Fin24

Zambia reverses FirstRand purchase

2011-10-03 11:10

Lusaka - New Zambian President Michael Sata on Monday reversed the $5.4m sale of the nation's Finance Bank to South Africa's second-biggest lender FirstRand [JSE:FSR].

“There's no document of sale for Finance Bank and I am directing the Ministry of Finance to take the bank back to its owners immediately,” Sata said as at the swearing-in ceremony of newly appointed government bureaucrats in Lusaka.

The Zambian central bank said last month FirstRand would pay $5.4m for the bank, which it seized from its shareholders in 2010 for violating the law through unsound practices, including insider borrowing.

Although only a week in the job, Sata has wasted no time in kicking out all vestiges of the previous administration of Rupiah Banda, whose Movement for Multi-party Democracy (MMD) had been in charge of the southern African nation for 20 years.

Sata has appointed a new head of the country’s anti-corruption agency and fired out respected central bank governor Caleb Funadanga.

FirstRand, South Africa’s second-largest bank, said it had yet to receive formal notification of the new government’s decision.

“We continue to liaise with the Bank of Zambia, which was the counterparty responsible for the transaction, when we have clarity we will comment further,” Chief Executive Sizwe Nxasana said in an e-mailed statement to Reuters.

Finance Bank's chairperson welcomed the move, saying the original decision to seize the bank’s assets had been based on politics.

“I am really grateful,” said Rajan Mahtani. “I am happy that Zambian investment has been restored to Zambian investors. It was all politically motivated.”

Zambia’s central bank said last month it had accepted FirstRand’s offer because the South African lender has a track record in managing weak banking institutions.

It said FirstRand would run all Finance Bank’s 34 branches and 16 agencies, while the Bank of Zambia would keep operating the problem assets.

The 74-year-old Sata swept to power two weeks ago on the back of voters looking for change in a country that has seen its economy grow but who felt the riches from its mines had not made their way to the people or created enough jobs.

Sata has said he would look at last year’s sale of state-owned fixed-line operator Zamtel to Libya’s LAP Green Networks for $257m, and investigate state fuel purchasing deals in Africa’s biggest copper producer.

Last week the new government asked banks to cut interest rates and copper exporters to route all payments via the central bank.