The Report, released last week for the period June 2011, was compiled by the African Development Bank Group (AfDB).
The news comes at a time when last month a Senior Manager with Kingdom Financial Holdings Limited (KFHL) said deposits in Zimbabwean banks were low despite the fact that the country has a very high literacy rate.
The country currently rides high and has the best literacy rate in Africa, beating its traditional rival Tunisia who held the title previously.
“Data from the Reserve Bank of Zimbabwe (RBZ) indicates that annual Broad Money supply (M3) growth, defined as total banking system deposits, declined to 48,4 percent in April, 2011 from 253,7 percent in March, 2010, as the eceonomy was recovering from a low deposit base,” the Review said.
“Annual growth in deposits held by banks stood at 48,4 percent in April, 2011, from 52,6 percent in April, 2011. In absolute terms, however, the level of deposits rose from US$1,75 billion (23,4 percent of Gross Domestic Product (GDP)) in April, 2010 to US$2,60 billion (29,1 precent of GDP) in April, 2011.
“Month-on-month M3 growth slowed down from 4,9 percent in March, 2011 to 0,9 percent in April, 2011. The monthly deceleration in M3 growth was underpinned by a sleight decline in long-term banking sector deposits.”
The Monthly review said despite an improved deposit base and increased financial intermediation, deposits were largely of a transitory short-term nature.
“However, the banking sector is still experiencing persistent liquidity shortages, lack of depositor confidence, low savings, low average deposit rates, high average lending rates, short-term nature of deposits, laxity in bak regulation and supervision, poor corporate governance, limited lender-of-last resort facility at the Central bank, limited inter-bank trading and uncertainty about the future of the banking sector.”
It said, generally, however, in the long-term, this was likely to have implications on the overall recovery of the economy because, to boost production, companies required affordable long-term bank finance.
“The recent renaissance Financial Holdings Limited (RFHL) default on loan repayment and the revelation by the RBZ of shareholding, Board and corporate governance flaws, irregular inter-company transactions and the possibility that the institution is under-capitalised may reflect attendant banking sector vulnerabilities,” the Monthly review said.
The RFHL scam was “allegedly” authorised by tycoon, Patterson Timba .
In an exclusive interview Trust Financial Holdings Limited (Trust) Chief Executive, international banker, William Nyemba, said the RFHL “scam” was “tarnishing the banking and financial sector’s otherwise very good image”.
“The market is currently awash with bad news about the problems at RFHL and this is affecting all of us,” Nyemba said.
“There is good news in the market and we should try to move away from the problems at RFHL.”
Nyemba recently bounced back from South Africa where he had gone after his empire was accused of allegedly “externalising foreign currency” but this was not proven and Trust Bank Limited, a subsidiary of TFHL, has re-opened its doors in Zimbabwe after its trading licence was “secretly returned” by the RBZ.
The Zimbabwe Monthly Economic Review said the country’s corporate sector was expected to benefit from a US$100 million Africa Export Import Bank (Afreximbank) facility to recapitalise local companies.
Four local commercial entities have already signed a deal with Afreximbank on the modalities of the facility.
The commercial banks are TN Bank Limited, a subsidiary of TN Financial Holdings Limited (TNFHL) currently under Tawanda Nyambirai, FBC Bank, a subsidiary of FBC Banking Corporation Limited (FBC) under new boss, John Mushayavanhu, Bank ABC, a subsidiary of the Botswana Stock Exchange (BSE)-listed African Banking Corporation Limited (ABC), under Douglas Munatsi, and the flamboyant NMB Bank, a subsidiary of NMB Financial Holdings Limited (NMB) under tycoon, James Mushore.
NMB Bank is also listed on the London Stock Exchange (LSE).
Mushore, like Nyemba, had also left Zimbabwe to operate from the Diaspora during the times of Zimbabwe’s hyper-inflationery escapade which finally ended in 2009.