Justify sale of FBZ - Magande

Justify sale of FBZ - Magande
By Chiwoyu Sinyangwe
Tue 08 Mar. 2011, 04:00 CAT

NG’ANDU Magande says the government should justify the planned sale of Finance Bank Zambia Limited to new shareholders when it is “solvent.” And Magande said the forcible nationalisation of Finance Bank Zambia Limited and its planned sale will hurt confidence of future investors in the local financial sector.

BoZ is tomorrow expected to conduct a public hearing on the planned sale of FBZL, forcibly nationalised by the central bank last December. According to BoZ, Finance Bank would be disposed in a transaction in which a healthy bank would purchase assets and assume liabilities from an unhealthy bank.

In the event that Finance Bank is sold, it will be the first time in the history of the local banking sector that BoZ would be privatising a commercial bank. Commenting on the planned sale, Magande, Zambia's longest-serving finance minister, said selling Finance Bank was not the last resort by BoZ.

Magande said revelations by BoZ that the state of affairs of the assets and liabilities showed FBZL to be solvent though short on regulatory capital prescribed by the Central Bank weakened the case of those pursuing the sale of Finance Bank.

“If they are telling us that the balance sheet of Finance Bank is very strong, then why go ahead and sell the bank,” Magande said.

“Finance Bank is very strong because it has strong participation of the majority Zambians, the civil servants, and now you want to transfer those local deposits to a foreigner. And when a foreigner makes profit from local money, all the profits get externalised.”

And Magande said the grabbing of FBZL from the previous owners would discourage future prospective investors to risk their money in starting up a bank.

Magande regretted that while other countries like South Africa were drawing initiatives to increase the participation of indigenous people in the running of key sectors of the economy, the opposite was happening in Zambia.

He said BoZ should have pursued other options of ensuring FBZL continued operating smoothly. Magande said BoZ should have helped FBZL to partner with other bigger banks outside the country to boost its regulatory capital.

“The Bank of Zambia should have said “how do we make you continue operating so that the question of you closing does not arise,” Magande said. “Now, with this process, we are laying a precedent that sometimes, your managers can do wrong things, and as shareholders, you are mistreated and the bank is taken from you. And as you know, it takes a lot of sacrifice and risk to set up a bank. And I hope it won't be sold to foreigners.”

Finance Bank, the country's biggest indigenously-owned bank was seized by BoZ for allegedly breaching financial laws and FirstRand Limited were appointed to manage it for 90 days - the period expected to elapse this month.

Magande said allowing First Rand Bank, which operates in the country as First National Bank (FNB), to buy the majority stake of FBZL would amount to inside trading.

Inside trading is against the laws of Zambia.

Magande said First Rand Bank, whose managers were appointed to manage it for 90 days following the forced takeover should not be allowed to bid for FBZL.

“A caretaker should just be a caretaker,” said Magande.

“If somebody wants information on FBZL, they are not going to make a decision on the basis of what the Bank of Zambia said at the time of takeover, but what the balance sheet is today. If you give a caretaker an asset to look after on your behalf and then he also admires it and he wants it, what is going to stop him from weakening the asset to his benefit when the time for disposing it comes.”

Finance Bank has almost 1,000 employees and 39 branches, the bulk in rural areas, and in some places it is the sole bank operating.