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Banking sector turmoil
Media Monitoring Project Zimbabwe (MMPZ)
Extracted from Weekly Media Update 2004-11
Monday March 15th - Sunday March 21st 2004

As more depositors continued to count the cost of banking with indigenous banks following the dramatic closures of Intermarket and Barbican financial institutions by the Reserve Bank of Zimbabwe in its on-going clean-up of the sector, very few media reports thoroughly provided a sound background to this unfolding tragedy.

For example, all the media except for The Sunday Mirror seemed to have forgotten that government had ignored expert advice during the late 1990s warning it against the proliferation of new banks as the country was already over-banked at the time. This followed the collapse of the United Merchant Bank (UMB) owned by the late black empowerment activist, Roger Boka.

As The Sunday Mirror (21/3) reported, the advice from the "mainly white economists" was "dismissed as racist and going against the grain of black economic empowerment". Notably, the economists' advice found currency again in the week under review when the Zimbabwe Independent (19/3) reported an International Monetary Fund (IMF) delegation, presently in the country on a routine visit, as saying "Zimbabwe's small, inflation-plagued economy can not take more than seven commercial banks".

This number, noted the paper, is less than half of Zimbabwe's registered 17 commercial banks serving a population of about 13 million people, most of whom survive on less than US$1 (about $4 200) a day.

Although the Zimbabwe Independent failed to link the two, government's failure to heed the economists' advice in its bid to break into the then white dominated financial sector provided fertile ground for such financial chaos as the new entrants battled for the hearts of Zimbabwe's small banking clientele.

The Sunday Mirror thus noted that while banks may have made speculative purchases unrelated to their main business, these moves were "innovative and applied to the prevailing economic environment at that time." After all, it added, "the banks were hedging themselves against the very hyperinflationary situation in 2003..."

On the other hand, none of the government media reports viewed the chaos in the financial sector as emanating from government's quest to indigenize the banking sector at the expense of sound economic advice. Neither did they provide any meaningful analysis on the severely destabilizing impact of such a policy. Only the Chronicle (18/3) attempted to do that in its story: Who shall protect depositors? ZBC was content to hail the RBZ's stance and presented it as indicative of the effectiveness of its monetary policy. For example, Radio Zimbabwe (16/03,1pm) claimed that "Zimbabweans have applauded the RBZ"s war on corruption by closing these banks."

It then accused indigenous bankers of undermining government's black empowerment policy by engaging in illicit deals.

One of its favourite commentators, Samuel Undenge was quoted saying: "Some of them were violating the requirements of their licences (and) were even buying bricks or empty bottles so that they can sell them when their prices had shot up. Again, they were guilty of externalising foreign currency thereby crippling the country's economy."

Likewise, The Herald (19/3) chose to gloss over the country's economic problems when it reported the IMF as "reportedly impressed" by government's economic reforms and that there were indications it may get the "needed lines of credit in the near future".

Though the report claims that government had resumed its loan repayments to the IMF, for example, it did not give figures.

These appeared on ZTV (19/3) which quoted Finance Minister Chris Kuruneri vaguely revealing that government would have paid US$1,5m by the "first quarter of 2004" as part of its efforts to service its debt with the IMF. He added that government would pay off its debt "within a reasonable time".

He was not challenged to give a specific deadline or explain how big the debt was.

However, The Financial Gazette (18/3) and the Zimbabwe Independent did not share the government media's optimism. Relating the RBZ's anti-graft crusade to the IMF visit, The Financial Gazette observed that for the anti-corruption drive not to be dismissed as an election gimmick "it should probe past corruption allegations". It further noted that the new monetary policy had ignored the "the fiscal side of the macro-economic equation," a sentiment echoed by the Zimbabwe Independent.

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