Old Mutual Zimbabwe’s banking subsidiary, CABS, is planning to invest over ZWL$152m in the forthcoming 2019/2020 summer cropping season in an effort to improve productivity in the agriculture sector.
The development comes at a time when the country is grappling with foreign payment backlogs of agriculture-related products due to subdued agricultural production, hence funding the most critical sector will help in turning around the economy.
Simon Hammond, CABS managing director, told Business Times that the bank and cut foreign currency deficits which rose from raw material importation.
“Last year, we supported agriculture to the tune of ZWL$152m and we hope to support it to such levels again this year. We will be giving loans to anyone who qualifies, not specifically large-scale farmers only. We’ve got a good project with Tongaat Hulett sugarcane outgrowers going on in the Lowveld,” Hammond said.
He said CABS “works through off-takers who then decide to subcontract to the surrounding small-scale farmers rather than lending them directly to individuals. We have directed a lot of lending to the productive sector, we remain the largest lender to the private sector of all the banks in the country.”
CABS’ thrust is to fund the whole farming value chain to improve productivity on A1 and A2 farms.
The bank’s support for smallholder farmers is in tandem with the Reserve Bank of Zimbabwe’s aspirations for financial inclusion aimed at embracing unbanked societies.
In most instances, the bank advances additional fees for other farming activities which include horticulture, wheat, maize, piggery, poultry, soya, cotton, dairy and beef production.
Though it is not clear as to how much money banks will set aside, early indications show that over ZWL$2bn will be mobilised for the upcoming agriculture season.
CABS recorded a profit growth of 195%, worth ZWL$61.1m in the half year ended 30 June, up from ZWL$20.7m in the previous comparable period due to the growth in net interest income, foreign currency translation gains, and property fair value gains.
Funds under management for the asset management business were up by 139% to ZWL$6.8bn attributable to positive investment performance.
The group’s operating and administration expenses were up 76% to ZWL$80.1m, from ZWL$45.5m previously due to inflationary pressures and the impact of local currency devaluation.
Meanwhile, the diversified financial services provider Old Mutual Zimbabwe’s revenue for the half year to 30 June 2019 jumped 741% to ZWL$2.4bn, from ZWL$290.7m.
Old Mutual has become the first company in the country to implement historical cost accounting in view of the high inflation that has been prevailing in the country.
Historical cost is a measure of value used in accounting in which the value of an asset on the balance sheet is recorded at its original cost when acquired by the company.
Old Mutual Zimbabwe adopted historical cost accounting after its parent company, the South African-based Old Mutual Group, recently announced that it had “ring-fenced” its Zimbabwe operation in view of inflationary pressures affecting Zimbabwe.
The parent company said financials from Old Mutual Zimbabwe had been removed from the group’s results from operations and adjusted headline earnings.
The group credited the increase in revenues to “growth in all main revenue lines, particularly investment returns and exchange gains.”
Profit before tax rose 671% from ZWL$66m last year to ZWL$509.2m on investment returns.
Operating profit — excluding investment returns from excess shareholder funds invested and gains directly attributable to policyholders, increased by 287% to ZWL$132.9m, fromZWL$34.3m driven by profit growth in the life, banking, short-term insurance, and asset management businesses.