Home > General > Standard Chartered Bank threatens to pull out of Zimbabwe

Standard Chartered Bank threatens to pull out of Zimbabwe

HARARE – Standard Chartered may be forced to abandon its operations in Zimbabwe if the government pushes ahead with a bill to limit foreign investors’ holdings in banks to 25 percent, the bank’s Africa chief executive Diana Layfield said.

The financial institution wholly owns Standard Chartered Zimbabwe.

A bill floated last week but not yet turned into law would force investors to require special approval from the country’s Finance minister to own more than 25 percent in any financial institution.

The bill will prohibit banks from buying their own stock or making loans using their shares as collateral.

Institutions will need Finance ministry’s authorisation to exceed the 25 percent shareholding.

Asked if Standard Chartered would be able to stay should this bill become law, Layfield said: “I think it would be very hard for us to do so.”

But Layfield, who was speaking to the Wall Street Journal on the margins of the African Development Bank meetings in Kigali, said it was too soon to fret about the bill.

“It’s a very early stage piece of legislation and there’ve been a number of those over the years,” she said.

“We would absolutely like to continue to play a very strong part in Zimbabwe’s economy. But how that happens is something that we’ll have to discuss with the government,” she added.

This comes as analysts have said the draft law could be unfair to foreign investors.

They, however, said the policy — also limiting individual shareholding in the financial institutions to five percent — is useful in enforcing good corporate governance and protecting depositors in indigenous banks.

Eric Bloch, an economist, said the “piece of legislation will protect depositors from various scams we have seen play out in the banking sector”.

“However, there are institutions like Barclays and Standard Chartered, they have been responsible and loyal in the past so the ministry of Finance must heed when they apply for exemption,” said Bloch.

There are 21 banks operating in Zimbabwe, 16 indigenous and five foreign-owned. The foreign controlled are AfrAsia Bank, Barclays, Standard Chartered, Stanbic and MBCA.

John Robertson, an economic analyst, said it would be unwise for Zimbabwe to try to control foreign-owned institutions.

He said while the law “is okay on local banks considering the amount of mischief they have subjected depositors to”, he doubted if the foreign institutions would comply.

“The country should seek to fix this mischief and not attempt to regulate foreign banks that are only answerable to their headquarters,” said Robertson.

This comes as Zimbabwe is implementing an indigenisation policy that compels foreigners to cede 51 percent shareholding to locals.

Until recently, when President Robert Mugabe shifted stance on the implementation of the empowerment programme, foreigners were expected to give up majority shareholding in banks.

Mugabe ruled out a one-size-fits-all approach, saying only companies utilising the country’s natural resources will be required to immediately turn over majority stakes to indigenous Zimbabweans.

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