THE Zimbabwean government has agreed to a somewhat soft stance on indeginisation of banks amid indications it has abandoned its one-size-fits all approach compelling players in the financial services to sell controlling stakes to locals.
Reserve Bank of Zimbabwe Governor (RBZ) John Mangudya said the central bank was in agreement with government on parameters to be used by foreign banks to comply with the Indigenisation and Economic Empowerment Policy.
“The parameters also take into account the fact that bank deposits are public funds,” Mangudya said in his maiden mid-term monetary policy statement.
Although the policy statement does not provide further details, depositors’ funds have been at the centre of protracted debates on how the government will ensure foreign-owned banks relinquish majority shareholding to Zimbabwean locals.
Serious disagreements emerged between then Indigenisation minister Saviour Kasukuwere and Former Reserve Bank governor Gideon Gono over the manner in which foreign banks should be indigenised.
Earlier this month, Indigenisation minister Francis Nhema said two foreign banks had complied with indigenisation requirements over the last three months, apparently signalling the easing of protracted disagreements over foreign financial institutions’ position on the issue.
Nhema said the two banks are part of 75 companies from across all economic sectors that have met requirements of the policy during the three-month period.
The move also comes as the central bank observed that the current operating environment still presents numerous challenges in banks’, particularly the locally-owned, ability to grow capital organically or raise capital from investors.
“Most local shareholders lack financial capacity to inject the much needed capital into their respective banking institutions. As a result, the local shareholders have failed to follow up on their rights during capital calls,” reads part of the statement.
In the Monetary Policy Statement of January 2014, the Reserve Bank reviewed the deadline for compliance with capital requirements to December 2020.
Mangudya’s statement put a thrust on the need for solutions to the challenges that the economy is facing, such as putting in place credible, consistent and predictable investment polices to stimulate growth.
“This would need to be complemented by dealing with the high debts or non-performing loans saddling the economy, mobilisation of financial resources, inculcating self-discipline, transparency and accountability across the board,” said Mangudya.
He also called for removal of restrictions on the participation of foreign investors on the bond market.
He said in order to encourage foreign investment inflows and further develop the country’s bond market, exchange control restrictions on the level of foreign participation on primary issuance of bonds and participation by foreign investors in the secondary market be removed, with immediate effect.
“The purchase of bonds shall be financed by confirmed inward transfer of foreign funds through normal banking channels,” Mangudya said.
“The Reserve Bank shall put in place enhanced reporting and monitoring structures to ensure the full accounting of these foreign capital inflows.”
The central bank chief also said amendments of the Banking Act were approved by cabinet to strengthen the regulatory environment, adding the Bill is about to be gazetted.
In terms of the proposed amendments to the Banking Act, Mangudya said provision would be made for licensing of credit reference bureaus and supervision of the Infrastructure Development Bank of Zimbabwe and the Small and Medium Enterprises Development Corporation.