Zim government takes over drug-maker CAPS

August 12, 2016

GOVERNMENT has taken full control of troubled drug-maker, CAPS Holdings, after buying out former major shareholder, Frederick Mtandah, the Financial Gazette’s Companies & Markets (C&M) established this week.

President Robert Mugabe’s government is also finalising discussions with potential local and foreign investors to partner it in reviving the business, which ran into problems a few years ago after battling to forestall high gearing.

One of its key properties came close to being auctioned to pay off debts last year, only four years after the CAPS board had de-listed the pharmaceutical group from the domestic bourse.

CAPS is the parent company of a chain of drug-making and distribution units that include QV Pharmacies, Caps Pharmaceuticals and Geddes Limited. It used to run St Anne’s Hospital but was kicked out this year after the property’s owners refused to renew the lease.

It also has a footprint in South Africa and Botswana.

Industry and Commerce Minister, Mike Bimha said a deal has been sealed by government to transfer CAPS’ debts to the Zimbabwe Asset Management Corporation, a central bank unit that was created last year to take over ailing companies’ debts to banks as part of efforts to relieve industries from pressures created by debts.

By so doing, government hoped it would give troubled firms the room to recuperate.

Bimha said government had settled the CAPS transaction and moved to appoint a new board headed by Abigail Shonhiwa, the permanent secretary in the ministry.

“Government has paid off Mtandah and a new board for the company has been put in place,” Bimha told C&M.

“This is chaired by our permanent secretary. The good news is that we have three serious investors who are willing to invest into the company. I can’t divulge their identities at the moment but we have international and local investors who are serious,” said Bimha, who spoke exclusively to C&M.

Mtandah confirmed the deal.

“It’s true, I was paid off and government has taken control of CAPS,” he said.

He declined to disclose the value of the transaction, saying this was “not for public consumption so I can’t divulge how much government paid me”.

At the centre of CAPS’ problems was declining capacity to pay for drugs by the State, as well as an influx of cheap imports.

Government is the largest customer for pharmaceutical products in Zimbabwe.

Most of about 1 531 health institutions operating in the country fall under the stewardship of the Ministry of Health and Child Care.

CAPS’ industrial complex survived a public auction three years ago, which was aimed at raising about US$4 million owed to two major banks — CBZ Bank and FBC Bank.

The auction followed a High Court judgment in favour of the financial institutions, but the property would later be placed on sale by private treaty after it failed to generate viable offers.

Mtandah then negotiated with the banks to suspend the sale.

If the pharmaceutical firm had lost the complex, which sits on 17 043 hectares of land and is also used as its head office, the development could have spelt doom for the company.

The development sent jitters in government, which was alive to the effects of closing the country’s major drug producer at a time when donor fatigue has undermined capacity to import medicine.

Now, government faces the difficult task of making sure the drug-maker returns to viability.

It already controls 100 percent shareholding in at least 100 other parastatals which have been pushed to the brink by mismanagement, fraud and corruption.

Should these vices creep into CAPS, the country’s ailing health delivery system would be compromised further.  Source: Financial Gazette