THE INDUSTRIAL DEVELOPMENT CORPORATION (IDC) WAS A BAD IDEA, IS A SCAM AND IT NEEDS TO BE DONE AWAY WITH BY THE UPND (PART 4)
By Shalala Oliver Sepiso
THE CURIOUS CASE OF INDO-ZAMBIA BANK AND ITS IDC ISSUES
IDC is like that troublesome Uncle who pesters his nephews and nieces for handouts while no one knows what he does for a living and he keeps defending all his nephews and nieces as long as they give him something for a drink from time to time despite them also struggling in life. IDC has some banks on its portfolio. Instead of running them profitably and professionally, IDC has borrowings from these same banks. IDC borrows from Indo Zambia Bank, which is under IDC. Now surely what is this? It means IDC is not being run professionally and it is not functioning well.
Today, we focus on Indo Zambia bank and how IDC is ignoring the bank’s mistreatment of workers and ex-workers all in the name of painting a picture of a well-to-do bank.
INDO ZAMBIA BANK AND LABOUR LAWS ON ACCRUED BENEFITS
Indo Zambia Bank is on record as one of the best performing banks posting extremely impressive results in excess of 300% growth in business over recent years. This was particularly highlighted in September 2021 via a communique from the Honorable Minister of Finance during a courtesy call on him by the bank top management and board chairperson.
Indo Zambia Bank Limited was incorporated in 1984. The principal activity of the bank is the provision of Retail and Commercial Banking and related services to the general public. IDC holds 40% shares in the bank. In 2021, Indo-Zambia Bank presented a dividend cheque worth K30 Million to the IDC. The bank is the third biggest player on the market with its total business growing by 38.89 percent to reach K9.267 Billion from K6.672 Billion in 2019. This year, Indo-Zambia Bank increased the dividend payment to shareholders for the 2021 Financial Year to K80 million from K75 million the previous year and handed over a K32 million dividend cheque to the Industrial Development Corporation (IDC), which holds a 40% stake in the Bank.
Unfortunately these results have been posted against a backdrop of reducing conditions of service for vulnerable junior and middle management staff who have never been accorded an opportunity to negotiate their conditions of service. Over successive years, management conditions of service have been systematically reduced going against the Employment Act which forbids such detrimental actions. One such action was brought to the attention of top management in 2020 when some retired management staff sued the bank for under-calculating and underpaying their terminal benefits against their conditions of service.
Under clause 28 of the Management conditions of service, employees who have served a continuous period of 20 years or reached age 55 were eligible for normal retirement. The terminal benefits were computed as 3 months pay for each completed year of service. The same conditions of service are mentioned in the published audited annual report of Indo Zambia Bank for the financial year 2020. The bank had been underpaying retiring management employees at the rate of monthly basic pay as opposed to monthly pay which was inclusive of allowances. Upon seeking legal advice and realizing their error, the bank made several out of court settlements with only the aggrieved former employees. Records of the settlements and attached restrictive conditions exist but are kept under lock and key at the bank.
In February 2021, the bank attempted to resolve this matter by unilaterally amending the normal retirement clause provision from 3 months pay to 3 months basic pay, effectively reducing the accrued terminal benefits of management staff. This constituted an offence under Part IV (Protection of Wages) Of the Employment Act which states that an employer shall not make any unauthorized deductions from wages payable to an employee or as a reward for providing employment for the employee or for retaining that employee in employment. After several failed attempts to convince or coerce all staff to accept the reduced conditions of service, the bank decided to do away with the internally administered Pension scheme by offering to pay off every employees accrued terminal / pension benefits and introduce an externally managed pension scheme at reduced accrual rates with a bank appointed fund manager and administrator. For management staff, once again a reduced rate of 3 months basic pay as opposed to 3 months pay was applied to the computation and determination of accrued benefits.
A complaint was raised with the Ministry Of Labour, where management were summoned to explain. In their defence management claimed they were making a gratuitous payment and not Pension / Terminal benefits to all the banks employees. However, in their submission to Zambia Revenue Authority seeking guidance on the forthcoming payment, they clearly stated that these were Pension / Terminal benefits which resulted in exemption of tax liability on the said proposed payments.
As can be seen here, not only did Indo Zambia Bank management commit an offence by misleading the Ministry of Labour in their submissions when they were summoned, but also under Part IV of the Employment Act which states, A person commits an offence if that person (a) Without reasonable excuse ,fails on demand to pay in accordance with section 66 any wages due to an employee or (b) Makes any deductions from wages, other than those authorized in this part. A person convicted of an offence under subsection (1) is liable to a fine not exceeding two hundred thousand penalty units or to imprisonment for a term not exceeding two years or to both.
The bank went on to make payment of the Pension benefits in the said manner, which resulted in management staff being underpaid in certain instances by more than ZMW1,000,000.00 in accrued Pension / Terminal benefits. Furthermore, the reduction caused a distortion where unionized staff who are junior in rank were paid more than management staff of equivalent years of service, against the natural order and balance.
You will recall that in one of my articles on IDC, I spoke about parastatals under IDC not writing proper annual reports and producing audited reports over the last 5 years also. Indo Zambia bank in some cases has produced these reports. Kudos. But one such report actually raises alarm. And this is why we need annual reports by these IDC state-owned enterprises.
In the 2021 Annual Report for Indo Zambia Bank, there is a section that talks of the bank paying off its permanent employees their accrued benefits as at 31st October 2021 to facilitate a change in its terminal benefits scheme. The report captures it as “terminal benefits” instead of “accrued benefits”.
The thing is we all know that legally speaking, terminal benefits and accrued benefits are not the same thing; they can’t be used interchangeably. But you know why? The bank has refused to pay its ex-employees who were dismissed and entitled to their accrued benefits as per the
Employment Code Act (Act No. 3) of 2019 and earlier iterations. The bank’s excuse is that the conditions of service do not provide for entitlement to accrued benefits when you have attained retirement age (or 20 years service). Now when you have attained retirement age, is it still an accrued benefit? No…at retirement age it is a terminal benefit. The employment act clearly states that an employee summarily dismissed must be paid his wages and accrued benefits but the bank has denied to pay its ex-employees just to frustrate them because they know they have “crippled” them financially and can not afford lawyers to sue the bank. The few who are able to engage lawyers face frustrations even with matters in court> The issue tricks of unnecessary delays come in.
Recently, when the bank paid the employees their accrued benefits (after being guided by the Labour Commissioner), the right thing to do should have been to pay even all ex-employees entitled to these according to the Employment Code Act of 2019. How does the bank neglect to pay accrued benefits to someone who, for example had worked for 18 years and has accrued benefits for each completed year of service at a rate of 3 months salary as provided in their terms and conditions of service before being dismissed? At their dismissal, where did accrued funds go?
These did not reflect in the annual report cited above. Has the bank been dismissing many employees when they see them approaching 20 years service to use this trick or not paying accrued benefits? Is this done so that the bank makes a saving on its balance sheets at the expense of the time of the employee? Is the bank finding long-serving employees excuses which they then escalate to make them dismissible even when they can be resolved through other disciplinary measures so they make a saving?
The excuse that Indo Zambia bank employees’ conditions of service do not provide for paying accrued benefits does not hold water. If it did, why did the bank pay its employees accrued benefits last year? Did the bank do so against its so-called “conditions of service”? If not, then why deny the ex-employees their accrued benefits? And by the way even when they paid current employees their accrued benefits, they still did it in a somewhat crookedly way. They underpaid them. Instead of paying at the rate of 3 months salary they paid at rate of 3 months “basic pay” minus allowances. The question is “what is a salary?” A salary is basic pay plus allowances. But they seem to have made the employees agree to the underpayment and to sign. I don’t think a broke employee has much choice when cash is dangled. Who would dare question his employer? You fear for your job. As always the bank made a ka “saving”, which they do not account for in the reports here. Or maybe it goes to profits or dividends. Who knows? IDC may have been the one paid these savings at the expense of workers and their families.
Ministry of Labour has been engaged by many ex-workers of the bank who are still fighting for their benefits and at times these issues are swept under the carpet. A typical answer by Ministry of Labour is “The bank knows the guidance given by the ministry on the matter. If you have issues with this approach, we advise that you go to court because we cannot intervene since you’re no longer an employee”. But these issues will soon affect current employees too. So if the Ministry of Labour and the Ministry of Finance, under which Indo Zambia Bank falls, do nothing, who will do something?
At the same time, while delaying cases against the bank, the same bank will pursue litigation against these dismissed employees in the commercial courts for speedy judgments over their mortgage loans and they make sure to repossess the properties and leave the ex-employee with nothing. Now imagine the unfairness here. You grab someone’s property and yet you owe them accrued benefits, which you crookedly deny to pay them and which they could have used to pay the mortgage.
The bank will drag an ex-employee to court for repossession of their house to settle their loans. When the ex-employee pushes in a counter-claim for their accrued benefits the bank does not comply with the courts orders for direction. (The bank fails to submit witness statements, documents of evidence and others submissions as per the orders for direction. It’s like the bank does not even respect the courts.) Next thing you see is a judgment on admission against the ex-employee for their liabilities as the ex-employee’s claim stalls in the courts because the judge says it is a separate matter. How when it is a counterclaim in defence? When an ex-employee applies for a default judgment because the bank has failed to file a defence to their counterclaim, you find that the application is set aside.
WAKO NI WAKO IN INDO ZAMBIA
And then there is the problem of the outlook of Indo Zambia Bank management. If IDC runs parastatals on behalf of Zambian people, why should we have a whole senior management of Indo Zambia bank coming from one region of Zambia i.e. Eastern Province? This is bank run by people from the same region right from Board chairperson, General Manager, Assistant General Manager, Head of Legal, Head of Treasury/Finance etc. Mrs Orlean Moyo was the board chairlady for years but by October 2020 there was a new board chairman Dr. Michael Gondwe in place. Now I am not saying these in Indo Zambia Bank senior management are not qualified but surely this is not a coincidence. You can’t tell me people from Northern or Luapula are not qualified enough for employment in Indo Zambia. Are they saying people from Muchinga or Central didn’t allow for jobs? There has to be a way to balancing employment so the senior management and staff reflects the diversity of Zambia since we are dealing with a parastatal here. Otherwise it starts to look like a curious case of “Wako ni Wako” especially that even our Zambians of Indian descent are mostly from the same Eastern region as well.
Let me also declare interest here than two of the senior management members are personal friends (one since secondary school in 1989 and the other since UNZA in 1999) and I have no personal issues with this and this has nothing to do with them but the whole entity they also just found themselves in.
And can the bank’s senior management refuse that they employ nieces, nephews, girlfriends and their children in their bank? Can the bank refuse that most service provider companies engaged to service the bank have links to some senior management?
This means that there is a case in thinking that senior management is a strong clique that is working together in doing the wrong things especially with nobody checking them.
Surely something has to be done here.
BANK OF ZAMBIA OVERSIGHT ROLE AND ISSUES OF LEGAL REPRESENTATION OF INDO ZAMBIA BANK
Further, Bank of Zambia (BOZ), which is supposed to be supervising banks, is not playing their role effectively.
Meanwhile, those in Indo Zambia Bank revealed to be that bank of Zambia inspections have occurred before and were effective. One on-site inspection by BOZ brought out a lot of irregularities in Indo-Zambia Bank including insider borrowings, issues with the bank’s H.R structure, etc. The bank never had an internal legal counsel at the time until this inspection raised the issue and the bank quickly created a position, advertised (for formality?) and employed someone from the region I mentioned earlier. Is this in-house legal counsel on payroll only since he doesn’t seem to represent the bank in any court cases while the bank spends money on outsourcing legal services? Shouldn’t the bank, owned by the Zambian people under IDC, be cutting down on expenses such as outsourcing legal services? The bill is huge! Humongous. Check how many cases are in the Industrial Relations Court, Commercial Court and the High Court relating to Indo Zambia Bank and its ex-employees. None of these cases have the in-house legal counsel representing the bank. Is it that he’s not competent to litigate or he is too senior to litigate? If that’s the case, how was he picked as the suitable canditate for the position? Did he represent the previous employer in court cases?
IDC AND MINISTRY OF LABOUR COMPLICITY
The ministry iS aware of these issues and in many cases doesn’t do anything. Letters have been written to the ministry including one on the 11th of July 2022 on these issues and the ministry if yet to answer or to act. We need action.
IDC is shocking in how detached it is to these matters. How is this curious case of Indo Zambia bank flouting labour laws and regulations going on and yet every year the bank is audited? The annual audits at Indo Zambia bank are not done by The Auditor General’s Office. They are done by private audit firms that are engaged by Indo-Zambia Bank. These audits are not forensic in nature and are not intrusive enough to unearth the issues we want to see. The audit reports simply report the picture that Indo-Zambia Bank management want to see or what to be seen by others. Is IDC auditing Indo Zambia Bank? Is IDC demanding proper forensic audits from Indo Zambia Bank? Is IDC passing these audit reports and are they interrogating these issues? Why is IDC failing to raise red flag on these issues? Has IDC exercised its oversight role over IDC over the last few years? Is it because IDC is borrowing from INDO Zambia Bank and, like the troublesome Uncle above, doesn’t want to gravy train to stop? Is IDC scared the bank will call back its borrowings?
I end here for now. I am off to work and later to mourn my grandma. Mum’s mother has left us.