Zimbabwean Banks Get 10 Days to Respond to $100 Million Lawsuit 

Source: Zimbabwean Banks Get 10 Days to Respond to $100 Million Lawsuit – Bloomberg

  •  Cambria’s Paynet suing banks for anti-competitive practices
  •  Bankers Association of Zimbabwe served with summons Wednesday
People queue outside a bank in Harare, Zimbabwe.
People queue outside a bank in Harare, Zimbabwe.Photographer: Dan Kitwood/Getty Images

Zimbabwean banks have been served with a summons in a $100 million lawsuit accusing lenders of colluding to stamp out competition in the provision of bulk-payment services, such as salary disbursements.

Cambria Africa Plc’s Paynet Zimbabwe and Payserv Africa units are claiming the damages from the Bankers Association of Zimbabwe, according to the summons, dated July 22 and served on the 21-member organization by the sheriff of the court on Wednesday. The summons gives the association 10 business days to oppose the application, the court filings show.

Calls to the banking association’s chief executive officer, Sijabuliso Biyam, didn’t connect, while calls to its vice president, Ralph Watunga, weren’t answered. Neither were calls to the association’s president, Webster Rusere, who didn’t immediately respond to a text message seeking comment.

The summons escalates a dispute between London-based Cambria and the association, which reached a tipping point in June when Paynet suspended services to banks, citing unpaid bills. It forced the lenders to switch to smaller providers or resort to manually managing payments. That’s hindering the flow of money in the cash-starved $31 billioneconomy, already grappling with rampant inflation and mass unemployment.

More noses were bloodied when it emerged banks are building their own bulk-payments network, a move Cambria says is anti-competitive. At stake is $22 million in profits Cambria estimates that banks in Zimbabwe made last year via charges to their account holders for services provided by Paynet, according to a June 12 statement.

Paynet had hardly cut the banks off when it announcedon June 19 that it partnered with Econet Wireless Zimbabwe Ltd.’s Ecocash in a venture that will bypass lenders when paying salaries or facilitating other transactions. Ecocash brings 6.3 million active users to the venture and has handled more than $10 billion worth of transactions since inception in 2011, while Paynet has more than 1,200 corporate customers in the nation of about 14 million people.

With very little cash being dispensed at ATMs and individuals relying on mobile phones to pay bills, banks will need to fight for relevance by focusing on those corporate clients who still need a “physical interface,” said Kato Mukuru, the head of frontier research at EFG Hermes, in response to the announcement of the venture.

“With the bulk-payment system not working, payments of salaries are now being slowed down significantly, so any solution should result in significant market-share gains” for any company making headway into the space, Mukuru said. The partnership “will give Ecocash a tremendous opportunity to get corporate and retail market share,” he said.