Announcements

ReNaissance Merchant Bank Limited placed under curatorship

On 2 June 2011, the Reserve Bank of Zimbabwe (“RBZ”) placed ReNaissance Merchant Bank Limited (“ReNaissance”), a wholly-owned subsidiary of ReNaissance Financial Holdings Ltd (“RFHL”), under curatorship for six months in terms of Section 53 of the Banking Act., after investigations conducted by the central bank revealed deficiencies, including inadequate capitalisation, inappropriate shareholding structure and the disintegration of corporate governance structures as follows:

• The bank was found to be technically insolvent with a negative capital of US$16.7m as at April 30 2011, against the prescribed minimum capital requirement of US$10m for merchant banks.
• Non-performing loans constituted 38% of the total loan book of which the bulk was loans to insiders.
• Patterson Timba has direct and indirect shareholdings amounting to 44.66% in violation of Section 4(b) of the banking regulations (SI 205 of 2000), which limits the shareholding of an individual and his interests in a banking institution to 25%.
• The three founding members (Patterson Timba, Dunmore Kundishora and Clementine Sibve) have a total interest of 78.03% in the bank. The major shareholders were able to maintain their shareholding in the bank through elaborate schemes, which involved borrowed funds and the abuse of deposits. The merchant bank also bought back some of its shares using depositors’ funds in violation of Section 32 of the Banking Act. Collectively, executive management own about 89.17% of the institution, while non-executive directors control a further 0.17% of the group’s shareholding.

In the interest of financial sector stability, the RBZ has taken the following measures:

• In order to preserve the financial resources of ReNaissance, and further, to prevent the uncontrolled withdrawal of funds and assets, the banking institution will close its doors to the public on 3 June 2011 for a period of two weeks to facilitate the curator’s assumption of effective charge of the bank.
• ReNaissance will reopen its doors to the banking public by Monday 20 June 2011 under the management of the curator.
• The RBZ has directed, with immediate effect, the removal of the following persons from office:
The board of directors of ReNaissance and its parent RFHL, comprising:

o Group Chairman – Lovemore Moyo
o Chief Executive Officer – Patterson Timba
o Group Executive Director (Business Development) – Dunmore Kundishora,
o Non-Executive Director – Robert Tindwa
o Executive Director (Treasury & Structured Finance) – Shepherd Shara.
o Head of Internal Audit – Shepard Muzivi
o Head of Treasury Operations – Norest Kwete
o Group Accountant – Tatenda Madzingo
o Group Company Secretary – Lydia Timba.

The curatorship period is expected to give ample time to the curator, who is working with the central bank and new shareholders (already identified), to put in place a robust framework to bring about the recovery and lasting stability of the institution.

GCR had accorded ReNaissance a non–investment grade long term national scale rating of BB+ in the last review in June 2010, which expired in May 2011. Following unsuccessful discussions with management and in light of the recent developments, GCR is unable to rate the institution and reinstate rating coverage until clarity has emerged on the way forward.

Jennifer Mwerenga

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