By Phillimon Mhlanga
NEARLY 20 properties belonging to embattled companies and individuals across the country will be auctioned today in Harare to settle debts owed to State-owned financial institution, Agricultural Bank of Zimbabwe Limited (Agribank), as the bank intensifies recovery of bad debts, the Financial Gazette’s Companies & Markets (C&M) can report.
Sam Malaba, the bank’s chief executive officer, recently said credit and debt recovery would “remain a key focus area in the bank”. The bank has enhanced its credit function and recently, it established a separate credit and debt recovery unit to focus on thorough credit analysis and debt recovery.
The move is critical to contain non-performing loans (NPLs) in this harsh macroeconomic and business environment.
C&M can report that Choruma Marias Valuation and Estate has been appointed by the bank to auction the immovable properties of 18 defaulting borrowers.
The public auction will be held at Raylton Sports Club this morning in Harare following a High Court judgement in favour of the financial institution.
Defaulters’ immovable properties, mainly land, are located in Harare, Bulawayo, Norton, Chitungwiza, Kwekwe, Mutare, Bindura, Karoi and Goromonzi. The properties will be sold by public auction.
The properties will be auctioned with all permanent improvements.
It was, however, not immediately clear by the time of going to press how much the bank was owed by borrowers whose properties will be auctioned.
Among several firms and individuals who will have their assets auctioned today are Zindoga Bottle Store’s 6 356 square metres stand in Midlands Township, Harare and two pieces of land in Bulawayo in Waterford Township belonging to Belkford Private Limited. One stand measures 3 795 square metres and the other measures 3 777 square metres.
Others include a piece of land measuring 483,5087 hectares in Borrowdale, Harare, belonging to Mathew Nyashanu and another in Mutare belonging to Lovemore Ngara, measuring 981 square metres.
The worsening economic conditions have resulted in businesses and individuals facing an unrelenting wave of forced sales in Zimbabwe and this has prevented them from realising value from their assets to help them get out of debts.
Forced asset sales, which are sometimes called forced liquidations, are done in order to satisfy court judgements. This is so because most companies in Zimbabwe are insolvent.
Most forced sale of assets have failed to attract the best market prices and in most cases, prices have not been enough to cover the amounts owed to creditors, even though the market value of assets that may have been offered to a bank could have been three times the size of the loan. This results in creditors hunting for more assets from the same defaulters.
Market watchers last week told C&M that the situation was likely to worsen due to a deepening economic crisis that has resulted in the closure of companies.
The most immediate impact of the falling realisable asset value, through forced sales, is that it negatively affects a firm’s balance sheet, triggering financial instability which in the end threatens the whole economy with bankruptcy.
While the trigger for the forced sales has been massive debts accrued by companies after the economy dollarised in 2009, the plunge in asset prices is indicative of a deeper crisis exacerbated by the ailing economy.
In its financial results for the year to December 31, 2016, Agribank reported a profit of US$4,8 million, which was an improvement on a loss of US$6,3 million recorded in 2015.
The bank recorded an increase of 45,2 percent in net interest income during the period under review to US$25,9 million compared to US$17,8 million reported in the previous year.
The bank’s non-interest income was US$5,3 million, same with prior year. Total assets grew by 18,6 percent to US$204 million during the period under review compared to US$172 million reported in 2015.