FIDELITY Life Assurance of Zimbabwe (Fidelity) has shelved plans to open a micro bank, preferring to plough capital towards its lucrative multimillion dollar Southview Park low cost housing scheme and a new operation in South Sudan, businessdigest has learnt.
The group has not abandoned plans to set up the deposit taking micro bank, but will resume the project once other ventures are up and running, Fidelity MD Simon Chapereka said in an interview this week.
“There are other urgent projects which have come up, but the micro bank is still in the pipeline,” he said.
Chapereka said the decision to postpone opening of the micro bank was driven by capital constraints at a time the market is suffering from tight liquidity.
He said the group had not abandoned plans to start operations in South Sudan, with management closely monitoring developments in the conflict area.
“All these things need capital and what we are doing is trying to rationalise and distribute the capital. Southview needs a lot of capital at the moment,” Chapereka said.
“Once Southview is up and running, we will invest in the micro bank.”
He said under the new microfinance bill, deposit taking microfinance units were required to have a minimum tier 1 capital of US$5 million.
Currently, Chapereka said the group was running a financial services division that has capital of about US$1 million. The unit offers micro-finance to individuals, the informal sector, Small to Medium Enterprises as well as corporates under the current license, he added.
Fidelity’s Southview Park project is expected to drive operations due to improved liquidity and profitability.
At the group’s annual results briefing for the year ended December 2013, Fideliy forecasted a US$30 million profit performance in the current year ending December 2014 buoyed by the low cost high density housing development scheme.
At the event, Chapereka said the company’s primary focus for 2014 was development of the South View Park project.
“This year we are expecting US$30 million profitability, US$21 million coming from the Southview Park Project,” Chapereka said, adding the project was a huge game changer.
Chapereka said 2 000 out of the total 5 950 stands available for sale had already been sold with another 1 500 expected to be sold by year end either on cash or installments. Presold stands have raked in US$4,5 million in revenues so far.
The company announced that a subdivision permit has been issued by the City of Harare while topographical and impact assessment surveys had been completed and approved. The company expects to receive US$32,4 million in revenues in the current year from the sale of stands and US$4,3 million interest income.
Chapereka said for 2015 the company has budgeted US$31 million income from stand sales and US$5,5 million in interest income.
Between 2016 and 2022, Fidelity expects to get US$63 million from stand sales and US$25 million from interest income.
In terms of total profitability, the Southview park project is expected to bring in US$57,2 million net profit to the group by 2022.
Group FD Benard Bare said total comprehensive income for the year 2013 stood at US$4,8 million up from US$4,1 million in the prior year.
He said gross premiums went up by only 3% to US$14,5 million because of liquidity challenges that have seen employers failing to pay premiums and individuals cancelling their policies.