Depositors at troubled Kingdom Bank Africa Limited (KBAL) might recover as little as P12 for every P100 held in their accounts as investigators have uncovered a massive balance sheet mismatch at the offshore bank.
The bank, which is currently under curatorship for 90 days, looks set to be liquidated when the temporary management period expires in May.
An inventory of the bank’s assets released by the Bank of Botswana (BoB) on Wednesday, shows that liabilities outweigh assets by as much as $16.7 million (P160 million) with an estimated minimum recovery rate of 12% on deposits.
KBAL, which has no resident depositors based in Botswana, was placed under temporary management by BoB last month due to acute liquidity constraints that resulted in depositors failing to withdraw their monies while workers went unpaid for several months.
KBAL depositors and debtors are predominantly in Zimbabwe where the bank originates.
During the temporary management period, operations of KBAL are only restricted to receiving repayments of loans and advances made to customers. No deposits or withdrawals are permitted during the ninety-day period and KBAL cannot extend any new loans.
According to the balance sheet compiled by Max Marinelli of Deloitte Botswana, KBAL has liabilities to the amount of $19.1 million including $18.6 million owed to depositors.
On the other side of the balance sheet, the bank owns assets worth a mere $2.4 million with the bulk of that money in the form of advances to customers amounting to $1.8 million.
On the best case scenario, Marinelli however estimates that the recovery rate can rise to 27% as the recoverability of the advances to customers and assets held offshore cannot be fully ascertained at present.
According to the banking insiders both in Botswana and Zimbabwe, KBAL liquidity and solvency matters largely stem from a shareholder dispute at its parent company in Harare, which resulted in the offshore bank losing $17 million (P161 million) in near-cash financial instruments invested in the holding company, Kingdom Bank Zimbabwe (KBZ).
KBAL, which is 100 percent owned by Zimbabwean businessman Nigel Chanakira, was registered in Botswana in 2003 with KBZ, as its parent company and technical partner.
KBZ would later enter into a partnership with Mauritius based Afrasia, but the business later ran into financial difficulties resulting in a separation between Chanakira and Afrasia.
The $17 million investment made by KBAL in KBZ could not be retrieved due to liquidity constraints in Zimbabwe, resulting in the shareholders agreeing to swap assets.
Chanakira was thus bought out of KBZ through 100 percent ownership in KBAL as well as some telecommucations equipment owned by the banking group. The equipment which KBAL estimates to be worth $10 million has however been written down to zero value by the temporary managers or $1 million in the best-case recoverability scenario.
The temporary managers have also written down KBAL’s loans and advances to customers worth $11.6 million to $1.7 million due to recoverability uncertainties. “The actual value of KBAL assets can only be determined with any certainty when the transaction to realise them takes place, and accordingly a range of possible values is provided,” said Marinelli.BoB said investigations into KBAL’s state of the affairs are still ongoing and the bank will advise all depositors, borrowers and other stakeholders on the next step to take in relation to KBAL, when the 90-day temporary management period lapses.