/ 23 March 2004

Moguls flee as Zim banks close

Zimbabwe’s anti-corruption crackdown last week resulted in the closure of five key financial institutions.

President Robert Mugabe is vigorously dismantling the country’s deep-rooted economic patronage system in an effort to ensure his political survival.

The sweeping clean-up drive has sent business magnates — whose economic power was beginning to threaten Mugabe’s diminishing political influence — fleeing abroad to escape jail.

As many as 10 prominent business tycoons have fled the country in recent weeks. Most are said to have sought refuge in London.

However, the Zimbabwean president has said the moguls will be found and brought to justice.

Financial institutions closed by the Reserve Bank this week included Barbican Bank and Barbican Asset Management. Reports say Barbican Asset Management South Africa, Barbican Holdings Botswana, and Barbican Capital Partners are also in deep financial crisis.

The collapse of the Zimbabwe Stock Exchange-listed Barbican Holdings, owned by Mthuli Ncube and others, was preceded a few days earlier by the closure of Intermarket Holdings, one of the local firms owned by Nicholas Vingirai.

The group’s major subsidiaries, Intermarket Banking Corporation, Building Society, and Intermarket Discount House, were shut down because of a severe liquidity crisis. Barbican Holdings was closed for the same reason.

But there were also allegations of corruption involving “foreign currency externalisation” and siphoning off of investors’ funds by directors in the form of “loans”.

Other financial institutions and companies that have been netted in the campaign include NMB Bank, Trust Bank, Century Bank, Century Discount House and Metropolitan Bank.

NMB Bank managing director Julius Makoni and his deputy, James Mushore, are believed to have fled to London.

Trust Bank, Century, and Metropolitan have had to be rescued by the central bank through its Troubled Banks Fund to protect investors and depositors’ funds, as well as preserve their assets.

A number of asset management companies, in particular ENG Capital Asset Management, whose directors have been languishing in jail since December over a Z$60-billion fraud case, and discount houses have sunk as the clean-up tide sweeps across the financial sector. Many other locally owned companies are facing the risk of going under.

When the corrosive banking crisis began affecting the ordinary people Mugabe stepped in, masquerading as their saviour. However, critics point out his disastrous policies helped create the problems.

Political analysts and a wide spectrum of Zimbabweans blame Mugabe’s regime for the corruption that has become an integral part of the country’s political system.

They have accused Mugabe of maintaining his tyranny through an eclectic mix of coercion, emotional propaganda, patronage and graft.

Business moguls have all along been kept within Mugabe’s political realm and at his regime’s service. The business executives provided resources to sustain his rule in exchange for security.

However, since September, Mugabe has complained of “unhelpful businessmen”, especially bankers, who had been beneficiaries of licences under his government but had shifted their political loyalty.

At the Zanu-PF conference in December Mugabe warned the “unhelpful businessmen” and “tricksters” that their days were numbered. Later that month the crackdown started, with the arrest of ENG directors.

Mugabe’s concentrated campaign has been likened to Russian President Vladimir Putin’s recent clampdown on the “oligarchs” in his country. On October 25 last year Putin ordered the arrest of Russian billionaire oil baron Mikhail Khodorkovsky for tax evasion and corruption dating back to the wholesale plunder of state property during former Soviet leader Mikhail Gorbachev’s perestroika and glasnost programmes in the early 1990s.

Khodorkovsky was using his immense personal fortune to bankroll opposition parties in Russia.

This apparently broke an unwritten covenant between the “oligarchs” and the Kremlin leadership committing the moguls to keeping out of politics in return for the state’s protection of their ill-gotten wealth.

Mugabe is seen as following the same formula by dealing with Zimbabwe’s “economic mafia” for breaking the cardinal rule of not interfering in politics and funding the opposition Movement for Democratic Change, a party deeply resented in official circles.

Zimbabwe’s nouveau riche had accumulated wealth that had given them economic muscle that was beginning to challenge Mugabe’s political power and influence.

The entrepreneurs, who admittedly had gained some of their fortune through illicit means, were building up their profiles as an alternative source of political power, and their adventurism as MDC financiers had ruffled the feathers of the powers that be.

Dumisani Muleya is chief reporter at the Zimbabwe Independent