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Massive job cuts rock banking sector

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ZIMBABWE’S financial services sector has been hit by massive job cuts due to a floundering economy and the outbreak of the Covid-19 pandemic as the future of the traditional brick-and-mortar banking comes under threat, a business executive has said.

BERNARD MPOFU
Unlike at the turn of the millennium where banks would trumpet the opening of new branches with their marketing teams often using the then buzzwords, “spreading tentacles” as they grew their footprints, new digital banking platforms have made operations much leaner and effective while sending many employees to the streets.

Just recently, CBZ Bank, Zimbabwe’s largest bank by deposits, announced that it was carrying out a voluntary retrenchment exercise, a development signalling a spate of more job cuts in the economy.

Chris Mugaga, Zimbabwe National Chamber of Commerce chief executive, told The NewsHawks that a conservative lending approach due to rising inflation had forced most banks to rely on non-funded income.

The landscape of Zimbabwe’s banking sector is shifting significantly with the brick-and-mortar model being increasingly replaced by the digital banking model. A number of factors could be contributing to this, Mugaga said.

“Firstly it’s the economic environment. When the environment is harsh, one of the major cost drivers for organisations, which is wages and salaries, becomes unsustainable and the only way to handle it is to replace labour with machinery or technology and that is what most of the banks are doing.

“Secondly for the past 10 years, if you look at banks in Zimbabwe, they had been over-depending on non-funded income as opposed to interest income or funded income which is generated through interest charges. That model alone where banks would thrive on non-funded income was not sustainable. So what could be happening is the non-funded income component of banking sector had reached maturity where banks can no longer continue at that level and the only way out is to close some of the branches in order to sustain their operations.”

CBZ, in a circular to employees, said Covid-19 had disrupted the business environment.

“The Covid-19 pandemic has resulted in many changes in the Corporate landscape and the way we do business,” reads the circular in part.

“As we venture into a new and changing business model and new ways of work, we will inevitably need to review our current structures and operations. We acknowledge that there are some colleagues amongst us who may not be willing or able to undertake this journey of change, and will want to take the opportunity to pursue other interests. We are therefore pleased to announce the offer of a Voluntary Severance Package for any employees who willingly, freely, and voluntarily wish to consider pursuing opportunities outside of the Organisation.”

Before CBZ announced its plans to retrench, Stanbic Bank,  the local unit of South Africa’s Standard Bank, had also cut jobs.

Stanbic Bank has entered into an agreement with representatives of nearly 160 employees who were retrenched as the financial institution remodels its business following the outbreak of Covid-19 pandemic and an aggressive digitisation drive.

A copy of the settlement agreement seen by The NewsHawks shows that retrenched workers will, among other perks, receive service pay, gratuity, notice pay and benefit from a comprehensive programme to empower the retrenched workers, among others.

Zimbabwe’s financial services sector has been hugely transformed over the past decade, with modern technology giving traditional banking an innovative, seamless and controlled structure never experienced before.

Mobile and internet banking has become the primary point of contact for banks as seen in 2018, with more than one million users in Zimbabwe having increasingly become reliant on quick digital solutions, like online wallets, for banking.

This move towards mobile and internet-based banking has come at a cost. Risks associated with fraudulent activities by support staff in the information technology departments of banks and the absence of a human face who can fully interact with customers are some of the downsides of this new trend in banking.

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