Inqo Investments Ltd - COVID-19 Company Portfolio Update

Inqo Investments Limited

COVID-19 Company Portfolio Update

11 May 2020

Inqo Investments Ltd, the Aquis Stock Exchange-listed ('INQO') social impact investment company today released an update on the response of their portfolio companies to the COVID-19 pandemic

Inqo is working closely with the management teams in their portfolio of companies in response to the COVID-19 pandemic. All of Inqo's portfolio companies serve the most vulnerable communities in sub Saharan Africa in some way - as such, protecting employees and customers is a high priority for both Inqo and portfolio company management at this time. At present, Inqo's focus is on mitigating risk and contingency planning in support of portfolio companies in what is a fluid and dynamic situation. Conversations with prospective portfolio companies are ongoing, but full due diligence will not be resumed until the COVID-19 situation is resolved.

Kuzuko Lodge (South Africa)

Kuzuko Lodge ('KUZUKO") closed down in early April due to the lockdown restrictions in South Africa. Prior to the COVID-19 pandemic Kuzuko was performing well with strong bookings in place for 2020. The COVID-19 pandemic has had a severe effect on the tourism industry globally and at this stage it is unclear what the full impact will be. Inqo anticipates that disruption through travel restrictions and the depression on sales due to economic downturn will last for a minimum of two years. As such, reductions in staff numbers at Kuzuko are regrettably inevitable. Inqo and Kuzuko management are deeply committed to their staff and are currently working with the operator, Legacy Hotels and Resorts, to look at ways to support staff during this time. One measure that has been agreed so far is the provision of a food bank for staff members and their families which will also help to support Kuzuko's suppliers.

The reserve management of Kuzuko has been largely unaffected by the COVID-19 pandemic. The recent emergence of pioneer grasses across the reserve indicates strong signs of veldt and soil recovery after many years of historical overgrazing prior to the formation of Kuzuko. Kuzuko's rewilding program with the Ashia Cheetah Foundation continues to be a success. To date, Kuzuko have released five cheetahs (three females and two males) to five different reserves contributing valuable diversity to the genetics of the metapopulation. Kuzuko's rewilding program has enabled new connections in the conservation space leading to a number of potential new conservation initiatives in the pipeline.

Spekboom Trading (South Africa)

The spekboom thicket restoration at Kuzuko is  likely to re-start  once the COVID-19 crisis has passed and restoration work can commence. A memorandum of understanding is being negotiated with a leading carbon fund to restore 5,000 hectares of spekboom  on the Kuzuko property in order to generate carbon credits.

There has recently been a renewed interest in the carbon markets in response to the growing global awareness of the impact of climate change with nature-based solutions, such as spekboom, being a high priority. Inqo anticipates scaling up spekboom restoration activities once the COVID-19 situation has resolved, providing valuable employment opportunities and sequestering carbon.

A small scale trial plot has just been planted to test the best method for growing spekboom based on the latest scientific research. The next step is to undertake large-scale trials over 40 hectares to refine the cost model of the investment. This will take place as soon as it is feasible (in the context of COVID-19 lockdowns) to run the trials.

South Lake Medical Centre (Kenya)

As a low-cost hospital, South Lake Medical Centre (SLMC) has an important role to play in the COVID-19 pandemic. At present, the majority of Kenya's 281 confirmed coronavirus cases are in Nairobi County and there are no confirmed cases in Naivasha County (where SLMC is based). The SLMC management team are working closely with the government hospital, local communities and local businesses to mitigate the risks of COVID-19 and put procedures in place should Naivasha County experience an outbreak.

Economically, this will be a challenging time for SLMC. The major industry of the area is cut flowers for the European market - a sector that has all but ceased trading in the current climate. There is however a strong vegetable growing industry in Naivasha that continues to trade. SLMC have placed a high priority on employee and patient safety during this time and their actions in support of their community have been highly commendable.

Kentegra Biotechnology Ltd (Kenya)

Kentegra Biotechnology Ltd ('KENTEGRA') continue to operate in a scaled down manner and still report demand during the COVID-19 pandemic. They have recently installed a new factory that is in the process of being commissioned ready for production. The senior management team have responded quickly and professionally drawing up well considered contingency plans for all eventualities and are re-evaluating the situation on a regular basis. Kentegra has shown a strong commitment to both their sub contracted farmer partners and their employees during this time going above and beyond to minimise the economic impact while ensuring safety for the organization.

Bee Sweet Honey Ltd (Zambia)

After a very successful harvest in 2019, Bee Sweet now face challenging conditions exporting their honey product during the COVID-19 pandemic. Bee Sweet provides invaluable additional income to over 9,000 small farmers in Northern Zambia and the senior management team are working hard to secure sales and minimise costs in order to purchase the first harvest of 2020. Inqo is in regular contact with the Bee Sweet management team.

Four One Financial Services (Uganda)

Four One Financials ('FOUR ONE') operates the Mazima Retirement Scheme, a regulated voluntary pension scheme for the informal sector. Prior to the COVID-19 pandemic, FOUR ONE was performing well having endured challenging operating conditions for the previous 18 months. The impact of the lockdown and subsequent economic downturn is likely to be severe in Uganda and so for FOUR ONE. The senior management have a strong track record in navigating a difficult business environment through lean operations and agile response to market demands. Inqo are in regular contact with the FOUR ONE management team and will monitor the situation as it progresses.

Stock Exchange Listing

AQSE Exchange PLC (AIM:AQX) acquired the NEX Exchange in March 2020, which has now been renamed the Aquis Stock Exchange (AQSE). Shares on AQSE will remain exempt from Capital gains Tax and Inheritance Tax as they were on the NEX Exchange.

Financial Reporting

According to the rules of the AQSE stock exchange rules, companies listed on the exchange are required to publish annual audited accounts by no later than six (6) months after the end of their financial year.  Inqo's audited financials would normally have to be submitted by 31 August 2020.

ASQE have recognised the impact of Covid-19 and realised it may lead to unforeseen challenges for listed companies and their auditors.  To accommodate these challenges AQSE shall allow, as a temporary measure, AQSE Growth Market companies seven (7) months from the end of their financial year within which to publish their annual audited accounts.

Inqo advise that their February 2020 annual audited accounts may thus only be released in September 2020 due to the fact that audit processes may take longer as a result of the lockdown in South Africa.

Corporate Adviser and Broker

Our Corporate Adviser and Broker has been novated to Hobart Capital Markets LLP. The new contact details can be found below.

Enquiries

About Inqo Investments Limited

'INQO' (www.inqo.co.za) is a South Africa-based social impact company listed on the London Aquis Stock Exchange Growth Market. It makes strategic acquisitions and investments in businesses designed to tackle poverty and provide employment, products and services to the poor in Low Income Countries (LICs).