HomePoliticsShould UK banks do business in Zimbabwe?

Should UK banks do business in Zimbabwe?

By Michael Holman

ZIMBABWE’S opposition calls it a US$80 million foreign loan. Standard Chartered Bank officials call it an “offshore line of credit”.

vetica, sans-serif”>It is a distinction with only a technical difference, for the effect is in my view the same: Standard Chartered is effectively helping to keep the regime of President Robert Mugabe afloat.

Not for the first time, a London-based bank is caught up in a battle for democracy in Africa. In the mid-1980s a group of banks delivered a mortal blow to South Africa’s apartheid regime when they refused to roll over Pretoria’s debt. Not long after, Barclays caved in and pulled out of South Africa, prompted by a student-led boycott in Britain that had begun to dent its profits and harm its profile.

This time Standard Chartered Bank will be in the firing line as Zimbabwe’s exiled opposition demands an end to Standard Chartered’s involvement in a country which has become synonymous with suffering. As Standard Chartered appreciates better than most, doing business in Africa is seldom straightforward.

Although Standard Chartered is today an Asia-dominated outfit, with headquarters in London, it should know the continent well. The bank has been operating in Africa for more than 100 years, navigating the end of colonialism, countless coups, and dozens of collapsing currencies.

So there is a certain historical symmetry in the fact that Zimbabwe, the first country – after South Africa – in which the bank opened its doors, should today present Standard Chartered with what is arguably one of the toughest decisions it has ever faced during its time on the continent.

Does Mervyn Davies, the chief executive officer, pull out of Zimbabwe and risk reducing the prospect of being the link institution between the growing economic might of China and the resources of Africa? Or does he decide to stay in, hold his nose, and face the opprobrium of onlookers, while doing business with a regime that gets nastier by the week?

Any hope of continuing with a third option – staying in and hoping that no-one notices – disappeared this week with the news carried by China’s Xinhua news agency. Standard Chartered, it reported, has secured offshore lines of credit for Zimbabwe’s industries.

Now this is not in itself surprising. Banks make money by lending money. But in Zimbabwe it can be argued that foreign facilities provided by Standard Chartered are helping to keep afloat a government regarded as one of the worst in Africa.

“Securing offshore lines of credit” is a fancy way of saying that Standard Chartered Zimbabwe branch is continuing to borrow abroad, on behalf of local clients, and providing them with precious foreign exchange.

A spokesman at the London HQ disputes this interpretation. The US$80 million, he says, represents a capacity for short-term loans to merchants outside Zimbabwe who are doing business in the country.

Either way, it seems a distinction without significant practical difference: it is a financial exercise which helps the struggling Zimbabwe economy survive. It is unclear whether the money will help state-owned or private companies but the distinction may be irrelevant in a country where private business must kowtow to President Robert Mugabe to stay in operation. – The Times (UK).

Recent Posts

Stories you will enjoy

Recommended reading