ZIMBABWE’S poor ma-croeconomic fundamentals have caused the country’s largest financial institution, Barclays Bank of Zimbabwe Ltd (Barclays) to downscal
e its operations threatening to put thousands of employees on the streets.
While admitting that it is downscaling operations, Barclays however, this week insisted that it would not send anyone home without a package, using a voluntary retrenchment scheme for staff.
Barclays, whose local operations have been sliding since the departure of prominent banker and businessman Isaac Takawira, sounded alarm bells as early as December last year.
Company chairman Robbie Mupawose told shareholders on December 31 that if the lopsided economic situation did not improve, his group would be forced to quit Zimbabwe.
Mupawose said Barclays would concentrate on projects with a low foreign currency content and also consider withdrawing its local credit cards which were being abused.
Barclays, whose headquarters are in the United Kingdom, is the country’s most heavily capitalised counter on the Zimbabwe Stock Exchange (ZSE) – worth more than $60 billion and is considered one of the country’s blue chip stocks.
The decision to downscale operations comes hard on the heels of another financial institution’s decision to also send workers home because of the huge costs of operating in Zimbabwe.
Standard Chartered Bank of Zimbabwe Ltd (Stanchart), another organisation whose headquarters are in the United Kingdom, has been slowly closing down its branches and offloading them to indigenous players who have entered the financial services sector.
Stanchart has hiked its fees to alarming levels, closing accounts which it describes as costly to maintain, and refusing to renew over-draft facilities for individuals in the low income bracket group.
Stanchart is currently led by Washington Matsaira and chaired by prominent lawyer Honour Mkushi.
Barclays managing director Alex Jongwe this week shocked employees when he told them that the bank was “reviewing their business with the objective of matching operational requirements to customer needs”.
Jongwe replaced Takawira at the held of Barclays.
Barclays, which has operated in Zimbabwe since 1912, said it was engaged in a series of measures which included scaling down the branch network and restructuring head office support divisions.
“A significant number of staff positions will, therefore, fall away and the implications of this have been the subject of discussions with staff and their representative union body,”Jongwe said. “These have now been concluded and full agreement reached on a voluntary retrenchment scheme for staff.”
He said negotiations were at an advanced stage with Royal Bank of Zimbabwe and Century Bank Ltd to take ownership of district branches.
Gary Shoko, a former Barclays manager, currently leads Century as Chief executive officer.
“Customers directly affected by the revision of the branch network will be informed of the options available to them including continuing to bank with Barclays,” Jongwe said. “Barclays has been particularly mindful of the effects of this change on customers, staff and other key stakeholders during this review of its operations and market position.”
Insiders said the major problem at Barclays was Zimbabwe’s precarious foreign currency situation, which has led to a thriving parallel market, resulting in huge bills for electricity and fuel imports.
They said all commercial banks were now scared of the Reserve Bank of Zimbabwe (RBZ)’s threat to take away their foreign currency trading licences as happened to NMB Bank Ltd last month.
Zimbabwe is facing a severe foreign currency shortage, which has resulted in several projects either being delayed or abandoned as the economy slowly, grinds to a halt.
The country’s balance of payments deficit during 2002 pushed the economy into foreign exchange shortages.
The official exchange rate which has remained fixed at $824 : US$1, coupled with the 40% retention of export proceeds by the RBZ, have substantially eroded export sector earnings as Zimbabwe’s inflation continued to surge while that of trading partners remained generally subdued.
The country’s foreign payment arrears continued to build up during 2002 and are forecast to have ended the year at US$1,5 billion up from US$700 million in 2001. This year the figure is expected to be around $2,5 billion.
In its financial report for the year ended December 31 2002, Mupawose said: “The Bank is reviewing its products, processes, delivery platforms, infrastructure and internal supportive structures to ensure that its business model meets customer needs and demands. Primary focus during the review process will be the bank’s capacity to invest in low foreign currency content solutions in light of the acute shortages of foreign currency.”
Mupawose said as a result of the Banking Act’s provisions which now permitted commercial banks to engage directly in leasing business, Barclays’ leasing subsidiary. Fincor Finance Corporation Ltd, would become a division of the bank.
“This will add value to the Bank by reducing operating costs and eliminating roles which were of necessity duplicated by its position as a subsidiary company,” Mupawose said.
“The brand name will be retained to maximise customer loyalty. The affordable asset financing facilities, for which Fincor is well known, will continue to be offered.”
Mupawose, who chairs several other companies, said the critical shortage of foreign currency had forced Barclays to withdraw its international credit card facility and to consider withdrawing its local credit cards later this year.
“Unless the situation improves, the bank will be forced to discontinue its local credit card system but will offer customers an alternative card product,” he said.