RFHL: ‘A colossus with feet of clay’

Business
BY NDAMU SANDU ACCORDING to its website, ReNaissance Financial Holdings Limited (RFHL) prides itself as having developed core competencies and critical mass that is being leveraged to propel it into a competitive and fully diversified investment group.

“Key to this success is the human and intellectual capital the group espouses, as well as the relentless desire for wealth creation, premised on the development and implementation of broader, more innovative and pragmatic financial solutions,” the company says.

Events in the first half of the year have demystified this notion raising concern that the acquisitive group could have been built on a shaky foundation. When businessman Jayesh Shah blew the whistle on RFHL founder Patterson Timba after a dispute over a loan borrowed to recapitalise ReNaissance Merchant Bank (RMB), the group’s stock started going into free fall.

Timba borrowed US$5 million to dilute other shareholders during RMB’s recapitalisation plan.

In addition to repaying the loan and interest, Timba agreed to pay a minimum of US$12,5 million in capital uplift and surrender the share certificate amounting to 60% of RFHL.

Shah is only prepared to surrender the share certificate if he is paid the capital uplift.

Early this month, the Securities Commission of Zimbabwe (SECZ) struck by suspending ReNaissaince Securities (RS) for six months beginning June 22 due to undercapitalisation.

“This (suspension) was necessitated by the fact that our inspection of the firm, conducted from 24th to 27th May 2011 mainly revealed that the firm required capitalisation,” it said adding that RS had failed to provide a recapitalisation plan.

The SECZ said that it would continue engaging the securities dealing firm during the period of suspension.

“Should we be furnished with a feasible recapitalisation plan that we approve of, guided by the relevant legislation, the suspension will be reviewed,” SECZ said.

RFHL’s Ugandan baby, ReNaissance Capital Limited (RCL) is not performing well and is under threat from losses despite meeting the capital requirements for stock broking firms of US$75 000, according to an RBZ report.

The report said RCL had been posting losses since inception in April 2005.

“As per the group’s consolidated audited financial statements for the year ended 31 December 2010, RCL reported accumulated losses of US$421 578. “RCL has sustained its operations on the basis of RMB deposits externalised by RFHL via the conduits of executive directors and the group accountant’s accounts,” RBZ said. In 2009, RCL was closed for two months over failure to meet statutory requirements of capital adequacy and bookkeeping.

RFHL’s asset manager, ReNaissance Asset Management (RAM) had brushes with regulatory authorities before its closure in 2005 after four years in operation.

“It was a colossus with the feet of clay,” an investment analyst said of RFHL’s fall from grace.

 

RBZ unearthes serious deficiencies

A Reserve Bank of Zimbabwe (RBZ) investigation unearthed serious deficiencies at both RFHL and RMB. RMB had been looted by the founding directors and corporate governance at the bank and RFHL was alien. It declared RMB technically insolvent and subsequently placed the bank under the curatorship of Reggie Saruchera.