'Help us with banks...'

HARARE - After the collapse of a certain local bank, Sekai (not real name) had to close her business and as if that was not enough, the single mother, who owned a small butchery, also lost property as creditors unleashed debt collectors on her.

However, shareholders at her bank did not lose a dime after the banks’ closure, as most still live in their mansions and have even upgraded their car models.

Life goes on as usual for them but certainly not for Sekai.

This situation is not peculiar to the 40-year-old as over 8 000 Zimbabweans have suffered the same ordeal, albeit in varying proportions.

While the country currently has 18 operational banks including foreign-owned Barclays, Standard Chartered, MBCA and Stanbic, four banks have closed in recent years.

Early this year, Transport minister Obert Mpofu’s Allied Bank voluntarily surrendered its banking licence, with about 245 employees set to lose their jobs upon liquidation.

Other collapsed financial institutions include Interfin, Royal Bank and Genesis.

Statistics from the Deposit Protection Corporation (DPC) show that $440 000 has so far been reimbursed to aggrieved depositors of the now defunct banks, from an outstanding amount of $812 523.

A total of $8 000 was paid to 56 Genesis Bank depositors out of $12 000 being owed to 85 depositors.

And 300 Trust Bank depositors out of 2 958 have so far pocketed $109 000 in repayments from an outstanding amount of $328 000.

Analysts say the reason why depositors fail to secure their hard-earned money from collapsed banks reflects on the dire need for a Commercial Crimes Court in the country.

Local analyst Issis Mwale told the Daily News on Sunday Government should seriously consider setting up a Commercial Crimes Court, to ensure banks don’t take advantage of depositor funds.

“The general feeling business owners, especially bank owners have, is that they can get away with taking depositors for granted. When most banks collapse depositors are the ones who suffer most while shareholders are cushioned.

“These shareholders have never been known to be dragged to court and this is not proper. Government must push more for a Commercial Crimes Court,” Mwale said.

Mwale said the weakness of the current system was revealed by the fact that to date, no major conviction had been made with regards to major commercial crime cases, with cases dragging on for several months.

The backlog of such crimes continues to worsen, a reflection that courts seem to lack the capacity to deal with them effectively.

Royal Bank creditors met with the bank’s liquidator’s agent before the Master of the High Court last week, many were emotional demanding the prosecution of the bank’s shareholders following the banks’ liquidation.

The atmosphere was tense and the court was overflowing with some depositors sitting on the floor and the rest following the meeting’s proceedings from outside.

Presently, 3 000 out of 5 400 Royal Bank depositors which closed operations in March 2014 have so far received $323 000 from a total of $472 000.

A Royal Bank depositor who spoke on the condition of anonymity told the Daily News on Sunday that while she had $3 500 in her account when the bank closed, the maximum payout per depositor was going to be $500 only.

“Where is Government when such things happen? What is the RBZ governors doing in their spacious offices? If he is an effective regulator how come banks like this are still operational?

“They have let us down and something has to be done. How come we never hear of any shareholders being arrested,” the depositor asked.

Cecil Madondo, the liquidator’s agent told creditors that the Jeffrey Mzwimbi-led bank has an instrument in its constitution that allows creditors to sue directors, given proper grounds to lodge claims.

“Based on information received from the Reserve Bank of Zimbabwe, creditors and other stakeholders, it can be concluded that the directors violated provisions of Section 319 of the Companies Act... Accordingly, we shall seek the guidance and directions of the creditors of the bank,” Madondo said on behalf of Depositors Protection Corporation (DPC), John Chikura who was appointed final liquidator.

However, Madondo was quick to point out that the process would take creditors years and would cost thousands in litigation costs.

Another creditor, Kunofiwa Hakufiwi called for the arrest of Mzwimbi and other shareholders for running down the bank in a “Mafia type of doing business.”

“…It looks like we are not going to get much from our hard earned money yet the owners of the banks are walking scot free when they abused our money. Doesn’t the constitution provide for the protection of depositors,” said Hakufiwi.

A DPC official told the Daily News on Sunday that the authority did not have adequate power to protect depositors.

“As much as we do not have proper instruments to summon shareholders when they fold, we also cannot drag them to court and attach their properties because we simply are not mandated to do so.

“The prosecution of shareholders is something we simply are not empowered to do on our own as the DPC,” said the official who spoke on condition of anonymity.

While the DPC was created to address the concerns and fears of depositors, many depositors are not aware of its existence.

In November last year, Government gazetted Statutory Instrument 156 of 2013, which states that depositors will be paid their funds immediately after a financial institution is placed under curatorship but the DPC is struggling to deal with funds owed to depositors of defunct banks.

Economists have come out guns blazing accusing the current governor of being too lenient with the fragile sector.

Last week, Reserve Bank of Zimbabwe (RBZ) governor John Mangudya said the numerous bank closures seen in recent years were normal in tough economic environments and insisted that the country’s banking sector remains “safe and sound”.

“This happens everywhere. In the United States, banks closed in 2008 (after a) financial crisis,” he said last week on the sidelines of the Confederation of Zimbabwe Industries 2015 economic outlook symposium, adding its “only that in Zimbabwe we tend to focus on the negative and this undermines investor confidence in the economy”.

However, analysts have warned that Zimbabwe’s banking industry remains fragile following the collapse of several institutions due to mismanagement, bad corporate governance, spiralling non-performing loans and an acute liquidity crisis.

Failure to get money after bank closures is not the only problem depositors are grappling with.

In the past few months, some banks have been unable to meet withdrawals, prompting calls for mergers and amalgamations to help the troubled institutions shore up their capital positions.

Last year, depositors, mainly with Metbank and AfrAsia, had to endure long queues to access their hard-earned funds while the DPC and RBZ did not offer an intervention.

In his maiden Monetary Policy Statement last year, Mangudya said he was concerned about four banks — Metropolitan, Allied, AfrAsia and Tetrad — facing liquidity and solvency challenges due to macro and institution specific factors.

These banks commanded low market shares in terms of loans (8,8 percent), assets (7,2 percent) and deposits (6,7 percent) as at June 30, 2014.

Despite this caution, the governor has not done anything to condemn the banks.

The closest he ever got to alerting depositors were remarks that depositors had to be shrewd and descending as they chose banks.

As confidence in local banks continues to erode further, more billions will be added to the estimated $5 billion currently circulation outside the formal banking system as the public feels no one is actually doing anything to regulate the sector.

Comments (3)

In deed there is need for depositors to be protected and how do yu instill confidence since many of us are still reeling from yester year events when we lost our zim dollars in banks.Some of us were not burning money.I am still sceptical of depositing my money esp indigenous banks.will only be confident when I get back my zim dollars.Also there is need to tighten corporate governance issues and closely monitor bank operations

tozivepi huchi wegonera - 1 February 2015

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