adminDickson Mangena, Business Reporter
ZIMBABWE Asset Management Corporation (Zamco) has acquired secured non-performing loans (NPLs) worth $541 million as at 31 October from the banks accrued from various sectors of the country’s economy.
Speaking at business luncheon organised by Association for Business in Zimbabwe on Wednesday, Zamco’s chief executive officer Dr Cosmas Kanhai said most of the NPLs were from the agricultural sector which contributed 34 percent with the financial services accounting for 18 percent, mining (15), manufacturing (12), services (nine) and unspecified others being (12).
He said since Zamco was formed, NPLs in the banking sector had peaked to $815,90 million, an NPL ratio of 20,14 percent, as at 30 September 2014.
“The acquisitions made by Zamco to date have contributed to the decline in the NPLs ratio as NPLs have since reduced drastically to $391,90 million, an NPL ratio of 10,7 percent, as at 30 September 2016.
“There are positives signs for most of the companies that we have taken over as they are now recovering. Although some of the companies that we have taken over are still in the repayment grace period and we have not yet assessed them,” said Dr Kanhai.
Zamco is a Special Purpose Vehicle (SPV) created by the Reserve Bank of Zimbabwe in 2014 to buy NPLs from banks as a way to clean their balance sheets and allow them to lend again to various sectors of the economy.
This was necessitated by a high loan default rate which hit an all-time high of 20,45 percent in June 2014 triggering fears that banks would cut back on lending.
Dr Kanhai said a number of successful acquisitions have managed to pay back the loans and have improved on their savings.
“A number of companies are benefitting from the relief brought about by the restructuring of their loans. Some of the firms have experienced savings in finance costs of up to $5 million annually. Thus, in terms of performance, Zamco is well on course to achieve its principal mandate of cleaning up the banking sector of toxic assets,” he said.
Dr Kanhai said Zamco only takes over NPL for companies that have prospects of turnaround or have demonstrated capacity and commitment to repay.
“At the moment the acquisition criteria is the NPLs should be secured by mortgage bonds — real estate-residential, industrial, and commercial or land banks. The underlying borrowers or companies should have prospects of turnaround and the NPLs should not be from insiders,” he said.
Further stating that the SPV would ascertain the reason behind the non-performance of loans as well as the challenges faced by entities resulting in failure to remit so as to formulate a proper resolution strategy.
“Zamco is not going to exist in perpetuity. It has a sunset period of 10 years – it’s going to wind up operations in 2025. The Government and policy makers have to address that which is making the symptoms which are NPLs.
“Some companies were in NPLs even if they were not in distress because of high interest rates of up to 40 percent that they were getting from banks,” said Dr Kanhai.
He said companies with prospects of being viability but are being choked by non-performing loans due to high penalty interest rates or are facing imminent foreclosure need to approach their banks to ascertain their willingness to handover the loan to Zamco.
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