AS the financial sector awaits the outcome of the Reserve Bank of Zimbabwe (RBZ)’s on-spot inspection on banks, the spotlight is on indigenous financial institutions who have become the major vic
tims of the country’s tight monetary controls.
Once regarded as the most visible symbol of government’s indigenisation policy, most financial institutions have turned out to empty shells or giants standing on feet of clay, much to the chagrin of proponents of the gospel of black economic empowerment.
At its peak, the financial sector was reaping super profits at a time when other sectors of the economy were succumbing to recession.
Although most indigenous institutions announced that they had met the RBZ’s capital requirements, analysts say the majority of them are not on a sound financial footing.
This is largely due to the liquidity crunch a number of them have been experiencing since the expiry of the September deadline to meet the new $10 billion capitalisation requirements. Two weeks ago the once prestigious NMB Bank succumbed to massive capital flight.
This year four financial institutions – Trust Bank, Barbican, Royal and Intermarket Banking Corporation – have become casualties of the RBZ’s monetary policy.
They were placed under the management of curators for six months each after revelations that they were financially unstable.
Barbican’s asset management arm was subsequently liquidated as was ENG Capital Asset Management and Rapid Discount House.
Intermarket Discount House is still under the management of a curator.
NDH Holdings is facing liquidity problems.
Analysts have warned that problems in the banking sector could cause tremors such as those experienced when Roger Boka’s United Merchant Bank (UMB) and David Chapfika’s Universal Merchant Bank (Unibank) collapsed in 1997 and 2001 respectively.
Boka, who had distinguished himself as an astute businessman, could only watch as UMB went under.
He built the largest auction floors in the world but was soon to discover that indigenisation alone was not a solution.
Boka’s UMB doled out loans to politicians in the same manner NDH has been dishing out money to Zanu PF. A report made to Zanu PF’s central committee by the party’s finance department revealed that NDH donated $200 million to the party, more than a quarter of total donations in the period January to September last year.
Analysts blamed the mess in the financial sector to lack of supervision by the Ministry of Finance.
Before Gideon Gono took over as head of the RBZ, the issuing of banking licences was the prerogative of the Finance ministry.
Economic commentator Jonathan Kadzura castigated the Finance ministry for not supervising financial institutions.
“The buck must squarely stop at the Ministry of Finance who were just issuing out licences without making a follow up on whom they had given licences,” he said.
“What went wrong is that there was lack of supervision and that financial institutions were not practising banking ethics,” he said.
Kadzura said that what was needed was for supervisors to monitor the activities of financial institutions.
“You don’t just buy a textbook and give it to a child and expect that child to pass. You have to follow up and see whether that child is reading that textbook,” he said.
Analysts also blamed government for not supporting its indigenisation programme.
They said its economic policies hardly supported its indigenisation rhetoric.