African Century banks on monetary policy

In a statement accompanying the financial institution’s audited results for the year ended December 31, 2022, chairman Victor Gapare noted that the Russian-Ukraine conflict had resulted in a downstream impact on the Zimbabwean economy.

“Notwithstanding ….notable improvements …, the economy continues to be impacted by the … Russian-Ukraine war, low business confidence, policy changes, high inflation, foreign currency shortages, low disposable incomes and unstable energy supply.

“The policy environment and strategies implemented by the fiscus are key to containing the impact of these challenges in the short to medium term,” Gapare said.

“Year-on-year inflation closed at 244 percent, having started the year at a low of 61 percent. Similarly, the Zimbabwe dollar lost 518 percent of its value in the period under review, moving from a Z$/US$ exchange rate of 108,67 to 671,45:1 as at December 31, 2022.”

“Going forward the fiscal and monetary authorities continue to work on slowing down inflation and runaway alternative market rates. The microfinance bank will work to maintain sustainable operating margins and preserve value for the shareholders,” Gapare added.

African Century posted an inflation adjusted profit after tax of $1,839 billion, which was 1 007 percent above the profit achieved in the comparative period.

The cost to income ratio decreased from 64 percent to 36 percent driven by a 188 percent increase in total income. Operating costs increased, however, at a lower rate of 63 percent.

“This was achieved by management implementing cost containment measures,  which sought to mitigate against the price changes that suppliers were making in order to maintain value and retain their margins,” Gapare said.

Managing director, Stanley Matiza, described African Century’s 2022 financial performance as strong against a challenging macroeconomic backdrop.

“African Century managed to grow its equity by 109 percent from $2,575 billion to $5,369 billion to exceed the minimum regulatory capital requirement of $3,653 billion, equivalent to US$5 million as of December 31, 2022.

“During the financial period, the ministry of Finance settled the legacy debt relating to foreign funders through Treasury Bills amounting to US$12 954 635 whose fair value was below the legacy debt.

“African Century entered into debt settlement agreements where the outstanding balances with three of the four funders were discounted. The value of the Treasury Bills was less than the negotiated debt balances, with the resulting variance being funded through African Century’s equity,” Matiza said.

“The loan book grew by 32 percent largely financed by redeployment of repayments. The return on equity increased to 52 percent at the end of the period under review, up from five percent and this was driven by the increase in profitability.”