Zimbabwe bank in trouble

zabgAn auditor's report has revealed that Zimbabwe Allied Banking Group splurged on 132 luxury cars for top managers and US$ 36 460 a month on food.

The Zimbabwe Allied Banking Group (ZABG), one of the biggest banks in the country, is on the verge of bankruptcy following revelations of serious financial mismanagement.

A due diligence report by Deloitte and Touche Corporate Finance and a verification report by the Reserve Bank of Zimbabwe (RBZ) in possession of The Sunday Times showed that the bank was saddled with potential liabilities of more than US$12 million due to alleged mismanagement of depositors’ funds.

The bank was engaged in non-core business, while spending extravagantly on luxury cars, fuel, personal loans and “cafeteria” allowances for top management.

Poor decisions by management, such as underwriting rights issues when the bank had no funding capacity, left it exposed. ZABG also spent large sums of money on promoting 61 per cent of workers to management positions.

ZABG is an amalgamation of Royal Bank Zimbabwe Limited, Trust Bank Corporation Limited, and Barbican Bank Limited, which were forced into curatorship in 2004 by the central bank. It accused them of abusing depositors’ funds. In 2005, the Reserve Bank merged the three into ZABG.

Recently it was decided to return the three banks’ assets to the original owners, although the deal has been stalled by the current crisis.

Revesai Gwenhamo, the ZABG spokesperson, said: “The Reserve Bank of Zimbabwe governor, Dr (Gideon) Gono, announced in a press statement he issued on November 6 last year that negotiations were under way regarding the return of ZABG to the original owners. As these negotiations are still on-going, it would be inappropriate to discuss the issues you raise on ZABG at this stage.”

The due diligence report and the RBZ verification follow-up revealed a startling free-for-all management style, despite the bank being in the red, management still continued to overspend, including allocating 40 litres of fuel a day for the chief executive officer, Stephen Gwasira.

Gwasira refused to comment, but stood by the response issued by Gwenhamo.

Documents showed that ZABG had established a group known as the “top 20” who earned hefty salaries, with the lowest remunerated of them getting at least US$ 500 of fuel a month, school fees and cafeteria (lunch and dinner) allowances.

The group blows US$ 36 460 a month on lunches and dinners. Gwasira gets about US$ 124 a day, while the rest get a minimum of US$ 71 a day.

In Zimbabwe, civil servants earn about US$ 150 a month.

Since 2005, the bank has bought at least 132 luxury cars, mainly for management. The document reveals that: “The Reserve Bank also determined that bank management made a number of imprudent decisions, which increased the bank’s liabilities against the background of a weak financial condition.”

The Sunday Times understands that the salary increases were done in anticipation of severance packages if the bank is returned to the original owners. The increases were effected in December soon after Gono had announced that ZABG had a paltry $500000 capitalisation base left.

Angry junior employees expressed outrage at management. ”Management is saying there is no money at the bank yet they increased their salaries and allowances. We see them driving top of the range cars and enjoying all the luxuries, yet we are wallowing in poverty,” said an employee.

Peter Mutasa, the acting president of the Zimbabwe Banks and Allied Workers’ Union, said that ZABG management and employees were in a dispute over wages. ”Workers at ZABG have told us that their employer is refusing to negotiate with them and we are going to deal with the case next week,” Mutasa said. Article first published by Times Live

Post published in: Economy

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