Industry faces high cost of finance

apparent is that industry is faced with high costs of finance and low capacity utilisation as most entities failed to raise recapitalisation funds.
However, the private sector managed to attract lines of credit from various regional and international financiers and the bulk of the funds are expected to be utilised during the second quarter of the year.
The private sector has also suffered from the dismal performance of the equities market.
Most companies listed on the Zimbabwe Stock Exchange have investment portfolios and these performed so badly that they resolved to dispose of such investments.
Zimre Holdings associate companies – Zimre Property Investments, Fidelity Life Assurance and NicozDimaond – indicated during their analyst briefings that they are considering offloading equity investment portfolios due to non-performance of the stock market.
Trust Holdings also indicated it was planning to do the same. Companies have used the proceeds as working capital. Undercapitalised companies recorded losses and a few capitalised companies managed to grow their businesses despite the challenging operating environment.
There were also a few surprises on the market coming from Edgars Stores and Kingdom Bank. This is also pointing to the fact that the economy is improving though at a very slow pace.
Despite publishing a loss warning statement, Afre Corporation posted good results, achieving US$9,4 million in operating profit after tax.
During the period under review, gross premiums of US$59,9 million were written as net premium earned amounted to US$47,2 million.
First Mutual Life Medical Savings weighed in with US$19,4 million, representing 32 percent of gross premium income.
The group’s property arm, Pearl Properties, achieved rent yields of 9,7 percent and rentals of US$5,61 per square metre, which was slightly lower than its target of US$5,64 per square metre.
Group executive chairman Mr Patterson Timba said there has been relative stability in the property sector but operating costs have remained significantly high.
Despite low salaries in the market, employee benefits schemes recorded growth during the year.
Improvements in the productive capacity saw employees benefits premium income of US$13,5 million.
Individual life premiums were US$4 million with the growth being attributed to an increase in uptake of individual life products.
During the period under review, First Mutual Life Medical Savings in partnership with the country’s largest mobile operator, Econet Wireless, introduced Ecolife that provided the former with a wider market.
The group’s short-term insurance subsidiary, Tristar Insurance, achieved gross premium written of US$10,6 million compared to US$7,3 million in the previous year.
The group reinsurance business, which started operating in Botswana in the second half of last year, wrote gross premiums equivalent to US$363 000.
Management said the business focused on writing facultative business, with treaty business contributing 37 percent from 16 percent in 2009.
The same business in Zimbabwe registered a 38 percent growth in gross premium written to US$10,9 million.
Increase in fire business, significant farming business and growth in treaty business were the major contributors.
Treaty business contributed 37 percent from 16 percent in the previous year.
Gross premium written by 45 percent to US$1,5 million from US$1 million recorded in the comparable period.
Despite aggressive marketing in the region, Afre failed to write any life and health business in the region during the year.
The 25 percent shareholders in leisure group Rainbow Tourism Group said the group managed to recapitalise FMRE Property & Casualty to the tune of US$1,5 million, FMRE Life & Health US$500 000 and African Actuarial Consultants US$250 000.
Afre also owns 30 percent of unlisted Bethel Finance Limited. Going forward, Mr Timba said the group remains optimistic that there would be continued improvement in the economy and it is poised to participate in the economic regeneration.
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