SURVIVAL TACTICS
As Zimbabwe’s economy teeters, crisis-hit banks are forced to find new ways to keep going as they struggle to overcome the hard currency crunch
Retailers and banks in Zimbabwe are battling for survival. In the face of an economy in crisis, they’re adopting new measures to stay afloat: switching banking partnerships, signing new cash supply deals and hiking prices to cover rising costs. And SA companies have not been spared the headwinds.
The country’s banks — which include local affiliates of Standard Bank and Nedbank — are scrambling for new sources of hard currency after SA banks terminated their cash supply arrangements. According to sources in the banking sector, some institutions are striking deals with export-driven companies such as mining firms to access hard currency from their nostro accounts. They’re also relying on the small inflows from businesses that are paid in forex.
It’s a universal problem, says Palmer Mugavha, spokesperson for Stanbic Zimbabwe. “All banks are facing the same challenges,” he says.
The currency crunch has also left ordinary Zimbabweans who earn foreign currency in a bind. They’re struggling to access funds from the banks. In some instances, depositors are required to submit an application to access their own funds, even when the banks have currency available.
“I first have to apply, and the bank then tells me when I will be able to access my funds,” says consultant Problem Masu. “It is frustrating because I earned these funds and I should have ready access to them.”
SA and foreign banks are better off than their local competitors — they can still lean on their parent organisations for assistance if a tangible deal, such as a corporate financing project, is on the table. But when it comes to foreign currency assistance, foreign partners are of no help. “No foreign bank will provide a local unit with forex under the current situation,” says Mugavha.
Zimbabwean units of Nedbank and Standard Chartered did not respond to a request for comment. Stanbic Zimbabwe, however, says Standard Bank SA supports its unit only
through collaboration and by pooling resources to conclude guaranteed deals.
“The support comes through deals,” says Mugavha. “We do collaborate a lot with our head office. We can pull resources together to conclude a deal. For on-lending, no.”
A finance manager in the banking sector also says foreign banks on the whole are “limiting funds for on-lending” — the practice of funding local banks’ loans to local companies.
Sam Matsekete, MD of First Capital Bank, says his institution has had to establish “new partnerships in areas of correspondent banking [and] lines of credit”.
With traditional international banking partners such as Commerzbank terminating their correspondent bank partnerships to reduce their risk exposure, banks are looking to establish new partnerships with Spanish, Chinese and Botswana banks.
No foreign bank will provide a local unit with forex under the current situation Palmer Mugavha
It’s not just foreign banks that have cut financial support; the corporate sector generally is suffering the same fate. In December, for example, it was announced that Nampak had cut back its support for its Zimbabwean subsidiary. “
A consequence of the lack of foreign exchange was that the SA shareholder reviewed and subsequently limited [its] support at the commencement of the third quarter, thereby curtailing their escalating exposure,” Nampak Zimbabwe company secretary Keith Nicholson said at the time.
And other foreign companies with subsidiaries in Zimbabwe, such as British American Tobacco and beer giant AB Inbev, are reportedly struggling to get their dividends out of the country. Foreign airlines, too, are owed money, and several airline operators have closed their ticketing offices.
Travel agent Bertha Gotora is having a hard time explaining the changing dynamics of ticketing and booking flights to travellers. She says Air Zimbabwe and Fastjet are the only airlines accepting payment in local currency (at the official exchange rate of about $1 to three real-time gross settlement dollars, or RTGS$, against a parallel market rate of about $1/RTGS$5).
Though Pick n Pay and OK Zimbabwe — the largest retailers — did not respond to requests for comment, it’s understood that retailers generally are struggling to price imported goods, given the pressure the government is putting on them to keep prices down.
Denford Mutashu, who heads the Confederation of Zimbabwe Retailers, believes currency stability will ease the burden on retailers. At present, he says “margins in retail are going down” due to the “rising parallel market forex rate”.
Because most retail stock is imported — and foreign currency is in short supply — companies are forced to buy forex on the parallel market.
When that rate goes up, they have to raise their prices — but when there’s a rapid increase in the rate, they take a knock on their margins because they can’t push their prices up on the same steep gradient.
Zimbabwean industrialist Busisa Moyo is also concerned about the currency fluctuations. He is rooting for the rand to be adopted — a solution he believes is “the most logical”, and which has been supported by, for example, the Confederation of Zimbabwe Industries.
The adoption of the rand — already in circulation unofficially — would reduce the hassle of accessing forex for imports. Given that Zimbabwe buys most of its finished products from SA,
it’s argued that the country should simply embrace its currency.
“We [should] benchmark our costs to the rand,” says Moyo.
“Give only rands from ATMS.”