Foreign lenders pump cash into Zimbabwe’s ailing bank sector

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Harare – Foreign banks in Zimbabwe are weighing in heavily to steady the country’s faltering financial services industry, which has been hit by cash shortages, despite foreign firms facing pressure to give away majority shares into the hands of black groups.

Banking executives and treasury officials told Business Report this week that foreign banks were playing a significant role in abetting the cash crunch, which saw some finance institutions struggle to meet cash demand from depositors.
“Foreign banks, such as MBCA (owned by Nedbank) and Stanbic (controlled by Standard Bank), are capitalising on liquidity support from their parent companies in South Africa. Most of the local banks are failing to meet demand from depositors and the industry is a bit stable because of the foreign banks,” a treasury official said, declining to be named.

Surprise growth

IH Securities research analysts Lloyd Mlotshwa, Joan Takaindisa and Fungai Nyaungwa said the Zimbabwean “banking sector surprised on the upside” during the month of March.

They added in a market report released on Tuesday that “listed banks showed a combined revenue/income growth of 9.7 percent, (with) total deposits” climbing up by 10.7 percent to $2.7 billion (R40.3bn) by the start of this month.

Most of the foreign banks in Zimbabwe are listed on the Zimbabwe Stock Exchange and the government is likely to lean on African Export-Import Bank to boost liquidity among the struggling banks through facilities to support the interbank market and other interventions.

IH Securities analysts said there was a “more cautious approach to loan book growth”, after average advances dropped by 2.6 percent to $1.8bn.

“Non-performing loans visibly declined given interventions from the Zimbabwe Asset Management Company,” the analysts said.

Reserve Bank of Zimbabwe governor John Mangudya conceded that banks were failing to meet demand for cash, although the government had tried to force tobacco farmers to open bank accounts to manage scarce liquidity.

“This situation has now been exacerbated by the opening of the tobacco auction floors. This is over and above demand for cash of about $5 million per week by artisanal gold miners,” he said.

The foreign financial services companies are under pressure to give away majority shares under controversial black empowerment legislation that has been at the centre of bitter disputes between Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao and Finance Minister Patrick Chinamasa.

Consistency sought

Tanzikwa Guranungo, an executive with the Zimbabwe Youth Council, said “there is need to align the Indigenisation Act and the Banking Act” to ensure there were no contradictions between the finance minister and the empowerment minister. He said this would lead stakeholders to “blame the government for policy inconsistency”.

The Buy Zimbabwe pressure and lobby group said last week: “The proposed cabinet directive to close companies as a punitive measure against companies is tantamount to condemning Zimbabwe into continued economic decline and abject poverty.”

The group added: “Threatening to close companies shows a lack of understanding of the economy and forces of economic prosperity.”-IOL

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