Zimbabwe’s reserve bank up to its ears in debt

The Reserve Bank of Zimbabwe (RBZ) is severely hamstrung by a debt bill of $1.5-billion owed to a host of local companies and non-governmental organisations. The debt, lawsuits and property seizures threaten the central bank’s very survival.

Three years ago, under the leadership of Gideon Gono, RBZ was the country’s single most powerful institution. Now, the pile of debt amassed by the bank from 2004 to 2008 as a result of its “non-core fiscal activities” has rubbed away its shine.

The latest figures from Finance Minister Tendai Biti have highlighted the debt bill. There are also allegations that the RBZ pocketed $7.3-million from the United Nation’s Global Fund, intended to be used in the fight against malaria and tuberculosis in the country. In its glory days the central bank shored up ailing parastatals such as Air Zimbabwe and National Railways of Zimbabwe and spearheaded a farm mechanisation programme to support Zanu-PF’s land seizures.

The Confederation of Zimbabwe Industries has been vocal in demanding that the RBZ pay its debts. The confederation’s president Joseph Kanyekanye said: “The money that the RBZ owes companies must be returned. It is a little bit difficult to quantify, I will leave that to the RBZ, but given the outcry, those amounts must be substantial.”

Last week, in a case that underscores the central bank’s ongoing financial woes, it announced the sell-off of seven of its private companies. In March, Biti alluded to the sale as a means to raise money and “clear up the RBZ’s balance sheet”. The sale includes its flagship Homelink company, a money transfer and house-building concern that targets Zimbabweans in the diaspora.

It comes shortly after 1 500 workers were retrenched from the institution in February, in the single largest retrenchment exercise in the country.

Meanwhile, Zimbabwe’s banking sector has been rattled by a scam involving Renaissance Merchant Bank (RMB), in which its directors and shareholders allegedly misappropriated depositors’ funds. RMB has been closed for two weeks while investigations take place. Patterson Timba and Dunmore Kundishora, RMB’s chief executive and director, have been fingered in an RBZ report that exposes large-scale looting by the bank’s top brass.

Allegations include an inappropriate shareholding structure in which Timba and Mundishora own 68.9% of the RMB group; gross undercapitalisation — the bank is technically insolvent, with a negative capital base of $16.7-million instead of the stipulated $10-million for merchant banks and requires an additional $55.1-million to meet regulatory capital requirements; the violation of banking regulations, in particular section 16 (2)(b) of the Banking Regulations Act, which stipulates that advances given to the insider and any of his relatives should not exceed 5% of the bank’s capital base unless it has been disclosed and approved by the board. Timba lent money to friends and relatives amounting to $12.4-million, which exceeded RMB’s capital base by 25%.

The Bankers Association of Zimbabwe has, however, urged depositors not to panic, saying the RMB scam was an isolated incident of poor corporate governance.

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