CHAIRMAN’S STATEMENT
OPERATING ENVIRONMENT
The fiscal crisis affecting the euro-zone during the year under review exacerbated the world financial turmoil with both the developing and high-income countries being affected. Developing economies suffered a marked reduction in capital inflows thereby hampering growth prospects.
That notwithstanding, the Zimbabwean economy is expected to have grown by 9.3% to close at $10.1 billion in 2011 on the back of a largely rebound performance from a, hitherto, low base attained during the hyperinflation period which ended at the beginning of 2009.
Whilst estimated to average a level of 60%, capacity utilization in the real sectors has remained largely irregular, with the textiles and clothing sectors exhibiting substantial vulnerability.
Inflation closed the year at 4.9% with food inflation having weighed in at a level of 5.8% year-on-year.
ECONOMIC OUTLOOK
In their “Global Economics Prospects” report of January 2012, the World Bank postulates that the year ahead will be characterized by substantial uncertainty and vulnerabilities as the world economy grapples with significant downside risk occasioned by the deepening sovereign debt crisis.
The Zimbabwean economy is expected to sustain the growth momentum in 2012 on the back of projected positive performance in the finance, mining, tourism, agriculture and manufacturing subsectors which are expected to attain growth rates of 23%, 15.8%, 13.7%, 11.6% and 6% respectively.
An incessant balance of payments deficit estimated at above $600 million, together with the huge external debt burden estimated at $6.9 billion will continue to exert negative pressure on growth prospects. A credible debt clearance strategy is necessary in order to facilitate reengagement with multilateral and donor agencies to spur capital creation in the local economy.
THE GROUP’S PERFORMANCE
On the back of a highly volatile operating environment, the Group was able to achieve a profitable outturn, with net profit having improved by 370% from a loss position in 2010 to a profit of $7.0 million in 2011.
The performance is despite a provision for an extra-ordinary expense amounting to $2.6 million. This represents the negotiated final settlement of warranties and indemnities issued upon the invitation of a third party to participate in the recapitalization of a former subsidiary company, Intermarket Banking Corporation (Zambia) Limited. The warranties and indemnities were previously reported as contingent liabilities at a level of $5.1 million.
The quality of the Group’s earnings is reflective of a stable and sustainable operating base which should be able to drive even better returns in the future.
More detail regarding the financial performance is provided by the Group Chief Executive Officer in his report.
DIVIDENDS
In order to position the Group to take full advantage of opportunities in the market, a number of strategic business units in the Group require further capital injection. In view of this critical requirement, the Board does not consider it prudent to declare a dividend for the year under review.
SHARE BUY-BACK
At the last AGM shareholders approved the extension of the authority for the share buy-back to the date of the next members meeting. A total of 15 055 905 of the Company’s shares representing 8.59% of the total issued share capital have been purchased to date. The shares have been kept as treasury shares and were purchased at a cumulative average price of $0.10 per share.
FUTURE PROSPECT
Whilst the Group has sufficient capital to meet all regulatory minimum capital requirements, further liquidity injection will enhance the Group’s product offering. The Group continues to scout for opportunities in this regard.
LITIGATION AND OTHER MATERIAL DISCLOSURE
The matter in which Transnational Holdings Limited is challenging the take-over of Intermarket Holdings Limited by the ZB Group is still pending at the Supreme Court of Zimbabwe.
Further, the Group continues to be listed as a Specially Designated National (SDN) by the Office of Foreign Assets and Control (OFAC) of the United States of America’s Treasury Department.
ACKNOWLEDGEMENT
On behalf of the Board, I wish to thank management and staff for their effort during the past year.
I also thank the various authorities and all stakeholders for their continued support.
B P Nyajeka
Chairman
31 May 2012
Harare
