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Mr Guvamatanga

Golden Sibanda Senior Business Reporter
Foreign banks may not declare dividends in the next five years as they battle to mobilise the US$100 million capital requirement and therefore Government should consider promoting empowerment as opposed to indigenisation, their local umbrella body has said.
Bankers Association of Zimbabwe president Mr George Guvamatanga made the remarks while giving oral evidence to the parliamentary portfolio committee on youth, indigenisation and economic empowerment on Friday.

He said most banks may not be able to declare dividends because banks want to raise significant funds to meet the deadline for regulatory minimum capital of US$100 million by 2020 and may retain earnings to reinvest in the businesses.

“If you indigenise, you are giving youth and women shares in banks, which for the next 5 years might not declare a dividend.
In terms of Government’s Indigenisation and Economic Empowerment Act all foreign-owned companies in Zimbabwe are required to transfer for value at least 51 percent of their shareholding to indigenous black Zimbabweans.
The BAZ president said with the deadline for the US$100 million minimum capital falling due in 2020, banks needed to capitalise either by

injecting fresh capital or through ploughing back retained profits.
He added that it is prudent not to declare dividends until they comply with the new capital threshold.

“So what we are saying is that, can we get the youth and women to provide services for our bank in (say) Gokwe or Chitsa.
“When you provide a service you get an invoice, which is non-discretionary income, a dividend is a discretionary income. Just ownership without cash flow does not help in any way if for five years there is nothing coming to their pockets,” he said.

In attempts to justify banks’ proposal that it was better to emphasise on empowerment rather than indigenisation of foreign banks, Mr Guvamatanga said empowerment would put money into the pockets of Zimbabweans much quicker.

Mr Guvamatanga said while foreign banks could pursue both indigenisation and empowerment, focusing on empowerment would bring quicker and more tangible benefits.

“Why would we want our people to have a dividend certificate, which is a discretionary certificate,” said Mr Guvamatanga.
The BAZ boss added that the banking sector was also already one of the best examples of the most indigenised sectors with 16 out of the 21 banks owned by indigenous people.

Mr Guvamatanga said while none of the foreign-owned banks had fully complied with the requirement to indigenise, BAZ was fully supportive of Government’s stance on localisation.

However, the number of foreign owned banks has actually increased from three to five since the Indigenisation and Economic Empowerment Act was enacted in 2010 because local shareholders have no money to recapitalise them.

According to BAZ most of the banks have already submitted indigenisation compliance proposals while engagements are ongoing with the parent ministry (Finance and Economic Development) on how to comply with the policy.