The High Court of Zimbabwe
MORE than 2000 Zimbabweans have had their houses auctioned by the Sheriff of the High Court of Zimbabwe as banks try to recover some of the over US$700 million they are owed by thousands of people who gambled with their immovable assets as to borrow money which, due to the worsening economic climate prevailing in the country, later found themselves unable to service the loans, an investigation by the Financial Gazette reveals.
A research by the newspaper revealed that in the past two years alone, more than 2 000 Zimbabweans have lost their immovable properties — most of them their only family homes — as their creditors pounced on them to recover the vast amounts of money they borrowed.
The number of houses and other immovable properties sold off to meet judgment debts against individuals could be as high as over 3000 since the country moved to use a multi-currency regime.
The courts are currently clogged with cases of borrowers who are unable to repay the various amounts of money they borrowed from the country’s over a dozen financial institutions, amid indications that if this trend is left unchecked, several thousands more families could end up being homeless in the next few years as the bulk of the over US$700 million in banks’ stock of non-performing loans have been secured by these private homes.
Those who have been repaying have been doing so at erratic rates, so much that virtually all their payments only go to service the interest component only, not the principal amounts, keeping them in a vicious circle of poverty.
Some of the properties being sold now involve some banks that closed shop several years ago, as the court processes drag for many years after which these properties that would have been used as collateral, are by the Sheriff either through public auction or through private treaty.
When the Reserve Bank of Zimbabwe set up the Zimbabwe Asset Management Corporation (ZAMCO) — a special purpose vehicle established in 2014 to undertake cleansing of the banking sector by taking over secured bad loans in order to free funds to productive sectors of the economy — non-performing loans had reached a record 18,5 percent of all loans (about US$700 million).
As of December 2015, ZAMCO had acquired US$242 million worth of the bad loans extended to businesses, reducing the ratio to about 13 percent.
It appears like many Zimbabweans — still confused from the Zimbabwe dollar era — were tempted to stampede into borrowing from banks even when they had no viable business projects in which to invest the money.
This week alone, nearly 70 properties were due to be sold at three public auctions, two of them in Harare, and one in Bulawayo.
An auction by Choruma Marias Valuation and Estates Executives on behalf of Agribank, was due to take place today where 16 immovable properties were set to go under the hammer, while tomorrow Ruby Auctions will be putting 53 properties on sale from around the country on behalf of several banks and other creditors, around the same time that Bulawayo Real Estate would be selling 10 properties at an auction to be held at St Patrick’s Hotel in the city.
In February, Drew & Fraser International Auctioneers put on sale 36 properties on behalf of the Sheriff’s office. Another 20 were sold by Bulawayo-based Hollands Real Estate through private treaty.
On April 1 this year, the Sheriff through Livingking Realtors auctioned 36 properties around the country on behalf of several creditors, mostly financial institutions.
Agribank has since mid last year been at the forefront of causing the auction sales, putting an average of 50 properties under the hammer every month.
In November alone, it caused the auctioning of 61 properties and on May 13, it will be putting another 21 houses on the auction floor.
Other financial institutions that have been actively pursuing their debtors include CBZ Bank, CABS, POSB, the Infrastructural Development Bank of Zimbabwe and ZB Bank among others.
However, there are few properties being auctioned by the country’s foreign-owned banks, among them Barclays Bank, Stanbic, Standard Chartered Bank, Ecobank, BancABC and MBCA Bank.
This could be because of the banks’ thorough vetting process when it comes to lending, as compared to their locally owned counterparts.
In 1998, Roger Boka’s United Merchant Bank (UMB) spectacularly collapsed as a result of imprudent lending practices, which saw several government officials and politicians literally looting the bank dry.
Since then, this has been repeated at several banks, many of which have since followed the UMB to the corporate graveyard.
Banks stand accused of not just charging very high interest rates, but some of them are also accused of being so unscrupulous as to deliberately choose to be unethical as to lend money even to individuals and businesses whose projects could patently be not bankable, for as long at the loans are secured.
Economist, John Robertson told the Financial Gazette this week that the economic situation coupled with imprudent lending decisions by banks had led to the current crisis.
“Many people thought that they could cope with the risks, but did not predict the market downturns that made their loans impossible to repay. Many others did not realise that dozens of others were starting similar businesses and the market they had identified was not big enough to support many suppliers. And many did not have the business experience needed to survive,” Robertson said.
“The bank managers should have checked all those possibilities and not lent the money to doubtful borrowers. Most cases should never end up in court. If the security was correctly valued, the bank should have been fully repaid by selling it. Needing a court case suggests that the banker was not careful enough.”
However, others blamed the scourge squarely on alleged predatory tendencies by some players in the financial services sector.
“Most banking and money lending institutions over-rely on collateral security ahead of cash-flows, capital and others. Interest rates are too high and in a harsh economy like ours, people end up losing their personal properties,” Christopher Mugaga, an economic analyst was quoted as saying in the media last year.
“Government is letting the people down by not protecting them against these vultures who charge strange and illegal interest rates for advances made.
“In fact, a Consumer Protection Bill must be put in place to protect the desperate masses who are falling prey to these vultures,” Mugaga said.
Economist and opposition politician, Tapiwa Mashakada, who was the minister for economic planning and investment promotion during the 2009-13 inclusive government, said it was unfair that the government — through ZAMCO — was taking over bad loans for all companies, leaving individuals borrowers at the mercy of their creditors.
“Most people borrowed during the inclusive government period as cash flows had improved drastically. The situation suddenly collapsed after 2013 and tight liquidity conditions erupted again,” Mashakada said, adding that in all fairness, the debt take-over by the central bank should be extended to all borrowers, both corporate and individual.
A number of prominent personalities in Zimbabwe have had their properties sold, leaving some of them homeless.
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