Tinaye Agere
Business Reporters
ZB Financial Holdings (ZBFH) is currently locked in discussions with Transnational Holdings Limited (THL) to push through the recapitalisation of ZB Building Society (ZBBS) ahead of the Reserve Bank of Zimbabwe (RBZ)’s deadline on Friday, it has been learnt.
Information gathered by The Sunday Mail Business indicates that the central bank gave the building society — previously International Building Society before it was taken over by ZB — until August 2 to comply with the minimum capital requirement, which presently stands at US$20 million.
The unit’s capitalisation is currently just over US$16 million.
But THL has long queried why the capital of the building society has remained stagnant since 2014, a development it believes suggests that some assets and business could have been transferred to ZB Bank.
In January 2020, the central bank increased minimum capital requirements for banking institutions.
Although the deadline for compliance was December 31, 2020, it was extended by 12 months owing to the advent of the coronavirus pandemic.
By December 2021, however, only five of the 18 banking institutions — AFC Commercial Bank, Nedbank Zimbabwe, CBZ Building Society, National Building Society and ZBBS — had failed to meet the deadline.
Initially, ZBFH proposed amalgamating ZB Bank and ZBBS to comply with the requirement, but the plan came unstuck after THL — a direct shareholder in Intermarket Holdings Limited (IHL), which controls the building society — insisted that the transaction could only proceed once “the Government-brokered settlement for the resolution of the dispute between Transnational and ZBFH over the scandalous and fraudulent acquisition of Intermarket by ZBFH is fully implemented”.
Surrendering licence
However, after concluding that the option of amalgamating ZB Bank and ZBBS was highly unlikely under the circumstances, ZBFH considered surrendering the building society’s licence to the RBZ.
As previously reported by The Sunday Mail Business, an internal memo generated after a July 15, 2022 meeting convened by ZBFH directors indicated that winding up the building society and surrendering the licence was “the option of choice”.
“In the course of implementation of Project Eagle, the directors of ZB Financial Holdings Limited have undertaken to explore alternative ways of resolving the future of ZBBS (ZB Building Society),” read the memo.
“The option of licence surrender and winding up ZBBS was considered a suitable route and a legal opinion was consequently sought from external counsel . . .
“The legal opinion is sound to the extent of the ordinary steps required by the law in a voluntary liquidation. However, the RBZ, acting within the ambit of its regulatory discretion, may attach supplementary conditions to a proposed course of action.
“In line with the preceding point, the RBZ has previously asked, among other conditions, that a resolution of historical shareholder impasses be secured in advance of any amalgamation of the bank and building society.”
ZBFH believed at the time that “it is abundantly reasonable” to conclude that the RBZ could insist on the same since the same set of interested parties was still involved.
“The lack of co-operation by a section of the minorities with regards to all transactions involving ex-Intermarket assets remains an ongoing matter and requires decisive closure,” it added.
Overall, the directors recommend that “while an amalgamation may have been the most commercially suitable option, the practical considerations around majority shareholder concerns point to a winding up of the building society and licence surrender as the option of choice under the circumstances”.
The memo further said: “While this option of choice is competent in settling questions around the future of ZBBS, it is important to note that the cooperation of minority shareholders remains imperative.
“Consequently, implementation of the proposed winding up should proceed on a written communication to the regulator, updating on the steps taken under Project Eagle to date and the fact that liquidation is contemplated as an alternative course of action.”
Overall, it was believed that surrendering the licence could conveniently help avoid the onerous task of both engaging with THL and enforcing the settlement agreement to resolve the outstanding shareholder dispute.
Dispute
Following recommendations that were made after the July 15, 2022 meeting, ZBFH duly filed an application to surrender ZBBS’ licence. However, it is understood that the central bank turned down the application in November 2023, insisting that the proposed action could only be countenanced or approved after resolution of the longstanding shareholder dispute.
In a statement published in our sister paper, The Herald, on November 17, 2021, ZBFH company secretary Mr Tinashe Masiiwa said, while the group’s board had “approved the merger of the two units in 2014”, “progress was delayed following a battle for control of the group between one of the major shareholders, Transnational Holdings Limited, and National Social Security Authority (NSSA)”.
THL, however, dismissed the claims as “false and mischievous disinformation”.
In a letter to ZBFH, dated November 22, 2021, THL founder Mr Nicholas Vingirai said: “Transnational strongly objects to the continuous peddling of corporate lies by ZBFH . . . We suggest that you correct the media report for the sake of the investing public . . . Transnational will not accept the expropriation of its assets.”
What could further complicate merger talks are suspicions by THL that Intermarket assets were transferred to ZB Bank.
According to a report by Mr Ngoni Kudenga, former curator of Intermarket, as at August 31, 2005, after debt conversion, “the bank (Intermarket Banking Corporation Ltd) and the Discount House were solvent”, with net asset positions of ZWL$68,9 billion and ZWL$105,5 billion, and net liquidity positions of ZWL$22,3 billion and ZWL$96,1 billion, respectively.
THL alleged these assets were moved from Intermarket to ZB Bank “just one of the many instances of asset stripping of Intermarket by ZB”.
It also claimed ZB Bank only built its capital using Intermarket cash and other Intermarket assets.
Reached for comment, Mr Vingirai said he could not “discuss confidential issues”.
However, ZBFH group chief executive officer Dr Shepherd Fungura told The Sunday Mail Business that the matter would be resolved before the deadline.
“This is work in progress, which we are busy working on through our board and shareholders to resolve the matter by the due date from RBZ,” he said.
Conundrum
At the centre of the dispute is the sale of 50,99 percent shareholding in Intermarket to ZBFH in 2006 by the RBZ, which THL also claims was against provisions of Intermarket’s memorandum and articles of association.
According to the articles, Transnational reportedly had inviolable rights of pre-emption, which the RBZ-ZBFH deal ignored.
The RBZ is a signatory to the 2016 Government-brokered settlement of the dispute.
It is expected that the central bank, as both signatory to the settlement agreement and regulator, would ensure resolution of the 17-year dispute.
Transnational still insists that should there be failure to implement the settlement agreement, it will “drive its cattle away” from the ZBFH kraal. Shutting down the Intermarket business would result in its assets being subsumed by ZBFH, a development that would further complicate resolution of the long-running dispute.
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