For Consumer Unity and Trust Society (CUTS) International, the issue is not about the actual sale or the amount tendered for this bid, but how the whole process was managed by the sector regulator, Bank of Zambia (BOZ) vis-à-vis its effects on the tenets of other regulators, especially the competition regulator, Competition and Consumer Protection Commission (CCPC).
As an adage says it is better to understand the disease than the symptom. The embryonic of this whole saga springs from how BoZ handpicked First Rand to manage the affairs of Finance Bank when it was declared unfit after the allegedly breaching of the Banking and Financial Services Act. What is of interest in this development is that FNB in Zambia is a subsidiary and a product of First Rand’s greenfields strategy which is part of the Group’s expansion into Africa. This implies that a competitor’s parent company was granted permission to preside over Finance Bank’s affairs, on the understanding that the parent company, First Rand, would not divulge any classified information to its subsidiary. It is rather difficult to believe that this is possible.
It is quite apparent that Finance Bank was already compromised after a competitor had the priviledge of gaining access to its classified information. As long as other banks knew that FNB was privy to the affairs of Finance Bank, they would not be willing to buy the bank. It is not clear whether this became the case and BOZ faced difficulties in selling the bank to another bank besides FNB. Whether this was the case or not, the BoZ created this mess by allowing interested parties to manage the affairs of a failing bank. Surely with its expertise spanning for over decades, BoZshould have been aware of the impact of such a move and prevented it.
Envisaging such a development, CUTS is on record to have advised BOZ about the immediate, short and long term implications of having First Rand Group managing the affairs of Finance Bank with particular emphasis on the competitive process and competition policy/law.
Issues that are of interest under competition policy and law are activities and actions that might distort the market structure. Issues related to tendering procedures are of interest to competition policy and law. In the case of Finance Bank, it was made clear from the onset by central bank that the outcome to the takeover was a lease to a possible interested and qualified bidder. The premonition of CUTS and a number of stakeholders is what seems to have carried the day as FNB appears to have been the best bidder.
There is also another dimension to the whole saga. The proliferation of banks in Zambia, now totaling more than seventeen since the economic reforms in the 90s, is expected to guarantee a highly contestable bidding process, with local firm participation. The K27 billion floated by FNB to acquire some of the shares could have favored a local bidder as this could have retained and guaranteed a fair participation of local entrepreneurs in the seemingly competitive sector. But alas, there was not much interest from local firms as other foreign banks such as the First Alliance Bank, Eximbank of Tanzania, I and M Bank Limited from Kenya, JM Capital and Quantile Capital, both from South Africa who also expressed interest in acquiring Finance Bank.
Lastly, though the Banking and Financial Services Act does give BoZ the due mandate to preside over the financial sector, what should be more important before arriving at decisions that might suffocate other laws, is for a consultative process with other regulators to precede the whole development. Therefore, to avoid future actions that might affect competition and competitive process in the sector, there is need to strengthen the interface between the Competition Commission and BoZ at policy, but more importantly at operational level.
In summary, for a vibrant, dynamic and competitive market system to be effective, it requires a sound regulatory framework across the board that ensures that the tenets of competition benefits the competitive environment and the consumer welfare vis-à-vis promoting economic growth.