Ingwebu to use head office as collateral

THE Bulawayo Municipal Commercial Undertaking, Ingwebu Breweries has been granted authority to use its head office premises as collateral to access more than US$1 million from ZB Bank.

Ingwebu Breweries is in dire need of huge capital injection to pull through its polyethylene terephthalate (PET) production venture but the financial back up needed cannot be financed through internally generated resources.

It is working on establishing a polyethylene terephthalate (PET) plant at its depot so as to package its beer in takeaway bottles and help improve its market share.

The need for huge capital investment resulted in the organisation approaching Ecobank for the funds to acquire foreign currency in the RBZ auction system.

To that end, on July 7, 2021 council authorised a loan guarantee of US$2,5 million (ZWL equivalent at the prevailing rate auction rate) and secured a facility with Ecobank.

According to a confidential report chronicling details for a meeting held on June 7, 2023 titled “request for approval to use head office building as collateral” Town Clerk, Mr Christopher Dube noted that the Ecobank loan facility for the PET production plant amounted to US$1 950 000,00 and to date Ecobank had only released US$750 000 leaving a balance of US$1 200 000, 00.

“However, it should be noted that Ingwebu Breweries had paid US$998 000,00 towards purchasing the plant of which US$248 000,00 came from Ingwebu Breweries. Ingwebu Breweries was currently having challenges in getting the outstanding loan balance of US$1 200 000,00 from Ecobank and payment to the manufacturer of the plant was now long overdue.”

Added to that, Mr Dube said the manufacturer of the plant was now considering charging storage fees if Ingwebu Breweries delayed in collecting their plant.

It was against this background that Ingwebu Breweries had approached ZB Bank for a loan facility equal to the amount owed by Ecobank.

According to the report, to acquire the loan from ZB Bank Ingwebu Breweries had considered three options.

The first option was to engage Ecobank for a possibility of registering a second bond with ZB Bank using the same security.

“Ingwebu Breweries wrote to Ecobank advising them of their intent to register a second bond with another bank so as to get the required balance. Ecobank had however, not responded to their request. The maximum loan that the business could obtain from ZB Bank through this option after the bank’s loan discount effect, would be US$715 050, 00. This was based on the previous valuation of Fell Could the security. However, this amount fell short of the required amount needed by the business to complete the PET project,” reads part of the confidential report.

Another option was engaging ZB Bank for the possibility of taking over the Ecobank Loan facility in full.

“ZB Bank was approached for this possibility but was unwilling to take over the Ecobank loan in full. They argued that this would have been possible if the relationship between the parties had developed. The bank indicated that this would have been considered when the PET plant had been installed and running.”

The last option, according to the report, was registering a new bond with ZB Bank.

“ZB Bank was willing to give the business the outstanding amount, provided that a separate collateral equal to the loan amount was given to them. Ingwebu Breweries were considering offering to wave their Head Office to ZB Bank as collateral for the required loan facility. It was to be noted that the loan application that the business intended to make with ZB bank was within the US$2,5 million guarantee that was originally approved by Council for the PET project.”

After considering the three options, the council resolved that ” Ingwebu Breweries be allowed to use their Head Office as collateral for the intended loan facility arrangement with ZB Bank on condition that the total loan facilities from the banks do not exceed the US$2,5 million Council Guarantee.

“That Council authorises Ingwebu Breweries to register a Mortgage Bond over a certain piece of land situated in the District of Bulawayo being Ingwebu Breweries Head Office physical address 17 and 18 Khami Road held by the City of Bulawayo.

“That Council authorises The Chamber Secretary, Mrs Sikhangele Zhou, and His Worship the Mayor, Clr Solomon Mguni to sign documents to confirm Council’s resolutions to do with the loan facility. That Council authorises The Chamber Secretary, Mrs Sikhangele Zhou, to sign the Power of Attorney for the Bond Registration as is required by the Lawyers.”