Africa

Three strongboxes of diamonds, weighing 29kg, have been taken from the central bank by police, violating orders from the country’s Supreme Court.

The removal is the latest in a long-running dispute between mines minister Obert Mpofu and British-registered mining company, African Consolidated Resources, over ownership of Chiadzwa claims. Chiadzwa is considered the world’s biggest diamond discovery in a century and could yield more than $1bn annually. In 2006, ACR was forced from its property at gunpoint; the courts later ruled this illegal. Read more

The MPC voted to keep the overnight deposit rate and overnight lending rate unchanged at 8.25 per cent and
9.75 per cent, respectively. The discount rate was also kept unchanged at 8.5 per cent.

Zimbabwe’s central bank owes mining companies “a substantial sum of money” that it is unable to repay at the moment, the Mines Minister says. Zimbabwe “empathises with the mining companies and feels obliged to make good,” Obert Mpofu said at a presentation in Cape Town today. (from Bloomberg)

Simone Baribeau

Daniel Mminele, Deputy Governor of the South African Reserve Bank, today strongly defended its inflation targeting policy, the day after the Treasury announced a review of the scheme.

As South Africa’s economy has suffered the fallout from the global recession – the economy was hit with a whopping 7.4 per cent annualised decline in the first quarter of 2009, though it has since returned to growth and struggles with unemployment rates well in excess of 20 per cent – critics have called for the central bank’s mandate to be widened to include growth and unemployment. Read more

The Central Bank of Kenyan has kept the central bank rate at 7 per cent in spite of falling inflation and rising growth. Inflation has fallen dramatically, partly because of a change in the way it’s calculated, which has brought the rate down from 17.9 per cent in September to 5.3 per cent in December. Inflation is expected to continue to fall. The central bank rate was cut sharply at the last meeting in November, down by 0.75 percentage points, which probably explains the decision to keep rates steady.

Comments from South Africa’s central bank governor reveal fierce disagreement among board members on whether to hold or cut the repo rate.

Governor Gill Marcus said:”It was not a unanimous decision. There were very strong views in terms of an interest rate cut. At the end we agreed that in this point of time, the prevailing view was to hold. There was no discussion of an interest rate increase.” Read more

Debate on the nationalisation of the South African central bank has been reignited after the head of the ANC submitted a document questioning the bank’s current ownership, raising fears of higher inflation.

ANC Secretary-General Gwede Mantashe asked: “Why have we been reluctant to even open the discussion on the role of the state in the banking industry? [We should also ask] why the South African Reserve Bank is one of less than five central banks in private hands in the world.”

A change to state ownership of the shareholder-owned bank could mean higher inflation. The left has complained that the bank focuses too narrowly on maintaining low inflation. They want policymakers to consider employment and growth when setting interest rates. Read more

Banking titans Jim Ovia and Tony Elumelu have been asked to resign by July after a new rule limiting the tenure of bank chiefs to 10 years. They are currently serving as MD and CEO of Zenith Bank and United Bank for Africa, respectively. They will not be able to reapply to the bank or its subsidiaries for three years.

The rule was agreed by a meeting of the Bankers’ Committee in Abuja – bank chiefs plus the central bank of Nigeria – and is effective immediately. It is one of several reforms spearheaded by central bank governor Lamido Sanusi, intended to limit the build-up of power and risk within the Nigerian banking system. Other proposals include cutting bank costs, replacing bank chiefs, toxic asset management and a radical suggestion on specialised bankingRead more

Apparently, the Transitional Federal Government in Somalia has today reopened the Somali Central Bank, which collapsed after civil war erupted at the start of 1991. The reopening has been a stated aim of the transitional government for some time. News reports suggest the governmental Bank will help international donors to assist the Transitional Federal Government in Somalia. Currently donations pass through neighbouring countries such as Kenya.

The Central Bank of Nigeria hopes to pass the Assets Management Company bill within the next six weeks. Bank governor Lamido Sanusi also disclosed that the monetary authority was targeting a lending rate of between 14 and 15 per cent, assuming an improved lending environment for banks.

Imagine a world in which banks are split by region, customer base, industry and function. This is one of the suggestions made by the Nigerian central bank governor at a conference organised by The Economist.

Lamido Sanusi said: “The Central Bank of Nigeria might eventually come up with banks that will address just the middle markets, the country’s regions, specific sectors of the economy such as agriculture or just operate as investment banks, Islamic banks or specialist financial institutions.” Such categorisation, he said, would entail different operational guidelines and capital requirements. Read more

The board of Nigeria’s central bank voted unanimously on Tuesday to keep the monetary policy rate at 6 per cent and the key lending rate at 8 per cent, though it reduced the borrowing rate from 4 to 2 per cent. Inflation poses a “serious threat in the months ahead,” said governor Lamido Sanusi. The all-item CPI rose to 12.4 per cent year-on-year in November from 11.6 and 10.4 per cent in the two previous months.

The board also chose to extend the guarantee on bank transfers to December 31, 2010. The Nigerian banking industry is still in serious trouble. Read more

Botswana’s central bank today cut the bank rate by 1 percentage point to 10 per cent. The bank has now cut this benchmark rate by 5.5 percentage points in the past year, as inflation has eased. Inflation, falling 1.9 per cent in November to 5 per cent, is comfortably within the 3 – 6 per cent target range, and is expected to remain low because of subdued growth. Unlike India and parts of east Asia, food prices are falling in Botswana, as are fuel prices. Read more

If you can muster any pity for bankers, direct it to those in Nigeria this Christmas.

Results are back from a special audit commissioned by the Nigerian central bank. The audit requested the balance sheets of banks that had received bail-out funds since August. Experts believe the financial position of eight of the banks is “grave”. Rumour has it that all the banks’ books were in the red, with combined losses of more than 1,000bn naira ($6.7bn). Read more

The ratings agencies have been busy: we are awash with downgrades and warnings. First up, S&P. They have ranked banks’ health using a new methodology, and it makes for grim reading. Just nine of 45 banks exceeded the minimum “risk-adjusted capital” ratio (for example, HSBC did well; UBS and Citigroup less so). The results are important because the new methodology foreshadows the new capital regime ratio likely to be adopted by Basel next year. S&P conclusion: “Capital for the majority of banks remains a relative weakness.”

Next, Fitch has downgraded Mexico to BBB, just two notches above junk status. Read more

More good news for China, Russia and India and more warnings for the US, UK and EU. George Soros asks if the new communist/capitalist divide has been replaced by a polarisation between international capitalism and state capitalism. Read more