Morice Maunya
Financial services giant Absa Group Limited has made a deal with the Tanzanian government for acquisition of majority shares in the country’s largest state-owned commercial bank.
The two sides – represented by Absa’s executive director, Jean Brown, and the chair of the Tanzanian privatisation agency, John Rubambe – signed a memorandum of understanding in Dar es Salaam last week for the purchase of 70% of the shares in the NBC (1997) Limited.
The NBC is Tanzania’s largest commercial bank with 34 branches country-wide – 14 branches in Dar es Salaam – and 1 080 employees.
The bank’s deposits were recently pegged at $300-million, while debts owed by loan defaulters stood at $200-million at the beginning of this year.
Rubambe is chair of the Presidential Parastatal Sector Reform Commission, the agency entrusted with selling state-owned companies.
In 1993 the socialist economic system espoused by former president Julius Nyerere was abolished.
“The decision to sell the majority stake in the NBC stems from the Tanzanian government’s initiative to reform and strengthen the financial sector,” says Rubambe.
The reform commission could not reveal the price Absa paid for the bank, saying “detailed negotiations” were still going on and the current offer was likely to be improved.
According to Raphael Molel, permanent secretary in the Tanzanian Ministry of Finance, the government will float the bank’s minority shares two to three years after Absa’s takeover, “once a track record of profitable growth has been demonstrated”.
An external audit report by Price Waterhouse issued in December last year described the bank as having serious liquidity problems.
Absa’s Brown said this week an interim management team consisting of experts from the South African banking group will start running the privatised bank from August 2, pending the finalisation of the acquisition process in October.
Privatisation of Tanzania’s banking sector started in 1991, when the government enacted a law inviting investors with international experience to enter into joint ventures with the government. Until then all the banks had been 100% state owned.
The current process to divest the NBC started in 1998 when the government invited tenders for the purchase of the majority shareholding in the bank.
By November 30 last year four bids had been received. These came from Stanbic Bank (Tanzania) Limited, First Adili Bankcorp/ Tanzania Consortium, Tanzania Chamber of Commerce, Industries and Agriculture, and Barclays Bank of the United Kingdom.
However, the reform commission disqualified all the bids and fresh bids were invited.
Absa joined the fray in this second round, which also attracted Barclays Bank of the UK, First Adili Bankcorp/Tanzania Consortium and Stanbic (Tanzania) Limited.