• The move to delist aims to give Khayah Cement the agility needed to restructure operations and finances without public market pressures
• The company grapples with inherited debt and outdated infrastructure
• U.S. sanctions on Fossil Mining restrict access to capital and complicate efforts to modernize critical assets

Harare- Khayah Cement creditors have approved a plan to delist the company from the Zimbabwe Stock Exchange, a move that sets the stage for majority shareholder Fossil Mining to potentially exit its investment just three years after acquiring the country’s second-largest cement producer.

The decision, finalised at a creditors’ meeting on Monday, stems from a proposal by Bulisa Mbano of Grant Thornton, appointed as Corporate Rescue Practitioner after Khayah entered voluntary business rescue in 2024.

Mbano argued that delisting is essential for the company’s turnaround, allowing it to restructure operations and finances away from the public market’s scrutiny.

This strategic shift aims to address the company’s mounting challenges, including inherited debt, operational inefficiencies, and U.S. sanctions on Fossil Mining, but its success remains uncertain in Zimbabwe’s volatile economic landscape.

The roots of Khayah Cement’s distress lie in a combination of legacy issues and external pressures that have intensified since Fossil Mining’s US$29.7 million acquisition of the company, then Lafarge from Holcim in 2022.

The takeover brought with it a US$11 million legacy debt from Holcim’s operations, which has strained Khayah’s financial position.

Compounding this, critical infrastructure like the company’s kiln, with a clinker capacity of 26,000 tonnes per month, was already three years overdue for major maintenance at the time of acquisition.

Khayah’s assets, including a Vertical Cement Mill with a 700,000-tonne annual capacity and two mothballed ball mills with a combined 450,000-tonne capacity, are significant but underperforming due to delayed maintenance and operational inefficiencies.

U.S. sanctions on Fossil Mining and its shareholders have further restricted access to capital and global markets, undermining the company’s ability to capitalise on Zimbabwe’s strong cement demand and pushing it into distress.

Delisting, as Mbano outlined in his April proposal, is designed to provide Khayah with the “agility” needed to navigate its challenges. By operating as a private entity, the company can negotiate with creditors, implement cost-cutting measures, and realign operations without the pressures of public market oversight.

This flexibility is critical for addressing the legacy debt and investing in overdue maintenance to restore production capacity.

However, delisting carries risks, including reduced transparency, which could complicate creditor relations, and limited access to capital markets, which may hinder funding for critical investments.

The success of this strategy hinges on Khayah’s ability to execute time-sensitive operational reforms and secure the resources needed to modernize its assets, particularly the kiln and mothballed mills, to regain competitiveness in Zimbabwe’s cement market.

Zimbabwe’s broader economic challenges add complexity to Khayah’s path forward. The construction sector, a key driver of cement demand, faces headwinds from economic instability, currency volatility, and infrastructure constraints.

Fossil Mining’s initial optimism about local demand has been tempered by these realities, as well as the geopolitical burden of U.S. sanctions, which limit Khayah’s ability to attract foreign investment or partnerships.

While delisting may shield the company from market pressures, it does not directly address these external constraints.

Competitors unburdened by similar sanctions or legacy debts could seize market share, further threatening Khayah’s position as it focuses on restructuring. The delisting decision reflects a pragmatic step, but its effectiveness depends on addressing both internal inefficiencies and external economic pressures.

The potential exit of Fossil Mining looms large over Khayah’s future, raising questions about leadership and investment in the company’s rehabilitation. If Fossil departs, finding a new investor willing to navigate Zimbabwe’s challenging economic and geopolitical environment will be daunting.

Alternatively, if Fossil remains, it must overcome sanctions and secure funding to address Khayah’s operational and financial challenges. Mbano’s turnaround plan relies on strategic investments in assets like the Vertical Cement Mill and the mothballed mills, alongside cost-cutting measures, to restore profitability.

However, without a clear resolution to the sanctions issue or a stable economic backdrop, Khayah’s recovery remains precarious.

The U.S. sanctions on Fossil Mining and its shareholders have significantly exacerbated Khayah Cement’s financial and operational challenges, creating a complex barrier to the company’s recovery efforts.

These sanctions restrict the company’s access to international financial systems, foreign investment, and global markets, which are critical for a capital-intensive business like cement production.

Sanctions typically block access to U.S.-based financial institutions and discourage international banks from engaging with sanctioned entities, reducing Khayah’s ability to raise capital for critical investments, such as the overdue maintenance of its 26,000-tonne-per-month clinker kiln or the reactivation of its two ball mills with a combined 450,000-tonne annual capacity.

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