While the announcement of the much-awaited, but ultimately underwhelming Cabinet had threatened to steal the thunder in September, a number of notable developments still emerged to save the day in the financial sector space during the month.
Financial Sector Spotlight with Omen Muza
Advent of the intelligent teller machine (ITM)
In what it claimed as a first in Zimbabwe,Tetrad Investment Bank announced the introduction of intelligent teller machines (ITMs). “A leap into the future of retail banking,” declared the bank.
The ITMs — available so far at four sites in Harare and one in Bulawayo — will allow the bank’s customers to make deposits and withdrawals 24hrs a day, subject to possession of a Tetrad debit card.
Wider adoption of this technology can help to decongest banking halls and — as competition for deposits heats up — accordingly reward the banks which invest meaningfully in such infrastructure.
Investment banking made difficult
Pursuant to its underwriting agreement with Interfresh Limited, Metbank Limited acquired a 32,1% stake in the horticultural concern through an undersubscribed $3 million rights issue.
Metbank reportedly paid $1,26 million to take up 63,7 million shares after only 57,53% of the 150 million rights offer shares were taken up at a subscription price of $0,02c. This transaction epitomises just how the liquidity situation in Zimbabwe has made otherwise routine investment banking transactions more difficult.
While underwriting fees would normally be a fairly easy source of income in liquid times, in this environment an underwriter can always be guaranteed that a rights issue will be undersubscribed, and subsequent to that underwriters can never be so sure that they will be able to dispose of the shares taken up at viable prices.
The aftermath of dollarisation without a plan
After several months of speculation, Kingdom Financial Holdings founder Nigel Chanakira finally announced the disposal of his 30% indirect interest in AfrAsia Kingdom Zimbabwe Limited (AZKL) to his co-shareholders AfrAsia Holdings Limited of Mauritius.
Through a reported cash and equity swap deal, Chanakira, completely exited AZKL while AfrAsia in turn sold its 35,7% stake in Botswana’s Kingdom Bank Africa Limited to Chanakira’s Crustmoon Investments.
Other terms of the deal included an immediate reorganisation of the AZKL board and retention of the “Kingdom” trademark by Chanakira, paving the way for the rebranding of AZKL as momentum gathered for the grand plan of securing liquidity and capital support from deep-pocketed AfrAsia Holdings Limited.
Chanakira’s statement that he had decided to exit AKZL after considering his obligations in relation to the liquidity and capital requirements of the group as a whole was quite revealing, if not entirely instructive.
At face value, this is typical corporate activity in the ordinary course of business, but in reality; the deal tells that sad tale of many other Zimbabwean shareholders who progressively surrendered entire balance sheets to hyperinflation and to cap it all, then faced government’s decision to dollarise the economy without any form of plan to recompense economic agents.
Now, devoid of the capacity to recapitalise the businesses they founded, the only way for Zimbabwean businessman to save those businesses is to surrender them to those with the means to sustain them — who, as things stand, happen to be foreigners. While this looks deceptively like a corporate-level issue, this is actually now of sovereign proportions.
AMA bills poser
During the month, CBZ Bank opened an issue of 272-day Bills at an interest rate of 10,5% per annum on behalf of the Agricultural Marketing Authority.
This was evidently the first of more issues to come, considering that the bank signalled the intention to raise up to $35 million to finance production of soya beans in the 2013/2014 season.
After government sucked almost $100 million worth liquidity for electoral purposes from a market dominated by the likes of Old Mutual, NSSA and others who are considered frontrunners amongst those expected to take up the bills, one wonders how much more capacity still exists in the market to take up these bills without causing further liquidity strain.
Resultantly, even with special features including prescribed asset status, liquid asset status, tax exemption status and the backstop of a government guaranteed, securing the desired level of support for the AMA bills is an uphill struggle.
Exorcising the Zim dollar ghost
In one of his first significant acts as Finance minister Patrick Chinamasa moved to calm the markets by asserting that the multi-currency regime will remain in force for the foreseeable future as part of measures to ensure stability and stimulate economic growth.
“In order to dispel any doubts on the market, I came back home to maintain the multi-currency regime.
It will be with us, it will remain with us for an indefinite period,” said Chinamasa in apparent reference to the introduction of the multi-currency regime in February 2009 when he was acting Finance minister.