18 May 2017

Zimbabwe: Rainbow Tourism Group Pursues Capital Bank

HOSPITALITY concern, the Rainbow Tourism Group (RTG), is in hot pursuit of the failed Capital Bank to recover US$1,9 million trapped in the failed financial institution.

It has since issued summons to Capital Bank in the hope that they would salvage something that would enhance the group's financial position.

RTG's confidence in pursuing the debt was bolstered by the victory it has scored in Zambia, where the Supreme Court there has ruled in favour of Zimbabwe's second largest hotel chain after a management contract went sour, with US$2 million at stake.

Finance director at RTG, Napoleon Mutukwa, confirmed the development saying the process was meant to "formalise" their claim "and avoid prescription". The Reserve Bank of Zimbabwe has been briefed about the summons.

Capital Bank surrendered its operating licence in 2014, having hit hard times.

RTG, which released its financial results for the year to December 31, 2016 two weeks ago, is now trying to ascertain the number of properties owned by the stricken bank, which it could fall back on in the event that it fails to recover the US$1,9 million.

The money was part of a US$7 million loan extended to RTG by continental lender, Africa Export and Import Bank (Afreximbank), to fund the facelift of the tourism group's units.

The loan was channelled through ReNaissance Merchant Bank (RMB), which also shut down in 2011 under the weight of alleged corporate governance deficiencies.

The National Social Security Authority (NSSA) had sought to bail out RMB by pouring fresh capital into the bank, rebrand it to Capital Bank, and bringing it back onto the market in 2012.

But during a wave of bank failures between 2012 and 2014, NSSA, the major shareholder, surrendered Capital Bank's licence, saying it had no cash to fund its recapitalisation.

At an analyst briefing two weeks ago, RTG chief executive officer, Tendai Madziwanyika, revealed that the group has repaid the Afreximbank loan in full.

"Afreximbank was owed US$7 million (and) US$1,9 million of that is in Capital Bank but we have paid Afreximbank in full. Today, we stand on a clean landmark. We have come out of legacy debts and we are ready to grow. We have completely come out of unprofitable entities in Zambia, in Beitbridge and in Mozambique," said Madziwanyika.

RTG revealed it has also liquidated its legacy debts with PTA Bank.

But the hotel group is still mired in challenges.

For example, NSSA has won the legal proceedings against RTG to recover a US$10 million loan extended to the company and had fallen due in December 2015.

While the pension fund is yet to execute the judgment, preferring to allow RTG to purse alternative ways of restructuring the debt, there is no guarantee that it will continue to treat the Zimbabwe Stock Exchange-listed group with kid gloves.

In the 12 months to December 31, 2016, RTG suffered another after-tax loss. In fact, the loss widened to US$4,7 million from US$29 304 during the prior year, on the back of lost revenues and retrenchment costs.

Revenue declined by 11 percent to US$24 million during the review period, from US$26,9 million reported during the prior comparative period in 2015.

The group lost US$800 000 in revenue due to direct cancellation of confirmed bookings when demonstrators camped at the hotel protesting against Vice President Phelekezela Mphoko who had stayed at the hotel for an extended period at the expense of the taxpayer.

RTG also incurred US$600 000 in retrenchment costs completed during the review period.

Discontinued operations incurred a US$1,6 million loss, representing 34 percent of the total loss.

Foreign revenue increased by 20 percent to US$8,1 million during the review period, from US$6,7 million the previous year.

Revenue per available room fell by 12 percent to US$36, from US$41 the previous year, on the back of a high volume-low rate strategy implemented by the company.

Total assets declined by 6,3 percent to US$46,7 million, from US$49,8 million in the previous year.

"In view of the subdued domestic market performance, the company aims to attain a 40 percent contribution in foreign revenues going forward," said chairman, Charles Chikura.

He said the opening of the new Victoria Falls International Airport was expected to spur revenue going forward.



ED Returns to Gwanda, Where His Journey Began

Ten months ago, he left Phelandaba Stadium unconscious, a victim of poisoning as the G40 cabal sought to stem the… Read more »

See What Everyone is Watching

Copyright © 2017 Financial Gazette. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 800 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.