The measures Dr Gono is contemplating have not been made public but this is not his war alone. His efforts need support from all arms of Government and the private sector.
The Sunday Mail
By Nomsa Nkala
The recent bi-annual Monetary Policy Statement by the Reserve Bank of Zimbabwe Governor, Dr Gideon Gono, brought to the fore the economic sabotage by some multinational banks operating in Zimbabwe.
Banking business includes, inter alia, financial intermediation between the savings and borrowing units of the economy. Banks harness and pull together the savings in an economy and then lend the same to the deficit units, chief among them the productive sector.
That is exactly what needs to happen in Zimbabwe.
If the country’s economy is to be turned around, then there is need for a concerted team effort among all economic players but mostly those in the financial sector should take a lead in championing this cause.
In his Monetary Policy Statement, the RBZ Governor noted with “serious concern the continued aloof attitude by some multinational banks towards the need to actively support the domestic economy”.
He concluded that these banks, clearly, were extending illegal sanctions on the domestic economy by “taking instructions from their international parentage. Under these misguided practices, some internationally owned domestic banks are deliberately declining loans to Zimbabwean companies and individuals appearing on the illegal EU/USA sanctions list,’’ Dr Gono noted.
The Governor was not off the mark. Basically these banks have been withholding capital that would have otherwise been available to the domestic economy if the deposits they held were with the local or more “patriotic’’ international banks like the MBCA Bank.
As a result these sterilised deposits — not available to the domestic economy — cause the same strain on the economy as the promised credit lines being held back by international agencies until certain reforms have been fulfilled, or rather to be precise, until regime change has been effected.
These low levels of loan to deposit ratios are a reminder of the previous banking era in Zimbabwe when there was a two-tier banking system.
The multinational banks, led by Standard Chartered Bank, Barclays, Stanbic and back then MBCA, used to operate in their own tier with the rest of the other banks in their own lower league.
Apparently, it is this lower league that participated in the real economic intermediation, parcelling out credit to the productive sector and taking part in the then vibrant interbank market.
The top tier banks would at times shun the domestic market, including the primary issues of the RBZ treasury bills, let alone parastatal and private sector money market instruments like bankers acceptances and the Grain Marketing Board (GMB)’s grain bills.
The GMB is usually an active participant in the money markets, but its support usually comes from the domestic banks as the multinational banks are clearly under instruction from London and partners not to “touch” domestic market debt.
How then is the GMB expected to pay the farmers for the maize they bring to the market when they cannot access domestic savings?
The money they should be accessing is usually locked in the vaults of these so-called big banks and the bulk of the deposits maintained in long nostro positions with their parent banks offshore earning no interest.
The multinational banks’ loan to deposit rates leaves a lot to be desired and the questions that arise are whose interests are they really serving? Do they deserve or even respect the licences they hold?
What they are doing is clearly a well-orchestrated plan to trap and hold the little deposits that are in the country. The three international banks are holding a combined total of US$688 million against a combined total loan book of US$255 million, translating into a loan to deposit ratio of 37 percent.
If these three banks were to increase their loan to deposit ratio to within the international benchmark of 70-90 percent, their combined loan book would swell to US$482 million, thus releasing a further US$227 million on the lower band of 70 percent and $364 million on the 90 percent high end band loan book.
The domestic productive sector is clearly being deprived of credit that’s being harnessed from the local market by the same banks whose executives have been accused of writing damning reports to their masters in London and Johannesburg urging them to further withhold credit lines destined for Zimbabwe.
The three institutions should take a cue from MBCA, which is leading by example, well ahead the pack with a loan deposit ratio of 126,72 percent.
One wonders what the banks’ strategy for Africa is.
Stanbic is owned by the Standard Bank of South Africa group ranked number two in Africa with a total deposit base of US$70,1 billion and a loan book of US$70,9 billion. The loan-to-deposit ratio for the bank is 102 percent according to the Africa Report, Finance Dossier on Africa’s top 20 Banks.
Clearly the bank practises normal lending trends elsewhere but not in Zimbabwe. The questions that then arise are where the local subsidiary gets its instructions from and if at all it cares about the turnaround of the local economy?
Surprisingly all the three banks are headed by local Zimbabweans. The same disturbing trend is also noticeable at building society level.
CABS, the country’s sole foreign-owned building society, through its Old Mutual parentage and therefore owned by Nedbank, has the least desirable loan- to-deposit ratio of 48,97 percent. Both its peers, CBZ and FBC, are above 100 percent, sitting at 181,25 percent and 103,03 percent respectively.
Clearly it is time for these financial institutions to focus on their core business more objectively and that is the general view among the country’s business leaders. Academic and farmer Mr Michael Chidoori says: “These banks need to comply with the indigenisation laws of the country by supporting the process.
“There should be no sacred cows in the indigenisation process.
“We are talking banking here and these should be the conduits of economic emancipation and prosperity and yet we are embracing within our borders agents of imperialism who are taking hard-earned deposits from our people and sterilising the same deposits without channelling them to the productive sector.”
Interestingly, elsewhere in Africa, the National Bank of Ethiopia relaxed caps on credit and lending after the IMF advised that it was doing little to help cut inflation or counter the threat of demonetisation.
While bankers reacted with unease, business owners were relieved. Unfortunately, the Zimbabwean domestic market cannot expect any favours from the IMF, in fact the Bretton Woods institution may give direction to the contrary.
Fortunately, the RBZ Governor has taken cognisance of the disturbing trend in the banking system and has since promised to “ensure that these retrogressive attitudes and practices are decisively dealt with in the interest of laying a solid foundation for sustainable financial intermediation in the economy”.
The measures Dr Gono is contemplating have not been made public but this is not his war alone. His efforts need support from all arms of Government and the private sector.
The tentacles of this undesirable practice are far-reaching. And unfortunately some decisions are not made locally for these subsidiaries or even for the multinational companies in this country that bank with them.
Whatever the lending and investment policies that are being pursued by these multinational banks, and wherever they are being prescribed from, they clearly are at variance with the economic turnaround efforts needed in this country.
Current practice is economic sabotage and is even worse than international sanctions. These are internal sanctions where the populace’s own hard-earned salaries and savings are unavailable for the development of their own country.
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