Mateyo Kaluba, the IDC Supremo under the mandate of the board Chairman, is working hard to bring balance to his portfolio of companies. Overseeing 30+ State Owned Enterprises that operate in almost every major economic sector in Zambia is not a small feat. That is why Mateyo and his team came up with the annual group conference as a means to break away from the drudgery of creating value in one of the most dynamic macro environments of this generation.
IDC held its annual group conference at the half way mark of Q4 and it saw Mateyo bringing together heads of the SOEs to a retreat styled second event to not only give awards but to have a candid family discussion regarding the performance of the values entities. The family discussions in questions are centered on what the analysts at IDC call “performance contracts” which all the boards of the SOEs have signed with IDC.
The purpose of the performance contracts is to address what has been a long standing problem for managing SEOs. It is one of the reasons why the IDC was set up in the first place. That problem is known as the Principle Agent problem or Agency dilemma. The problem arises where the two parties have different interests and asymmetric information (the agent having more information), such that the principal cannot directly ensure that the agent is always acting in their (the principal’s) best interest.
Using informed conjecture, it is envisaged that the contracts are centred on key specific areas which include: Financial Performance, Corporate Governance, Business Internal Processes, Stakeholder Management, Capacity Building and Growth.
During the event that was held at the illustrious Avani Hotel in Livingstone, Chairperson of the Finance and Administration Committee of the Industrial Development Corporation (IDC) Board of Directors Mr David Kombe was happy to note that most subsidiaries under the IDC portfolio were making good progress in terms of development, performance and implementation of the growth strategies that are in line with the aspirations of the IDC. He further acknowledged that subsidiaries that had improved their financial performance and are now paying dividend to the shareholders.
In a statement attributed to Mr. Kombe, “As at October 2018, companies that had paid a dividend included Indo Zambia Bank, ZANACO, ZCCM-IH, Mulungushi Village Complex, Indeni, Zambia Railways and ZAFFICO, which translates into Twenty-Four (24%) of the Twenty-Nine (29) portfolio companies in which IDC has control”.
He also took the opportunity of the event to positively caution companies that were trailing in terms of implementing positive reforms to immediately commence realigning their business models. He believes the IDC Board has set the environment for transformation, therefore it is incumbent on the subsidiaries to drive reform from within. This was further echoed by CEO Mateyo who called on the Board and Management of companies in the IDC group to take responsibility of the transformation agenda of their respective companies.
Mr Kaluba stated that “Whereas our strategic objective as IDC is to see the transformation of companies in the group, we can only do so much as shareholder. The nuts and bolts of transformation is the responsibility of Boards and Management”
The event also saw the ushering in of 3 new entrants into the IDC portfolio. The new companies included Zambia Industrial Commercial Bank, Superior Milling Limited and Zampalm Limited. It is estimated that the latter two companies cost the IDC kitty north of $30 million to acquire. This only reinforces the importance of addressing the agency problem because for the board of IDC to make the “buy” decision over the “make” one, it entails they obviously made projections as to when they would expect a return on investment. It therefore becomes incumbent on the boards and management teams of the new SOEs to deliver on the parameters of the performance contract.
Following last year’s inaugural conference, the performance monitoring and reward system that was put in place saw awards being giving to the best performance companies in the portfolio. The awards recognize the efforts of Boards and Management as Champions of the transformation agenda laid out by the IDC Board.
The awards presented included the following categories:
- Subsidiary with highest dividend declared in 2018 (ZCCM – IH PLC, Indeni, Indo – Zambia Bank)
- Subsidiary with highest dividend pay-out ratio (Indo – Zambia Bank, Indeni, Mulungushi Village Complex Ltd)
- Best Governance Compliant Subsidiary (Mulungushi Village Complex Ltd, Indo – Zambia Bank, Indeni)
- Most Improved Subsidiary (Mpulungu Harbour Corporation, Indeni, Indo – Zambia Bank)
- Chairman’s Award (ZSIC General Insurance – first profit in 10yrs since split of companies)
- Overall Best Performing Subsidiary (Indeni, Mulungushi Village Complex Ltd, Indo – Zambia Bank)