ZIMBABWE – The government of Zimbabwe is set to embark on privatization of the state-owned Agriculture Development Bank (Agribank) in bid to improve the performance and viability of the enterprise, as well as ensure it contributes optimally to efforts aimed at growing the economy.]
According to reports by The Herald, the bank has completed due diligence to ascertain its asset value, undertaken by Ernst and Young (EY), before calling for bids from prospective strategic partners willing to inject capital in exchange for equity.
Chief Accountant in the Ministry of Finance and Economic Development Memory Mukondomi stated that, “We appointed a transaction advisor and a lot of work has been done, the due diligence and evaluation of the asset was done.”
“They came up with an independent opinion and information they will give us to share with the shareholder.”
The agriculture development bank has evolved over the years into a fully-fledged commercial bank, which has grown its appetite for funding in order to fulfil its mandate of supporting agriculture, as well as other strategic productive sectors.
This comes after the financial institution received $200 million from the Reserve Bank of Zimbabwe under its $2.5 billion support facility for the productive sectors, which has all been disbursed to clients desperately in need of the funding.
While many clients have borrowed, the bank says available resources fall far short of the $1.3 billion pipeline loan applications for funding from the bank, given farming remains the fulcrum of Zimbabwe’s agriculture driven domestic economy.
It is against this background that the bank believes the coming on board of a strategic technical partner, to inject both critically needed resources as well as the relevant modern technology, would augur well for growth of agriculture in Zimbabwe.
Government, the current sole shareholder in the bank is still to access the full contents of the valuation report before inviting expressions of interest from deep pocketed prospective buyers who can inject capital in return for shares.
The due diligence exercise and its recommendations will help the Government fully appreciate the implications and benefit of roping in an equity partner against the bank’s mandate of providing affordable financing to the agriculture sector.
Chief executive Elfas Chimbera said due diligence was important in the process to rope in a technical partner, given the exercise will provide a scientific basis determining the true value of the bank, which is critical for bargaining purposes.
“I have a value that I can place on the bank because I am internal, but of course being internal means, I may be subjective in my valuation of the bank’s true value.”
“So, to shy away from that subjectivity and ensure transparency and something that can withstand public scrutiny, we had to bring in independent advisors,” he said, adding the valuation would help show strengths and weaknesses of the bank.
Recently Agribank was fully removed from the US sanctions list, allowing them to do international business more easily and obtain lines of credit.
The bank was put under US sanctions in July 2008. In April 2013 the sanctions were partially lifted by the issuance of a licence permitting business with the bank subject to limitations.
In February 2016 they were removed from the sanctions list, but the licence requirements remained. They have now been removed fully by the Office of Foreign Assets Control of the US Treasury.
By being taken off all sanctions lists, many of those who were reluctant about doing business with Agribank will now feel it is safe to deal with them.
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