Acting Chairman’s Statement
Introduction
It is my pleasure to issue this statement in my acting capacity, having assumed the position on 26 September, 2019.
Operating Environment
The operating environment remained challenging with the International Monetary Fund [IMF], in its World Economic Outlook Report for October, 2019, projecting the Zimbabwean economy to have contracted by 7.1% in 2019.
Businesses, in general, grappled with many negative factors, chief amongst which were:
- An widespread shortages and rapid devaluation of the unstable currency regime characterized by local currency. The introduction of a mono-currency framework and a managed floating exchange rate system since June 2019 did not eliminate an otherwise thriving parallel exchange market which traded at a substantial margin to the interbank rate.
- Rising costs affecting both businesses and households with year-on-year inflation reaching an estimated 521.2% as at 31 December, 2019.
- Constrained supply of critical commodities which include fuel and electricity.
- A poor farming season with the rainfall levels being well below long-term averages.
The above, amongst other factors, resulted in reduced market competitiveness thus constraining capacity utilisation in the manufacturing sector to levels below 40%.
Performance volatility in the financial sector was experienced as market players tried to adjust their business models to align with changing, and often uneasily balanced, policy frameworks which attempted to stabilize the currency management system, stimulate production and curtail liquidity expansion.
Group Performance
In the context of an inclement operating environment, the Group posted decent financial results as discussed in more detail by the Group Chief Executive in his report.
Capital Requirements
The Group faces a compliance burden going forward, following the review of the minimum capital requirements for banking entities to the Zimbabwean dollar equivalent of US$30m and US$20m for Tier 1 and Tier 2 banks respectively with effect from 31 December, 2020.
The Group intends to maintain a Tier 1 banking licence and this will be partially met through finalizing the merger of ZB Bank Limited and ZB Building Society in order to lessen the compliance burden. Capital resources will be augmented through retention of reserves and, possibly, fresh equity.
Statutory Instrument 39 of 2020 fixed capital requirements for life assurance operators and reinsurance companies at ZW$75million. ZB Life Assurance Company and ZB Reinsurance Company met these capital levels as at 31 December, 2019.
Dividends
The Board has declared a dividend of ZW6.49 cents per share for the year ended 31 December, 2019. A detailed dividend announcement with dates will be published after the Annual General Meeting.
Legal Contingencies
Engagements with stakeholders in order to find a final settlement to the long-standing dispute between the Company and Transnational Holdings Limited regarding the ownership of Intermarket Holdings Limited have continued. This matter is still pending at the Supreme Court of Zimbabwe.
Compliance & Regulatory Issues:
The Group has dealt with all governance issues which were the subject of a Corrective Order issued by the Reserve Bank of Zimbabwe [RBZ] on 7 March, 2017 and reviewed in March 2018 and awaits the lifting of the order upon satisfactory review by the regulator.
Directorate
Professor C. Manyeruke, then chairman of the Board, resigned on 1 September, 2019. On behalf of the Board and Management, l extend warm gratitude for her contributions and leadership during her term of office. l wish her success in her new role.
Executive appointments
Mr. G. Nheweyembwa resigned from the Group on 1 September 2019. He was the Managing Director of ZB Bank Limited. I wish Mr. Nheweyembwa success in his future endeavours.
In his stead, Mrs. G. Chikorno, previously the Chief Finance Officer for ZB Bank Limited, was appointed in an acting capacity from the same date.
As a result of the above movements, Mr. E. Masinire was appointed the Acting Chief Finance Officer for ZB Bank Limited.
I pledge the Board’s support to Mrs. Chikomo and Mr. Masinire and wish them enjoyable and successful terms of office.
Outlook
The Zimbabwean economic prospects are expected to remain tenuous in the short term, reflecting the downstream effects of a protracted drought; structural defects of an unstable currency management framework; and increasing momentum for general price increases. Policy interventions will be expected to address waning confidence in the monetary system and general financial sector operations.
The advent of the COVID-19 health pandemic exacerbates an already fragile economic outlook.
Whilst lasting solutions for macro economic stability are being sought, the Group will continue to grapple with the need to preserve its capital and asset base. To this end, investment opportunities that offer growth prospects will be taken whilst operations will be recalibrated to offer improved service to customers at a reduced cost leveraging on technologies.
Increased focus will be placed on the Group’s human capital which has always been the key source of competitiveness in a challenging environment.
Conclusion
I would like to thank Board colleagues, management and staff, our valued customers and all other stakeholders for the contributions made in the achievement of the results posted in 2019.
P. Chiromo
Acting Chairman
29 May, 2020
