Banks should act responsibly

Minister Biti’s US$4 billion budget has not quite taken off the ground three months into the year because of lack of financial resources.
Banks have said they do not have enough to meet demand and in instances where they do lend, the terms and conditions are restrictive.
Some observers say more and more companies are closing business in Harare and other parts of the country as they increasingly find the going tough. Other firms are having to downsize drastically, rendering hundreds of people jobless.
Many families are now operating on shoestring budgets because of the precarious liquidity situation. The real value of the US dollar is now being felt. I was chatting on Monday with my sister from Zambia that a few years ago one could misplace a US$100 bill and not feel it at all but now one knows exactly where they have placed their five dollar note and if they cannot locate it the entire house or office is turned upside down until it is found.
Does someone relate to this? Do I hear chuckles in the background?
Some experts have even revised growth projections because of the challenges that have persisted in this quarter. They say nothing short of miracle will carry the day for Zimbabwe.
Indeed, the good thing is that God never runs out of miracles, so we know if we call on Him sincerely, He will answer. He sustained us in the murky waters of 2008 and He can do it again and again.
Under the current circumstances, the economy can use every cent it can get. This is not a hypothetical statement. It is literal.
One, therefore, wonders why some banks still choose to keep millions of dollars stashed in Nostro accounts instead of channelling them back home to fund the productive sectors of this economy.
Central Bank Governor Dr Gideon Gono was frothing on the mouth last week as he explained that some banks, particularly some of the big boys in town, have not complied with the directive to bring 75 percent of their funds onshore.
The Bankers’ Association of Zimbabwe has admitted that indeed some banks are not in compliance and has recommended the compulsory issuance of Negotiable Certificates of Deposits against funds repatriated from offshore accounts.
Dr Gono is expected to hold a meeting with the banks that have been caught with more than 25 percent in their offshore accounts. We hope a solution will be found and that sound reasoning on the part of the banks will prevail.
That some of them are bringing the money and offloading it on blue chip companies at concessionary interest rates is not exactly plausible. There is need to ensure that funds are not directed to a selected few while the rest of the economy remains starved.
On the other hand, banks would also want to lend to those with the capacity to repay, particularly at a time when reports are that companies and individuals alike are defaulting.
This picture means that there is need for a proper channel through which transfers from Nostro accounts are processed. There should never be a hide-and-seek relationship between banks and their superintendent, the Reserve Bank.
The speculative behaviour by banks that characterised the wild days of 2008 proved costly to the economy because banks, like others in that desperate state, sought to beat the system in one way or the other.
Let’s discard that spirit and begin to work for the good of our country.
As responsible corporate citizens, banks need to adhere to the 75 percent release of the funds to finance economic activity without necessarily having to be flogged into compliance.
As of last Thursday US$82 million was owing, so we would want to see the funds transferred to onshore accounts to boost liquidity.
Where there could be a genuine reason for variance as in instances with some banks that were given a reprieve last week, let it be so but the RBZ should not allow any dilly-dallying on the part of some banks.
Presently the liquidity crunch poses the greatest threat to the economy and efforts to inject more funds need to be sustained. Any impediments should be dealt with decisively. Excess balances in the Nostro accounts should help improve the situation.
Productive sectors are thirsting for funding so we need to broaden the catchment area instead of blocking inflows from the few available sources such as the Nostro accounts.
My understanding is that the funds kept out there, particularly the excess figures, are doing much to sustain economies in the respective countries. In most instances, those countries have sound balance of payments positions and do not necessarily depend on those funds and yet here, the survival of companies and even people hinges on that extra dollar bank X can bring into the country.
So our appeal is to the banks, which may feel constricted initially, to bring in the funds while other efforts to improve liquidity are being pursued by monetary and fiscal authorities.
“The meaningful recovery of the Zimbabwean economy is also contingent upon increased financial intermediation by the country’s banking sector. The intermediary role of banks remains critical in the redeployment of surplus investible funds into key productive sectors of the economy.
“This is particularly so given persistent liquidity challenges that have lingered in the economy since the introduction of the multiple currency system,” noted Dr Gono in his January Monetary Policy Statement.
This statement is instructive.
Furthermore, Zimbabwe needs to boost its export performance. Again it is a chicken and egg situation where firms say they need new machinery and working capital to improve production in terms of quantity and quality.
Presently, firms need at least US$100 billion to re-tool.
But in the meantime the economy needs to maximise on mineral exports and other processed or valued added sales to boost liquidity.
Figures in the 2012 National Budget statement shows that Zimbabwe exported US$3,2 billion worth of products against imports of US$6,3 billion, leaving a trade deficit of US$3,1 billion.
The figures say a lot about the state of the economy.
Therefore, strategic efforts to re-engage the Diaspora community could also help despite current fears that remittances and foreign direct investment could slow down given adverse developments on the global economy.
Last week’s investment drive to South Africa is said to have turned out into more of a political rally than a trade and investment seminar if reports coming from there are anything to go by.
There is need for a more holistic approach to engage the Diaspora constituency and other investors keen on pouring funds into the economy.
We hope the next road show, believed to be targeting Mauritius, will have all systems in place for the sake of the economy.
FBC Securities and other economic commentators say projections of 9,4 percent economic growth this year are too optimistic given the challenges confronting the economy.
We feel the figures could still be achieved once the liquidity situation improves.
Zimbabwe is still to utilise the trillions of mineral deposits in its belly and these could help sustain the growth momentum that has been achieved over the past three years.
The next nine months should give birth to a more stable economy firmly anchored to take a giant leap towards the US$100 billion economy.
In God I Trust!