FirstRand’s Zambia venture shattered

government cancelled its purchase of a leading bank in that country.
In a move that has shocked executives at the JSE-listed financial services group, new Zambian leader Michael Sata has ordered his finance minister, Alexander Chikwanda, to cancel the sale of Finance Bank to FNB Zambia for US$5,4 million and return it to controlling owner Rajan Mahtani.
FirstRand acquired the bank last month as part of the group’s strategy to expand on the continent. Less than a week ago Mr Sata fired Zambia’s central bank governor, who would have approved the sale. The collapse of the deal comes a few months after FirstRand confirmed the failure of talks to buy Nigeria’s Sterling Bank, over price.
Dr Mahtani, who has described the sale of his bank as illegal, is a controversial figure in Zambia and was arrested for alleged money laundering last year.
After allegations of maladministration Finance Bank was put under administration by the central bank, which requested FirstRand, through FNB, to rehabilitate the institution, leading to the subsequent purchase.
Management at FirstRand, who were careful yesterday not to criticise Mr Sata, were said by insiders to be shocked. The group, which was already discussing how to integrate Finance Bank into FNB Zambia, was yesterday still seeking clarification from the Zambian authorities about why the sale had been reversed.
Dr Mahtani stuck a defiant note yesterday in the Zambian media, saying the sale of his bank had been “politically motivated” by the previous government.
Mr Sata, who had already warned Chinese investors to comply with Zambian law or risk losing their licences, claimed the sale was being cancelled because there was “no document of (the) sale”.
But FNB chief executive Michael Jordaan yesterday denied the purchase of the bank was irregular.
“We strongly believe that due process was followed and that the agreements reached with the (central bank in Zambia) were concluded in accordance with Zambian law,” Mr Jordaan said.
Analysts said Zambia’s decision highlighted the political hazards of investing in an African country, particularly after a change of government.
“It is a bit of a shock, as I thought that it was done and dusted,” said Johan Scholtz, banking analyst at Cape Town-based Afrifocus. – Businessday.