2017: When cash becomes king

From banking queues, forex shortages and messy divorce at ZB Financial Holdings, 2017 was an incident-filled year for the banking sector. It was also a time in which the Barclays eagle flew out of Zimbabwe.

By NDAMU SANDU

NewsDay gives some of the highlights for the year.

No respite to cash crisis

At its core, banking is not simply about profit, but about personal relationships, American businessman Felix Rohatyn once said.

It was a topsy-turvy year for depositors as they waited in banking queues to get their monies. What was more painful for depositors was that, while banks did not have money, the parallel market was awash with crispy bond notes with fingers pointing at the banks as the source of the money. In the court of public opinion, banks were seen as lubricating the parallel market. The year 2017 saw the introduction of premiums on cash that reached 25% on mobile money transactions.

Rising premiums on dollar

Premiums on dollars shot to the roof, rising to about 90% during the course of the year, as companies turned to the parallel market to get the elusive dollar and make foreign payments for supplies. This came after banks were struggling to effect foreign payments, with some suppliers threatening to turn the screws on struggling companies in Zimbabwe.

Experts attributed the foreign currency crisis to the introduction of bond notes, which chased away good money in line with Gresham’s law.

Authorities believe the worsening forex situation was due to increased demand for the greenback from companies, on the back of increased production.

The marriage that never was


In 2016, Nicholas Vingirai bounced back at ZB Financial Holdings Limited, nearly a decade after losing his treasured Intermarket Holdings which was subsequently amalgamated into ZB. A dispute arose over dividend and NSSA felt Vingirai’s Transnational Holdings Limited should not have received the $658 000 dividend. At a stormy meeting in May, Vingirai and his allies were booted out of the board. It was clear that the marriage could not work and divorce proceedings are currently underway.

Eagle lands in Malawi

First Merchant Bank, a Malawian financial services group, snapped up a 42% stake in Barclays Bank Zimbabwe in October to seize control of the banking institution. Barclays Plc retained a 10% stake, employees through an employee share ownership trust (15%) and 33% remained listed on the Zimbabwe Stock Exchange. Barclays Plc announced last year that it was putting the Zimbabwean unit — in which it had 68% shareholding — in its non-core division, with an intention to sell in future.

Staying put in Zim

The exit of Barclays Plc from the local market could have triggered an exit of foreign banks. The fears were allayed when the country’s oldest banking institution, Standard Chartered Bank Zimbabwe said it was here to stay and had no plans to exit the market anytime soon.

Farewell Never, George Never Nyemudzo’s resignation as chief executive officer of CBZ Holdings came as a shock to the market. His reason that he wanted to rest and play with his children found no takers. He was succeeded by Peter Zimunya, in an acting capacity.

George Guvamatanga left Barclays Bank Zimbabwe which has been his home for 28 years following the acquisition of the bank by FMB. Samuel Matsekete was appointed the bank’s new managing director.

Time will tell

Last week, the Reserve Bank of Zimbabwe (RBZ) announced that Time Bank would resume operations, bringing closure to a dispute that had raged for over a decade. The bank’s licence was cancelled in 2004 and reinstated by the Administrative Court following its ruling in 2009. It has been a long road for Time Bank shareholders following the dispute with RBZ over interest on the $15 million Memorandum of Deposit raised from the PTA Bank.

The loan was disbursed through RBZ. On repayment, RBZ charged the bank 70% interest instead of 7%. RBZ went on to debit Time Bank’s account with 63% excess interest.

Not as easy as ABC

Bob Diamond-led Atlas Mara bought BancABC in 2014 promising heaven on earth. Atlas Mara said the group would leverage on technology. The once top bank has been sliding down the pecking order and is a laggard when it comes to technology.

Luring diasporans

In August, the Reserve Bank increased the Diaspora Remittances Initiative to 10% from 3% on remittances received through banking or wallet accounts in a bid to increase the use of formal channels. The incentive for Money Transfer Agencies and remittances received as cash is 2% and 3% respectively.

Building a savings culture

RBZ introduced savings bonds in 2017 to build a savings culture among citizens. Investments start from $100 with no commission, agency or service fees. Savings Bonds will be made available through banks, selected agencies and electronically on a platform to be established. The bonds will be accepted as collateral on all borrowings and convertible to cash on a simple open and transparent fixed conversion rate on any trading day. Its features include fixed rate savings bonds, rolling maturities of one year, two years, three years and five years, interest rate of 7% and tax free on interest earned.

Aftrades as lender of last resort

RBZ renewed the African Export-Import Bank Trade Backed Securities (Aftrades) facility during the year following the maturity and settlement of the initial $200 million facility in February. The new enhanced facility of $400 million will mature in 2019. According to RBZ, Aftrades is the bank’s lender of last resort window wherein the Zimbabwe country risk is transferred offshore to Afreximbank. It said the facility has managed to bring stability within the banking sector over the past three years, as banks are able to borrow from this window to support their liquidity requirements through RBZ.

Depositors, creditors rescue Tetrad

In April, depositors and creditors of Tetrad agreed for a debt to equity swap plus partial payment at scheme meetings in Harare and Bulawayo which rescued the troubled institution from the jaws of liquidation.

Afreximbank lifeline

Two weeks ago, a team from Afreximbank led by president and chairman of the board Benedict Oramah paid a courtesy call on President Emmerson Mnangagwa in which the Cairo-headquartered bank pledged to assist Zimbabwe in its re-engagement with the international community. Oramah said the bank was currently processing funded and unfunded facilities for Zimbabwe amounting to between $1 million and $1,5 billion. The facilities included a country risk and investment guarantee programme, which would help the new government to attract foreign direct investment into critical sectors of the economy and a $150 million line of credit confirmation facility to enable commercial banks process imports of some essential goods.

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