Political fallout over bank

A coporate war, with political undercurrents, has broken out over the need to urgently rescue the collapsing ReNaissance Merchant Bank – which is technically insolvent – amid revelations that the institution is a nexus for volatile conflicting interests.

Finance Minister Tendai Biti and Reserve Bank Governor Gideon Gono are pushing to rescue the bank through a $20-million bail-out package from National Social Security Authority (NSSA) but have met with fierce resistance from some employers and workers, who say the deal is riddled with corruption and patronage.

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NSSA is a statutory corporate body formed by an Act of Parliament in 1989 and tasked by the government to provide social security to Zimbabwean workers. It is managed by a tripartite board constituting equal representation from government, Employers’ Confederation of Zimbabwe (EMCOZ) and the Zimbabwe Congress of Trade Unions (ZCTU).

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Workers, through ZCTU, say they don’t want their money to be used to bail out an insolvent bank run down through abuse of depositors’ funds and managerial ineptitude. They say rescuing ReNaissance would be tantamount to rewarding corruption and incompetence.

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Bankers say ReNaissance is a volatile nexus of incompatible political and business interests. “The ReNaissance crisis is explosive. There are too many conflicting interests and that’s why all these fights have now erupted,” a senior banker told the Sunday Times. “What you are seeing in public is the tip of an iceberg. There is a burning corporate war raging in the boardrooms and behind the scenes.”

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ReNaissance Bank is wholly owned by ReNaissance Financial Holdings which has interests in ReNaissance Securities, ReNaissance Capital and Africa ReNaissance Corporation.

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A recent investigation by the Reserve Bank into ReNaissance Bank affairs exposed a gross violation of banking laws and regulations, chronic liquidity and income-generation problems, insider-lending and related-party exposures, weak corporate governance structures and internal controls, inappropriate shareholding structure, undercapitalisation and systematic abuse of depositors’ funds, leading to the removal of senior board members and management.

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Biti and Gono insist, in line with their mandate, they have to intervene to save ReNaissance to protect the fragile banking sector from systemic contagion and vulnerabilities which may lead to a sector-wide collapse. Several Zimbabwean banks collapsed in 2004 due to the economic meltdown, liquidity problems and mismanagement.

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“First, I would like to state that what happened at ReNaissance could have been avoided. The main problem there was a breakdown of corporate governance structures which led to the conflation of shareholders, management and the board interests,” Biti told the Sunday Times.

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While Biti insisted he was motivated by the need to protect the banking sector, vocal tycoon and President Robert Mugabe’s nephew, Philip Chiyangwa, said this was not true, because several other banks in trouble had not been bailed out by government.

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National Indigenisation and Economic Empowerment board chairperson David Chapfika accused Biti of abusing public funds to rescue a bank in which a brother of his MDC-T colleague is a major shareholder – Timeslive