Banks getting away with murder

23 April 2013

STRONG legal and regulatory frameworks are a prerequisite for achieving good corporate governance and the growth of ethical business cultures in any business.
A business environment that exhibits weak legal and regulatory processes makes it difficult for businesses to evolve from unorthodox means of doing business to responsible

business conduct. The overhaul of the Companies Act in the country is long overdue, and the inept approach with which regulatory authorities are in some instances performing their duties leaves a lot to be desired.

Take, for example, the assertion made through the 2013 National Budget and Monetary Policy Statement that existing bank charges must be reduced forthwith, yet we continue to see some banks flouting that directive and continuing to charge the exorbitant fees with apparent disdain. People now wonder whether this is a case of pure non-compliance, or there is a backdoor arrangement that was mooted between the banks and the regulating authorities so that banks can continue to charge these fees.

Regulatory authorities must understand the need to promote accountability and transparency in the business sector through effective regulatory frameworks.
Effective legal and regulatory processes inhibit corruption and rent seeking and helps to raise governance standards in the economy.

Regulatory processes together with the laws of the land provide the minimum conditions upon which effective governance and ethical business cultures can be built.
Regulatory authorities thus must understand that the survival of ethically oriented businesses made difficult in an environment characterised by weak regulatory frameworks, corruption and rent seeking.

As the situation stands today, it is quite clear that businesses are taking advantage of the vacuum created by inept regulatory processes to covertly indulge in unorthodox ways of conducting business with consumers being the main losers.

And in the few moments that regulatory authorities have been seen to try and exercise their authority over unscrupulous businesses, it has in most cases been so apparent that their motivation is to overtly raise money to fund their operations with little or no concern at all for maintaining business order as mandated.

A poor regulatory framework abates the growth of a shadowy economic structure where corruption, bribery and rent seeking thrives defining “the how we do things here”, and in such a scenario, firms are forced to rely more on personal relationships with Government officials to propel their growth.

Rent seeking is a by-product of poor regulatory processes, and it is when a firm, organisation or an individual uses money or political links to obtain a market advantage over other economic players and competitors.

Rent seeking means that favoured companies do not compete on market forces alone but on the basis of their relationship with Government officials.
A business environment tilted by rent seeking dampens the spirit of fair competition and discourages those who want to do business ethically.

Corrupt officials in some regulatory authorities are normally the main drivers of rent seeking as they accept bribes from rent seekers, and at times induce payment of bribes by those who in normal circumstances would not pay bribes.

Corruption, bribery and rent seeking leads to regulatory failures, discourages firms from embedding good governance and ethical cultures in their operations, and ultimately detracts the businesses and the nation at large from pursuing production and productivity in the national economy.

Ineffective regulatory processes kill entrepreneurial talent as it becomes more beneficial to engage in rent seeking and other inappropriate behaviours than doing business ethically.

And when talent becomes allocated more to rent seeking and corruption rather than production, total economic failure ensues.
Regulatory frameworks in the country need to be revamped to make them more effective. They should be empowered enough to exercise their ordained role of promoting authentic business operations.

Regulators should give a deep thought to the ethical challenges the country’s economy is facing today and understand that inept regulation is needlessly contributing to this untenable situation.


Bradwell Mhonderwa is an Ethics Coach and Trainer with the Business Ethics Centre. Send feedback to This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or call 0772 913 875

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