Agric sector tops NPLs list

THE agricultural sector tops on the $1,13 billion non-performing loans (NPLs) acquired by the Zimbabwe Asset Management Company (Zamco), chalking 43 percent of the NPLs.

The sector’s NPLs amounted to $490,27 million followed by the construction sector with ($67,8 million), representing 6 percent; distribution ($95,1 million), financial services ($88,8 million); manufacturing ($130,77 million); mining ($83,47 million); retailing ($11 million); services ($76 million); and other ($90,8 million).

The grim statistics, which have previously been weighing down the operations of companies, were provided by Reserve Bank of Zimbabwe Governor Dr John Mangudya during a Public Accounts Committee hearing on Monday.

“The portfolio has concentration towards the agriculture sector.

“The sector accounted for 43 percent of the acquired NPLs as at December 31, 2018, followed by manufacturing and financial services sectors at 12 percent and 8 percent respectively,” said Dr Mangudya.

Farmers have generally been struggling to pay back bank loans, due to challenges associated with bad weather patterns and in some cases poor farming methods.

This has caused banks to be sceptical when lending farmers, with some banking institutions reportedly demanding that farmers should produce collateral or pay slips to access loans.

Farmer representatives say the demand for pay slips is preposterous as farmers are not formally employed, a move that prevents them from increasing productivity.

Meanwhile, Dr Mangudya said Zamco has started resolving NPLs acquired from banks.

Up to end of last year, Zamco had resolved NPLs totalling $251,46 million.

Zamco’s NPLs resolution policy provides for a number of options including loan restructuring; debt to equity conversion into preference and ordinary shares; debt-asset swap agreements; private treaty sales; disposal of NPLs to investors in distressed assets; negotiated settlement; securitisation and foreclosure.

Said Dr Mangudya: “Thus far, Zamco has exercised most of the above resolution options in varying degrees, with a preponderance towards restructuring, debt to equity conversions and increasingly, debt to asset swaps in the absence of meaningful business cash flows.”

Beyond resolving NPLs, Zamco also assists distressed firms to ensure they don’t collapse, and also preserve jobs.

Dr Mangudya said upon acquisition of NPLs, Zamco says a number of companies have potential to turnaround their fortunes if afforded enough time and better credit terms on funding.

“The measures that Zamco is implementing to assist companies to turnaround are bearing fruit. These measures include plain loan restructurings whereby Zamco extends loan repayment periods and reduces interest rates, as well as debt/ asset swaps where loan obligors settle their debts using properties,” said Dr Mangudya.