Barclays profit in Zimbabwe doubles while economy stalls

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Tawanda Karombo Harare

A WEAKER rand has partly been blamed for the deflationary trend currently hobbling Zimbabwe’s economy, with the chairman of Barclays Zimbabwe saying yesterday that there was a need to boost local productivity and normalise operational efficiencies.

Experts in the country say the economic situation is worsening, with margins taking a knock. Retail executives, whose companies now have to import more products from South Africa, say demand for goods and commodities in Zimbabwe is softening.

As a result of the economic slowdown in Zimbabwe, interest rates in the financial services sector have continued to narrow and Barclays Zimbabwe chairman Anthony Mandiwanza said this had necessitated the adoption of defensive strategies aimed at ensuring a quality loan book.

Barclays is one of the few companies that are managing to make a profit in the current difficult operating environment. The Zimbabwe arm of the UK bank reported yesterday that interim after-tax profit more than doubled to $1.7 million (R18.3m).

“Inflation for traded goods has been trending down partly due to the effect of a weaker rand, but also due to stagnation in demand for certain goods,” Mandiwanza said.

Zimbabwe uses multiple currencies, with the US dollar being the most-traded currency in the country. Earlier this year, the central bank broadened the currency basket to include money used in Japan, China and Australia, among others.

The Barclays Zimbabwe unit was last year left out of a deal that saw Barclays merge its African operations with South African banking group Absa to form Barclays Africa Group. This may have been because of outstanding issues at the time of the merger over demands by the government that foreign banks hand majority shares in their domestic operations to black Zimbabwean groups.

Although banking sector executives were expecting finalisation of what they said would be favourable indigenisation compliance thresholds in the next few months, Barclays has continued to turn a profit in troubled times. The bank said first-half after tax profits had soared by 106 percent.

The bank also doubled its basic earnings a share for the period to 0.08 US cents, but chose not to declare a dividend, citing “the need to increase the capital base in order to support further growth”. Turnover for the period rose 9 percent.

Although it posted a stronger financial performance, Mandiwanza said there was a need to adopt “stronger quality lending” strategies.

He said “interest ranges” for the period had continued “to narrow down”.

“Levels of non-performing loans went up to about 17 percent… and this has generally made it more critical to focus on the quality of the loan portfolio and adhere to prudent risk practices,” Mandiwanza said.

Most Zimbabwean banks advance loans predominantly to the minority of the population that is formally employed and demand proof of employment before processing loans.

However, Old Mutual and Stanbic Bank, a unit of JSE-listed Standard Bank, started last year to advance loans to Zimbabwean youths, but the default rates for these have been high.

Finance Minister Patrick Chinamasa said on Wednesday that the country was struggling to tame deflation, while interest rates had become problematic for the economy.

He said the economic problems Zimbabwe was experiencing required implementation of measures that promoted better labour productivity.

“Our problem at the moment is negative inflation. Interest rates are beyond redemption,” Chinamasa said.

Barclays Zimbabwe managing director George Guvamatanga said the bank had attained revenue growth of 9 percent against the backdrop of “interest yields trending down and transaction activity being subdued”. He said the bank’s loan book had grown by 14 percent in the interim period after it extended credit facilities to businesses and high-net-worth individuals.

The productive sector in Zimbabwe has been rendered ineffective, with the country clocking up a wider trade deficit. The import bill has reached $8.3 billion, significantly up from last year’s $7.6bn.


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