CHAIRMAN’S STATEMENT
Operating environment
The level of liquidity on the market remained critically low throughout the year thus making the overall cost of money disproportionately higher than that obtaining in other countries within the region.
Trading margins also remained very tight and, with low volumes of business transacted generally, this had an adverse effect on the levels of profitability posted by the Group.
As a consequence of the low levels of disposable incomes, the property and capital markets exhibited bearish trades with the overall capitalization level of the Zimbabwe Stock Exchange being heavily discounted. The much anticipated inflows of foreign capital following the exchange control reforms of February 2009 and the launch of the Short Term Emergency Recovery Programme (STERP) proved rather sluggish as foreign investors remained apprehensive about the prospects of the inclusive government that was ushered in by the signing of the Global Political Agreement in 2008.
As testimony of a much improved trading environment compared to prior year, the year-on-year inflation to December 2009 receded by 7.7% whilst the economy is estimated to have grown by 4.7% in 2009 compared to a decline of 14.1% in 2008.
The general price stability obtaining in the multi-currency environment has resulted in improved planning processes as cost trends are now more predictable. Pressure has, however, continued to mount on staff related expenses driven by salary demands which are linked to a high cost of living indicator.
Confidence in the financial services sector has generally continued to be low as exemplified by the lukewarm response to the traditional service channels offered by the institutions. According to the monetary policy statement issued by the Governor of the Reserve Bank of Zimbabwe in January 2010, only 19 997 inter-bank cheque transactions were processed between August and December 2009.
Economic outlook
Amongst other objectives, the Three Year Macro-Economic Policy and Budget Framework launched by His Excellency, The President of Zimbabwe, during the first quarter of 2010 seeks to sustain macro-economic stabilization, provide support for rapid growth and employment creation, and encourage public and private sector investment. Government projects a 7% growth rate in the Gross Domestic Product (GDP) for 2010 whilst inflation is projected at 5.1%.
A gradual improvement in the culture of investment is projected with a savings to GDP ratio of 14.3% expected for 2010, increasing to 25.4% by 2012.
Achievement of the macro-economic goals indicated above will require, among other things, the active participation of the financial services sector through a deliberate stimulus package that injects more liquidity into the sector. Such an approach will result in capital being distributed evenly throughout the economic sectors at more reasonable and sustainable prices.
The mounting risk of default on assets on account of the high level of interest rates generally applicable is expected to induce pressure for the reduction of such rates. This should result in trading margins tightening even further, thus requiring an aggressive mobilization of business volumes to guarantee profitability.
The Group’s performance
Trading in a markedly changed environment, the strategic priority for the Group for 2009 was to protect the capital of the business whilst at the same time developing and nurturing business relationships with our trading partners. These relationships are expected to become solid pillars of sustainable future growth.
The Group posted a total comprehensive income of US$8.8m for the year ended 31 December 2009, as is discussed in more detail in the Group Chief Executive Officer’s report.
Dividend
In view of the need to recapitalize the business, the Directors have considered it prudent not to pay a dividend for the year under review.
Strategic thrust
All the regulated entities within the Group have sufficient audited reserves to meet applicable regulatory capital requirements.
The Group is, however, in the process of evaluating technical and financial partners with a strategic fit to the business.
Corporate governance
ZB Financial Holdings Limited is listed on the Zimbabwe Stock Exchange (ZSE) and subscribes to recommended best practices regarding corporate governance principles and conduct.
The Group is committed to meaningful and accurate disclosure through comprehensive reporting in order to facilitate objective assessment of the Group’s potential, its earnings capacity, and the risks associated with the generation of those earnings.
Litigation
The case in which Transnational Holdings Limited is challenging the acquisition of a controlling interest in Intermarket Holdings Limited by ZB Financial Holdings Limited (ZBFH) is still to be heard at the Supreme Court of Zimbabwe.
Material post-balance sheet events
In terms of the Council Decision 2010/92/CFSP of 15 February 2010, the Council of The European Union removed ZBFH and all its subsidiary companies from the list of entities on which restrictive measures must be applied. This development paves the way for enhanced customer convenience as the Group has resuscitated its network of counterparties in the Euro-zone.
The Group remains hopeful of similar revocation from the listing of Specially Designated Nationals of the Office of Foreign Assets and Control (OFAC) of the United States of America’s Treasury Department.
Directorate
I would like to acknowledge the sterling effort of our former chairman, Mr. Richard C. Hove, who passed on during the second half of the year. His wise counsel will be sadly missed.
The Group welcomes Messrs Thamsanqa P. B. Mpofu and Elliot Munemo who were appointed to the Board of Directors during the year under review. The Group looks forward to their contribution to its affairs.
Acknowledgement
I would like to thank members of the Board for their support.
On behalf of the Board, I wish to thank management and staff, the various authorities and all stakeholders for their support and hope for continued harmonious relations going forward.
B. P. Nyajeka
Chairman
25 March 2010
