The Sunday News
Tinomuda Chakanyuka, Senior Reporter
MORE than 100 indigenously-owned companies in Bulawayo are on the brink of collapse after loans and rentals that they have accrued since dollarisation in 2009 have come back to haunt them with banks and property managers on their tails, approaching the courts to auction their houses and other belongings.
Investigations by Sunday News revealed that a number of local businesspeople and budding entrepreneurs rushed to borrow money from banks soon after the country started using the United States dollar with the hope that they would prop-up their businesses.
However, in the last few years, the economy has recorded sluggish growth pinning down the businesses resulting in most of them defaulting on loan repayments and rentals. This has seen a number of banks owed approaching the court seeking permission to attach the businesspeople’s properties.
A number of the businesses have already lost properties through public auctions while some are contesting the actions taken by the banks. Last month the AAG made an urgent Chamber application to stop the auctioning of property belonging to 21 companies and individuals. The empowering body said more than 100 companies have come to seek sanctuary at their offices after being approached by the banks.
Some of the local companies and individuals that have approached AAG in the latest development are Mr Tanius Mumbengegwi, Memory Mawoyo, CMS Leatherwear, C and M Investments, Trishal Properties, Glycemic Investments, Builders’ Deport, Simerek Investments and Barragen Private Limited. Others are Familiar Marketing, Nabane Roy Tshuma, A and S Ndebele trading as Masalu’s Kitchen, Maxwell Sibanda, Francis Maponga, Tandara Inn, Nacbol Investments trading as Parama, Khulumani Moyo, Matfield Operations, Aman Investments and Roblees Investments.
The Bulawayo City Council, Bulawayo Real Estate, People’s Own Savings Bank, CABS Building Society, NMB Bank, FBC Bank, ZB Bank, MBCA Bank and NRZ Pension Fund Fund were cited as respondents. The companies and individuals were handed over to debt collectors for defaulting loans and rentals.
AAG, in its founding affidavit filed by chief executive officer Mr Silani Paulus Mtshiya, argued that attaching and auctioning of property to offset debts was unjust and an “affront to the right to human dignity and shelter.”
Most of the proprietors of companies that are being sued do not have commercial properties and thus used their personal immovable assets as collateral when they applied for loans.
The empowerment group, in its arguments cited section 74 of the Constitution which states that “no person may be evicted from their home, or have their home demolished without an order of court made after considering all relevant circumstances.”
AAG further argues that all relevant circumstances were not considered when the creditors secured wits of execution to attach the owing companies’ property. However, the Bulawayo High Court struck the matter off roll for failing to comply with provisions of practice direction 1 of 2014.
AAG national vice-president Mr Sam Ncube told Sunday News that his organisation would pursue its case with the Constitutional Court, challenging the constitutionality of attachment and sale of properties by creditors to offset debts. Mr Ncube said this year alone his organisation had assisted over 100 companies whose properties had been attached for failing to pay back bank loans. He said last year, AAG had helped save over 30 houses from being auctioned under similar circumstances.
“Last year alone we saved about 30 houses through the courts. This year we have assisted over 100 companies whose properties have been attached over debts. Our legal team is working on our papers and any time next week we should be approaching the Constitutional Court to challenge the conduct of banks and landlords,” he said.
Mr Ncube said some businesspeople were facing civil imprisonment as their properties would have failed to offset the debts after being auctioned. He said, again, civil imprisonment was unconstitutional.
“Section 49 of the constitution states that no person shall be imprisoned merely on the ground of failing to fulfill a contractual obligation, yet most companies are applying for civil imprisonment when debtors fail to pay debts,” he said.
Mr Ncube said most banks took advantage of indigenous business and offered them loans at ridiculously high interest rates when the country adopted the multicurrency system. He said the high interest rates, which ranged between 50 and 75 percent per annum saw most companies needing to pay almost double of what they would have borrowed.
“That’s what killed most companies. If you look at it now most companies have actually paid back whatever was advanced to them, what remains now are the interests which are almost equal to the initial amount borrowed or more. Most of our entrepreneurs are not really sophisticated and they were tricked into taking such loans,” he said.
Mr Ncube went on to slam banks for not taking due diligence when extending loans to clients.
“Local banks don’t look at bankability of projects as a basis to give loans. They simply look at collateral. That’s how selfish they are. Due diligence requires them to look at bankability of a project first before financing it.
“In other countries banks demand that they run the finances of a company as a condition to give a loan, to make sure that the money is used for its intended purpose and the loan is paid back,” he argued.
Mr Ncube called on the Bankers Association of Zimbabwe to rein in banks. He said the practice by local banks was against the ethos and spirit of indigenisation.