Externalising funds crippling the economy

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The Standard Chartered Plc logo sits on display at the company's private banking unit in London, U.K., on Wednesday, Oct. 13, 2010. Standard Chartered Plc plans to raise about 3.3 billion pounds ($5.2 billion) in a rights offer, as banking regulators prepare to force large lenders to hold more capital than the Basel III capital accords require. Photographer: Simon Dawson/Bloomberg

STANDARD Chartered (StanChart)Zimbabwe is allegedly externalising more than US$20 million a year, a move that is bleeding the local economy.
Last week, the Zimbabwe Banks and Allied Workers Union (ZIBAWU) organised a demonstration against StanChart accusing the bank of centralising its operations in Kenya and India, resulting in massive retrenchments.
In an interview ZIBAWU president Farai Katsande said in 18 months StanChart has prejudiced the local economy of more than US$20 million.
“What is happening is that most of the bank operations are now being done outside the country, for example the bank card processes are now done in Kenya and Zimbabwe is now a conduit,” said Katsande
“In 2014 over US$13 million was paid for bank cards processes, loan approvals and other minor services, like getting a certificate of balance for clients, which were done in Kenya and India.
“While in 2015, from January to June, about US$6,3million was paid for those services at the expense of our economy.
“This is tantamount to externalisation of funds.”
Katsande said it defies logic why the multi-national bank would engage Kenya and India for processes that can be done locally.
“These are very simple processes that can be done locally but it are benefitting other economies,” he said.
“And it is actually cheaper having these processes done in Zimbabwe.
“We would not mind having a brotherly relationship with our African brothers in Kenya or our counterparts in India but what we do not accept is that their economies prosper at our expense.”
Katsande said in outsourcing processes the bank was also migrating jobs to Kenya and India.
StanChart recently laid off 36 workers; 12 non-managerial staff and 24 managers
StanChart Zimbabwe has denied externalisation of funds claims laid by its former workers saying the financial institution was committed to reviving the country’s ailing economy by sourcing cheap external loans.
The bank’s head of corporate affairs, Lillian Hapanyengwi, said the bank’s international strategy to outsource processing to various centres has been in place for many years, supporting the StanChart markets across Africa, Asia and the Middle East.
“Hubbing select operations enables Standard Chartered and many other multi-national companies to streamline internal business processes and efficiencies, and most importantly, deliver an enhanced and consistent level of service to our retail, commercial and institutional clients,” she said.
Last year several companies were under investigation concerning externalisation of funds.
In December, Fly Africa was suspended and put under investigations by Reserve Bank of Zimbabwe (RBZ) for allegedly externalising funds.
In the same year De Vere financial services group is alleged to have siphoned out millions of dollars for wealthy individuals in the country.
However, RBZ has moved to tackle the issue of externalisation by suspending the free funds concept, restriction on offshore investments and capping cash withdrawals.
In his 2016 monetary policy last week, RBZ Governor John Mangudya suspended the free funds concept, put restriction on offshore investments and said withdrawals above $10 000 now required at least one day’s notice to the bank.
This comes after nearly US$2 billion evaporated from the capital-starved economy through externalisation last year.
Dr Mangudya said out of the US$1,8 billion externalised in 2015, US$1,2 billion was siphoned out by corporates in the form of export proceeds, high management and expert fees.
He added that government will operationalise an economic crimes court to plug revenue leakages.
“Bank statistics show that during the period January to December 2015, a total of US$684 million was remitted outside Zimbabwe or externalised by individuals under the auspices of free funds for various dubious and unwarranted purposes that include remittance of donations to oneself, offshore investments, externalisation of export sales proceeds by corporates through individual accounts leading to pervasive tax evasion and externalisation,” said Dr Mangudya
“This rampant export of liquidity is not sustainable.
“We are drawing a line in the sand.
“Those who have done it before please do not do it again.
“We have a list of those people, some taking more than US$10 million and taking advantage of the laxity of the system to do that.”
The central bank also ordered all financial institutions to report all suspicious outgoing transactions before processing them to plug the rampant revenue leakages.
“Each person, subject to the jurisdiction of the Zimbabwean financial system, having an interest in or authority over one or more financial accounts or securities or investments in a foreign country should report, through normal banking channels, to RBZ if the aggregate value of such accounts or securities at any point in a calendar year exceeds US$10 000,” he said.
“Going forward, any offshore investments would require prior bank approval.”

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