Recently ABL announced it had splashed US$9,5 million on KFHL, a move that would result in the Nigel Chanakira-founded group meeting the minimum capital requirements for its banking arm, Kingdom Bank, ahead of the February 14 deadline set by the central bank.
Kingdom alongside Royal, Genesis, Zimbabwe Allied Banking Group and ReNaissance, had by December 31 2011 not met the minimum capital requirements of US$12,5 million and US$10 million for commercial and merchant banks respectively.
James Benoit, ABL’s chief executive, told Standardbusiness in written responses, KFHL will form a core part of expansion strategy in the region.
“KFHL provides us with great Sadc (Southern African Development Community) exposure as it has operations or investments in both Zimbabwe and Malawi,” he said.
“Combined with our existing operations in Mauritius and South Africa, this provides us with a strong presence in the region, which we certainly intend to build upon, either organically or via acquisition, depending on the opportunities that present themselves.”
ABL’s entry into the Zimbabwean financial services sector comes at a time some investors have been sceptical after the government announced regulations which stipulated locals should have majority shareholding in companies operating in the country.
With the mining sector having already submitted proposals on how they would incorporate locals, attention has now shifted to the manufacturing and financial sectors.
Benoit said the regulations were a key consideration for ABL, but it made its investment decision “based on the actual track record of the country, rather than on the hype that has surrounded some of this legislation”.
“We also believe Zimbabwe is a land of great opportunity and we particularly identified areas in which our investment and collaboration with KFHL would add significant value to this particular bank,” he said.
Benoit said the investment in KFHL entitled ABL to appoint representative on the board and as a “cornerstone investor and strategic shareholder, we will do so as this is a key part of the assistance that we will provide to KFHL, as we develop and implement a new corporate strategy”.
“At this stage we are finalising the board appointees and will announce their names in due course.”
The same also applied to executive management.
Benoit said ABL will probably do so over time and has “great respect for the current management team of KFHL, which was a large part of the investment attraction for us”.
Due to the liquidity conditions, banks are only offering short-term loans and analysts say only foreign injections will help ease the problem.
Since the use of multi-currencies, locally-owned banks have roped in foreign partners to open windows to international capital.
NMB invited African Century; ABC Holdings roped in Africa Development Corporation while Premier allowed itself to be incorporated into pan-African bank, Ecobank.
KFHL expects deal to boost capital inflow
KFHL said the coming on board of ABL is expected to open windows to international capital. Chanakira said: “this transaction will open new channels of much-needed capital, lines of credit and deal flow for our loyal client base. I am excited about the prospects beckoning on our horizon.”
Benoit said it is ABL’s intention to work with KFHL to assist them to improve the diversity and maturity of their funding.
“The recapitalisation of KBL was the first required step to achieve this.” Analysts say ABL’s entry onto the financial sector will attract other foreign players and hence, bring the much-needed liquidity.