Friday, November 30, 2012

(NEWZIMBABWE) I’ve given up on foreign banks: Biti

COMMENT - Why on earth is anyone asking a geriatric neoliberal like Eric Bloch for advice?

I’ve given up on foreign banks: Biti
29/11/2012 00:00:00

ZIMBABWE plans to amend its Banking Act after repeated attempts to sell Treasury bills failed to attract bids at rates acceptable to the central bank and Finance Ministry, Finance Minister Tendai Biti said.

“I’ve written foreign banks off, they’re not worth their salt,” Biti said Thursday.

“That is why we are amending the Banking Act.” He declined to elaborate on the changes he plans to make, though he said in his Nov. 15 budget speech that the government would step in to regulate banks after the “misadventures” with T-bills.

Foreign banks that operate units in Zimbabwe include the U.K.’s Barclays Plc, Old Mutual Plc and Standard Chartered Plc, Togo’s Ecobank Transnational as well as South Africa’s Standard Bank Group and Nedbank Group.

Biti and the central bank are trying to rejuvenate the country’s capital markets after a decade-long recession ended in 2009 when the 15-nation Southern African Development Community intervened to facilitate a political settlement.
A coalition government between President Robert Mugabe’s Zanu PF party and the Movement for Democratic Change was then formed.

Zimbabwe hasn’t been able to fund development projects or infrastructure repair through tax collection, while foreign aid has been sparse because donors aren’t confident about the southern African nation’s power-sharing agreement, Harare-based independent economist John Robertson said in a phone interview.

Attempts to raise money for government expenditure through the sale of Treasury bills, the first since the country abandoned its currency for the dollar, failed this month when rates offered by banks were rejected by the Finance Ministry and central bank, Robertson said.

“Banks are resisting because they’re not sure government will be able to repay the bills,” Robertson said. “Government likely wants to borrow at about 4 percent and it’s likely that 8 percent to 10 percent would ultimately be acceptable to the banks.”

Lending rates between banks are as high as 25 percent, he said. Annual inflation in Zimbabwe was 3.2 percent in September, according to the national statistics agency.

Zimbabwe’s indigenisation minister, Saviour Kasukuwere, said foreign banks are “determined to ignore” the country’s laws. The government on July 3 ordered all foreign-owned banks to transfer 51 percent stakes to black Zimbabweans by July 2013.

“The gloves are now off as they’re opposed to the aspirations of our people,” he said. “We tried to use moral persuasion, but this has failed. We now have to crack the whip.”

Four banks hold about 80 percent of deposits in Zimbabwe, Biti said in his November budget speech, without naming them. Lending rates will be capped at a maximum rate of not more than 10 percent above a bank’s weighted average deposit rate, he said in the speech.

Biti declined to say whether he had held talks with the Bankers Association of Zimbabwe about the plan to force banks to buy negotiable certificates of deposit.
“It would be disastrous if he decides to marginalize the foreign banks,” Eric Bloch, a Bulawayo-based economist, said.

The effect will “be considerable” as it may cause job losses and “also worsen confidence in the sector at a time when it’s illiquid.”

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