ZIMBABWE’S formal banking system lost in excess of US$50 million in deposits in the month of August as the market responded to President Robert Mugabe’s July 31 elections victory signalling the end of the inclusive government.
An August Reserve Bank of Zimbabwe (RBZ) monthly economic review report says major declines in deposits occurred at commercial banks, which registered net outflows across all deposit classes amounting to US$56,08 million, during the same month.
The central bank said as a result of withdrawals on most deposit classes, there was a month-on-month decrease in broad money.
“On a month-on-month basis, however, broad money declined by 1, 5% to US$3,796 billion in August 2013, from US$3,854 million in July 2013,” said the RBZ.
The central bank said annual broad money supply growth however increased to 5,77% in August 2013 from 4,26% in July after declining for the past three months.
“The marginal recovery in annual broad money largely reflected deposit maturities being rolled over,” the report said.
In terms of composition, the deposits mainly comprised demand deposits which accounted for 51,8% while those under 30 days accounted for 21%. Savings and long-term deposits accounted for 12,5% and 12,7 % respectively.
The Zimbabwe Stock Exchange market capitalisation fell by more than US$1,3 billion in the first 21 days of trading while the banking industry lost in excess of US$1 billion in deposits over the same period following Mugabe’s controversial victory in the presidential election and his party’s more than two thirds majority in parliament.
Mugabe’s declaration of his intention to bring back the defunct Zimbabwe dollar as well as to vigorously implement the indigenisation programme in line with the Zanu PF manifesto sent shockwaves across the market.
Other policy matters have seen banks, through their umbrella body the Bankers Association of Zimbabwe, seeking immediate finalisation of the demonetisation of the Zimbabwe dollar in many forms, including issuing of special bonds for companies and payment of cash equivalents for individuals, to regain depositors confidence.
In its August report, the RBZ said annual growth in credit to the private sector further declined by 0, 71 percentage points, from 13,55% in July to 12,84% in August 2013.
On a month-on-month basis, credit to the private sector registered a marginal growth of 0,61% in August 2013, from US$3,671 billion in July 2013 to US$3, 694 billion.
Of the total credit to the private sector, 41,23% was utilised for asset purchases while 34,74% was channeled towards inventory build-up. Loans and advances utilised for fixed investment activity have generally remained low.
Loans and advances channeled to agriculture accounted for 19,05% while manufacturing accounted for 17,12% and distribution 15,99%. Households accounted for 16,55% of total loans and advances to the private sector.
Statistics show that the loan-to-deposit ratio rose to 97,32% in August 2013, compared to 95,25% in July 2013, because credit to the private sector continued to be driven by loans and advances, due to limited financial instruments in the Zimbabwean money market.
“Domestic credit was also partly sustained by offshore lines of credit, as the local economy continued to face liquidity constraints.
The contribution of offshore lines of credit in total credit to the private sector increased marginally from 12, 36% in July 2013 to 12, 40% in August 2013,” said RBZ.
The RBZ said the ZSE succumbed to selling pressure as investors unwound their pre-elections positions.
Market capitalisation declined by 23,13%, from US$6 billion at the end of July to US$4,62 billion at the close of August 2013, largely driven by losses in industrial blue chip counters.
“The largest losses were recorded in Delta, African Sun, Zimre Property Investments and Mashonaland Holdings. As a consequence of the high selling pressure, the volume of shares traded for August was 409 million, 37, 29% higher than the 297,91 million shares traded in July 2013,” the report said.
The value of shares traded also rose by 24, 46% to US$54, 18 million. RBZ said the industrial index declined by 21,99% to close the period under review at 181, 67 points while the mining index also fell by 27,02%, from 66,77 points in July to 48,73 points in August 2013.
“Trading on the local bourse continued to be dominated by foreign investors. Purchases by foreign investors were recorded at US$33,31 million in August 2013, against US$18,44 million in July. Over the same period, sales by foreign investors rose to US$29,18 million from US$15,3 million,” the report said.