Time Bank of Zimbabwe (Time Bank) has proposed to offer a syndicated loan of US$35 billion to the Government for purposes of paying compensation to 10 key groups of people, among them previous farm owners and sovereign debt resolution, as part of its business repositioning strategy, which the bank believes would also improve Zimbabwe's business environment.
Some of the stand-out compensation obligations include payment to foreign lenders (US$20,4 billion), payment for land improvements by indigenous Zimbabweans whose land was acquired by the Government without compensation (US$7 billion) before 1980 and land improvements by previous white former commercial farmers (US$3,5 billion) whose land was acquired after 1980.
The liabilities are part of unsustainable debts Zimbabwe is battling to expunge, for which it has appointed African Development Bank president Dr Akinumwi Adesina and former Mozambique President Joaquim Chissano to help design the repayment process.
According to AfDB, Zimbabwe's total consolidated debt amounted to US$17,5 billion, as of July 2023.
The country is in arrears for servicing its debt, with outstanding payments to multilateral development banks, including the African Development Bank, the World Bank and the European Investment Bank.
Compensations to the 10 groups, Time Bank said, were critical to avoid violation of property rights and the unintended consequences, which both local and international investors are concerned about.
Notably, compensation of previous farm owners (PFOs) is provided for in terms of Section 295 (3) of the Constitution of Zimbabwe and the Global Compensation Deed (GCD) agreed with the farmers in July 2020.
In terms of the GCD, the Government and the affected farmers had a second agreement under which the farmers could raise additional funds from donors to settle the compensations for land improvements without obligation to the Government.
Time Bank intends to take advantage of this provision to provide appropriate banking solutions to assist the previous farm owners to raise such funding for the compensation of US$3,2 billion for the land improvements, which the bank believes would help improve confidence in Zimbabwe's business environment.
The intervention follows the reopening of the bank on October 27, 2022, after 18 years of closure. The bank adopted a phased approach to the reopening, which has seen it offering limited banking services.
Following the gradual growth of operations since reopening in 2022, Time Bank has revealed plans to resume full banking services by the end of this year.
Part of the banking group's business growth strategy, covering the period 2022 to 2025, is the proposed US$35 billion loan for the Government to compensate the 10 key groups of people.
The bank provided a peek into its business strategy, which entails the US$35 billion loan proposal to the Government, in its audited financial statement for the year to December 31, 2022.
In his statement, managing director Chris Takura Tande said the bank was focused on growing the business using a scalable model based on the organisation's capacity, new products, new markets, research and development.
"In terms of its strategy, Time Bank is pursuing a phased approach business model, where the bank is being reopened in phases. Such a business model enhances the financial performance of Time Bank during the period of reopening.
"As part of its business model, Time Bank is currently conducting limited banking services and is not taking deposits from the public.
Central to Time Bank's business model is the development of a bank that starts small, and which can be scaled up easily," Mr Tande said.
Time Bank's compensation framework proposal includes loan repayment (US$20,4 billion) to foreign lenders (existing and new), previous farm owners or their representatives (US$3,5 billion), for land improvements, and land improvements by the first group of indigenous Zimbabweans whose farms were acquired without compensations before 1980 (US$7 billion).
The acquired land, Mr Tande said, on which the improvements were made included precious minerals beneath it. Also covered under the US$35 billion compensation plan are foreign investors who were covered by Bilateral Investment Protection and Promotion Agreements (BIPPAs), second group of indigenous Zimbabweans who bought farms under the willing buyer willing seller but had their farms acquired by the Government without compensation for land improvements after 1980.
Other key groups to be compensated would be depositors of banks who lost value after the hyperinflationary period in 2009 (US$1,1 billion), compensation to pensioners (US$1 billion) affected by inflation, compensation to ex-farm workers of previous farm owners (US$400 million) and compensation to insurance policyholders US$400 million also affected by inflation.
"The motive of Time Bank in making this loan proposal of US$35 billion to finance such compensations, as part of its strategy, is that Time Bank wishes to see an improvement in the business environment in Zimbabwe, and believes that payment of such compensations by Government, in an inclusive manner, to all the 10 groups of people, including PFOs, as one of the groups, will improve the business environment in the Zimbabwean economy," Mr Tande said.
Mr Tande said Time Bank was awaiting approval of the loan proposal by the Government of Zimbabwe. "It is Time Bank's hope that the loan proposals will be approved by the Government," he said.
He said there were legal and moral obligations for the Government to pay the listed obligations to the various groups in an inclusive manner. The exact amounts to be paid to each of the 10 groups, Mr Tande said, would have to be agreed with the Government.
"The loan proposal is subject to the resolution of the foreign debt crisis and the loan proposal is intended to be part of such resolution.
"The loan proposal will also address the issues raised by the International Monetary Fund (IMF) in its public press statement of October 25 2023, in that Time Bank's loan proposal will provide a clear path to foreign debt resolution, debt sustainability and it will also provide safety nets for vulnerable groups," Mr Tande said.
One major advantage of the proposal, he said, was that the proposal was a homegrown solution that met both local and international standards.
He also highlighted that the loan proposal would utilise local resources, including adding value to Zimbabwean products before selling them.
"For purposes of clarification, Time Bank does not have such an amount of US$35 billion on its balance sheet and does not need to have such money on its balance sheet on day one.
"Instead, Time Bank has the organisational capacity to arrange such a loan facility for the Government, as syndicate loans, including mobilising financial resources and structuring such loans to ensure viable loan repayments," Mr Tande said.
Mr Tande said the payment of the compensation would be done in three phases namely pilot scheme, second and third compensation schemes.
The bank would begin with the pilot scheme, where the bank would raise an initial US$1 million from its resources for the compensation of previous farm owners.
Under the pilot scheme, Time Bank will purchase Treasury bonds from previous farm owners "at a very small discount" on the basis of willing buyer willing seller, as a normal secondary market transaction and at the risk of the bank.
"The purpose of the pilot scheme is to demonstrate the viability of Time Bank's loan proposal," Mr Tande said.
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The bank would then leverage on the success of the pilot scheme to raise additional funds from both local and international investors to finance the second compensation scheme for previous farm owners for the land improvements, and third compensation scheme for the nine other groups.
"The key role of the bank is to intermediate funds from surplus areas and give it to deficit areas, in a manner that is commercially viable," Mr Tande said.
Under the agreement, the Government would also use Treasury bonds for settlement of compensations. The Government would borrow through Treasury bonds, under a structured loan.
This would ensure beneficiaries do not suffer huge discounts on their Treasury bonds when they resell while the Government would have viable sources of repayment of the loan, which will not rely on increasing taxes or borrowing from the central bank.
The bank would also arrange syndicate loans, where other banks, companies and other investors (local and international) would participate.
"The loan proposal is non-political. Time Bank can work with anyone who is interested in financing the payment to all the above-mentioned 10 groups of people," Mr Tande said.
He said the loan would not disturb macro-economic stability, cause inflation or cause a crowding-out effect (high interest rates) or worsen foreign currency shortage or increase the tax burden on the current tax payers.
"Further details of the structure of the loan proposal, including sources of loan repayments, viability of the loan proposal and the implementation matrix, will be advised to the public in due course, after the approval of the loan proposal by the Government, but before its implementation in line with the Constitutional requirements for transparency," Mr Tande said
