RESERVE Bank governor Gideon Gono yesterday made a dramatic about-turn on the country’s drive to indigenise the financial sector, lending his support to Indigenisation and Economic Empowerment minister Saviour Kasukuwere with whom he had been openly sparring over the issue.
Announcing his monetary policy statement for 2013 in the capital yesterday, Gono, who previously had been adamant the banking sector was a sacred cow that should not have been included in the ongoing radical transfer of economic power into the hands of the black majority, showed he had yielded to the political pressure he has been facing from Zanu PF, which has been having an upper hand in the unity government.
“All banks should observe the laws of the country including the Indigenisation and Economic Empowerment laws. In this regard, the Reserve Bank is working together with the Ministry of Indigenisation and Economic Empowerment to ensure that compliance with appropriate laws is done in an orderly manner,” Gono said yesterday.
He however stressed that the process to indigenise the banks should take cognisance of the sensitivities around the operation of the banks to restore confidence, trust and stability in the sector.
Nonetheless, the governor could be taking his last stand by demanding that all indigenisation transactions that involved notion vendor finance for the new black shareholders obtain his approval.
The transactions, which have been dubbed successful by some sections of the financial markets, could be in danger of being labelled null and void if Gono disapproves of them in the interests of curtailing further national debt.
The country’s Indigenisation Act compels foreign owned firms to sell 51% of their stakes to local entities. In the absence of credit lines willing to fund the sale of the stakes, the companies and the ministry of Indigenisation have an agreement that the stakes would be sold through notional vendor financing (NVF).
NVF is credit provided by the supplier, normallly in the form of deferred payment terms, usually over 10 years or so. This means indigenous entities contracted commercial debt from the companies which they have now taken over.
However, Gono said there were laid down procedures in the contraction of credit lines which strictly requires the approval of the External Loans Coordination Committee.
The contraction of credit lines and loans in Zimbabwe are undertaken through the ELCC as it has been empowered by government to use stipulated guidelines in debt contraction with a view to monitoring the country’s indebtedness to the rest of the world.
Gono noted there had been incidents where credit lines were contracted on behalf of government outside the purview of the ELCC or involvement of the RBZ.
“Against this background all institutions, both in the private and public sectors, need to send their loan applications through the ELCC for prior approval.”
Gono said this applied to various vendor financing schemes that had emerged over the recent past Zimbabwe Independent is reliably informed that Gono is currently in the process of granting ECCL approval to the transactions in the same as he had already approved that of Blanket Mine.
Blanket Mine was the first company to receive an indigenisation compliance certificate.