Maravi

Govt, Rabobank to seal deal amidst concerns

Govt, Rabobank to seal deal amidst concerns
By Kingsley Kaswende
Tuesday April 03, 2007 [04:00]

THE Zambian government and Rabobank are today expected to seal the deal in which they have agreed for the latter to buy 49 per cent shares in the Zambia National Commercial Bank (ZNCB), amidst concerns on outstanding issues. The government agreed in principle last December that Rabobank should buy 49 per cent in Zambia's largest consumerbank, in the face of widespread outcry and suspicion over the transaction.

The sale of the bank, whose process started over 10 years ago, is understood to be a prescription from the International Monetary Fund (IMF) and has been met with resistance from a cross-section of the Zambian business community, civil society organisations, labour movement and opposition political parties. The association of minority shareholders in the bank has been up in arms against being kept in the dark over the transaction.

Recently, association chairperson Andrew Kashita, who happens to have been the bank's first chairman when it was established in 1969, wrote to commerce permanent secretary Davidson Chilipamushi, the bank's chairman, demanding to be availed the finest details of the transaction. This was a result of the perceived secrecy surrounding the transaction and the cost of the 49 per cent shares, which left everything open to speculation.

In January, sources had told The Post that Rabobank would pay US$10 million. However, Chilipamushi immediately clarified that the figure was the reserve price, and that the true value of the shares would only be known when auditors closed the financial books.
He said the bank's net position had now improved.

Kashita hoped that the sales figure would be announced at the signing ceremony. But he said yesterday that he was due to meet with finance minister Ng'andu Magande to get some clarification on the transaction.

By press time, the meeting had not been concluded. ZNCB is also being sold to Rabobank amidst concerns that it has been sold against the provisions of the Banking and Financial Services Act (BFSA) of 2000.

Section 75 (3) of the BFSA as amended by Act number 18 of 2000 states: "A bank or deposit-taking financial institution shall not acquire an equity interest in any single person, property or undertaking where the value of the bank or deposit-taking institution equity exceeds 25 per cent of its regulatory capital."

Analysts say the government erred at law by allowing Rabobank to hold 49 per cent shares in the bank.

But legal experts yesterday clarified that this provision excludes entities that are publicly listed in countries where they are registered. The expert said this was the reason banks such as Barclays and Standard Chartered hold clear-cut majority shares in their Zambian operations. Rabobank is listed in Amsterdam.

To this effect, Rabobank has been granted a waiver to own more than 25 per cent shares, pending future divesture of the balance.
There have also been concerns about the composition of the board and directors of the bank.

Fears abound that most of the board members would be drawn from the Rabobank Co-operative, but government sources yesterday said only three board members would be from Rabobank.
The source said the major aspect to look out for at today's signing is the composition of the board.

"From my understanding, only three will be expatriates. This includes the managing director and two others. The other three will be local although two will be from the government," the source said.

The source further said the next task would be to change ZNCB's articles so that it complies with the provisions of both the BFSA and the Securities and Exchange Commission. Upon sealing the deal, government will immediately, following legal and financial closure of the Rabobank transaction, be proceeding to offer 25.8 per cent shareholding to the Zambian public and eligible local institutions.

The resultant shareholding would see Rabobank retain 49 per cent shareholding whilst the Zambian government would hold 25 per cent and the Zambian public 26 per cent.

ZNCB, founded in 1969, has a network of more than 50 branch offices in Zambia, making it the country's largest consumer bank. The bank has 1,100 employees. As of December 31st 2005, it had net assets of US$384 million. Objections have also been raised as to how Rabobank's co-operative business model will work with rural branches in Zambia.

Sources say pursuant to its business model, Rabobank would franchise the ZNCB branches, effectively making them agents operating on behalf of ZNCB. Sources wonder how much interest Rabobank will have in some rural branches that are not performing very well.

Labels: RABOBANK, ZNCB

posted by MrK @ 4:46 AM