FIVE out of six banks which made submissions to a government committee on indigenisation policy have opposed the mandatory threshold required to dispose controlling interest to black Zimbabweans, the businessdigest has learnt.
This follows a rejection on proposals made by the Bankers Association of Zimbabwe (Baz) to the Financial Services Sectoral Committee tasked with advising government on the empowerment modus operandi.
The Baz submitted that the sector was already indigenised arguing that 85% of banks were owned by locals. Eight foreign-controlled banks — Standard Chartered, Barclays, Stanbic, MBCA, Cabs, Premier, Metropolitan and BancABC— are targeted for the black empowerment drive. They are part of the 25 operating banking institutions in the country, comprising 15 commercial banks, five merchant banks, four building societies and one savings bank.
This week businessdigest looks at proposals made by the six banking institutions — Metropolitan, Premier, Stanbic, Stanchart, MBCA and ZABG.
Metropolitan is a commercial bank registered in 1999. In July 2007, the regulatory authorities approved the acquisition of a 60% stake in Metropolitan by Loita Capital Partners International. The acquisition by Loita, according to the bank’s website, was aimed at bolstering its existing service delivery capabilities, bringing both immediate and long term value to its customers and shareholders.
The bank, according to a draft report compiled by the Financial Services Sectoral Committee, advised the committee to use net asset value, discounted cash floors and the Zimbabwe Stock Exchange market capitalisation as a valuation method for the empowerment exercise. Metropolitan also opposed the US$500 000 cap for banks, but instead said government should push the threshold to US$25 million. The bank is also lobbying government to revise downward to 40% from 51% shareholding that can be taken up by black Zimbabweans in foreign-owned firms targeted for empowerment.
Metropolitan advised government to make it mandatory to list all banking institutions operating in Zimbabwe.
Metropolitan also suggested that “only indigenous banks should mobilise deposits from pensioners and civil servants”.
Premier Bank in its submission said it wanted government to make valuations based on the multiple of book value and multiple of retainable earnings. The bank was, however, mum on the indigenisation threshold currently at US$500 000. With consistency among all regulatory bodies and ensuring that banks are strong and uphold high standards of corporate governance, the bank believes that indigenisation regulations can be effectively implemented within five years.
On ownership, Premier said locals should have a minimum of 29% shareholding and a maximum of 49%. The committee recommended a 40% cap on locals.
Stanbic Bank, a traditional foreign bank headquartered in South Africa, says government should weigh banks based on share capital value as determined by the Reserve Bank book value. The bank differs with the indigenisation regulations in many ways. Firstly, it opposes the time limit saying the compliance period should be 10 years instead of five years. Stanbic also believes the indigenisation threshold should tally with central bank minimum capital requirements. Commercial banks are currently expected to meet US$12, 5 million minimum capital requirements.
The United Kingdom-headquartered banking group is part of the top four banks in Zimbabwe in terms of market share and assets. The bank proposed the use of discounted cash floor analysis as a valuation method. Stanchart was candid in its proposal. The bank said “banks be exempt(ed) from indigenisation”.
Instead, it advised government to “use of a scorecard model where organisations are allowed to meet their indigenisation obligations through a mixture of elements”. Seemingly aware that its proposal to spare banks from the empowerment drive would hit a snag, Stanchart said locals should have a maximum of 20% shareholding in foreign-owned companies.
The shareholding cap could be equity represented in management of such companies (share option schemes) and highly skilled Zimbabweans.
“Foreign banks should not be indigenised,” is what the bank advised government. With at least 76% shareholding in the hands of foreign investors, MBCA believes that the valuation method of the empowerment exercise should be anchored on the book value of the company. On indigenisation threshold, the bank said government should ensure the cap should be three times the minimum capital requirement of each banking category set by the Reserve Bank.
MBCA also proposed the following:
- The financial sector does not face any specific barriers or challenges with regard to indigenisation as it is already 85% indigenised.
- Financial sector to play a critical role in mobilisation of funds for the indigenisation and empowerment programme.
The bank said government should consider investments in venture capital companies and private equity funds as part of the prescribed assets for financial institutions.
Since the unbundling of the amalgamated banks that made up ZABG, the bank was thrown into deep waters. ZABG advised government, its majority shareholder, to apply the discounted cash floor method as a valuation method for indigenisation. The banking group said foreign owned banks valued at US$12,5 million should comply with the regulations. ZABG also toes the government line which compels foreign-owned companies to dispose 51% interest to black Zimbabweans. Government, according to the bank’s proposals, should equally distribute business among the indigenous banks, a position reportedly held by the Baz.