12 May 2014

Zimbabwe: Agribank Told to Seek Local Partners

Finance Minister Patrick Chinamasa has instructed Agribank to first seek local partners to recapitalise the bank before considering bringing in foreign investors.

Agribank chief executive Mr Sam Malaba told The Herald Business that the State- owned agriculture-oriented institution has been told to first seek local partners to provide the much needed funds to recapitalise the bank.

"The position was that we try and recapitalise the bank (first) before we seek for an external partner," Mr Malaba said. "Otherwise a foreign partner would be getting this investment at a very big discount," he said.

Agribank will go to the market seeking to identify investors to inject $50 million to shore up its capital in line with Reserve Bank of Zimbabwe minimum capital thresholds.

Commercial banks were required to have $25 million minimum capital as at December 2013, but must submit a strategic plan to the Reserve Bank on how they would meet the $100 million threshold effective 2020.

Minister Chinamasa is however still expected to approach Cabinet for permission to allow Agribank to seek foreign investors to inject fresh capital into the bank.

"He will still go back . . . through the process of Cabinet, but he is just saying that let us try and see if there is anybody that we can get who could inject money locally first. So that is what we are doing," Mr Malaba said.

The Agribank boss told an analysts briefing in March that financial and legal advisors had completed due diligence and were finalising valuation of the bank, following which the bank would go for selective tender.

Agribank posted a $9,2 million loss for the year to December 2013 compared to $5,6 million in 2012 weighed down by an increase in non-performing loans.

The bank's full year loss was however exacerbated by an increase in impairment expenses to $5,8 million from $3,8 million in the previous comparative period.

Mr Malaba said inadequate capitalisation resulted in funding and liquidity challenges and the inability to underwrite business for growth. Low capital also meant having to make recourse to expensive market fixed deposits and the inability to attract significant deposits.

In an effort to minimise the impact of non-performing loans Mr Malaba said Agribank would adopt aggressive debt management and recovery through expanding and intensifying pre-loan assessments, stronger credit granting process and security provisions.

Mr Malaba said this week that it was mostly corporate clients that were struggling to repay short-term loans; hence they defaulted, compared to individual borrowers.

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