All but one foreign-owned banking institutions operating in the country have complied with country’s local ownership requirements, a cabinet minister said today.
Banks, which include Standard Chartered, Barclays, Stanbic and Afrasia, had been under pressure to comply with Zimbabwe’s indigenisation law which demand that local blacks own a minimum of 51 percent in companies valued over $500 000.
Foreign-owned banks had been a subject of debate, with fears of capital flight should they be forced to comply, but indigenisation minister Francis Nhema said government had approved empowerment plans submitted by most of the financial institutions.
“Most of the banks have complied and we are happy, it is now more on us to process the papers,” Nhema told journalists, declining to give details.
“As of now, we have one which we are discussing with, the others have put down their plans and we are happy. The one which is outstanding is not because they are resisting but we are still discussing the plans with them.”
Nhema said government was appreciative of the current liquidity constraints that had seen some local banks approaching foreigners for funding, which diluted the shareholding structures.
“We do understand that there are liquidity problems and therefore we will give them more time to comply,” he said.
“Even if you ask for more funding you have to state to us and we approve when you will comply. You might temporarily give foreigners an edge, probably 40-60, which has happened with one bank, but you give us the timeframe within which you will have complied.”
Nhema said government had not faced any resistance from companies in the rest of the economy on compliance.
“…what has been happening is that companies have been coming through seeking advice on how they can comply. Initially they were hesitant,” he said.
The indigenisation law is seen as inhibiting Zimbabwe’s ability to attract new investment, after it registered a meagre $67 million in foreign direct investment in the first half of 2014, down from $165 million over the same period last year.
On community share ownership trusts (CSOTs), Nhema said government was now aiming at making the trusts commercially viable after noting that they had been focusing on social projects.
A total of 16 CSOTs out of the registered 72 are operational.
“We also have observed that in most cases they (trusts) lack the business skills that are required for them to run as profit organisations as opposed to social institutions,” he said.
“We are emphasising that the projects they do must be income generating so that the trust is sustainable.”
He said projects funded through the trusts must now be of a national rather than local area focus to ensure that the whole country benefited from the trusts.
Nhema said government was also changing the requirements for beneficiaries under the Youth Development Fund (YDF) to curb growing cases of loan defaults.
Financial institutions such as Central African Building Society (Cabs) and CBZ, which are managing the funds, have complained of high cases of non-performing loans, forcing a rethink of the programme.
Nhema said youth were now required to provide guarantors for their projects in cases where they did not have collateral.
“Some form of guarantee must be provided. Even if they don’t have collateral, they must have a guarantor,” he said.-The Source