The genesis of the demise of local merchant bank, Genesis Investment Bank, could have been foretold after it emerged that on numerous occasions it had failed to raise capital despite several assurances it would pull through.
According to the Reserve Bank of Zimbabwe (RBZ), the bank “voluntarily surrendered” its licence following its failure to raise the requisite minimum capital from over 20 different potential inventors whom the bank tried to engage since 2009.
After the divestment of Zimre Holdings (ZHL) from the bank, which surrendered its operating licence a fortnight ago, it became apparent that the banking institution would labour in vain in its bid to raise the $10 million in minimum capital requirements. That the market has cash shortages affecting both individual and institutional investors is something Genesis shareholders were aware of in their fund-raising exercise. Records show how rights issues and private placements by local companies have fared. Undersubscribed! This week ZHL announced it was seeking more capital, another indication that the proceeds made from the disposal of Genesis were not sufficient to fund the group’s undercapitalised units. So the decision to sell Genesis, a non-core asset for the reinsurance group, could have been a foregone conclusion. Critics say it is ironic Indigenisation minister Saviour Kasukuwere, who on numerous occasions had threatened foreign-owned companies with closures and takeovers, allowed Genesis to fold. Kasukuwere is believed to have been one of the bank’s shareholders, but he insists that he had sold his shares by the time it was closed. An RBZ document gleaned by this paper shows that Migdale Investments, a company linked to Kasukuwere, had 17,2% shareholding in the now defunct bank. Analysts also contend that although Genesis was weighing down ZHL’s profitability, the decision by the group to pull out of the investment bank could have been triggered by the poor performance of merchant banking on the domestic market. The introduction of the multiple currency regime has seen merchant banks transforming into commercial banks, as competition intensified in retail banking. The failure by Genesis vindicated central bank governor Gideon Gono, who dared empowerment crusaders to save ailing banks at their time of need rather than grabbing international banks for a song.
