Michael Tome Business Reporter
Old Mutual Zimbabwe has implored Government to continue with the ongoing global re-engagement efforts to ensure healthier relations with international financial lenders, which the financial services group says are critical for a strong banking sector.
Zimbabwean banks have been operating at sub-optimal level due to impediments caused by the Zimbabwe Democracy and Economic Recovery Act (Zidera) of 2001, which restricts the movement of money owned by State firms.
In 2019 Standard Chartered Bank Zimbabwe was fined US$18 million by the US’ Office of Foreign Assets Control (OFAC) for violating the Zimbabwe sanctions regulations after handling transactions for State-owned firms and sanctioned individuals worth close to US$77 million.
In one way or the other, OFAC regulations have led many international banks to be hesitant when dealing with Zimbabwe while some have cut off ties completely.
Resultantly, Zimbabwe has relied heavily on correspondent banks to gain access to foreign financial markets and to serve international clients due to the frosty relations it had with some Western countries opposed to its land reform programme.
According to the Reserve Bank of Zimbabwe (RBZ), at least 102 correspondent banking relationships have been severed over the last decade due to the country’s alleged high-risk status after the West imposed sanctions on the country.
Correspondent banks provide services to banks in other countries. They act as intermediaries or agents that facilitate wire transfers, conducting business transactions, accepting deposits and gathering documents on behalf of another bank.
Under President Mnangagwa, Zimbabwe’s foreign policy is characterised by the desire to engage all friendly nations and “re-engage” with the West with a view to securing the removal of sanctions and encouraging investment.
In this, it has received the backing of the African Union and Southern African Development Community states.
While presenting the half-year results to June 2021, Old Mutual Zimbabwe group chief executive officer and head of banking portfolio Mr Samuel Matsekete noted that improved relations with the international community would set right the restricted access to funds by local financial services companies.
“Efforts to continue to engage international community remain very important, we believe that we still have a financial services industry that can benefit from amicable relations with international markets which would allow us to establish relationships much more easily as well as ensure that we can sustain financing arrangements into our markets here locally,” said Mr Matsekete.
Recently, Germany-based Deutsche Bank curtailed its correspondent banking ties with Stanbic Bank, one of the few remaining international banking providers operational in Zimbabwe triggering a major setback to the institution and its clientele at large.
To avoid upsetting the US treasury, in 2016 Standard Chartered instructed Industrial Development Corporation (IDC) to close its accounts with the bank.
Barclays (now First Capital) was instructed to pay a US$2,5 million settlement to the US Treasury after handling IDC (and its subsidiaries) transactions worth US$3,4 million between 2008 and 2013.
In 2017 CBZ escaped sanctions from OFAC after it carried out transactions on behalf of sanctioned ZB bank, imposing a penalty of US$385 million.