I am sure this did not happen, but it’s interesting to imagine an analyst with an Excel model methodically including and excluding comparable companies from their peer set until the average landed right at 20x EV/EBITDA, and the cell that said “valuation” said $1 billion.

Another billion-dollar business created!

What Do Tower Companies Actually Trade At?

The circular mentions several global tower companies as peers: IHS Towers, Helios Towers, and American Tower Corporation. So what multiples do these companies actually trade at?

• IHS Towers: around 7-8x EV/EBITDA

• Helios Towers: around 9-10x EV/EBITDA

• American Tower Corporation: around 19-20x EV/EBITDA

The African companies (IHS and Helios) average around 9x EV/EBITDA. American Tower’s higher multiple reflects its US market operations, which isn’t particularly relevant for Zimbabwe-focused infrastructure.

So what happens if we use the 9x EV/EBITDA that actual African tower companies trade at?

Enterprise Value = 9x × US$50.42m ≈ US$454 million

This means your Econet InfraCo shares would be worth about US$0.15 per share (not US$0.33).

Add that to your US$0.17 cash, and your total exit offer would be worth US$0.32. Not too far from what the stock is trading at today.

A Reality Check: The Dividend Yield Test

Let’s try another angle. If InfraCo is really comparable to Tigere (the closest local comparable at 21.64x), shouldn’t it deliver similar returns to investors?

Here’s what Tigere currently does:

• Market cap: US$101 million

• Planned FY2026 dividend: around US$4 million

• Dividend yield: 3.96%

For InfraCo to match this yield at a US$1 billion valuation, it would need to pay dividends of US$40 million annually.

There’s a problem. InfraCo’s forecast for FY2026 profit is only US$26.82 million. Even if InfraCo paid out 100% of profits as dividends (which is unrealistic for a growing infrastructure company), it would only deliver a 2.68% yield. Well below Tigere’s 3.96%.

Let’s be more realistic. What if InfraCo followed an aggressive 60% payout policy?

• Dividends paid: US$26.82m × 60% = US$16.1 million

• Dividend yield at US$1bn valuation: 1.61%

Even if InfraCo doubled its profits next year and maintained a 60% payout:

• Dividends paid: US$53.6m × 60% = US$32.2 million

• Dividend yield: 3.22%

We’re still below Tigere’s current 3.96% yield. And remember, Tigere itself already trades at a premium.

Context: Econet InfraCo Beating Tech Giants?

Here’s a final reference point. A US$1 billion market cap would make Econet InfraCo the largest company on the VFEX.

In Zimbabwe, it would only be behind Delta Corporation, which generates 8x more revenue and 6x more profit than InfraCo is forecasting.

Let’s also look at the implied P/E ratio. The P/E ratio indicates market expectations for future profit growth. The higher the P/E, the bigger the growth expectations.

Based on the circular’s valuation, Econet InfraCo’s implied P/E ratio would be 37.3x (US$1bn ÷ US$26.82m profit).

Now let’s compare to some technology companies known for high growth expectations:

• Google: 22x

• Meta: 25x

• Microsoft: 33x

So Econet InfraCo, with a P/E ratio of 37x, would trade at a higher multiple than leading global technology firms.

And what’s InfraCo’s business model? Leasing towers and providing power to NetOne, Telecel, and Econet in Zimbabwe.

Why Does This Matter?

Here’s the critical issue: The exit offer is structured to give minorities a generous premium to walk away. But because 66% of that payment is in InfraCo shares that may be valued at roughly double what they might trade at, the real value of the exit offer is likely closer to US$0.30 than to US$0.50.

If Econet InfraCo lists on the VFEX and the valuation drops sharply, it may give the impression that minorities who accepted the exit offer were misled, even if that wasn’t the intention.

Path 2: Stay in the delisted Company

Whilst the exit offer has significant issues with InfraCo’s valuation, at least there is an alternative which has genuine benefits.

If you decide not to take the exit offer, the other option is to remain a shareholder in the delisted company, which will still remain a public company (still called Econet, but now consisting of the mobile network and EcoCash businesses after InfraCo is spun off).

One of the inherent challenges of being in a delisted company is that it’s really hard to sell your shares, and when you do find a buyer, it’s really hard to know what they’re worth.

The Board has proposed some mechanisms to try to address this problem.

The OTC Trading Platform

Post-delisting, shares will be traded via OTC (over-the-counter) markets, facilitated by the VFEX.

The way I like to think about the OTC market is that it will be like those really big buy-and-sell WhatsApp Groups, with the Board serving as the Group Admin.

Like any well-run WhatsApp group, this OTC platform comes with lots of rules, which I have simplified below:

• The board sets the rules and can change them at any time

• The board appoints the brokers who handle all trades

• The board sets a floor price (US$0.50) and can reject any trade below it

• The board must approve all new buyers and can say no for any reason

• Rejections are final, no appeals, “no legitimate expectation” of approval

• Silence means no. If you don’t hear back in 7 days, you’re rejected

The reality: It will be harder to trade your shares.

Before, you could be pretty certain that if you wanted to sell your shares, you would have the money in your bank account within a week. Now? Who knows.

The Share Buyback Commitment

To help ease some of the liquidity concerns, the board has made an important commitment: Econet will repurchase 10% of outstanding shares after one year for US$0.50 per share, which has also been set as the floor price for Econet shares to trade on the OTC platform.

This is meaningful. It means if you vote for the delisting but don’t take the exit offer, you should be able to sell your shares (or at least some portion of them) back to Econet in a year or so for US$0.50 per share.

That represents a decent gain considering today’s share price of around US$0.30.

The Hidden Benefit: Creating a $1.5 Billion Valuation

There’s something else happening here that’s worth understanding.

By committing to buy back shares at $0.50 and setting that as the OTC floor price, Econet is essentially establishing a minimum valuation of $1.5 billion for itself as a company.

This seems like a pretty smart way to unlock paper value with a bit of financial gymnastics.

Here’s the maths:

• Shares outstanding: ~3 billion

• Floor price: $0.50

• Implied market cap: $1.5 billion

Now, you might say, “Wait, just because Econet says shares are worth $0.50 doesn’t make them worth $0.50.”

And you’d be right, except unlike with Econet Infraco, this valuation is actually quite defensible based on fundamentals:

• Expected FY2026 EBITDA: ~$400 million (estimated from half-year results)

• Valuation $1.5 Billion

• Implied EV/EBITDA: 3.75x

• Comparable EV/EBITDA ratios: MTN 5x, Vodacom 6x

Valuation is an art, but the implied EV/EBITDA of 3.75x is quite reasonable or at least reasonable enough to persuade people that the company’s valuation is $1.5 billion, especially if some people start buying and selling the stock on the OTC at that valuation.

Econet currently trades at around a $900 million market cap on the ZSE. By delisting and establishing the $0.50 floor, the company’s implied valuation jumps from $900 million to $1.5 billion.

This solves the original problem that triggered the delisting idea, which we talked about at the beginning: “My profits went up, but my share price didn’t.”

Now the company can reasonably claim a $1.5 billion valuation.

Why could this matter for shareholders?

If Econet shares represent a significant portion of your personal or institutional balance sheet, this valuation uplift is extremely valuable:

1. Strategic flexibility: Higher stated valuations make it easier to raise capital for other ventures or use shares as currency in deals.

2. Net worth statements: This uplift can also represent a material increase in reported net worth.

3. Other: I am sure there are a lot of things you can do that I am not smart enough to know of!

I can see how these could be good reasons to push for a delisting.

Creating a higher, more stable valuation that shareholders can use for their own strategic purposes.

The catch for minorities?

The repurchase is good, but it also depends on whether Econet has the cash to fund these commitments. At least based on the most recent half-year results, Econet is on track to have about $150m in free cash flows, which seems quite healthy.

So Is the Delisting a Good Deal?

Let’s see who benefits.

If You Are a Major Shareholder: Definitely Yes

Major shareholders get:

• Ability to execute long-term strategies without the additional scrutiny from the public

• Elimination of market volatility affecting their net worth

• Greater strategic flexibility for corporate actions

• A credible $1.5 billion valuation they can use for balance sheet purposes

• Increased relative ownership of a fast-growing business (EcoCash revenues grew 102% last year, and as we’ve seen with companies like Safaricom, mobile payments can sustain significant growth for extended periods)

By the way, the fact that this is a good deal for major shareholders isn’t a bad thing.

You should always assume that if a major shareholder initiates or backs any corporate action, it’s good for them.

That’s just rational behaviour.

The question one should ask as a minority is whether minorities also get a fair deal.

If You Are a Minority Shareholder: It Depends

Minorities face a more complex decision with tradeoffs depending on which path they choose:

Path 1: Take the Exit Offer

Minorities who take the exit get:

• Immediate USD liquidity (US$0.17 cash per share, valuable if you originally bought shares in ZWL)

• 192% premium to pre-announcement prices (shares traded around US$0.17 before the circular), about 70% premium to current prices (shares currently trading around US$0.30). There are really good returns.

• No ongoing illiquidity concerns

• InfraCo shares that could be quickly sold after listing

But:

• Headline value of US$0.50 likely overstates the real value as InfraCo shares appear overvalued

Path 2: Stay in the Delisted Company

Minorities who stay in the company get:

• Potential to sell at US$0.50 in year-one buyback (about 67% gain from current prices). 192% premium to pre-announcement prices if realised at US$0.50. These are also really good returns.

• Increased relative ownership of a fast-growing business (EcoCash revenues grew 102% last year, and as we’ve seen with companies like Safaricom, mobile payments can sustain significant growth for extended periods)

• Ability to participate in Econet’s long-term value creation without market volatility

But:

• Significant illiquidity (harder to sell your shares)

The Fundamental Question: Is This “Fair and Reasonable”?

All things considered, the exit offer’s headline value of $0.50 looks attractive on paper, but two-thirds of that is in InfraCo shares that seem overvalued. This makes it difficult to pass the test based on the current structure. Had the valuation been more defendable I think one could have called it fair.

As things stand, the delisting option looks more like “fair and reasonable” in my view.

The $0.50 buyback commitment (backed by Econet’s strong cash flow generation) provides a clearer path to realising that value, even accounting for the illiquidity and allocation uncertainties.

Ultimately, minorities have a genuine choice here. Take the exit (with InfraCo risk), stay in the company, which will be delisted (with liquidity risk), or split between both options.

Different shareholders will reasonably weigh these tradeoffs differently based on their own circumstances and risk tolerance.

Whether the overall transaction passes the “fair and reasonable” test may depend on where you stand and what your situation is. And that’s a judgment call each shareholder will need to make for themselves.

Where’s the Money? What’s the Move?

Ordinarily, I always end with this section where I propose some ideas of what moves you can make to make money from the situation.

Today, I think it’s wise to wait and see what happens next, as this is a complex transaction with significant implications for all Econet shareholders.

Despite this being a long, deep dive, there are still issues I was not able to touch on. If you have a significant holding in Econet and would like additional insights sooner, please reach out.

Thanks for reading, and forward this to someone who may need to see this! You could help them make an important decision.

PS: I am working with publicly available information in my analysis, and so it’s possible that there are some things that may be missing or interpreted incorrectly. I also could be wrong! This is not financial advice but intended for educational and informational purposes. Do your own research and consult with qualified advisers before making investment decisions.

Over the last few years, formal retail has been associated with struggling businesses.

Metro Peech & Browne and Truworths entered corporate rescue and were effectively sold for $1. Choppies, the Botswana-based retailer, exited the market. OK, Zimbabwe is in distress.

So it’s easy to assume that formal retail is generally a bad business to be in.

However, Axia’s financials prove that it’s not necessarily the case and also serve as a useful case study when it comes to identifying market opportunities.

Let’s unpack.

About Axia

Axia is another “Excor” company—a business that used to be part of the Innscor Group.

It has two main segments: Speciality Retail, made up of TV Sales & Home and Transerv, and Distribution, made up of Distribution Group Africa (DGA), which distributes several brands.

The Numbers

Axia posted solid results for the financial year ended 2025. Revenue for TV Sales & Home was up 10%, and Transerv showed a strong 18% growth.

The drop in revenue in the DGA businesses was not operational but due to an accounting change brought about by restructuring one of its businesses. For DGA Zimbabwe, when you adjust for these accounting changes, revenue actually grew 44%, which is really strong.

Another topic to explore for another day is why distributors like DGA are still performing while formal retailers selling the same goods have been struggling.

What also improved significantly was the profitability, with EBITDA up 24%.

This makes you wonder: if formal retail is struggling, why did Axia have a strong year?.

Not All Retail is the Same

To understand why Axia is thriving while other formal retailers are struggling, we need to make a simple distinction.

There are two types of retailers: general and speciality.

General retailers sell everyday goods that are standard and well understood by consumers.

Speciality retailers sell products that often need expertise, guidance, and trust, such as car parts, solar systems, and hardware.

Think about it this way: how many questions do customers ask before buying?

For example, when you go buy a Sunlight Dishwashing Liquid at the supermarket, you generally don’t stop a shop attendant and ask several questions about how well it does with plates or spoons or how many washes you can get out of a bottle.

Perhaps in extreme circumstances you may have some questions, but once answered, the next time you most likely just pick up the bottle and put it into your trolley.

Compare this with when you are looking for a spare part for your car or buying a solar system. More likely than not, you will probably have multiple questions and may not even make a purchase decision on the day.

Also the degree of knowlege that the shop attendant demonstrates will likely impact what you buy.

If you ask about how reliable a solar system is, and they say “we don’t really know”. You probably wouldn’t be too keen to make a purchase, and the opposite is likely true.

This distinction is important because when it comes to specialised goods, it is harder for informal retail to disrupt.

For sure, people will still buy car parts from informal traders. However, there is a large segment that will prefer the peace of mind and support during the sales process.

This specialisation is where informal trade is not as strong. Fundamentally, informal retailers’ biggest advantage is pricing; not much is invested in anything else.

As a result, companies that are operating in the speciality retail space have a better chance of keeping customers away from informal retail.

It is worth noting that of late especially with the stability of the ZiG, formal retailers such as Meikles (TM Pick n Pay) are now seeing some signs of growth and recovery.

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Where’s the Money? What’s the Move?

In 2025, Axia went under the radar; its stock price only increased by 14% while the rest of the VFEX was up over 60%. Considering the fairly strong performance, there was a case to be made that Axia could have been an attractive investment option.

However, since the beginning of the year, Axia’s stock price has exploded such that between the time when I first started thinking about this article (last week) and today, the share price is up 40%.

While there may be potential for it to rise further, typically the best investments are those where there is a margin of safety.

This basically means there should be a gap between what you think the value of the share is and what price you are paying for it today. It’s basically a buffer, like when you tell your unreliable friend the party starts at 1:30 pm when the real time is 2:00 pm.

With Axia’s 40% increase, that margin of safety has been eaten away. However, stock prices go up and down, so there may be another opportunity to invest in the future.

What the distinction between general and speciality retailers also presents is a strategic option as well. One of the ways to beat out informal retail is if you can specialise in an element of your business, even as a general retailer.

A good example, which we covered last year, was on Food Lovers’ Greendale. By becoming specialists in fresh food, they have been able to avoid disruption from informal retail.

Can other general retailers do likewise?

What do you think?

Thanks for reading. If you found this helpful, please share it with someone in your network and subscribe to the newsletter if you haven’t already done so.

• A new Simbisa Brands-backed REIT listing on the VFEX

• What a Stronger Rand Means for Your Supply Chain and Pricing

• What Trump’s Actions in Nigeria Could Signal for Zimbabwe

Pfuma REIT listing on the VFEX

There are two things Zimbabweans love as inflation hedges: the USD and property.

Real Estate Investment Trusts (REITs) are the stock market version of those two things, and perhaps explain why they are becoming increasingly popular.

With a REIT, you own a piece of property that generates USD income.

The Pfuma REIT offering is live and will be closing on the 23rd of January.

This is an interesting REIT. Part of Pfuma’s pitch is that it is backed by Simbisa Brands, which will also be a part owner.

As a result, the REIT is positioned to have a high-quality anchor tenant pulling from Simbisa’s portfolio, including Pizza Inn, Chicken Inn and several other international brands.

This is also a smart move by Simbisa. “Selling chicken” generates much better returns than developing property, and so essentially “outsourcing” the property development increases their returns on invested capital.

What Pfuma promises investors is a steady and reliable USD return of 7% - 8% on a gross basis or 5.5% - 6.5% net.

This week, I will have the opportunity to discuss more about the Pfuma REIT on a Webinar with Tinashe Kembo, from Arctic Blue Asset Management, which will be managing the REIT.

The Webinar will be on Thursday, 15 January, from 10 a.m. to 11 a.m. Click here to register for free.

Register Here

What a Stronger Rand Means for Your Supply Chain and Pricing

The rand has had a very strong last 12 months, appreciating 16% against the USD (with the USD/ZAR depreciating by 14%).

This means if you imported goods from South Africa and used $1,000 last year, this year you would need $1,160 for the same items.

This has a big impact on many businesses, as about 35% of all imports into Zimbabwe are from South Africa.

This also means that for local producers in Zimbabwe, your goods may be more price-competitive compared to South African imports at present, which could be a significant strategic advantage for gaining market share in the short term.

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What Trump’s Actions in Nigeria Could Signal for Zimbabwe

President Trump warned of more strikes in Nigeria this week. The BBC reports:

In a wide-ranging interview with the New York Times, Trump was asked whether the Christmas Day strikes in Nigeria’s northern Sokoto state, targeting Islamist militants, were part of a broader military campaign.

“I’d love to make it a one-time strike. But if they continue to kill Christians it will be a many-time strike,” he said.

On paper, the reasons sound commendable. But under Trump, US foreign policy rarely operates on principle alone; it’s America First, or lobbying second.

With Venezuela for example, it was clearly about oil and “America First”.

But Nigeria’s case is harder to understand. There’s no obvious direct benefit to the US.

So if it’s not America First, perhaps it’s lobbying that prompted this action. Trump drew 80% of the evangelical vote, and so to be seen as protecting Christians abroad resonates with that base.

What matters for Zimbabwe is the pattern this reveals: Trump can be lobbied into action, even on contested claims. Afriforum and others convinced him of a “white genocide” in South Africa, something widely refuted even by white South Africans. If he’ll act on that, what else might he accept?

This presents an opening for Zimbabwe. Though blanket sanctions ended in 2024, targeted designations and risk-averse compliance practices still restrict firms’ and indivisuals access to financial systems, investments and opportunities.

Trump’s willingness to override and change longstanding policies may be the best opportunity in years to push for the removal of these residual constraints.

What do you think?

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For Zimbabwe, several taxes have kicked into effect, including the higher VAT rate of 15.5% and the new Digital Services Tax, 15% withholding tax on payments for services from foreign digital platforms (streaming, apps, internet, etc.).

The general sentiment seems to be that Zimbabweans are overtaxed.

What’s interesting, however, is that Zimbabwe actually collects very little tax revenue relative to the size of the economy.

The chart below shows tax revenue as a percentage of GDP—the lower the number, the less tax revenue collected relative to economic output.

As you can see, Zimbabwe sits well below its African peers. In fact, the African Development Bank has long-term targets of 27.2% for African countries.

In other words, Zimbabwe would need to increase its tax collection by about four times to reach that target.

By these measures, one could interpret that Zimbabwe is actually “undertaxed.”

So why does this feel like the complete opposite for most taxpayers?

The Informal Economy Problem

To understand this paradox, we need to look at the size of Zimbabwe’s informal economy.

When we layer the percentage of the economy that is informal alongside tax collection rates, the issue becomes clear: the informal economy is the problem.

As shown below, Zimbabwe has the highest level of economic informalisation at 64.1% and the lowest tax revenue-to-GDP ratio at 7.2%.

The relationship is clear across all the other countries as well: the more informal your economy, the lower your relative tax collection.

This makes sense; the informal sector generally doesn’t pay much tax and is incredibly hard to monitor.

As I explained in detail in an earlier article the effect of this is that more taxes are levied on those already paying tax.

This is why you might feel overtaxed, even though at the country level the overall tax collection is actually low.

Current taxpayers end up covering the shortfall caused by the informal economy, which pays relatively little tax compared to its size.

How to Solve This?

The data indicates that finding ways to formalise more businesses is key.

Currently, for informal traders, formalisation means more admin and costs without any perceived benefit.

To encouratage formalisartion International experience shows two promising approaches.

Firstly, radical simplification of tax administration.

Mexico’s RIF programme provided free web applications for accounting and invoicing, processing over 19 million operations, whilst the integration of Kenya’s iTax system with mobile money platforms shifted most tax filing and payment processes online, substantially lowering reliance on physical tax office visits.

Second, linking taxation to tangible benefits.

Brazil’s SIMPLES program combined tax payments with social security contributions, significantly boosting formalisation. By turning part of a tax into a pension contribution, Brazil made the shift to formal business more rewarding.

Pension benefits might not appeal much in Zimbabwe because of hyperinflation-induced trauma. Instead, it could be a “unified license”—a single, low-cost flat tax covering all permits and licenses needed for trading.

This could reduce admin for traders and the constant harassment and monitoring that often leads to the “unofficial tax” of bribes that don’t reach the goverment.

That said solving tax issues is very complex and so some of the above although well intended may not work.

What is clear that without addressing the issue, current taxpayers will end up paying more taxes on average, which will eventually become unsustainable.

What do you think should happen with taxes?

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Zimbabwe’s second-largest listed company just announced it’s leaving the Zimbabwe Stock Exchange.

Econet Wireless plans to voluntarily delist from the Zimbabwe Stock Exchange (ZSE) while carving out its infrastructure assets (real estate, towers, and power) into a new entity that will list on the USD-based Victoria Falls Stock Exchange.

The move will wipe 20% off the ZSE’s market cap and force minority shareholders to make a decision: accept an exit offer or hold shares in an unlisted company with limited liquidity.

Below, we unpack whether this strategy makes sense and who wins and loses.

Econet is “Grossly Undervalued”

The events leading up to the delisting began with a bold statement from the Econet Board: the company is “grossly undervalued”. In their announcement, Econet references their low EV/EBITDA ratio compared to African peers.

The board’s position makes sense, as there is a lot of data you can use to conclude that Econet is undervalued.

Another data point you could use is the P/E Ratio.

Despite the blockbuster half-year results, Econet trades at a PE ratio of around 4, compared to MTN at 12, Vodacom at 14, and Kenya’s Safaricom at 14.

Relative to its African peers, Econet does look undervalued.

Why Is the Stock Undervalued?

Stocks typically trade at a discount for several reasons.

One reason is complexity—when investors struggle to understand a business, they apply a discount.

While most people understand Econet’s business model, its ZiG financial statements can be incredibly hard to understand.

It’s still somewhat puzzling why Econet hasn’t switched to USD reporting or at least revealed what percentage of its revenue is in USD, especially since this has become standard practice.

Of the seven largest listed companies, Econet is the only one that didn't report in USD or provide additional context on its performance in USD terms.

In their 2025 financial statements, the directors offered some explanation for reporting in ZiG, pointing to various factors such as economic conditions and regulatory requirements.

However, all the reasons, even if valid, led to an adverse audit opinion on ZiG financials, making it much harder to interpret the company’s performance.

Despite the above, this is probably not the driver of undervaluation.

How Markets Price Stocks

The hard reality of stock markets is that share prices rise not because a stock is undervalued, but because enough people are willing to buy it at increasingly higher prices.

While strong performance matters, buyers and sellers determine the stock price.

Unfortunately, the ZSE lacks this critical mass of buyers and liquidity.

For example, the total value of Econet shares traded in November was ZiG 31 million, roughly equivalent to about US$1 million.

Safaricom’s current daily average is US$1.8 million. In other words, there’s almost twice the activity in Safaricom’s shares in a single day as Econet had over an entire month.

Since the initial corporate action announcement, there has been a spike in trading volumes, but it also highlights the conditions leading up to the decision.

Without sufficient buyers and liquidity, even fundamentally strong companies can trade at steep discounts.

The Zimbabwe Discount

The other major factor impacting valuations is the Zimbabwe discount itself.

Zimbabwe carries a significantly higher country risk premium than most regional peers, with estimates often in the 7–9% range, meaning investors demand a materially higher return to compensate for their view of sovereign and structural risk.

By comparison, South Africa’s country risk premium is typically estimated at around 4%.

These are systemic, market-wide constraints that affect valuations across all ZSE-listed companies, not just Econet.

Put it all together, and you can see why a company could end up being undervalued.

Does Unbundling Make Sense?

To unlock shareholder value, Econet plans to separate its infrastructure assets—real estate, towers, and power infrastructure—into a separate entity.

This strategy generally makes sense.

Think of it like a butchery: selling an entire cow might fetch $500, but when the cow is divided into different cuts, the total value of all the meat sold typically exceeds $500.

This happens because a lot of people don’t want a whole cow—they want specific cuts like sirloin, rump, or ox tail.

When you “slice up” companies, you often attract more buyers looking for something specific, which should drive share prices higher.

In principle, this move makes sense and is what Econet is trying to do.

However, there’s an additional step in Econet’s proposal that’s harder to understand.

Does Delisting Unlock Value for (All) Shareholders?

The current plan calls for Econet to delist completely from the ZSE while listing only the Infrastructure Business separately on the VFEX.

This is unusual.

While there are many examples of listed companies carving out their tower or infrastructure businesses, I can’t think of an instance where the parent company was then delisted.

It also seems like it could decrease the impact of the carve-out.

As mentioned earlier, when businesses are well understood, they typically command higher valuations.

Consider this: the largest customer of the infrastructure business will be Econet’s existing operations, made up of the Mobile Network and Ecocash—let’s call this Econet Services.

To gauge the risks in the InfraCo business, wouldn’t investors need insight into how well Econet Services is performing?

Private companies don’t have to share as much information and aren’t subject to the same scrutiny or oversight as public companies.

This can make the infrastructure business more difficult to understand, which in turn could lead to a lower valuation.

It’s like buying an investment property that already has a 20-year lease with a tenant. If you were unable to get any information about the financial situation of the tenant, wouldn’t that make the property less attractive to buy?

Minorities Have to Walk Away

The delisting could also lock away value for minority shareholders.

As a minority shareholder, you’ll face two options.

The first is holding onto your shares in the newly delisted Econet Services business.

The challenge here is that once private, it becomes extremely difficult to trade your shares and even harder to determine their fair value.

It’s already challenging being a minority investor in a public company—imagine how much harder it becomes in a private company where the major shareholder will likely be even more dominant.

The second option is accepting the exit offer, which will be a mix of cash and shares in the new Econet InfraCo. This presents several challenges.

There’s a broad consensus that Econet is undervalued, especially given its recent results. So why would you want to exit when everyone agrees the price is low?

To be fair, the exit offer terms haven’t been fully disclosed as yet—my guess is there will be a premium paid.

So perhaps it will adequately compensate for the sale. This will be interesting to watch.

The final issue for minorities is the change in investment exposure.

Previously, owning Econet shares gave you exposure to both infrastructure assets and the core business—Econet’s mobile network and EcoCash.

These are the high-growth business areas of Econet. For example, M-Pesa is over 15 years old but is still growing revenue by 15% per year.

In addition, in the latest results, EcoCash was the fastest-growing revenue line with over 102% growth based on the inflation-adjusted accounts.

Now you’ll only be able to own Econet’s infrastructure business, which likely will be more like owning a REIT than a fast-growing business.

If Econet Services remained listed, you would be in a much better position to choose what business you wanted to bet on.

The Big Loser: The Ecosystem

The delisting has significant implications for the broader ecosystem.

Econet is the second-largest listed company in the country and had one of the most famous IPOs in corporate history.

The complete delisting from the ZSE would result in a 20% drop in market capitalisation and remove one of the few high-quality stocks that the average investor could invest in.

It would also send a negative signal about the exchange itself. If the biggest companies are calling it quits, what about the others?

Where’s the Money, What’s the Move?

This situation does pose some questions about whether the Zimbabwe Stock Exchange needs to make some changes. One idea would be to allow people to buy ZSE-listed stocks in USD.

This may not make much of a difference, but it could potentially improve some liquidity, as some estimates suggest that 80% of the economy is transacting in USD.

For most minority investors, the current phase is about information gathering and preparation for what happens next. For example, how will the exit offer be valued?

For Econet, I still believe a complete delisting from the ZSE is worth reconsidering, as it’s not clear how all shareholders would benefit.

At the moment, Econet Global, the major shareholder, appears to be in the strongest position under the current structure, unless a compelling exit offer is made to the minorities.

As for Econet Infraco, that business is already moving full speed ahead with a management team already in place and a website with all the information about the company.

Naturally I am working with public infomation and so there could be other driving factors at play that I may have missed.

What do you think?

I have many more thoughts to add, but for now, I’ll end here and leave it for follow-up posts, which will likely be necessary as this story develops.

Thanks for reading; if you found this helpful, please forward this article to someone in your network and subscribe to the newsletter if you have not already done so.

PS: I am working with public information so I could be missing something or simply wrong in my analysis.

The chart above shows the banking sector split by income, comparing 30 June 2024 and 2025.

What first jumps out is that banking income is no longer skewed by massive revaluations which made up over half of all income - with revaluations of investment property contributing 25.2% and revaluation of foreign currency assets contributing 28%.

In June 2025, the contribution of revaluations if any is minimal such that it would fall into the “other” category.

Why did revaluation gains disappear?

Two things are happening at once.

First, the accounting reality. With the ZiG more stable banks no longer need to constantly revalue assets upwards to keep pace with the exchange rate.

But the second factor is more telling: USD property prices are likely levelling off.

If real estate values were increasing in USD terms, we would still see healthy revaluation gains, especially since banks have so much investment property.

The fact that this line item has essentially disappeared suggests the property values are reaching their peak.

How Revenue Actually Looks

Now, to compare the two years below, we have removed the impact of the revaluations in 2024 to have a more like-for-like comparison. This is the adjusted view.

The biggest category is still Fees & Commissions, making up 45% of all income in 2025 with net interest income from loans, advances and leases (core lending) at 32%.

Banks still make money primarily from charges rather than interest income.

In South Africa, for example, net interest income is typically around the 60% range; Standard Bank of South Africa was at 59% and Nedbank was at 56%.

Part of this is to do with policy conditions that make lending, especially in ZiG, challenging.

However, making money from charges is actually a much easier way to generate income as a bank, and so there may be a temptation to continue that way even if the environment changes.

With lending, there is a risk you won’t get the money back. You have to monitor the loan book, perform credit assessments, etc.

With charges, it’s guaranteed, recurring, and low-risk income.

The New Tax on Withdrawals

It will be interesting to see if the new additional taxes will have any impact on banking margins.

Based on the new regulations, if you have already withdrawn over $10,000 in USD cash in a month, and you want to make another withdrawal, you will be taxed 3%.

Then add another 2.5% which is the typical fee banks charge. So, taking out another $10,000 will cost a company $550. Ouch!

Considering how high this is, will banks eat up part of the tax and reduce their fees on cash withdrawals?

When the Sugar Tax was introduced, which increased the cost of most soft drinks, most players like Delta and Innscor, etc, ate up some of that cost rather than pass it all to the customer.

Will banks do the same? If they don’t but manage to maintain business, then it would further prove that it’s much easier to make money with charges than lending!

Naturally, the most likely response from customers will be never to let your money get into the bank. I suspect the amount of cash outside the banking sector will only increase.

I wouldn’t be surprised if there is more money in safety deposit boxes than in actual bank accounts.

The FX Trading Income Drop

The final interesting point is on the decrease in FX Trading income from 28% to about 9%. This is a big swing and one which I honestly am still trying to get my head around.

Could this indicate that more individuals and companies are finding ways to settle foreign currency obligations outside of traditional banking platforms?

Or is this just lower volumes of trades since ZiG is harder to get a hold of, so people are settling with their USD balances? Or could it just be the removal of the 5% trading margin for the interbank market? Is it the move to a Willing Buyer, Willing Seller market?

What could it be?

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Where’s the Money, Where’s the Move?

As long as fees primarily drive banking, there will always be excess demand for lending. This is still a massive untapped opportunity.

When you also consider that gold mining, for example, is doing so well and that it’s also predominantly a cash-based sector, the amount of money outside the banking sector is massive.

A lot of these individuals also have lending needs, but are not plugged into banking.

Linked to the cash-based economy, if you are in the safe deposit or cash storage business, there is no better time to be alive.

Honestly, there is a case to be made for building an entire operation around this.

Zimbabweans have been paranoid about banking due to Hyperinflation-Induced Trauma (more about that here). The likelihood is that this new tax will make people avoid banking even more.

What do you think?

Thanks for reading; if you found this helpful, please forward this article to someone in your network and subscribe to the newsletter if you have not already done so.

PS: I am working with public information so I could be missing something or simply wrong in my analysis.

• OK Zimbabwe’s Store Closures

• G20 Summit: What It Means for Africa — and Why Debt Still Dominates

Let’s unpack.

OK Zimbabwe Closes More Stores – But Is It Enough?

OK Zimbabwe, once the country’s largest retailer, continues to struggle. Last week’s trading update confirmed that “revenue generation remains below break-even levels.”

The update revealed that OK has closed 11 stores deemed “no longer viable,” reducing its footprint to 62 stores. While these closures make sense, the numbers suggest OK may need to close 20+ additional stores to manage its working capital requirements effectively.

The Working Capital Challenge

Back in 2015, when OK was healthy, its net working capital (current assets less current liabilities) stood at $22m.

As at 31 March 2025—the most recent figures available—that position had deteriorated to negative $19m, creating a $41m gap to return to 2015 levels.

OK raised $20m through a rights issue but has struggled to secure the planned $10.5m from property sales. With only the $20m in hand, they have just half of the $41m needed to restore 2015 working capital levels.

Here’s the problem: in 2015, OK operated 61 stores. Today, even after recent closures, it has 62 stores—essentially the same footprint but with half the working capital and significantly weaker credit terms from suppliers.

Given these dynamics, sustaining 62 stores appears increasingly challenging. The only realistic option may be cutting another 20+ locations. It’s better to operate 30 well-stocked stores than 60 stores with limited inventory.

This aligns with our analysis during the rights issue, which showed that the best path to favourable returns was to become smaller but more profitable (the numbers in blue in the table. For a more detailed deep dive, you can read the earlier article here)

What Delta’s Results Tell Us

Another revealing data point: Delta generated 92% of its revenue in USD over the last half year. Since large formal chains still conduct significant trading in ZiG, Delta’s results indirectly suggest that major retail chains like OK are no longer as important a sales channel.

OK was once a big draw for suppliers—a must-have relationship. That appears to have changed.

G20 Summit: What It Means for Africa — and Why Debt Still Dominates

This past weekend’s G20 summit in South Africa marked a historic first: Africa hosting the world’s premier economic forum.

The G20 comprises 19 countries plus the European Union and African Union, representing 85% of global GDP, 75% of world trade, and two-thirds of humanity.

Think of it as the board of directors for the global economy—setting direction on interest rates, tax policy, climate finance, and banking regulations.

Africa’s Critical Challenge: Debt

In my view, the most significant topic for Africa was still the debt-dominated discussions.

Across the continent, governments are spending huge portions of revenue simply servicing old loans, creating a hidden tax that strangles entire economies and hits businesses hardest.

Here’s what high debt service means on the ground:

• Taxes rise relentlessly — VAT, fuel levies, PAYE, corporate rates all climb to meet obligations

• Credit ratings fall, making new borrowing even more expensive, worsening the trap

• Chronic deficits emerge — governments borrow again just to repay old debt

This vicious cycle is trapping economies across the continent.

Kenya’s controversial 2024 Finance Bill—which triggered deadly protests—was about raising revenue, which was also in large part for payments.

As of May 2025, Kenya spends 67.1% of its revenue on debt service. When two-thirds of income goes to paying for old loans, governments either raise taxes, borrow more, or cut services.

Zimbabwe’s crisis is even graver. External debt service equals 119.5% of government revenue—meaning even using all revenue wouldn’t cover what’s owed. Zimbabwe’s debt also includes areas, and the $3.25 billion owed to former commercial farmers for farm improvements.

Who’s Responsible?

African governments share responsibility through off-budget borrowing, unsustainable subsidies, weak fiscal discipline, and political spending.

But systemic shocks matter too: COVID devastated tourism and exports, rising global rates increased borrowing costs, and geopolitical tensions complicated debt negotiations. Crucially, countries shouldn’t pay indefinitely for past administrations’ mistakes.

Part of the reason why capital is so expensive is because of this debt overhang that hits Africa the hardest.

Progress on debt restructuring remains slow because real solutions require IMF consensus, and the US, the notable absentee from the summit, has veto power.

It also doesn't help that China and Western creditors disagree on restructuring terms, and many African governments lack fiscal transparency.

The symbolism of this weekend’s summit was powerful, but structural debt problems aren’t going away.

Still, visibility matters. The summit brought Africa closer to the centre of global economic conversations than ever before.

It also allowed Cyril Ramaphosa to flex a bit at the US, or as the white house press secretary put it, run his mouth:

“I saw the South African president running his mouth a little bit against the United States and the president of the United States earlier today, and that language is not appreciated by the president or his team.”- White House press secretary, Karoline Leavitt

I can imagine Cyril saying to himself, “Trump, keep your USA, and I’ll keep my South Africa”.

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Last week, the Big 3—Delta, Econet, and Innscor—all posted very strong results that showed big increases in revenue and volumes.

Delta, the beverage maker, started the run, and it led to quite a lot of discussion on what the revenue growth meant, especially as it relates to inflation.

This is what you need to understand as you digest the results in the week ahead.

Did Delta Really Grow? The Inflation Benchmark Debate

Delta grew revenue by 32%, or 21% when adjusted for the impact of the recent acquisition of Schweppes (which was previously an associate company).

The core of the discussion centred around whether this 21% growth was meaningful or not, because it didn’t pass the blended inflation rate of 27%.

If the answer sounds obvious to you, then it’s even more important to read this, because the level of confusion around this topic is much more than you think.

The Basic Principle

The basic idea is that if a company’s revenue increases 5% but inflation is 10%, then in reality, the company didn’t really grow, because its revenue is now worth less than before due to inflation.

The above is generally accepted.

The issue, however, in Zimbabwe is how inflation is calculated and how it’s applied where blended inflation is made use of.

How Blended Inflation Works

Because of the multi-currency regime with ZiG and USD, Zimbabwe currently reports both USD inflation, which is 13%, and ZiG inflation, which is 83% as of September.

To get to one inflation number, blended inflation is then used.

The idea is that since about 80% of the economy is in USD and 20% is in ZiG, you can calculate a combined inflation rate:

(80% × 13% USD inflation) + (20% × 83% ZiG inflation) = 10.4% + 16.6% = 27%

This has been taken to be the benchmark rate of inflation and has also now been used to compare the growth rate of companies like Delta, which grew 21%, and conclude that the growth wasn’t real growth.

In other words, Delta’s growth was good on paper but not in reality.

The Problem with This Approach

One of the arguments for using the 27% is that this is the economy-wide purchasing power change you have lost over the last year (assuming the economy is 80% USD and 20% ZiG).

In other words, what you could buy for $100 last year, you would need to spend $127 for today.

However, this is not true.

Consider someone who made 100% of their income in USD and then had expenses that were 80:20 in USD and ZiG.

Let’s assume they had $100 of expenses.

Their $80 of USD expenses would now cost $90.40 (a 13% increase).

The ZiG expenses, which would have been ZiG 260 (that’s $20 at the old rate of 1:13), would have increased by 83% due to inflation to ZiG 475.80.

However, over the same period, the USD: ZiG rate moved to 1:26. This means that to settle ZiG 475.80 would now cost $18.30.

So in total, a year later, you would need $90.40 + $18.30 = $108.70 to settle those bills.

This means the purchasing power you have lost is around 8.7%, not 27%.

The example is not perfect, but it shows you can not use the 27% as the reference point.

The Other Approach Company-Specific Blended Inflation

The other approach that has been described is to use a company’s revenue mix to determine its own blended inflation and then compare that with the nominal growth.

In this case, Delta’s blended inflation would be calculated as follows:

Delta USD: ZiG revenue split is 92%:8%

(USD % of Revenue × USD Inflation) + (ZiG % of Revenue × ZiG Inflation)

(92% × 13%) + (8% × 83%) = 18.6% (approximately 19%)

This 19% would then be compared with the nominal revenue growth of 21%, implying a real revenue growth of around 2%.

This seems more reasonable, but makes the same mistake of not factoring in the exchange rate movements and so uses a lower growth rate for Delta.

If you wanted to compare Delta’s to the 19% blended inflation, you would need to calculate Delta’s “blended growth rate.”

This requires looking at the growth rate for the USD revenue and the ZiG revenue separately.

For example, assuming that prices stayed the same and the revenue split remained at 92:8, if you separated the USD revenue and the ZiG revenue, it would potentially look like this:

• The USD revenue increased by 21%

• The ZiG revenue increased by 142%, mainly due to the exchange rate change from 13 to 26, combined with the 21% volume growth.

In the accounts, this would show as a 21% growth in USD terms.

If you then calculated the blended growth rate:

(21% × 92%) + (142% × 8%) = 30.7%

This 31% is what you would then compare with the 19% blended inflation, and would give you about 10% real growth using the textbook calculation (or 12% using the approximation method).

As you can see, the differences can be quite significant, and if you had not made this calculation, you would have assumed real growth was only 2%.

The Simpler Approach

By far the simplest approach is to use the USD inflation and compare it with the USD growth.

For Delta, this would be the 21% compared with the 13%, giving you approximately 8% real growth.

This avoids all the unnecessary back and forth and calculations that are more likely to lead to confusion.

But is USD Inflation Really 13%?

One final note: USD inflation is currently 13%, which looks pretty high. Does this number make sense with what we are seeing in the financials of companies?

The biggest driver of the high USD inflation is the food and non-alcoholic drinks category, which has a 31% weighting. Inflation in this category, compared to last year, has reportedly increased 19%.

When you think of food and non-alcoholic drinks, you have to think of Innscor and Delta.

On Innscor, it doesn't look like they have been increasing prices of late; in fact, it seems the business is under pressure to maintain margins, judging by the drop in profitability.

For Delta, in the non-alcoholic segment excluding Schweppes, the average revenue per litre—which is a proxy for price, although not perfect—only increased by 3%.

So, where is the big increase in USD inflation coming from?

There are a few possible explanations:

1. Imported inflation from FX changes: Zimbabwe imports a lot of goods, and the USD has been depreciating against other currencies, which makes imports more expensive.

2. Tax changes: Should we call this Taxflation? The sugar tax and other changes in the VAT status of certain goods have likely increased prices.

3. Data collection sources: Prices in formal retail chains tend to be higher than in informal trade. Perhaps it could be a question of where the prices are being picked from?

Whatever the case may be, one thing I expect is that the USD inflation will come down significantly to under 10% by the first quarter of 2026.

Where’s the Money? What’s the Move?

The good thing about this confusion is that it seems many people still haven’t understood what these results mean. A lot of the companies that have shown impressive results are likely undervalued.

For the investor, if you believe this is the case, there’s still time to move in.

More generally, I mentioned a few weeks back that Delta is a good measure of the degree of economic activity, and the sharp increase in revenue seems to indicate that the economy is growing.

The strong results from Econet and Innscor seem to confirm this as well.

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Caledonia Mining’s stock has tripled in 2025, making it one of the best-performing gold miners on both the Victoria Falls Stock Exchange and the NYSE American.

The Q3 2025 results make it clear why.

Revenue up 52%. Free cash flow is now $5.9 million. EBITDA jumped 163%. Profit spiked 467%.

But here’s what’s really interesting: production barely moved. Gold production increased just 1%.

So how did profit surge 467% when production was essentially flat?

It comes down to the economics of mining — and why rising gold prices are so powerful for gold miners like Caledonia.

Let’s unpack.

Simplified Mining Economics

Unlike most businesses, the easiest part of gold mining is sales.

There’s always a customer (Fidelity in Zimbabwe’s case) and always a price (set with reference to international markets). If you’ve mined it, you’ll sell it.

This means the heart of mining is getting gold out of the ground today and preparing to extract more tomorrow.

The cost to produce an ounce is measured using AISC (All-In Sustaining Cost) — which includes labor, electricity, maintenance, development work, sustaining capex, royalties, and overheads, but excludes taxes, interest, and major growth projects.

The goal is to keep AISC low, but that’s not always in your control.

Blanket Mine started operations in 1904 and has been producing, with some interruptions, for over 120 years.

After more than a century of digging, Caledonia has to go deeper. Blanket used to mine at 750 meters; today it’s pushing around 1,100 meters underground.

Deeper means more electricity for ventilation and cooling, more labour for complex logistics, more equipment maintenance under extreme conditions, and more development work to access distant ore bodies.

Even an efficient operation will have a higher AISC simply because that’s where the gold is.

The other critical point: many of these costs are fixed. Ventilation keeps running. Pumping continues. Maintenance must happen. Labour stays on payroll.

This high fixed-cost structure is what creates leverage. When gold prices rise, almost all the extra revenue flows straight to profit because the costs don’t increase proportionally.

Here’s exactly how that played out at Caledonia in Q3.

Caledonia by the Numbers

Q3 2025 Highlights:

• Revenue: $71.4m (↑52%)

• Realised gold price: $3,434/oz (↑40%)

• Gold production: 19,106 oz (↑0.6%)

• Gold sold: 20,792 oz (↑8.7%)

• AISC: $1,937/oz (↑29%)

• EBITDA: $33.5m (↑163%)

• Profit after tax: $18.7m (↑467%)

• Free cash flow: $5.9m vs. -$2.4m in Q3 2024

Revenue surged by an impressive 52% in the quarter, driven by a 40% increase in realised gold prices to $3,434/oz and higher sales volumes.

Production was up 0.6%, which in other businesses may seem disappointing. But for a mine that has been producing for over 100 years, steady and consistent production is actually a good sign.

The Cost Story

The AISC was $1,937/oz, up 29%. This warrants some discussion. Arguably, this was the only weak part of the results.

AISC jumped 29% due to higher on-mine costs (electricity, labour, consumables, and other costs directly related to production), plus increased administrative expenses, higher royalties driven by the elevated gold price, and sustaining capital expenditure for underground development and modernisation.

It seems especially with the on-mine costs, there were some inflationary pressures as well. With USD inflation in Zimbabwe supposedly at 13%, perhaps this played a part. Whatever the case, there is a sense that these costs are more sustained than one-off increases.

Caledonia increased its 2025 AISC guidance from $1,690-$1,790/oz to $1,850-$1,950/oz, indicating costs will remain higher.

The good news, however, is that even with the increase, Caledonia still seems to compare favorably with peers in South Africa, as shown below.

Why the Profit Surge

Here’s where the high fixed-cost structure pays off. Even with the elevated costs, the margin between the realised selling price $3,434/oz and the AISC of $1,937/oz is still very big.

Because most costs don’t rise when gold prices do, an extra $1,000+ per ounce in revenue from higher gold prices flows almost entirely to profit. This is why production barely moved, but profit shot up. EBITDA and profit were up 163% and 467% respectively.

What is more intriguing is that so far in Q4, the average gold price internationally has been about $4,000/oz, nearly 20% higher than the price realised in Q3, which means Q4 results could be much stronger, even with the higher AISC.

So despite cost pressures which need to be looked at, Caledonia still seems to be in an attractive position.

Preparing for the Future

But strong current results aren’t enough if there’s no tomorrow.

Current mine life runs to 2034, so Caledonia is using Blanket’s cash flows to fund three growth priorities: expanding exploration around Blanket (deep drilling showing “highly encouraging” results with grades higher than the current mine plan), developing Bilboes (feasibility study ongoing), and advancing Motapa (maiden resource declaration expected in the coming year, adjacent to Bilboes with synergy potential).

If exploration succeeds at any of these projects, either mine life extends or future production jumps.

Where’s the Money? What’s the Move?

The gold rally appears to have room to run. Goldman Sachs is maintaining its position that gold prices will rise in 2026 with a “$4,900/toz target by end-2026”.

As these Q3 results demonstrate, higher gold prices translate to dramatically higher profitability for Caledonia due to its fixed-cost structure.

The share price increase means Caledonia is no longer as attractive as a dividend play.

While the company has paid dividends consistently for over a decade, management has signalled that windfall profits will fund future growth rather than significant dividend increases.

For now, new investors may get more from capital appreciation rather than yield, which sounds hard to believe given the stock price increase.

The bull case: “Caledonia offers high leverage exposure to gold prices — a small rise in the gold price can lead to a much larger percentage increase in profit, given its fixed-cost structure and stable production.

For example, in Q3 the realised gold price rose ~40 % and profit after tax rose ~467 % (with production nearly flat) — highlighting the leverage effect.

If you’re bullish on gold continuing its run, Caledonia amplifies that bet. With Goldman Sachs seeing further upside in Gold prices, perhaps there is still more opportunity.

The bear case: Zimbabwe carries political and economic risk. Costs are rising structurally as mining goes deeper. And operating leverage goes both ways — if gold falls to $2,500/oz, margins compress fast and profits could collapse even faster than they rose.

However, all things considered, Caledonia is a company that is hard to ignore and clearly one of the best performing in the country and even in the region.

What do you think?

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P.S. I’m working with publicly available information from Caledonia’s Q3 2025 results. Do your own research before making investment decisions.

• Caledonia Mining’s Financial Results

Caledonia Financial Results

This morning, Caledonia released its latest Q3 financial results. For those who don’t know, Caledonia is the VFEX, AIM and NYSE-listed gold miner and the best-performing stock in Zimbabwe.

We’ve been talking a lot about how the gold price has been good for gold companies, and this is further proof. Below are some of the highlights of their results.

Caledonia Mininig Q3 2025 Highlights

• Revenue: US$71.4m, up 52%

• Realised gold price: US$3,434/oz, up 40%

• Gold production: 19,106 oz, up 1%

• Gold sold: 20,792 oz, up 8.7%

• EBITDA: US$33.5m, up 163%

• Profit after tax: US$18.7m, up 467%

• Free cash flow up to US$5.9 million vs negative US$2.4 million in Q3

  2024.

Caledonia had one of its strongest quarters in its history. The combination of a 40% jump in gold price realised and steady production has resulted in a big windfall.

Just to put into context how strong that revenue growth is, Innscor posted 19% growth, and we described that as blockbuster. I am not sure what phrase I could use for 52% growth!

Granted, a lot of that growth was from the 40% increase in realised prices, but it shows that if the gold price holds or continues to rise, Caledonia has a solid business. As of writing, it seems the stock market liked the results, with the stock rising over 4% after the results.

The trick question is how much upside is still in the stock after tripling in value this year? I will need to dig into the results in more detail, however, and will cover them later this week, but for now, this is definitely a story worth watching.

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When Zimbabwe rebased its GDP this year, the numbers seemed almost too good to be true — Zimbabwe’s GDP increased by around 40% to $45 billion.

This made Zimbabwe the second-largest economy by some distance, with Zambia following at around $26 billion.

But was this real growth, or just creative accounting?

I wasn't sure. So I looked for a proxy to test whether these numbers made sense.

The Delta Test

Delta Corporation is Zimbabwe’s beverage giant and the largest listed company in Zimbabwe.

Its sales volumes serve as one of the most reliable indicators of Zimbabwe’s economic health.

When Zimbabwe grows, Delta's business grows and when the country takes a hit, so does Delta.

This makes sense: beer and soft drinks are constants in day-to-day life. If people aren’t buying drinks, they probably aren’t buying much else either.

With this in mind, I pulled Delta’s sales volumes over the last 20 years for Zimbabwe and layered them against GDP to cross-check if the economic growth made sense.

The blue line represents Delta’s sales volumes, while the blue bars indicate Zimbabwe’s GDP. It is important to note that these figures are based on Delta’s financial year, which ends in March.

For example, FY2005 includes nine months of 2004 and three months of 2005. In this case, the GDP data for 2004 has been layered over this timeline.

As you can see from the above, GDP and Delta’s volumes generally moved together. When the Economy collapsed during 2008/2009, Delta’s volumes did the same. When the economy picked up quickly post-dollarisation, Delta’s volume followed suit.

What we also see is that from FY21, there was a sharp increase in Delta's volumes, and that rebased GDP number of $44 billion doesn't look out of place.

Delta’s volume growth validates that the economy is much bigger than was initially thought. The rebasing wasn’t just a financial gimmick, but the new reality of the economy's size.

What is also interesting is that it also seems to be growing faster than we thought. Currently, the IMF projects Zimbabwe to grow around 6% this year, one of the highest forecast growth rates in SADC and roughly double the regional average.

So what’s driving this?

How Gold Is Fuelling Growth

Gold is having a spectacular year — we’ve talked about this before.

Global gold prices crossed multiple all-time highs, and gold-linked equities have followed.

Gold miner, Caledonia, has tripled in value over the past year, largely due to the surge in gold prices and improved operational output.

Gold has not just been good for individual stocks; it has also been good for the country.

Zimbabwe’s export figures tell the story. Total exports are on track to reach roughly USD 9–10 billion, up 23% driven by gold and tobacco.

The catalyst has been record gold prices and a steady rise in gold production. The following shows deliveries of Gold to Fidelity, Zimbabwe’s official buyer, on behalf of the government.

But here’s the thing.

Zimbabwe is still nowhere near its full gold potential.

The Australia Comparison

Zimbabwe and Western Australia were once part of the same ancient landmass, so they share very similar rock formations that are known to contain gold.

Western Australia has built a huge gold industry by exploring and mining these rock formations with modern technology.

Zimbabwe has similar potential, but large-scale exploration using the latest technology has been limited.

That means a lot of gold is still largely untouched. This, by the way, is part of the idea behind why VFEX-listed Kavongo Resources is betting on Zimbabwe.

Australia exports USD 25–30 billion in gold every year. Zimbabwe exports roughly 10–15 times less. There should be much more room for investment and growth.

Where’s the Money? What’s the Move?

Zimbabwe isn’t the easiest country to operate in, but its ability to grow despite the challenges shows there’s still significant untapped potential. It’s a market worth watching - and perhaps explains why Dangote is reportedly still considering an investment after two false starts.

On gold, despite it reaching record highs, there may still be a case for portfolio exposure.

The world in which Trump is President of the USA is one of policy uncertainty, geopolitical risk, and volatility. This has historically been good for gold and Goldman Sachs is maintaining its position that gold prices will rise in 2026.

“We maintain our $4,900/toz target by end-2026, supported by continued central bank demand and renewed investment inflows as the Fed cuts,” - Goldman Sachs.

At a national level, the US has Silicon Valley; Zimbabwe has Golden Valleys. Both need venture capital — albeit of a different kind.

Gold exploration is risky (success rate is less then 0.1%) , but when it succeeds, it delivers decades of returns.

Zimbabwe needs more risk capital aimed at exploration — not just extraction. Perhaps a national co-investment fund that derisks early-stage exploration could encourage more activity and unlock long-term value?

For businesses, the opportunity is equally clear.

If you sell any service that is mining relevant, now is the time to build relationships. It’s always easier to sell anything to a company that is doing well.

For the more adventerous could now be the time to consider a mining venture. Padenga went from selling crocodile skins in 2019 to mining for gold and now the gold business brings in over 90% of its profits. They say fortune favours the bold, and right now you could also say fortune favours the bold.

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The Week Ahead: Fuel, Cement, and Beer

Here are some of the most important stories to watch this week

• Dangote investing $1 billion in Zimbabwe? Is this about Cement or Fuel?

• Delta’s Dominance Faces New Test as Varun Enters Beer

Let’s unpack.

Dangote Investing $1 Billion in Zimbabwe?

In an interview with McKinsey in 2015, Aliko Dangote said that “the big growth opportunities for Dangote Group are mainly on the south side of Africa.”

At the time, it seemed he had eyed a few countries with South Africa, Zimbabwe and Zambia on the watch list.

However, as shown below, while progress was made in Zambia and South Africa, nothing materialised in Zimbabwe despite following up on the initial 2015 interests in 2018 as well.

Dangote is now reportedly planning to visit Zimbabwe, ten years after the initial discussions, to try again to enter with a “$1 billion investment”.

Will this investment happen? Hard to say since in the past so many deals have fallen through. But this time, there could be a little more incentive to take on risk by Dangote.

Is Dangote more Interested in Cement or Fuel?

Historically, when you think of Dangote group, you would think of Cement, and the deals that have been closed so far in Southern Africa have been cement-related.

However, with the launch of the refinery in 2023, the interest could be more to do with Fuel?

For context, the Dangote refinery located in Lagos is the largest single-train oil refinery in the world, built to process 650,000 barrels of crude per day, and hopefully can make Nigeria self-sufficient in refined fuel.

This is also what has driven up Dangote’s personal wealth in the last couple of years. The chart below from Forbes shows that Aliko Dangte’s net worth went up by over $10 billion the year the refinery started operations.

The significance of the refinery to Southern Africa is that Dangote has planned a 1.6-million-barrel storage facility in Walvis Bay, Namibia, that could reshape energy access across the region.

The facility will target five primary markets: Botswana, Namibia, Zambia, DRC, and Zimbabwe, together consuming more than 120,000 barrels of fuel each day.

Many countries in the region import fuel from the Middle East and Europe, facing lengthy shipping times and price volatility. This facility could supply 15-20% of Southern Africa’s current demand, potentially reducing the region’s $10 billion annual fuel import bill.

With Zimbabwe, one of the largest importers, which also doesn’t have many options, could this be the opportunity that has spiked Dangote’s interest again?

Who knows, but it’s worth watching either way. It will also potentially give some hints at how the Government plans to ease investors’ concerns around dedollarisation.

Delta’s Dominance Faces New Test as Varun Enters Beer

Everyone wants to crash Delta’s party.

Last week, Varun Beverages, the PepsiCo bottler, announced its first push into alcoholic beverages, starting with distributing Carlsberg beer in Zimbabwe.

For context, Delta is the largest beverage manufacturer in Zimbabwe. The company holds the Coca-Cola license in the country and also manufactures beer, in which the company has been particularly dominant.

Delta holds 96% of the market share in the beer segment that Varun is now targeting.

Varun Beverages Limited is an Indian-listed bottler for Pepsico, operating in 10 countries. Its markets include India, Nepal, Sri Lanka, and several African nations like Mozambique, Zambia, South Africa, and Zimbabwe, which it entered in 2015.

It’s notable that the initial market where Varun is testing beer distribution is Zimbabwe. This indicates several key dynamics.

First, the risk-to-return trade-off in Zimbabwe is much more attractive than global markets might suggest.

While RMB ranked Zimbabwe the Worst Investment Destination in Africa, for Varun, it appears to be one of the first markets worth exploring for this new product category.

Second, Delta’s business must be inherently healthy. When you have both Innscor and Varun Beverages trying to enter a market aggressively (Innscor with its Nyathi beer brand and now Varun with Carlseberg), the unit economics of the business must be good.

How will Varun’s move impact Delta? There may be a need to unpack this in more detail, but let me leave you with a question that offers a hint.

Varun entered Zimbabwe in 2015 to challenge Delta in the soft drinks market. Did Delta’s beverage sales volumes increase or decline since then?

The answer: Delta’s soft drinks volumes between 2016 and 2024 increased at a growth rate of 7.5% per year, even outpacing other parts of the business.

Here’s a fascinating paradox: dominant companies often grow when serious competitors emerge, rather than shrink as you’d expect. Take Econet’s data business after Starlink arrived—the pattern holds.

This warrants a full deep dive, but that’s a topic for another time. Let me know what you think?

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Capitec’s Results Part 2: The Magic of Serving the Underserved

At the heart of every magic trick lies a simple principle: making something appear from nothing.

Capitec does the same thing, only with profits. Its magic lies in turning overlooked customers into new income streams.

That’s the real power of serving the underserved — and it’s a play any business can copy.

Let’s unpack!

The Underserved Customer Advantage

In Part 1, we discussed how Capitec built its foundation by targeting a previously ignored segment of the market: low-income South Africans who needed access to unsecured credit.

Now we’ll explore what makes this strategy even stronger: customers who have been neglected in one area are probably underserved in another.

If customers have difficulty opening an affordable bank account and getting credit, it likely means they also lack access to many other financial services.

This gives a business targeting these customers two pathways to growth.

First, the business can grow quickly in absolute terms by simply acquiring clients who were previously ignored.

This is precisely what Capitec did—growing their customer base rapidly to the point where today, one in three South Africans is a Capitec client.

However, absolute client growth eventually slows.

This is where the second advantage becomes critical: people who are underserved in one area are often underserved in multiple areas.

This means once you’ve built trust and a relationship with these customers, you can add new services and continue growing—even when customer acquisition starts to plateau.

Diversifying Beyond Lending

In the last few years, Capitec has focused on diversifying income away from just lending.

Their insurance business has grown from R1.6 billion in 2021 to being on track to pass R4.5 billion in 2026.

This means while customers have increased by about 50% the insurance income has increased by about 200%.

The other business line that is doing the same is the Fintech Business. This includes Capitec Connect, a prepaid mobile offering (voice, SMS & data) launched in 2022.

It operates with the same fundamentals as banking, providing clients with flat, low prepaid rates on data and no fees for recharges. This business has also grown incredibly fast over the last three years.

In addition to Capitec Connect, the Fintech segment offers value-added services (VAS) such as processing vehicle license renewals, purchasing electricity, buying lottery tickets, and sending cash. This segment has been growing rapidly as well and was up more than 40% compared to last year.

These relatively new divisions now accounted for 52% of the group's earnings in the most recent half-year, up from 47% in the previous half.

These results show that in a short space of time, Capitec was able to turn a banking client into an insurance and fintech client.

This is how magic with profit happens, and in part may explain Capitec’s P/E ratio.

Understanding the P/E Ratio Premium

The P/E ratio indicates market expectations for future growth in earnings.

In some ways, it also marks how good the market believes your business is at “magically” making profits appear.

As can be shown from the below, Capitec's P/E ratio has historically been higher than the other banks largely because Capitec has been able to grow earnings faster than its peers.

All of this has been based on identifying an underserved segment and then riding the wave that comes with it. Capitec has been able to grow consistently above the market for 20 years because of this.

The Competition Question

Now, while Capitec had a really strong set of results showing continued growth, the future will have more challenges as more players join the party.

Could the“underserved” mass market soon be the “overserved”?

TymeBank launched in 2019 and now has 10 million users. OM Bank will go live this year and has spent about R3 billion to build out the new bank. All these and other banks are going for that segment that was once ignored for years.

Perhaps recognising this, Capitec is now diversifying.

The acquisition of Avafin—expanding outside South Africa for the first time—suggests an acknowledgement that growth in the domestic market may be approaching its limits.

This also poses the question for the other banks: if the best dancer starts eyeing the exit, is the party as fun as it was before?

Where’s the Money? What’s the Move?

The broader lesson for any business is clear: finding profitable underserved markets can be a powerful differentiator.

How can you identify these market segments?

Look for segments where four conditions converge:

• a large customer segment facing a significant pain point,

• limited available solutions,

• high prices relative to value delivered,

• and complacent incumbents.

When these factors align, you’ve likely found a profitable, underserved opportunity.

I think this applies to lending in most African countries, so there may still be scope for more Capitec-like banks.

However, there are many other areas where this applies. Student accommodation, insurance, and affordable transportation are just a few that come to mind.

What do you think?

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Appreciate the support. Now, onto the stories to watch this week.

Zimbabwean Banks Accused of Overcharging

Has your bank overcharged you?

A story from The Independent implies this could be the case.

Below is an excerpt from the article “Zim banking nightmare: Millions vanish in hidden charges scandal”.

“Multiple Zimbabwean banks are under fire amid explosive allegations that they overcharged corporate clients millions of dollars through inflated interest rates and hidden fees, triggering what could become one of the biggest financial recovery drives in recent years.

The revelations, uncovered by the Zimbabwe Independent, point to a pattern of systematic overcharging by local financial institutions, a practice that a forensic accounting firm says has cost businesses millions in unlawful deductions.”

Source Zimbabwe Independant 24 October 2025

A few things to note before you call your banker.

These claims originate from a report by the Interest Research Bureau Zimbabwe (IRBZ), a company that examines interest calculations and bank charges on behalf of clients to support refund claims.

This means that there is an incentive for the company to claim that “systematic overcharging of clients” is taking place because it would be good for their business.

That said, the company could also claim there is equally an incentive for bankers to have “systematic overcharging of clients” taking place because it would be good for their business — provided they don’t get caught!

Incorrect charges are not uncommon, however.

In South Africa, there were 15,412 complaints about Banks made to the National Financial Ombud Scheme for incorrect charges, of which 11,535 cases were successfully closed and resulted in R29 million recovered for consumers.

Capitec, which we have been covering, actually had the most complaints with 20% of the total. However, they also have the most clients, serving one in three South Africans.

If Capitec, arguably the most digital-first and successful bank in South Africa, can incorrectly charge clients, it wouldn't be a surprise if some Zimbabwean banks have done the same.

Where’s the Money, What’s the Move?

If you are a banker, it may be a good time to ensure your systems are functioning properly. A significant mistake with a major client could not only be financially bad but also hurt relationships.

If you are a large corporation with high bank fees, you may want to recheck your bank statements and loan repayment schedules.

If you're just someone who thinks bank fees are too high, keep a lookout for this story, as it could have a big impact if this issue is really pervasive.

Trump Wants African Minerals

This is a fascinating story from Fox News with the headline “Trump administration works to break China’s rare earth mineral stranglehold on Africa”.

Here is a key extract from the article.

In Africa, China is on Washington’s threat radar, with the spokesperson continuing, “China’s dominance in global mineral supply chains — specifically in processing and refining — is a threat to both U.S. and African interests. Beijing’s state-directed strategies exploit Africa’s natural resources, consolidate control over upstream mining assets, perpetuate opaque governance structures, degrade local environments and create economic dependencies that undermine regional stability.”

The fascinating thing about the above is that the US is loosely admitting that it needs Africa, especially when it comes to rare earth minerals.

Rare earths are a group of 17 elements that are used in consumer electronics, electric vehicles, aircraft engines, medical equipment, oil refining, and military applications such as missiles and radar systems.

China controls over 69% of the production and processes 90% of the global supply. Considering how critical these rare earths are, it is obviously not a situation that the US likes.

Here is another data point from the African Union’s African Metals Development Centre.

Benchmark Mineral Intelligence indicates that 37% of Africa’s future rare earth supply is already committed to Chinese buyers, with the rest available for other markets. By 2029, eight new rare earth mines in Tanzania, Angola, Malawi, and South Africa are expected to start production, potentially contributing 9% to the global supply.

In short, Trump recognises that the US has fallen far behind in securing African rare earth partnerships and is now scrambling to catch up. This is likely positive for Africa. Competition for the continent’s resources creates leverage and better terms.

Where’s the Money, What's the Move?

Generally, it seems the mining sector under the Trump administration is poised to perform well.

Rare earth miners are likely to experience a boom, and this year, as mentioned earlier, has already seen record prices for many metals.

Strangely enough, thanks to many unintended consequences, Trump has so far been relatively good for Africa. Who would have thought?

For countries like Zimbabwe that have faced sanctions (directly or indirectly), the Trump administration may present the best opportunity in years to have them lifted.

Trump’s predictable unpredictability means that, given the right incentive and motivation, he could break from long-held US policies if he thinks it’s a good idea or believes it will benefit him.

Let’s see what happens next.

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Capitec’s Results: The Power of Serving the Underserved Pt 1

Twenty years ago, Capitec was a small bank serving the lower-income category of South Africa, so much so that it placed its branches near taxi ranks to cater for its customer base.

Twenty years later, Capitec became the most valuable bank in South Africa, growing over 30,000% over that time.

How did focusing on a low-income customer base generate such extraordinary returns?

Let’s unpack

Capitec’s Financial Results

Capitec had another strong start to the year, with income up 27% and earnings (profit) up 26% compared to the previous half-year.

Part of the growth was due to the acquisition of Avafin, a fintech company operating in North America and Europe. However, even adjusted for that, the income was still up 23% and earnigns 25%.

This is really impressive, considering that most banks in South Africa grew between 5% and 10%.

This is higher than the market growth has lasted for a while. In the last 10 years, Capitec has grown its income by close to 400% while Nedbank Bank, for example, has increased its income by about 60%.

This is not to say that Nedbank is performing, but more to illustrate that the strategic approach that Capitec took early on is really hard to match and creates long-term upside.

Before digging further, we need to lay the foundation to understand why Capitec has sustained so much growth over the last twenty years.

It all can be underpinned by one principle. Serving the underserved.

Capitec’s History and Foundation for Success

The best customers are the ones who have a big problem that is being ignored by the market.

In the early 2000s, when Capitec started, lower-income South Africans who needed affordable unsecured microloans were the ignored segment.

Traditional banks had viewed this segment as too risky and unprofitable, forcing people to borrow from loan sharks instead.

Capitec’s 2003 annual report illustrates this well. At that time, the industry norm was that people who needed small unsecured loans typically had to pay interest of 30% per month, or a staggering 2,230% annually.

Note that the lending rate banks were offering customers was around 15%, so this segment of the market was being massively overcharged by paying over 2,000%.

Capitec was “cheap” at 22% month (which was still about 984% per year), but even they recognised that the amounts were excessive and that the way to be successful was to “reduce prices, help the customer and beat the competition.”

The issues with the high cost of credit, as well as other unfair practices, also prompted the development of the National Credit Act, which ended up putting some limitations on interest rates that could be charged.

At the time, it was clear that there was a large segment of the population that needed credit but was unable to access it.

So why didn’t other banks tap into this segment that seemed like it was positioned for growth?

Why Other Banks Didn’t Follow Capitec

It wouldn’t be accurate to say that banks completely overlooked this segment.

The best example is of the ABSA. In April 2000, ABSA acquired a majority stake in UniFer, one of the leading third-party microlenders paying over R1 Billion, in what was its first significant acquisition in almost a decade.

UniFer was much bigger than Capitec. It actually took Capitc five years to have the size of the loan book that UniFer had in 2000.

Unfortunately, the UniFer acquisition ended up being an absolute disaster for ABSA, with UniFer collapsing just two years after it was bought.

UniFer had a lot of hidden issues that included management conflicts of interest, reckless loan growth, unauthorised lending, executive kickbacks, and weak internal credit controls.

This ultimately resulted in ABSA taking well over a billion rand in losses.

Perhaps this disastrous encounter made other banks also more risk-averse to entering the space.

What also played a part was that the traditional banks were doing well enough. As shown below in 2002/2003, the big four banks controlled 75% of the retail lending market.

To target the microlending space would have required increased focus and more aggressive cost discipline to allow for the low-cost lending approach.

In addition, the unsecured microlending business was still small. For ABSA, microlending was less than 3% of its loan book, even after acquiring one of the largest players.

With all these factors, the natural approach for any bank would have been to focus on what it already controlled and was making money from. This happens more often than we think.

Why Large Companies Lose To Smaller Players

Large, established companies frequently get beaten out by new entrants that focus intensely on niche segments, which the larger company considers secondary.

An example is Coca-Cola and the energy drink segment. While Coca-Cola remains the world’s dominant soft drink company, it has struggled to win in the energy drink segment.

Red Bull entered and successfully built a powerful brand by pioneering and focusing on the category, and now controls roughly 36% of the US energy-drink market.

Perhaps even more remarkable is that this repeated itself with Monster Energy, entering the same segment and also surpassing the other brands that Coca-Cola had.

This time, however, Coca-Cola, recognising the success of Monster, decided to partner and not compete and invested about US$2.15 billion in 2014 for a 16.7 % stake, and transferred its other energy brands to Monster.

This might have been an acknowledgement that highly focused and determined competitors are difficult for larger, well-established companies to beat. It serves as a key lesson for any business when competing against a bigger player.

This was the same with Capitec. They were all in on this underserved segment and could build their business and strategy entirely around it, including adopting a lower-cost digital-first structure.

They summed it up well in one of their early annual reports:

We remain on track to build something unique: a low-cost, full-service mass market bank”

What happened next was magical and will help us analyse their current financial results in more detail and draw lessons that can be applied to any business, especially those in Africa.

Since there is so much to unpack, we will need to pause for now.

Part 2 will be coming next week.

Let me know if you have any comments or questions which we could then cover in Part 2 as well.

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