THE spat between Youth Development, Indigenisation and Empowerment minister, Saviour Kasukuwere and Reserve Bank of Zimbabwe (RBZ) governor, Gideon Gono, over empowerment in the banking sector shows that government is dysfunctional, analysts said last week.

In a notice gazetted over a week ago, Kasukuwere's ministry gave foreign banks one year to hand over 51% to locals as the empowerment crusade reached the banking sector.

But Gono dismissed the notice as of no force without amendments to existing legislations that give him power to superintend the banking sector, namely the RBZ Act and the Banking Act.

Kasukuwere hit back on Thursday saying he was talking to shareholders of the concerned banks and not the regulator.

"We are engaged with the shareholders, not regulators. The two are very different. A regulator is not a shareholder. The law is for shareholders to comply and then we can discuss with others," Kasukuwere wrote on his Facebook profile.

The notice comes at a time local banks have been knocking on the doors of foreign institutions to open the windows to international capital due to the liquidity constraints obtaining in the country.

Analysts told The Standard last week that Kasukuwere's notice was of no force as it is not law.

"For it to be law, it must be an Act of Parliament or Statutory Instrument," a lawyer said.

"To enforce it, he relies on the regulator, the entity that issues licences which is the Registrar of Bank, an office that resides in RBZ."

The lawyer, who could not be named for professional reasons, said without consultation with the Minister of Finance, that notice would remain invalid.

There were indications last week that some banks that were on the verge of securing lines of credit were told to wait a bit longer as those with capital wanted to make a preliminary analysis of the implications of proposed bank take-overs.

This development has dealt a huge blow to the economy which is already reeling from a liquidity crisis as multilateral lenders want the country to settle its debts first before they could avail lines of credit.

Foreign-owned institutions have built a solid reputation among depositors, more so after the banking sector had witnessed over a dozen bank failures involving indigenous banks.

Statistics from RBZ showed that when ReNaissance Merchant Bank was placed under curatorship last year, there was a flight of deposits amounting US$1,2 billion from indigenous banks to perceived stable banks that are mostly foreign-owned.