The Infrastructure Development Bank of Zimbabwe (IDBZ) says the government should deal with the issue of debt that stood at $36,7 million at the end of last year if the bank is to play a significant role in the development of infrastructure in the country.
IDBZ received a budgetary allocation of $9 million in further equity by the government for use in the current financial year.
In a statement accompanying the group’s financial results for the year ended December 31, IDBZ chief executive officer Charles Chikaura Chikaura said while the injection of capital was welcome, its impact was minimal.
“Whilst the equity injection is most welcome, its impact on the group statement financial position will be minimal given the negative equity position of the institution arising from the legacy of foreign debt which stood at $36,7 million by December 31 last year,” Chikaura said.
“It was imperative that the legacy of foreign debt problem be resolved as a matter of urgency if the group is to realise its full potential and play its role as envisaged in the Act, namely infrastructure development to support economic growth.
“Government as guarantor of the legacy foreign debt is fully seized with the legacy debt issue and is actively assisting the group in resolving this legacy problem in 2011.”
The bank is currently negotiating with a potential equity partner and expects to finalise the matter before the end of the year.
During the period under review the bank returned to profitability after it posted a profit after tax of $3,9 million for the financial year ended December 31 2010.
In 2009 the bank recorded a loss of $3 million.
Chikaura said the good performance was achieved inspite of an interest charge of $1, 4 million on non-performing legacy lines of credit inherited from the Zimbabwe Development Bank.
“The growth in operating profit was driven by rapid growth in the short-term loan book following successful resource mobilisation strategies, significant growth in non-funded income from infrastructure related business and $1,4 million,” said Chikaura.
IDBZ recorded a fair value gain in investment of property of $1,7 million and a foreign exchange gain of $1,4 million.
Chikaura said owing to the high credit risk challenges prevalent in the financial services sector, the group incurred loan impairment charges of $2,9 million.
Group cash balances stood at $54 million up from $1,9 million in the previous year as a result of successful resource mobilisation.
He said the bank carried out a review of internal processes in the short-term lending business to ensure that they were aligned to the changing macroeconomic environment following the adoption of the multiple currency system.
“The review resulted in the establishment of a new unit called the central credit administration and monitoring whose main role is to carry out the credit processing function of the bank and facilitate approval of facilities by the management credit committee and to ensure all bad loans are timeoulsy referred to the credit control and recoveries unit,” said Chikaura.
The bank remained bullish about its prospects in the medium to long term.
“The group has formulated its strategies around the core mandate of infrastructure development. The country has certainly turned a corner, and with the vast business opportunities that are available across all economic sectors, the group stands ready to work with both the public and private sectors in realising the country’s growth potential,” he said.