Zimbabwe Central Bank, banks fight reaches tipping point




John Mangudya

THE central bank is embroiled in a vicious fight with financial institutions over the suspected manipulation of local currency, barely two years after it wielded the hammer on mobile money transfer companies, the Zimbabwe Independent has established.

There are indications that the Reserve Bank of Zimbabwe (RBZ) has wielded the hammer on a number of errant banks that are suspected of fuelling the current spike in the exchange rate.

In the past, the RBZ has been battling with mobile money transfer companies, like Ecocash, accusing them of fuelling the parallel market. The focus has now shifted to banks, which are now accused of being involved in shady currency dealings at the expense of economic stability.

The RBZ’s Financial Intelligence Unit yesterday said there were some banks that were using suspense and other internal accounts under various descriptions for the purpose of purchasing foreign currency on the parallel market.

The financial intelligence arm will carry out an intensive audit on the accounts in question after every bank has submitted the required information. The information should be provided to the FIU by not later than today.

“We intend to carry out an audit of such accounts. To facilitate the planning of the audit, every bank is required to furnish the Financial Intelligence Unit with a list of all bank’s suspense accounts and other internal accounts used by the bank for its own transactions,” FIU director Oliver Chiperesa said in a circular.

“Subsequent to receiving this information, the FIU may request detailed bank statements for all or some of the accounts.

The FIU will take a serious view of a failure to disclose any particular account as requested therein.”

The latest efforts by the RBZ have been triggered by a recent depreciation in the local currency, which has stalked disharmony among the citizens.

In the past two weeks, the volatile Zimbabwean dollar has suffered its worst beating on the parallel market, depreciating to US$1:$450, after ending 2021 at US$1:$280.

Some student representative bodies and labour unions last week threatened a national shutdown, which saw President Emmerson Mnangagwa announcing rushed policy pronouncements aimed at dousing possible civil unrest.

On the other hand, industry has been castigating what they described as the RBZ’s dismal failure in carrying out its mandate of tracking how borrowed funds were utilised as well as unfairly punishing them through the suspension of lending by banks.

Mnangagwa last week announced a raft of measures to curb the rapid fall of the local currency, which included a directive to suspend lending by banks and micro-financing institutions (MFIs).

Companies, however, say the government cannot punish everyone when the central bank has the capacity to know who borrowed how much and what it was used for.

Analysts and market watchers have blamed the government for failing to consider that over 60% of banks’ incomes were now non-funded, implying that they could not be causing market distortions through lending.

While the traditional role of banks and MFIs is lending, arguments point to the fact that whatever impact this will have on the market depends on the time it will take before the government lifts the suspension.

A banking source this week told the Independent that the central bank had to ensure that banks made follow-ups to ensure that companies use the money for the purposes that it was taken for.

“A lot of companies have stockpiles and they are the ones taking money from banks to go and buy foreign currency on the market. It’s a pity no one is following up on how the money is being used. This is what is driving the rate,” the source said.

“The banks should be challenged to follow-up on what the companies are using the money for and what it was intended for and not used for buying foreign currency,” the source said.

“There is a link between lending and foreign currency as people are buying the US dollar for speculative purposes. The Zimdollar therefore depreciates. If you look at the composition of banks’ profit and loss, you will realise that it’s made up of fees income, not lending fees. So in the short term, one would not be affected by not lending.”

Dairibord chief executive Anthony Mandiwanza, however, pointed out at the CZI manufacturing survey that the central bank had the capacity to monitor, who got how much and what it was used for.

Meanwhile, in an interview on the sidelines of the launch of the survey, N Richards director Archie Dongo said there was no serious businessperson that would take money for the purpose of going on the parallel market.

“Speaking from the retail and wholesale sector that we are in, there is no sustainable business that we can run by taking money to go and play on the alternative markets,” he said.

“The funding that we seek is for business expansion or working capital. If there are people who are doing it, fine but any serious business would not do that.

”For the formal retail and wholesale, the financing we seek is for business expansion, to lubricate our working capital. That is the norm in our industry,” Dongo said.

An investment analyst, who requested anonymity, said the government should know that it could not instil market confidence by putting in place laws that scared the country’s citizens.

“People are rational and will always seek to maximise value. Any rational person will exploit any arbitrage opportunity in the market and it’s a fact, “ the analyst said.

“Banks have been lending less and less over the past few years so it does not support the view that bank loans are the source of parallel market activities.

“There is also a risk that is already ascribed to the country. It is huge and will be felt for generations to come. It is unprecedented for bank loans to be banned.

“The rate is moving because the market and everyone has lost confidence in the ability of the Zimbabwean dollar to hold value.” – Zimbabwe Independent