BancABC conduit for dodgy funds

Published: 08 September 2017

BancABC, which has subsidiaries in Botswana, Mozambique, Zambia and Tanzania, was one of the major conduits for dodgy diamond funds flowing internally and across borders, the Zimbabwe Independent has established.

The bank was a major banker for diamond miners and dealers before the Atlas Mara take-over because of its regional presence which easily facilitated the flow of transactions.

Most players in the diamond sector, including Marange Resources, Anjin, Jinan, Diamond Mining Company, Fetch Minerals, First Element, Mahaveer Trading, Lesley Faye Marsh, PTY Holdings and even the shady Nyaminyami Tobacco (Pvt) Ltd, which facilitated the acquisition of Zanu-PF campaign materials worth US$14 million during the 2013 general elections, with Sakunda also helping to bankroll the campaign, banked with BancABC.

Documents show in 2013 Nyaminyami borrowed funds to the tune of US$20 million from BancABC, but it was energy firm Sakunda Holdings, controlled by Zanu-PF benefactor Kuda Tagwirei, which signed the loan application forms. The purpose of the funds was unclear, but they were secured at a time Nyaminyami was actively buying diamonds from Marange Resources and helping to import campaign materials for Zanu-PF under the military's direction.

This news article is part of an ongoing ground-breaking investigation into the Marange alluvial diamonds discovery and subsequent plunder at various stages by state and non-state actors. The special series is supported by the Investigative Journalism Fund.

Documents say although it is illegal, BancABC ventured into non-core banking activities using various investment vehicles, including its sister company Second Nominees.

Second Nominiees - wholly owned by ABC Holdings which owns and controls BancABC - was used as an investment vehicle for high value non-core banking activities, including diamond trading.

Curiously, there is no clear separation between Second Nominees and the bank. The documents indicate selected employees of the bank are also employees of Second Nominees, including the managing director. The company was not registered with Zimra until August 2013 despite having been in operation since 2008.

Various high-value structured finance deals were done through the vehicle. This includes the financing of Lesley Faye to buy diamonds in excess of US$10 million which resulted in litigation after the operator failed to pay back the money upon the sale of diamonds, leading litigation.

The bank jointly lent Lesley Faye Marsh t/a Premier Diamonds and Ray Diam BVBA US$10 million under a facility letter dated August 10 2010.

ABC Holdings, which owns BancABC Zimbabwe, also loaned US$20 million to Faye Marsh in structured finance deals, but transferred the deal to BancABC Zimbabwe to facilitate litigation. ABCH also loaned US$20 million to Premier Diamonds.

In another case, investigations revealed BancABC opened a Jinan Mining (Pvt) Ltd account without all the required Know-Your-Client documents. The bank is currently under investigation for assisting Jinan externalise over US$500 million. BancABC and Jinan officials are accused of conniving to illegally externalise US$585 million during the time when the Chinese firm was mining in Chiadzwa in Marange.

Investigations show BancABC used its sister company, ABC Asset Finance, to facilitate all Jinan payments. ABC Asset Finance is BancABC's sister company involved in asset-financing and leasing.

Coincidentally, the bank performed very well when diamond trading was booming between 2010 and 2013 at the height of Marange mining and trading activities.

In 2010, BancABC made a profit of US$3,4 million which grew to US$7,3 million in 2011, US$11,9 million in 2012 and US$14,2 million in 2013. The bank made a loss of US$1,5 million in 2014 when the Chiadzwa mining activities declined.

BancABC registered an improved performance marked by a huge jump in after tax profit from US$0,2 million in June 2016 to US$3,2 million in June 2017. The positive performance was a result of cost containment measures and huge earnings from its treasury activities.

However, the performance is still far below its historical performance where the bank used to post more than US$7 million in half year after tax profits.

Income from lending activities fell by 6% and was cushioned by huge discounts gained from Treasury Bill (TBs) purchases in the secondary market to register a positive growth in net operating income.

BancABC's government securities portfolio, which includes TBs and other bonds, increased from US$50,3 million in June 2016 to US$167,7 million as at June 2017. This is a significant growth of 216% as the bank enjoyed short-term earnings from TB discounting.

Fees and commission income declined by 26% due to a combination of a decline in fees from lending activities, controlled charges and to some extent the bank's low transactional business. This is contrary to the sector's performance in which most banks capitalised on increased transactional business as a result of the ongoing cash crisis to boost their fees and commission income. Increased treasury activities resulted in a 68% growth in dealing income on the back of an increase in foreign currency trading and closing on arbitrage opportunities in the secondary market for investment securities.

Operating expenses decreased by 5% as the bank implemented various cost containment measures. As such the bank's efficiency as measured by cost-to-income ratio improved from 90,3% in 2016 to 75,4%.

However, the ratio is still way above the industry average of 70% and the required standard of around 50%.

Total assets grew by 17% to US$514 million driven by a 39% growth in deposits, a common trend in the sector. However, loans to the private sector declined by 25% from US$279 million in June 2016 to US$209 million as the bank reduced its lending appetite in light of non-performing loans.

Although it did not disclose its level of non-performing loans, it is among banks succumbing to the ravages of loan defaults due to its historical trades.

As at June 2016, the bank's non-performing loans ratio stood at 35% which is believed to have improved to slightly below 20% as a result of a US$26 million disposal to the Zimbabwe Asset Management Company.

According to documents from the Registrar of Companies, Nyaminyami, whose offices are said to be in New Mabvuku and has strong links with Sakunda, which in turn is connected to the army, has interests in agro-processing, security, ammunition trade, commodity broking, construction and mining among other pursuits.

Electronic transfers to the tune of US$10,2 million were made to Marange between 2011 and 2012 through BancABC. According to bank statements seen by the Independent, Nyaminyami, for instance, deposited US$4 million into Marange's account on June 30 2011.

This transaction was done before Nyaminyami was registered with the Registrar of Companies in June 2013, raising eyebrows why BancABC opened an account for a company that was not registered then.

Documents show Sakunda was the only local company that deposited funds into Nyaminyami's BancABC account. Sakunda deposited US$3,3 million in 2013. Later Nyaminyami borrowed funds to the tune of US$20 million from BancABC, but Sakunda signed the loan application forms.

Nyaminyami received its first credit of US$101 864,50 from Ahmad Ismail Ibrahim in 2011, bank statements show. Ibrahim is a known diamond dealer. He has traded with Diamond Mining Company, Marange Resources and PTY, among other companies.

"If you look closely at the accounts, you will find out that Sakunda was depositing large sums of money into Nyaminyami before part of these funds were then credited into Marange Resources bank account and transferred offshore," one source said.

"Nyaminyami was apparently purchasing diamonds from Marange Resources on behalf of Sakunda and Sunflower Ltd (China) and the military. BancABC was involved in all this."

In a telephone interview with the Independent yesterday, BancABC managing director Joe Sibanda said he will not comment on the issue since it is still under police investigation.

"You have been reporting on these things and right now I cannot comment on the issue that is under police investigation. It will be sub judice," Sibanda said.
- Zim Ind

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