4 September 2014

Zimbabwe: Govt Should Save POSB

THERE is a potentially devastating financial situation at the People's Own Savings Bank (POSB), created by government to mobilise savings and promote a savings culture across the country. With the widest network in the country, POSB, for over 100 years, served both urbanites and rural folks, particularly those within the low income range.

There are many people who will testify to having been introduced to the savings culture while still at primary or secondary school when their parents opened bank accounts for them at POSB years before the economic crisis that ravaged the economy in 2000. The green or red books issued by POSB then were a source of pride; parents opened accounts for themselves or their children to save for unforeseen situations, or basically for school fees, among other things.

Then, it was easy to see one's savings grow by way of interest, unlike the erosion of savings people are now witnessing through diminution of the same due to bank charges and other costs that are severely undermining confidence in the banking sector. In terms of the People's Own Savings Bank of Zimbabwe Act {Chapter 24:22}, POSB still has the mandate to encourage savings and provide banking services to the people of Zimbabwe regardless of geographical location.

Although the institution has been affected by economy-wide problems related to the liquidity situation in the country since dollarisation of the economy in 2009, its predicament was worsened during the six months to June 31, 2014 by a tax bill from the Zimbabwe Revenue Authority, which has recently been raiding companies for tax audits that have resulted in many companies having their bank accounts garnished to pay tax arrears accrued through default or evasion.

As we reported in this edition, the Tax Bill resulted in POSB extending its loss position of US$130 956 during the interim period last year to a loss of US$340 288 during the reporting period to June 31, 2014, a 160 percent decline. This will inevitably worsen the financial position of the bank, although management believe the situation is under control. We believe that government should intervene and recapitalise POSB and ensure it returns to viability as quickly as possible and allow it to play a meaningful role in deposit mobilisation in the country.

Bank failures over the years have resulted in an erosion of confidence in the sector, and this has been worsened by exorbitant bank charges, fees and other costs that have resulted in depositors losing money rather than earning interest. Consequently, the incentive to save has been lost. POSB can play that role again.

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