Robert Mugabe assisting South African Banks to "invade" Zimbabwe

HARARE – THE First National Bank (FNB) and ABSA — two of South Africa’s top banks — have described Zimbabwe’s economic reconstruction endeavour as a “huge financing burden”, which local banks may not be able to bear, and pledged to bridge the gap.\r\n

Both banks have announced plans to establish operations in Zimbabwe’s banking sector, which currently faces the most devastating liquidity crunch in the economic history of the sector.

FNB and ABSA were part of the 22 companies that came scouting for business opportunities in the country led by the Business Unit South Africa, which subsequently held meetings with President Robert Mugabe, Finance Minister Tendai Biti and local business leaders.

“A lot of things have collapsed in Zimbabwe as a result of a prolonged crisis. Infrastructure has virtually collapsed — your roads, your railways, telecoms, power and water utilities, hospitals, education system.

“In terms of productive capacity, the country is in serious trouble. At the moment, the only sector which is thriving is the retail sector. Now all these challenges lay a huge demand on the financial institutions,” Bobby Madhav, FNB’s chairman for the Gauteng Province, told The Financial Gazette. “And coming from a crisis, very few local banks can carry that huge financing burden.”

Madhav said current efforts by the government and the local business community to fast-track the country’s economic reconstruction had created “a lot of lucrative financing opportunities” for heavily capitalised foreign banks in the form of external lines of credit and foreign direct investment.

The government at the weekend worked out a 100-day action plan for its 12-month long Short-Term Emergency Recovery Plan, which targets 60 percent capacity utilisation by December 2009.

Analysts say, without external sources of financing for both public and private capital spending on infrastructure and plant rehabilitation, the target may be a pipedream as many local banks were still struggling to re-build their balance sheets in foreign currency since the country migrated to a multi-currency system in January.

The few that have resumed lending have only managed to create short-term loan portfolios of up to 90 days for working capital and other short-term financial requirements.

Top local bankers who spoke to this paper said they were also pinning hopes on expected external lines of credit for recapitalisation.

The interest of FNB and ABSA has come at a time when the country has announced a policy to systematically remove capital controls, one of the factors which burglar-barred foreign players from the local financial sector.

Currently, there are only three foreign banks, namely Standard Chartered, Barclays Bank and Stanbic, a subsidiary of Standard Bank South Africa and Africa’s largest bank by assets. Fingaz