THE future of Zimre Holdings’ subsidiary in South Africa, ZimreSA, hangs in the balance after the holding company revealed that it is undercapitalised in accordance with the country’s standar
Zimre chairman William Mudekunye said ZimreSA was facing solvency problems.
“Our operations in South Africa are having solvency problems,” Mudekunye said.
He said ZimreSA’s solvency situation was far below South Africa’s statutory requirements.
He said the company’s liabilities exceeded by far its assets, which was very risky.
“The solvency margins for ZimreSA are below the statutory requirements while liabilities as at December 31 2003 exceed assets by $2,6 billion,” Mudekunye said.
He said the company’s position by the end of the first quarter of this year was still the same.
“This position has not improved during the first quarter of 2004,” Mudekunye said.
He said efforts to improve ZimreSA’s position were being held at the highest levels.
“The board and management of these companies are however working very hard to improve the situation,” he said.
Mudekunye said the holding company had made provisions against its net assets to protect the company.
“In view of the uncertainty surrounding the South Africa operations, the board deemed it prudent to make a provision in the December 2003 accounts, against the net assets of the subsidiaries,” said Mudekunye.
He said the board had set aside $6 billion for the provision and this had been accounted for in the 2003 accounts.
He said Zimre Holdings was taking steps to recapitalise its other operations after the new monetary policy issued by the Reserve Bank of Zimbabwe.
“Following the announcement by the central bank of the new capitalisation levels for businesses in the financial services sector, the group has taken active steps to ensure that the capitalisation levels of the operating units meet statutory capitalisation levels,” Mudekunye said.
The company managed a total gross revenue of $216,7 billion, an increase of 503% compared to the previous years’ figure of $35,9 billion.