Biti asks US to lift sanctions on three banks

Finance Minister Tendai Biti wrote to the United States government to lift sanctions on three banks, the Infrastructure Development Bank of Zimbabwe, Agribank and ZB Bank and Building Society, to speed up economic reforms.

US ambassador to Zimbabwe Charles Ray urged his government to comply saying the banks no longer had any role in supporting President Robert Mugabe.

“This would cost us little while working to the advantage of reformers who stick their necks out to bring democracy back to Zimbabwe, and it would serve to undercut and weaken ZANU-PF rhetoric regarding sanctions. If we believe that sanctions give us leverage, now is the time to use it,” he said

Full cable:

Viewing cable 10HARARE9, RECOMMENDATION ON RESPONDING TO ZIMBABWE FINANCE

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C O N F I D E N T I A L SECTION 01 OF 02 HARARE 000009

SIPDIS

FROM THE AMBASSADOR FOR ASSISTANT SECRETARY CARSON AND NSC

DIRECTOR GAVIN

E.O. 12958: DECL: 01/07/2020

TAGS: PREL PGOV EFIN ETTC ZI

SUBJECT: RECOMMENDATION ON RESPONDING TO ZIMBABWE FINANCE

MINISTER BY DE-LISTING BANKS

REF: 09 HARARE 987

Classified By: Ambassador Charles A. Ray for reasons 1.4 (b) & (d).

¶1. (C) SUMMARY: Finance Minister Tendai Biti sent me a letter

requesting that three banks be removed from Treasury’s

sanctions list. I recommend that we honor Biti’s request.

The information available to me indicates that these three

banks no longer have any role in supporting Mugabe. This

would cost us little while working to the advantage of

reformers who stick their necks out to bring democracy back

to Zimbabwe, and it would serve to undercut and weaken

ZANU-PF rhetoric regarding sanctions. If we believe that

sanctions give us leverage, now is the time to use it. END

SUMMARY.

¶2. (SBU) On January 4 I received a letter from Biti

requesting changes in the list of specially designated

nationals (SDNs) that are targets of USG financial

restrictions. The letter, dated December 29, names three

state-owned banks as candidates for de-listing: the

Infrastructure Development Bank of Zimbabwe (IDBZ), Agribank,

and ZB Bank and Building Society (ZB).

¶3. (SBU) Biti argues that de-listing these banks will support

his economic reforms. As SDNs these banks cannot conduct

transactions with U.S. banks and are therefore “unable to

undertake normal treasury operations. This has resulted in

the slow pace of some Government projects and programmes.”

The letter also notes that “these banking institutions are

owned by the Government of Zimbabwe and are apolitical as

reflected by their shareholding.” The GOZ owns 85 percent of

IDBZ, 100 percent of Agribank, and 26 percent of ZB.

¶4. (SBU) IDBZ has been in business since 2005, when the GOZ

established it for the purpose of financing construction of

roads, dams, utilities, and other infrastructure. The bank

has been largely inactive due to a lack of funding — the

hyperinflation wiped out its initial capitalization of 1

trillion Zimbabwe dollars. All members of the IDBZ board are

GOZ appointees. The current chief executive officer is

Charles Chikaura, a former deputy governor of the Reserve

Bank of Zimbabwe (RBZ) with no known political affiliation.

Chikaura left the RBZ when Gideon Gono became governor in

¶2003.

¶5. (SBU) Agribank’s main line of business is lending to

small-scale farmers, including those cultivating communal

land. In many rural areas, Agribank is the only source of

financial services. Shareholding in Agribank is split evenly

between the Ministries of Finance and Agriculture. Agribank

is led by a 10-member board of directors consisting of three

executive directors and seven non-executive directors. The

executive directors are either Ministry of Finance officials

or appointed by them. Two of the seven non-executive

directors are civil servants, one from each of the two

ministries. One non-executive director, Wilson Nyabonda, is

a member of the Zimbabwe Commercial Farmers Union (ZCFU).

Some members of the ZCFU have benefited from Mugabe’s land

reform program. Another non-executive director, Sij Biyam,

has publicly supported politicians who oppose Mugabe. The

other three non-executive directors are independent

professionals with no apparent political affiliations.

Qprofessionals with no apparent political affiliations.

¶6. (C) ZB’s largest shareholder is the National Social

Security Authority (NSSA), which holds 42 percent of the

bank’s equity. The Ministry of Finance controls 25 percent

of ZB shares, Old Mutual Life Assurance owns a 5 percent

stake, and the remaining shares are held by ZB employees and

the public. NSSA is a GOZ-sponsored pension fund supported

by contributions from the wages of private-sector employees.

NSSA’s board chairman is Albert Nau, a politically

unaffiliated business professional who previously chaired the

ZB board. The current chairman of ZB’s board is Bothwell

Nyajeka, an insurance executive known to be politically

independent. Nyajeka replaced Richard Hove, a ZANU-PF

politburo member who died last year. But even when Hove

chaired the ZB board, there was no evidence of political

interference in the bank’s operations. Post’s LES economic

HARARE 00000009 002 OF 002

specialist previously held management positions at ZB and

reports that the bank’s credit committee, of which he was a

member, has always made decisions exclusively based on

commercial considerations.

¶7. (C) As noted reftel, I presume that OFAC has classified

information to support designation of the three banks Biti

wants de-listed. I have received no response to my request

for such information. All of the information available to me

locally indicates that these banks are professionally managed

and commercially driven entities. Agribank and ZB have

provided candid responses to all of our requests for

information, including closely held lists of their most

important banking clients.

¶8. (C) Biti’s letter is an echo of my most recent

conversation with him (reftel). The motivation behind his

request is not to throw ZANU-PF a bone, but rather to see USG

policies adjust to the new circumstances in Zimbabwe. Biti

would like to see these three banks in a position to

contribute to Zimbabwe’s economic recovery. Like all

commercial banks in Zimbabwe, Agribank and ZB sustained

severe financial losses during the hyperinflation. But now,

as the banking system recovers, these two banks’ status as

SDNs impedes recapitalization. Biti would like to sell a

portion of the GOZ’s stake in both banks, but this is not

practical while they are SDNs.

¶9. (C) I believe it is in our interest to honor Biti’s

request. ZANU-PF no longer has the means to abuse these

three banks. The only risk in removing them from the SDN

list is that Mugabe may get the incorrect impression that we

are loosening the screws on him and his cronies. But that

will be their problem, not ours, and it would serve to weaken

the impact of ZANU-PF’s continuing rhetoric regarding

sanctions and their economic impact.

¶10. (C) There is, I sincerely believe, far greater risk for

us in ignoring Biti’s request. Biti, his MDC colleagues, and

other brave Zimbabweans are in a high-stakes, long-term

struggle to restore democracy to their country. We should

not miss opportunities to help them “chip away at the fascist

dictatorship,” as Biti likes to put it. De-listing these

three banks will, at no cost to us, let Biti push his reform

agenda a few inches forward and further bolster his standing

as the most effective minister in the transitional

government. Ignoring his request, by contrast, will leave us

with the untenable status quo of our current sanctions

policy, which has so far had no effect on Mugabe’s actions.

If we believe sanctions give us leverage, now is the time to

use it to Biti’s advantage, and perhaps be an impetus at some

point for further moves in a positive direction.

RAY

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