Strike a balance between regulation and economic development

The looming collapse of the CBZ Holdings Limited (CBZHL) and ZB Financial Holdings Limited (ZBFHL)  proposed merger underscores a pressing challenge for Zimbabwe to find the right balance between regulatory oversight and fostering economic growth.

While the Competition and Tariff Commission (CTC) has a legitimate mandate to ensure fair competition and protect consumer interests, its stringent conditions for the proposed merger raise important questions about how such oversight may unintentionally stifle transformative investments in key sectors.

At the heart of this debate lies the fundamental need for Zimbabwe to build financial institutions with the capacity to support its ambitious economic aspirations.

As CBZHL chairman Luckson Zembe aptly highlighted, the country’s fragmented banking sector—characterized by small and undercapitalized institutions—lacks the scale to mobilize the $20bn annually required to sustain economic transformation.

The proposed merger between CBZHL and ZBFHL was more than just a business transaction, it was a bold attempt to create a homegrown financial powerhouse capable of driving national development.

Regulatory bodies like the CTC play a crucial role in maintaining fair competition, ensuring consumer protection, and preventing the monopolisation of markets.

These objectives are particularly relevant in a developing economy where unchecked market dominance could undermine the growth of small and medium-sized enterprises (SMEs).

By imposing conditions on the CBZ-ZB merger, the CTC sought to align the deal with these principles, but the rigidity of these conditions may have hindered the broader national interest.

Zimbabwe’s regulatory framework must evolve to address the unique challenges of a developing economy. Striking a balance between promoting fair competition and enabling economic growth is not an easy task, but it is essential for long-term prosperity. Policymakers and regulators must consider the broader implications of their decisions, particularly when they have the potential to reshape critical sectors like banking, which serves as the lifeblood of economic activity.

In today’s global economy, scale matters.

Countries with robust financial institutions—like Standard Bank and First National Bank in South Africa or JPMorgan and Citibank in the United States—enjoy a competitive advantage in mobilizing capital and driving economic development. Zimbabwe, by contrast, lacks a dominant local player with the resources and influence to compete on the global stage. This gap limits the country’s ability to attract foreign capital, finance large-scale projects, and support the private sector.

The CBZ-ZBFHL merger presented a rare opportunity to address this deficiency. With combined assets exceeding US$2.5bn, the merged entity could have emerged as a regional financial giant, positioning Zimbabwe as a competitive player in Southern Africa.

By imposing stringent conditions, however, the CTC may have inadvertently dampened these aspirations, potentially delaying Zimbabwe’s economic transformation.

The collapse of this deal serves as a wake-up call for Zimbabwean policymakers. As Zembe pointed out, decision-making within the public sector often prioritizes political considerations over economic imperatives. This approach undermines the country’s ability to compete in a global economy characterized by fierce competition and rapid innovation.

Regulators must adopt a more pragmatic approach that balances their mandate to protect competition with the need to enable large-scale investments.

This does not mean abandoning oversight or compromising on core principles.

 Instead, it requires an understanding of the strategic importance of certain transactions and a willingness to engage in constructive dialogue with stakeholders.

The implications of the CTC’s stance go beyond the CBZ-ZBFHL merger. Last year, the commission blocked CBZHL’s attempt to increase its stake in First Mutual Holdings Limited (FMHL), effectively curtailing the company’s ambitions to create a diversified financial conglomerate.

Such decisions risk sending the wrong message to investors, both domestic and international, about Zimbabwe’s openness to large-scale investments and economic transformation.

The collapse of the CBZ-ZBFHL deal could also have ripple effects on the broader economy.

Without a dominant local financial institution, Zimbabwe may struggle to mobilize the resources needed to finance critical infrastructure projects, support SMEs, and attract foreign direct investment (FDI).

This, in turn, could hinder the country’s efforts to achieve its Vision 2030 goal of becoming an upper-middle-income economy.

However, the onus is also on policymakers and regulators to create an environment that encourages local companies to scale up and compete globally.

For Zimbabwe to realize its full economic potential, it must adopt a balanced regulatory framework that protects competition while fostering innovation and growth.

This requires greater collaboration between regulators and the private sector, as well as a commitment to aligning regulatory decisions with the country’s broader economic goals.

The CBZHL-ZBFHL merger may be on the verge of collapse, but it offers valuable lessons for Zimbabwe.

As the country seeks to rebuild its economy and reclaim its place on the global stage, finding the delicate balance between regulation and economic development will be crucial.

Policymakers must seize this moment to rethink their approach and prioritise the long-term interests of the nation over short-term political considerations.