eBusiness Weekly
Nelson Gahadza
Nedbank Group says despite operational headwinds in Zimbabwe, the market remains favourable largely as a result of increased usage of a stable currency, the US Dollar.
The South African financial services group operates in Zimbabwe through the local banking unit, Nedbank Zimbabwe, which continues to perform better than its regional peers.
The Zimbabwe market falls under the Nedbank Africa Regions (NAR), whose other operations are in Eswatini, Lesotho, Mozambique and Namibia, as well as representative offices in Ghana and Kenya.
However, over the years, the group, like any other foreign companies, has been facing foreign exchange losses due to the volatility of the country’s currency.
On the contrary, Dr Terence Sibiya, the group managing executive of Nedbank Africa Regions, said the group enjoyed foreign exchange gains from Nedbank Zimbabwe largely as a result of increased USD business.
“Zimbabwe will continue to be a significant contributor to the group’s overall growth, and should the dollar book continue to grow, we will gain the benefit of the net foreign income,” he said.
According to Zimbabwe’s national statistical agency, ZimStat, the country is 80 percent dollarised, with the Zimbabwe dollar continuously losing relevance in all spheres of the economy.
Dr Sibiya said the group is eagerly awaiting the Monetary Policy Statement (MPS), which is expected to provide clarity on exchange rate challenges and provide price stability.
“We would like to see what will happen in terms of what the functional currency will be, and we are eagerly awaiting the MPS, and that has an impact somewhat on how we then continue to co-direct business.
“Despite the fact that, by and large, most of our clients are now borrowing in USD in that market,” he said.
Outgoing Reserve Bank of Zimbabwe (RBZ) Governor Dr. John Mangudya recently stated that the 2024 MPS will decisively deal with the exchange rate challenges that the country has experienced for several years.
However, the MPS delay has led to confusion in the market with some companies adopting a wait and see approach.
Dr Sibiya said the group will ride on foundations already put in place by the local unit.
“The foundations that were put in place and what we have done as a team, including Dr Sibongile Moyo, are to look at the overall structure and the NAR business to position it for growth.
“One key component of that growth will be how quickly we merge or converge onto the group’s overall tech stack.
“For the longest time, we have been investing in the group’s technology evolution, or managed evolution, and that has been a complete overhaul with an investment of close to R9 billion in the overall tech stack, which would touch onboarding client products and all kinds of other control around those issues.
“And it’s time now that we have a series of subsidiaries that have been running outside of that core banking platform on a different core banking system to merge them all.
“What that will do is increase our ability to develop products and to develop products once and deploy to multiple countries, multiple regions and multiple currencies at the same time.
“That will contribute significantly to our digital revenue story and digital revenue growth, which is showing some significant improvement,” he said.
Dr Sibiya said the group expects some improvement in the macroeconomic environment for banks and clients in 2024.
However, the risk to the downside possible is obviously from geopolitical events, as there is still war between Ukraine and Russia and instability in the Middle East.
“But in terms of what we see from the bank’s point of view, in terms of our outlook and interest rates, I think we are seeing that the interest rates will remain high and somewhat elevated for the next couple of months.
“We think that the average inflation forecast should ease, however, on average by 5 percent so that we can contend with the impact on neighbouring countries.
“The credit extension from our perspective is going to slow in the first half and gradually pick up to about 5 percent by the year.
“We see the domestic interest rates probably begin to calm off, and we see stability in the energy side of the economy, improvement in logistics and transport as well, and the massive focus on ramping up of alternative energy,” he said.
During the financial year ended December 31, 2023, Dr. Sibiya said the group’s SADC operations delivered headline earnings (HE) of R662 million, up by 80 percent, and this was a result of strong growth in revenue, up 21 percent to R4 290 million, largely driven by an expansion in net interest margin (NIM) and net forex gains in Zimbabwe.
“This strong growth in revenue was achieved despite increased reserve requirements in Mozambique and muted economic growth across the regions,” said Dr Sibiya.
He noted that SADC’s improved performance is attributed to net interest income (NII) up by 25 percent to R2 433 million, mainly driven by higher interest rates with NIM widening to 7,78 percent, loans and advances growth across most of the regions, and significant growth in the US$ loan book in Zimbabwe, despite a marginal 2 percent decrease in average total loans and advances to R21 billion.
Dr Sibiya said the group’s subsidiaries are well capitalised for the environments in which they operate, with capital requirements well higher than the respective host regulators’ minimum requirements.
Dr Sibongile Moyo, managing director of Nedbank Zimbabwe, said the bank continues to play a significant role in its contribution to the group’s performance.
“Within the Africa region’s performance, we are glad we are a strong contributor to the group’s return on equity and overall performance,” she said.
Last year, Nedbank Zimbabwe partnered with American Express (AMEX) in an agreement that allows the bank to acquire merchants, enabling international American Express card members to use their cards in Zimbabwe.
The partnership enables AMEX card members to use their cards at both physical and online merchants, including tourist destinations, restaurants, and hotels that are acquired by Nedbank Zimbabwe.
Dr Moyo said the bank is pleased with the level of interest realised to date.
