adminMartin Kadzere Harare Bureau
THE Infrastructure Development Bank of Zimbabwe is now better placed to attract equity investors after the government assumed the bank’s legacy debt of $38 million. The debt has since been transferred to a special purpose vehicle, leaving the bank with a clean balance sheet and a positive equity of $34 million, well above the minimum regulatory capital of $25 million, IDBZ chief executive Charles Chikaura said.
He said the government, the 89 percent shareholder, was prepared to be diluted to 51 percent.
The bank is now looking at engaging financial development finance institutions in China, Brazil, India, Eastern Europe and DFIs in South Africa to buy shareholding in the bank.
IDBZ used to be owned by the government and regional and international development partners on an almost 50-50 percent shareholding basis but other partners had their shareholding diluted after failing to follow their rights in capital raise exercises.
“Through this restructuring, the bank now has adequate capital to underwrite more business and is in a stronger position to attract equity investors and debt capital from both domestic and international capital markets,” said Chikaura said yesterday.
Coupled with the re-licensing of the bank by the US Office of Foreign Assets Control, Chikaura said the group will also leverage “on these newly acquired strength” to mobilise external lines of credit from regional and international finance institutions.
He said the bank was concluding lines of credit of up to $70 million to support key economic sectors such as infrastructure, mining, tourism, agriculture and manufacturing.
Major challenges that have been affecting the bank included sanctions and legacy debts. Since dollarisation, the IDBZ has been relying on short-term business for sustenance.
This was at the expense of its core mandate of infrastructure development and long-term financing.
Chikaura noted the business model was necessitated by the short-term nature of the funding available in the domestic market and the bank’s inability to access long-term funding from international capital markets due to sanctions.
“The bank is no longer under sanctions and can now access long-term capital from international financiers for infrastructure development. Similarly, the domestic capital market has witnessed some growth, thereby providing local sources of long term capital.
“These changed market condition have provided an opportunity for the IDBZ to shift its focus to long term to long term infrastructure business.”
The bank has since successfully floated bonds to the tune of $80 million on the local market.
Chikaura said the shift in business focus afforded the bank an opportunity to streamline costs and review skills mix.
This resulted in the current voluntary retrenchment exercise to ensure the bank is optimally resourced with appropriate skills to deliver on its core infrastructure mandate.
He said most employees who had commercial bank experience opted to be retrenched while those who remained would undergo training to equip them with relevant skills.
Despite the challenges which faced the bank since its formation in 2005, it had shown resilience and has been consistently posting profits since 2010 and has been declaring dividends.
“We’ve a good record of performance even under difficult circumstances. The situation has changed. Sanctions have been removed, legacy debts eliminated; there is long-term money in the market and we are now ready to take off,” said Chikaura.
Online Reporter