via We are broke: Agribank – DailyNews Live by John Kachembere 10 FEBRUARY 2014
Agribank says it has insufficient money to fund the forthcoming winter-cropping season due to limited resources received from Treasury.
Sam Malaba, the Agribank chief executive, last week told Parliament that the agriculture-focused institution only received $4 million from a $50 million request, which was earmarked for the 2013/2014 farming season.
“We have no money at the moment and it’s a chilling position. All the funding we received from the national budget went towards summer cropping,” he said.
Malaba, however, said the financial institution will devise ways of getting the scarce resource to fund farmers.
Agribank — which was recently removed from the United States sanctions list — has been struggling to deliver its duties of lending to farmers, due to liquidity constraints in the economy.
The bank’s capital amounted to $20,43 million as at 31 December 2012, against the minimum regulatory capital requirement of $25 million.
Malaba noted that the recapitalisation of Agribank would help the troubled financial institution to get cheap credit lines from external creditors.
“If we get $50 million from government then the bank’s capitalisation will be over $70 million and then if we sell the 49 percent stake, that will be an additional $70 to the bank.
If we are capitalised to the tune of about $150 million it would make the bank attractive to international lenders,” he said.
Last year government approved the disposal of its 49 percent shareholding in the bank to strategic investors as a way of recapitalising the financial institution.
Malaba said a technical committee made up of officials from the ministries of Finance, Agriculture and Justice, Attorney General’s office, the central bank and Agribank was set up to conduct an evaluation.
“We are waiting for the Finance minister (Patrick Chinamasa) to take the papers to Cabinet for approval and then we can go to tender looking for equity partners.”
Plans to find a strategic partner for Agribank have been on the cards for a long time and analysts believe it is important for a suitor to be roped in to recapitalise “one of the country’s most crucial banks”.
Market watchers assert that Agribank badly needs an investor who will inject fresh capital as the bank seeks to regain lost ground after posting an $3,7 million loss in the half year to 2013.
Economic analyst Tapiwa Nyandoro said he doubted Agribank would get a capital injection of $50 million from Treasury, due to limited fiscal space.
“That of course means the bank can only raise $20 million from other investors, even if they would wish to invest more. This is thanks to the restrictive nature of the indigenisation law, which limits foreign investment to 49 percent of equity in our enterprises,” he said.
Nyandoro noted that government could also pledge land held by A2 farmers worth a billion dollars or so as equity as part of recapitalising the bank.
“This in turn could allow Agribank to seek as much as $2 billion in foreign direct investment diluting government’s Shareholding to around 33 percent.
“With the concurrent enactment of legislation for land titling, this would allow the bank to offer 25-year mortgages for the purchase of farms by sitting tenants or other interested parties, as well as the provision of working capital.
It is time to bring bankability and liquidity to the commercial farming sector. Allow the idle assets to sweat,” he said.