STATE-owned Agribank has returned to profitability, posting a US$8 million profit in 2017 from US$4 million in 2016, two years after the United States of America lifted sanctions on the bank. Agribank was among other companies perceived to have been propping up the regime of former President Robert Mugabe. The Zimbabwe Independent business reporter Tinashe Kairiza (TK) spoke to the Agribank chief executive Sam Malaba (SM) on the bank’s efforts to attract offshore credit facilities in the absence of the embargo. Below are the excerpts:
TK: Last year you reported US$8 million profit up from US$4 million in 2016, what has been driving this profit growth?
SM: Basically, the recovery that you are seeing has been a result of the growth in terms of our non-interest income of 115% which saw the growth from US$4,7 million to US$10 million and that growth in non-interest income is a result of the exponential growth in our Information Communication Technology based transactions. Our e-channels grew by 1800% from the level of 200 000 in January to the level of 3,6 million by December and we are therefore benefitting from the strategy of investing in technology innovation that we did in 2014/2015. We also invested in ICT and e-banking deliver channels, Point of Sale machines, agents banking etcetera. You will also see that interest expense went down by 8% and that was as a result of us being able to mobilise cheaper deposits which allowed us to repay the US$40 million that we had under the RBZ Afri-Trade facility. Our loan book quality also improved, we were able to reduce our Non-Perfoming Loans (NPL) ratio from 21,4% as at 31st December 2016 to 13,8% as at 31st December 2017. It reduced from 31, 14% to 13,81% and that means our loans impairments went down from US$4million to US$2,8 million.
TK: Let us talk about the range of measures that you are employing to satisfy the RBZ minimum capital requirements. What are you doing to satisfy the US$100 million threshold?
SM: Well look, remember that the RBZ has given banking institution options. There are three targets for 2020.There is tier 1, whereby banks will be allowed to do all forms of banking, which includes commercial banking, mortgage lending, asset financing, lease financing. There is level 2 which is US$25 million they do just commercial banking.
Our intention is to be tier 1 banking where we are able to do all forms of all banking. Currently, we are on US$57,7 million, government is injecting US$10 million this year-that puts us at US$67 million. If we record profit again profit this year, it will go up. So basically, we can achieve tier 1 before 2020 through support from the shareholder and organic growth. What we are saying is that we want to achieve US$100 million before 2020.
TK: During your presentation you spoke about engaging external financiers, how important is this towards building the capital base of Agribank?
SM: The negotiations are progressing well. The historical challenge if you remember is that the bank was placed under the sanctions list and was only removed in 2016. That is where the challenge is.You remember in 2010-2011, we were able to mobilise US$60 million from the Industrial Development Corporation (IDC) but then we ran into problems because we were under the sanctions. With the removal of the bank from sanctions, those challenges have been overcome and that is why we are back on the market again to raise external lines of credit. We believe we will be successful.
TK: How much are you looking to raise from the external financiers you are engaging?
SM: It would not be fair on the external financiers we are engaging (to disclose), but we are negotiating-and the negotiations are going on well.
TK: But are there any timelines as to when these will materialise?
SM: I am hoping that within the next three months we would have concluded the negotiations.
TK: If it materialises, much of that would be channelled towards financing agriculture productivity?
SM: We are an agriculture bank. Therefore we want to support the fertiliser companies, the seed companies, chemical companies which are key supply chain sectors for the agriculture sector. We also want to support Command Livestock and many other areas.
TK: You have also received US$10 million from government as part of your recapitalisation drive. Are you expecting more funding from government this year?
SM: No, basically government only makes its commitments once every year. The US$10 million we have received from government is adequate and we will try and make that money sweat to increase our profitability.
TK: Your Non Performing Loans ratio is now standing at 13,8% and your goal is to reduce it to single digit. How are you going to achieve that?
SM: Basically, we will continue trying to lend to customers that we believe have credibility and those who at the moment cannot pay we will help them to restructure so that we come up with a payment plan that they are able to meet. It is important that at the stage of appraisal-you do a correct appraisal in terms of the ability of the farmer to have a proper cash flow which can ensure that what he is borrowing he uses it effectively and he is able to repay and remain with a surplus.
TK: Sometime last year there were reports that top government officials topped the list of defaulting clients. Can you confirm that?
SM: That is nonsense. Our results speak for themselves. Yes we are at 13% defaulting rate but we intend to move towards single digits. It is people who think that because we are state owned there is something wrong with our books. If you look at our books there is nothing wrong with them.
TK: How much do you intend to commit towards financing the 2018/2019 summer cropping season?
SM: I was looking at the fact that at least we want to do US$105 million in 2018 as a minimum, but we are likely to do significantly more than that because I have not included various lines of credit and other possible sources of funding.
TK: Any particular sub-sectors within the agriculture value chain that you want to specifically finance?
SM: We want to support all sub-sectors but we will be very strong on tobacco. We will do at least US$42 million for tobacco. We will be supporting horticulture, sugar cane, government irrigation schemes and livestock. We will also support maize and soyabeans.
TK: You are a state enterprise and government has been very firm about realigning parastatals to robust corporate governance practices-What are some of the measures you have implemented to address that?
SM: We are profitable now as you can see. We have made a profit of US$8 million from US$4 million made in the previous year. As a public institution, we are publishing our accounts before the 31st of March in line with the requirements to publish within three months. We have done a clean audit.
Our external auditors Deloitte and Touché were here. Government has also emphasised that state owned enterprises staff loans should not exceed 30% of their income. We are meeting all those corporate governance requirements. If you look at the RBZ capital requirements we are adequately capitalised and our liquidity levels are very much liquid. We are meeting both government and RBZ requirements.
Fact file: Somkhosi Malaba
- Agribank CE
- Former Deputy Governor -Reserve Bank of Zimbabwe (August 1998 to April 2004)
- Immediate Past President of Bankers Association of Zimbabwe (2014-2016)
- Chairman of Council of Lupane State University
- Co-Chairman of National Economic Consultative Forum (NECF) Steering Committee