Zimbabweans are flocking to open nonresident bank accounts with South African banks as the country’s cash crisis deepens and trust in the banking sector plummets.
The government’s insistence on 1:1 parity between the US dollar and the bond note has fuelled the crisis of confidence. On the black market, one dollar is the equivalent of costs 3.5 bond notes.
Other factors that have eroded confidence in the banking sector include the separation in October of bank accounts into “nostro” foreign currency accounts funded with proceeds from outside the country, and local accounts funded by local bank transfers.
The separation of the accounts was announced by John Mangudya, governor of the Reserve Bank of Zimbabwe (RBZ), governor, in his monetary policy statement on October 1.
Elelwani Pandelani, the head of Nedbank’s nonresident and embassy banking division, told the Sunday Times from Johannesburg this week that nonresident Zimbabweans had opened “a sizeable number” of current accounts with the unit this year.
“The majority … were through word-of-mouth referral and clients visiting our website,” he said. “Nedbank cannot quantify [the year-on-year increase] at this stage; we can, however, confirm that we have seen an increase in new Zimbabwean nationals’ accounts opened month on month.”
Standard Bank media relations executive Ross Linstrom, said nonresident accounts were subject to the rules of the South African Reserve Bank and exchange control regulations. But he said the bank had not seen “any new patterns in usage or uptake of this facility”.
South African banks require three months of bank statements, a utility bill in a person’s name and a letter of confirmation from their primary banker in the country of permanent residence before a nonresident account can be opened.
Zimbabwean banking executives said they were aware of a move towards nonresident bank accounts. “At one point, Botswana was getting a lot of accounts from Zimbabwe,” said one executive.
A dentist who asked to remain anonymous said he opened a nonresident account with a South African bank because it was convenient.
“There is a lot of volatility in our banking environment here. If everything was fine, definitely there would be no need to open an account in SA, if I could use my locally issued bank card there,” he said.
“It’s not a crime to open a foreign bank account, it’s self-preservation. If my money comes from outside sources such as family and investments, but I can’t get it when I deposit it in Zimbabwe, then I definitely will have to find a way for it not to get to Zimbabwe.”
As the foreign currency squeeze persists, local banks have maintained strict withdrawal limits, which is one reason depositors are looking elsewhere. At most banks, $300 in bond notes can be withdrawn weekly, while individuals can withdraw $1,000 a day in cash and companies $10,000 a day, subject to availability.
The RBZ said total banking sector deposits amounted to $9.53bn at the end of June, up from $8.48bn at the end of 2017. About two-thirds were demand deposits, which means money can be withdrawn immediately.
One of the main reasons Zimbabweans are turning to foreign banks is to make it easier to access money while travelling outside the country. Local banks often insist on seeing an itinerary before they provide funds for trips.
The RBZ allows individuals to take up to $2,000 in as cash for use outside the country.
Most local banks offer Mastercard facilities that clients can use when abroad, but they insist on credit cards being pre-funded with physical US dollars before travel.
In the past, depositors have been left stranded after banks imposed daily transaction limits of up to $200 on locally issued Mastercard and Visa cards, or terminated the service in an attempt to conserve foreign currency.
Economist John Robertson said demand for foreign bank accounts was likely to be driven by depositors’ desire to control their own money.
“Once the funds are in Zimbabwe, the central bank can either approve or deny access to them based on what they think is necessary,” he said.
“So naturally, many people have become anxious and by all means would want to avoid coming under many restrictions.”
Robertson said stringent banking regulations globally aimed at preventing money laundering and the funding of terrorism meant it was not easy to open accounts in a nonresident country. In a 2016 report, the RBZ estimated that as much as $684m had found its way outside the country that year...