'Zimbabwe's financial sector needs to be harmonised,' says Mangudya

RESERVE Bank of Zimbabwe (RBZ) governor John Mangudya says the country must establish a Financial Sector Development Plan (FSDP) as part of efforts to coordinate the operations of companies working in various sub-sectors of the industry.

Mangudya, who spoke during a Zimbabwe Economics Society discussion held in partnership with the Zimbabwe Independent, dwelt on issues around rebuilding confidence in Zimbabwe's financial services, saying Zimbabwe must adopt a coordinated approach which is a global standard.

There has been concern that the country needs to harmonise financial services sector legislation and corporate governance standards to eliminate overlapping regulations.

Zimbabwe's capital markets, for instance, are regulated by the Securities and Exchange Commission of Zimbabwe (Secz), while the pension industry falls under Insurance and Pensions Commission of Zimbabwe (Ipec).

The banking sector falls under the stewardship of the RBZ.

There have been instances where an insurance firm is a holding company that follows Ipec guidelines. But the firm may own banks within its group, which are regulated by the RBZ.

"We need a financial sector strategy which brings in all the players in the sector," Mangudya said.

"I will not call them (the regulations) fragmented, but I will say they are individualistic. When we talk about Zimbabwe, what we talk about is coordination so that the economy grows. If you look at the banking sector it's basically about short-term money, the pension is longterm and what is required under the financial sector strategy is to ensure all those are brought under one house.

"If you go around the world, it's common where the working parties make a coordinated approach. We need to take players which are existing like Secz, Ipec and RBZ and these now come up as working parties to what they want to achieve."

The RBZ boss said Zimbabwe needed to cultivate a savings culture to drive economic growth. These must include savings in banks, pensions and capital markets.

He said before the strategy is established, economic stability is critical as a basis for implementation.

"Before that is achieved we need to ensure we have a stable economy so that it is not firefighting. We now smell stability; we now have to ensure there is coordination and harmonisation of governance and laws," Mangudya said.

"When someone puts money into pension funds those are long-term funds which should go into building roads and houses. If we don't take this time to do what is right, we won't sustain the stability, what we are doing is sustaining this stability and these are the measures."

He said the central bank is committed to ensuring monetary and financial systems stability.

Cuthbert Munjoma, pensions director at Ipec, said there was need for some convergence or harmonisation of financial services sector legislation to eliminate fragmentation.

"As regulators, the central bank would issue its own corporate governance framework, the Secz will do the same, but because of the existence of holding companies we need to ensure there is harmonisation of these frameworks," Munjoma said.

"I envisage reform in the pension funds financial inclusion, restoration of confidence in the financial services industry and then a plan that promotes a savings culture."