Business owner often complain that the lack of finance stops them growing and fully exploiting profitable investment opportunities. Selling shares of a business, may help a business owner ensure they raise funds most needed…. but as a business owner you must be able to explain & demonstrate to all shareholders how you have used their resources and what you have achieved. 

Guest Bio: Maybin Madiba Mudenda is a group executive chairman for the Insizwe Holdings Africa, was born in 1974. He has worked for Oxfam, after leaving Oxfam he was unemployed and then he was taken on as an Agent for Zigi Insurance by Mr Connie Mumba. From being an agent at Zigi Insurance he went on to owning companies and Insizwe private brokers is one of them.

 

A few years back you solely owned African Grey Insurance whose shares you sold to Mulundu holdings. Give us a brief history of African Grey Insurance up until you decided to bring on shareholders?

Mr Mudenda: From Zigi insurance I moved to Cavmont Insurance as an agent, I then assisted in growing it to a bigger company as it was one of the smallest insurance companies at the time. It was later rebranded to Diamond insurance and while at Diamond Insurance I realised I had a huge portfolio of business and then I thought to myself, spoke to my wife and another partnered and we decided to start our own Insurance company. This birthed African Grey Insurance, later on we brought in two other partners one of them being Charles Nakozi and another independent party. We did so well in the three years and decided we needed to capitalise the business, Mulundu Holdings helped with the capitalisation to whom we sold 50% of African Grey Insurance shares.

What was the process of bringing on shareholders, what did you have to do to sell shares of African Grey Insurance?

Mr Mudenda: When we were starting African Grey Insurance, we needed to find the basic money, at that point we brought in the Insemi group from Italy of which am a shareholder. These put in some money and then Mr Nakozi as well came in with his partners, we had another partner called medin investments who also came in and put some money, that’s how we grew the business.

In terms of Financial Management, what was the shape of your financial information at the time of selling the shares?

Mr Mudenda: The condition of your financials always matters when it comes to selling shares of a business. As for African Grey Insurance we always made sure that we had our books in check, which made it easier for us to bring on shareholders as need arose and the monies brought in helped us grow our business. 

In your opinion, why do SMEs find it difficult to raise funds from selling shares?

Mr Mudenda: Mulundu holdings actually had a conference on the 3rd of May, 2017 were we had the finance minister and Minister of Commerce. We were talking about the same and unanimously agreed that the interest rates in the banks are quite high. I feel for an SME it would be wrong to go to a bank, equity is one of the best. 

The problem is that Zambians want to own a business 100% but this does not work out very well or make sense. You are better off owning 2% of a business that is making profit. “Equity is the way to go, I mean now the world has opened up to equities and these are coming into Africa. Even governments are benefiting from private equities and they are encouraging that the SMEs take on equity funding. 

If you decide to go to the banks they will basically own your business and may completely take it away from you.

Accountability, why is it very important for shareholders?

Mr Mudenda: You have to account for the monies and resources other people have put in your business as these people are looking to benefit from their investments, thus you have to have accountability in place.

What should an SME consider in terms of financial management to get ready for selling shares of a company?

Mr Mudenda: If you want to sell shares of your company. You will need to have all your financials and accounting, corporate governance and many other systems in place. If you are going to sell the next person who wants to buy will want to know what if your business is worth their investment.

Guest Advise: First and most important put God first in every business that you do. Human capital and corporate governance are also very important as most Zambian businesses do not have governing structures this is so because they want to own the businesses completely. Having a board in place will help you grow your business.

If you have a comment, please feel free to add your thoughts. In the meantime like our Facebook page https://www.facebook.com/smeaccountingservices and tune into ZNBC radio 4 for the NdalamaInsights radio Show every Tuesday 07:15 and Wednesday 17:30 or Listen to a recorded podcast of this episode http://www.ndalamamarket.com/?page_id=229

 

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