Investors back CBZ Bank's bet on grain

 

 

The bank was on the market last week with a 90-day paper which was over-subscribed with total bids amounting to US$2 950 000 at an average rate of 23,49 percent.

 

Lowest rate tendered was 20 percent while the highest rate was quoted at 30 percent.

 

Money market dealers said the paper was attractive and supported because of the lucrative rates saying: "Investors thought the rates were quite good and what they did was to lock their investment in anticipation that rates will fall in the next year."

 

The bank was also on the market last month to raise a similar amount which was under-subscribed with total bids amounting to US$1 895 000 resulting in US$1 630 000 being allotted at average rate of 21,32 percent.

 

"With a strong bank like CBZ Bank the market was confident in the paper as they also increased the rate at which they accepted the last bids.

 

"However, the parastatal would be under pressure in the new year to come up with money-spinning projects to pay back the market," one dealer said.

 

Depressed money market activity characterised by low liquidity has seen the grain purchaser approaching potential investors on the market to subscribe to the paper. The bank last week invited investors including pension funds, insurance companies, life mutual, commercial banks and other interested institutions and individuals to subscribe to the grain bills.

 

However, liquidity on the market remains at critical levels as indicated by the thin deposit base on the local financial sector estimated to be just above US$1 billion.

 

Lending rates, as indicated by quotations on Bankers Acceptances for 30 to 90 days continue to trade in the eight percent to 15 percent range while deposit rates are being quoted in the region of six percent to 12 percent for the said tenor.

 

GMB has been seeking cash to purchase an estimated 50 000 tonnes of grain to strengthen the country's Strategic Grain Reserves.

 

This year, GMB is competing with other buyers to purchase grain from farmers and is among those offering high prices. At the time the parastatal was failing to pay cash for maize deliveries because of lack of funding they resorted to offering inputs as part-payment to farmers who delivered their maize.

 

With cash in their hands, GMB has an advantage against its competitors, as farmers would want to sell their grain ahead of the festive season.