CRUCIAL corporate governance issues could have been lynched in the haste to cobble the Zimbabwe Allied Banking Group (ZABG) out of the ashes of three collapsed banks.
>Even after its opening last month, serious flaws that characterised its formation are still haunting ZABG.
The registrar of companies recently wrote to ZABG complaining about the bank’s offer document, which he said was in contravention of the Companies Act.
In the letter written to ZABG chief executive, Stephen Gwasira two weeks ago, the registrar said the move to issue a prospectus was unprocedural. He said no effort was made to inform his office as per standing rule of the decision to change the ownership structure through a share offer to creditors, depositors and former workers of the closed banks.
The letter, seen by the Zimbabwe Independent, also points out that it was improper for ZABG to alter the structure of Royal, Barbican and Trust banks without prior notification to the companies registrar. An official at the registrar’s office confirmed the letter but said he needed clearance from the Ministry of Justice to make a comment. He was still to get clearance by the time of going to press yesterday.
The bank’s woes have been worsened by the fact that it was not formed under the Troubled Financial Institution (Resolution) Act, which ironically was promulgated for that purpose. The Act was fast tracked through parliament and there was strong lobbying for the president to sign it in time for ZABG’s formation. ZABG says it has its legal basis in common law.
There were also serious defects in the selection of directors and senior employees. Some top managers and directors recruited by the Reserve Bank for ZABG posts were part of the collapsed banks.
This contravenes good corporate governance regulations which say individuals involved in collapsed banks should not hold a managerial post or directorship in any bank.
There are allegations that even before commencing full operations, ZABG has already splashed millions of dollars in loan to one of the directors.
The offer document released last month shows that one of the directors, Douglas Mamvura, was recently given a $634 million loan. This despite the fact that the bank is still to set on a firm footing. There are still outstanding court cases that might have a material impact on the bank.
Conflict of interest is also rampant at board level.
For instance, Lindsay Hugh Cook, a founder partner of Atherstone & Cook legal practitioners, was elected to the ZABG board despite having been deeply involved in the promulgation of Troubled Financial Institution (Resolution) Act.
Cook has also on several occasions stepped in as legal advisor for the bank despite being a director.
Mamvura is the owner of Corporate Momentum, which provides marketing consultancy to ZABG but sits on the board of the bank. Richard Makoni, another board member, runs Lorimak, a company which has a human resources contract with ZABG.
Luckmore Chitima, who is head of information technology of the bank, is head of an IT consultancy firm which is still managing ZABG’s IT integration.
The head of human resources, Phipps Mabika, was a partner at Lorimak, the company that provided human resources consultancy for ZABG.
Good corporate governance prohibits directors from providing services and goods to the companies on whose boards they sit.
It is the same problem that sank CFX Financial Services, where top official used their companies to provide service to the bank.
There are also flaws in the management, where people who were involved in the financial crises have been appointed to key positions.
The managing director of ZABG’s Asset Management and Stockbroking, Never Mhlanga, was chief operating officer of National Discount House (NDH), which nearly collapsed due a liquidity crunch.
He was eventually forced to leave after depositors expressed concern over his management style. NDH has since been taken over by depositors and creditor after it failed to pay their maturities.
Managing director (retail banking) Dominic Magwada, was the head of the team that failed to save Trust Bank from collapse. He was managing director of Trust Bank, during the stormy 2004.
Gwasira denied that there was anything irregular about the appointments. He said everything was done according to the law.
On directors that provided consultancy services to ZABG, Gwasira said everything was above board. “Any consultancy work undertaken by any director is declared to the board as required in terms of good corporate governance,” Gwasira said.
“Mr Cook is not acting legal advisor to ZABG. He acted on behalf of ZABG in respect of the two urgent applications before the High Court by virtue of the urgency of the matters as he was seized of the matters at hand by virtue of his position on the board,” said Gwasira.