FMB buys Barclays Zimbabwe

By Shame Makoshori

Barclays Plc has sold its interest in Barclays Bank Zimbabwe Limited to First Merchant Bank (FMB) of Malawi, but long after the deal had triggered a lawsuit that had irretrievably split workers at one of the country’s oldest financial institutions.

The deal clearly left management stunned, as they had hoped to thwart FMB’s bid, after they had last week gone to court to force Barclays Plc to consider their own offer which had already been rejected.

The consummation of the transaction, which appeared to have been going towards a protracted battle, indicated Barclays Plc’s resolve to quickly dispose the asset before the wrangle escalated and dented its image.

Last night, Barclays Plc and FMB executives flew into Zimbabwe and summoned all Harare-based employees to Holiday Inn for the announcement.

FMB group managing director, Dheejaj Dikshit, confirmed the deal saying it was now subject to regulatory approval.

“We are looking at being in Zimbabwe for a long time not short-term because we see a bright future here,” said Dikshit.

FMB chairman, Hitesh Anadkat, said the bank will be rebranded Barclays&FMB.

The Financial Gazette can report that so intense was the lobby pitting two groups of suitors for the retail bank that what should have been a purely commercial transaction threatened to drag in political bigwigs because the bidding process had been muddled by politics.

Workers were caught up in the middle, and had been divided right through the middle amid indications that factions in the ruling ZANU-PF party had thrown their weight behind opposing camps.

Last week, 63 low-level managerial workers filed an urgent application at the High Court seeking a court order against the planned sale to FMB, or to any other investor, saying they should get the right of first refusal.

They added that the sale needed to comply with the indigenisation law. The workers had asked the court to interdict Barclays Bank Zimbabwe “from disposing its shares or business to the Malawi investors or any other investors without, firstly, consulting the applicants (workers), as required in terms of the Labour Act,” the workers said in their court application.

They also asked the court to rule thus: “The respondent (Barclays Bank Zimbabwe) is, hereby, interdicted from disposing its shares or business to the Malawi investors or any other investors without giving the applicants the right of first refusal or the right of pre-emption and/or complying with the indigenisation and empowerment laws, which mandate that the applicants and other lower level employees be empowered by forming share-ownership schemes, which allow them to be shareholders before other suitors are considered.”

But this week, low-level workers broke ranks with their colleagues to support FMB’s takeover and had garnered the support of the Zimbabwe Banks and Allied Workers Union (ZIBAWU).

In a memorandum to non-managerial employees of Barclays, ZIBAWU alleged that the 63 workers were being used by their bosses to scuttle FMB’s bid notwithstanding the fact that they had rejected proposals by their subordinates to craft an empowerment deal involving all workers.

ZIBAWU was not convinced that the local consortium had capacity to fund and continue the operations of the bank at current levels.

The union therefore preferred a shareholder who would ensure that Barclays Bank does not lose its clientele as well as access to lines of credit.

“This, unfortunately, we are not getting from a potential management buyout that is simply based on an unclear, but potentially dangerous black empowerment drive. We challenge the consortium to open up about its bid and how it addresses the numerous issues of concern to workers. Without a convincing elaboration, we will never be used as pawns in a war that does not benefit us. We will (only) support the transaction on condition that our demands are addressed,” wrote ZIBAWU secretary-general, Peter Mutasa on May 27.

Mutasa said the union was fully behind the position adopted by non-managerial employees whom it represents.

“We have been following all your discussions on this matter and we are therefore properly guided. Your workers committee has also been giving us regular feedback hence our mandate is very clear.

Together, we have also been carrying out background checks on the potential bidders, including numerous discussions with regulatory authorities and external sources. This, we will continue to do in order to inform our way forward,” he said.

“The union made numerous overtures to the local management with a view of working together on crafting an empowerment employee share ownership scheme. At all times, local management made it clear that they were not keen to work with us or include the generality of employees in any possible takeover arrangement. Even when we heard that a consortium, including local management had forwarded a bid, they still refused to shed light on any details about the intended transaction and how it will impact the workers. Although we viewed this as betrayal by fellow compatriots, we were not surprised considering our past experiences with the local management,” added Mutasa.

He said ZIBAWU only got to know about the specific details of the bid through the local press.

Mutasa said the bid by the local consortium was merely meant to enrich a few senior managers and probably a few junior managers “willing to be used as pawns in this disturbing corporate war”.

“If this particular bid cared for all workers, why were the workers’ committee and the union never involved or even consulted? We therefore agree with your position that workers should never be used as mercenaries in a war without cause,” added Mutasa.

The union noted that past experience had shown that banks taken over by Zimbabweans have collapsed due to poor corporate governance and lack of adequate capitalisation.

Banks that have shut down due to bad corporate governance include Allied Bank, which closed in 2015; Trust Bank, which had its licence cancelled in 2012 over abuse of depositors’ funds; and Interfin Banking Corporation, which was placed under recuperative curatorship in 2012 after alleged looting of depositors’ funds by shareholders and directors. The central bank later allowed Interfin to collapse after failing to get a rescue package for the bank.

In 2015, AfrAsia Bank, formerly Kingdom Bank, was placed under liquidation by the central bank after its shareholders surrendered their banking licence due to bad debts.

Msasa Capital, an advisory firm, was representing a management consortium said to be led by Barclays Bank Zimbabwe managing director, George Guvamatanga, which enlisted the backing of Old Mutual to support its bid.

Msasa Capital is a private investment and advisory business built on the traditional merchant banking model

It offers strategic advice and in depth knowledge across various industries and locations, focusing on the southern African region, with particular emphasis on Mozambique, Tanzania, Zambia and Zimbabwe

It was founded by Richard Honey, a former executive with Investec, and Border Timbers shareholder, Heinrich von Pezold.

Barclays Plc controls 57,68 percent shareholding in the domestic unit. The other major shareholders are Old Mutual Life Assurance Company, FED nominees and Stanbic nominees.

The stampede to take over Barclays Bank Zimbabwe erupted in February, after Barclays Plc announced its intention to pull out of the country by the end of this month.

Barclays Plc announced last year that it would be divesting out of its African assets, including the Zimbabwean operation to focus on the high return British and American markets.

The announcement came a few years after Barclays Plc’s units in Zimbabwe and Egypt had been left out of a 2013 deal in which South African financial services outfit, ABSA, purchased eight of the financial services operations on the continent, before it was re-branded Barclays Africa.

Barclays Bank Zimbabwe’s workers’ committee had agreed with Barclays Plc that the institution would release 15 percent of its shareholding to an empowerment scheme that includes all workers.

The workers had, however, spurned this overture, resulting in the 63 workers filing the lawsuit last week.

They argued that the planned sale did not comply with the country’s Indigenisation and Economic Empowerment Act.
Banking executives familiar with the developments at Barclays had argued this week that it would be an injustice of the worst order to sell Barclays Zimbabwe to investors from Malawi when there are competent locals, including the current management, who can run the bank even better and keep whatever accrues from that investment locally, including dividends.

“Why is the central bank allowing this to happen? The truth will come out one of these days,” said the executive, without giving details.

The executive had insisted that the indigenisation law, which the RBZ and government have vehemently charged should not be implemented in the financial services sector, ought to have been invoked because the law ought to be observed unless it has been struck off the statues.

While President Robert Mugabe has clarified certain issues with regards to the Act, the law is yet to be amended to reflect his views.

“This talk about economic emancipation and servant leadership is hollow as our own people are playing second fiddle to externals who are bringing onto the table something that falls far short of foreign direct investment — it’s an asset grab by any other name made possible because of the complicit of a few amongst us who are motivated by other things,” said the executives.

“There are those who are quick to attack the current management for coming short of what could be required to run the bank. It’s unfair. Let’s ask ourselves this question: Did they have the powers to make decisions or that authority was vested outside, in London to be precise?”

The drama at the local unit of Barclays emerged as pressure mounted from critics of the planned acquisition for the central bank to scrutinise the credentials of the FMB’s directors, after allegations they had been implicated in money laundering in Malawi.

Dikshit and a shareholder, Rasik Kantaria, were reportedly investigated for money laundering by Malawi’s central bank. However, there is no record that they were ever convicted of the offence.

FMB was listed on the MSE in 2006.

It has two wholly owned subsidiaries incorporated in Malawi.

These are The Leasing and Finance Company of Malawi Limited, a licensed financial institution engaged in deposit taking and asset finance and FMB Capital Markets Limited, a licenced portfolio manager.

FMB also holds 70 percent shareholding in Capital Bank Limited, a licensed commercial bank incorporated in Mozambique, a 38,60 percent shareholding in Capital Bank Limited, a licensed commercial bank incorporated in Botswana and 49 percent in First Capital Bank Limited, a licensed commercial bank incorporated in Zambia, the company said on its website. Financial Gazette