Zimbabwe Asset Management Company (Zamco) says it has to date cleared a quarter of the US$1 billion non-performing loans (NPLs) it acquired from companies.
Zamco CE Cosmas Kanhai told businessdigest on Wednesday that there are a number companies that have already secured equity investments.
He said the companies are close to signing agreements with investors whilst others are still undertaking due diligence processes.
“To date, about a quarter of the acquired loans have been fully resolved. For these resolved NPLs, it means that the loan obligations have been fully expunged using cash and other repayment methods. As you are aware Zamco has up to 2025 to resolve all the acquired NPLs. We will continue with implementation of various resolution strategies on the portfolio that has yet to be fully resolved to ensure that they are resolved before the sunset period,” he said.
“We still continue to receive investor interest on various companies that are in our portfolio. There are a few companies that have already secured equity investments from investors. In addition, a number of companies are at agreement stage whilst some investors are still undertaking due diligence processes. We expect the trend to continue into the future in light of the numerous investment opportunities that are there and the expected improvement in the macro-economic environment going forward.”
Kanhai said the scramble for rescued firms by investors is continuing. Zamco acquired bad debts from stressed companies that had the potential to be rehabilitated upon injection of fresh capital. Some companies that benefitted from Zamco’s rescue scheme include the Cotton Company of Zimbabwe, RioZim Ltd, Star Africa, Cairns Holdings, Hwange Colliery Company of Zimbabwe, Border Timbers and CSC.
For equity investments, Kanhai said Zamco expected continued investor interest underpinned by investor’s bullish long term view on investment prospects in the country as they normally look at the long term view regarding risk and reward. Kanhai allayed fears of another NPLs surge following the current hyperinflationary indications, saying banks had increased their credit risk management.
“We do not believe that the creation of non-performing loans is going to increase in the future. With banks having improved their credit risk management systems over the past couple of years as well as the setting up of the credit reference system, the creation of new NPLs should decrease,” he said. In Q1 2017 Zamco closed the window to loan acquisitions saying continued acquisitions would erode the incentive to guard against risk in the financial sector and would promote moral hazard in the banking sector, whereby banks lower their underwriting standards hoping that any loans that go bad will be sold to Zamco.