Zimbabwe’s new threat to take over foreign-owned banks may widen the cracks in the government over the empowerment law and has drawn criticism even from President Robert Mugabe’s allies.
Empowerment Minister Saviour Kasukuwere told a meeting of industrialists last week that banks would be the next target, after mines, for his black empowerment crusade.
“We have been focusing on mining. We will move to the banking sector. We need to ensure banks respect and respond to the aspirations of the people,” he said.
But central bank governor Gideon Gono, a close Mugabe associate, has cautioned against takeovers in a sector of which he is in charge. He warned that companies would be grabbed by the same elite that seized farms if the empowerment regulations were applied as they now stood.
Gono warned against those “hiding behind the indigenisation law” to “commit or justify acts of economic banditry, expropriation and unfair practices” by parcelling out “pieces of the economic cake and opportunities created by this noble piece of legislation to a few connected cliques of people, while the majority of intended beneficiaries remain with nothing”.
He suggested a model that “envisages a gradual approach to attainment of the company ownership thresholds by indigenous Zimbabweans in a manner that ensures sustainable empowerment, inflows of much-needed foreign capital and minimal disruption to economic activity”.
Top political figures who were awarded farms but who were not using them “should not be allowed to go and multiply that failure in other sectors”, Gono said.
Foreign banks in Zimbabwe include Stanbic, the Zimbabwe unit of Standard Bank; MBCA, the majority shareholder of which is Nedbank; Standard Chartered; Barclays and Ecobank of West Africa, which recently acquired a local bank. Old Mutual owns Cabs, one of the country’s largest mortgage lenders.
Reflecting a view widely held in Zanu-PF, Kasukuwere said the refusal of these banks to lend to local businesses was the reason their ownership had to change.
The banks have resisted pressure to increase lending to resettled black farmers, who form the anchor of Mugabe’s political support.
Reserve Bank statistics show that the loan-to-deposit ratio is much higher at local banks than at foreign-owned banks. The ratio stands as high as 122% at local banks, compared with as low as 25% at foreign-owned banks. In total, bank loans increased from $686-million in 2009 to $2.4-billion in June this year.
Bankers Association of Zimbabwe head George Guvamatanga said this was because banks had to have collateral to lend money. Resettled farmers did not have title deeds and therefore could not put up security for loans.
But Zanu-PF sees the lack of credit as part of a campaign by foreign interests to undermine land reform. “They cannot take people’s money but refuse to lend to them,” said Kasukuwere.
Bankers said this week that the proposed law remained unclear and was hurting already weak investor confidence.
“There is a need for clarity on the implementation of the indigenisation legislation issue. The law has caused uncertainty and, to some extent, the de-industrialisation [sic] of the country,” said John Mangudya, head of the country’s largest lender, CBZ. Absa sold its minority interest in CBZ in 2007.
The banking sector is already weak, with a half-dozen institutions undercapitalised, according to the central bank.
The banks are reluctant to comment while they negotiate with the government. However, at public hearings in Parliament when the legislation was being debated Standard Chartered warned that banks could be forced to withdraw from the country if they lost majority control.
“The removal of the possibility of holding a controlling interest may make it difficult for existing companies or potential new investors being able to justify their continued interest in the country,” Standard Chartered said in a report it submitted to a parliamentary committee.
Stanbic, which had planned to sell up to 30% of its shares to local staff, said foreign banks would not allow the use of their corporate identities by businesses in which they no longer held majority control. This would mean international markets would not recognise them.
A committee on empowerment in financial services recommended that local bank shareholding be set at 40%, but Kasukuwere rejected this as well as empowerment proposals from 175 other firms.