HARARE – The recent Supreme Court ruling ordering Standard Chartered Bank of Zimbabwe (Stanchart) to reimburse over $45 000 to a Chinese firm exposes the financial services sector to bankruptcy, economic experts have warned.
Last Friday, the Supreme Court ordered Stanchart to pay back $47 739, 86 it transferred to the Reserve Bank of Zimbabwe (RBZ), belonging to China Shougang International following central bank governor Gideon Gono’s directive six years ago.
In October 2007, RBZ governor Gideon Gono moved control of all foreign currency accounts to the central bank.
This “centralisation” proved to be an excuse for the apex bank to seize billions of dollars kept by other banks and authorised foreign currency dealers, on behalf of companies and non-governmental organisations (NGOs).
Gono said the move was meant to prevent the total economic collapse following years of ruinous policies and government’s mismanagement of resources.
In July this year the Chinese engineering company approached the courts seeking to have its money reimbursed by Stanchart.
The bank, through its lawyer Adrian de Bourbon, argued that it was not liable to make the payment because of supervening impossibility of performance, urging the firm to demand its money from RBZ.
However, the Supreme Court last week ruled that Stanchart surrendered the funds to the RBZ at its own peril and has a legal obligation to pay its clients on demand.
“The general rule relating to deposits made in a bank account by a customer is that the money becomes the property of the bank which can use such deposit as it pleases so long as it pays to the depositor, on demand, the equivalent of the amount deposited in the account,” read part of the ruling by Justice Vernanda Ziyambi.
Economist John Robertson said the court ruling was disturbing and if not challenged might set a bad precedent where all banks in the country — that had their accounts seized by the central bank — could be sued by clients.
“In 2009 the RBZ admitted that it owed depositors over $1 billion and you can imagine if all the people who owed this money approach the courts,” he said.
Early this month, the cash-strapped central bank appealed for immunity from prosecution as a way of evading repaying millions of dollars it seized from foreign currency account holders during the height of the economic meltdown.
The appeal which is before the Supreme Court follows an order issued by a lower court in June compelling the RBZ to return $1 million it seized from Trojan Nickel Mine (Trojan).
Between 2007 and 2013 Trojan, which had an account with BancABC, lost over a million dollars to the RBZ, which the miner is reclaiming through the courts.
In June the High Court ruled in favour of Trojan, despite efforts by the RBZ to distance itself from the firm, citing an absence of a contract. The central bank argued that Trojan should direct its claim to BancABC.
In his decision, Justice Nicholas Mathonsi said the RBZ could not hide behind the proverbial finger, and must pay back.
But determined not to pay and perhaps fearing a floodgate of lawsuits from entities whose funds were similarly looted, the central bank now says it has found evidence proving that it is immune from prosecution.
RBZ lawyer Linos Mazonde recently told the Supreme Court that his client had acted in good faith and therefore must be immune to litigation, citing sections of the General Laws Amendment Act.
The lawyer asked for more time to furnish the court with this “evidence”.
However, observers say the RBZ is coming up with all these excuses when it is obvious that it just does not have the funds to pay back what it owes.
Economic analyst Masimba Kuchera said it was shocking that the central bank was seeking to use the law to abdicate its responsibility.
“For them to say BancABC or any other bank should be held responsible for the looted funds is shocking since the RBZ, as the financial services regulator, issued the directive to banks to surrender clients’ funds.
“The governor then used these to fund the quasi-fiscal activities that kept the regime afloat at the time. For them to try to seek recourse to the law for something which was illegal in the first place is shocking.
“It does not matter that the RBZ did not have a contract with Trojan Mine, the fact is that they issued the directive to the banks and expropriated other people’s funds which they converted to their own use,” Kuchera said.
Kuchera added that by trying to avoid paying back, the RBZ was demonstrating the culture of dishonesty that has come to be associated with the current government.
“And this does not inspire any confidence in anyone seeking to invest in the economy. What it means is that even local investors will not be keen to use normal banking channels for fear that their funds will be expropriated,” Kuchera said.
The Zimbabwe Aids Network (Zan) is one of several donor-funded organisations that lost more than $500 000 from Standard Chartered (Stanchart) Bank after the financial institution was forced to transfer the money to RBZ.
Despite suing both banks Zan has received nothing, with the RBZ denying that it directed Stanchart to carry out the transaction.