BY MELODY CHIKONO
OVER 70% of the total loans taken over by the Zimbabwe Asset Management Company (Zamco) have been fully expunged, with the vehicle now seized with processes to wind up its operations ahead of its sunset period following the settling of its ZW$1,2 billion (US$14,3 million) obligation to the Reserve Bank of Zimbabwe (RBZ).
Zamco was established in July 2014 as part of the holistic measures to deal with high levels of non-performing loans (NPLs) in Zimbabwe’s banking sector by acquiring, restructuring and managing the NPLs.
Zamco was given the mandate for 10 years, meaning that the sunset period was set for the year 2025.
The first process in winding up operations was to ensure Zamco met all its liabilities, a process which has seen Zamco paying its major Treasury Bills (TBs) obligations amounting to about ZW$1,2 billion (US$14,3 million).
The obligations are in relation to TBs that were issued to acquire NPLs and this obligation has been fully met.
Zamco CEO Cosmas Kanhai told the Zimbabwe Independent this week that this effectively puts paid sentiments that public funds would be used to bail out borrowers as clearance of Zamco’s obligations was through repayments by the respective borrowers.
Kanhai said further processes now include collecting residual loans, converting non-cash assets into cash, including disposal of shareholding in companies and ultimately rendering an account to the Reserve Bank in terms of the law.
“Repayments from the companies have been very satisfactory with over 70% of the loans by value having been fully expunged to date. Zamco employed different loan resolution strategies to suit the circumstances of the various borrowers which increased chances of recovery,” Kanhai said.
“The first process in winding up operations is to ensure Zamco meets all its liabilities and as was indicated in the mid-term monetary policy review, Zamco has already paid its major Treasury Bills obligations amounting to about ZW$12 billion. Most importantly, this has been done ahead of Zamco’s sunset time of 2025.
“Further steps to be followed in the winding up process include collecting on the residual loans, converting non-cash assets into cash, including disposal of shareholding in companies and ultimately rendering an account to the Reserve Bank in terms of the law.”
Kanhai said one of the challenges has been that, apart from the loan restructuring that was provided by Zamco, some of the companies also required working capital in the form of cash injection which Zamco was not able to provide.
In some instances, he said, companies were not able to borrow from banks as they would have been blacklisted for failing to pay the loans that were acquired by Zamco.
This lengthened the period in which they were able to generate sufficient cash flows to expunge the Zamco debts and return to profitable operations.
Zamco has allowed the companies to restructure their borrowings through reduction of interest rates, conversion of debt into non-interest-bearing instruments such as preference shares and ordinary equity as well as allowing companies to pay in kind using real estate assets.
“These measures reduced the cash flow burdens of the companies which allowed them to return to viable operations and some were saved from eventual collapse. This has set the foundation for those companies to thrive and their future performance really depends on how they implement their respective business strategies” Kanhai said.
While the initial date of winding up was set for 2025, Zamco may be winding up earlier due to the exceptional performance in resolving the bulk of the loans and paying off its major obligations.
However, he said, the actual date for winding up Zamco would be determined by the shareholder depending on progress made in collecting the residual loans and converting non-cash assets into cash (including disposal of shareholding in other companies).
“Since all the obligations would have been paid off, we do not expect to face major challenges.” Kanhai said.
Zamco has since mopped ZW$1,3 billion of bad debt from banks.