As we come to the end of yet another eventful year for the financial sector, it’s time to take stock.
The big question that arises is that as the financial sector bus hurtles into 2011, when we look in the rearview mirror at the receding 2010, what do we see?
A trail of unmet expectations and broken promises or an array of milestones signposting a path of progress?
After reading this article, you can judge for yourself.
The year 2010 will be remembered in the financial sector as the year in which recapitalisation initiatives hogged the limelight and liquidity concerns were uppermost in people’s minds.
Unsurprisingly, most of the events chronicled below have something to do with fundraising across the debt to equity spectrum either to meet regulatory capital requirements or mitigate liquidity constraints, although innovation, human resource and regulatory issues also feature to some extent.
From the highs to the lows and everything in between, what follows is an outline of selected financial sector developments in 2010, some of which will remain embedded in the collective memory of the sector’s watchers.
TN Holdings Limited shares start trading on the Zimbabwe Stock Exchange at a listing price of US5,5c following the reverse takeover of Tedco Limited, whose extensive branch network is ideal for TN Bank’s retail banking activities.
Kingdom Financial Holdings Limited appoints Lynn Mukonoweshuro as the group chief executive officer with effect from February 1, 2010. Lynn makes history by becoming the first female executive to head KFHL since its formation.
Charity C Jinya is appointed as Managing Director of MBCA Bank Limited with effect from February 8, 2010, replacing Mberikwazvo Chitambo and in the process becoming the first female director to head the bank in its 54-year history.
Barclays Bank of Zimbabwe Limited announces that it has met the Reserve Bank’s new capital requirements with almost twice as much the regulatory benchmark ahead of the Reserve Bank’s March 31 deadline, becoming the first bank to publicly announce its compliance status.
The new Reserve Bank of Zimbabwe (RBZ) Act comes into force paving the way for a new board of governors to be announced and for the apex bank to focus on its core functions of monetary policy formulation, stabilising the local currency (if, not when it returns) and supervision of financial institutions in line with international best practice.
The ReNaissance Group and Equity Partners Fund SPC, launch the $1,5 billion RFHL Africa fund against the background of illiquid market conditions. The fund seeks capital appreciation through direct and indirect investments in private and publicly traded securities in Zimbabwe and other African countries.
ZB Capital, a subsidiary of ZB Financial Holdings comes to the market to raise $7 million for on-lending to farmers to fund the 2010/2011 agricultural season through 360-day agro-bills attracting an interest rate of 10% per annum. Analysts and players in the agriculture sector hail this as the re-emergence of long-term paper on the market.
The Tetrad Group introduces the country’s first gold linked unit trust fund called Tetrad Gold Fund which is directly linked to the New York Mercantile Exchange gold price and has a minimum threshold of $150 000. The question arises whether this could evolve into the country’s first Exchange Traded Fund.
NDH Holdings Ltd’s major shareholders fail to raise $14 million required to enable its merchant banking subsidiary to meet minimum regulatory capital requirements, resulting in the surrender of its operating licence.
Interfin Financial Services Limited shares start trading on the Zimbabwe Stock Exchange, with 53 396 ordinary shares trading at an opening price of US45c, following listing of the financial services counter through a reverse takeover of CFX Financial Services.
African Century Financial Services snaps a 28% stake in NMBZ Holdings Limited after underwriting the company’s $10 million rights issue, in a quest to enable the latter’s banking subsidiary to meet new capital adequacy requirements as well as to strengthen its balance sheet and underwrite more business.
The RBZ’s mid-term monetary policy review statement announces the scrapping of statutory reserves and an increase in the prudential liquid asset ratio from 10% to 20%, in an effort to improve liquidity and strengthen risk management.
The Agricultural Development Bank of Zimbabwe (Agribank) gets a further capital injection of $5 million from government, which is its sole shareholder, having received another $5 million in the first quarter of 2010. The injection of fresh capital is meant to enable the land bank to underwrite more business and recover from a loss making position.
Ecobank Transnational Incorporated snaps a 70% controlling stake in the Premier Finance Group, in a transaction meant to enable the latter to meet regulatory capital requirements and reverse its fortunes, leveraging on Ecobank’s expertise in Africa and its unrivalled network on the continent.
The RBZ announces the re-issuing of commercial banking licences to Trust Bank Corporation Limited, Barbican Bank Limited and Royal Bank Zimbabwe Limited, in a development expected to have a significant impact on the competitive landscape of the local financial sector.
Regional banking group BancABC clinches a five-year $8 million line of credit from Norsad to finance small to medium enterprises, similar to the $3 million, four-year facility arranged by ReNaissance in June 2010 and to which there was an overwhelming response manifested by applications for funding totalling $20 million.
Government, through the Ministry of Finance, moves to restore the RBZ’s role as a lender of last resort by making available $7 million in a move seen as forerunner to the re-emergence of overnight lending, revival of the interbank market and ultimately the improvement in confidence in the financial services sector and consolidating economic growth. The IMF however declares the amount to be insufficient to mitigate financial shocks in the banking sector.
Government selects four banks namely BancABC ($5m), NMB Bank Ltd ($5m), TN Bank Limited ($5m) and FBC Bank Limited ($10m) as disbursing agents for the first tranche of $25 million under the $70 million Zimbabwe Economic and Trade Revival Facility (ZETREF). Coordinated by government and Afreximbank, ZETREF is targeted for procurement of equipment, capital goods as well as working capital. It is priced at LIBOR plus 6%.
Agribank and FBC Bank Limited come to the market to raise $10 million through 360-day Tobacco Bills to finance tobacco production for the 2010/2011 agricultural season. The bills’ special features include tax exemption status, prescribed asset status and liquid asset status. Interest is negotiable on a private placement basis.
ZB Bank comes to the market again through a more ambitious public floatation of debt securities to raise $30 million for purposes of financing agriculture on terms very similar, in all material respects, to those offered earlier by Agribank and FBC Bank for their Tobacco Bills.
The visiting IMF mission to Zimbabwe, headed by Vitaly Kramarenko, urges government to step up the restructuring of debt-ridden RBZ and notes that the banking sector remains fragile. The team recommends the transfer of the Reserve Bank’s non-core assets and liabilities to a properly legislated Special Purpose Vehicle.
Omen N. Muza is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd. He writes in his personal capacity. For feedback and your views on the issues raised in the article, please contact him on: email@example.com