ZIMBABWE’S financial sector is diversifying from traditional banking locally to venture into the region to spread risk and earn the much-needed but elusive foreign currency.
This comes when the Reserve Bank of Zimbabwe (RBZ) is experiencing very little foreign currency inflows.
Last month the RBZ received less than US$500 000, most of it coming from tobacco growers after a poor season.
On the external sector, the country’s balance of payments prospects remain bleak due to continued decline of exports, drying up of investment inflows and international support.
This has been exacerbated by the negative perception of the situation in Zimbabwe, which is adversely affecting the country’s risk rating.
The scenario has made it difficult for both the public and private sectors to secure offshore lines of credit.
Total exports have declined from US$3,1 billion in 1996 to an estimated US$1,2 billion in 2002, resulting in serious foreign currency shortages in Zimbabwe.
Bankers said the capital account recorded huge deficits following the drying up of international balance of payments support from both bilateral and multi-lateral institutions.
They said external payment arrears accumulated from around US$800 million in January 2002, to an estimated US$1,5 billion by year-end.
Jefta Mugweni, deputy chairman of Century Holdings Ltd (Century) said it was worthwhile for his group to venture into the regional market because “there is much foreign currency in this sector”.
Mugweni said: “The vision for Century began in 2000 when we registered Century International Ltd in Botswana. This was because Zimbabwe was now being viewed negatively as an investment destination. The benefits, however, take long to be visible and it could be some time before we realise our investment.”
He said the group had decided to spread its risk at a time when the local market was shrinking.
“By doing so we are no different from exporters,” Mugweni said. “The regional market has much foreign currency and one needs to tap into it.”
He said Century was going regional to cushion itself against the current economic climate.
“It is not easy to get into the regional sector because this increases competition. Zimbabweans are highly-skilled and highly-respected if not feared or hated in some countries. In order for us not to put our eggs in one basket we decided to diversify.”
Trust Holdings Ltd is expanding regionally to East, Central, West and southern Africa.
Trust chief executive officer William Nyemba said: “This is for two main reasons – diversification and growth. Given the current harsh economic conditions prevailing in our country that has resulted in the free-fall of the Zimbabwean dollar. The diversification, therefore, will bring about the much-needed hedging of currencies hence try to maintain a valuable asset for our shareholders.
“It goes without saying that the regional expansion will add some growth to our group both in terms of assets and profitability.”
He said the benefits for Zimbabwe were immense.
“Central upon all is the ability for Zimbabwe to be seen exporting its services and hence generate the much-needed foreign currency,” Nyemba said. “Wherever we go we have found ourselves carrying the national flag high. It is also true to say that we are a lot more skilled and experienced than most of sub-Saharan Africa.”
Trust said regional operations were now being vigorously pursued resulting in negotiations with several parties in this region and in the West African region being initiated, a number of which were expected to be concluded by the end of the second quarter of this year.
Trust said: “The major highlight for 2002, on the regional front, was the approval by exchange control authorities of the 40% investment in Nicorp Securities Ltd, Malawi. This investment is supported by technical agreements with the National Insurance Company Ltd of Malawi (Nico), and various units under the Nico.”
Another major player,African Banking Corporation Holdings Ltd (ABC) said its huge success so far was the result of its business model and regional expansion strategy.
Group chief execu-tive officer, Douglas Munatsi said operations in Botswana, Zambia and Mozambique substantially increased their contribution to net profit resulting in a decrease in Zimbabwe’s contribution to 50% from 82% in the previous year.