A TOP Zimbabwean banker has spoken out on the country's liquidity crunch rocking the financial services sector and the economy, saying government must show policy consistency and re-engage the international community to normalise diplomatic relations while attracting foreign investment.
Barclays Bank MD George Guvamatanga, who is also Bankers Association of Zimbabwe (Baz) president, told bankers last week at a 2013 Zimbabwe Independent Banks and Banking Survey event at a local hotel in Harare that government must move with urgency and clarity to tackle the resurging economic problems which followed the recent general elections.
Guvamatanga said government also needed to recapitalise the Reserve Bank of Zimbabwe (RBZ), indicating a functional and adequately capitalised central bank would restore its lender-of-last-resort status. He said good corporate governance within the banking sector is critical to boosting market confidence, improve liquidity and save financial institutions from collapse.
While deposits grew from US$3,7 billion between June 30 2012 to US$3,9 billion by June 30 2013, banks are saddled with massive non-performing loans. Banks have been keen to lend as shown by the loan-to-deposit ratios of over 90%, but companies are failing to repay, thus contributing to the liquidity problem. The deteriorating balance of payments due to the widening gap between exports and imports, among other things, is exacerbating the situation.
Analysts say banks need a massive cash injection to avoid a full-blown crisis across the economy -- reeling from company closures and retrenchments -- given the persistent negative balance of payments.
"I have a long career in treasury space and I know that if there is anything that a bank can surrender to, its liquidity. If there is no money, you are as good as dead," said Guvamatanga.
Apart from liquidity challenges, local banks have failed to attract deposits due to a reputation of bad corporate governance that has seen some players closing and depositors losing their money.
Guvamatanga said the country, which lost over US$1 billion before and after elections, needs to court confidence among investors after the RBZ indicated the collapse of banks was linked to bad corporate governance even if the sector has one of the most water-tight corporate governance frameworks in the country.
"The starting point for banks is to put the interest of the depositor first. This means depositors will give you money if they believe you are not going to lose it," he said.
The Baz president said Zimbabwe's reputation of lacking policy consistency and sending mixed signals to investors was damaging.
He said the banking sector requires clarity on policies that have a direct bearing on banking confidence, for example, laws on indigenisation, the land reform policy and multiple currency regime tenure.
"If we are to propel this economy forward, we need to reduce discretion on all regulations and implement clear-cut policies that are backed by legislation. This will minimise misrepresentation and policy reversal," said Guvamatanga.
The international community, according to Guvamatanga, closely watches an economy's performance on the International Monetary Fund (IMF) and World Bank ratings, hence the need for government to consolidate relations with the IMF staff monitoring programme after more than a decade of isolation.