Maravi

(HERALD) Agribank turns the corner

Agribank turns the corner
Thursday, 01 March 2012 00:00
Golden Sibanda Senior Business Reporter

AGRIBANK has managed to free itself from the financial quagmire that has been weighing down on its operations and is poised to report a profit for the first time since dollarisation. Managing director Mr Sam Malaba told journalists at a Press briefing on Monday that the land bank had turned the corner and would report a profit for the year ending December 31 2011. He was giving an update after the bank completed a US$2,5 million Information Communication Technology upgrade.

But he would not reveal the magnitude of the bank's profit since the financial accounts are still being audited. The agriculture-focused financial institution recorded a US$8,2 million loss in 2010.

He said contrary to perceptions that the bank was facing financial challenges and buckling under bad debts, Agribank had already met the central bank's regulatory minimum capital requirements. As at December 31, 2011, Agribank had tier 1 capital amounting to US$15,9 million.

Mr Malaba said the bank was adequately capitalised and that it would have US$26 million capital by the end of the year and boasted he had one of the best performing loan books.

"The quality of the loan book (US$73 million) is very good, with non-performing loans just under 5 percent as at December 2011. The non-performing loan book was 4 percent in 2010," said Mr Malaba.

Agribank was not spared the challenges associated with the liquidity crunch that has characterised the economy since dollarisation in 2009 following a decade of economic instability.

But unwavering financial support from the shareholder and management ability to negotiate external lines of credit enabled the bank to ride the crest of financial and economic constraints.

"The bank has made a huge turnaround from the loss of US$8,2 million in 2010 to achieve a profit," he said.

And developments since 2009 have left the Government-owned bank in a much stronger financial position and well placed to play a major role in supporting the agriculture sector going forward.

In a demonstration of confidence in the operations of Agribank, the Industrial Development Corporation of South Africa last year advanced a US$30 million, six-year loan for on-lending to agriculture.

The loan came in handy for local fertiliser firms, namely ZFC, Windmill and Chemplex. Although inadequate to cover all their requirements, the funds helped them shore up production.

Agro-focused firms such as Olivine Industries and Interfresh and other manufacturing firms that included Zimglass, Zim Copper, Sunway City and Aluminum Industries also benefited.

Beneficiaries will repay the funds over six years. They have six months grace period on interest payment and one year relief from settling the principal loan amount. They will also pay interest of 16 percent per annum in the first repayment year and 14 percent thereafter.

In what will further enhance profitability and its balance sheet, Agribank expects to conclude a much bigger facility with IDC this month with a view to support the agriculture sector.

Agribank has received a total of US$20 million from Treasury in support of its operations and Government has already committed US$8,5 million under the 2012 National Budget Statement.

posted by MrK @ 10:42 AM