Fidelis Munyoro Chief Court Reporter
A South African company, Mining, Oil and Gas Services had plans to transform Trust Bank into an energy bank through an investment of US$800 million, it has emerged.
This is revealed by Trust Bank director and shareholder Mr William Nyemba in response to the Reserve Bank’s application seeking an order for the liquidation of the bank.
Mr Nyemba argues his institution was on the verge of concluding an investment deal with MOGS, which would have resulted in the initial injection of US$25 million to capitalise the bank.
Thereafter, the investor would then transform the bank through injection of US$800 million.
The liquidation of Trust followed cancellation of its licence by the central bank over allegations of abuse of depositors’ funds and violation of the provisions of the Banking Act.
It said efforts to recapitalise the bank had all been futile and Trust was no longer safe and sound. However, its liquidation was last week deferred to February 18 after the bank’s lawyer Advocate Thabani Mpofu successfully challenged the move.
Mr Nyemba said it was not proper for the central bank to wind up operations of Trust Bank since it was close to concluding a recapitalisation agreement with the SA investor.
“It has always been known that respondent (Trust) was on the verge of concluding an investment agreement which would have seen the investors injecting at least US$25 million,” reads part of the affidavit.
“The idea behind the investment is the establishment of an energy bank which would see an ultimate investment of US$800 million.
“It is therefore difficult to understand why in an economy in which most indigenous banks are struggling and at a time when the relevant agreement is being concluded, it has become important to the insolvent applicant to take this drastic action.”
With Trust Bank’s liabilities at US$17 million against assets of US$22 million, there was no reasonable ground for placing the bank into liquidation, according to Mr Nyemba.
“Winding up the respondent would be the highest piece of injustice not only to it but the creditors who have loudly and credibly spoken against liquidation,” he argues.
Mr Nyemba also claims the bank’s problems were a result of the Reserve Bank of Zimbabwe’s undue interference with the financial institution’s operations.
Mr Nyemba also questioned the logic of the RBZ’s push for the Trust’s liquidation when it was clear that the lender of last resort was itself insolvent.
“It is public knowledge that the central bank has failed to perform its role as the lender of the last resort and Government has had to inherit its debt,” said Mr Nyemba.
Mr Nyemba further stated that Trust’s operations were severely hampered by the RBZ’s unlawful decision to sale its assets to Allied Bank at the height of the banking crisis about 11 years ago.
He said the liquidity crisis in the banking industry at that time was a result of the illegal sanctions imposed on Zimbabwe.
“It is common cause that at this time, applicant (RBZ) was and remained virtually insolvent and in a state of economic comatose. There is therefore need for these issues to be considered holistically and in their contest,”
Mr Nyemba argues that the RBZ’s approach to the Trust’s problems has been to magnify them without considering the environment in which the bank is operating.
He challenged the RBZ to produce the provisional liquidator’s accounts and projections showing how much the liquidator will ultimately charge, how much the central bank and each creditor will get.
The liquidation of Trust Bank was last week deferred to February 18 after Adv Mpofu successfully challenged the move.
The reprieve came as the Deposit Protection Corporation had announced plans to begin liquidation processes at the bank.
Adv Mpofu had argued that depositors were unlikely to support outright closure of the institution hence it should be given a chance to engage investors for fresh capital injection.
High Court judge Justice Loice Matanda-Moyo placed Trust under provisional liquidation and ordered it to wind up, paving way for liquidation.
Prior to cancellation of the bank’s licence, its parent company, Trust Holdings Limited, voluntarily delisted from the Zimbabwe Stock Exchange after failing to meet the bourse’s obligations.