How To Raise Money? Part 1

After our license was finally issued, we quickly turned our attention to raising the money to build the business.

I had long realised that this kind of business was capital intensive. I knew that I had to have a very good team on Finance. This was not just a job for an accountant, I needed a banker, to lead the team that would look for the money. I approached Jeff Mzwimbi, who had been working as an international banker, to return home, and lead our team. He had wanted to start his own bank, but I persuaded him to delay his plans, and come and work with me. We also recruited a Chief Finance Officer, Marion Moore, a very mature and experienced Zimbabwean executive. Together with Zac Wazara, our Chief Marketing Officer, the four of us, had worked every day for years, preparing our business plans. Even when we were in court, we never stopped planning.

Initially we thought that it would be best to bring in an international operating partner. We found a very respectable potential partner, but we failed to agree terms, and we walked away.
Our financial model showed that if we simply borrowed money from the banks, the business would not grow properly. We needed to raise EQUITY, as well.

As soon as the case was over, Tawanda Nyambirai left the legal profession, and joined a bank, called NMB. Another young lawyer at the same law firm, came and joined us, as our legal advisor, at the company. His name was Nic Rudnick, and he is one of our most senior executives today.

Another young banker, who had been a member of Dr Moyo's team, at Standard Chartered Bank, and now working with Tawanda, at NMB, was Pateson Timba,
One morning , I gathered this group, in my office. I had an audacious proposal that I wanted them to debate. It is how we make decisions, even today:

"Can we list a company on the Stock Exchange of Zimbabwe, that has no trading record, and has never actually operated?"

Pateson Timba:
"Mukoma, the exchange say we need minimum 3 years experience, and audited accounts".

Tawanda Nyambirai:
"Mukoma, its just a tradition they have been applying. It's not underpinned by law. If we go to court, we will win."

Nic Rudnick:
"I agree. We can win."

Jeff:
"My brother, we need to raise just $5m, in equity. Why don't we just go to London. I know investors who can write a cheque for that kind of money, without all this hassle."

Me:
"I want to give all those people who supported us, over all those years, a chance to own shares in this company."

And so we discussed, well into the night. Finally, I made the call:
"Tawanda, and Nic, tell the Exchange, that unless they give us, an exemption, we are ready to test it in court."

The stand off with the Zimbabwe Stock Exchange, lasted less than two weeks. They quickly realised that we had found a legal loophole in their regulations, and they had no choice but to let us list the company, even though we had no trading history!

The Zimbabwe Stock Exchange is the second oldest in Africa, having been established in 1896.

Getting permission to list the company on the Stock Exchange, was not my biggest challenge. The exchange knew it, and I knew it, and it was probably why they said, "go ahead".... No one seriously expected us to pull it off, and there were many good reasons why it was practically impossible:
Whilst I strongly believed that the general public would buy our shares, the problem was that we needed foreign exchange, not local currency. This is because 85%, of the money you need to set up a cell phone network goes into importing equipment, which is only produced by a handful of international manufacturers, even today. To raise the money we needed as a public listed company, in what is called an Initial Public Offering (IPO), meant that we would have to raise the money from international investors, in Johannesburg, London and New York........ And this was 1998!

- For a "start up" company, to try and raise money, through an IPO, was just unheard of;

- for a start up company coming from Africa, let alone Zimbabwe... That was also unheard of;

- we were considered an inexperienced management team, with no previous experience in the industry, and no "technical partner"!

- the long legal battle we had been through also made investors nervous.

- the cell phone industry in Africa, was just starting. Many African countries, including places like Nigeria, did not even have cell phones. Those countries that had cell phones, still had very few subscribers. It was an unproven industry.

After all those years of struggling to get a license, I was financially exhausted.

Investors who had the foreign exchange that we needed were only willing to invest, if I gave up control, and allowed a "technical partner" with experience to provide management. Most were not even willing to discuss the idea of my listing the company, before it was profitable, after three or four years.

In part three I will reveal to you, how we managed to raise money on the international capital markets. I also kept control of the business...And most important for me, I gave an opportunity for thousands of ordinary Zimbabwean's to buy shares.