News / National
Motion moved by senator Tholakele Khumalo in the Zimbabwean upper house
23 Feb 2015 at 10:19hrs | Views
MOTION ON THE NEED FOR GOVERNMENT TO COME UP WITH STRATEGY TO BAIL UP THE VARIOUS BANKS' AND LENDING INSTITUTIONS' DEBTORS:
MOVED BY SENATOR: DOROTHY THOLAKELE KHUMALO - 19/02/2015
Introduction
The Financial system:
The Financial system in a country is the engine that drives the economy. It is the financial system that lubricates all the levers of the economy. All economic successes and economic failures in the world can be traced to the state of the financial system. When the Financial sector sneezes, the whole economy shivers and Zimbabwe is no exception. The various challenges that we are facing has its roots in the financial industry.
ADOPTION OF MULTI-CURRENCY:
Following the adoption of multi - currency regime in our country the Reserve Bank is no longer in a position to exercise most of its functions and thus compromising its role as the monetary authority in the country. The Reserve Bank of Zimbabwe no longer prints money (not that I want it to at present) and accordingly is unable to set the interest rates.
The past few years following the demise of our local currency, has seen the use of multi currency in the country with the United States of America dollar being the dominant currency and the South African rand to limited extend.
The RBZ due to its weak balance sheet is no longer a Banker of last resort and cannot effectively participate in the interbank market and influence monetary policy. Our central Bank is now a toothless bulldog and the best it can do is bark. It is unfortunate that its influence in the financial industry is so very limited.
In view of the fact that we do not print these currencies, doing business in this country has become extremely difficult and a night mare for businesses.
Liquidity Challenges:
Zimbabwe is facing liquidity crisis of unprecedented proportion. The liquidity challenges have seen many industries in Zimbabwe closing with the few remaining industries operating at less than 40% capacity utilisation.
Zimbabwe has instead of being a producer and manufacturer, been reduced to a retailing nation. A walk in the central business districts (CBD) in all our cities and towns confirms/bares testimony of being retailers.
Beneficiaries to Liquidity Crisis:
The major beneficiary of the liquidity crisis in the country has been those that have access to funds. Those that can access funds and lend money have made real profitable business in the country. The people and institutions with money are charging interest rates in excess of 25% per annum compared to countries such as USA where the rate is lower than 2%. While it is true that the interest rates charged are bound to be different due to other factors, Madam president, the difference in my view is too much and exorbitant. Madam president, it is extortion to even charge 10% as when people keep their own money in the bank they get nothing or just 4%.
While it is true that Banks and other lending institutions are faced with huge levels of defaulting clients it is my argument that these institutions are in most cases well secured and in the event of failure to pay they will sell the clients' properties.
The major victims of the economic downturn and the crippling liquidity crisis in the country have in my view been the various Debtors who owe money to these banks and lending institutions.
Madame President, I am speaking of and on behalf of the thousands of individuals and companies that owe money to Banks and other lending institutions.
* I am talking of those people and organisations who borrowed money to increase capacity utilisation in their industries and factories.
*I am referring to the farmer who went to the Bank to borrow hoping to farm and make profit and help in the building of this country's economy.
*I am speaking here of the small business and that entrepreneur who borrowed money but who has found business environment to be tough due to low demand due to liquidity crunch and hence failed to pay back the loans and overdrafts.
All these debtors and borrowers are victims of the economic meltdown and I can bet you Madame President that there are fewer economies in the world going through the same challenges our businesses are operating in. These debtors and borrowers who in a normal operating environment could be heroes and heroines are today the laughing stock of the country.
Today, Madam President, if you open a newspaper you can be guaranteed to see various advertisements of public auctions of various properties ranging from household (TVs, freezers, stoves, etc) to small businesses property like computers, photocopiers, to residential properties.
Today, madam President, a lot of these debtors are dying silently and thousand are suffering depression, high blood pressures, ulcers and other stresses and ailments due to the financial difficulties that have seen them losing their properties and others becoming beggars.
Madame President, the Government cannot watch while properties are being auctioned, Government cannot sit Madame President and leave all these debtors to lose their properties because it does not want to interfere in commercial transactions.
Government in my view cannot fold its hands and let these entrepreneurs suffer yet the Government knows that the operating environment is harsh and is not the making of these debtors.
Madame President, I am not calling for the punishment of the Banks and Creditors but am calling for the Government to be proactive and come up with strategies to help the situation. Government is to help fathers and mothers and the youths who have the aim of improving the country's economy. These new or young entrepreneurs had aimed at growing and employing more people who could then look after their families and improve the health, and nutritional status of their families through the money earned.
What I am calling for Madam President is not something new but what has been done in many countries and economies. In the recent credit crunch (Global Financial Crisis 2007 - 2008) in the USA, the Obama administration had to actively participate in the economy by bailing out ailing companies and banks and protecting borrowers who ordinarily would have seen their houses going under the hammer, being sold. Similarly, we saw this method used by the Gordon Brown led Labour Party in UK that bailed out their citizens who were to lose their properties to money lenders. (A good thing is a good thing no matter who does it). Lets copy good things.
In Zimbabwe when the economy was slightly better came up with various facilities such as small business sector facility (SBSF).
The Government as recent as last year wrote off debts of households to local authorities primarily because of the liquidity challenges.
At present parliament is debating if it could pass a law that is seeking to allow Government to take over the debt of $1.35b owed by RBZ. The debt is due to the liquidity challenges faced by senior people who were borrowed by RBZ.
Relieving Mechanism:
This house therefore Madame President Calls upon the Government to do everything in its power with a view to save a lot of the debtors whose properties are on the verge of being sold in some cases this resulting in families being impoverished.
In coming up with this mechanism Government will not help these bank debtors only but will help the banks in the process and the economy in the longer term.
The Government should as a matter of urgency through the Reserve Bank of Zimbabwe urge the Banks and other creditors to rollover loans and overdrafts until such time that the loans and overdrafts have reached the in duplum rule in other words until the interest accrued has reached 100% of capital . This process allows creditors time to run around to look for the money rather than to quickly dispose their properties.
The Government should create a fund with a view to bail out many of our entrepreneurs who are facing liquidation and disposal of their properties. The fund so created will be used in a responsible manner so as to either inject funds into these debtors business to enable them to repay their debts or alternatively to allow the banks to arrange new rollover facilities.
There is need for the Reserve Bank of Zimbabwe to sit down with the Bankers Association of Zimbabwe and look at the individual bad debts books of Banks and other lending facilities. The RBZ should in my view advice the Government the level of funds that should be injected using a special vehicle or facility.
There is a need for the Government to urge the Banks and other creditors to do a debt swap so that the special facility created by the Government can result in banks becoming shareholders in some of these ventures.
There is need for the Government to make it difficult for one to lose his or her property by creating a mechanism that ensures that there are BOLD signpost, steps and processes that have to be taken before Bank and other creditors ask the courts to dispose properties especially land and buildings.
Madame President, I am aware that the Government has challenge of its own but I believe this is one area that the Government need to rise up and be counted. Desperate times as the ones we are going through, calls for extra ordinary intervention. Let government prevent poverty from households that were trying to uplift themselves and others through running their small businesses.
Madame President, future generations will applaud us as Government if we assist in this regard but should we not we will be harshly judged as a Government that was heartless and killed the spirit of hard work.
Zimbabweans are hard working people. Let that spirit be up held. This august house is asking the Government that it should continue encouraging keeping the Zimbabwean entrepreneurship spirit up.
I THANK YOU
MOVED BY SENATOR: DOROTHY THOLAKELE KHUMALO - 19/02/2015
Introduction
The Financial system:
The Financial system in a country is the engine that drives the economy. It is the financial system that lubricates all the levers of the economy. All economic successes and economic failures in the world can be traced to the state of the financial system. When the Financial sector sneezes, the whole economy shivers and Zimbabwe is no exception. The various challenges that we are facing has its roots in the financial industry.
ADOPTION OF MULTI-CURRENCY:
Following the adoption of multi - currency regime in our country the Reserve Bank is no longer in a position to exercise most of its functions and thus compromising its role as the monetary authority in the country. The Reserve Bank of Zimbabwe no longer prints money (not that I want it to at present) and accordingly is unable to set the interest rates.
The past few years following the demise of our local currency, has seen the use of multi currency in the country with the United States of America dollar being the dominant currency and the South African rand to limited extend.
The RBZ due to its weak balance sheet is no longer a Banker of last resort and cannot effectively participate in the interbank market and influence monetary policy. Our central Bank is now a toothless bulldog and the best it can do is bark. It is unfortunate that its influence in the financial industry is so very limited.
In view of the fact that we do not print these currencies, doing business in this country has become extremely difficult and a night mare for businesses.
Liquidity Challenges:
Zimbabwe is facing liquidity crisis of unprecedented proportion. The liquidity challenges have seen many industries in Zimbabwe closing with the few remaining industries operating at less than 40% capacity utilisation.
Zimbabwe has instead of being a producer and manufacturer, been reduced to a retailing nation. A walk in the central business districts (CBD) in all our cities and towns confirms/bares testimony of being retailers.
Beneficiaries to Liquidity Crisis:
The major beneficiary of the liquidity crisis in the country has been those that have access to funds. Those that can access funds and lend money have made real profitable business in the country. The people and institutions with money are charging interest rates in excess of 25% per annum compared to countries such as USA where the rate is lower than 2%. While it is true that the interest rates charged are bound to be different due to other factors, Madam president, the difference in my view is too much and exorbitant. Madam president, it is extortion to even charge 10% as when people keep their own money in the bank they get nothing or just 4%.
While it is true that Banks and other lending institutions are faced with huge levels of defaulting clients it is my argument that these institutions are in most cases well secured and in the event of failure to pay they will sell the clients' properties.
The major victims of the economic downturn and the crippling liquidity crisis in the country have in my view been the various Debtors who owe money to these banks and lending institutions.
Madame President, I am speaking of and on behalf of the thousands of individuals and companies that owe money to Banks and other lending institutions.
* I am talking of those people and organisations who borrowed money to increase capacity utilisation in their industries and factories.
*I am referring to the farmer who went to the Bank to borrow hoping to farm and make profit and help in the building of this country's economy.
*I am speaking here of the small business and that entrepreneur who borrowed money but who has found business environment to be tough due to low demand due to liquidity crunch and hence failed to pay back the loans and overdrafts.
All these debtors and borrowers are victims of the economic meltdown and I can bet you Madame President that there are fewer economies in the world going through the same challenges our businesses are operating in. These debtors and borrowers who in a normal operating environment could be heroes and heroines are today the laughing stock of the country.
Today, Madam President, if you open a newspaper you can be guaranteed to see various advertisements of public auctions of various properties ranging from household (TVs, freezers, stoves, etc) to small businesses property like computers, photocopiers, to residential properties.
Today, madam President, a lot of these debtors are dying silently and thousand are suffering depression, high blood pressures, ulcers and other stresses and ailments due to the financial difficulties that have seen them losing their properties and others becoming beggars.
Government in my view cannot fold its hands and let these entrepreneurs suffer yet the Government knows that the operating environment is harsh and is not the making of these debtors.
Madame President, I am not calling for the punishment of the Banks and Creditors but am calling for the Government to be proactive and come up with strategies to help the situation. Government is to help fathers and mothers and the youths who have the aim of improving the country's economy. These new or young entrepreneurs had aimed at growing and employing more people who could then look after their families and improve the health, and nutritional status of their families through the money earned.
What I am calling for Madam President is not something new but what has been done in many countries and economies. In the recent credit crunch (Global Financial Crisis 2007 - 2008) in the USA, the Obama administration had to actively participate in the economy by bailing out ailing companies and banks and protecting borrowers who ordinarily would have seen their houses going under the hammer, being sold. Similarly, we saw this method used by the Gordon Brown led Labour Party in UK that bailed out their citizens who were to lose their properties to money lenders. (A good thing is a good thing no matter who does it). Lets copy good things.
In Zimbabwe when the economy was slightly better came up with various facilities such as small business sector facility (SBSF).
The Government as recent as last year wrote off debts of households to local authorities primarily because of the liquidity challenges.
At present parliament is debating if it could pass a law that is seeking to allow Government to take over the debt of $1.35b owed by RBZ. The debt is due to the liquidity challenges faced by senior people who were borrowed by RBZ.
Relieving Mechanism:
This house therefore Madame President Calls upon the Government to do everything in its power with a view to save a lot of the debtors whose properties are on the verge of being sold in some cases this resulting in families being impoverished.
In coming up with this mechanism Government will not help these bank debtors only but will help the banks in the process and the economy in the longer term.
The Government should as a matter of urgency through the Reserve Bank of Zimbabwe urge the Banks and other creditors to rollover loans and overdrafts until such time that the loans and overdrafts have reached the in duplum rule in other words until the interest accrued has reached 100% of capital . This process allows creditors time to run around to look for the money rather than to quickly dispose their properties.
The Government should create a fund with a view to bail out many of our entrepreneurs who are facing liquidation and disposal of their properties. The fund so created will be used in a responsible manner so as to either inject funds into these debtors business to enable them to repay their debts or alternatively to allow the banks to arrange new rollover facilities.
There is need for the Reserve Bank of Zimbabwe to sit down with the Bankers Association of Zimbabwe and look at the individual bad debts books of Banks and other lending facilities. The RBZ should in my view advice the Government the level of funds that should be injected using a special vehicle or facility.
There is a need for the Government to urge the Banks and other creditors to do a debt swap so that the special facility created by the Government can result in banks becoming shareholders in some of these ventures.
There is need for the Government to make it difficult for one to lose his or her property by creating a mechanism that ensures that there are BOLD signpost, steps and processes that have to be taken before Bank and other creditors ask the courts to dispose properties especially land and buildings.
Madame President, I am aware that the Government has challenge of its own but I believe this is one area that the Government need to rise up and be counted. Desperate times as the ones we are going through, calls for extra ordinary intervention. Let government prevent poverty from households that were trying to uplift themselves and others through running their small businesses.
Madame President, future generations will applaud us as Government if we assist in this regard but should we not we will be harshly judged as a Government that was heartless and killed the spirit of hard work.
Zimbabweans are hard working people. Let that spirit be up held. This august house is asking the Government that it should continue encouraging keeping the Zimbabwean entrepreneurship spirit up.
I THANK YOU
Source - Byo24News
