Old Mutual Zimbabwe: Suspension in bank lending leaves a dent in investor confidence, says Matsekete

By Farai Shawn Matiashe
Posted on Wednesday, 22 June 2022 14:34

People queue outside a bank in Harare
People queue outside a bank in Harare, Zimbabwe February 22, 2019. REUTERS/Mike Hutchings

On 7 May this year, President Emmerson Mnangagwa introduced a raft of measures meant to stabilise Zimbabwe’s economic crisis. Among the measures included was a suspension - with immediate effect - of lending by banks to both the government and private sector.

Mnangagwa accused ‘economic saboteurs’, who include corporates and individuals, of sabotaging his efforts to stop the spiralling inflation. Just over a week later, the Reserve Bank of Zimbabwe lifted the ban on bank lending. As of June this year, Zimbabwe’s inflation rate was at a staggering 324%, according to Professor Steve Hanke of John Hopkins University.

The Africa Report spoke with Samuel Matsekete, group CEO of Old Mutual Zimbabwe and head of banking portfolio at Old Mutual Rest of Africa, about the president’s short-lived decision.

Old Mutual Zimbabwe provides a variety of financial and investment products to their Zimbabwe-based clients. The company’s 2021 financial report shows that the firm posted significant growth for 2021, with profit after tax (adjusted for inflation) of Z$28.8bn up from Z$10.5bn the year before.

The Africa Report: Recently, the Central Bank suspended banks from lending to corporates and individuals, but later lifted the suspension. Meanwhile, inflation continues to climb, and operating costs are rising. How are you managing in the new operating environment?

Samuel Matsekete: The operating environment has been challenging, [but] we have been able to continue to provide financial services to our customers. We have not experienced any material challenges with growing both our lending and transactional business.

The suspension of lending was temporary with provisions for specific applications to be made to the Central Bank for any urgent disbursements during the period. Credit is a key enabler of economic growth hence it is important that we play our part as a financial services business to provide lending to customers.

We have continued to focus on supporting the key growth sectors of the economy, including agriculture and export-generating businesses.

What impact did the suspension have on your investments?

There has been a dent in investor confidence weighing down financial intermediation across all our products. The performance of our funds under management was impacted by the temporary pull-back on the local stock exchange while fixed-income investments have been negatively impacted by the suspension in bank lending. Since the lifting of the suspension, fixed-income investments are back to full operations while the equities products are still finding their feet.

We have a strategy in place that allows us to seek foreign currency and we do tap into this market as and when we can

Our investment portfolios have continued to do well under the circumstances as a result of the diversification across various asset classes. Our focus remains on value preservation as well as ensuring we outperform benchmarks and grow our investment portfolios in real terms.

Do you still require external funding for lending in Zimbabwe?

We have a strategy in place that allows us to seek foreign currency and we do tap into this market as and when we can. We are at various stages of negotiating for renewal and new lines of credit. We appreciate the continued support from existing and potential financiers.

What are your potential growth paths? Any projections?

We anticipate activity to be centred around consumer-facing sectors and agriculture in the pre-election period. Beyond that, we anticipate growth to trend around the economy’s natural resource base as well as infrastructure. Visibility of future growth prospects will become clearer [after] the election as investors may sometimes be cautious around the macro-environment.

How do you manage to maintain a strong business in these difficult times?

At Old Mutual, our focus is on our customers and remaining relevant to them by offering them solutions to their everyday financial needs. We seek to grow our business, [but] we are equally focused on retaining and growing the business from our existing customers. We are actively seeking to grow our business through the development of new markets and new customer segments, as well as driving our business through technology.

Any last words?

Despite some challenges currently being experienced in the market, Old Mutual Zimbabwe remains committed to supporting its clients and customers as they pursue efforts to grow and protect their prosperity. Through its offering in investment management, life and general insurance, and commercial banking, Old Mutual Zimbabwe also stands ready to work with partners, including those from international markets, seeking to explore opportunities in the country.

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