Long-term strategies for banks

via Long-term strategies for banks | The Zimbabwean by Farai Mabeza

The local operating environment remains risky for banks and has compromised the prospect of sustainable long-term growth, according to recently released financials.

“We continue to focus on sustainable growth in the long term ensuring our value proposition adapts to the changing needs of our customers,” Barclays Bank Chairman, Anthony Mandiwanza, said in his bank’s financial statements.

He highlighted a number of challenges in the macroeconomic environment.

“The Balance of Payment economic indicator continued in the negative territory with some economic analysts projecting the trade deficit to close 2013 at close to $3 billion against an estimated $2,6 billion for 2012,” he said.

Other issues of concern include low Foreign Direct or Portfolio Investment inflows. According to the midterm fiscal policy review exports for the first half of the year, imports were just over 50 percent of GDP.

Economist Erich Bloch told The Zimbabwean there were two areas that were critical to the wellbeing of local banks.

“Firstly the population needs to be convinced that we are not going to re-introduce the Zimbabwean dollar anytime soon. Secondly, we need to modify indigenisation laws. Foreign and international lenders do not want to give loans to banks they fear could be taken over,” he said.

President Robert Mugabe and senior members of Zanu (PF) mentioned their desire to bring back the local currency during the campaign period.

John Robertson, an economist, said the indigenisation requirements were isolating local banks.

“For the banks to recapitalise the capital has to come from outside,” he said.

Robertson said mergers were a possible solution but there were significant hurdles to achieving this.

“We have a very large number of banks. We need to make them fewer and bigger because we don’t need so many. This is difficult because the banks cannot afford the retrenchment costs that come with creating mergers. The current labour laws are unreasonable and are holding back the consolidation of banks,” he said.

Threats to the banking sector come amid a poorly performing Zimbabwe Stock Exchange.