Zamco recovers 80 percent of bad debts

TINASHE MAKICHI

The Zimbabwe Asset Management Corporation (Zamco) has recovered  more than 80% of the bad loans estimated to be ZWL$1.3bn it assumed a few years ago from banks, Business Times can report.

Zamco, was established in 2014 by the Reserve Bank of Zimbabwe as a special purpose vehicle,  to deal with the problem of growing non-performing loans (NPLs) in the financial services sector.

When  Zamco was formed,  the NPLs ratio had peaked to  about 22.14% of the total loan book in September 2014. They were not able to lend again. However, after Zamco took over NPLs from the balance sheets of banks, the average ratio has now been reduced to less than 2% compared to a global benchmark  of 5%.

This means, Zimbabwe’s financial services sector now has a sound credit risk management system  and internal controls in place.

“Almost 80% of the loans in terms of value have been collected,” Zamco chief executive officer  Cosmas Kanhai (pictured) told Business Times.

Kanhai also disclosed that Zamco has since fully paid the loan received from government to acquire NPLs from banks.

It is understood that Zamco received about ZW$1.2bn to acquire NPLs at a discount and restructured the loans, giving debtors more time to pay.

“Government has been paid off the amount used to acquire NPLs meaning there is no recourse to public funds. This has been done ahead of the sunset of 2025 which is the period Zamco is supposed to wind up,” Kanhai said.

Since its  inception, Zamco, has been assuming mortgage bonds, non-insider loans and NPLs for companies in good stead.

Zamco, however, is winding up operations in 2025.

“.… Zamco has begun the process of winding up its operations. The mandate has been largely achieved,” Kanhai said.

This year Zamco divested from starafricacorporation and sold its stake to Takura Capital.

Zamco invested in starafricacorporation in a debt to equity arrangement in June 2017 after purchasing a total of ZWL$32.7m of starafricacorporation’s NPLs in exchange for shares among a series of other intertwined transactions.

Zamco became the largest shareholder in starafricacorporation controlling 57.40% with NSSA controlling 30.10%. The balance was controlled by minorities.

The creation of Zamco had led to controversy amid claims the SPV was used to clear the debts incurred by politicians.

Kanhai has in the past said the creation of Zamco was necessary to save banks which were almost choking due to the rising NPLs. Banks were the biggest beneficiaries of the formation of Zamco.

The company has been fully focused on resolution and recovery and notwithstanding the turbulent environment, Zamco managed to implement various strategies that maximised recovery from means other than loan repayments such as debt asset swaps.

Analysts say the recoveries to-date are a demonstration of the fact that Zamco was not formed to simply acquire and warehouse or write-off NPLs as all amounts acquired remain due and payable.

Zamco has powers to acquire, reschedule, dispose of, hold, manage or otherwise settle NPLs of banking institutions.