Barloworld, a well-known Caterpillar earthmoving equipment distributor, recently made a significant strategic decision in Zimbabwe. The company has exited a long-standing joint venture called Barzem, which served as the Zimbabwean Caterpillar dealer and was majority owned by Zimplow, a company listed on the Zimbabwe Stock Exchange. As a result of this change, Barloworld Zimbabwe will be the sole distributor of Caterpillar equipment in the country.
During the transition, Barloworld offered all Barzem employees the opportunity to join Barloworld Zimbabwe, and an impressive 95% of them accepted. Andronicca Masemola, Barloworld Equipment’s Southern Africa CEO, stated that the company has made significant investments in its wholly-owned subsidiary, Barloworld Zimbabwe, including new facilities and personnel. Barloworld Zimbabwe acquired Barzem’s 49% shareholding at a discount, in accordance with the remedies provided in Barzem’s shareholder agreement, demonstrating the company’s commitment to protecting shareholder value.
Meanwhile, Zimplow, the previous majority owner of Barzem, must now find a new supplier of heavy equipment. To ensure continuity in serving its customers, Zimplow has established a new entity called TPS, which will focus on heavy equipment and earthmovers. TPS has already begun securing affiliations with key suppliers, allowing it to meet ongoing customer demands.
This decision comes at a time when Zimbabwe is dealing with a volatile operating environment. While the year 2022 appeared to be promising, with strong demand for equipment in the mining, construction, and agriculture sectors, the country experienced dry spells that significantly impacted agricultural equipment demand. According to the company, the implementation of monetary and fiscal measures in Zimbabwe, such as higher interest rates and restrictions on foreign currency retention, has contributed to a slowdown in demand for capital equipment, particularly in the agricultural sector.
It is worth noting that Zimbabwe is not Barloworld’s only difficult market. The company also operates in Russia, which is subject to economic sanctions. In 2022, Russia accounted for nearly a quarter of Barloworld’s revenue. The rating agency Moody stated in April that while it maintains Barloworld’s long-term credit rating with a stable outlook, an upgrade is unlikely as long as uncertainties surrounding the potential financial consequences of the Russian operations persist.
Despite the difficulties encountered in Zimbabwe and other markets, Barloworld remains committed to its strategic decisions and is actively adapting to the changing business landscape. By naming Barloworld Zimbabwe as the sole distributor of Caterpillar equipment, the company hopes to strengthen its presence and continue serving customers in the country’s southern African region.
