The GOVERNMENT, together with local and international bankers including buccaneer business tycoon Kudakwashe Tagwirei, is working on an ambitious plan to create the largest financial services company in Zimbabwe, with an asset base of over 2, 5 billion US dollars, The Newshawks can exclusively reveal.
BRIDGET MANANAVIRE/ALEX MHANDU
The heart 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).
A survey of 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 main divisions: banking, insurance, investment, real estate and agriculture.
The merger and subsequent 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. It will work with the government and local bankers of the relevant financial institutions.
Holtzman is also president of the Bank of Kigali. Previously, he was Chairman of Meridian Capital HK, a private equity firm with investments in natural resources, real estate, food, agriculture and transport.
Prior to joining Meridian, he served as Vice Chairman of Barclays Capital and ABN Amro Bank in the same capacity.
Holtzman was previously appointed by former Prime Minister of Kazakhstan Karim Massimov to the board of directors of Kazyna, the country’s sovereign wealth fund. He was also Chairman and CEO of Kazkommertsbank, the largest bank in Kazakhstan.
His orbit in the corporate sphere began at Barclays Capital and ABN Amro Bank where he was Vice Chairman 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 a stake in the merged financial institutions, as well as its broad business portfolio that straddles mining, finance, agriculture, construction and other areas – making his conglomerate Sotic International, one of the largest in the country and region, will take a back seat as a politically exposed person rocked by corruption allegations.
Documents obtained from affected banks indicate that the new financial services institution will thrive on economies of scale and finance large-scale public, national and private sector projects, 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 corporations 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 reporting already done.
“Plans by the government and bankers and 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 real estate subsidiary FMP,” a document said.
“The project will be driven 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.
“Over the past 20 years, Zimbabwe’s national development agenda in the private sector has been dominated and driven by a few companies, namely Old Mutual, Econet and Innscor. These entities have influence over critical sectors spanning financial services, telecommunications, agriculture, real estate and mining.
“This type 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 misalignment with the socio-economic trajectory of the country. To realign ourselves with the government’s national development agenda and its 2030 vision, we need to create a new institution that feeds and drives this process.
The documents indicate that to achieve this, a merger between CBZ, ZB, FMHL and FMP is essential to create a holding company specializing in and investing in the entrepreneurial businesses that form the backbone of the economy.
“The size and scale of such an institution would also allow the country to increase its ability to finance large-scale projects, for example in mining and agriculture,” another document said.
“The merger of the operations of CBZ, ZB, FML and FMP will achieve the scale needed to compete with Old Mutual in the local Zimbabwean market.
“The combined total asset base, which will be approximately $2.5 billion, will enable the new group to be the leading institution in financing large-scale national projects.”
In addition, documents indicate that the new institution will have a higher single debtor limit – the maximum amount a bank is allowed to lend to a single borrower or individual out of that bank’s total shareholder funds – from $15 million to at least $35 million US.
“The merger is likely to increase industry competitiveness against our regional peers, directly impact loan pricing and improve credit growth. It will also combine the high return on equity of FMHL/ZB and the low cost of funding of CBZ. The resulting entity will further combine the consumer banking, asset management and strong agricultural offerings of CBZ with the strong insurance and property portfolios of FMHL and ZB.
“This will create a well-rounded 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.
“Current capital requirements for a Tier 1 bank are US$30 million and a Tier 2 building society is US$20 million, which means CBZ needs two licenses which require US$50 million. Americans. ZB also requires the same. The government as a shareholder must inject fresh capital into the two banks. However, if they merge, no fresh capital is required.
The new project will also create a larger insurance portfolio.
“The larger insurance entity created would increase risk retention and lead to greater retention of premiums by the combined entity – this will increase risk coverage for business and project development. The larger entity should be able to apply economies of scale to reduce its combined cost base and thus result in higher profits and dividends for shareholders. Synergies would reduce the number of branches, consolidate management teams and reduce the costs of improving technologies for banking and insurance.
The post-consolidation strategy requires significant investments in technology and digital products and delivery.
This will improve gross margins, such as better market pricing or greater buying power with suppliers, according to the documents.
“It will also be necessary to sell non-core assets or divisions to allow for better focus or fund growth,” he says.
The new institution aims to make inroads into the unbanked segments of the market and into 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, sold its shares in several banks, while retaining strategic stakes. This helped the process of the new financial institution evolve.
Last year, Nssa sold its 37.79% stake in ZB Bank, then worth more than Z$755 million (US$11.984 million) to Tagwirei, which already had a stake in CBZ, and could also hold shares in FMHL.
The merger plan also calls for Tagwirei to buy ZB’s second largest shareholder, Nicholas Vingirai, although Vingirai says he has not been approached.
“I had no discussion about this (disposal of his stake in ZB). Are you aware that there is a settlement that is in progress? However, send me your questions so that I can answer them directly Vingirai said.
However, he did not respond to questions put to him. The ZB deal was a share swap that saw Nssa obtain CBZ shares worth Z$640 million or US$7.8 million.
Earlier this year, the Nssa said it was reducing its stake in FMHL and creating a strategic alliance around its wholly owned subsidiary, National Building Society, to unlock value.
He said he would sell 31.22% of his 66.22% stake in FMHL and retain 35%. The size of Nssa’s shareholding, which it had held since 2012, breached 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 with FMHL and divested its stake in Fidelity Life and Zimre Property Investments under a share swap agreement with Zimre Holdings Limited.
“The new project in Zimbabwe will be similar to those found in Nigeria, South Africa, the United Arab Emirates and South East Asia, covering banking, insurance, mining, agriculture and other sectors of the economy,” a document said.
Matilda Nyathi, CBZ Group’s head of marketing and general affairs, did not respond to questions. Similarly, FMHL Group CEO Douglas Hoto did not respond to questions sent to him via WhatsApp, although he had read them. But CBZ issued a warning, saying it was in negotiations to acquire shares in a financial institution.
“Following the advisory issued by the board of directors on May 30, 2021, the directors of CBZ holdings Limited have informed shareholders that CBZ Holdings limited (the company) is in negotiations for a potential transaction involving the acquisition of shares in a complementary business, which if successfully completed 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 file.”
Source: Hawk News