Barclays sitting on USD 100m
Zimbabwe - Corporate - 03-09-2010

Barclays Bank of Zimbabwe Limited is presently sitting on USD 100m in customer deposits after having extended USD 20.3m in loans and advances of the USD 121m held by the bank in 2009. The lender had USD 111m as at 31 October 2009.The financial institution managed to extend only USD 6.2m to the agricultural sector, which is regarded as key to the countryquotes economic revival, underlying the credit crunch that is still affecting the local financial markets. Banks are still adopting a cautious approach to lending because of the perceived risk that is still inherent in the economy. However, the financial support to agriculture falls within the stipulated 30% of the bankquotes loan portfolio that was recommended by the Reserve Bank of Zimbabwe. Support to light and heavy industries topped USD 9.2m, representing 45% of the loan portfolio. Ironically, staff costs chewed almost USD 10m, which is more than the financial support extended for either the agricultural sector or to manufacturing. Barclays, Stanbic, CBZ and Standard Chartered account for 72.2% of deposits in the commercial banking sector and 65.6% of total loans. Financial support to the countryquotes key sectors agriculture, mining and manufacturing still remains below expectations, as the loans to deposit ratio in the banking sector remains below international thresholds of between 70% and 90%.

Barclays managing director Mr George Guvamatanga said risk management had to be tightened in 2009 after the introduction of the multi-currency system in order to “contain potential losses arising from operational errors and irregularities”. “Most businesses required medium to long-term finance to recapitalise and retool. The financial sector on the other hand had to deal with constrained liquidity conditions, especially as most of their deposits were on demand. “Credit processes on the part of borrowers and lenders alike imperatively had to adapt to the reality of operating under hard currency conditions clean of the false “security” that was part of hyperinflation. “Those that scored favourably for credit in the past were not necessarily going to score the same under the new real economy.” He further noted that time was spent at familiarising with the clientele base including the new economic environment. Added Mr Guvamatanga: “Credit risk scoring models were tightened and fully adapted to the dollarised environment. Barclays continued to prefer a cautious approach in advancing loans to minimise risk of default. “A lot more time was spent on understanding prospective borrowers and evaluating their projects.”

Market watchers note that it is proving increasingly difficult for financial institutions to play their intermediary role because most of the deposits are transitory and short term.
It is also believed that banks with an international exposure also want to manage risk on their international balance sheets. In 2009 Reserve Bank of Zimbabwe Governor Dr Gideon Gono and the Minister of Finance Mr Tendai Biti raised their reservations at the rate of lending by local banks, with the former threatening intervention if the lenders remained reluctant to support the critical sectors in the economy. In particular, monetary authorities encouraged banks to orient their lending portfolios to ensure that 30% was extended to agriculture, 25% for both manufacturing and mining and 20% to other sectors.
Representatives of the Business Council of Zimbabwe, which is an umbrella body with members from the Zimbabwe National Chamber of Commerce, the Confederation of Zimbabwe Industries and other business groupings, implored on the Minister of Industry and Commerce, Professor Welshman Ncube, to help in facilitating access to medium to long term loans that are needed to increase production. Aggregately, capacity utilisation in industry is hovering between 35% and 40%. CZI president Mr Kumbirai Katsande said production in industries is now tapering off because of lack of capital injections to spur activity.

Speaking at the same occasion, Bankersquote Association of Zimbabwe president Dr John Mangudya said there was need to promote exports so that the country establishes its own pool of funding that can be used to support businesses. However, Government is finalising modalities for the disbursement of a USD 500m facility that will be used to help industries.
The money is expected to be relatively cheaper than that currently obtaining on the local market. Barclays chairman Mr Anthony Mandiwanza believes that there is now pressing need to attract foreign capital in order to help rehabilitate the economy. “Attracting foreign capital is an imperative for the Zimbabwean economy and the financial sector alike. In this light, we consider the ongoing engagements with the International Monetary Fund and other multilateral institutions to be a positive development. If the recovery path is sustained and consistent economic policies are followed and applied, the financial sector can only recover to vibrant levels attained in the past,” said Mr Mandiwanza.

Source: Herald