News / National
Mnangagwa's 'paranoid' measures roundly condemned
11 May 2022 at 04:16hrs | Views
VARIOUS stakeholders and experts roundly condemned economic stabilisation measures introduced by President Emmerson Mnangagwa to "stop economic hitmen" from sabotaging his under-fire administration.
They said the measures, mainly the banning of lending by banks, were unconstitutional, inadequate, and ill-advised.
Experts also said the measures would result in a serious economic bloodbath.
Officials at leading financial services provider, BancABC, came out guns blazing, saying the lending ban would result in banks resorting to dealings to compensate for ensuing losses.
Last year, Ethiopia affected almost similar measures when it barred banks from providing loans backed by collateral, such as land and buildings following findings that the money was being used on the black market.
But an analysis submitted by the leading bank's executives accused the government of using a blunt approach to try and address a long-standing issue of currency conundrum warning there could be dire consequences.
The bank was however forced to issue as statement that opinions expressed by its executives did not reflect its official position.
"Banning lending activities will threaten the survival of Banks as this will wipe out 20% to 50% of their incomes. Consequently, this could push banks to embark on risk and/or non-permissible activities to compensate for the loss of incomes," the executives said.
"This could also push bank charges upwards as Banks devise survival strategies. On the other hand, the companies cannot survive without working capital facilities. This will lead to scaling down of operations, shortages of goods, further price increases, viability challenges and possible company closures and job losses," they said.
"The ZSE is also reflecting the investors' behavior of running for cover in times of economic trouble, as well as lack of confidence in the direction the local currency was taking. A plethora of regulations impose operational bottlenecks, make the ZSE inefficient and unattractive to foreign and domestic investors. This has potential to undermine pensioners and new listings."
"On the other hand, companies cannot survive without working facilities. This will lead to scaling down of operations, shortages of goods, further price increases, viability challenges and possible company closures and job losses. No economy can survive without access to working capital," they added.
The Zimbabwe Banks and Allied Workers Union (ZIBAWU) said Mnangagwa's measures would weigh heavily on ordinary Zimbabweans.
ZIBAWU secretary general, Peter Mutasa described the measures as anti-people.
"Our experience of the demand for loans indicates that some clients are applying for loans for medical care. Banning loans is sentencing many to death. Some want to pay school fees and examination fees," Mutasa said.
"The directive throws many children out of school, and some will fail to write examinations. We regard these as negative consequences of the policy that may not have been intended and overlooked," he said.
He warned that banks are going to be forced to increase bank charges, restructure and in the process experience viability problems coupled with increased bank charges which will increase inflation and hit hard on the poor.
"Stopping lending will seriously affect the productive sector. There are many companies that will close if they don't get loans and overdraft facilities.
"We expect policies that will aid economic recovery and we don't believe that this is one such policy," he said.
He said the measures are the surest way of discouraging the public from banking with an impact which could erode confidence in the country's banking sector into the future.
"It is our view that this policy should be reviewed and reversed immediately. It doesn't benefit the nation as the negative outcomes far outweigh the anticipated positives. We, therefore, call for broad-based and inclusive monetary policy dialogue involving all stakeholders including unions in the sector as the long-term solution," Mutasa said.
Former finance minister Tendai Biti weighed in saying: "The move is unconstitutional. It is an illegal move."
"The truth is the measures are ill-thought and reflective of a paranoid incompetent regime. The fall of the exchange rate stems from the introduction of the Zimbabwe dollar when the necessary preconditions were absent. It stems from a huge mismatch between supply and demand and the failure of the auction system," Biti said.
"It stems from corruption. It is bluntly unlawful to ban banks from lending when it is their core business. It is a lie the cooperatives are getting loans from banks and injecting it into the black market. The new taxes and proposed civil penalties are unlawful," he said.
Already, a leading meat processing company, Surrey, announced it was stopping trading on account of the ban.
"We will not be able to pay producers/sellers of cattle and pigs until further notice. We will not accept cattle and pigs for slaughter or live weight. Please be guided accordingly," the company said in a notice to customers in a development experts warn could herald a massive economic bloodbath.
They said the measures, mainly the banning of lending by banks, were unconstitutional, inadequate, and ill-advised.
Experts also said the measures would result in a serious economic bloodbath.
Officials at leading financial services provider, BancABC, came out guns blazing, saying the lending ban would result in banks resorting to dealings to compensate for ensuing losses.
Last year, Ethiopia affected almost similar measures when it barred banks from providing loans backed by collateral, such as land and buildings following findings that the money was being used on the black market.
But an analysis submitted by the leading bank's executives accused the government of using a blunt approach to try and address a long-standing issue of currency conundrum warning there could be dire consequences.
The bank was however forced to issue as statement that opinions expressed by its executives did not reflect its official position.
"Banning lending activities will threaten the survival of Banks as this will wipe out 20% to 50% of their incomes. Consequently, this could push banks to embark on risk and/or non-permissible activities to compensate for the loss of incomes," the executives said.
"This could also push bank charges upwards as Banks devise survival strategies. On the other hand, the companies cannot survive without working capital facilities. This will lead to scaling down of operations, shortages of goods, further price increases, viability challenges and possible company closures and job losses," they said.
"The ZSE is also reflecting the investors' behavior of running for cover in times of economic trouble, as well as lack of confidence in the direction the local currency was taking. A plethora of regulations impose operational bottlenecks, make the ZSE inefficient and unattractive to foreign and domestic investors. This has potential to undermine pensioners and new listings."
"On the other hand, companies cannot survive without working facilities. This will lead to scaling down of operations, shortages of goods, further price increases, viability challenges and possible company closures and job losses. No economy can survive without access to working capital," they added.
The Zimbabwe Banks and Allied Workers Union (ZIBAWU) said Mnangagwa's measures would weigh heavily on ordinary Zimbabweans.
ZIBAWU secretary general, Peter Mutasa described the measures as anti-people.
"Our experience of the demand for loans indicates that some clients are applying for loans for medical care. Banning loans is sentencing many to death. Some want to pay school fees and examination fees," Mutasa said.
"The directive throws many children out of school, and some will fail to write examinations. We regard these as negative consequences of the policy that may not have been intended and overlooked," he said.
He warned that banks are going to be forced to increase bank charges, restructure and in the process experience viability problems coupled with increased bank charges which will increase inflation and hit hard on the poor.
"Stopping lending will seriously affect the productive sector. There are many companies that will close if they don't get loans and overdraft facilities.
"We expect policies that will aid economic recovery and we don't believe that this is one such policy," he said.
He said the measures are the surest way of discouraging the public from banking with an impact which could erode confidence in the country's banking sector into the future.
"It is our view that this policy should be reviewed and reversed immediately. It doesn't benefit the nation as the negative outcomes far outweigh the anticipated positives. We, therefore, call for broad-based and inclusive monetary policy dialogue involving all stakeholders including unions in the sector as the long-term solution," Mutasa said.
Former finance minister Tendai Biti weighed in saying: "The move is unconstitutional. It is an illegal move."
"The truth is the measures are ill-thought and reflective of a paranoid incompetent regime. The fall of the exchange rate stems from the introduction of the Zimbabwe dollar when the necessary preconditions were absent. It stems from a huge mismatch between supply and demand and the failure of the auction system," Biti said.
"It stems from corruption. It is bluntly unlawful to ban banks from lending when it is their core business. It is a lie the cooperatives are getting loans from banks and injecting it into the black market. The new taxes and proposed civil penalties are unlawful," he said.
Already, a leading meat processing company, Surrey, announced it was stopping trading on account of the ban.
"We will not be able to pay producers/sellers of cattle and pigs until further notice. We will not accept cattle and pigs for slaughter or live weight. Please be guided accordingly," the company said in a notice to customers in a development experts warn could herald a massive economic bloodbath.
Source - NewZimbabwe
