Posted on Saturday, 25 October 2014 08:27

In election season, worry looms over Tunisia's state banking trio

By Nizar Manek in Tunis

File Photo©ReutersAfter a vote to recapitalise Tunisia's ailing state banking trio bites the dust, enter the next stage of the saga: pass the buck to the next parliament.

Linked to almost 40 percent of Tunisia's economy, the fate which has befallen the north African country's trio of state-owned banks is no secret. Audits of two of the trio earlier in 2014, the first since the end of the over two-decade presidency of Zine el-Abidine Ben Ali, showed the banks have a combined capital deficit of 1bn dinars (US$550mn).

Who is behind the huge loans engaged by the state banks?

As Tunisia approaches election season, investors already appear to have signalled worry. While the volume of traded shares of state banks remains thin, market capitalisation figures released by the Tunis Stock Exchange, on which the trio are listed, show a loss of lustre.

In August, Investors shaved almost ten percent from Banque de l'Habitat (BH) and Société Tunisienne des Banques (STB)'s market capitalisation. The results remained the same for STB in September, while BH fell to almost 15 percent.

As for the third state bank, Banque Nationale Agricole en Tunisie (BNA), investors erased 20 percent of its market capitalisation for both August and September.

With an as yet undisclosed capital deficit, the long-awaited audit of BNA being undertaken by PricewaterhouseCoopers France will be concluded in October, Tunisia's outgoing caretaker Minister of Finance Hakkim Ben Hammouda told The Africa Report.

Still ongoing

Lobna Jeribi, a deputy of the FDTL Ettakatol political party, Forum démocratique pour le travail et les libertés, asks why her finance committee, responsible for issuing consultative reports to parliament on recapitalisation and related matters, has been denied access to the details of the completed BH and STB audits.

"Who is behind the huge loans engaged by the state banks?" she asks on the campaign trail in Tunis II, where she is up for re-election in Tunisia's parliamentary polls on Sunday. And do vested political and economic interests belie the opacity of audits for which, Jeribi says, Tunisia's exchequer has paid?

Speaking on condition of anonymity, a local Tunisian banker close to the trio's audit process says their profitability is likely to be better when banks report their results this year, although he is convinced it is all "based on paper, and everything but reality". He says the old system of off-balance sheet financing, used initially by the trio to provide loans to the Ben Ali clan and its political protégés without accumulating a public deficit, is still ongoing.

STB, says a person close to the donor community, "was forced to finance all the loan applications presented by friends of Ben Ali, often for hotels," which would be used as collateral for loans. "These were not experts in hotel management. Some of them succeeded, most failed miserably."

Tunisia has historically imported more than it exports and the hospitality industry is important to bring in foreign currency, and to equilibrate the country's commercial balance, or net exports.

Slim Tlatli, Tourism Minister under Ben Ali and an advisor to caretaker Tourism Minister Amel Karboul, says the tourism sector represents a quarter of the banks' total US$6.7bn in toxic loans.

There are two sides to the problem, says Tlatli. The first is a need to clean the portfolio of the state banks, while the second involves hotels continuing to charge low prices because they are not paying their debts. "It's a problem in the banking system, and it's a problem in the tourism sector."

Pass the buck

Eyebrows were raised after minister for economic affairs Nidhal Ouerfelli declared on radio, Shems FM, on the morning of 27 September that the cabinet passed a decree to release 100mn dinars on 13 October to support BH and STB.

In August, a 1bn dinars recapitalisation plan was floated as part of a supplemental budget law, but another authorisation was needed from parliament. And according to Hammouda and Jeribi, the plan came to an abortive head in parliament on 26 September when the decree on recapitalisation was withdrawn at the last minute after parliament failed to meet a quorum to allow it to pass.

The same fate befell another proposal to adopt a 'bad bank'-style entity to absorb the trio's non-performing, or toxic, loans.

Perhaps that was only faux pas. Local banking experts suspect Ouerfelli's finely calibrated scales may have also forgotten to add a final zero to the figure, which would have brought it to the billion dinars required to recapitalise STB and BH.

Parliamentarians are aware an annual budget assistance due from the World Bank in the form of a $500mn loan, which is just under BH and STB's combined capital deficit, is conditional on measures being adopted by year-end to at least set in motion a process to restructure, recapitalise, and absorb the trio's toxic loans.

Promises have been made amongst insiders that there will be another vote on October 28 on budget assistance to the trio, but this is likely to pass as water under the bridge. Parliamentary polls take place two days earlier, and a period of coalition jousting is expected to follow.

Jeribi's finance committee ultimately didn't block the law by majority, since representatives from the Islamist Ennahda party supported a law on recapitalisation. But she presented blocking arguments to Hammouda who, as a finance minister in Prime Minister Mehdi Jomaa's outgoing technocratic government, is bound in to make way for a new incumbent after the polls.

One point Jeribi made to Hammouda was to ask the Finance Ministry to support producing a quarterly report to monitor the progress of such major financial reform programmes.

The ultimate aim of the recapitalisation plan, which is associated with financing a process of deep structural reforms of state banks that are enjoined to Tunisia's economy, was impossible for the committee to define, says Jeribi.

Since Jeribi's committee had no access to the details of the two completed audits, she says her committee's wings were clipped: it couldn't offer parliament an adequate diagnosis of the situation.

So she refused to support a law that would have public funds be used for intents and purposes unknown, and her finance committee linked the effectiveness of the law to recapitalise the state banking trio to the result of the still-outstanding BNA audit.

Enter the next stage of the saga over Tunisia's state banks: pass the buck to the next parliament, the 217-member Majlis Nuwaab a-shaab, or Assembly of the Representatives of the People.

Ascent to Carthage

Nizar Manek in Tunis

The crowd is standing in Avenue Habib Bourguiba. The crowd is standing in the sunshine, on the eve of Tunisia's presidential election under a blue Maghrebi sky. The crowd is standing and waiting for Béji Caïd Essebsi, the eighty-eight year old who would be sworn in at the turn of the new year as the new president of the Second Republic of Tunisia. Its newly-elected parliament overflows with applause for the octogenarian.

And as the new year turns, congratulations flow to the newest occupant of the Carthage Palace from both the Emir of Qatar Sheikh Tamim Bin Hamad Al-Thani, and from the United Arab Emirates, into whose orbit Essebsi's anti-Islamist Nidaa Tounus party entered—alongside Egypt's Abdel Fattah el-Sisi and Libya's General Khalifa Haftar—to neutralise a rapprochement between Qatar and Tunisia's previous Islamist-led government. Half-way through the year, the Emiratis grew so enthusiastic about their seeming triumphs in the regional cold war—even in the little Maghrebi country which lies between the oil and turmoil of Libya and Algeria—that they dispatched Essebsi a private jet. They even gifted him two armoured cars.

At a campaign rally earlier in December in the town of Beja, the then incumbent of the Carthage Palace Moncef Marzouki declared that a triumph for his presidential rival Béji, as he is affectionately known, would bring the country back to "square one and ensure the return of the old regime." And after the triumph of Béji, who during all the grand talk of the presidential contest accused Marzouki's supporters of being "terrorists" and campaigned to restore security and the prestige of the state, Marzouki congratulated him and sought to quell protests in southern Tunisia that turned violent. The 55-percent to 45-percent battle meant Tunisia's political transition concluded in a state of polarisation. Preceding parliamentary elections were also divided between Nidaa and Ennahda, the moderate Islamist party that didn't field a presidential candidate, but whose ranks informally supported Marzouki for his anti-old regime noises.

Delenda est Carthago. 'Carthage must be destroyed,' wrote Plutarch in the Life of Cato. 'Carthage must be restored!' Or so Marzouki's own security guards at the Carthage Palace appeared to rebuke Marzouki himself on 26 December, as he prepared to step out of the palace and make way for Essebsi. The chair of the transitional justice commission Sihem Ben Sedrine declared the commission had an advance agreement with Marzouki for it to harvest away from the Office of the Presidency the relevant files on transgressions of the regime of deposed President Zine el Abedine Ben Ali.

But just as the commission was turned away by members of the presidential security union, and a debate followed over the legality of transferring the files off-site and out of the gaze of Essebsi. If presidential security was beyond Marzouki's orders, as both Marzouki and Sedrine later publicly confirmed, from whom did those orders come?

For the cognoscenti, this was one of the first signals for what the palace could become under Essebsi, who briefly served as a speaker of parliament under Ben Ali, and as a Foreign, Defence, and Interior Minister under Habib Bourguiba, the country's first president since independence from France over sixty-years ago.

Despite a liberal constitution, how far will Tunisia's new parliament and cabinet bow to the Office of the Presidency? The presidency has constitutional powers to grant specific pardons, and appoint senior military and diplomatic positions related to national security after consulting with the Prime Minister, Habib Essid, who was chef de cabinet in Ben Ali's iron-fisted Interior Ministry until 2001, whom Béji selected Interior Minister after Ben Ali's fall. 'You can't judge what they're going to do just by seeing their declarations,' one of the cognoscenti watching for shifts in the balance of power says before Essid's appointment on 5 January. 'We're still sitting in the classroom, and taking the first lessons.'

Like some slippery figures connected to the Ben Ali regime who have been seeping back into political life through Nidaa Tounus, which dominates Tunisia's new parliament but doesn't have the structures of what some might expect of a political party, the transitional justice commission appeared to have an ear into decision-making circles. And it sought to secure the files before Tunisia's new government consolidates power.

Essebsi has said proper accountability and judicial proceedings must be held for politicians and businessmen who committed during the reign of Ben Ali. But he has also spoken against excluding members of Ben Ali's Rassemblement constitutionnel démocratique from politics for electoral reasons, and Nida is overflowing with established interests.

Concerns began bubbling as early as last February about Nidaa's recourse to the RCD networks, with Essebsi selecting a Vice President in Ben Ali's Social Affairs Minister Mohamed Ennaceur, who has now succeeded as Nidaa head until the party holds its first congress, expected in June. When the decision was made, it triggered something of a brawl between the party's Destourian branch and its left-wing, then led by the party Secretary-General, ex-union chief Taïeb Baccouche.

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