Ring-fencing is the practice of confining a risk to a place where it can do limited damage. For Zimbabwe-exposed capital, the goal is blunt: let the opportunity sit in Zimbabwe while the value, the contracts and the recourse sit somewhere more stable. Done well, a Zimbabwean shock hits the operating layer without reaching the investor’s capital.
Keep the value in USD
The first ring-fence is monetary. Fund NAV, investor accounts and distributions are denominated in USD; revenues are swept into USD at the earliest contractual point; and Zimbabwean operating balances are held at operational-minimum working-capital levels. The ZWG balance you are exposed to should be the smallest amount the business can run on, not a pool of value waiting to be devalued.
Hold the capital offshore, under treaty cover
The second ring-fence is structural. Capital is held in South African (and, for the contracting layer, US) entities rather than on a Zimbabwean balance sheet. South African holding brings bilateral-investment-treaty and SADC dispute-resolution cover, and means the assets investors own are shares in a stable-jurisdiction entity, not Zimbabwean assets directly. The opportunity is reached through the structure; it is not held inside the exposed jurisdiction.
- No Zimbabwe-balance-sheet ownership of fund assets — investors own the offshore holding layer.
- Treaty and SADC cover provide a route to recourse outside the local courts.
- The contracting layer (often US/Delaware) is where the investment documents are governed.
Control the money movements
The third ring-fence is operational. Offtake agreements are collateralised before capital is deployed, so counterparty failure meets security rather than an unsecured claim. Dual-signatory controls apply to all material fund disbursements, so no single person can move capital out of the structure. And investment tenor is matched to the underlying asset, with trade-finance recycling used to return capital to the fund before project completion — which is as much a liquidity mitigant as a control.
Ring-fencing reduces exposure; it does not eliminate it. A structure’s suitability, legality and tax treatment are fact-specific and must be confirmed with qualified legal and tax counsel before implementation. The measures here are advisory recommendations, not a template to copy.
Where it shows up in the documents
Ring-fencing recommendations are part of the scope set out in a Risk Advisory Engagement Letter. When the structure is funded, the holding-layer economics and the conditions precedent — including screening and diligence — are captured in the Investment Term Sheet, and sensitive structuring discussions are run under a Mutual NDA.