Connect with us

Support The NewsHawks

Business

Proposed bank mergers illegal — Biti

Published

on

FORMER Finance minister Tendai Biti (pictured), who is also a former chairperson of the National Assembly’s Public Accounts Committee, said the proposed mergers of financial institutions involving government entities do not pass the due diligence test.

BRIDGET MANANAVIRE

The chief merger is a CBZ Holdings, ZB Financial Holdings, First Mutual Holdings Limited (FMHL) and First Mutual Properties (FMP), in which the government, in collaboration with local and international bankers, is working on an ambitious project to create the biggest financial services company in the country, with an asset base of over US$2.5 billion.

The authorities are also considering consolidating six financial institutions controlled by government into three big ones. The consolidation process will create five major divisions consisting banking, insurance, investment, property and agriculture.

Biti said the mergers, particularly the one involving CBZ, ZB and FMHL and FMP, was “pure theft of public assets, as it has no basis in economics and business”. “The Reserve Bank of Zimbabwe as the regulator was supposed to do due diligence. The deals are supposed to go through a fitness test,” he said.

“Because public assets are involved, the deals were supposed to come to parliament. These deals involve National Social Security Authority (Nssa) shares which are being transferred to one person. The Competition Act is against monopoly.”

The Competition Act is there to promote and maintain competition in the economy of Zimbabwe; to establish a Competition and Tariff Commission and to provide for its functions; to provide for the prevention and control of restrictive practices, the regulation of mergers, the prevention and control of monopoly situations and the prohibition of unfair trade practices; and to provide for matters connected with or incidental to the foregoing.

According to section 28 of the Competition Act: “(1) Subject to this Act, the Commission may make such investigation as it considers necessary — (a) into any restrictive practice which the Commission has reason to believe exists or may come into existence; (b) in order to ascertain — (i) whether any merger has been, is being or is proposed to be made; (ii) the nature and extent of any controlling interest that is held or may be acquired in any merger or proposed merger”.

The new mergers being considered, according to a government advisory, involve a merger of FBC Holdings Limited, in which the National Social Security Authority (Nssa) is the single largest shareholder and National Building Society (NBS), in which Nssa is the only shareholder.

The other merger involves Agricultural Finance Company (AFC) — formerly Agribank — and the People’s Own Savings Bank, both owned by the government. The proposal also includes plans to merger the Zimbabwe Women’s Microfinance Bank and the Empowerment Bank, also owned by the government.

According to the mid-term monetary policy by Reserve Bank of Zimbabwe governor John Mangudya, as at 30 June 2021, the banking sector comprised 13 commercial banks, five building societies and one savings bank. In addition, there were 178 credit-only microfinance institutions, eight deposit-taking microfinance institutions and two development financial institutions under the purview of the central bank. The banking sector had total assets of ZW$486.4 billion, total loans and advances of ZW$142.79 billion and a net capital base of ZW$72.90 billion as of June 2021.

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Popular