Investing in Zimbabwe: How Vhusi Phiri of Diaspora Kapita and Tsigiro Usekelo Manages Challenges in Investing in Zimbabwe

Interview with Vhusi Phiri, CEO of Diaspora Kapita and Co-Founder of Tsigiro Usekelo

Could you provide an overview of your desire to become a leading Pan African holding, and subsequently explain the group’s scope of business?

Our journey began in 2014 with the establishment of Diaspora Kapita, a predecessor to Lake2Shore. We started with a core team of about five individuals, either based in South Africa or originating from Zimbabwe. Our approach centered around utilizing modest savings for investments in Zimbabwe, driven by an acute awareness of the country’s recurring challenges. While situated in South Africa, we were committed to initiating something that could provide assistance and growth over the span of a few years, dovetailing into our retirement plans. The larger vision encompassed inclusivity, allowing others to join in later through forums and similar avenues.

Our initial strategy involved monthly contributions, with each member putting in approximately 3,000 Rands. This collective pool amounted to roughly 15,000 Rands, which translated to around 1,000 USD at prevailing exchange rates. These funds were then accessible within the group, serving as a source for loans that could be invested. Returns generated were repaid to our company, completing the cycle.

This approach continued for about one to two years, during which we recognized a need for growth beyond our equal shareholder structure and equal say. Thus, in 2014, we embarked on expanding our entity, leading to the birth of Diaspora Kapita. This growth coincided with our property acquisition in South Africa, a milestone that marked the formal emergence of Diaspora Kapita. The name itself reflects a focus on individuals residing outside their countries of origin, including cases such as Nigerians in America or Zimbabweans in the UK. The nomenclature “Diaspora Kapita” was deliberately chosen to acknowledge the origins of our initial capital and emphasize the diaspora-driven ethos. This marked the official commencement of our journey in 2014, as Diaspora Kapita transitioned into a more extensive entity with the inclusion of additional participants, expanding our initial team of five to eight members.

A significant shift in our strategy involved shedding rigid constraints. Recognizing the significance of accommodating individual contributions based on capacity, we moved away from an entirely equal participation model. Our collective agreement led to each entity member committing to a minimum monthly contribution of 3,000 Rands for approximately three years. These funds were then strategically channeled into investments spanning various sectors. It is important to note that our company ethos leaned towards passive investment, recognizing the professional commitments of our members in other spheres. At the same time, my cousin and I maintained our separate assets, contributing to the overall growth of the company. This dual-pronged approach has been instrumental in shaping our journey since its inception.

We also operated our own companies within Zimbabwe. Around 2019, we arrived at a juncture where it became evident that to facilitate the growth of Diaspora Kapita, active management was imperative. Prior to that, I had been employed at PwC, an auditing firm, for approximately five years, commencing in 2014. My entry into PwC was through the sale of a consulting company that I had co-established with five individuals. PwC approached us and acquired our company, a service-oriented entity that entailed purchasing contracts and expertise, securing a two-year commitment for services. In 2019, the timing seemed opportune for me to transition from PwC and assume a full-time role in leading Diaspora Kapita.

Hence, in 2019, we initiated the full-time management of Diaspora Kapita. Concurrently, we recognized the need for consolidation. Considering my involvement in various companies alongside other partners, a decision was taken to streamline and diminish conflicts of interest. All these entities were amalgamated as subsidiaries under the umbrella of Diaspora Kapita. Our overarching objective from the outset was to eventually extend the scope of Diaspora Kapita to encompass the wider diaspora community, a goal that is currently in progress.

As we move forward into September and beyond, the plan is to open up Diaspora Kapita to the broader Zimbabwean community. This initiative aims to facilitate investment opportunities within Zimbabwe, South Africa, and other African nations through the diaspora channel. This encapsulates the foundational journey that brought us to this point.

We have made investments in the mining sector through a company known as Northlands Resources. Within Northlands Resources, our focus is on contract mining. This entails providing mining services for various mines in Zimbabwe. Notably, we collaborate with significant entities such as Freda Rebecca, a prominent goldmine in Zimbabwe, and Bindura Nickel Corporation, another substantial mining operation. Through these partnerships, we employ nearly 100 individuals within the mining department.

Additionally, our interests extend to the agriculture sector, specifically in collaboration with a company called AgroStrong. Under the AgroStrong umbrella, our investments primarily revolve around cattle. Cattle serve as a pivotal asset, and we are innovatively developing financial products that leverage cattle as collateral. For instance, you can opt for a life cover policy, where payouts can be received either in cattle or cash, based on the preferences of your family or beneficiaries.

Furthermore, we have a presence in the financial services domain through a subsidiary known as 21st Century Life. This well-established company has been operational in South Africa for over 25 years and has expanded its reach with more than 28 branches across the country. Our portfolio encompasses funeral cover for a substantial base of over 100,000 individuals. We are committed to scaling and expanding this enterprise.

As we navigate this diverse landscape, we possess a range of assets. Nevertheless, our vision remains inclusive and ambitious. We firmly believe that there is ample room to involve a broader diaspora community in our efforts to further elevate and expand these enterprises.

Are you suggesting that the points being discussed might not be relevant in Zimbabwe? For example, is the concept of 21st Century Life not present or applicable in Zimbabwe? Or could this be a scenario where operations cover both Zimbabwe and South Africa?

We maintain a diverse portfolio of businesses that operate both in Zimbabwe and South Africa. One noteworthy entity is 21st Century Life. While its roots are in South Africa, it has expanded its reach to encompass operations in Zimbabwe as well. A significant aspect of our strategy involves a strong collaborative relationship with Old Mutual, a well-known and substantial corporate entity. They share an interest in enhancing the funeral services sector within Zimbabwe. Through our partnership with 21st Century Life, Old Mutual is actively involved as our strategic partner in Zimbabwe.

Could you elaborate on your competitive advantage and what sets your corporation apart?

The core essence of our business has always been centered around addressing pressing challenges. If you examine any of our subsidiary ventures, you will find that they originated from identifying critical issues either directly experienced by us or prevalent within the broader community. This has been the driving force behind the inception of some of these companies.

Take AgroStrong as an example. What prompted its creation were recurrent instances across Africa, not solely limited to Zimbabwe, Angola, DRC, or Nigeria, where individuals face cyclical losses of their life savings. These losses often stem from investments in financial instruments lacking substantial underlying assets. In Zimbabwe, for instance, notable instances include the years 2000, 2008, and 2019, along with recent episodes. These periods witnessed significant loss of savings, pension funds, and more due to currency fluctuations. In light of this, we ventured into cattle investment, recognizing that cattle are consistently traded in hard currency. Although local currency payment is feasible, it occurs at fair value. Through cattle and its inherent asset value, people are empowered to harness their pension funds. To facilitate this, we have collaborated with experts in cattle farming and fattening. Addressing the issue at hand, our partners regularly slaughter cattle every 90 days, supplying beef to retail outlets and even export markets. This generates financial liquidity within the cattle business, notably untouched by inflation. The significant advantage lies in the result itself – the capital preservation. This remains largely unaffected by inflation, which is a notable distinction. This example demonstrates our approach of identifying and addressing the real pain points faced by individuals, designing instruments that retain value, especially in the realm of savings.

The formation of Diaspora Kapita emerged from a similar need to address pain points. In countries where significant populations reside, savings and investments were at risk. Our response was to take matters into our own hands, acknowledging that relying solely on conventional employment could prove uncertain. We endeavored to build something of our own to secure our financial futures. The birth of Diaspora Kapita is rooted in this need to resolve everyday issues.

Turning to our health business, MediChem, a similar principle prevails. Health services encounter challenges in Zimbabwe and across Africa. Our aspiration is to actively enter this industry, contributing a meaningful transformation that benefits ordinary individuals within these sectors. It is important to note that such initiatives tend to yield rewards for those investing in these endeavors.

You mentioned several promising developments, but I believe there are other businesses within your portfolio. Could you provide more insight into the array of businesses your corporation is currently engaged in or developing?

As I mentioned previously, we are engaged in the mining sector through our company called Northlands. At Northlands Resources, we have a workforce of around 80 individuals, and our approximate annual turnover is in the range of $4 million.

Moving on, we have SysTech, a construction services company. Our focus here encompasses both manufacturing construction materials and aiding individuals in their construction endeavors.

AgroStrong stands as another significant endeavor. We specialize in cattle investments, maintaining cattle in both Zimbabwe and South Africa. Additionally, we are in the process of establishing AgroStrong Botswana, with plans to introduce cattle farming operations there.

Our involvement extends to 21st Century Life, which offers funeral policies in South Africa. Moreover, we play a supportive role for Old Mutual Zimbabwe in their business expansion and funeral services sector.

Now, onto an exciting initiative called Tsigiro Usekelo. Although the company is new, the concepts driving it are well-founded. Tsigiro Usekelo addresses a critical pain point among the diaspora community. A prevailing concern for many in the diaspora is to possess an asset, such as property, back in their home country. This often aligns with retirement plans or serves as a fallback option in times of uncertainty. However, the challenge lies in the considerable financial requirements set by institutions, such as substantial deposits and short repayment periods.

Our approach with Tsigiro Usekelo involves forming a bridge with financial institutions. We propose that, as long as an individual is part of Tsigiro, loan conditions can be adjusted. This means lower deposit requirements, extended repayment periods, and more manageable terms. We are currently in discussions with various financial institutions to make this a reality. Taking Zimbabwe as an example, there are roughly 2 to 3 million people living abroad. If we consider a conservative 10% market share and around 20,000 individuals per week seeking a mortgage with an average of $40,000, the total potential mortgage amount is a substantial $8 billion.

Tsigiro is actively collaborating with financial institutions in Zimbabwe, South Africa, and beyond to empower the diaspora community to acquire properties in their countries of origin. This initiative aims to address a significant need within the diaspora and provide them with a tangible path towards property ownership.

What is the geographic reach of your corporation?

Currently, our operations are centered in Zimbabwe and South Africa. However, when it comes to Tsigiro Usekelo, it is addressing a global issue. To elaborate, consider the diaspora community. Annually, they contribute nearly $50 billion in remittances to Africa. A significant portion, more than 85%, goes towards immediate needs like education, food, and so forth.

However, there is an opportunity to channel a part of these remittances into projects and investments that can effectively address various challenges across sectors like healthcare, agriculture, and construction throughout Africa. While Tsigiro currently focuses on assisting the Zimbabwean diaspora with property assets in Zimbabwe, our vision extends further.

Once we have established our approach in Zimbabwe, we intend to replicate it in other nations. We aim to expand this concept to Kenya, Nigeria, and beyond. Our goal is to offer similar support to the Nigerian diaspora in accessing properties and investments within Nigeria, as well as assisting the Kenyan diaspora in acquiring assets in Kenya. While Zimbabwe serves as our initial platform, our ultimate objective is to scale this model to other countries.

There are other institutions operating within a similar sector, though not necessarily from the same perspective, given your focus on the diaspora. To shed light on your distinctiveness and to offer clarity to our audience, could you elaborate on the competitive advantages your institution possesses compared to other financial entities?

I believe the most significant advantage lies in the diaspora community itself, which represents a substantial market. As an example, consider the fact that remittances into Africa amount to around $50 billion annually. For instance, Nigeria alone receives an estimated $20 billion, and Zimbabwe receives around $2 billion in remittances each year. Our competitive edge emerges when we realize that a significant portion of this remittance amount, around 5% to 10%, is claimed by various international entities like Western Union. In essence, the diaspora community is the customer, yet they do not actively participate in these profits.

Our unique advantage comes from a different perspective. We aspire to empower the diaspora community to own and operate entities that are integral to their financial dealings. Instead of being customers of these external companies, we encourage the diaspora community to become stakeholders. By enabling them to own remittance companies, banks, and businesses that offer mortgage services, we are shifting the paradigm. This approach forms the core of our competitive edge – we are creating opportunities for ownership and participation that directly benefit the diaspora community.

Currently, what are some of the ongoing projects that your corporation is engaged in?

Within the Tsigiro Usekelo platform, we have a range of initiatives in progress. First off, we have recently established a partnership with SendHome, a company based in South Africa, to facilitate remittances. This is a significant step, especially considering that approximately 40% of the $2 billion remitted to Zimbabwe originates from South Africa. Through this collaboration, we are actively participating in the remittance value chain, capturing a portion of the value. You can find more details about this partnership on our website under the SendHome section.

Looking beyond remittances, our secondary focus is on asset management. We are in the process of setting up a fund in Zimbabwe with the involvement of a reputable asset management company, Peoples Asset Management. This fund will be designed to provide a channel for remitters to allocate an additional 10% of their remittance amount. This 10% will be channeled into the fund, which can be utilized to build a house deposit, plan for retirement, or invest in various avenues like cattle or other assets. This concept has the potential to yield substantial results. To put it into perspective, over the last 15 years, Zimbabwe has received more than $20 billion in remittances. By allocating just 10% of this amount into the fund, the diaspora community would possess a fund totaling approximately $3.5 billion.

By having a stake in a remittance company or partnering with one, we are able to launch projects that encourage regular contributions. These contributions can be directed towards the fund, fostering savings and investments that can have far-reaching impacts, such as constructing hospitals or other essential facilities. This represents a significant dimension of the platform. Furthermore, we are also focusing on assisting individuals in purchasing properties. Members of the platform can avail themselves of preferential loan conditions from banks, facilitating property ownership. Another facet of the platform involves online grocery purchasing. Instead of traditional methods, our platform allows users to easily buy groceries online for their families, which can then be collected in Zimbabwe from our trusted partners.

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