BANKING
Mugabe grabs control of Zimbabwe’s banks
Mzwake Mzala
Published: 26-NOV-04
It began with the nationalisation
of land, then
mines and now President
Robert Mugabe’s
administration has pointed its
poisoned chalice at the banking
sector with the creation of
a banking phoenix christened
the Zimbabwe Allied Banking
Group (ZABG).
The financial behemoth,
which will be capitalised to
the tune of Z$2trn, will be
made up of eleven banking
institutions that failed to
meet new minimum capital
requirements of Z$10bn
set by regulators in January.
When the entity becomes
operational in January 2005,
relief will be brought to millions
of depositors who had
their money locked up in the
collapsed banks, as they will
be reimbursed their money by
the end of January 2005.
The central bank says the
institution, which will be
owned by the government
through a special purpose
vehicle, would be three or four
times bigger than individual
existing banks. Central bank
chief Gideon Gono says the
nationalised banks will be
freed from
the shackles of the
government by 2007.
However, critical observers
view the move to nationalise banks as reflecting the commitment
of the government to retain state control on key assets and build
a socialist state. They say Harare’s return to socialism is a characteristic
of the irrationality of a desperate regime that will stop at nothing to stay in power.
The ruling Zanu PF party faces the
opposition MDC in crucial elections set for March 2005.
Besides targeting the banking sector, which for years had been
considered the bonfire of black empowerment until Gono introduced
some painful reforms in 2003, the government is eying
the lucrative mining industry.
Accordingly, President Robert Mugabe in September proclaimed
the seizure of half of every foreign owned mine operating
in the country, shifting his focus from land repossession to
the mining sector.
“There can be no absolute ownership
of natural resources in Zimbabwe,” said
Mugabe.
Land is not the only issue that
needs reform. There are still many other
issues we have to address, like the mining
sector. We will ask that government be given
a 50% share in the mines.”
In addition, a new mining legislation
stipulating the surrender of 49% shareholding
to locals awaits debate in parliament.
Although the Chamber of Mines suggest the
empowerment stake be sliced to 40% and
that foreign companies be allowed to scout
for black, local shareholders over a period of time the government
can not take anymore of that.
And to back up the plan, Mugabe last month complained that
South African companies were exploiting the country’s platinum
reserves.
All these uncertainties, which have sent shivers down the
spines of miners, has led to a cutback in investment and total
disinvestments. Anglo Ashanti has since sold its Zimbabwean
operations to Mwana Africa.
Investors see the transfer of mines to favoured black owners
as
expropriation akin to the land grab initiated in 2000. Africanisation
or indigenisation, investors say, evokes memories of
Zanu-PF’s previous commitment to a state-controlled socialist
economy. As such, international jitters about Harare’s economy
in the wake of the mines threat are increasingly turning to fullblown
panic.
According to the Zimbabwe Congress of Trade Unions
(ZCTU), four mines that were controlled by the governmentrun
Zimbabwe Mining Development Corporation (ZMDC) have already been forced to shut down because of mismanagement while more than 3 000 employees have been
forced out of employment in the sector in the past four years.
Observers say besides ‘africanising’ mining and banking, the
next target could be the commercial sector.
With 24 years of experimenting with command economics
and free market reforms, what Zimbabwe boasts is a disintegrating
and devaluing economy, which is dramatised by frightening
shortages of essential commodities
and medical drugs. Although
inflation is receding at 251%, it is still the highest in the region.
Despite claiming an end to the land grab exercise, the government
has given six companies and estate firms three months
to give up more than one million hectares of land in a fresh
campaign to seize corporate-owned land. Personal assets have
also not been spared in the government’s blitz against economic
‘saboteurs’ and the fight against graft.
Businessman Mutumwa Mawere has had
his multi-million dollar asbestos mines
and other ventures seized after falling out
with the authorities.
But businessman and economist
Jonathan Kadzura defends the return to
socialism.
“What the government is saying to
these foreign mines is can they show the
reflection that you are mining in Africa.
We need our people to participate in the
economy,” says Kadzura.
On the contrary, Zimbabwe’s main
opposition party, the MDC, sees nationalisation as the wholesale
plunder of
the country’s resources by the ruling elite. It says the
programme, which many countries have abandoned is the highest
act of desperation and could lead to economic disaster.
“They (the government) are a vampire. They have to touch
something. They don’t know what direction to take,” remarks
Tendai Biti, the party’s secretary for economic affairs.
“When you preside over a failed state and economy you must
continuously create a victim ideology to justify the victimisation.”
Under nationalization, the likelihood of company closures
would increase, say analysts. The Confederation of Zimbabwe
Industries (CZI) reports that more than 1 000 companies have
shut down since 2000. It records that 25 firms are battling to
remain in production while eight are sounding death knells.
Nonetheless, by setting its sights beyond the land reform, Harare
is trying to stroll where Soviet Union angels feared to tread
decades ago.
Other African countries
that have tried a go at the
largely discredited ‘Africanisation’ are Uganda and DRC formerly
Zaire. As for Russia, it has since adopted some dramatic
market reforms.
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