Published 11 years ago

Foreign-owned banks in Zimbabwe are prepared to brave the current wave of uncertainty emanating from the country’s controversial indigenization policy which could lead to “significant changes” in the shareholding structure of the banks as they are also under pressure to raise $100 million in statutory capital.

“The new capitalization requirements and compliance with indigenization will likely result in major changes in the structure of the banking sector as players try to comply with those two requirements,” says Willard Zireva, the chairman of MBCA Bank, the Zimbabwean unit of Nedbank.

The indigenization policy, which was promulgated in 2008, requires that foreign-owned companies cede 51% of their shares into the hands of black Zimbabwean groups. President Robert Mugabe and his Zanu-PF party are apparently pushing for the policy ahead of elections expected in July this year, while Prime Minister Morgan Tsvangirai and his MDC party will try to reverse the policy, saying it is not investor-friendly.


The government has, however, not swiftly moved in on the banks as Reserve Bank of Zimbabwe governor, Dr Gideon Gono, insists that forcing the banks to cede 51% shares will destabilize the already fragile banking sector. More than three locally-owned banks have already collapsed in the past year after succumbing to operational constraints, low liquidity levels and low capital bases.

It is the larger, foreign-owned banks—Barclays, Standard Chartered and the Zimbabwe units of Standard Bank and Nedbank—that have brought stability to the banking sector. Only about three local banks are considered stable and these include CBZ, FBC and ZB banks. Zimbabwe has 22 banks, most of them commercial.

“The smaller, locally-owned banks are less stable than the larger, more established foreign banks. We have… 22 banks functioning in an economy which is much too small for that number of banks,” says Zimbabwean economist John Robertson.

While economists and investment fund managers have warned that the indigenization policy and the placid nature of Zimbabwe’s regulatory framework may push investors out of the country, foreign banks are prepared to brave the current chill in Zimbabwe’s operating environment.


Dennis Mambure, the spokesperson at Barclays Zimbabwe, which has been left out of a deal that saw Barclays Africa operations merge with South Africa’s Absa Bank, says the bank is keen to comply with Zimbabwe’s policies. He insists that the bank had made submissions to the government and that negotiations are ongoing.

“Barclays operates within the confines of the legal and regulatory framework of the country. At no time has the bank disregarded any regulatory directive or obligation. Barclays Bank has made all submissions required by the laws on indigenization to the relevant authorities. Engagement with authorities on these submissions is on-going and Barclays is not at liberty to disclose the content of those confidential discussions,” says Mambure.

Interestingly, Mugabe has called for lower indigenization compliance thresholds for the foreign banks. He said in a televised interview, ahead of his 89th birthday celebrations, that the 51% threshold was not rigid, adding that the banking sector could be considered for lower thresholds, further complicating the placid nature of the regulatory environment in Zimbabwe.

This has been interpreted as a victory for the banks who had earlier argued against the 51% compliance thresholds. But youth development, indigenization and empowerment minister, Saviour Kasukuwere, appears to have the final say as to what thresholds the banks will have to comply with. He told FORBES AFRICA in an interview this month that the banks have to show willingness to comply.


“The minister can use his powers to consider variations. The banks have to come forward and submit their plans and we can even consider different timeframes for compliance,” he says.

Gono called for flexibility in implementation of the empowerment policy in the banking sector. “You need to be flexible when you come to the banking sector… because you cannot indigenize technology. You cannot apply the same rules that you are applying everywhere to the banking sector. I am going to defend that position,” he told a breakfast meeting of industrialists

Despite the earlier softening in the government’s stance regarding indigenization compliance for foreign banks in Zimbabwe, Kasukuwere in March wrote to the foreign banks asking them to be fully compliant with the contentious policy by the end of June.

The new directive by Kasukuwere stokes up the fight between him, the central bank governor and finance minister, Tendai Biti. Gono says that he will defend Mugabe’s reasoning in calling for compliance variations below the mandatory 51%.


However, the Zimbabwean unit of Standard Chartered has welcomed Mugabe’s statement, saying the bank is committed to its employees and clients in Zimbabwe, hence the bank’s willingness to comply with the indigenization policy.

“We remain committed to the long-term interests of our staff and customers in Zimbabwe, and to continuing to facilitate the development and growth of the economy. We welcome President Robert Mugabe’s comments. Standard Chartered has taken the conscious decision to continue to maintain our long-standing commitment to doing business in Zimbabwe,” says the bank’s spokesperson, Lillian Hapanyengwi.

Economists say that Zimbabwe’s regulatory framework is uncertain as regulations change without notice while there are always variations in how the laws are implemented. The Bankers Association of Zimbabwe say the banks are engaging the government on their own while the association’s president, George Guvamatanga, the head of Barclays in Zimbabwe, says he is still weighing the implications of Mugabe’s statement.