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BizDay Zimbabwe

ABC’s good, bad banks


Dually-listed banking group, ABC Holdings, is not pulling out of Tanzania, where government-related debts, now estimated at over US$38 million, have paralysed its operations in East Africa, executives have said.DOUGLAS MUNATSI  ABC Holdings, which is listed on the Zimbabwe and Botswana stock exchanges, is the parent company of a number of sub-Saharan Africa banks operating under the BancABC brand, which offer a diverse range of financial services including personal, business and corporate banking as well as asset management, stockbroking and treasury services.
Its Zimbabwean business is still the largest contributor to the group’s income.

Douglas Munatsi, the ABC group chief executive officer, said pulling out of Tanzania would be a hard decision.
“It is easy for us to say let’s just shut down, but there are reputational issues that come with this,” Munatsi told analysts after presenting the group’s half-year results to June 30, 2013 a fortnight ago.
“The next time we will go to Kenya (to apply for business) and they will say you closed a bank in Tanzania. (We will) spend many years (waiting for an operating licence),” Munatsi said.
He said a special purpose vehicle (SPV) had been created to house the bad debts.
This SPV will be called the “bad bank”.

The existing bank, with a cleaned balance sheet and healthy operations, would house the “good bank” with new accounts and existing ones.
He said debt recovery efforts would continue through the SPV.
Some analysts thought this strategy of two “banks” was just ‘creative accounting’ that would have little positive results.
Chief operating officer, Bheki Moyo, said this was the best solution available to contain the long-standing debt.
Munatsi has been careful on Tanzania, extremely careful not to hurt Africa’s confidence on his ambitious banking plan.
ABC has operations in Zimbabwe, Zambia, Tanzania, Botswana and Mozambique.

Across the five countries, BancABC has launched a massive depositor mobilisation programme.
At the same time, it has been slowing down its lending.
“Tanzania has 40 million people,” Munatsi told analysts.
“It is how government works, the court system and corruption (that has to be looked at). That is why you saw Chinese and US leaders all stopped over in Tanzania during their recent trips to Africa,” he said, referring to the vast potential for business in the East Africa country.

ABC has dispatched Zimbabwean bankers to take charge of its perennially loss-making Tanzanian operation, as Munatsi moved to arrest a serious slide in profit seen over a significantly longer period of time.
In Tanzania, the bank’s rebound has continued to be affected by shrinking interest margins and the loans to the government of Tanzania whose terms have been reviewed but not in the interest of BancABC.
“Your money is in the good bank,” Moyo told analysts last week.

“Otherwise, continuously, we used to get this question: ‘is my money safe?’. Instead of a situation where we would always continue fire-fighting, we have housed the bad debts in an SPV,” Moyo said.