Lawsuit and retrenchments batter Zimbabwe's banks
Publish date: 08 August 2019
Issue Number: 672
Diary: Legalbrief Forensic
A $100m lawsuit and news of 100 retrenchments are just the latest blows that have plunged Zimbabwe’s banks into a perfect storm, say unions and experts. They say the inexorable rise of EcoCash, which handles more than 80% of digital transactions, and failure to keep up with technological progress are other factors behind the crisis in the banking sector. More retrenchments are expected as banks outsource some operations to cut costs. And even staff who keep their jobs are suffering, according to the Zimbabwe Banks and Allied Workers Union. ‘They used to be paid in US dollars. Their salaries have been severely eroded and divided due to inflation and exchange rate losses,’ said union assistant secretary-general Shepherd Ngandu. The biggest bank by deposits and asset base, Commercial Bank of Zimbabwe, has announced 100 retrenchments. This follows a similar move in April by Standard Chartered, which has reduced its branches from 15 to nine as it transitions to online banking. CBZ's group marketing and corporate affairs executive, Matilda Nyathi, told the Sunday Times the economic climate had forced the bank to look for a more viable model of operation.
Meanwhile, the Zimbabwe National Statistics Agency won’t report year-on-year inflation figures until February 2020. Finance Minister Mthuli Ncube said this was in order to allow it to to collect comparable data after the introduction of a new currency earlier this year. Annual inflation surged to 175.7% in June as shortages of food and fuel pushed up prices and the official exchange rate weakened to 9.2 per dollar from 2.5 per dollar since 25 February. Of 120 countries tracked by Bloomberg, only Venezuela has a higher inflation rate. A Daily Maverick report notes that Ncube told lawmakers that the economy will contract this year because of a lack of foreign exchange and energy.