Cash shortage a result of trade deficit, says Guvamatanga


Barclays Bank Zimbabwe managing director, George Guvamatanga

BARCLAYS Bank of Zimbabwe says the current cash shortages in the economy are largely defined by the trade deficit of US$3 billion which is a result of the import of goods some of which are available locally.
Speaking at the bank’s annual general meeting, the banks managing director, George Guvamatanga, said speculation in the market was also contributing to the current cash shortages.
“We have to ask ourselves, what are we importing exactly? Fundamentally, we need to shift as a country and ask ourselves what it is that we are producing and what we can produce so that we keep the liquidity circulating locally”, he said
He said on average the amount of cash needed for transacting purposes between January and November 2015 remained largely the same but the same does not apply in the current situation.
“As Barclays, the amount we used to load in ATMs to last us three days, now lasts for three hours”, he said
“The question is when an individual withdraws US$10 000, what do they want to use it for? Who do they want to pay and what are they going to buy? So there are many other things that we fail as a nation which create problems and in the process puts pressure on the central bank and the banking sector”, he said.
Commenting on the measures put in place by the Reserve Bank of Zimbabwe to ease the cash crisis, Guvamatanga said, controls were necessary as the country is not using its own currency hence it is impossible to print US dollar which have to be brought into the country.
“We need to look at these measure in the ‘right mind’, the reality is that we are consuming more than we are producing”, he said.
Guvamatanga said even in countries where the currencies come from, daily ATM withdrawal limits are very low when compared with Zimbabwe. In the USA, ATM withdrawals are limited to US$500 a day, 300 pounds in the UK and  3 000 rand in South Africa.
He said he believes the country has a very strong and resilient banking sector. A total of 15/18 banks were profitable in 2015 but this was largely a reflection of the reduction in non-performing loans most of which were taken over by Zimbabwe Asset Management Corporation  (ZAMCO).
“ZAMCO took over most banks non performing loans (NPLs) which were a drag on their performance and replaced them with high yielding treasury bills which boosted banks’ incomes”, he said.Guvamatanga said this is contrary to media reports that suggest that banks were making money from overcharging customers on fees and commissions.
In terms of the sector NPL ratio which currently stands at 10,8 percent, Guvamatanga said there has been a huge improvement but the ratio still remains very high when compared with global standards at five percent, and what would be expected in  a market that is “viable and sustainable”.
Giving a trading up, for the four month to April 2016 the Barclays total income was at US$16 million which he said showed “improving performance”.Net Interest income y-o-y growth was at 24 percent compared with 11 percent last year and this was largely driven by a higher retail loan book than same period last year. Non Funded Income to total income ratio was at 63 percent versus 75 percent same period last year.
Guvamatanga said the shape of banking had changed and the market expectation that a bank should generate 80-90 percent of income from funded income or from interest income is an outdated model which is not sustainable given the volatility of interest rates and business cycles.
“Banks long ago used to offer one service, we kept the deposit and we lent it out. There is now digital banking, internet banking, banc assurance and more other services that banks are now offering, generating more non funded income,”  he said
“Because if the majority of the bank’s income is being generated from interest income and we have all these headwinds in the market; the question is; is one able to run a sustainable business? And it does not necessary follow that if a bank generated most of its income from non-funded income it is from fees and commissions, ledger fees or withdrawal fees, because income sources are now diverse. A good business model is one that has a balance between funded and non-funded income and as Barclays we are working on achieving that balance,” Guvamatanga said. FinX/Staff writer

Follow us on Twitter @FingazLive and on Facebook – The Financial Gazette