Gono, banks on collision course

received mostly from locally owned banks, were rejected.

The US$7,7 million bids, just above half what Treasury floated, were subscribed for at annual interest rates of between 5,5 and 15 percent.
The auction was the first sale of the TBs since the adoption of the multi-currency system about four years ago. Treasury Bills were last floated in 2008.
Sources said that Standard Chartered Bank Zimbabwe, Barclays Bank and Stanbic “ignored” the TBs while MBCA Bank subscribed for only US$100 000.
“The sector should brace for a hurricane,” said one source privy to developments in the sector. “Stanchart, Barclays and Stanbic and MBCA (the four biggest foreign-owned banks) boycotted it.

“Although MBCA subscribed for US$100 000 only of the US$15 million, the other the three refused to take even US$1. For foreign banks that have been supported by both (Dr Gideon) Gono and (Tendai) Biti (Finance Minister), it must be read as a serious slap in their faces, opening themselves for Government immediate demands for compliance with the country’s indigenisation laws.” Dr Gono and Minister Biti have been against the indigenisation of foreign-owned banks, arguing the sector was already largely indigenised, considering that they constitute only a small percentage of the banking sector. Sources in the industry said the major reason why the paper failed was to do with the application of an average rate applied for the allotments.

One source said in the absence of an overnight rate normally used by the RBZ to give direction to the floatation, it was difficult to come up with an average rate.
Another source said the latest development exposed weaknesses in the recently established Central Depository System and should not be viewed as a snub by the foreign-owned banks.

In addition, some of the banks said they had made other commitments to fund the agriculture sector and they feared that committing more resources to other issues such as Treasury Bills was not possible.
Efforts to get a comment from Bankers’ Association chairman Mr George Guvamatanga were unsuccessful.

The fiscal and monetary authorities had previously called for the re-introduction of money market instruments to mobilise funding for critical Government programmes. It was also expected that the re-introduction of the money market instruments would help resuscitate inter-banking activity as the stock would provide security against which banks would lend each other in the highly illiquid economy.

In an interview, Dr Gono yesterday said the TBs were rejected because of the interest rates that were not consistent with extremely low risk factors attached to the Government stock.
“The US$15 million Treasury Bills issue was undersubscribed and even that which came through did so at rates we do not believe are reflective of the risk factors attached to the paper that was on offer,” he said.

“Furthermore, we are disappointed by the double standards displayed by some of the market players who had been in the forefront of lobbying for the issuance of the paper only to show their true colours at the critical moment of reckoning.
“Against such background, both Treasury and monetary authorities were united in our decision to reject the bids in their totality. We will be returning to the market soon with measures that will see both Treasury and monetary authorities achieving earlier objectives, through a battery of other instruments, crafted to adequately deal with the market failures of the nature we all witnessed.”

Analysts interviewed by Herald Business said Dr Gono’s statement was “measured but pregnant” with meaning, after he talked of market failure and the introduction of measures to achieve the Government’s originally intended objectives. “Once the banks lose the support of the two men at Treasury and the central bank, they are on their own. It remains to be seen what the authorities have up their sleeves,” said one analyst.

“Gono and Biti have been arguing for market forces and market instruments but their approach has not been reciprocated by the very beneficiaries of the softly-softly approach, leaving the two men with egg on their faces.”