27 May 2011
THE ReNaissance Merchant Bank saga deepened this week amid revelations that Finance minister Tendai Biti is determined to bulldoze his way to force the National Social Security Authority (NSSA) to bail out the troubled bank, a situation which has ignited a political storm in the corridors of power.
Informed sources said this week Biti on Monday instructed Reserve Bank governor Gideon Gono to receive US$20 million from NSSA on behalf of ReNaissance — which is technically insolvent — to avoid criticism over the use of workers’ money to rescue a bank plunged into a crisis due to systematic abuse of depositors’ funds. This came as British tycoon and real estate magnate Nicholas van Hoogstraten and prominent mogul Jayesh Shah attacked Biti for indirectly describing them as “loan sharks”.
“There are two particular loan sharks, one of Indian descent and one of British descent, that have unlawfully descended into our market and that are exposing our banking system, our money market system to unacceptable usurious rates of interest,” Biti said recently.
Van Hoogstraten and Shah — two of the richest people in Zimbabwe — this week hit back, saying they knew Biti was talking about them because they have rescued banks and many companies locally by providing loans and bridging finance.
Van Hoogstraten, who told the Zimbabwe Independent that he was widely known on the market as “lender of last resort”, described Biti’s comments as “foolish and inaccurate”.
“As a lawyer and a minister he should know better than to make such foolish and inaccurate comments,” Van Hoogstraten said. “For many years I have been the single largest investor in the Zimbabwean financial market and currently have Zimbabwe Stock Exchange-quoted holdings with a value of well over US$250 million.”
Shah said the minister’s remarks were “unfounded and baseless”. Former ReNaissance chief executive Patterson Timba, recently booted out of the bank following revelations of financial mismanagement, had borrowed US$5 million from Shah.
“It’s unfortunate,” Shah said “that the Honourable Minister of Finance is indeed giving the impression that: (a) We approached Timba and conned him into borrowing the money from us, (b) then put a gun to his head and forced him to sign the agreement, (c) blasted Timba’s safe and forcibly took the security, (d) and when Timba refused to accept the loan proceeds — we forced open his pockets and shoved the money in.
“One does not have to be a genius to know and understand that Timba would have been history in September 2009 if he failed to raise US$5 million — the RBZ minimum capital requirement then.”
Efforts to get comment from Biti or Gono failed yesterday but senior Treasury officials confirmed the two had a meeting on Monday over the ReNaissance issue. “There was a meeting between the minister and the governor on Monday where it was decided that NSSA would now channel US$20 million to ReNaissance through the Reserve Bank,” a senior Ministry of Finance official said. “This is a complicated and tricky issue because some senior government officials, including the minister, have a potential conflict of interest in the matter. Now they have decided to try to disguise the rescue package by sending it through the central bank, but I think this will cause problems going forward. There are many banks in liquidity problems in Zimbabwe, so why ReNaissance? There is a problem.”
Insiders say Biti is trying to rescue ReNaissance to prevent it from collapse affecting the whole banking and financial system. They say Biti is motivated by the “common good” instead of personal or political interests as suggested by some when they pointed out that Patterson Timba was brother of Jameson Timba, Minister of State in Prime Minister Tsvangirai’s office and a friend of the Treasury boss.
Patterson Timba’s relationship with Biti through various networks has complicated the matter. Biti insists he is doing it to safeguard the banking sector, although his critics say this was not true.
Those opposed to NSSA funds being used to rescue ReNaissance say doing so would be rewarding corruption and ineptitude.
ReNaissance problems were laid bare recently after an investigation by the Reserve Bank which exposed a gross violation of banking laws and regulations, chronic liquidity and income-generation problems, insider-lending and related-party exposures, weak corporate governance structures and internal controls, inappropriate shareholding structure, under-capitalisation and systematic abuse of depositors’ funds.
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Bank Dispute Deepens