Old Mutual Zimbabwe Ltd (OMZ) has announced plans to tap into the country’s informal economy and grow business using its banking unit, Cabs.
Presenting the group’s half year financial results to June at a briefing held in the capital this week, CEO Jonas Mushosho said going forward the group would ride on Cabs’ infrastructure and geographical presence across the country to push new products aimed at the informal economy from the group’s various business units.
In the period under review, OMZ invested heavily into a new banking system and additional manpower in Cabs to prepare for the overall group growth strategy, Mushosho said.
“The growth of Cabs is very important because it is our distribution channel for the group. We have decided it will be our key for entering into the informal sector and we have decided our activities in the informal sector will cover funding, shelter and loans for SMEs,” he said.
Mushosho said the group has taken a deliberate strategy to spread into the informal economy amid indications formal industry is shrinking, while government activity is also slowing down. He said investor confidence is low, resulting in poor foreign direct investment inflow.
“We have seen company closures, retrenchments and this affects our business,” he said.
In terms of financial performance, the group reported a 2% growth in adjusted operating profit to US$32,4 million compared to the same period prior year. Mushosho said the slow growth in profitability was a result of the difficult operating environment and takes into account the 25% growth in operating expenses mainly due to latest investments in Cabs and the increase in manpower.
Group revenues went up 12% to US$120,6 million.
OMZ FD Isaiah Mushinya said the group plans to grow funds under management from current levels of US$1,7 billion to US$2 billion. He said bank deposits grew 21% in the period under review owing to the new investment. Mushinyira said deposits were currently growing faster than lending, reflecting the group’s liquidity targets.
“The investment we have made into Cabs is securing growth into the future and we should be able to lend more,” he said.
In the period under review, Cabs’ non-interest income grew by 6%. Non-performing loans stood at 10,3% from about 4% prior period. Mushinyira said the company’s target is to bring non-performing loans to below 10%.
“We are taking remedial action with clients that have faced difficulties in the first half so that the situation goes to below 10% in the second half of the year,” he said.
He said banking should grow its contribution to group earnings significantly from the current 22% by year-end.
In terms of the earnings mix, insurance contributes 57% while investment services contribute 12%. The remaining 9% is accounted for by the holdings and other businesses. In an update of projects, Mushosho said the group has completed 52% of its low cost housing project in Budiriro where 1,186 housing units have been completed to date.
He said the company’s Borrowdale Office Park has been completed with occupation currently underway.