No to more banks!

mhlomuli.jpgBy Mhlomuli Ncube


Some writings are eye-openers if one really takes time to think deeply. I say so with reference to Christopher Takunda Mugaga’s article in the Business Herald entitled, ‘Economy recovering at a very slow pace.’


I do not claim to be an expert on money matters, but I speak as an observer on behalf of my society if I feel there is need to point out certain flaws. Mugaga wrote, “In the banking sector, CBZ has been a knight in shining armor posting impressive returns, which could surpass all the competitors.


At the beginning of the year, CBZ was valued at 17cents, and with the close of the second half, the share price has just moved southwards by –11, 76 percent to close at 15 cents. What could be lacking for such an impressive counter is the international touch that is failing to spruce up the image beyond local roots. We cannot say CBZ has not shaken off the Bank of Credit and Commerce tag, but it is failing to translate results on the ground to suit the stock performance.”


I have reflected along the same lines as I go through a number of articles that I come across in the media in relation to the banking industry in our country. We do not really get to hear many confessions that business is tough especially from those who are supposed to be custodians of our valuable and precious dollars. But experts in that regard have told us that our economy is over banked and there is need for drastic measures to address the situation. The assessment is not very far from the truth. Every day reports speak of liquidity difficulties in our economy and the banks have come out wailing loudly much to our annoyance about the fact that there are very few depositors willing to channel cash in the formal way.


We have seen most of them downsizing, branches folding up and staff being reduced as operational cost reduction measures.


Nobody can doubt that if our banks are to survive regardless of the many livelihoods that will be affected, they have to take such daring moves. We will have to forgive our banks and understand that it is all part of strategizing for sound operations

A few weeks ago, NDH Holdings’ major shareholders were announcing their failure to raise US$14 million required to boost minimum capital requirements for NDH Merchant Bank despite being granted a 3-month grace period by the Reserve Bank. They surrendered their license, according to the group’s executive director, Tinashe Chimanikire. Hands up to NDH for such an exemplary business conduct.


If banks are failing to capitalize yet they are supposed to be custodians of the public’s cash, they should pack their bags. How can we expect them not to be corrupt as they give us their periodic financial reports? Can they be trusted to understand that as long as they are not realizing any significant cash inflows, they have to reduce even the remuneration of their own executives?  It is time we took a serious look into theses issues especially where we are no longer using our own home currency.


There is need for the Ministry of Finance to reach out and take a deep analysis of the banks’ financial status at any given moment even if it means unannounced raids. If European and American banks with all the cash that they had could trigger events that led to the global financial crisis, then what assurance do we have that our own banks that are undercapitalized might not take us through the same course one day?


My major complaint is that there is no room for new players in our banking sector and am not happy with the intended come back by banks like Time Bank and Trust Bank. The two can argue and prove irregularities that led to the cancellation of the Time Bank license and the incorporation of Trust Bank in the Zimbabwe Allied Banking Group.


I have no personal issues with the two bouncing back into business as fully fledged business entities. However my worries lie in the fact that, there is no guarantee that in this turbulent environment, the two will not take their customers down memory lane by with a repetition of the same acts, especially when those liquidity shortage issues persist as they are reported in our press now and again.


With undercapitalization still a serious issue to many of our banks, the best way to safeguard would-be depositors to the two banks would be first proving beyond reasonable doubt that the two are properly and satisfactorily prepared. Responsible authorities might even go a step further by even asking for in place contingency plans that will protect depositors should there be complications.
I subscribe to the notion that our banking sector has got no room for new babies, let alone those that failed to go beyond the crawling stage previously. There is no room for nursing failures like we did some time ago. This time the issue is very sensitive because, the people will not take kindly to losing their hard earned dollars. Like him or not, Dr Gideon Gono gave these failed babies a lifeline. Trust and Time are best advised to stay away from the business of banking if they do not have a new formula that’s very different from their old one. Maybe Trust Bank should really feel at home in the ZABG.


If I could be granted audience with the responsible authorities, pertaining to this matter, I would spell out without compromise the fact that we do not need more banks in this economy. What we need is to strengthen the balance sheets of the ones that are in existence. In actual fact the new players want a slice of the already shrunk customer base.  Not to say we should discourage new business ventures but in this particular sector I would tell the responsible authorities that doing exactly that is no harm but it will actually help our already ailing banking industry. If a giant like CBZ is failing to translate results on the ground to suit stock performance, I wonder what new strategies Trust and Time intend to bring us.


Such a time when banks were set up purely for speculative purposes is gone. We want our financial institutions to run their operations according to fundamental basics. In terms of our people’ disposable incomes, we should ask experts to calculate the number of banks that our economy can withstand. With all conviction, I say no to more players in the banking sector.


The Ministry of Finance is best advised to be on the lookout.