MEMBERS of Parliament have proposed amendments to the Depositors Protection Act (DPA) to align it with the Insolvency Act, and the consumer protection legislation, in fresh moves meant to tighten the screws on bankers, who run down vital lenders but still ‘benefit from wrong doing’.
Should Parliament approve proposals by Clement Chiduwa, chairperson of the Parliamentary Portfolio Committee on Budget, Finance and Investment Promotion, such bankers and shareholders would be barred from opening financial institutions and running for public office.
This is meant to prevent a repeat of the turmoil that shook Zimbabwe between 2004 and 2008.
At the height of upheavals, which ended with a 50% slide in gross domestic product, the collapse of a local currency and 500 billion percent inflation, Zimbabwe’s banks closed in big numbers, living depositors in quandary.
The blue-chip Trust Banking Corporation Limited, Intermarket Holdings Limited, Time Bank Limited, Barbican Financial Holdings Limited, Royal Bank, Rapid Financial Holdings Limited, CFX Financial Holdings, Highveld Financial Services and Century Holdings Limited were among those that were either shut down or collapsed, many of them due to director and shareholder delinquency.
When the Reserve Bank of Zimbabwe demanded action, it sparked off an exodus of bankers, who fled the country.
But in 2009, an amnesty gave them the green light to troop back without prosecution.
Chiduwa, who until last year was deputy minister of Finance, Economic Development and Investment Promotion, told parliament last week there were serious delays to compensate depositors.
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“Having looked at the DPA and what is obtaining on the ground now, we have seen that the new Insolvency Act does not cover the liquidation of banks,” Chiduwa said.
“Already it shows that there is a gap there. In the event of the closure of a bank, the small depositors can only be protected through Presidential Powers.
“This is because we do not have the banks covered under the new Insolvency Act. So I am saying we need to close that gap.
“I am also proposing that going forward, the new law should bar directors, shareholders of failed banks from benefitting from their wrong doing,” he added.
Chiduwa said legislative fault-lines were so deep that costs emanating from bankruptcies have had to be shouldered by depositors.
“I may want to give reference to what happened when Statutory Instrument (SI) 133 of 2019 was promulgated. We have seen a number of institutions that were liquidated because their liabilities were greater than their assets,” he said.
“However, because of SI 133 and the long process that it takes for the Depositors Protection Corporation and the Reserve Bank of Zimbabwe to conclude the compensation process, what is obtaining on the ground now is a situation where institutions that had liabilities that were greater than assets now have assets that are greater than liabilities.
“What is happening now is that those who presided over failed banks now need a Toyota Vitz to compensate all the depositors and the residual assets are then given to the shareholders.
“I think there is need for us as this August House, to ensure that the depositors are protected.
“The law should also bar such directors from taking public office and I am proposing again that as we amend the new DPA, there is need for us as an August House to ensure that those who presided over failed banks should not be allowed to reopen banks,” Chiduwa said.
A local analyst, Jacob Mutisi, in a recent article, slammed laxity by Zimbabweans authorities.
“In stark contrast to South Africa, Zimbabwe has struggled with a pervasive culture of impunity surrounding corporate fraud,” Mutisi said.
“The country's financial sector has witnessed numerous scandals, where executives involved in fraudulent activities have evaded prosecution.
“Despite the creation of the Deposit Protection Corporation in 2003 to safeguard depositors, no meaningful action has been taken against the culprits.
“Banks such as United Merchant Bank, Universal Merchant Bank, and Interfin collapsed due to insider loans and mismanagement, but the responsible individuals have largely gone unpunished.
“The lack of accountability in Zimbabwe's financial sector has eroded public trust and damaged the economy. Perpetrators of corporate fraud have often used their ill-gotten gains to bribe key individuals, including regulators, legislators, and law enforcement officials, effectively evading justice.
“The compromised state of (key) institutions and auditing firms has further exacerbated the problem. Deposit holders, who have suffered significant losses, continue to bear the brunt of this corporate corruption,” he added.
