MELODY CHIKONO/ TINASHE MAKICHI
THE proposed exit by Standard Chartered PLC (Stanchart) from Zimbabwe has caused economic earth tremors and thrown fiscal and monetary authorities off-balance as the shocking move signals the end of an era for correspondent banking.
The implications, according to market analysts, overarch beyond job carnages and waning confidence in the country’s systems. It has a ripple effect on the clearance of United States dollar (USD) transactions.
While there are other banks handling correspondent banking for US dollar transactions, Stanchart clears over 60% of forex payments.
But the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya in an interview with Zimbabwe Independent said the planned exit will have no impact on the economy since new shareholders will be taking over one of the country’s oldest financial institutions.
He said the apex bank will ensure Stanchart’s exit will not cause market upheavals.
“As part of measures to foster financial sector stability, the role of central banks is to ensure a smooth orderly exit and entry of any shareholder into the financial services sector,” Mangudya said.
“No impact is envisaged on the economy as a result of the exit of Standard Chartered Bank Zimbabwe. The exit of the shareholders of the institution will not result in the closure of banking operations but will result in transfer of ownership to the new investors.
“Standard Chartered Bank advised that a potential investor will be identified.
Thus, the entity will continue to operate normally as a banking institution under the supervision of the Reserve Bank of Zimbabwe,” he said.
Mangudya said Stanchart was exiting other markets apart from Zimbabwe.
“As you may be aware, Standard Chartered PLC, the major shareholder for Standard Chartered Bank Zimbabwe Limited, announced its intention to exit some operations in seven markets and exit retail banking business in a further two markets.The seven markets are Angola, Cameroon, Gambia, Jordan, Lebanon, Sierra Leone and Zimbabwe,” the RBZ chief said.
However, Zimbabwe has been battling confidence issues and has so far lost in excess of 102 correspondent banking relationships with elevated country risk, compliance issues and sanctions.
Over the years, international banks have been “de-risking” on correspondent banking relationships with local banks, posing significant risk to efforts to access foreign lines of credit. Last year, bankers complained about the impact of Western sanctions on Zimbabwe, which has led to the loss of more than 100 correspondent banking relationships since the restrictions were imposed at the turn of the century.
A senior official in the banking sector said: “Yes, it was the only bank left with worldwide access and it clears more than 60% of all USD transactions for Zimbabwe.
“It would be critical that new correspondent banks are identified, especially for USD clearing, if Standard Chartered Bank decides to withdraw this service or to manage the concentration risk.”
While other banks like Stanbic are predominantly operating in Africa, Stanchart is present in all continents.
The fact that Stanchart is present in all continents assists its customers in remitting funds to any part of the world without going through multiple correspondent banks, thereby quickening remittances.
With a correspondent bank in China, India or the US, it means one can easily send funds to such countries without difficulties, whereas in the absence of such a facility one has to go through multiple banks to process telegraphic transfer to remit large funds.
Being internationally present in multiple countries also allows a financial institution to have many sources of lines of credit, minimising risk.
Stanchart is currently a banker to more than four big banks in Zimbabwe and any exit will spell doom, while there will be no joy for most Visa and Mastercard users.
There is, however, lack of clarity on the future of the bank with no clear direction on whether a new investor is coming in or it means a total exit for the financial institution.
The biggest concern around acquisition is that there will not be much to sell considering that the bank was only left with two physical branches as it focused on digitisation.
A banker told the Independent that: “We had a meeting with top management and various proposals were put on the table. There is a suggestion to go the South African route of maintaining a branch in charge of clearing USD transactions and abandon the subsidiary route”.
Stanchart Zimbabwe head, corporate affairs, brand and marketing, Lillian Hapanyengwi said the bank was committed to managing this process in partnership with key stakeholders to minimise disruption for customers.
“The exit process is subject to regulatory approvals and Standard Chartered will continue to serve customers in Zimbabwe as usual, while options for divestment are pursued,” she said in an e-mailed response.
“We believe that the Zimbabwe business is well-placed to be run under new ownership and appropriate investment. The quality and capability of our staff will be a key point of attraction for potential buyers.”
Zimbabwe Banks and Allied Workers Union assistant secretary-general Shepherd Ngandu said the exit shows lack of faith in Zimbabwe considering that the same Stanchart is reported to be expanding its investment in neighbouring Zambia and establishing a regional head office.
“The decision by Stanchart, while celebrated by misguided elements within the polarised and politicised Zimbabwean society, has far-reaching implications not only in terms of massive job losses but also the loss of international correspondent banks and diminishing confidence in our national economic performance,” he said.
“With the departure of Barclays, Stanchart was the only remaining truly international bank.
“A number of international deals or transactions will thus be processed ordinarily through a bank that is well connected, and in Zimbabwe, we unfortunately continue to lose the connections, which are dominated by these foreign banks,” Ngandu said.
He said Standard Chartered Bank, which has a staff complement of over 200, had not officially communicated to its employees about the possible exit from Zimbabwe prior to the announcement in the media.
However, Ngandu said there were marathon discussions currently ongoing between the bank and its employees through the workers committee.
“The union is available to support the Stanchart workers through negotiations for separation packages and any necessary support,” he said.
“We understand an urgent works council is on the cards this week and a series of meetings to bring the workers up to speed with this possible job carnage.”
Meanwhile, the banking sector has been hit by successive retrenchments since 2021 to date with more than 117 workers, including managers, having lost their jobs. The number is expected to increase by nearly 50% this year.
Banks, such as CBZ, Stanbic Bank and Steward Bank, contributed to the job losses with the major causes of retrenchments being reduction in physical branch network, shareholder changes and digitalisation.
According to Ngandu, job losses were as follows; CBZ, 59; Stanbic, 48; and Steward Bank, 10 non-managerial employees.
“If you add the managerial class of employees, the number can increase by a factor of nearly 50%. We have negotiated for up to four-to-six times the statutory minimum packages on behalf of our members,” he said.
“That is, the negotiated packages ranged from two months’ salary for every year served to three months’ salary against a statutory minimum of two weeks for every year served.”