KINGDOM Financial Holdings Ltd is seeking international investors for US$3 million to adequately capitalise Kingdom Bank Africa Ltd (KBAL). The financial institution has already raised US$1 m
illion through a private placement.
Chairman Richard Muirimi, in his statement accompanying the company’s results for the period ended December 31, meanwhile says the successful turnaround of the economy will depend on a number of factors some of which lie outside the fiscal, monetary and structural issues introduced by Reserve Bank of Zimbabwe governor Gideon Gono in December.
Muirimi says despite efforts having being made to raise capital through the issuance of preference shares in a private placement an additional US$3 million was needed for KBAL.
He said these preference shares were non-redeemable, non-cumulative and were convertible to equity.
Muirimi said the preference shares had the right to receive a non-cumulative dividend out of the profits of the company at a rate of 0,75% above the 12-month yield rate.
“KBAL nonetheless remains undercapitalised and it requires at least an additional US$3 million in line with the original business plan for the bank to attain critical mass and execute its mandates without having to frequently canvas for the support of other institutions in the region,”Muirimi told shareholders last week.
He said the suspension of all cross border investments with effect from August 2003 had forced the group to look for investors outside Zimbabwe to participate in the international venture.
“Stakeholders will be kept informed of developments on the capital-raising front,” Muirimi said.
For the period ending December 31 Kingdom posted attributable profits of $13,7 billion, an increase of 56% over the $8,8 billion achieved in the year ended December 31 2002.
The group’s associate companies in Malawi and Zambia contributed 20% of the attributable earnings, up from the 13% achieved previously. Operating expenses increased by 32% compared to 2002.
Muirimi said KBAL now accounts for 12% of the group expenses.
In his monetary statement in December RBZ governor Gono raised the minimum capital requirements for financial and related institutions.
The institutions were given until September 30 to comply with the new capital requirements.
“In our case, Kingdom Bank, Discount Company of Zimbabwe, Kingdom Asset Management and Kingdom Stock Brokers will all be compliant by June 30 2004 as the resources to achieve this objective have already been set aside,” Muirimi said.
He said the group had emerged much stronger from the turmoil that befell the banking and financial services sector late last year and during the first two months of this year.
Meanwhile turning to Gono’s monetary policy statement Muirimi pointed out that political will was necessary for the policy to work.
“Naturally, these policy initiatives have ushered in a completely different operating environment particularly for financial institutions, which continue to grapple with issues such as liquidity crunch, mismatches of asset/liability profiles, the new foreign exchange regime and guidelines on current and capital flows,” he said. “As a complement to the monetary policy statement thrust, we remain convinced that, one of the most fundamental requirements for economic recovery for this country, lies in agricultural output, not only to ensure food surplus but supply of essential raw materials for our manufacturing sector.
“With current critical shortages of foreign currency, it does not make sense to import raw materials for our industries when the bulk of these could be produced locally.”
The chairman said business needed to again insist that the authorities give priority to the issue of sustainable security of tenure particularly for the newly settled A2 indigenous commercial farmers and large commercial farming enterprises.
“This would enable financial institutions to play their part in funding this critical sector for the qualifying new entrepreneurs in agriculture,” Muirimi said. “Ultimately, the successful turnaround of the economy will depend on a number of factors some of which lie outside the fiscal, monetary and structural issues. The most important non-economic factor is political will by the Government of Zimbabwe to be integrated into the global world and African renaissance. We need to rebuild the confidence of all our productive sector participants by stabilising the economic and political environment.”
The Kingdom chairman said it was necessary to improve the country’s sovereign risk, which is essential, to attract foreign direct investment.
“Political will enables the macro-economic policies that have been announced by the government to be implemented,” Muirimi told shareholders last week.