Government has gazetted new regulations to force banks and other sensitive sectors of the economy to cede the majority of their shareholding to locals.
The new thresholds would also compel foreign-owned tourism players, educational institutions, engineering companies; energy; telecoms, transport and motor industry companies to dispose 51% interest to blacks within a year.
According to a Government Gazette published last Friday, acting Secretary for Youth Development, Indigenisation and Empowerment George Magosvongwe said foreign-owned banks should within a year dispose of 51% shareholding to locals.
He said the minimum net asset value would be determined by the minimum capital requirements prescribed by the Reserve Bank.
Currently seven banking institutions — Barclays, MBCA, Stanbic, Standard Chartered, Ecobank and CABS are understood to be under the spotlight amid reports that senior executives from Barclays were expected in the country this week to present a new empowerment compliance plan.
The move is an apparent rejection of submissions made by the Financial Services Sectoral Committee in 2010. The sector-specific committee was set up to ensure that the empowerment exercise would not adopt a blanket approach which could trigger divestment.
The committee advised the government that a ceiling of 40% local ownership of banks was ideal given the fragility of the sector.
Kasukuwere’s threshold, which could expose flaws in the country’s legislature, could face resistance from Reserve Bank of Zimbabwe governor Gideon Gono and Finance minister Tendai Biti with the latter insisting that a supply-side based empowerment initiative would be broad-based.
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The country’s Banking Act says no banking institution shall permit any one person to acquire or obtain a significant interest in it unless the Registrar of Banks has given his written approval of the acquisition.
The law further states that “any contract, arrangement or transaction whatsoever which, if implemented or effected, would result in a contravention of subsection (2) or (3), shall be void”.
Official figures show that as at December 31, 2011, foreign-owned banks accounted for 34% of the sector’s total revenue (turnover) of $870 million while indigenous banks accounted for the balance of 66%.
The revenue drivers for the banking sector include interest income, foreign exchange fees and commission, ledger and handling fees as well as management and establishment fees.
The central bank figures showed total banking sector revenue amounted to $870 million, while total expenses were $800 million, resulting in net profit of $70 million.
Out of the total profitability of $70 million, foreign-owned banks accounted for 52% ($37 million), while indigenous banks had the balance of 48% ($33 million).
Based on the foreign banks’ share of profitability amounting to $37 million, the Reserve Bank argues that if indigenous participation were to be based on profitability alone, the indigenous investors would be entitled to $19 million being 51% of $37 million.
In what could also result in the change of ownership of foreign-owned hotels, Kasukuwere announced that a five-star hotel with a net asset value of $10 million should comply with the 51% threshold within a year.
A one-star hotel with a net asset value of $2,5 million is also expected to dispose of shareholding to locals.
