DIVERSIFIED listed investment group, ZimRe Holdings Limited is set to sink more than US$12 million in competitive capital to capacitate its regional balance sheets, businessdigest can reveal.
Competitive capital is defined as the sum total of tangible and intangible assets that a company possesses, enabling it to gain a competitive edge in the market.
By investing in these assets, ZimRe is looking to shore up its balance sheet.
From the US$12 million, the group has already internally deployed US$7 million, with the remainder to go to its operations in Malawi and Zambia.
ZimRe chief executive Stanley Kudenga told businessdigest that the group was also looking at ceding part of its rights to local investors in Zambia in fulfilment of legal requirements.
“We had an independent, actual assessment of the depth of the markets that we operate in, on the level of competitive capital that would be required, and they came up with a figure of US$12 million. Out of that US$12 million, we have already internally deployed about US$7 million,” he said.
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“So, what remains is US$5 million, and that will need to go into Malawi and Zambia. In Zambia, there is also now a requirement for us to have local participation at a shareholding level of 25%.
“So, we are looking at doing some kind of rights issue, where we then cede our rights to selected investors in the local market, which means that there is capital in the local market.”
He continued: “In Malawi, it is almost the same thing but by and large, we are also looking at complementing it from the local market.”
The group last year passed on some lucrative businesses, especially in Mozambique, due to a lack of capacity.
“We lost in Mozambique, mainly because of our balance sheet. Like I said, it is the one destination that we were very quick to respond to and put in US$2 million,” he said.
“That one, it has also improved, even the rating for Mozambique from the international GCR Ratings to BBB, and that has allowed us to rebuild the business that we had lost. Also, in Botswana, we are losing in the form of our own retention levels.”
Such investments into the region will help the firm raise hard currency, which is lacking in the local market due to low investment, confidence, and supportive policies, among other reasons.
The group’s profit after tax grew by about 321% to ZW$304,9 billion (US$49,95 million) in the financial year ended December 31, 2023, compared to the 2022 comparative year.
This was largely owing to the firm cutting its total expenses by nearly 67% in the year under review, compared to the prior year, saving nearly ZW$75 billion (US$12,28 million).
The cost cutting, along with total income rising by about 96% to ZW$357,63 billion (US$58,58 million) during the period, from the 2022 comparative, drove the profit after tax.
ZimRe’s total income was driven by net insurance and investment income as well as gains in its property portfolio.
ZimRe chairperson Desmond Matete said the group’s strategy remained anchored on delivering a strong cash wallet through driving a cost-effective insurance float through momentum and scale.
“Increasing the contribution from our regional investments by upscaling their balance sheet and effective deployment of competitive capital across all strategic business units,” he said.
Matete pointed out that the strategy would also be anchored on tilting its property portfolio towards high yielding commercial and retail sectors through near liquid investment structures.
The group’s key businesses include reinsurance and reassurance, short term insurance, life and pensions, real estate, and wealth management.