ZIMBABWEAN Finance minister Mthuli Ncube’s move to raid custody vaults at any time to ascertain their contents has all but snuffed out any hope of the country becoming a regional financial services hub, with banking experts predicting a fall in confidence in the banking sector.
In his presentation of the 2024 national budget, Finance minister Mthuli Ncube proposed to empower the commissioner of the Zimbabwe Revenue Authority (Zimra) to raid custodial bank vaults, to abate tax evasion.
People often keep title deeds, educational certificates, marketable securities and cash in the custody-service vaults.
Ncube said: “In order to deter tax evasion, I propose that the Commissioner be empowered to open Custody vaults at any time to ascertain contents and that financial institutions and other companies that offer custodial services receipt the contents of cash in their custody.”
Zimbabwe is trying to make Victoria Falls a regional financial hub which will offer a variety of financial services and institutions.
It has already established the Victoria Falls Stock Exchange as part of that. Yet the country has shown that its government and leaders cannot be trusted with any money at all.
The government previously raided companies’ hard currency accounts and stole people’s monies through unpredictable policy shifts, particularly via currency changes and exchange rate manipulation.
After badly running down the economy and shrinking its tax base, hence low tax revenues, the Zimbabwean government has resorted to extortionate taxes to squeeze more money out of the poor, while remaining extravagant, buying expensive cars and gallivanting around the world using taxpayers’ money.
However, Ncube’s move to raid custody vaults will have far-reaching consequences on Zimbabwe’s reputation as a country where authorities always want to eye and seize people’s money.
While Zimbabwe is destroying its reputation and making it hard to trust it to become a regional financial services hub, another leading hub, Mauritius, is reaping the rewards of good governance and policy consistency.
Since gaining its independence in 1968, Mauritius has undergone remarkable transformation. It now prides itself in having a diversified economy, with a clear economic strategy: to accelerate the established sectors, including agriculture, hospitality, financial services, research and intelligence, and fintech.
Experts say Treasury’s latest move will have ripple effects on Zimbabwe’s banking sector.
An economist, Professor Gift Mugano, told The NewsHawks that the Treasury’s latest move shows an increase in lawlessness by government elites.
“First, it is a sign that we now have lawlessness in the country, because how can you expect a commissioner to raid vaults without a court order? So who is now the law? You would expect that if I have my privacy in a bank, I cannot just be raided like I am a criminal. And, his expectation is that he wants to force people to put money through the formal system,” Mugano said.
“Already, that money is not on the balance sheet of the bank. That is where he is missing the point. The bank does not even know what is in the vault. It does not know if there is an ID or a passport. Yes, it is a common fact that people put money in those boxes, but the bank does not know. The people are going to remove their items from the vaults, and the banks are going to lose income.
Mugano said the government should work to improve waning confidence in the nation’s formal banking system.
“If the banks lose income and they would like to meet their operational costs, they have to raise their bank charges. This is unnecessary. If for example I am evading tax, am I going to wait for the commissioner to come and do his nonsense? No! The minister should deal with the issue on why people are not using the formal banking system and correct that. People are banking because they do not have confidence in the sector,” Mugano said.
The Zimbabwe Allied Bankers and Workers’ Union (Zibawu) secretary-general Peter Mutasa told The NewsHawks that Treasury’s move will see many people banking their money at home.
“Banking is all about confidence. Clients put their money in banks because they believe that their money and affairs are safe with banks. The country is grappling with low confidence with very few people banking their money. This was caused by many successive government policies that caused losses to many economic agents,” Mutasa said.
“This particular announcement will definitely put many people off banking. That means less business for banks and possible job losses. In addition, a lot of people and businesses will be forced to keep their money at home. This will result in increased robberies. It is a disruptive policy that will have serious ramifications.”