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Zimbabwe @ 33 – Peace, Prosperity & Economic Empowerment – Targeting foreign-owned banks

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It is clear that after 33 years of independence, there is no consensus on the relevance and efficacy of the Indigenization and Economic Empowerment program with respect to building a cohesive, inclusive and prosperous nation.

The proposed indigenization of the banking sector has regrettably been reduced to a personality battle between the Minister of Youth Development, Indigenization and Economic Empowerment, Saviour Kasukuwere and the Governor of the Reserve Bank of Zimbabwe, Gideon Gono and in so doing help distort the core issues that have to be addressed if Zimbabwe has to deliver the promise of a prosperous and empowered nation.

Zimbabwe is no longer an infant state that can afford to engage in directionless and counter-productive discourses.

After 33 years of nation-state building, both state and non-state actors must have learned something about what matters in advancing the human cause and spirit.

Kasukuwere whose assignment in government is to administer the Indigenization and Economic Empowerment Act has made a case that there should be no scared cows.

He has sought to bring the banking sector within the ambit of the Act. His critiques including Gono have argued that the Act has no jurisdiction over the banking sector and in any event the banking sector has to be treated with caution and care.

The fact that this is an election year makes the content and context of the debate problematic.

President Mugabe needs a coherent and consistent message on indigenisation and its perceived link with economic empowerment.

So far he has chosen to be a spectator leaving Gono and Kasukuwere backed by Professor Moyo to fight it out while the true owners of banks, customers, are reduced to spectators.

Zimbabwe inherited a sophisticated financial services industry at independence. An uninformed observer would easily conclude that the banking system was part of the colonial package and, therefore, its success was race-determined. The holders of shares in the biggest banks in Zimbabwe at independence were foreign domiciled.

Notwithstanding the location of the shareholders, all banks that operate in Zimbabwe are registered in terms of Zimbabwean law and operate in accordance with the laws and regulations in place.

The Companies Act provides for the registration and operation of juristic persons. Accordingly, all banking institutions have to be registered as companies in the first instance and then the Banking Act and related Regulations kick in.

The RBZ is responsible for administering the Exchange Control Act and related regulations. The laws that apply to banks have co-existed peacefully with other pieces of legislation. There was no intention by the legislators to make the Indigenization Act superior to all other laws otherwise this should have been expressly stated as such.

The Indigenization Act was meant to cure a specific injury that could only be inflicted on blacks in the period preceding independence.

The affected banks i.e. Standard Chartered Bank, Standard Bank of South Africa, Merchant Bank of Central Africa, and Barclays Bank are all Zimbabwean corporate citizens.

There has been no suggestion that these banks have operated unlawfully in Zimbabwe. It would appear that even the proponents of indigenization agree that the majority of the customers of these banks are voluntary market participants who are black and indigenous.

The last 33 years provided an opportunity for the black majority to signal their distaste of the perceived foreign control of these banks. It is common cause that no one was forced to bank with such institutions to give credence to the argument that indigenization such institutions was in the interest of the directly affected parties i.e. customers.

Even Kasukuwere would know better that the balance sheet of banks exposes the fallacy of the argument that such institutions operate solely for the benefit of one class of stakeholders i.e. holders of shares. It would be an interesting exercise to establish the actual dividend flows from these banks over the last 33 years.

In advancing the argument of indigenization of the four banks no reliance is made of any empirical evidence confirming that the operation of such banks in post-colonial Zimbabwe has adversely impacted on blacks.

The last 33 years have seen new banks being created and some failing. There can be no argument that these foreign banks would have long collapsed if they did not have a loyal client base.

Why then should such institutions be targeted? If prosperity and economic empowerment is the ultimate objective, there can be no doubt that a wrong instrument is being used to address a problem in which state-actors may have played a large part in creating.

If banks are evil, then surely the people who have supported such institutions must be condemned.

Unlike the state and its actors who are elected but less accountable to their voters, banks can only remain viable if they are responsive and responsible to their clients. State actors can remain in office even if they no longer serve any useful or legitimate purpose.

Africa has many examples of state actors who now believe their own voices and continue in office in the mistaken belief that they are the best protectors of the poor and unemployed.

It would be obvious to any rational mind without the assistance of Gono that the act of changing the identity of the holders of shares in banks from foreign domiciled ones to locally based shareholders will not advance the interests of the bank in question, the clients and more importantly the nation.

When the end justifies the means, then anything is possible and it is easy to see why disastrous concepts and misconceived strategies find expression as pro-poor public policy choices.

Kasukuwere was a shareholder in a bank that collapsed and should, therefore, no better but evidently once a person is appointed a Minister in many developing nations; it is very difficult if not impossible to negotiate with such persons what matters.

Kasukuwere is not a stranger to the dictates of the corporate world and yet his views on what matters would seem to suggest that he is a corporate infant.

I have no doubt that he will agree with the proposition that all companies registered in Zimbabwe are citizens of the country. It is also possible that we can at least negotiate with him the proposition that companies are in law and fact incapable of being owned hence the holders of security interests in companies are called shareholders and not shareowners. If this is the case, then surely should it matter where the shares are held?

What matters is if the people who make banks successful find no reason for closing them through ill-conceived and misguided policies and choices.

A bank is after all, a financial institution and an intermediary that accepts deposits and channels those deposits into lending activities. It is nothing but a bridge between customers that need cash and customers that have cash.

Such customers that the bank connects do not trust each other hence the need of an intermediary. If for instance, Zanu PF was trusted by its voters there is no reason why in 1980, the party could not have established its own bridge and by now such a bridge would not only be empowered but would be 33 years old.

The failure to have a Zanu PF facilitated bridge is not accidental but reflects the real challenges of building institutions that deliver value to stakeholders.

A bank is not created to generate profits but it must be accepted that profits represent the difference between income and the costs related in generating such income.

In the case of Standard Chartered Bank, one must accept that consistently over the last 33 years the banks has generated from Zimbabwean customers income in excess of related costs.

Kasukuwere would know that due to their influence within Zimbabwe’s challenged financial system and economy, banks are already highly regulated and are generally subject to minimum capital requirements. The government of Zimbabwe is technically insolvent to be relied upon in the event of any collapse of the system caused by reckless indigenisation transactions in the banking sector.

The effect of independence was to allow all Zimbabwean eligible voters to express their opinion through elections but it would be tragic to expect elected officials to be custodians of economic and social change.
No country has found a reliable mechanism of using elections to identify the best talent and, therefore, any state actor who behaves as if they have all the answers is not only dangerous to him or herself but undermines the promise that democracy officers.
Free people are able to make choices that are aligned to their aspirations. The people who choose to use banks whose shareholders are domiciled in foreign states need to be respected by not arbitrarily altering their member registers in the mistaken belief that control of companies is vested in shareholders. Kasukuwere would know better that control of banks is not only vested in directors but the RBZ.
So when Gono calls for caution he is not alone and deserves to be listened to. Irrespective of the outcome of the elections, people deserve to know the truth about what matters.

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