At this time of the year, I normally put my views out on what I expect to see in the Budget statement in respect of the financial sector. In an effort to add my two cents’ worth to the Budget consultation process, I try not to forecast anything, but rather just to express my wish list based on the situation on the ground as I see it. But this year is different; I have neither new expectations nor new demands. Instead, I will just be watching out for answers to some longstanding questions.
Report by Omen Muza
Interest rates and bank charges
Finance minister Tendai Biti has said an awful lot of things about what he considers to be the unsavoury aspects of local banking in relation to interest rates and bank charges. For the umpteenth time, he has threatened to do something drastic in the most dramatic language imaginable, but has never really gotten around to belling the cat — so to speak. The forthcoming Budget statement is, therefore, an opportunity for him not to speak some more, but to act and put this matter to rest once and for all. Otherwise it will become a dead horse that is flogged to no end without any prospects of ever bringing it back to life, at the considerable risk of harming his credibility as an effective regulatory authority.
Following the launch of the agricultural policy, the forthcoming Budget is the government’s first opportunity to put its money where its mouth is, otherwise it will amount to yet another high-sounding policy, condemned to gather dust in Cabinet’s offices like others before it. If the Budget does not do justice to the implementation of this new policy, my worst fears — and those of many others — will be confirmed.
“The government has a long record of policy formulation only matched by its inaction when it comes to implementation,” recently said one Brian Chitemba.
I couldn’t have said it better myself Chitemba. By the way, whatever happened to the Three-Year Rolling Financing Strategy for the agricultural seasons 2011-2012, 2012-2013 and 2013-2012 whose detailed financing structure was supposed to be announced during the first quarter of 2012? What’s the hold-up, chief?
How much is unbanked, really?
Several amounts ranging from $2 billion to $4 billion have been bandied around as the quantum of liquidity circulating outside formal banking circles, but no one has ever really put a systematic finger on a decent estimate of the amount. In August 2012, FBCH chief executive officer John Mushayavanhu put the amount at close to $4 billion, but economist Isaac Kwesu said it could be as little as $200 million. Someone has to do the maths before we go too far on a wild goose chase.
The African Development Bank has urged local monetary authorities to carry out a formal study and I agree with them.
“Over time, an exercise of this nature would indicate whether the amount circulating outside the formal banking sector has been increasing or decreasing, which is important for monetary purposes,” said the regional financier.
Credit reference bureau
We hear that the implementation of the credit reference bureau, which the Bankers’ Association of Zimbabwe had promised would be finalised by September 2012, has stalled. If this important market infrastructure is not prioritised, efforts by the Finance ministry to set up the Zimbabwe Resolution Corporation (ZRC) may eventually be in vain. While ZRC is meant to clean banks’ balance sheets by buying their non-performing loans, the services of a fully-functional credit bureau will ensure that non-performing loans are curtailed to the barest minimum. In a nutshell, ZRC is a curative measure, while the credit bureau is a preventive measure and we all know that prevention is better than cure. Will the Budget pay as much attention to the business of forming ZRC as it will give to ensuring that the banking sector closes ranks and expedites the formation of a fully functional credit reference bureau?
Unless that happens, we are likely to see nothing more than bhasikiti raTizirai, rakarehwa nomushakabvu Paul Matavire, rinoti uku rinorukwa uku rinodunururwa? (Tizirai’s basket, woven on one end, while being undone on the other).
Omen N Muza writes in his personal capacity. He is a banker and managing director of TFC Capital (Zimbabwe) (Pvt) Ltd, a Harare-based financial advisory, research and training company with interests in banking, technology and agriculture as well as the convergence area among them.