CBZHL / ZBFHL deal in limbo

LIVINGSTONE MARUFU

The proposed merger between CBZ Holdings Limited (CBZHL) and ZB Financial Holdings Limited (ZBFHL), meant to create Zimbabwe’s largest financial institution,is on the verge of collapse.

This follows the imposition of stringent  conditions precedent by the Competition and Tariff Commission (CTC) , raising doubts  about the feasibility of the deal.

Although, there has been no formal announcement regarding the deal’s collapse, insiders have revealed that conditional approval had been granted.

However, the onerous requirements set by CTC have left CBZHL reconsidering its position.

CBZHL board chairman, Luckson Zembe, disclosed to Business Times, a market leader in business, financial and economic reportage, that regulatory hurdles have jeopardised the transaction.

“It was a conditional approval (of the merger  between CBZ and ZB).  From our side, we are still working on those conditions which they would like us to fulfil. From our own point of assessment, some of the conditions do not make much sense from a national perspective as well as from an organisational perspective,” Zembe told Business Times yesterday.

He added: “So those are some of the areas where we are still trying to engage each other so that we can come to an equal agreement in order for the transaction to go ahead.

Otherwise, the conditions themselves as they stand at the present moment creates challenges in terms of moving ahead.”

Zembe expressed frustration over the CTC’s tough stance, emphasising the strategic importance of creating a robust financial institution capable of driving Zimbabwe’s economic ambitions.

“The main reason for these transactions is to try and create institutions that we can anchor our national strategy on.

“We need  to have institutions that have the capacity and capability to be able to support national strategy, to support business strategy.

“One of the biggest challenges we have in Zimbabwe is that we have got almost about 16 commercial banks, but they are very small banks.

“When you talk about mobilising resources for the economy, if you look at this economy, Zimbabwe economy, for it to be really turned around and performing and achieving the aspirations that we have of an upper middle income economy, we need to be able to mobilise not less than US$20bn annually to be injected into this economy.

But there is no bank, even all of them, all our banks put together.They have challenges because they are too small to be able to go out into the market, especially international markets, to mobilise lines of credit and to be able to mobilise the resources that can support this economy,” Zembe said.

He further criticised decision makers in the public sector , stating: “So one of the major objectives is to try and create an institution similar to those in South Africa,  where there is Standard Bank, First National Bank and a couple of other banks there.

“If you go to America, you have got JP Morgan, you have got American Bank, you have got Citibank.

“If you go all over the world, all countries that have really mattered, they have got local institutions that are strong and capable and have the capacity to be able to mobilise the resources for the economy.

But unfortunately, that is not being well understood by some of the officers who make decisions in our public sector.

“They tend to perceive things to a large extent from a political perspective rather than from an economic perspective.

Instead of looking at and addressing issues from an economic perspective, in the interest of the nation, in the interest of our people, in the interest of business, and also to realise that we are competing in a global economy.

It is not just about Zimbabwe but the country is  part of the global economy.  It is a pool of sharks out there.

CBZHL Group CEO Lawrence Nyazema echoed Zembe’s concerns, hinting at the possibility of abandoning the deal.

“It [the proposed merger] was approved with a number of conditions which we are reviewing. Chances are we will not proceed with the transaction.”

The CTC’s strict oversight has put the brakes on what could have been a transformative deal in Zimbabwe’s financial sector.

Analysts had  anticipated the merger would create  a financial giant with assets exceeding US$2.5bn, positioning the new entity as the most aggressive player by asset base, net present value, and market capitalisation in Zimbabwe.

Zimbabwe’s economic landscape lacks a dominant local player with the scale to drive organic growth. And the proposed CBZHL-ZBFHL merger was seen as a rare opportunity to establish a homegrown financial powerhouse capable of driving national development.

However, CTC’s stringent conditions precedent had dampened  these aspirations.

While the regulatory body seeks to promote fair competition and prevent market dominance, critics argue that its approach may strifle large-scale investments critical for economic transaction.

The CTC’s intervention is not the first setback for CBZHL.

Last year CBZHL sought to increase its stake in First Mutual Holdings Limited (FMHL) beyond 31.22% by buying out minority shareholders.

The company had acquired this stake from the National Social Security Authority (NSSA) last year and aimed to buy out minority shareholders to launch a full takeover bid.

However, the CTC blocked the move, instructing CBZ to limit its holding to 31.22%.

This decision curtailed CBZ’s ambitions of creating a financial conglomerate capable of underwriting major projects across Zimbabwe and the region.

With its plans for the FMHL and ZBFHL mergers disrupted, CBZ is now pivoting to alternative growth strategies.

The group is leveraging its subsidiary, Datvest, as a key driver for both domestic and international expansion. Datvest’s asset management expertise is central to CBZHL’s plans to diversify its portfolio and spearhead growth initiatives.

CBZ’s strategic focus also includes expanding its presence in high-growth sectors such as insurance and property. By integrating these businesses into its operations, CBZ aims to build a resilient and diversified financial institution capable of weathering market volatility.

Analysts, who spoke to Business Times on conditions of anonymity, said CTC’s tough stance on mergers and acquisitions reflects its broader mandate to promote competition and prevent market dominance.

Others said while such oversight protects consumer interests and ensures fair competition, it also raises questions about whether the regulatory framework is too restrictive for a country in dire need of large-scale investments and economic transformation.

In the case of the CBZ-ZB merger, the CTC’s conditions may have inadvertently stymied a deal that could have brought significant benefits to Zimbabwe’s financial sector and broader economy. The creation of a financial behemoth would have enhanced Zimbabwe’s competitiveness on the global stage and attracted much-needed foreign capital.

Despite the hurdles, CBZ appears determined to pursue its growth ambitions. The group’s regional expansion strategy and emphasis on diversification signal a proactive approach to navigating Zimbabwe’s challenging regulatory environment.

For Zimbabwe, now that the deal faces collapse, it highlights the need for a delicate balance between regulation and economic development. Policymakers and regulators must create an environment that encourages local companies to grow and compete globally while safeguarding competition and consumer interests.

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