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By Sure Kamhunga
A recent update by the Governor of the Reserve Bank of Zimbabwe, Dr Gideon Gono, showing that some banks and financial institutions are struggling to adequately capitalise their operations should compel one to ask the simple question whether we really need so many of these banks in Zimbabwe.
Granted, all the banks — save for those owned by international shareholders such as Barclays Bank, Stanbic, Standard Chartered and Merchant Bank of Central Africa — were formed following the commendable efforts made by the Government to allow blacks to enter the financial services sector.
In fact, it can be argued that the sector became and still remains one of the most transformed in terms of black ownership and control.
But inasmuch as Government provided the environment — and support — for these banks to be established and flourish when the times were good, probably now is the time for the central bank — and the Ministry of Finance — to go back to the drawing board and ask themselves whether in the interests of the country some of these banks, which seem to exist in name only, should continue to operate.
Dr Gono, aware of the financial predicament facing some of these banks and the likely negative contagion effect to the economy of allowing them to fail, has extended a magnanimous hand to their owners and given them time to capitalise their institutions.
First, the deadline was set for December 31 2010, and confident noises were made by the owners of most of the banks that they would meet the deadline.
The deadline came and passed with hardly any significant progress made.
Now Dr Gono has been forced again to extend this moratorium to the end of June this year.
One hopes this is the last time and that after this deadline, for the sake of continued stability of the financial services sector, those that fail to meet the grade should be allowed to either close shop with minimum fuss, or be merged or consolidated into existing institutions.
To minimise job losses, mergers should be allowed.
Ideally, therefore, after June, the market should experience a flurry of activity through forced and friendly mergers and acquisitions as the weaker banks seek refuge in the comfort of well-capitalised competitors.
This is good for the country and the economy for a number of reasons.
First, call me a pessimist, but I believe there must be something wrong with a country that has about 15 commercial banks serving a tiny population of just under 14 million at the last count, out of which probably more than half are not formally employed, and of those employed, a tiny fraction have functioning bank accounts.
One might argue that let market forces dictate and license as many banks as you can as long as they can meet the minimum fee requirements, but that is too simplistic and ignores the threat of systemic risk to the sector and the economy were one or two of these banks to fail for one reason or the other. And that risk continues to rear its head given the fresh memories of the past when a number of indigenous banks were closed with disastrous consequences to the account holders.
Second, what purpose are some of these banks serving in a country that is so desperate for the financial sector to take the leading role to revive stagnant economic growth through the provision of affordable credit, and support to the small- and medium-scale enterprise sector?
Even if the economy was to overnight become awash with liquidity, how many of these will actually be useful to stimulate the growth that is needed as the weaker and smaller banks will find themselves playing second fiddle to stronger competitors.
Third, how are these weak banks surviving from month to month when they are saddled with such a huge costly structure comprising things like a branch network for which they most probably have to pay monthly rentals in addition to other costs such as service charges and security, IT systems (some of which require licence fees to be paid) as well as the biggest cost of all — staff salaries.
A business needs to generate enough revenue to cover operating expenses and leave some change for re-investment and for the shareholders if and when a dividend is declared. One therefore wonders where the “profits” of some of these banks are coming from to be able to sustain their operations and meet these expenses.
Small wonder then some sceptics begin to speculate that probably some of the banks make up for the depressed revenues through bank charges — considered extortionate by some customers — to pay for these expenses.
Fourthly, Zimbabwe needs a strong and vibrant financial services sector that can compete, at the very least, with regional players, among them South African banks. For that to happen, there is really no need to have as many as 15 or more banks for the sake of having a badge of an empowerment honour that we have blacks owning banks, when some of them can hardly raise enough money to capitalise their operations.
Arguments that it is difficult to raise capital in the current environment — given the country’s slow slide out of stagnation and lack of international credit lines — do not hold water simply because even if all things were normal, no global investor worth their salt would in all probability consider investing in some of these banks for the simple reason that there would be no credible business case for such a venture. 
The central bank should be bold enough to focus on the future of the country post the economic crisis, and decide what sort of financial sector does it want developed in Zimbabwe as the country slowly returns into the global economic environment.
This means ensuring that the financial sector is strengthened and capitalised so that it can begin to play its role to stimulate and oil economic growth and development of the country by promoting trade and investment.
But as long as we have institutions that wobble from month to month struggling to survive, depending on the benevolence and sympathy of the central bank in the hope that their problems will simply disappear or some magic wand will bring in the cash, we will continue to put at risk those institutions that have either complied or are showing credible efforts to comply so that they become relevant to the country.
The owners of these weak banks should begin to question themselves what purpose they are serving — beyond feeding a personal ego that they own a bank — and be bold enough to start considering seeking alliances and strategic partnerships, particularly if the writing is on the wall that they won’t be able to meet the Reserve Bank deadline.
After all, there is safety in numbers, and the country will be better off with a properly capitalised, efficient and dynamic banking sector that can hold its own against the best in the world.
Black empowerment is a noble and politically and economically justifiable cause, but let it be empowerment that has the right credentials which start with good corporate governance and business ethics, and that means having owners who are honest to themselves and to the country that probably they have had their chance and fought the good fight, and it is now time pass on the mantle and move on.
Sad as it might seem, but it is an unavoidable fact that right now that there is just not enough economic activity to sustain and support all these banks.
Therefore, this could be the opportune time to prune the sector and wean it of pretenders to the crown of financial excellence and stability.
The country — and the people — deserve nothing less.
l Sure Kamhunga is a journalist and corporate communications consultant.