Nelson Gahadza Senior Business Reporter
Financial services group, Old Mutual Zimbabwe says it maintains a positive long-term view of the Zimbabwean economy, which the South Africa company believes will be sustained, underpinned by implementation of measures to support the current stability.
Group chief executive Samuel Matsekete, in a presentation of the company’s 2022 half-year financial results on Monday, said that the group’s lending and investment activities would continue to support the policy thrust to grow production and exports.
Zimbabwe’s economy, estimated to have grown by 7,8 percent in 2021, is expected to further expand this year although at a slower rate of 4,6 percent, which was revised down in the mid term budget from the initial forecast of 5,5 percent on account of the negative impact of resurgent inflation and exchange rate constraints, now under control.
“The economy has got significant opportunities and potential and our view in the long term remains positive. We see in the immediate to short term that some subsectors are continuing to register growth which is significant in some subsectors,” he said.
He added that there were sector-specific green shoots within the domestic environment.
“We however see some uncertainties, which need to be addressed to underpin the growth in some areas especially on the policy thrust.”
He noted that the group could support the stability and support the economic sectors that are registering growth and support the economic players and businesses that are registering growth in their areas.
Mr Matsekete said there also were measures that the group believe are supporting the different sectors of the economy, and if those are seen through, the economy should be able to get the stability for growth to be maintained as well as see growth that in some sub-sectors is sustained.
“The period we are getting into is the agriculture pre-season which needs to be funded. It will be also important to sustain levels of production that need to be seen in the forthcoming season,” he said.
He said that economic growth will be underpinned by implementation of measures to support improvement in key economic sectors.
Mr Matsekete said that consistency on key policies to foster predictability and stability in the economy mainly in the monetary and external sectors will be key to sustain the stability and growth.
“As we look ahead into the second half of 2022 we will continue to focus on adapting our offering to the evolving environment and customer preferences, ensuring that overall risks are kept within appetite in the wake of potential and emerging risks in both the global and the local market.”
The Government’s tight monetary policy stance premised on an aggressive interest rates regime has seen relative exchange rate and inflation stability.
New assets such as gold coins have also enhanced market depth.
Mr Matsekete said that in pursuit of growth opportunities, the African Development Bank (AfDB) approved a US$7,5 million trade finance transaction guarantee facility to Old Mutual’s banking unit CABS.
He said this resulted in growth in lending and investments in renewable energy, agriculture, and other key economic sectors.
“An equivalent of US$16 million was deployed into alternative investment assets during the period while the stockbroking business continued to support growth of the capital markets and provide access to retail customers.”
Mr Matsekete noted that during the period under review, all group companies were adequately capitalised and well positioned to support planned growth.
He added that the company expanded the breadth of services and functionality on MyOldMutual platform and continued automation of key processes enhanced efficiency and customer experience.
In terms of the individual line of business performance, the banking division net loans and advances grew 30 percent to $78,4 million largely driven by US dollar loan book growth.
The bank’s profits were impacted by expense growth year on year and monetary losses as a result of a surge in inflation. On a historical cost basis, net profit went up 651 percent.
In Life Insurance, growth in policy holder funds was driven by growth in property values and alternative investments funds that posted above inflation returns.
Higher premiums were driven by client retention and new business acquisition including some denominated in US dollars.
“Results from operations impacted by lower returns on reserves as the capital markets returns were sub-inflation.”
On General Insurance, growth in gross and net premiums was driven by increased USD business underwritten in response to the need to preserve value under hyperinflationary conditions.
The group noted that currency translation distortions were real for the business for Zimbabwe dollar reporting purposes as over 70 percent of the revenue is now in USD.
The claims ratio increased from prior year driven by the fire and motor classes but the company noted that significant work is being done around fire prevention and suppression.
“The underwriting result was impacted by the claims experience mentioned above and to a large extent the currency distortions between the revenues and expenses,” the group noted.
In terms of asset management, the group said funds under management (FUM) growth was driven by above inflation returns on properties and alternative investments portfolio. The group noted that it continued with efforts to diversify the portfolio into alternative investments, including forex generating property sectors.