HomeLocal NewsNssa risks losing US$50m

Nssa risks losing US$50m

A BITTER battle has erupted over Capital Bank’s future, with National Social Security Authority (Nssa), the Labour ministry and the bank’s chief on one side, and the Reserve Bank of Zimbabwe, senior managers and workers at the financial institution on the other side, with the risk US$50 million in public funds could go down the drain if the bank closes.

Faith Zaba

The fight has escalated to the extent worried workers are on the verge of petitioning parliament as the ministry, through its permanent secretary Ngoni Masoka, wades ever more deeply into the matter.

While Nssa, the bank’s managing director Lawrence Tamayi and the ministry are pushing for the bank’s closure arguing it cannot be resuscitated, the RBZ is opposed to winding up the operations due to the implication the move would have on the banking sector.

According to an internal document dated January 23, the Capital Bank board ratified an October 23 resolution to wind up the bank’s operations.

Several meetings have been held between the bank, majority shareholder Nssa which has sunk a total of US$48 million into Capital bank, and RBZ since October 24 when the bank filed with the RBZ for approval to wind up.

Nssa, which administers social security public funds on behalf of about 1,3 million contributors and pensioners, has held separate meetings with the RBZ since October and in January the central bank advised it that given the bank’s non-trading position and its low capital, a surrender of its licence would result in the expeditious winding up of the bank.

Nssa has since directed its board to surrender the bank’s licence to the RBZ, following due process, by January 23, reads the document.

It was agreed at the meeting that the board requests the cancellation of the bank’s registration from the Registrar of Banking Institutions in order to facilitate the expeditious winding up of the bank because of its financial position.

The Zimbabwe Banks and Allied Workers Union (Zibawu) has since written to Nssa general manager James Matiza questioning the rationale of Nssa pushing for the bank’s closure.
“We remember that not so many years ago Nssa justified its hostile takeover of Capital Bank and injected substantial workers money in this project,” reads the statement by Zibawu assistant general-secretary Shepherd Ngandu.
“If information we have been getting through the Bank’s Works Council and other meetings with the bank’s executive is correct, Nssa has already sunk around US$30 million. In addition, Nssa gave guarantees to a number of Capital Bank creditors. If all this is added up to the inherited goodwill then our estimates indicates that the move to wind up Capital Bank operations will result in Nssa writing off close to US$50 million.”

Ngandu added: “It surely does not make any economic sense for an institution such as Nssa that is holding workers’ pensions in trust to simply lose such an amount in such a dramatic if not scandalous fashion.

“If the information we have is correct that the Nssa board of directors’ term of office expired, then we are left wondering as to who is making such decisions. We are also questioning what is informing such a decision of writing off US$50 million.”
Zibawu pleaded with Matiza to reconsider his company’s decision to shut down the bank.

In a third internal document submitted to the RBZ, the bank managers argued that it was best to preserve the US$30 million Nssa investment in the bank by capitalising it rather than Nssa writing off US$48 million as loss arising from discontinued operations.

When contacted for comment, Matiza said he was “very busy at his office” and could only speak to this reporter “maybe tomorrow” (today).

However, sources in the Labour ministry said they could not allow Nssa to continue sinking money into “an empty shell” of a bank and would not allow the pension company to go back on its decision.

Efforts to get comment from Labour minister Nicholas Goche were unsuccessful as his phones were not reachable.

In the third internal document, the bank managers said if the financial institution was to wind up and go into liquidation, the bank would not be in a position to pay up all its depositors and creditors because of a US$11,8 million funding gap.

“However, depositors and creditors can all be repaid in the event that Nssa opts to restructure its US$12,5 million deposits into a long term loan, which can then be recovered from collections from unsecured non-performing loans over the next three years,” reads the report.

“The Nssa group would lose about US$48 million (being goodwill impairment, provisions for guarantees to PTA bank and Norsad and share of losses recorded by the bank since Nssa took over).”

The managers argue that the bank has a potential to be viable and profitable provided there is adequate capital and liquidity.

“With a capital injection of US$22 million, the bank will have capacity to turn around without further capital calls to shareholders, except in order to increase underwriting capacity. An injection of US$22 million will see the bank meeting the capital requirements of a microfinance bank, namely US$5 million,” the managers said.

In early 2012 media reports, citing a report by the national Economic Conduct Inspectorate, revealed Nssa was exposed to local banks to the tune of more than US$200 million through a combination of direct equity investments, loans and money market investments in various, mostly indigenous banks.

In June 2012, Nssa was exposed to the tune of US$15 million which was deposited with Interfin Bank Corporation and US$708 000 with Genesis bank when the two financial institution shut down.

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