The closure of Allied Bank by the Reserve Bank of Zimbabwe (RBZ) is no cause for celebration neither was it unexpected.
NewsDay Editorial
The writing was on the wall.
The RBZ cancelled the operating licence of the troubled bank, owned by Transport minister Obert Mpofu, saying the financial institution was no longer in a safe and sound condition.
The closure comes barely a month after Mpofu’s family investment vehicle, Trebo & Khays, rescued the bank from the brink of collapse.
Allied Bank had been facing severe liquidity constraints and failed to attract a new investor to bolster its capital and liquidity position.
The Allied Bank failure cannot be looked at in isolation because some four other banks are in a similar predicament, verging on collapse for similar reasons.
But the fact that Mpofu himself has been under a cloud for years regarding the origins of his wealth did not help matters either. In banking, transparency and probity are essential.
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Mpofu belongs to a government tainted with massive corruption, resulting in investors avoiding the country like the plague.
So, it is no surprise at all that his bank failed to attract strong and sustainable investment.
This is the sort of collective punishment Zimbabwe has had to pay over the past 15 years for corruption and misgovernance at the highest level.
Another thing is that Mpofu could have overstretched himself by going into the financial services sector during most uncertain and unfavourable times economically.
His pockets were not deep enough to weather the storms. He did not have the wherewithal to fund his project.
He tried to do to many things at once.
Instead of being strongly focused on one sector as a beginner, he wanted to expand before consolidating.
His actual and rumoured business interests point to that.
Well, that is a recipe for disaster, especially in this deflationary economy where there is hardly any room for expansion. Rome was not built in a day.
Nevertheless, Allied Bank did not have an auspicious start. That it was formed from the ashes of ZABG Bank, then a coalition of three troubled banks — Trust, Royal and Barbican — posed difficulties of image and confidence, requiring complete makeover, without which it was doomed to fail — and failed it has.
Allied Bank was guaranteed to lose money — it was a toxic investment.
How a whole minister, who happens to be a policymaker, could not have steered clear of that is an indictment on him. Maybe his boastfulness about his vast wealth got the better of him.
