BancABC Zimbabwe, whose US$228 000 after-tax profit for the six months to June makes it the second least profitable bank, is reeling from non-performing loans (NPLs) totalling US$83 million lent to listed firms, army investment vehicles, defunct diamond firms and other companies.
By Bernard Mpofu
The Zimbabwe Independent can also report that, as of June, BancABC’s total politically-exposed persons’ debt portfolio stood at US$2,28 million.
The list of the bad debtors includes politicians, bankers, military commanders and judges, although the majority of BancABC’s politically-exposed persons are sugarcane farmers in Chiredzi in the Lowveld under an out-grower facility.
While banking sector loans and advances declined from US$4 billion as at June 30 2015 to US$3,7 billion as at June 30 2016, largely as a result of cautious and prudent lending measures by banking institutions in response to the operating environment that requires banks to contain foreign exchange-induced demand pressures attributable to lending activities, BancABC has been struggling with bad loans.
Contacted for comment, BancABC MD Joe Sibanda said he could not comment because the bank’s parent company is currently in closed period.
BancABC at US$65,58 million was the country’s third most capitalised bank after CBZ and Stanbic as at June 2016.
Senior BancABC managers and central bank sources who spoke to the Independent on condition of anonymity said the bank, a member of London Stock Exchange-listed Atlas Mara, is exposed to the tune of US$83 153 000 to local firms.
Atlas Mara has tumbled 68% since the company went public in December 2013 on the back of a commodities bust exacerbated by what analysts said were miscalculations in taking over operations such as Zimbabwe.
ABC Holdings operates BancABC, a commercial banking unit, which is 98,7% owned by Atlas Mara.
The ABC acquisition was the first major deal by former Barclays group CE Bob Diamond who was forced out of the international bank last year when it was fined US$450 million for allegedly manipulating the Libor interbank lending rate.
The firms which owe BancABC Zimbabwe, according to the sources, include starafricacorporation Limited (US$16,9 million); Meikles Limited (US$13,8 million); Zimasco (US$12,2 million); Sakunda Energy (US$10,4 million); Windmill Pvt (Ltd) (US$6,4 million); New Donnington which is owned by former Reserve Bank of Zimbabwe governor Gideon Gono (US$1,2 million); PG Industries (US$1,1 million) and Old Stone Investments which is owned by the army (US$1,1 million).
Other debtors include diamond firms Marange (US$1 million) and DTZ-OZGEO (Pvt) Ltd US$3,2 million; Turnall Holdings Limited (US$1,6 million); Solarhart Zimbabwe (US$1 million); Cider Minerals (US$1,8 million); Kukura Bus Services (US$1,5 million) and Ocean Park Investments T/A Tashas (US$1 million).
Power utility Zesa owes BancABC US$4,2 million, part of which is unsecured.
“Out of these NPLs, the bank has set a target of US$21 million to be collected by year end. It is pursuing various channels such as debt restructuring to recover the funds,” a source said.
“BancABC’s NPL ratio has been on an upward trend lately despite easing in the first half of the year. This ratio increased from 26,28% in June 2016 to 37,98% in August 2016.”
Sources said a special purpose vehicle formed by the government to take over bad loans, the Zimbabwe Asset Management Company (Zamco), had agreed to take over the starafricacorporation debt at a discount of 30% subject to BancABC availing a US$1m additional working capital facility.
Sakunda has partnered President Robert Mugabe’s in-law Derrick Chikore in the corruptly awarded Dema Emergency Power Plant deal which was initially pegged at US$194 million a year. Sources said the controversial project was expected to free up funds for Sakunda to service its debt.
Sakunda CE Kuda Tagwirei did not reply to questions sent to him by the Independent.
The acting managing director of Turnall, which also owes the bank, did not respond to questions.
Former central bank governor Gono told the Independent his businesses are hampered by a floundering economy.
“Having said that, I can confirm that indeed my group of companies that include New Donnington Farm have facilities running into millions with not just BancABC but others. It’s not a crime to borrow. The economy as a whole is in trouble and when the macro-economy is not performing, it is difficult for the micro to perform,” Gono said.
“During the period under which we borrowed the money (2009-2012), the growth trajectory was heading northwards and positive. Today that trajectory is heading southwards with no prospect of recovery in sight hence borrowers like us, New Donnington, Lunar and others are finding it tough to remain standing.
“In 2012 we employed 1 650 in the group, today I’m the only employee in the group, yet the vision and business model remain technically feasible and financially viable if only there was liquidity to back it up.”
Lunar Chickens, Gono said, has export orders for over 10 million chickens per month for 12 months but cannot even produce one chicken because of a lack of support and the absence of a conducive business environment.
“My loans stick out like a tall tree in a potato field because my vision is taller than that of potatoes in a given farm and so I catch most of the wind but it will not be long before things get better and those with tall visions will reap the benefits of seeing further than potatoes,” he said.
“Gideon Gono and all his group of companies may be experiencing a bad patch in our history at the moment, having running battles with courts and debt collectors but don’t write us off. We will pay every penny to everyone whom we owe in the fullness of time.
“We will recover and still be the economic giant with a colossal vision that gave rise to our huge debt portfolio in the first place”.
BancABC, sources said, is hoping that the ongoing ambitious command agriculture programme is expected to help fertiliser maker Windmill to repay the bank.
Atlas Mara has embarked on a restructuring exercise that could result in up to 35% job cuts at ABC Holdings and its Dubai office. Around US$8 million is expected in savings annually.
This comes as Atlas Mara moves to lower its cost-to-income ratio that rose to 102% in the six months to June from 95% in the prior year as expenses rose.
Last month, Atlas Mara, the parent company of African Banking Corporation Holdings (ABCH), appointed its CE John Vitalo as head of the pan-African banking entity.
Vitalo, former Barclays Plc CE (Middle East and North Africa), took over from Blessing Mudavanhu.
Mudavanhu succeeded Doug Munatsi, who exited the group after he sold his stake to Atlas Mara. The business is co-owned by former Barclays Plc CE Diamond and billionaire Ashish Thakkar.