Zim’s nostro accounts closure: China not all-weather friend

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The recent closure of local banks’ nostro accounts’ by South African and Germany banks has exposed the real nature of Zimbabwe’s relations with China as the Chinese People’s Bank has refused to open the accounts for some of the affected banks citing sanctions imposed on Harare by the European Union and United States as reasons.

Jealousy Mawarire,Political analyst

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On the few occasions that they have done so, the accounts opened do not allow any individual customer payments to pass through. They are strictly for interbank settlements.

Zimbabwean banks have traditionally been holding US dollar-denominated nostro accounts with US banks and in other jurisdictions like Germany and South Africa. These accounts facilitate the smooth flow of money in and out of the Zimbabwean financial system through facilitating outward payments (MT103s) or inward receipts (MT202s).

Nostro accounts are key and very necessary enablers for a country to pay for its imports and to receive payments for export proceeds due to it. They are, in fact, at the centre of international trade payment mechanism.

In 2014 South African banks, mainly Absa and FNB, instructed most Zimbabwean banks that were holding US dollar-denominated nostro accounts with them of their decision to close the accounts. They cited US Anti-Money Laundering and Organisation of Foreign Assets Control (Ofac) guidelines in their decision to close the accounts.

Most of the affected banks switched to Germany banks like Commerzbank which were more lenient and not very thorough with their requirements and minimum Know Your Customer (KYC) guidelines.

But Commerzbank has now communicated to Zimbabwean banks (by telephone) informing them of the decision to close down all US dollar-denominated accounts held with them. They have not pronounced the reasons behind their actions and the affected banks are, namely, POSB, NMB and Ecobank, among others.

Ordinarily, with the talk of the adoption of the Chinese renminbi (yuan) as one of the currencies in our multi-currency system, one would have thought that opening nostro accounts with Chinese banks would be the way out for the affected banking institutions.

But the refusal by the People’s Bank of China to open these accounts for some local banks indicates that it is now becoming very evident that all well-meaning governments in the world have come to understand that our current regime in Harare is rogue, corrupt and is run by unscrupulous officials who are in the business of plundering the country’s resources and stashing their ill-gotten wealth into off-shore accounts. Hence, the various measures against the transfer of such ill-gotten wealth to off-shore accounts.

China, especially under its current President Xi Jinping, has clamped down on corruption and various Chinese companies investing in Zimbabwe are under investigation by the central government in China. There is a growing concern within the Chinese leadership of the level of corruption in the Zimbabwean government to an extent that Chinese officials have described the Zimbabwe government as a cancer that cannot be treated, but can only be cut-off, especially if one of the people touted as a potential successor to President Robert Mugabe, by any means, takes over.

One would ask, are the Chinese concerns warranted? Is our government clean?

I will assess the issue of diamond mines, especially Mbada Diamonds that was recently closed.

We are told that Mbada submitted about US$300 million or so as dividend to government for the almost 10 years that it has been mining in the country. Mugabe, in his birthday interview, talks of US$2 billion instead of US$15 billion he now mentions. But the actual amount realised from diamond mining by the company is way above his projection.
Independent evaluators, who projected the annual sales values of ACR, which was mining on an area six times smaller than Mbada, revealed that billions of US dollars were made each year in total sales by the diamond companies.

Figures for a 42-day period between September and October 2009 obtained by ACR indicate that the annual sales value for Mbada industrial diamonds (about 50% of mined diamonds) would be over US$286 000 000 while annual sales value for gem quality would be US$1 375 760 000 and this figure could be increased ten-fold. Those evaluations mean that Mbada’s annual sales value could be around US$16,6 billion per year.

If we are to believe this and if government only got about US$300 million or so for all the years that Mbada mined diamonds in the country, so where was the rest of the money going?

It is such discrepancies and activities of individuals involved in diamonds which justify the actions of Ofac and the US government in tightening requirements for settling any US dollar-denominated transactions outside its jurisdiction.

The situation in Zimbabwe and the allegations of money laundering and abuse of state funds for electoral violence and other related electoral malfeasance have been a cause for the US and the international community hence the closure of these nostro accounts by foreign banks.

Our government has not helped matters by refusing the Comptroller and Auditor-General to audit the diamond sales in Marange.

Former finance minister Tendai Biti tried to order such an audit, but an unnamed official from the Ministry of Mines was then, quoted by the Herald newspaper arguing that as a ministry “we are not instructed on what to do by any minister, and just like Zimra (Zimbabwe Revenue Authority) and other statutory bodies, we institute investigations as per our own constitutional mandate”.

Former deputy mines minister Gift Chimanikire once painted a gloomy picture of diamond and other minerals smuggling in the country. He told journalists when he toured Happy Valley and Old Nick mines outside Bulawayo that the country’s borders were very porous and this was costing the country close to a billion US dollars a year.

“Government is losing close to a billion to smuggling of minerals at our borders. We have discovered that there is a lot of illegal exportation of minerals such as diamonds, gold and chrome. There is need to beef up security and inspection at our borders to address the problem of smuggling,” Chimanikire said then.

It is this rampant smuggling of the country’s resources by government and state security agents that necessitated the closure of nostro accounts.

Ordinarily, our government should be the one to champion the fight against corruption and the smuggling of diamonds and other minerals in the country but the government seems contend on protecting the corrupt within its ranks and even appoint the extraordinarily corrupt to bodies such as the Zimbabwe Anti-Corruption Commission.

The consequences of the closure of nostro accounts are already beginning to be felt in the banking sector. Most banks have been caught off-guard and this has unsettled the market in an environment that was already characterised by a severe shortage of cash and nostro funding.

This recent development has already affected efforts of banks to import hard notes direct from offshore jurisdictions. Prior to this development; most banks would import US dollar bank notes against balances held in their nostro accounts. In the absence of nostro accounts this option is no longer available hence the serious cash crisis that we are experiencing now.

One of the biggest dependents of nostro funding are fuel importers. A shortage of nostro funding could affect the procurement of fuel and fuel shortages are likely going to recur sooner rather than later unless there is a change in the way we do things as a country.

Mawarire is a former journalist and Zimbabwe People First official.

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