eBusiness Weekly
Tapiwanashe Mangwiro
The Infrastructure Development Bank of Zimbabwe has seen its operating income turn negative in the full year to December 31, 2021 as the bank tries to match industry incomes.
“Operating expenses increased by 95 percent, driven by a 75 percent increase in personnel expenses as the Bank aimed at retaining critical staff and matching market remuneration levels,” the bank said in a statement accompanying results.
Additionally, fees and commission income was 49 percent lower than the prior year at $20 million as the Bank was negatively impacted by thin interest margins emanating from the cap placed on interest rates.
The Bank’s inflation-adjusted net operating income decreased by $1,3 billion from $1,2 billion in in 2020, to negative $28,87 million in 2021. Interest income was weighed down by subdued effective interest rates. On the other hand, the bank’s administration expenses shot by 118 percent mainly driven by inflation and Covid-19 related expenses.
Resultantly, during the period under review, the IDBZ recorded a loss before tax and other comprehensive income of $945,8 million compared to a profit of $ 2,5 billion for the same period last year.
However, IDBZ embarked on a number of projects in the financial year and raised money through a USD-linked bond worth US$9,84 million.
IDBZ chief executive officer, Zondo Sakala said;
“To adequately fund projects, the Bank embarked on several fundraising initiatives which included the issuance of USD- linked bonds. The Bank managed to raise an equivalent of US$9,84 million ($877,9 million) for project implementation.”
Of this amount, $461,9 million was raised for the Sumben Phase 1 Housing Project and the Elizabeth Park Housing Project through the USD-linked Bonds and other structured instruments.
$416 million was raised for the Bulawayo Students Accommodation Complex Project (BSAC).
During the reporting period, the bank also approved private sector projects worth $144 million while applications worth more which continues to influence pricing of construction services and materials, has negatively impacted cost budgets for projects under implementation.
Sakala added that; “Furthermore, the resurgence of the Covid-19 in the second half of 2021 posed significant downside risks to both the country’s economic growth and the Bank’s operations.”
The bank achieved commendable progress on ongoing projects notwithstanding the macroeconomic pressures and the negative impact of the Covid-19 pandemic on project activities. The Sumben Phase I Housing Project reached a 93 percent completion rate while the BSAC Project reached a 74 percent overall completion rate over the period under review.
“An equivalent of US$2,5 million was needed for project preparation and development in 2021 and an equivalent of US$2.02 million ($200 million) of capital was allocated towards the bank’s Project Preparation and Development Fund (“PPDF”) facility in the last quarter of 2021 from the proceeds of the Rights Issue.
An equivalent of US$237 600 was disbursed towards project preparation activities over the period,” Sakala said.
In its outlook despite the negative impact of the Covid-19 on the bank’s financial performance for 2021, they are optimistic that the projects under implementation will be completed in 2022 and more business will be underwritten under the bank’s private sector funding window.
“This is expected to enhance the Bank’s financial performance. Capital preservation, strategic partnerships and recapitalisation will remain central to the financial sustainability of the IDBZ,” Sakala concluded.
