Auctioneers sink teeth in economic strugglers

HARARE - As the Zimbabwe economy continues to choke, throwing workers onto the streets and companies closing down, there have been a few smiles elsewhere as a result of this carnage.

It is the auctioneer who is smiling all the way to the bank.

And as fate would have it, some of the banks are also at the mercy of auctioneer whose steady business has seen a sharp rise in fortunes in the current economic environment.

As the carnage from the economic mess continues, the courts have been battling with the increasing number of cases requiring closure to commercial executions.

Master of High Court, Eldard Mutasa, recently said commercial cases were choking the judicial system.

On Wednesday alone, the court received a record breaking 17 cases of companies under judicial management and liquidation.

According to Mutasa, companies have been filing an increasing number of lawsuits against their clients to recover unpaid loans and in most cases ending up at the auctioneer’s guillotine.                                                  

Harare-based analyst Issis Mwale said despite the mystery of their profits, auction houses have been making a killing of late.

“In an otherwise slow environment, they are getting business more often than not. And as you know, when a company goes into liquidation the first batch of expenses covered are the liquidation costs, auction services included,” Mwale said.

Mwale, however, cautioned that the presence of business was not synonymous with great profits, as auction sale companies suffer from their own competition, as well as the unfavourable economic context that is affecting their development.

“The thing is in general their situation is a lot better compared to say, the people in manufacturing or other sectors not feeding on others when they collapse,” she added.

The worsening economic situation has seen both companies and individuals losing their assets as auctioneers sank their teeth in outstanding cases to fetch money on behalf of the instructing clients.

Among those that have been vicious in trying to recover what they are owed, are leading commercial banks that are among companies seriously affected by the downturn in economic fortunes of their clients.

Zimbabwe banks are owed a combined $750 million by defaulting customers who include companies and politicians.

These non-performing loans have seen banks institutions tough measures to recover the money by attaching assets that include properties which have been auctioned off.

Independent economist analyst, John Robertson, said while auction houses were getting business where most collapsed, it was “too ambitious to assume they had a market after they got the tender to auction”.

“What stands is the fact that auctioneers are recording better business than everyone, small or large profit margins, that is the fact. With all these closures, it is very accurate to say auction houses are benefiting from the chaos,” he told the Daily News On Sunday.

“You should not be quick to assume the goods are going to be bought, because what led to the closure of the company whose assets are being auctioned are tough economic conditions.”

Leading auctioneers have had brisk business in the execution of auctions involving either collapsed banks or those that voluntarily surrendered their licences.

When Trust Bank Corporation (Trust) was shut by the Reserve Bank of Zimbabwe (RBZ), a local auctioneer began classifying the bank’s assets, even after central bank had extended the olive branch to the bank to secure an investor by April 2015 to avoid liquidation.

Royal Bank Limited Zimbabwe (Royal) also used the services of the same auctioneer.

“It is strange in its way; however, we are experiencing very good business. The more companies close the better it gets for us, because we are sort of the undertakers in this business,” said an employee at one of the auction houses, who spoke on condition of anonymity.

The employee said while the auctioneer had not received a direct order from relevant authorities, preparations were already underway to auction off assets belonging to one of the closed banks.

AfrAsia Bank Zimbabwe Limited (ABZL) early this year surrendered its banking licence after its Mauritian shareholder failed to recapitalise the financial institution and the defunct bank has engaged auctioneer services.

This followed the similar fate of banks such as Allied Bank, Tetrad Investment Bank and Trust Bank.

Auctioneers, however, face costs of their own despite booming business.

Kennedy Mwarura, a small scale auction owner based in Bulawayo said the present fiscal pressure may catch up with the market soon.

“It is just for this moment, when there is hype and many banks have collapsed, in any case they choose to work with bigger and more reputable houses. Secondly, it takes a long time for a company to get into final liquidation so it may appear rosy but it is not as great,” he warned.

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