Chairman’s Statement
Operating Environment
The Zimbabwean economy continued to under-perform in 2014 with the growth rate projections having to be revised from 6% to 3.1% for the year. Average prices receded by 2.1% on an annual basis on the back of low aggregate demand and continued deindustrialisation.
As a consequence of the low level of economic activity credit risk has become more amplified as the borrowers’ credit absorption capacity continues to deteriorate. This development breeds the undesirable effect of reduced financial intermediation as institutions attempt to preserve capital – a situation that compounds the pressure on any future growth prospects for the economy.
Liquidity remained elusive with capital inflows being too low to provide an effective stimulus to industrial activity and export performance. A wholesome upgrade of national infrastructure will be important in the effort to restore the country’s attractiveness as an investment destination.
Group Results
In anticipation of a tight operating environment in the short to medium term, the Group adopted aggressive austerity measures during 2014.
Resultantly, loss making operations were discontinued whilst a right sizing and re-orientation exercise saw the disengagement of staff and outsourcing of non-core activities.
The measures were taken to make the Group leaner and more efficient and resulted in significant front-loaded costs that have had an impact on the operating results for 2014. The benefits from these measures are already apparent in the outturn posted for the last quarter of 2014 and the first quarter of 2015.
Additionally, a balance sheet clean-up which commenced in June, 2014 continued up to the end of the year with further downgrades of loan accounts. This also had a significant impact on the operating result.
The Group thus posted a loss for the year of $9.8 million (2013: $0.3 million) as discussed in more detail by the Group Chief Executive in his report.
Capital and Future Prospects
The measures indicated above have resulted in a temporary strain on the fixed capital resources. The Group has thus mantained a significant liquidity buffer in order to ameliorate short term operational shocks.
In the meantime, the merger of banking operations within the Group remains critical to the optimization of capital resources. This transaction still awaits regulatory approval which is expected after certain pre-conditions are met.
Prospects for sustainable profitability have been enhanced through reduced overheads and innovation.
Material Issues
The long-outstanding matter in which Transnational Holdings Limited is challenging the acquisition of Intermarket Holdings Limited by ZB Financial Holdings remains to be determined at the Supreme Court.
Additionally, the Group still remains listed as a Specially Designated National (SDN) by the Office of Foreign Assets Control (OFAC) of the United States of America’s Treasury Department.
Directorate
During the course of the year the following changes in the composition of the Company’s Board and that of its principal operating subsidiary ZB Bank Limited, occurred:
Mr Bothwell Nyajeka resigned as Chairman of the Board on 1 July 2014.
Dr Christopher Hokonya resigned as director on 6 May 2014.
On behalf of the Board, I would like to thank Mr Nyajeka and Dr Hokonya for their contributions towards the affairs of the Group during their terms of office on the Board.
Mr Zvisineyi Churu resigned as Chairman of ZB Bank Limited with effect from 24 April 2014. He was replaced by Mr Stanford Sibanda who assumed office on 19 June 2014.
I would like to thank Mr Churu for his leadership of the Board of ZB Bank Limited and congratulate Mr Sibanda on his election as the new Chairman of ZB Bank Limited, and wish him the best in his tenure.
I am pleased to advise members of the appointment of Mr George Nheweyembwa as the new Managing Director of ZB Bank Limited with effect from 28 April 2014.
I welcome Mr Nheweyembwa to the Group and wish him the best during his term of office.
Acknowledgements
On behalf of the Board, I wish to thank management and staff for their effort during the past year.
I also wish to extend my gratitude to the various authorities and all stakeholders for their support and hope for continued harmonious relations going forward.
T B P Mpofu
Chairman
26 March, 2015
Harare
