Financial Gazette (Harare)
Shame Makoshori
5 December 2011
MID-TIER commercial bank, MBCA Bank Limited, a unit of South Africa’s Nedbank Group, this week coasted into a storm after failing to pay November salaries and bonuses, triggering speculation the bank had lurched into a liquidity crisis.
But a bank spokesperson immediately discounted the speculation, insisting the bank had priorities on its expenditure “based on the ultimate value created for the benefit of our customers”.
Johannesburg Stock Exchange-listed Nedbank, South Africa’s fourth largest banking group, last year shored up its interest in MBCA from 50 percent to 74 percent after following its rights in a capital raising initiative undertaken to increase the bank’s capital in line with central bank regulations.
Old Mutual, the other shareholder in MBCA, was in the process diluted.
This week, the Zimbabwe Banks and Allied Workers Union (ZIBAWU) said it was extremely worried by what it described as a “serious liquidity challenge” at MBCA and demanded assurances that its members’ jobs were secure.
“It has come to our attention that you either failed or neglected to pay salaries and bonuses this month for a number of your non-managerial staff,” ZIBAWU president, Peter Mutasa, said in a letter to MBCA on Monday.
“Whilst initially all employees on the retrenchment list were not paid as at pay day 18 November 2011, we have been told that another batch was paid on 24 November 2011.
This is clearly unusual and we are very concerned considering the business you are in (banking).
“We therefore seek an explanation as to the reasons for the failure to pay employees’ salaries or the unusual payment interval. We are writing to you in order to allay the justifiable fear in your employees that the bank might be experiencing serious liquidity challenges,” Mutasa said.
MBCA’s link to one of southern Africa’s top banking groups had generally cultivated confidence in its operations, but confidential details indicate that the bank had been battling what it has called a “largely subdued performance” which it has tried to contain by “selling off its pool car fleet and transferring ownership of company cars to users in a bid to cut costs”.
MBCA has abandoned a full floor at its Old Mutual Centre headquarters in Harare, and embarked on a controversial review of its “bloated” headcount, which has been fiercely resisted, but is seen as key to achieving stability.
The Financial Gazette’s Companies & Markets understands that during the full-year to December 2010, Nedbank was forced to suspend MBCA’s management fee payment as part of efforts to strengthen the local operation’s balance sheet.
“In 2011, the bank continues to struggle with performance that is below budget,” a confidential report filed by MBCA to the Retrenchment Board said.
MBCA Bank, which says its operations had continued to be strained during the first half of 2011 when it proposed a raft of cost-cutting measures, becomes the first bank in Zimbabwe to struggle to pay salaries.
Developments at MBCA confirmed concerns that the situation within the banking sector remained dire, 36 months after dollarisation.
In 2009, government introduced a multicurrency monetary system after a prolonged recession that lasted a decade.
Overnight, financial institutions woke up to realise their capital reserves in Zimbabwean dollars had lost tradable value, yet they still faced enormous costs to deal with.
Financial institutions had to fight to strengthen their balance sheets, at the same time battling the cost-cutting war in order to reserve the little revenue that trickled into their systems.
MBCA says it was not spared.
In her answers to questions from this newspaper, MBCA spokesperson, Dedrey Mutimutema, skirted issues related to the salary dispute, only indicating in her terse response: “MBCA Bank has sufficient liquidity to meet the requirements of its customers.
This is amply evidenced by the statement of assets and liabilities which is displayed in all our banking halls.
“As a bank, we carefully consider and prioritise our expenditure based on the ultimate value created for the benefit of our customers.”
She said the decision to retrench had been made early this year, and an application was sent to the retrenchment board in July 2011.
“The matter is under deliberation before the Minister of Labour,” said Mutimutema.
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