Saturday, April 20, 2024

The Collapse of Investtrust Bank:A new model of managing national assets urgently needed!

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On Tuesday, April 2, 2024, the Bank of Zambia (BOZ) took possession of the management and control of Investrust Bank Plc (IBP). Apart from Zambia Industrial Commercial Bank (ZICB), IBP is the only other truly indigenously owned and controlled bank in Zambia. For contexts’ sake, as of June 30, 2023, close to 95% of the banking assets in Zambia are foreign owned and controlled. With the sad news at IBP, this paltry stake we hold in the ownership of financial assets has been diluted further to near zero. Every patriot must be worried about this. You cannot be truly sovereign if the financial and banking assets are controlled and owned by foreign interests.

In our view, the problems at IBP are symbolic of what happens in any industry when state actors throw their national’s interests and assets to the wolves of international monopoly capital. In the Socialist Party, we will heighten support to state owned banks and encourage indigenous Zambians to own and manage banks and financial institutions.
The government must support local banks unapologetically.

The takeover of IBP is primarily because state institutions, which are key institutional investors, do not have a deliberate policy to support local banks and local financial institutions. The rise of Nigeria as an economic giant in Africa can be traced to decisions made in the late 1980s under the leadership of Gen Ibrahim Babangida where all federal and state finances were to be deposited (not in foreign banks) but in newly created Nigerian owned banks. The result is a robust Nigerian financial and banking system, which has now made Nigeria the banking and financial services Mecca of Africa. Patriots, imagine for once that NAPSA, NHIMA, Workers Compensation funds were exclusively deposited in local banks like ZICB, IBP, Zanaco, Indo Zambia, NATSAVE and ZNBS? I am not even talking about ministries and spending agencies in government! In 5 years’ time, these institutions will become market leaders and control the economic barometer of our land. Today, the top 5 banks by asset and earnings in Zambia are overwhelmingly foreign. This is a ticking time bomb. There is no economy where a government flirts and dates with all things foreign. Are the leading banks in Egypt foreign owned? Are the major banks in South Africa and Ethiopia foreign owned?

We know that by the time BoZ was making this decision, they had several engagements with the shareholder ZCCM-IH, which falls under CDC chaired by the President. Why did IDC not intervene and bail out a local bank? Who bewitched us!
The UPND’s chaotic monetary policies are worrying.

The IBP failure also exposes the UPND’s chaotic monetary policy of siphoning liquidity through increased Statutory Reserve Ratio (SRR) to 14.5%. At the same time Monetary Policy Rate (MPR) was increased to 12.5%. When you add the mopping up of nearly K2bn in January 2024, these knee-jerk reactions were bound to cause unimaginable disaster. This has milked away all the cash in the market.

Today, there’s no support for local businesses worth talking about.
It has been worse for our local banks whose main clients are local contractors whose invoices have never been paid for nearly 3 years. Whilst international banks are well funded and capitalised, you can’t say the same for our local unsupported banks. Also don’t forget that most local businesses who bank with local banks have been shunned by the UPND government in preference for foreign companies. The government must reverse the draconian monetary policy that has crippled the banking industry before more local banks and financial institutions are swept away in the way of bank failures. The government must also settle the billions of money they owe local contractors and suppliers on the pretext that they are PF cadres. These are the businesses that transact with local banks. The big multinational foreign investors bank with their own foreign banks.

Governance and management weaknesses at IBP should also not be ignored.
Of course, we are aware that IBP has had historical governance weaknesses and management incompetencies. We are aware of how high impact and productive senior management were frustrated and sidelined out of the bank. The bank was not short of cronyism, tribalism, and even outright abuse and fraud by stakeholders. If the boards and management of IBP in years gone by had made more professional decisions, the course of the bank would be different. We are also aware of the corporate wars that happened at the bank. We are also aware of how ZCCM-IH was literary forced to acquire that shareholding against internal ZCCM-IH management and board due diligence. There was no value in the deal, and Rupiah Banda’s State House forced that deal on ZCCM-IH. But this is a story for another day.

Incompetence at the Bank of Zambia should not also be ignored.
Where is the Bank of Zambia in all this? Can it be said that BoZ was not aware of the systemic problems at IBP until now? We don’t think so. When did IBP last publish its financial statements as required by the Banking and Financial Services Act 2017? The leadership challenges at the central bank are in public. At a deeper level, we have a central bank that is inept and an acolyte of Western and textbook monetary policies that have no meaningful value for our local industry and our people. Under Socialist Party, the Bank of Zambia will be reformed to make it an instrument that helps to elevate the standards of living for our people. What use is double-digit GDP and single digit inflation if our people are hungry and poor? If our people are excluded from participating in commerce and enterprise through artificially propped up interest rates? The reforms at BoZ are long overdue.

Under the SP, we will identify financial institutions and support them to run profitably, but these must be Zambian owned and controlled. State resources will be banked in the local banks as part of the deepening of our local financial systems.
For now, and as a matter of national urgency and emergency, we demand that the government and the central bank move in to forestall financial sector confidence. The mounting loss of confidence in Zambian owned financial institutions is a serious national risk to our financial system. If this is not done, we shall see contagion risk spread to ZICB, NATSAVE, Zanaco, and ZNBS. We cannot afford to lose these national assets and institutions regardless of their weaknesses. SP already has a master plan to come revive our own local financial houses. We will use this critical artery to catalyse a national economic renaissance that is rooted in our own people, our own systems, and for our own national, not monopoly capital interests.

Fred M’membe
President of the Socialist Party

18 COMMENTS

    • What is he talking about, did he pay back the loan he got from his friends at DBZ.
      Meanwhile there are lessons next door, Zimbabwe’s currency plunged to yet another record low as citizens rushed to the safety of the US dollar amid speculation an announcement from the central bank on the fate of the local unit is imminent.
      The Zimbabwe dollar traded at 22 476 against the greenback, taking its losses this year to 73%, the world’s second-worst performance only after the Lebanese pound. A sense of urgency has gripped the nation after authorities brought forward the start date of the new governor, John Mushayavanhu, by a month. The local media reported the move was made to announce a new currency plan that may include embracing the gold standard.

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    • Is it the fault of the borrower that money was not repaid,? Only a careless bank can allow people go without repaying their loans. It’s just common sense. If a komboni lender can secure his lendings by asking the borrower to surrender his ATM card or even property such as vehicles how can a bank fail.

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  1. A new model needed ?? Bollocks !!! there is only one way to run institutions of this nature
    competent and moral management, avoid giving loans on over inflated properties and favouring cronies

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  2. *****. You are always talking of things that are practically impossible. How many countries in the world follow your so called socialist ideology? Have you ever bothered to think of what led to the collapse of the Soviet union and why Cubans still drive cars manufactured in the 1900’s?

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  3. @ Tikki
    I agree with you 100%…these financial institutions give massive loans to Politicians and if they default nothing happens to them….

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  4. For once somehow he sounds sensible, maybe we should look into his socialist ideologies next time around.

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  5. Has Fred M’membe no shame?
    He is one of those that has led to the demise of this bank, he needs to pay back the $350,000 he borrowed. As well as Fred all the others need to, including PF members.
    As you all know no bank will survive if loans given are not repaid.
    The bank was very badly managed and the government is absolutely correct in not bailing it out. The country has enough debt without wasting money on bailouts on situations that was avoidable.
    At the end of the day people are not bothered about who owns financial institutions as long as the money is looked after.
    Zambians had a chance to run a home grown bank and they blew it.

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    • You don’t make sense. How can a bank allow someone to borrow without collateral? You people supported Mmembe when the PF went after him for defaulting tax and other obligations.
      All in if Fred had borrowed that amount, it’s not his fault but that of the bank management.

  6. The mindset of some people is really amazing. Do you really think $350,000 is an amount which would cause a bank to collapse? Do people actually understand the job of a bank? The bank’s job is to lend money and earn interest on the loans. If invest trust was giving out loans without collateral or interest then why didn’t those suggesting this reason apply for free money? The truth is if this bank has a shortfall, the money is somewhere with the shareholders or debtors. I’m sure Bank of Zambia will do their investigations and follow up on bad debts. My worry is that this debt will be sold to foreigners who will exploit poor people even more.

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    • @FutureZed the $350,000 is just but one of the many non-performing loans (NPL’s) that has affected the bank’s capital adequacy requirement. The NPL’s you’ll discover are mainly to Polically Exposed Person’s (PEP’s) like mmembe in opposition now as well as former rulling party’s i.e. mmd and pf. The same group of persons or companies you’ll find the DBZ loan book which or who contributed to its collapse. Before mmembe and his ilk cam talk changes in the financial sector, they need introspect and clean themselves of borrowing with no intent to repay.

    • @Nineo, are you saying that if these people borrow from the bank just because they are pollical exposed, the bank can’t recover the loans? seriously, don’t you think that is enough information to have people like Mmembe arrested by the government?

  7. Exactly whatever companies Fred used to run like post newspapers, post couriers have all collapsed so he should be the last to talk about running of companies or even the country for that matter.

    • But he has no loans with the said bank….yes he’s collapsed companies like the Zambian Airways. Looking at the names of office bearers I would expect upnd members would be more favored for loans than Mmembe

  8. Fred does not owe any bank a single ngwee. Stop writing lies on media. It will make him more popular when banks release the list of borro

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    • Actually there’s a lot of mingalato involved in this saga. We shall only when the instruments of power are transfered to another person.

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