We are stronger now: IDBZ

IDBZ

IDBZ

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THE Infrastructure Development Bank of Zimbabwe, which has been reeling under a US$38 million legacy debt and ruinous illegal sanctions, says it is now in a stronger financial position

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to attract equity investors and debt capital from domestic and international capital markets after Government took over the debt.

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IDBZ inherited the debt from the then Zimbabwe Development Bank in 2005.

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Government, in line with Zim-Asset, took over this debt through a special purpose vehicle — the Zimbabwe Asset Management Corporation (Zamco) — and left the key national institution with a clean balance sheet.

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Crucially, the assumption of IDBZ’s legacy debt has left the bank with a positive equity of US$34 million, which is US$9 million more than the minimum regulatory capital of US$25 million set by the Reserve Bank of Zimbabwe.

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Zamco was set up to purchase non-performing loans from local banks and has so far purchased NPLs worth US$65 million out of an estimated US$700 million bad loans.

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Due to the debt and sanctions imposed by the United States’ department of the treasury in 2003, the IDBZ had become unattractive to equity investors.

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Since adoption of the multi-currency system in 2009, the IDBZ has been relying on short-term business for survival, at the expense of its core mandate of infrastructure development and long-term financing.

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The short-term business model was occasioned by the short-term nature of the funding available locally and the bank’s inability to access long-term funding from international capital markets due to sanctions.

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The bank was eventually removed from the sanctions list in 2013, and can now access long-term capital from international financiers for infrastructure development.

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To its credit, the bank has consistently posted profits since 2010 and has duly paid dividends to its shareholders.

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IDBZ public relations executive Ms Priscillah Mapuranga last week said the bank could now take advantage of the growth in the domestic capital market, thereby providing local sources of long-term capital.

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Total bank deposits rose eight percent to hit US$5,1 billion in December last year.

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“These changed market conditions have provided an opportunity for the IDBZ to shift its focus to long-term infrastructure business. The change in business focus afforded the bank an opportunity to streamline its costs and review its skills mix.

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“This resulted in the current voluntary retrenchment exercise with the objective of ensuring that the bank is optimally resourced with appropriate skills to deliver on its core infrastructure mandate,” said Ms Mapuranga.

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Most staff who had commercial banking experience opted to be retrenched while those who remained are set to undergo training to give them appropriate skills.

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Ms Mapuranga said the restructuring exercise has left the bank with adequate capital to underwrite more business and in a stronger position to attract equity investors and debt capital from both the domestic and international capital markets.

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The thrust by the bank to restructure its operations, strengthen its skills base and institutional capacity to deliver on its mandate is in line with Government’s economic blueprint.

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The IDBZ has since successfully floated US$80 million worth of bonds in the domestic capital market in support of infrastructure projects in the energy and housing sectors.

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Ms Mapuranga also said the bank is on the brink of concluding negotiations for external lines of credit with a combined limit of US$70 million.

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The lines of credit are earmarked to support key economic sectors such as infrastructure, mining, tourism, agriculture and manufacturing.

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IDBZ is a statutory body established through an Act of Parliament, the Infrastructure Development Bank of Zimbabwe Act (Chapter 24:14), and came into being in September 2005 following the amendment of the Zimbabwe Development Bank Act.

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It is mandated with promoting economic development and growth and to improve the living standards of people through development of infrastructure including housing, amenities and utilities.