South African lender Nedbank is expanding its footprint in Zimbabwe, despite the economic turbulence, which the company is sizing up to determine if it can avail more funding facilities for on-lending.
Nedbank operates MBCA Bank in Zimbabwe, a crucial financial conduit and lender for corporates in the country.
Charity Jinya, the managing director of MBCA, told Business Report in an interview that
“Zimbabwe remains a key market for Nedbank Group and is an important part of the group’s strategy to grow a Pan African banking network”, hence the decision to maintain investments in the country.”
“At present there are definite plans to open new branches in Gweru and Msasa before the end of the year,” she said.
In 2013, Nedbank extended a $75 million (R1.06 billion) line of credit to its Zimbabwean unit and MBCA has also been leveraging on access to other international lines of credit to secure lending facilities for Zimbabwean companies.
Jinya said the company was assessing the economic situation in the country to determine viability of new lines of credit. However, the bank is focused on ensuring that the lines it has in place are utilised by qualifying clients, while it reviews opportunities for new lines.
“The performance of the economy will to a large degree determine other lines, which we will consider in addition to current ones,” she said. In the half-year period to the end of June, MBCA raised after tax profits from $1.9m to $2.7m.
This was boosted by stronger operating income, which rose from $11.5m in the prior year same period to $13m this year, with the stronger financial performance also attributed to significant cost reductions.
Board chairman for MBCA, Willard Zireva, said recently that “the bank’s clients will continue to access direct lending from the Nedbank Group” in South Africa. He added that MBCA was positioning itself for future opportunities from the Zimbabwean economy.
However, he highlighted that the company could not readily fund such opportunities “from its balance sheet”, but from “existing lines of credit from regional and international” finance institutions, such as Afreximbank, which advanced a $20m line of credit for the bank in March.
Nedbank has a controlling stake in MBCA, while Old Mutual Zimbabwe also controls a significant interest of about 18 percent.
An employee share trust for MBCA owns minority shares in the bank.
Zimbabwe appears to have relaxed on indigenisation laws for the banking industry, allowing foreign investors to keep control of local finance institutions.
Zimbabwe’s banking industry has been hit by bank failures in the past three years that saw the collapse of AfrAsia Bank Zimbabwe, Allied Bank and Genesis Bank among others.
The central bank and the finance minister, however, say the industry is stable, although economists and experts have called for mergers and cleansing out of bad bank balance sheets.
The new banking regulations, contained in the Finance Bill that is sailing through parliament, will “penalise shadow directors, like shareholders who direct board decisions behind the scenes when they are not part of the board”.