Maravi

ZNCB is finally gone, but....

ZNCB is finally gone, but....
By Editor
Tuesday April 03, 2007 [04:00]


IT is very sad that President Levy Mwanawasa and his government have totally ignored the will of the people over the issue of Zambia National Commercial Bank (ZNCB). While the people of Zambia made it very clear from the beginning that ZNCB should not be privatised, Levy and his government have instead opted to go with the demands of the International Monetary Fund (IMF) that this national bank should be sold. What is more sad, and perhaps an act of insincerity on the part of Levy, is his apparent numbness on this subject even when in August 2005 he agreed with many Zambians that there was no justification for the sale of ZNCB.

But we know that Levy and his government have been under a lot of pressure from the IMF to deliver ZNCB into private hands. And since it appears that the government listens more to the IMF than to its own people, it is not surprising that ZNCB has finally been handed over to foreign investors.

We have been consistent in our arguments against the sale of ZNCB. First of all, we believe that privatisation should not be undertaken for the sake of it or for ideological reasons. We think that every privatisation must make economic sense. We do understand that we need to open up our country to foreign investments in order to fully realise our economic potential.

However, the opening up of our economy should be done in a manner that benefits the local economy. We are saying this because experience has taught us that while we have liberalised our economy so much and opened it to all sorts of investments, the benefits of such liberalisation have not accrued so much to our economy, let alone to the population.

And when we oppose some of these economic decisions such as the sale of ZNCB to foreign investors, we do not do so without a critical interrogation of existing facts. At the moment, we are aware that ZNCB is performing very well in the market.

In terms of markets alone, we know that ZNCB enjoys the biggest market penetration than any bank in this country. On the issue of profitability, recent financial statements show the bank has been doing very well. As things stand today, we know that ZNCB is not inherently fragile. If that were the case, we doubt if there would be any interest in it from foreign investors.

And this is why we have continued to be opposed to the sale of this bank. However, now that the government has completely ignored the will of the people over this matter, we nonetheless still have some observations to make on this transaction, which should not have been allowed in the first place.

It is obviously public knowledge that ZNCB has been sold to Rabobank of the Netherlands. However, it appears that the cost of the business transaction has been kept as a closely guarded secret for a long time now. We hope this is the right time for the parties involved to disclose how much Rabobank will pay for the shares.

A clear explanation should also be given as to how the shares were valued. We are insisting on this because we do not want a repeat of what happened in the mines where Konkola Copper Mines shares were grossly undervalued.

In any case, why did the government opt not to ask for an upfront payment from Rabobank? We have already stated that going by available facts, ZNCB is a very profitable bank. For example, in 2004 ZNCB posted a K9 billion profit, despite a large provision for debts, most of which are on account of government borrowing.

Its statutory requirement in terms of required capital adequacy ratios as at October 2004 was 17 per cent, the fourth after Indo-Zambia (72 per cent), Citibank (37 per cent) and Standard Chartered (21 per cent.) Isn’t it possible to see a repeat of what happened to KCM where Vedanta bought KCM at US $25 million and earned a similar amount in just six months.

Now we understand Vedanta’s shares are well over US$1 billion.
Another contentious issue is that of the future of rural branches. We have heard fears being raised from various sections that Rabobank may not retain the rural branches that are underperforming, thereby eliminating the service nature of the bank. What should be understood is that ZNCB is not just a bank that exists to make a profit, it is also a service organisation that has penetrated areas where other banks have failed to go, where they think they cannot make profits.

In many districts of the country, ZNCB is the only bank available to the people. A good example is the district of Sinazongwe in Southern Province. Before ZNCB opened its office there, we are told workers at Maamba Collieries Limited used to travel 130 kilometres to Choma to access banking services. We understand Rabobank has committed itself to maintaining the rural branches. However, the experience of multinationals is that they tend to pursue profit gambits.

Besides, we have also been told that Rabobank follows its co-operative business model where its branches operate on franchise basis. It is feared that, pursuant to its business model, Rabobank may just franchise the ZNCB rural branches, effectively making them agents operating on behalf of ZNCB. Non-profit making branches will logically fall off. These are some of the questions that need to be clarified today.

When it comes to the future of ZNCB’s employees, let us not forget that this is a bank that employs 1,100 workers. It has not been made very clear whether or not all these employees will be retained with the coming of Rabobank.

It would not be wise to start witnessing retrenchments and job losses as a result of this transaction. If anything, we would want to see the bank expand its operation to serve more of the previously unserved rural markets and create more employment opportunities for Zambians.

These are some of the fears we have had in opposing the sale of ZNCB. But since it seems this is an IMF prescription the government is not willing to reject, we have no option but to live with these realities. We did our best to argue against the sale of ZNCB. And we are still opposed to this transaction.

But since it is now very clear that ZNCB has finally been delivered into foreign private hands, our only hope is that a lot of care will be taken to ensure that this transaction is not just like many of those where the Zambian people have ended up the biggest losers.

Labels: EDITORIAL, RABOBANK, ZNCB

posted by MrK @ 4:48 AM