Zimbabwe to create one of Africa’s largest financial institutions

GOVERNMENT, working with local and international bankers, including buccaneer business tycoon Kudakwashe Tagwirei, is working on an ambitious project to create Zimbabwe’s largest financial services company, with assets of over $ 2.5 billion. dollars, Hawks News can exclusively reveal.

BRIDGET MANANAVIRE / ALEX MHANDU

The core of the project will involve the merger of leading financial institutions including CBZ Holdings, ZB Financial Holdings, First Mutual Holdings Limited (FMHL) and First Mutual Properties (FMP).

An investigation into the project which is already taking shape shows that the new institution – which will have a footprint in local and regional markets – will involve serious financial engineering and megabucks.

It will include five major divisions: banking, insurance, investment, real estate and agriculture.

The subsequent merger and consolidation process will be led by CBZ Chairman Marc Holtzman, an American international banker, who was appointed on September 1, 2019 to chair the country’s largest bank. He will work with the government and local bankers in relevant financial institutions.

Holtzman is also President of Banque de Kigali. Previously, he was Chairman of Meridian Capital HK, a private equity firm that invests in natural resources, real estate, food, agriculture and transportation.

Prior to joining Meridian, he was Vice President of Barclays Capital and ABN Amro Bank in the same capacity.

Holtzman has already been appointed by former Kazakh Prime Minister Karim Massimov to the board of directors of Kazyna, the country’s sovereign wealth fund. He was also chairman and managing director of Kazkommertsbank, the largest bank in Kazakhstan.

His orbit in the business world began at Barclays Capital and ABN Amro Bank where he was vice president of both entities. He was co-founder and chairman of MeesPierson Euramerica, which was later acquired by ABN Amro Bank. In addition, he was a senior advisor to Salomon Brothers, an American investment banking firm (now Salomon Inc).

The investigation shows that Tagwirei, which already has an interest in the merging financial institutions, as well as its extensive portfolio of activities spanning mining, finance, agriculture, construction and other fields – making of its conglomerate Sotic International, one of the largest in the country and the region, will take a back seat as a politically exposed person, shaken by allegations of corruption.

Documents obtained from the banks involved indicate that the new financial services institution will thrive through economies of scale and finance large-scale projects in the public, national and private sectors, while having a direct impact on loan pricing and growth. credit in the market.

It will also have a major impact on the economic landscape, which is largely dominated and driven by large companies such as Old Mutual, Econet, Delta and Innscor. The information gathered shows that the project is now at an advanced stage, with all the necessary market research, concept and reports already completed.

“Plans of the government and bankers, as well as associated businessmen, are underway to form a new financial services institution, which will be the largest in the market, by merging and consolidating CBZ, ZB, FMHL and its FMP real estate subsidiary, ”a document said.

“The project will be led by bankers and the government which has an interest in CBZ and is also in the process of selling or reducing its interests in the relevant financial institutions held through the National Social Security Authority (Nssa) and other entities.

“For the past 20 years, Zimbabwe’s national private sector development agenda has been dominated and driven by a few companies, namely Old Mutual, Econet and Innscor. These entities have influence in critical sectors spanning financial services, telecommunications, agriculture, real estate and mining.

“This kind of private sector influence is not unique to Zimbabwe. However, what is unique is that their agenda has not necessarily and always converged with that of the government, leading to a misalignment with the socio-economic trajectory of the country. To realign the government’s national development agenda and vision for 2030, we need to create a new institution that feeds and directs this process.

The documents indicate that to achieve this, a merger between CBZ, ZB, FMHL and FMP is essential to create a holding company specialized and investing in entrepreneurial activities which form the backbone of the economy.

“The size and scale of such an institution would also allow the country to increase its capacity to finance large-scale projects, for example in mining and agriculture,” said another document.

“The merger of the operations of CBZ, ZB, FML and FMP will reach the scale necessary to compete with companies like Old Mutual in the local Zimbabwean market.

“The combined total asset base, which will amount to approximately US $ 2.5 billion, will enable the new group to be the lead institution in financing large-scale national projects.”

In addition, documents indicate that the new institution will have a higher single borrower limit – the maximum amount a bank is allowed to lend to a single borrower or individual out of that bank’s total shareholder fund – from $ 15 million to at least $ 35 million.

“The merger is likely to increase the industry’s competitiveness relative to our regional peers, have a direct impact on loan pricing and improve credit growth. It will also combine the high return on equity of FMHL / ZB and the low cost of financing in CBZ. The resulting entity will further combine CBZ’s strong consumer banking, asset management and agricultural offerings with the strong insurance and property portfolios of FMHL and ZB.

“This will create a well-balanced financial services entity that can support the development of Zimbabwe’s public and private sectors.

The documents add that the institution will be a catalyst for individual, corporate and national projects in the process.

“The current capital requirements for a Tier 1 bank are $ 30 million and for a Tier 2 construction company $ 20 million, which means CBZ needs two licenses that require 50 million. millions of dollars. ZB also demands the same. The government, as a shareholder, must inject new capital into the two banks. However, if they merge, no new capital is required.

The new project will also create a larger insurance portfolio.

“The larger insurance entity created would increase risk retention and result in greater premium retention by the combined entity – this would increase risk coverage for trade and project development. The larger entity should be able to apply economies of scale to reduce its combined cost base and thereby generate higher profits and dividends for shareholders. Synergies would reduce the number of branches, combine management teams and reduce technology improvement costs for banking and insurance.

The post-consolidation strategy requires significant investments in technology and digital products and delivery.

This will increase gross margins, such as better market pricing or greater purchasing power of suppliers, according to the documents.

“It will also be necessary to sell non-core assets or divisions to allow for better concentration or growth of funds,” he said.

The new institution aims to penetrate unbanked segments of the market and the region using FMHL’s operations in Botswana, Malawi and Mozambique. The project for a new financial services institution is already underway.

Nssa, which manages a fund of more than a billion dollars, has sold its shares in several banks, while retaining strategic stakes. This helped the process of the new financial institution to evolve.

Nssa last year sold its 37.79% stake in ZB Bank, worth more than ZW $ 755 million (US $ 11.984 million) to Tagwirei which already had a stake in CBZ and may also have interests in FMHL.

The proposed merger also provides for the takeover by Tagwirei of ZB’s second shareholder, Nicholas Vingirai, although the latter says he has not been approached.

“I had no discussion about it (disposition of its stake in ZB). Are you aware that there is a settlement in progress? However, send me your questions so that I can answer them directly, ”Vingirai said.

However, he did not respond to the questions addressed to him. The ZB deal was a share swap that enabled Nssa to obtain CBZ shares worth ZW $ 640 million or US $ 7.8 million.

Nssa said earlier this year that it was reducing its stake in FMHL and creating a strategic alliance around its wholly-owned subsidiary, National Building Society, to unlock value.

He announced that he would sell 31.22% of his 66.22% stake in FMHL and keep 35%. The size of Nssa’s shareholding, which it had held since 2012, violated both the regulations of the Zimbabwe Stock Exchange and those of the Insurance and Pensions Commission, the industry regulator.

This came after Nssa sold its stake in First Capital Bank and ZB.

In the initial stages, Nssa merged NicozDiamond into FMHL and sold its stake in Fidelity Life and Zimre Property Investments in a share swap with Zimre Holdings Limited.

“The new project in Zimbabwe will be similar to those found in Nigeria, South Africa, the United Arab Emirates and Southeast Asia, covering banking, insurance, mining, agriculture and other sectors of the economy, ”says a document.

Matilda Nyathi, director of marketing and corporate affairs for the CBZ group, did not answer questions. Likewise, FMHL Group CEO Douglas Hoto did not respond to questions sent to him via WhatsApp, although he did read them. But CBZ issued a warning, saying it was in negotiations to acquire shares in a financial institution.

“Following the warning issued by the board of directors on May 30, 2021, the directors of CBZ holdings Limited, informed the shareholders that CBZ Holdings Limited (the company) was in negotiations for a potential transaction involving the acquisition of ‘actions in a complementary business, which if concluded successfully, could have a significant effect on the price of the company’s securities, the full impact of which is currently being determined, ”the bank said.

Nssa spokesman Tendai Mutseyekwa said: “I acknowledge receipt of your email and will get back to you after checking with my colleagues working on this matter.”

Source: Falcon News


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