via US$50m lifeline for MetBank Sunday, 05 January 2014 by Kudakwashe Mutandi SundayMail
Mauritius-based financial firm Loita Capital Partner International is set to inject a US$50 million line of credit into MetBank after taking a long-term view to invest in the country.
The credit line from the financial powerhouse, which has a 60 percent stake in MetBank, is set to ease the bank’s liquidity problems and finance various developmental projects.
MetBank was one of the financial institutions whose operations were affected by the liquidity crunch as some of its depositors reportedly went through the festive season without accessing their hard-earned cash.
A senior MetBank executive, who cannot be named for professional reasons, told The Sunday Mail Business last week that the bank’s future prospects look bright in light of the conclusion of the deal.
“MetBank is on a financially sound footing and is not closing shop anytime soon in light of the massive financial lifeline being thrown at it by the Mauritians,” the senior executive said.
Last month board chairperson Mr Wilson Manase hinted that shareholders, the board and management were actively pursuing a number of initiatives to resolve the financial institution’s liquidity challenges.
Some of the proposed initiatives had already passed the compliance stage.
Then, Mr Manase said the bank was working on a number of lines of credit, including the Loita Capital option, which senior bank management were finalising.
“Our senior bank executives are in the process of finalising a composite US$50 million line of credit, which follows hard on the heels of the recently approved US$10 million credit line which the bank has been drawing down,” he said then.
Mr Manase also said the bank was pursuing several other initiatives to ensure normal trading, including aggressive loan recovery, asset disposal, and negotiating with clients for rescheduling.
Loita Capital has a strong presence in the region with interests in countries like South Africa, Zambia, Tunisia, Malawi, Ivory Coast and Tanzania.
It is against this backdrop that the alliance is set to strategically position MetBank as an active financial player not only locally but also regionally.
Over the years, companies from the Far East and Asia have been increasing investments in the country, tapping from the immense potential that is inherent on the local market.
International lines of credit have been discontinued by Western financiers from 1999 as a result of huge differences, particularly occasioned by the country’s land reform programme.
MetBank is one of the banks that have been hit by the liquidity crunch as the financial sector battles with a financial squeeze.
Experts apportion the blame on the fact that banks have to import cash at a high cost which is out of reach for most of the indigenous banks.
However, some banking experts said the cash shortage was a result of high demand during the festive season and was temporary.
Bankers’ Association of Zimbabwe president Mr George Guvamatanga said the liquidity crisis that has beset most banks signalled the need to restructure operations with a view to staying afloat in tandem with the regulations governing the operations of financial entities.
“Since the adoption of the multi-currency regime, the country has been characterised by a severe liquidity crunch, as the obtaining system cannot print its own currency, hence the problem we are facing,” he said.
“There is need for all stakeholders to play a role by restoring confidence in the economy so that foreign capital flows to Zimbabwe as foreign direct investment (FDI) and other capital flows are critical.”
Mr Guvamatanga said there was also need to deal with balance of trade and drive productivity and exports up so that the country becomes a net exporter.
Financial experts said the nation needs to develop a culture of saving if mitigation factors against the liquidity crunch are to be initiated starting from all social strata.
“The economy needs to generate its own internal savings, starting at individual or household level, as the bulk of our banking sector deposits are short term in nature. As a nation, we have not yet regained our sense of the need to save long term,” said Mr Liberty Machando, a Harare-based financial expert.
Mr Machando said consumptive imports were acting as a huge drain on the domestic liquidity and should be managed downwards.
He said procuring inputs and consumption goods locally would result in the circulation of the scarce cash locally.
The Ministry of Finance and Economic Planning and the Reserve Bank of Zimbabwe have been consistent in reiterating the soundness of the local banking sector.
Trading results for the half year ended 30 June 2013 show that on balance, there continues to be modest but encouraging growth in both the quantum and quality of bank earnings.