NSSA is the controlling shareholder of ZB Financial Holdings limited with a 37.7% shareholding. The shocking news which has hit the market is that NSSA is set to dispose its entire shareholding to other parties and will use disposal proceeds to complete some of its outstanding projects. The question no one can answer is; What opportunities is NSSA pursuing which can have a better upside potential than shareholding in a bank whose Net Asset Valuation (NAV) exceeds its market capitalisation?
How did NSSA become a controlling shareholder in ZB Financial Holdings?
The controlling shareholder in ZB was Government of Zimbabwe through Ministry of Finance. However, GoZ lost its controlling stake to NSSA by way of signing or agreeing to a share warehousing agreement. Every time that ZB offered rights issues to its shareholders, the portion that was supposed to be taken by GoZ was warehoused at NSSA. So effectively the shares held by NSSA in ZB belongs to the GoZ and if they were to be disposed they need to be sold through a proper competitive bidding process similar to the process which is taken when Government equity in state owned entities are sold.
Why is NSSA selling this stake?
In everyone’s eyes this is a very unwise move based on the following reasons
- The share price is significantly undervalued at the present point in time. This investment was once valued above USD200 million in GoZ books. Currently this controlling stake may not earn more than USD30 million if negotiations make reference to the recent ZSE trading price.
- ZB has “Strategic Fit” within NSSA if NSSA will be any close to the business model of long term investments which preserves values of pensioners. Poor management and high staff turnover at NSSA has resulted in failure by management in taking advantage of such strategic fit. It may be surprising that within NSSA there is not one single executive with the corporate memory of why the GoZ decided to warehouse its shares within NSSA. Worse still, even finding such agreements or correspondence within NSSA will be a miracle. ZB has capacity to raise debt equity in excess of USD12 million to give to NSSA for the purpose of completing its projects while at the same time retaining control of the group.
How diversified is ZB Financial holdings
The group has investments in subsidiaries and strategic business units in:
- Retail banking
- Corporate banking
- Agribusiness:- Possibly best in the country
- Investment banking:- One of a few in Zim
- Life assurance
- Short term insurance
- Property holdings
- Building society
The bank’s systems and procedures for its operations were inherited from Nedbank and have remained solid over the years which explains why it has survived over the past years when other local owned banks failed.
GoZ refused to sell this valuable asset over years and it is surprising that NSSA has decided to dispose this stake for whatever reason it is telling the market. If NSSA genuinely requires money to complete projects, ZB Investment bank can raise that money within a short space of time. This bank has assisted the GoZ when it was short of fuel (when NOCZIM collapsed). Petrofin bills were issued and fuel kept coming in the market. When the GoZ wanted to fund agriculture, it is ZB which started mobilising finance through the issuance of Agro bills and bonds which other banks have started issuing as well. However, remember ZB was the first local bank to issue these bills in support of the land reform. I can also authoritatively indicate that ZB has a structure for both development of a commodities exchanges as well as precious minerals exchange. These two structures can be game changers in the development of both the agriculture and mining sectors of the economy. The same structures can also facilitate every ordinary Zimbabwean to invest in an asset that is backed by gold, maize and other commodities. I can assure you that without disturbances by shareholder changes, ZB will be the first local bank to have asset backed securities trading in the local market.
I do not think that any investment banker will recommend a sell decision to NSSA at this point in time. If ever NSSA proceeds to sell this stake, the motive may be different from the reasons disclosed so far.
This article was independently written by Ayanda Nyanga (A chartered accountant, as well as a holder of MBL, and LLM International business)