Taking shareholders to task is the way to go

THIS week’s move by the Reserve Bank of Zimbabwe (RBZ) to hold bank shareholders accountable for weaknesses that may affect their firms was an important step toward bringing sanity to an area that had never received due attention. RBZ governor John Mangudya announced that bank shareholders would shoulder the costs of presiding over undercapitalised financial institutions. The plan, which was announced in the monetary policy statement, will see shareholders in banks that fail to meet the RBZ’s minimum capital directives being asked to forgo dividends until they comply.

In fact, the RBZ wants them to seek its approval before enjoying the dividend, which, in any case, is money derived from customers during the course of operations, which ends up as profit. For many years, bank shareholders have been pampered with dividends before looking at consolidating their balance sheets to secure sustainability.

The vocabulary of depositor protection does not exist in some banks. In contrast, depositors have been held to ransom by banks, and have borne the brunt of bank failures.

That is why when the sector was hit by a spate of failures between 2000 and 2015, high-rolling bank executives and shareholders didn’t feel the pinch. It is the depositor who suffered.

They expanded operations into many jurisdictions at the expense of minority shareholders and depositors. Minorities have been told that they cannot get dividends because of the need to conserve cash for expansion. In the meantime, banks would spend many years without meeting capital requirements.

The last attempt by the RBZ to take action was when former governor Gideon Gono attempted to deal with delinquent executives for running down banks. But the fat cats took to their heels and settled in safe havens. When the terrain changed, they used their wealth to influence politicians to grant them amnesty without being held to account for decimating banks, and millions of families.

Such transgressions have not been addressed to date, and high rollers still walk the streets, instead of serving time in prison.

This is not how it should be.

Transgressors must be punished to send a clear signal that Zimbabwe does not tolerate this. And action must be taken on every malcontent, regardless of where they come from. This is what it means to say no one is above the law. Mangudya must improve his policy by pushing through legislation making it legal to repossess assets amassed by milking shareholders and minority shareholders, decimating banks by not recapitalising them and such other wayward behaviours. The problem is, while the RBZ may have good intentions, politicians have become filthy rich, through stakes in these financial institutions. These sharks have been unwilling to back policies or legislations that threaten their interests.

It has been at implementation of many good policies that Zimbabwe had been found wanting. We urge the RBZ governor not to be dissuaded. The financial system falls under his jurisdiction.

No one will arrest him for doing the right thing.