Bloomberg News

Zimbabwe Biti Gives Banks Including Barclays Ultimatum

November 05, 2012

Barclays Among Zimbabwe Banks Given Ultimatum by Biti on Bills

Biti and the central bank are trying to kick-start the country’s capital markets. Photographer: Daniel Acker/Bloomberg

Zimbabwean Finance Minister Tendai Biti said lenders including units of Barclays Plc (BARC) and Standard Chartered Plc (STAN) have a last chance to support the central bank’s Treasury bill sales or they will be compelled to buy negotiable certificates of deposit.

The Harare-based Reserve Bank of Zimbabwe will on Nov. 6 offer $30 million worth of 91-day Treasury bills after after two failed offerings and one partially successful sale last month. The sales are the first since 2008, shortly before the country abandoned its currency in favor of the dollar in a bid to curb an inflation rate that had risen to 500 billion percent, according to the International Monetary Fund.

“I am giving the banks sector the last chance to fully support the Treasury bills,” Biti, 46, said in a Nov. 3 interview in the northwestern resort town of Victoria Falls. “If they don’t support it, I will issue NCDs and that’s it.”

Biti and the central bank are trying to kick-start the country’s capital markets after a decade-long recession ended in 2009 after the 15-nation Southern African Democratic Community negotiated a settlement that ended a political dispute. A coalition government between President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front and the Movement for Democratic Change of Prime Minister Morgan Tsvangirai was then formed.

On Oct. 26, the central bank offered $15 million of the securities of which $9.9 million were sold at an average yield of 8.51 percent. The bank rejected all bids at attempted sales on Oct. 4 and Oct. 24.

Barclays, Nedbank

The plan to restart the bill sales was announced in July by Gideon Gono, the central bank governor. Zimbabwe lacks a benchmark interest rate. The weighted average lending rate for private banks ranged from 14 percent to 20 percent in the four months through July 31, Gono said in a midyear monetary policy statement.

Barclays Bank of Zimbabwe Ltd. is the biggest lender by market value on the Zimbabwe Stock Exchange with a capitalization of $62 million while units of London-based Standard Chartered as well as Standard Bank (SBK) Group Ltd. and Nedbank Group Ltd. (NED), both based in Johannesburg, operate in the country. CBZ Holdings Ltd. (CBZ) is the biggest locally owned bank.

Biti is also in negotiations to secure funding to recapitalize the country’s banks and plans further regulation of the industry.

Stress Tests

In September, Global Emerging Markets, a $3.4 billion investment company with offices in London and New York, said it had proposed setting up a $1 billion fund in a venture with the finance ministry to fund banks, especially the smaller, locally owned lenders.

“There are discussions with parties, but it’s not anywhere near the $1 billion,” Biti said. “I can’t tell you the figure but, what I can say is that there are various negotiations taking place.”

Alongside any recapitalization, the Finance Ministry plans to appoint a banking ombudsman.

“We have come up with comprehensive amendments to the banking sector,” he said. “We are introducing a banking ombudsman to ensure that the consumer is protected and the amendments will also ensure mandatory stress tests. It’s a plethora of amendments that are coming.”

Biti is also in talks with South Africa’s Finance Minister Pravin Gordhan in a bid to secure funding to help accelerate the country’s economic recovery.

No Leadership

“The South African government is firmly committed to assist us. I can’t put a figure on how much they would give us,” Biti said. “I spoke to Pravin Gordhan about two days ago and I am optimistic it would come through.”

On Nov. 2, Biti cut his forecast for Zimbabwe’s economic growth this year to 4 percent from an earlier estimate of 5.6 percent, citing a smaller-than-expected crop harvest.

Zimbabwe’s recession was triggered by the start of a program of seizing of white-owned commercial farms in 2000. That slashed exports of crops including tobacco and roses and turned the country into a corn importer. A new program compelling mining companies to cede 51 percent of their assets to black Zimbabweans has hindered investment in the world’s second- biggest platinum reserves.

“There are no signs that we are providing sufficient leadership,” Biti said. “You can’t continue doing things over and over again. There has to be a paradigm shift or else we will continue limping.”

Government revenue won’t be able to meet annual budget requirements of $3.4 billion to $3.8 billion, he said.

‘There is so much demand against the state and its not possible to meet the demands,’’ he said. The economy is a crumb against developmental needs of the country.’’

To contact the reporter on this story: Godfrey Marawanyika in Johannesburg at gmarawanyika@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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