Critical for the banks, as with the rest of the economy, is finding the liquidity to cope with the newly dollarised economy. In the short term, for several financial institutions the servicing of the credit needs of business has taken a back burner while they dash for cash. This is because the Reserve Bank announced a 30 September deadline for new minimum capital requirements of $6.25m for commercial banks and $5m for merchant banks and building societies – requirements which will double by March 2010.
Banks that focused on corporates dealing in export sectors are doing better, and many started to wind down their Zimbabwe dollar holdings at the end of 2008 to build up US dollar reserves. Foreign-owned banks like Barclays, Stanbic and Standard Chartered will have no trouble accessing funds. For the rest, looking abroad seems the best bet, given the low savings rates in the economy at present.
Profile: Nigel Chanakira
As CEO of Kingdom Financial Holdings Limited (KFHL),
which has operations inBotswana and Malawi as well as
Zimbabwe, Nigel Chanakira is one of his country’s
leading businesspeople. KFHL has for some years occupied
a central place in Zimbabwe’s financial ecology. Chanakira
has also been at the heart of a majorboardroom struggle,
which eventually led to the break-up of a merger deal KFHL
had arranged with Meikles Africa, Taganda Tea and Cotton
Printers. With the dreamsof developing world-beating
conglomerates behind him for now, Chanakira is
currently more focused on the core banking business.
“Our priority is getting liquidityinto the system”, he says,
“as savings rates have declined to about 3% of GDP –
if you look at the Asian Tigers it is closer to 25-30% –
that’s what we need.”
Foreign banks are now looking to enter the market. South African banks are keen to take stakes, and Nigeria’s, with experience of expanding in West and East Africa, have been making inquiries into several banks including NMB (formerly National Merchant Bank). If NMB receives outside investment, it could then take a position as market maker, lending to local banks.
Several banks have weak balance sheets, and so mergers and acquisitions will likely increase in coming months. A top contender among local banks that might be tempted to purchase smaller banks is the Commercial Bank of Zimbabwe, which along with Barclays, holds half of banking assets in the country; as one of the largest retail lenders, it also acts as a well-diversified financial group, with stockbroker and property subsidiaries.
The Zimbabwe Stock Exchange (ZSE) has been buoyant in the second quarter of the year, recently doubling its market capitalisation to around $2bn, despite locals exiting positions that they previously used as a hedge against inflation. Renaissance Capital believes there is a bullish outlook ahead, with a base-line scenario of a $2.5bn market capitalisation by the end of 2009.
Foreign investors agree and have been piling into the ZSE. Funds associated with George Soros are active, as well as UK and US investment houses. High-flying stocks include Hippo, the successful agribusiness concern, National Foods, which has benefited from the end of price controls on foodstuffs, and brewers Delta Corporation, which has recently received new investment from shareholder SABMiller.
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