The Sunday Mail
– AfrAsia sheds 90 jobs
– Shuts down 5 branches
– Optimism remains
AFRASIA Zimbabwe Holdings Limited — a financial services business that was carved out of businessman Mr Nigel Chanakira’s former business empire by a group of Mauritian-based investors — is struggling to regain its footing in the current treacherous economic conditions, with recent developments casting a huge doubt on the health of the institution.
Sources said last week the business, built under the Kingdom brand, has been forced to adopt emergency measures that are designed to keep it afloat.
Apart from scaling down its branch network by shutting down five branches, understood to be in Ruwa, Chitungwiza, Newlands (Harare), Belmont (Bulawayo) and Victoria Falls, the bank has also shed more than 90 jobs.
Depositors are seething
The bank has put a cap on withdrawals of between US$100 and US$200 even at month-ends when demand for cash spikes.
Clients are forced to access their cash through ZimSwitch-enabled Point of Sale devices or through the internet banking platform.
Further, the departure of the bank’s managing director, Mr Tineyi Mawocha, under unclear circumstances earlier this year after a mere three-month stint, made the market uneasy.
Analysts believe that the banking giant is failing to hold its own in a highly volatile market plagued by low depositor confidence and a high loan default rate.
As at December 31 2013, non-performing loans in the banking sector stood at 15,9 percent, which is above the 5 percent international benchmark.
Wazara’s ‘‘ghost’’
AfrAsia is believed to be haunted by a US$21 million loan that was extended to former Econet Nigeria boss Mr Zach Wazara and chief executive officer of local firm Spiritage.
The fallout between the businessman and the bank prompted the former to write a letter to the central bank accusing the latter of trying to conceal souring loans on its books.
The letter claimed that the lender, through its special purpose vehicle Lalela Trading, had subsequently entered into a debt-to-equity arrangement to acquire 80 percent of Valley Technologies — a subsidiary of Spiritage — after the mobile operator failed to settle its obligations to the bank.
Mr Wazara claims that the bank undertook to eventually offload the shares to a Chinese company, but then chose to foreclose.
The feud has since spilled into the courts.
However, it is thought that the debacle surrounding the loan spoiled the relationship that existed between Mr Chanakira, who held a 35 percent stake in the then AfrAsia Kingdom Bank, and the new group of investors who resultantly bought him out of the business for US$12,5 million.
While Mr Chanikira previously said he decided to exit the business because he dreaded the spectre of being diluted into a minority shareholder in the bank he established 20 years ago, in December he reportedly said he sold the business because “it was no longer excelling”.
Last week, the bank was mum on its recapitalisation plan, noting that the prerogative to disclose such information lay with the Reserve Bank of Zimbabwe.
AfrAsia Zimbabwe’s marketing and public relations executive Ms Sekai Chitemerere maintains that the recent interventions are part of a rationalisation effort to make the group “leaner and efficient”.
“The group is consolidating operations, reviewing its cost structure and product portfolio, among other initiatives. These initiatives have resulted in a reduction of its branch network which necessitated a voluntary staff separation offer.
“The group has already started engaging with staff on the offer and can confirm that only five branches have been affected as a result of this exercise.
“The group is confident that these initiatives will result in a much more leaner and efficient business, enable it to manage its costs, grow revenues from relevant and profitable product lines and continue to provide an efficient and customer-focused service to its valued clients, while contributing to the economic development of Zimbabwe . . .
“The prevailing liquidity challenges that the whole market is going through have not spared the bank resulting in us having temporary cash withdrawal limits to ensure that all our clients have access to available cash.
“We at the same time want to reassure our clients that both ZimSwitch and point of sale (POS) devices in retail outlets nationwide are alternatives available for them to transact. In addition, the bank’s internet banking platform is available.
“Clients are being, hence, encouraged to register for immediate internet banking activation and enjoy convenient banking within the comfort of their offices or homes any time of the day. We are confident that our clients will soon realise significant improvement in our service delivery as a result of strategies that have been put in place,” said Ms Chitemerere.
Like many local banks that have taken a risk-averse approach, AfrAsia is now tightening the screws.
According to Ms Chitemerere, the misnomer where companies are borrowing short-dated money against long-term projects and individuals are borrowing solely for consumptive purposes were fanning high default rates.
Zimbabwe’s non-performing loan index, last reported at 17 percent and growing, against a regional average of 3,5 percent, she says, reveals larger macro-economic difficulties experienced across the economy.
“The sector has been revising the lending criteria hence also the reduced amount of lending. Players have resorted to taking a risk aversion strategy which hinges on lending based on the clients’ ability to repay.
“To that end, the bank successfully embarked on a cleaning up exercise of its non-performing loan book last year. Our NPL book is not a new book but we continue to collect on old facilities which are still running.
“The issue of credit risk has also been addressed with new processes and new skills taken on board and new policies adopted and therefore all new lending is performing satisfactorily.
“Going forward, our focus is strictly on secured lending as we are targeting various growth sectors of the economy,” explained Ms Chitemerere.
Worryingly, the local unit of AfrAsia Bank Limited in now beginning to affect the parent company.
The Mauritian-based bank indicated in its 2013 annual financial report that its results were subdued by “negative returns from its investment made in Zimbabwe through its associate AfrAsia Kingdom (Zimbabwe) Limited”.
It blamed the poor performance squarely on non-performing loans and also noted that a restructuring at shareholder, board and management levels had been initiated together with a capital-raising exercise to turn around the business.
Market watchers say it is highly unlikely that AfrAsia will collapse as it has deep-pocketed shareholders capable of ably supporting the business, but there are doubts if investors are willing to stick it out given the exposure to bad loans.
Encouragingly, the banking group, which had US$7,94 million capital as at September 2013 against an expected base of US$25 million, recently reported that its US$5 million rights issue had been fully subscribed.
Most significantly AfrAsia Bank followed its rights.
The rights issue is part of a phased capital-raising plan to boost the group’s balance sheet.
The first phase of the plan was to raise US$20 million split into a rights issue of US$5 million and a private placement of shares to raise US$15 million.
Ultimately the bank intends to raise US$100 million to make it one of the top five banks in the short to medium term.
