ZAMBANKER- September 2009.CDR

Transcription

Mission
The mission of the Bank of Zambia is to formulate and implement monetary and supervisory policies
that achieve and maintain price stability and promote financial system stability in the Republic of Zambia
ZAMBANKER
A Bank of Zambia Journal
SEPTEMBER 2009
“Stop HIV/AIDS,
Keep the Promise.”
IMF approves US $256m
By Zambanker reporter
The International Monetary
Fund (IMF) completed the first
and second reviews under the
Poverty Reduction and Growth
Facility (PRGF) arrangement
and its Executive Board
approved US $256.4 million
(an equivalent of Special
Drawing Rights 171.185
million) to help Zambia cope
with the global economic
meltdown during the second
quarter of 2009.
The completion of the
combined reviews allowed for
the immediate disbursement
of SDR 106.91 million (about
US$ 160.1 million), bringing
total disbursements under the
PRGF arrangement to
SDR113.897 million (about
US$ 170.6 million).
In addition, the IMF disbursed
to Zambia Special Drawing
Rights worth US$627.2
million.
Out of this amount, US $567.0
million was disbursed under
the general SDR allocation and
the balance of US $60.2
million under the Special SDR
allocation.
Disbursement of these
amounts has greatly expanded
Zambia's international foreign
exchange reserves and has
provided a stronger
foundation for exchange rate
stability.
IMF Deputy Managing
Director Takatoshi Kato said in
a statement made available to
the Zambanker that Zambia's
programme implementation
and economic performance
had been adversely affected by
a number of exogenous
shocks.
Mr Kato attributed the above
programme target inflation in
the first half of 2008 to
international food and fuel
price increases, while alluding
the deterioration in the terms
of trade for copper, related to
the current global economic
and financial crisis, to severely
compressed export proceeds
and government revenue.
“Notwithstanding this, the
Zambian authorities have
responded appropriately to
these shocks by scaling back
investment and recurrent
spending, while protecting
priority social spending.
In addition, the authorities
have sought to strengthen
public expenditure
management by establishing a
Treasury single account and
improving the execution of
capital projects,” he said.
He also noted that although
the floating exchange rate had
served Zambia well in helping
the economy adjust to external
shocks, the volatility of the
exchange rate of the kwacha
against major foreign
currencies underscored the
need to reduce Zambia's
dependency on copper
through diversification of the
economy.
He further said the recent
decline in inflation was
welcomed by the Fund, noting
there was need to adhere to a
firm monetary policy so as to
reduce inflation to single digits
by 2010.
Concerning the banking
sector, Mr Kato observed that
progress had been made in
strengthening financial
regulation and supervision
and that the overall banking
sector had remained
adequately capitalised.
He nevertheless said
continued vigilance was
needed in light of the global
financial crisis and pressures
o n t h e exc h a n g e r a t e ,
particularly to safeguard
against increased credit risk
and adverse balance sheet
effects.
With regard to financial sector
development, the IMF noted
the authorities' efforts to
enhance the population's
access to financial services,
including credit.
“The authorities have adopted
a new public debt
management policy and
strategy to help ensure that
public debt remains
sustainable by contracting new
non-concessional external
debt cautiously,” he said.
And the ZDA Spotlight says the
International Monetary Fund
(IMF) and the World Bank have
projected higher economic
growth for Zambia in 2009
following the recent doublingup of the copper prices and
To Page 7
Free-market economy 'bears fruit’
Financial sector growth factors outlined
Dr Fundanga
By Zambanker Reporter
Bank of Zambia Governor Dr
Caleb Fundanga has said that
almost all sectors have
performed well this year,
with the exception of
tourism and manufacturing
which are projected to
decline and slow down
respectively.
Responding to a question on
how the financial market
was thriving when other
sectors were not doing well, Dr
Fundanga stated that it was
not many sectors that were not
doing well. He said this in an
interview with Mr. Frank
Mutubila on the Mid-morning
Show on Zambia National
Broadcasting Corporation
television.
The Governor pointed out
several factors which were
responsible for the sound
performance of the financial
institutions. These included
enhanced regulation and
supervision through various
initiatives, such as raising of
the minimum start-up capital
for commercial banks in
January 2007,
enhanced
information flow in the
financial system and issuance
of appropriate measures, such
as directives to banks
prohibiting them from lending
in Kwacha to non-residents for
a period of less than one year.
Non-exposure of domestic
banks to the subprime assets
that precipitated the global
financial crisis and the
engaging of other sector
regulators to stem the
occurrence of unfavourable
trends such as dollarization
had also contributed to the
sound performance of the
financial system.
On why interest rates were not
coming down when there were
more players on the market, Dr
Fundanga said the high cost of
doing business, inflation and
inflationary expectations, type
of economic activity and other
structural issues related to
poor infrastructure were some
of the factors that were behind
high interest rates.
He,
however, said that several
factors were being put in place
to lower the cost of borrowing.
These include Phase II of the
Financial Sector Development
Plan, promotion of
competition, plans to change
the monetary policy
framework to target prices
unlike monetary aggregates,
development of a fully
operational credit reference
bureau, Government's
commitment to borrow within
acceptable limits and moral
suasion.
The Governor also mentioned
that the overnight lending
facility, once implemented,
would help improve the
commercial banks
management of short term
liquidity by providing an extra
channel where banks could
obtain an overnight credit.
The overnight lending facility,
announced in the 2010 budget
address by the Minister of
Finance and National Planning
Dr Situmbeko Musokotwane, is
a Bank of Zambia lending
window open to commercial
banks to borrow money
overnight from the Central
Bank. The banks that would
be eligible to borrow should
To Page 12
INSIDE THIS ISSUE
Mr Kanguya Mayondi Head - Public Relations led a team that delivered an assortment of groceries and toiletries valued at more than
K5 million donated by the Bank of Zambia to Thalumi Girls Shelter in Lusaka, whose Chief Executive Officer, Mweemba Munyati was
on hand to receive the donation
A publication on foreign private
investment and investor
perceptions in Zambia has
shown that the private sectorled free-market economy
embarked on by the
Government in 1991 is paying
off.
The reforms are reported to
have led to the positive effect of
boosting local and foreign
investor confidence in the
economy, which in turn
attracted external capital
flows.
A publication jointly produced
by the Central Statistical
Office, Zambia Development
Agency and the Bank of Zambia
entitled 'Foreign Private
Investment and Investor
Perceptions 2007/2008' has
revealed.
In an effort to effectively
monitor and manage these
flows, the three institutions
and other Balance of Payments
Statistical Committee (BoPSC)
member institutions conducted
Phase II of the Private Capital
Flows survey in 2008.
The survey findings showed
that foreign private capital
inflows in 2007 were largely in
f o r m o f Fo r e i g n D i r e c t
Investment, accounting for
68.5% noting that these flows
were underestimated by 67.5
percent prior to the survey.
The publication revealed that a
total of 321 enterprises were
enumerated, of which 268
responded, representing a
response rate of 83.5 percent
and was conducted in line with
international best practice.
Foreign Direct Investment
(FDI) inflows in 2007 were
largely in form of reinvested
earnings which accounted for
58.6 percent of total FDI
inflows.
FDI inflows were largely
concentrated in the mining
sector, accounting for 59.0
percent, largely from Australia,
Canada, Switzerland, India and
Netherlands.
The inflows in 2007 were
largely in form of reinvested
earnings which accounted for
58.6 percent of total FDI
inflows.
On the portfolio investment
front, a source country analysis
of survey data showed that
portfolio investment inflows in
the form of debt securities were
mainly from the United
Kingdom, Kenya and Bahrain.
Portfolio equity investments
were driven largely by the
Republic of South Africa and
Australia with a higher
concentration in the
manufacturing sector.
To Page 12
BoZ clocks 45 years
Pull Out
Pandemic Flu Guidelines issued
Page 2
Human Resources System Launched
Page 2
Honest Banda awarded
Page 4
Regulating For The Poor
Page 5
Five Years on - Zambia's Ambitious FSDP
Page 6
Celpay holds Mobile Banking 'Indaba'
Page 8
From Note Examiner to Manager
Page 10
NEWS
Pandemic Flu Guidelines issued
disruption to operations and
services provided by key
institutions in the economy.
Deputy GovernorAdministration, Dr Tukiya
Kankasa-Mabula said in a
communiqué to all members
of staff that the main objective
for issuing these guidelines
was to ensure that the Bank
was in a position to continue
discharging its missioncritical functions in the event
that a pandemic flu spreads to
a greater or lesser extent, as
categorized by the World
Health Organisation (WHO)
through the Ministry of Health
of Zambia.
She said these guidelines were
also meant to assist
responsible departments in
the Bank ensure that there
was minimal disruption to the
functioning of the financial
system in the face of an
outbreak of pandemic flu in
the country.
Dr Mabula explained that the
governance arrangements will
be implemented through the
Board’s Risk Management
Committee, the Incident
Management Committee and
the Business Continuity
M a n a g e m e n t Te c h n i c a l
Committee.
The Bank of Zambia approach
to mitigating potential impact
of a pandemic flu has been
adopted from the general
instructions of the World
Health Organisation (WHO),
as reviewed by the Ministry of
Health (MoH) of the Zambian
Government. Additionally, the
activities under this
framework are aligned to the
WHO Phases describing the
characteristics under each of
the pandemic levels.
The structure of the Bank's
categorization, however,
conforms to the procedures
that have been worked out for
the finalization of the Business
Continuity Plan (BCP) and
Business Resumption Plans
(BRPs). The triggers for
actions under the BoZ Phases
would emanate from
pronouncements made by the
WHO as disseminated through
instructions and guidance of
the MoH.
The Risk Management
Committee of the Board and
the Incident Management
Committee can also issue
directives to deal with specific
localized incidents if deemed
fit, without waiting for
instructions from the MoH.
In order to deal with the risks
of the pandemic, the Ministry
of Health has announced
measures for its units
throughout the country, as
well as guidelines for public
hea lt h a ut horit ies . T he
Ministry has further
announced that WHO has
donated enough anti-viral
drugs to meet the
requirements of the country
should the pandemic affect
Zambia.
Recently, the Bank of Zambia
held awareness campaigns on
the Swine flu and one of the
consultants, Dr Christine
Mulundika explained to staff
that Swine Flu was a common
disease of pigs and was caused
by the same category of
away immediately after
In children, these symptoms
influenza virus (influenza A)
use.
that causes flu in humans.
!
Washing one's hands often
will include:
She said while outbreaks of
with soap and water,
!
Fast breathing or trouble
swine flu were common in
especially after coughing
breathing
pigs, the out break could
or sneezing. Alcohol!
Bluish skin color
however occur in individuals
based hand cleaners are
!
Not drinking enough fluids
who were around pigs, and
also effective.
!
Not waking up or not
that it was known that the
!
avoiding close contact
interacting
virus could spread between
with sick people.
!
Being irritable such that
humans in much the same way
the child does not want to
regular flu could spread,
If one contracts influenza, it is
be held
typically through coughing or
highly advisable that one stays
!
Flu-like symptoms
sneezing as well as by contact
away from work or school and
improve but then return
with items contaminated by
limits contact with others to
with fever and worse
the flu virus.
keep from infecting them.
cough
Dr Mulundika said Swine flu in
Avoid touching the eyes, nose
!
Fever with a rash
humans resembles seasonal
or mouth. Viruses spread in
flu, with symptoms such as
this manner.
In adults, symptoms will also
fever, a cough, a sore throat,
It is also recommended that
include:
body aches, a headache, chills
people who live in or have
!
Difficulty breathing or
Dr Tukiya Kankasa-Mabula
and fatigue. Some people will
recently traveled to areas
shortness of breath
experience diarrhea and
where swine flu cases have
!
Pain or pressure in the
The Bank of Zambia has issued
vomiting as well. Like regular
been reported and who
chest or abdomen
guidelines for dealing with the
flu, swine flu can in some
developing flu-like symptoms
!
Sudden dizziness
outbreak of the pandemic flu
cases cause serious
consider seek care from their
!
Confusion
(also called swine flu). The
respirator y problems or
health care providers. More
!
Severe or persistent
guidelines are being issued
worsening of chronic medical
serious symptoms require
vomiting
pursuant to provisions of the
conditions .
emergency medical care.
Bank of Zambia Risk
She said people could spread
Management Policy, which
swine flu when they have
requires the Bank to have a
symptoms and possibly as long
Business Continuity
as seven days after they first
Management (BCM)
The Payroll Module, which is
become ill, even if symptoms
Programme, and the BCM
The Bank of Zambia has
one of the core interfaces of the
have subsided. She added that
Policy, which requires the
implemented the Integrated
System will enable employees
it was also thought that
Human Resources System
Bank to have a fit-for-purpose
view and print their pay slips as
children could remain
(HRS). The system which was
business continuity and
well as get their previous
contagious for an even longer
sourced from Oracle Solutions
disaster recovery capabilities.
months' pay slips on their desk
period of time.
is called the Oracle E-Business
The BCM Policy also requires
tops. Employees will also be
In order to mitigate
Suite. The implementation
able to manage their own salary
the Bank to address a broad
contraction of the flu, she
exercise commenced in June
and bank transfers.
range of disruptions, in as far
recommended that some
2007 and ended in July 2009
Speaking in an interview with
as financial institutions under
measures be taken, including:
The Integrated Human
t h e Z a m b a n k e r, S e n i o r
its jurisdiction are concerned
!
Covering one's nose and
Resources System consists of
Accountant Payroll, Mr. Eric
and to have arrangements
mouth with a tissue when
several modules which include
Masumbu, said the HRS is
with other regulators to
coughing or sneezing. The
i recruitment, Core Human
interactive as employees will be
ensure that there is minimal
towel should be thrown
Resources, Employee Self
able to interact online with the
Service, Payroll, Performance
system through the Employee
Management System and
Self Service module.
Oracle Learning management.
“Currently employees write
The system comprising three
memos to payroll when they
modules was launched by
want to transfer a certain
D e p u t y G o v e r n o r
amount of money, but the
Administration, Dr Tukiya
system has provision for them
Kankasa-Mabula on 4th August
to manage their own bank
2009. The three modules that
transfers”, he said.
were launched are Core Human
Through managing their own
Resources, Employee Self
payroll module, staff will be
Service and Payroll.
able to give priorities to
The major functionalities of the
transfers. The system has an
System include storing and
in-built control that will allow
tracking employee records
loans to be transferred and
from job applications to
balanced either by commercial
retirement, keeping up to date
banks or Bank of Zambia staff
all year leave accruals as well
accounts.
Staff shall be
as the training history of each
required to indicate the type of
employee, managing the
transfers they require, for
performance assessment
example, loan, SAYE or salary.
process online and providing
Furthermore, all allowances
employees with appraisal
will be paid through the Bank of
details, recording each change
Zambia staff accounts. To back
in an employee's career and
this up, the Human Resources
providing information on each
Department has issued
employee's competencies.
instructions that all employees
Other functionalities comprise
should have an account at the
recording areas which an
Bank as there will be no issuing
St Francis of Assisi staff (in the background) taking stock of five new personal computers that they received as a donation from the BoZ
employee needs training on,
of cheques for those who have
providing qualification analysis
no accounts. Mr. Masumbu also
based on levels of education,
informed the Zambanker that
training or specialization,
the self service payroll system
keeping track of offences,
will enable staff apply for salary
punishments, performance and
advances, mid-month pay,
Responsibility Programme
receive the PCs.
at the DAPP Children's village
grievances history, providing
leave travel allowances, over(CSRP) for this year.
Ms Malama said ICT skills
Malambanyama area in
After the handing over of 10
records of children,
time and funeral grants.
In making the Solwezi
were critical for all pupils,
Chibombo district, which plays
personal computers (PCs) to
dependants, spouse and
However, some payments have
donation, Head of Public
especially in a place like
hosts to former street kids,
Sanjongo and Chavuma High
handling overtime payments.
not yet been incorporated on
Relations, Kanguya Mayondi
Sanjongo, which needed a
orphans and vulnerable
schools in Solwezi, the Bank
The Human Resources System
the new System. These include
said in meeting its CSPR
dug-out canoe to transport the
children.
has completed its donation of
is web enabled and will benefit
club payments, council rates
responsibilities, the Bank was
PCs along the way.
In a letter of appreciation to
60 used PCs to various
the Bank in various ways such
and office imprest.
also helping to bridge the
She thanked the Bank for the
the Bank written on 27
institutions in the country.
as standardizing the human
Another benefit of the selfdigital divide between the
donation, which she said
September 2009, DAPP
Other Institutions that have
resources processes bankservice module is that
urban and rural areas.
would go a long way in
Project Leader, Mr Imasiku
benefitted from the
wide, streamlining the human
employees will be able to
He said having also donated to
assisting both pupils and
Sitali said the hammer mill has
computer donations were
resources administrative
undertake various tasks done in
Mumbwa High School, it was
teachers enhance their ICT
been purchased, installed and
David Kaunda National
process and eliminating
the Human Resources and
the Bank's expectation that
knowledge and skills.
was currently in use.
Technical High School (20),
common data input thereby
Finance Departments, at their
more pupils would acquire the
Meanwhile, the Development
Mr Sitali, who also attached
Mumbwa Technical High
avoiding repetition and
own desks.
necessary ICT skills, which
Aid from People to People
receipts for the transactions
School (5), Information and
duplication.
Director Human Resources Mr
were now critical in accessing
(DAPP) has expressed
said: “we are happy we got
Communication
The system will also facilitate
Hobby Kaputa informed the
meaningful employment.
profound appreciation to the
this support from you as it will
Technology (ICT) Ladders
real time information flow.
Zambanker that one of the
And Provincial Education
Bank of Zambia for the K15
increase the revenue base for
(20) and St. Francis of Assisi
Fu r t h e r, a l l e m p l o y e e
challenges that the Bank
Officer for North Western
million donation which they
the school and it will also give
in Lusaka (20).
information will be kept on one
encountered in the roll out of
Province, Ms Jennipher
used to purchase a hammer
a good service to the above
The donation of computers
centralized database,
the E- Business Suite was the
Malama said the region was
mill and accessories.
named community”.
was part of the Central Bank's
employees will be able to view
acceptance of the System by
'more than delighted' to
The hammer mill will be used
Corporate Social
their leave balances online and
employees. Mr Kaputa said that
apply for leave electronically.
To Page 8
Schools Receive BoZ Pcs
A BANK OF ZAMBIA JOURNAL
2
ZAMBANKER SEPTEMBER 2009
NEWS
More join financial sector
One leasing company and two
Bureau De Change firms have
been added to the list of NonBank Financial Institutions
(NBFIs) that are currently
registered and licensed to
operate in Zambia.
Registrar of Banks and
Financial Institutions, who is
also Bank of Zambia Deputy
Governor- Operations, Dr
Denny Kalyalya approved the
three licences on September 8,
2009.
The new NBFIs whose
applications were approved
are: Focus Financial Services,
for a Financial Business
license to offer leasing,
factoring and lending to small
and medium enterprises.
The others were Presans
Bureau de Change Limited,
which is authorized to operate
as a Bureau de Change and
Floodgates Forex Bureau de
Change to also operate as a
Bureau de Change
This brings the total number
of leasing companies and
bureaux de change under the
supervisory ambit of the BoZ
to twelve (12) and forty-four
(44) respectively.
Dr Fundanga said FinMark
Trust, the firm conducting the
second FinScope demand side
survey, held a stakeholders'
meeting on August 6, 2009.
He said the purpose of the
meeting was to infor m
stakeholders about the ongoing FinScope survey and
give them an opportunity to
provide input into the design
of an 'improved' questionnaire
that could build on the
experiences of the first survey.
This follows the conclusion of
the focus group sessions,
which were held in 4 provinces
to better understand informal
financial activities and to
ensure that these activities are
addressed by the quantitative
questionnaire.
Dr Fundanga cited some the
salient issues of the report as:
economic activities in both
rural and peri-urban areas
that tended to be multiple;
savings and credit as being the
most reliant on informal
options for rural and periurban areas and formal
remittances by SWIFT Cash as
being widely used.
He however said the use of
informal mechanisms such as
use of bus drivers and relatives
to “transfer cash” was also
KPTF dates BoZ employees
The Kwacha Pension Trust
Fund, KPTF as it is popularly
known, is the pension wing of
the Bank of Zambia. The
KPTF is a statutory body
established under Section 8 of
t h e Pe n s i o n S c h e m e
Regulation of 1996 as
amended in 2005 and it is
regulated by the Registrar of
the Pensions and Insurance
Authority (PIA).
Mr. David Ng'andu is the Chief
Executive Officer (CEO) of the
Fund whose administration
currently consists of seven
employees.
In August 2009, Mr. Ng'andu
took time off his busy
schedule to enlighten the
Bank of Zambia permanent
and pensionable employees
on the role of the Trust Fund
and how they as members,
could benefit from it.
Mr. Ng'andu began by giving a
detailed background of the
Trust Fund.
He told the
gathering that the Fund which
was registered under Trust in
1991 was for many years
managed in-house. “The
transformation of the Fund
into an autonomous entity
commenced in 2001 when the
Bank upgraded Pensions into
a section under the Human
Resources Department”, he
said.
In 2005, the Fund's first
independent Board of
Trustees was appointed and a
management structure to
administer the Fund was
established in 2007. It was
this Board of Trustees that
appointed Mr. Ng'andu to the
position of Chief Executive
Officer.
M r. N g ' a n d u f u r t h e r
elaborated the role of the
Trustees in the Fund.
“A pension trustee is someone
who technically holds a
scheme's assets for the benefit
of the scheme members and
their powers are written in the
trust deed and the scheme's
rules”.
Amongst the various roles of
the trustees, some major ones
include taking investment
decisions in accordance with
the scheme's investment
policy, keeping financial and
member records, resolving
member disputes and
informing members of their
choices at the time of
retirement.
Fifty per cent of the Board of
Trustees were appointed by
the sponsoring employer while
the other fifty per cent were
elected by the members of the
Fund, in this case, the Bank of
Zambia employees.
The Board comprises four
committees namely Finance
a n d Au d i t , I n v e s t m e n t ,
Administration and Benefits
and the Tender committee.
Each committee is chaired by a
Trustee.
Mr. Ng'andu further touched on
the financial position of the
Fund. He told the members
that the Fund got its income
from member contributions
and investment. Over the
years, the Fund's investment
portfolio has been prudentially
diversified to include
investments in long term
assets which are consistent
with the nature of the Fund's
long term liabilities.
He was quick to note however,
that member contributions
were on the decline due to the
Bank's move in 2004 to change
its employment policy in
respect of new employees from
permanent and pensionable, to
F i x e d Te r m C o n t r a c t
Employment.
Other factors that led to the
operations that conform to
international best practice
shall be assessed and
evaluated in achieving the
Fund's investment objectives”,
Mr. Ng'andu pointed out.
Trustees and Management
adhere to good corporate
governance in order to ensure
that investment decisions did
not conflict with the role of the
employer or that of the
Trustees.
Changing market forces
included the change in interest
rates, change in the market
price of shares and the change
in the market value of property.
Mr. Ng'andu further informed
the gathering that the Fund
undertook to invest in
government securities because
they were risk free, had
attractive interest rates and
were easy to match with
emerging pension liabilities.
According to the Chief
Executive Officer, the Fund
complied with a statutory
requirement to subject the
Fund to periodic actuarial
valuations, the next one being
scheduled for end of the year
2009. “An actuary is a business
professional who deals with the
financial impact of risk and
uncertainty. He is one who has
a profound understanding of
financial security systems, with
a focus on their complexity,
their mathematics and their
mechanisms”.
In concluding his power point
presentation, Mr. Ng'andu
informed the members that the
Kwacha Pension Trust Fund
was among the best
performing Pension Funds in
the country, and that following
full implementation of the
actuarial recommendations
issued in 2007, it was in a
position to meet its future
liabilities.
dwindling employee
contributions were the
increase in the retirement
ratio, the high volume of early
separations and the high
mortality rate in some years e.g
2008. This no doubt exerts
pressure on the Fund's asset
base.
However, the cushioning factor
has been the Fund's increasing
investment income which is
derived from government
securities, real estate, equity
and corporate bonds.
The Fund's main expenditure
lines are; pension benefits,
investment expenses and
administration costs.
Mr. Ng'andu informed the
members that one of the major
benefits of being a member of
the scheme was that one was
entitled to a monthly pension
after having obtained one's
retirement age, thereby having
a reliable source of income.
Moreover the pension lump
sum and monthly pension were
tax free and in case one
decided to switch jobs, the
accrued pension was
transferrable.
The Kwacha Pension Trust
Fund investments were guided
by the investment policy and
guidelines, corporate
governance issues and
changing market factors.
“The objective of the
investment policy is to set out
the rules and regulations
which shall gover n the
investment of pension funds
and assets. In general, the
policy seeks to maximize
average long-ter m total
returns on the funds as
constrained by risks in order to
preserve the value of the
Fund's assets. The policy thus
serves as a benchmark against
which the performance and
effectiveness of the investment
Mr John Banda of Internal
Audit receiving a clock and
a plaque in recognition of
his honesty for returning
cash which he picked up in
the Bank from Ms Gloria
Chongo of Security Division.
Next to her is Director
Human Resources, Mr
Hobby Kaputa
3
prominent.
The report further highlights
other limitations to increasing
financial access. These are
inadequate capital, distance to
banks, prohibitive bank
requirements, high bank
charges and account opening
requirements, and the
dependence on one main
income per year such as profit
from sales from the year's
harvest.
Further, the Governor cited
inadequate education on
savings, banks in rural areas
running out of money (when
you need to withdraw
relatively large sums of say
K7m or above), fear of
confiscating your money if it is
found to be 'fake' (i.e.
counterfeit), and limited
options to alternative financial
institutions appropriate for
lower income groups as being
gross limitations.
The Governor said inflationary
pressures in the month of
October 2009 were expected
to originate mainly from the
seasonal increase in the prices
of beef and its by-products,
largely due to low supply of
quality beef as the natural and
cheap feed for cattle dries up
in the period before the rain
season.
Dr Kalyalya
He however added that the
expected stability in prices of
mealie-meal and fresh
vegetables resulting from the
continued increase in the
supply of maize grain and
vegetables on the market,
coupled with the relative
stability in the exchange rate,
could moderate inflationary
pressures.
“Nevertheless, broader risks to
the achievement of the endyear inflation projection
remain the function of supply
side shocks associated with the
second - round effects of the
recently revised electricity
tariffs for ZESCO (averaging
35%) effective 1st August,
2009,” he said.
Botswana a shining example
African Export and Import
Bank (AFREXIMBANK) has
said that in recent years Africa
has seen some good fortune
and Botswana presents a
shining example of how such
good fortune, if well nurtured,
can be a source of sustainable
and economic development.
This is according to a
statement made by the
AFREXIMBANK President,
Jean-Louis Ekra during the
official opening of the 15th
meeting of Afreximbank
Advisor y Group Trade
Finance and Export
Development in Africa held on
3 July 2009 in Gaborone,
Botswana.
Mr Ekra said that in the past 7
years Botswana has
witnessed an unprecedented
rally in commodity prices
which have impacted
positively on Africa's trade
and economic growth
performance adding that
most African countries posted
record price gains.
“For instance, four
commodities of trade
interests to Africa namely
Crude Oil, Copper, Gold and
Cocoa averaging in 2008 at
respective levels of 551 per
cent, 200 per cent,127 per
cent and 92 per cent above
their average levels in 1994 a period of marked rally in
commodity prices”, he said.
These high commodity prices
have led to accumulating of
foreign exchange reserves
across Africa.
Mr Ekra said on 31 December
2 0 0 8 Af r i c a ' s ex t e r n a l
reserves were estimated to
have amounted to US $61.5
billion, enough to cover 70 per
cent of the reserve, which he
said had created a
dichotomove external
financing situation.
Mr Ekra said one of the
challenges to Africa's capacity
to benefit from the current
high commodity prices was
limited access to
appropriately priced trade
export and import, financing
for the extension and
modernisation of production
capacity to lift production and
add value to export
commodities, as well as
diversify into the production
of dynamic products.
“ Fo r m o r e s m a l l a n d
vulnerable African economics,
especially those with limited
foreign exchange reserves or
limited access to external
credits, importation of
essential consumer and
capital goods has been sharply
scaled back with dire
consequences for
consumption and investment
demand, especially during the
cur rent global financial
crisis”, Mr Ekra said.
While many foreign exchange
deficit African countries,
those with insufficient
reserves to cover essential
imports, would be willing to
pay attractive interest rates to
surplus countries, those with
more than sufficient reserves
to cover essential imports, for
use of their reserves to bridge
temporary Balance of Payment
difficulties, including trade
financing, surplus countries
have been placing their
reserves with non-African
institutions in mature
economies that pay very low
rates on them.
“This arrangement regarding
the management of Africa's
external reserves does not
help surplus African countries
since their reserve holdings,
at the current rate of interest
on deposits, attract close to
nothing as return on such
reserve holdings with nonAfrican Banks”, he said.
The net effect of this situation
is that neither surplus, nor
deficit African economics, and
thus Africa as a group,
succeeds in optimizing the
potential benefits to be
derived from the continent's
large and growing reserve
holdings.
NEWS
‘Honest’ Banda awarded
Mr John Banda, an Internal
Auditor in the Bank has proved
his commitment to banking
ideals when he returned a
K200,000 that he picked up
from the Executive Building
entrance stairs.
Mr Banda told the Zambanker
that upon picking up the
money, he went to his office
and sent a bankwide e-mail
message announcing 'the find'.
“This morning I came across
money (lost but found) at the
entrance of the Executive
Building which appeared to
have just been paid from
Banking and was still clipped”,
read Mr Banda's message in
part. Mr Banda urged anyone
who may have lost the money
to get in touch with him on his
extension in the Internal Audit
Department.
It was not long before his office
mate, Mr Hamilton Chitete
emerged as the”culprit” who
had dropped the money as he
headed out of the Bank after he
had drawn it from Banking
Office.
It was after returning to the
Bank, later in the afternoon,
gratitude. The message that
had been posted on the Bank's
mail system raised a lot of
reactions from employees with
Mr Rainford Chir wa of
Financial Markets saying:
“Honesty is a virtue. Keep it
up John. And to our Bemba
brothers, please learn
something”. While Mr
Chirwa's message had a tribalcousinship sentiment, the
other message was religious in
nature, quoting from the holy
scripture.
Mr Davies Chimota quoting
from the Bible book of Mark
that he complained of the loss
of cash (K200,000), to office
mates who told him of Mr
Banda's message of 'lost but
found cash' that was doing the
rounds on the BoZ mail system.
With the help of Security
Division, Mr Banda and Mr
Chitete were brought together
to compare notes and
eventually have the money
handed back to the owner.
Mr Banda got two awards for
his great act of honesty: a wall
clock from the Security
Division and a K10,000 from
Mr Chitete as a sign of
Photo Focus
9:33-35 wrote: “Dear John, I
am humbled by your act of
honesty. Greatness is hidden in
faithfulness. The difference
between ordinary and
extraordinary is that extra.
Thanks for that extra”.
Mr Mickey Phiri's message was
both tribal and humorous in
nature saying, “It didn't come
as a surprise to me that the one
who picked the lost treasure
and immediately broadcast it
was a wise man from the East
(Eastern Province)”.
“Apparently yesterday I met
Hamilton Chitete of Internal
Audit Department, another
wise man from the East, in a
Chemist who disclosed to me
that he had lost K200,000 in
f r o n t o f t h e E xe c u t i v e
Building”.
Commenting on his action, Mr
Banda said honesty was a core
value that was to be embraced
by every employee of the Bank
of Zambia.
“We're running affairs of the
Bank on behalf of the entire
Mr Chitete
nation and I think it requires
every Central Banker to
embrace the values of integrity,
honesty and trustworthiness”,
said Mr Banda.
Judy Zama is Orphanage Manager
Deputy Governor Operations, Dr Denny Kalyalya recently hosted
a delegation from the Head Office of the Bank of China in the
BoZ Boardroom
The Bank recently donated a hammer mill worth over K15 million
to the Development Aid from People to People (DAPP) Children's
Village in the Chibombo area that is now being used as a
fundraising tool for underprivileged persons at the centre
HR Champions training participants at the Regional Office ready
to manage the new HR System
North Western Province Education Officer, Ms Jennifer Malama with
BoZ Head - Public Relations, Mr Kanguya Mayondi (third from r) and
Communications Officer, Mr Marvin Ilunga at the handover of 10 pcs
donated by the Bank to Sanjongo and Chavuma High schools in Solwezi
Regional Director, Mr Morris Mulomba presenting a cheque in
the sum of K 1.8 million to Mr Probby Chisanga a Ndola orphan
who had scored 7 Points at grade 12 and was offered a 75%
bursary to study and the University of Zambia (UNZA)
Mr Stephenson Namooya of Security Division toasting his
attainment of a BA degree in Development Studies at the first
graduation ceremony of the Open University in Lusaka
Ms Febby Mulambia of Human Resources Department bade
farewell to spinsterhood when she married Mr Clint Mbangweta
in Lusaka on 4th July 2009
Ms Suzyo Ndovi of Non Bank Financial Institutions Supervision
Department quit spinsterhood when she married Mr
Katembo Akatama in Lusaka
4
Bank of Zambia House Keeper
Ms Judy Zama is
Administrator/ Board
Secretary of the Kingdom Kids
House of Hope orphanage in
Roma Township in Lusaka. The
orphanage began its
operations in March this year.
The house being used for the
work was donated by Ms
Zama's friend Mrs. Molly
Matale, a former Human
Resources Manager at the
Bank of Zambia now based in
Dallas, Texas, USA.
Mrs. Matale donated the house
in honor of the memory of her
deceased son, Christopher
Matale, who passed away five
years ago and her deceased
husband, the late Austin
Matale, who was also an
employee of the Bank of
Zambia, as an Assistant
Director in the Financial
Markets Department.
The project overseer is Pastor
Sydney Musoba, a Zambian
based in the United States,
while the administrative
operations would be carried
out by Ms Zama, who has
worked with women and
children (widows and orphans)
through the church.
Speaking to the Zambanker
after the official launch, Ms
Zama said the short term goal
of the project was to provide
medical examinations and
ensure that all children under
the age of five were
immunized against infectious
diseases, and that they were
proactively tested for
HIV/AIDS.
She added that the long term
goals were to provide basic
home management while
adhering to the minimum
standard of care and fostering
the children's self esteem.
“What sets this facility apart,
is the provision of quality
healthcare and education as
well as the empowerment of
needy families by providing
them with tools to earn an
income, thus breaking the
cycle of dependency and
poverty.
Psychological counseling to
meet individual needs using
age appropriate activities will
also be administered,” she
said.
Ms Zama further explained
that while the basic needs of
the orphanage were being met
by contributions from well
wishers, mostly from the USA,
the orphanage had other
income generating activities
including purchasing maize
from farmers and reselling it
at a profit.
She also said the orphanage
has a piece of land in Ng'ombe
compound where they have
sank a community borehole
and charge a minimal fee to
e n d - u s e r s . Fu r t h e r,
vegetables, which are grown at
the same plot are sold to the
surrounding communities. In
addition, Kingdom Kids House
of Hope orphanage is in the
process of building a chicken
run in order to further sustain
itself.
Ms Zama also informed the
Zambanker that the orphanage
raised substantial amounts of
money from well wishers
during its official launch. She
elaborated that most invited
guests made pledges, which
they had since honoured.
The orphanage currently
accommodates ten girls, six of
whom were brought in from
Petauke, Eastern Province,
while the other four were
brought in by the Ministry of
Community Development and
Social Services from another
orphanage located in
Mtendere, Lusaka.
She said while the current
target number of children was
twenty, more children would
be admitted to the orphanage
as similar homes are opened.
The girls are aged between five
and nine years old and they are
taken care of by a house
mother and helper/maid. The
house mother and her helper
are employed on a full time
basis and live in the same
house as the children.
The Home is registered with
both the Adoption Society of
Zambia and the Ministry of
Community Development and
Social Services and they carry
out continuous inspections.
Kingdom Kids House of Hope
also encourages contributions
from well wishers and the said
contributions can be made in
monetary terms by cheque
into the Standard Chartered
Bank
Northend Branch
Account whose number is
0100523553900. Donations in
material form are also
welcome.
“We would like the children to
feel loved hence when people
make material donations, we
would like them to give what is
of value to them and not what
they despise,” she said.
In congratulating Ms Zama for
the tremendous job she is
doing with the children,
Zambanker urges all well
wishers to contact her on
cellular phone number 097 7
776 535 for further details or
to make their respective
contributions.
FEATURE
Withdrawing Unfit Banknotes from Circulation
Mrs Chileshe
By Angela Chileshe
Introduction
The Bank of Zambia gets its
mandate to withdraw unfit
banknotes from circulation
from Section 4 [32] of the Bank
of Zambia Act of 1996, which
states that 'the Bank shall have
all such powers and make all
such arrangements as may be
necessary for the printing of
notes, the minting of coins and
for the issue, re-issue,
exchange and destruction of
notes and coins; and for the
safeguarding thereof.'
The Bank of Zambia therefore,
is charged with the
responsibility of ensuring that
banknotes of high quality are
issued into circulation. This is
because high-quality
banknotes also assist the
public's detection of
counterfeits. This objective
also requires that unfit
banknotes are efficiently
withdrawn from circulation.
The current family of Zambian
banknotes comprises seven
paper banknotes namely, the
K20, K50, K100, K5,000,
K10,000, K20,000 and
K50,0000 and two
denominations of polymer
banknotes that is, the K500
and K1,000. Further, these
denominations are categorised
into the following:1. High value banknotes
K50,000 and K20,000
denominations
2. M i d d l e v a l u e
denominations K10,000
and K5,000 denominations
3. Low value denominations
K1,000, K500, K100, K50
and K20 denominations
Lifetime of banknotes
Banknotes do not have an
unlimited life. After a certain
period of circulation, during
which their condition is
periodically checked, unfit
banknotes are withdrawn from
circulation and destroyed
while fit notes are reissued
back into circulation. In this
regard, banknotes deemed to
be unfit by the commercial
banks are returned to the Bank
and processed mostly through
high-speed sorting equipment
to confirm their quality and
a u t h e n t i c i t y. R e t u r n e d
banknotes that are
subsequently deemed to be fit
by the Bank are re-issued while
unfit banknotes are destroyed.
This process of continuously
checking the condition of
banknotes in circulation,
aimed at ensuring that the
public handle quality
banknotes is in line with the
BoZ Banknote Clean Note
Policy.
There are several reasons that
may determine the lifetime of
banknotes. In most instances,
frequent handling of
banknotes contributes to
significant wear and tear and
thereby shortening their
lifetime. This applies mostly to
the low value banknotes. A
contributing factor is that
lower denomination banknotes
tend to remain in circulation
relatively longer than higher
denomination banknotes,
before being returned to
financial institutions for fitness
sorting and ultimately to the
Bank for assessment and
destruction.
On the other hand, banknotes
that are not frequently handled
are most likely to have longer
lifetime circulation and remain
in better condition in
circulation.
This is the case mostly with
high value notes.
Some banknotes become
damaged in circulation beyond
the normal levels of wear and
tear and become unsuitable for
sorting through high-speed
sorting equipment. The Bank
of Zambia has a policy of
paying value for severely
damaged banknotes that can
be authenticated as genuine
Zambian banknotes, subject to
the amount of the banknote
that remains recognisable (the
banknote should have at least
one serial number or should be
substantially intact without
any possibility that the missing
part may be presented for
claim). Although commercial
banks can assess damaged
banknotes, they can only
exchange mutilated currency
at full face. However, all
damaged banknotes are finally
returned to the Bank for final
assessment and destruction.
Due to the different materials,
banknotes wear out differently
as follows;
Paper banknotes “may be
rendered unfit if it is soiled and
the public recognition features
such as the water mark,
security thread, and
holographic patch/strip are not
clearly visible. In some
instances, the banknote may
also be mutilated on account of
tearing, burning or eaten up by
termites in some cases if not
properly stored.”
Polymer banknotes “may be
deemed unfit if the banknote
begins to fade and the public
recognition features such as
the shadow image is not
clearly visible. If not properly
stored, the banknote may also
be mutilated on account of
tearing, burning or eaten up by
termites.”
Methods of withdrawing unfit
banknotes.
When banknotes are soiled
(paper banknotes) and or faded
(polymer banknotes) the Bank
of Zambia prompts commercial
banks to withdraw them from
circulation and deposit them at
the Bank.
1. The general public - a
member of the public may
present and exchange
unfit banknotes for fit ones
at a commercial bank;
2. C o m m e r c i a l b a n k s
deposits - commercial
banks will sort all cash
deposits received from the
public during the normal
course of business and
ensure that they deposit all
soiled or faded banknotes
during their cash deposit
transactions at the Bank of
Zambia Head office,
Regional Office and the six
(6) Sub chests namely
Chipata, Kasama,
Livingstone Mansa,
Mongu, and, Solwezi; and
3. Other stakeholders retailers will receive unfit
banknote from members
of the public during cash
transactions but will not
pass on the unfit notes to
the next customer but
ensure they are deposited
with a commercial bank.
To ensure fit clean banknotes
in circulation, commercial
banks have been issued with
sorting standards as provided
for in the 'Banknote Quality
standard Booklet.'
Booklet. This booklet is made
available to all commercial
banks and major retail outlets
for use by them in ensuring the
timely withdrawal of unfit
banknotes.
In this regard, based on Bank
of Zambia Banknote Quality
Standards, commercial banks
and retailers through their
normal course of business
should ensure that once unfit
banknotes are tendered during
a cash transaction, they should
not be reissued in the next
business transaction but
should be deposited with Bank
of Zambia where the
banknotes will be processed
Sorting standards
To guide commercial banks on
what is considered fit or unfit,
the Bank of Zambia in
collaboration with the Bankers'
Association of Zambia in
November 2004 issued the
Banknote Quality Standard
and verified and if deemed
unfit destroyed.
The destruction process
Unfit banknotes scheduled for
destruction must first be
cancelled since they are not
destroyed at the same place
they are sorted, in order to
prevent manipulation on the
transport route between
sorting and destruction. It is
known in this connection to
cancel by perforation, a
process that involves cuttingoff sections of the banknotes by
machine rendering them
unusable.
Cancelled banknotes are then
destroyed through a
destruction process called
briquetting. This process
involves the shredding of the
banknotes and the formation of
briquettes in the form of bricks,
the size of a small red brick.
This enables easy
transportation to the
designated disposal site in
accordance with the guidelines
set by the Environmental
Council of Zambia.
The author of this article is an
Assistant Director, Currency
Division in the Banking
C u r r e n c y a n d Pa y m e n t
Systems of the Bank of
Zambia.
Regulating For The Poor
Mr Nobert Mumba addressing the AFI Forum in Nairobi
policies to reach millions
across the developing world
by expanding access to
financial services. AFI is a
non profit making
organisation which is funded
by the Bill and Melinda and
Bill Gates Foundation. The
main purpose of the forum
was to identify key questions,
and answer those that posed
essential challenges for
making a breakthrough in
financial inclusion to facilitate
the building of practical
roadmaps for implementing
financially inclusive
programs.
AFI targets to facilitate access
to formal financial services for
50 million living on less than 2
dollars a day by the year 2012.
Yes you read me right, that is
less than K9400 ($2) a day!
Why Financial Inclusion
It is estimated that at least 3.2
billion people do not have
access to financial services
and yet a major proportion of
this number is engaged in
informal financial services
that, if harnessed, holds a
massive reservoir of economic
potential. These statistics are
not akin to the Zambian
situation as access to finance
is at a paltry 33% of the
eligible population.
What, therefore, are the
regulatory reforms that are
required to facilitate and
accelerate access to financial
services?
Until recently, banks and
other traditional financial
By Norbert Mumba
They need to eat, they need to
drink water, they need to
sleep, and they need to take
their children to school. They
also need medical help, but all
this on less than 2 dollars a
day. How is that possible and
what are the prospects for the
future? These and many other
similar questions confront
many policy makers the world
over in their quest to ensure
an all inclusive financial
sector.
The answer lies in policy
makers adopting a deliberate
stand to provide for
regulations that are not only
pro-poor, but regulations that
will provide for effective
access to finance by the poor.
The Alliance for Financial
Inclusion (AFI) held its first
Global Policy Forum in Nairobi
Kenya from 14th -16th
September 2009 and was
opened by the Prime Minister
of Kenya, the Right
Honourable Mr. Raila Odinga.
The Forum attracted over 100
policy makers and experts
from more than 40 developing
countries and close to 70
strategic partners.
The Alliance for Financial
Inclusion is a global network
for Central Banks and other
policy makers from 59
developing countries that
account for 90% of the world's
unbanked population. The
global network is intended to
facilitate the development
and implementation of
5
service providers did not
entertain the poor because it
was believed they lacked a
credible portfolio and that
they were not just profitable
for business. Quite obviously
this was a grave
miscalculation as it did not
only lack a strategic view, but
down played the role the 'socalled poor' play in most
economies (developed or
otherwise). In Zambia the
peasant farmers, most of
whom have no access to
financial services, produce up
to 60 % of the staple food crop.
Countless are proud owners of
significant heads of animal
stock and yet the financial
sector has not adequately
captured them.
To d a y t h e b a n k s f i n d
themselves on the back foot as
mobile service providers have
first mover advantage on
covering for the poor.
Dar yl Collins et al in
“Portfolios of the Poor”
(Princeton University Press
2009) make a lucid case that
Financial Assets
$174.80
contrary to belief that the
poor have no financial
portfolio, the poor are astute
financial managers who in
essence practice all the
essential characteristics
inherent in a well defined
financial system.
This ranges from deposit
taking, lending, and
insurance against peril.
Daryl Collins' typical poor's
balance sheet is given
Quite clearly there is a lucid
demonstration that the poor
have a portfolio probably no
different from that of the
advantaged. It is this
portfolio which has to be
harnessed in order to better
the standards of living.
In the next issue this article
will discuss the possible
policy responses.
The Author of this article is
an Assistant Director R e g u l a t o r y P o l i c y,
Liquidations and Licensing
of the Bank Supervision of
the Bank of Zambia
Financial Liabilities
$223.34
Microfin loan a/c
153.34
Micro finance savings
16.80
Savings money guard
8.00
Private interest free loan
14.00
Home savings
2.00
Savings held for others
20.00
Life insurance
76.00
Shopkeeper credit
16.00
Remittances to village*
30.00
Rent arrears
10.00
Loans out
40.00
Cash in hand
2.00
Financial net worth
-$48.54
___________________________________________________________________________
*treated as asset as it is considered an investment
FEATURE
Five Years on - Zambia's Ambitious FSDP
RECOMMENDATION ISSUE
STATUS
established to spearhead the
from within Bank of Zambia as WORKING
AREA
drawing up of a draft Financial
the coordinating agency for GROUP
Harmonising International Accounting Standards and Financial Reporting Standards (IAS/IFRS) standards with DONE
ACCOUNTING
Sector Development Plan
the FSDP. The working groups AND AUDITING Zambia Institute of Chartered Accountants (ZICA) standards, Accountants Act and Companies Act
Strengthening the regulatory authority on accounting and auditing which will be independent of ZICA
PARTIALLY
(FSDP). The coordination of
were composed of subject
DONE
work and buy-in that followed
experts focusing on the
Reviewing the Companies Act and provide recommendations to make it mandatory for all companies operating
PARTIALLY
in
Zambia
to
have
external
auditors
subject
to
agreed
conditions
DONE
from individuals and
technical aspects of
To establish a financial safety net, through a Deposit Protection Scheme.
WORK IN
BANKING
organizations involved in the
implementing the
PROGRESS
Enhance financial stability – by raising the minimum capital requirement for banks, introducing rule based rule
DONE
process could only be
recommendations of the
interventions, prescribing corporate governance guidelines, developing macro prudential supervision and risk
described as fantastic. While
FSDP, under a private-publicmanagement systems.
the phrase 'stakeholder
partnership. These included:
Review and enhance the liquidation guidelines
WORK IN
PROGRESS
consultations' is loosely used
1. Accounting and Auditing;
Address the weaknesses related to poor Credit Culture i n Zambia by establishing a private sector led Credit
DONE
in this country, the ones
2. Banking;
Reference Bureau
Address high cost of banking services by among others educating consumers on services and products available, DONE
applied under this process
3. Contractual Savings;
encouraging competition among banks and publishing industry wide bank (and non-bank) charges annually in
were immense because in this
4. Corporate Governance;
the national media to enhance consumer awareness.
case, most key financial sector
5. Financial Access;
Develop strategy for rural banking
WORK IN
PROGRESS
organizational players and
6. Financial Markets;
Enforce anti-money laundering guidelines for banks and other financial institutions.
DONE
international cooperating
7. Human Resources;
To review and amend the Insurance Act Pensions Scheme Regulation Act to provide for supporting rules and
DONE
CONTRACTUAL
regulations.
agencies were indeed
8. Legal and Regulatory SAVINGS
To develop investment guidelines and set minimum capital requirements for the industry
PARTIALLY
consulted.
Infrastructure;
DONE
Mr Phiri
The drafting work that
9. Macro-economic Issues;
Introduce code of good corporate governance that imposes stricter corporate governance practices and
DONE
structures in all institutions managing pension and insurance funds
followed the consultations
10. N o n - B a n k F i n a n c i a l
By Musapenda Phiri
To make recommendations on how Government can improve funding of Public Service Pension Fund.
YET TO BE
Institutions;
culminated into a National
While there can be no doubt
DONE
To undertake intensive training to build capacity and carry out awareness campaigns
DONE
11. Payment Systems; and,
Stakeholders Forum held at
that the FSDP has scored a
Consider ways of subjecting NAPSA to an independent supervision.
PARTIALLY
12. Taxation.
the Mulungushi International
good pass mark, it is however
DONE
Conference Centre in May
Enhance scope of corporate governance principles enshrined in cross cutting laws relating to the financial
DONE
CORPORATE
not a distinction. A lot has still
sector
which
are
considered
to
be
limited.
GOVERNANCE
2004. Officially opened by the
During this period, the
been achieved and you can
Review and recommend corporate governance guidelines, board charter and code of ethics.
PARTIALLY
then Minister of Finance and
Ministry of Finance and
decide whether the
DONE
Conduct
a
status
audit
and
review
of
corpo
rate
governance
practices
in
banks
and
non
-bank
financial
YET TO BE
National Planning Hon
National Planning was also
development and subsequent
institutions in Zambia using international corporate governance best practices
DONE
Ng'andu Magande, over 200
considering organizations and
implementation should score
Undertake corporate awareness programmes in corporate governance principles and best practice.
PARTIALLY
DONE
participants attended this
names of persons who could
a merit or credit.
Facilitate studies related to Financial Access, such as the FinScope Consumer surveys on the demand and
DONE
FINANCIAL
lively event at which
s i t a s m e m b e r s o f a n ACCES STUDIES supply of financial services in Zambia.
A review based on an insider's
Implementation Committee,
proposals were debated and at
perspective of what has and
Facilitate the supervision of NAPSA by an independent regulatory authority.
YET TO BE
DONE
responsible for reviewing and
times challenged - even
hasn't been done.
To introduce a market-making system in the money and securities markets by developing a code of conduct and
PARTIALLY
FINANCIAL
monitoring activities and a MARKETS
amended to meet the
They say that failing to plan is
establishing rules and guidelines
DONE
To encourage corporate entities and local authorities to issue corporate and municipal bonds respectively
PARTIALLY
Steering Committee, chaired
country's expectations. After
a recipe for planning to fail.
DONE
by Government and
two and a half days of
However, a plan on its own
To harmonise and enact the Central Securities Depository bill with the Payment Systems Bill
WORK IN
deliberations,
a
consensus
r
e
s
p
o
n
s
i
b
l
e
f
o
r
p
o
l
i
c
y
PROGRESS
will not deliver the goods. And
To
introduce
long
-term
Government
(GRZ)
bonds
(of
up
to
15
years)
DONE
was reached and the
direction.
delivering the goods alone
To introduce strategies that will activate secondary market activity on the stock exchange by undertaking
WORK IN
discussions concluded. The
Initially, some views were
does not imply success. The
intensive awareness campaigns as well as designing and introducing rules and guidelines for secondary market
PROGRESS
trading i.e. government securities
Technical team was tasked
expressed that the existence
goods may not be used as
To introduce a financial services charter
YET TO BE
thereafter to finalize the draft
of the two committees would
intended, or may not be used
DONE
result in duplication and a HUMAN
document of what was to be
Ensure compliance to the Zambia Institute of Human Resources Management (ZIHRM) requirement that all
DONE
at all. We all know of reports
Human Resources Managers be members
layering of decision making, RESOURCES
Zambia's first FSDP. This was
w i t h b e a u t i f u l
Establish recruitment and gender policies in financial institutions
YET TO BE
typical of the bureaucratic
the document that would
recommendations that have
DONE
Develop HIV/AIDS codes or guidelines in financial institutions
PARTIALLY
public sector, they argued. But
complement the various
ended up on bookshelves. And
DONE
it was to turn out that while
national development plans
trust me, there are many out
Develop a comprehensive personal information data base system throughout the financial sector
YET TO BE
the decision making process
only this time a more specific
DONE
there, including some I know
Propose
modalities
for
all
financial
institutions
to
provide
internship
opportunities
for
trainees
and
build
YET TO BE
chapter for the financial
became lengthy, the two
on my own bookshelves. The
capacity for existing local skills.
DONE
sector. It was a lot of work and
committees played
Educational campaigns on the importance of providing for retirement benef its, encouraging in -house pension YET TO BE
schemes
and
personal
savings
by
staff.
DONE
if any accolades were to be
significantly different but
Plan (FSDP) however tells a
To remove conflicts and contradictions in the current Legislation that Governs the Financial Sector
PARTIALLY
LEGAL AND
handed out, this technical
important roles.
different story.
DONE
REGULATORY
team certainly did a good job.
The Committees got to work ISSUES
In 2002, the IMF and World
harmonise the Banking and Financial Services Act (BFSA) with all other financial sector regulations; for
DONE
in mid 2005 but due to the
Within two weeks the revised
Bank in their Financial Sector
example, the Development Bank of Zambia Act, the Building Societies Act and the National Savings and Credit
i m p l e m e n t a t i o n
document was reviewed and
A s s e s s m e n t Pr o g r a m m e
Bank Act
Participate in improving justice delivery system through adequate staffing and training and consider liberalizing YET TO BE
requirements, the framework,
sent to Ministry of Finance
(FSAP) Mission highlighted a
publication of law reports.
DONE
procedures and modalities for
and National Planning for
number of weaknesses in
payments were not finalized
endorsement before
Zambia's financial sector. This
To enact financial sector consumer protection laws
NOT DONE
Encourage the use of Alternative Dispute Resolution (ADR) mechanisms in resolving commercial disputes
PARTIALLY
submission to Cabinet. In
until the latter part of the year.
of course followed the already
DONE
June 2004, Cabinet approved
The pace of progress thus MACRO
tremendous liberalization
Facilitate initiatives for ensuring macroeconomic stability including low inflation and interest rates, as well as
DONE
employment generation in the Zambian economy.
Zambia's Financial Sector
tended to move slower than ECONOMICS
reforms of the 1990s. Some of
ensuring effective expenditure management so as to reduce the incidence of crowding -out the private sector by
PARTIALLY
Development Plan.
private sector expectations.
the weaknesses highlighted in
the public sector and devise a mechanism to ensure effective debt management
DONE
The FSDP was aimed at
However, the big wake up in
the Zambian financial sector
Pulling government revenue out of the commercial banks into the Central Treasu
ry or the Central Bank
DONE
efficiently
and
timely.
guiding efforts to realise the
the programme was the
assessment reports were:
Ensure there is Quality and reliable statistical data.
DONE
FinScope study undertaken NON BANK
vision of a financial system
!
L o w f i n a n c i a l
Develop appropriate regulations for Development Finance Institutions (DFIs), Housing Finance Institutions
WORK IN
(HFIs), rural banks, leasing and finance companies for effective regulations and supervision
PROGRESS
between 2005 and 2006 FINANCIAL
that is 'stable, sound and
intermediation;
INSTITUTIONS
which showed that 66% of all
market-based and that would
!
Lack of financial services
Restructuring weak NBFIs and implementing strategic turn around plans.
DONE
adult Zambians do not have
support efficient resource
in rural and peri-urban
Establish an institutional framework such as an Apex Institution for channelling long term funds
WORK IN
PROGRESS
mobilisation necessary for
access to any banking or other
areas;
DONE
economic diversification and
financial service
whether
!
High bank charges &
develop a policy framework for the development of microfinance and the rural banking sector and
Develop WORK IN
institutional framework for the provision of linkage banking through appropriate regulations and guidelines
PROGRESS
sustainable growth.' Yes it is a
formal or informal. In other
account requirements;
To provide secure, efficient and effective mechanisms for the exchange of money between transacting parties
DONE
mouthful, but the programme
words, 2 out of every 3 PAYMENT
!
Poor credit culture;
through the RTGS.
SYSTEMS
emanating
from
the
Plan
was
Zambians.
This
is
to
say
only
1
!
Multiple roles of
Effective use of technological advances to serve all End
-Users and in particular the unbanked and rural
WORK IN
population
PROGRESS
one that was also ambitious
out of every 3 Zambians had
Government;
To ensure legal finality and irrevocability of both payment and settlement
DONE
and needed to be all
access to a financial service.
!
Lack of long term
To enable the management, reduction and containment of systemic and other payment –related risks
DONE
To
review
and
carry
out
a
survey
of
the
current
financial
taxation
regime
including
a
review
of
the
SADC
WORK IN
TAXATION
And
of
even
more
concern
was
encompassing.
development and housing
financial taxation regime in relation to the Zambian system and make proposals to remove distortions and how
PROGRESS
the finding that only 15% of
Inspite of all the good will and
finance;
the tax base could be broadened in the financial sector.
the adult population (or
a beautifully articulated
Review the law relating to Value Added Tax (VAT) on finance lease charges
DONE
!
We a k r e g u l a t o r y
approximately 1 million
development plan, there was
framework for non-bank
people aged 16 years old or
however no established team
that we should make it a
financial institutions
progress (implying a lot more
constraints, all the positives
in place to implement these
above) were using banking
requirement in the not so
(NBFIs);
yet to be done) or yet to be
and negatives, the Bank of
reforms, particularly over the
services and products.
distant future for salaries to
!
Fragmented financial
done (i.e. not done and thus
Zambia team paddled calmly
first few months, with activity
Compared to the United
be paid through a bank
sector laws;
outstanding). More detailed
like a duck above waters but
work undertaken on an ad hoc
Kingdom, over 95% of adult
account, and thereafter
!
Inadequate financial
information is available to the
paddled hard below waters (or
residents use banking
basis. After extensive
'encourage' banks to issue
safety net;
public on the Bank of Zambia
behind the scenes as the case
services. In India, the figures
discussions between
debit (and credit) cards as a
!
Under developed financial
website, www.boz.zm.
may be). Although the road
are slightly above 60%. In the
Government, Bank of Zambia
way of reducing cash
markets; and
The initial five year period for
has been built with limited
sub region, South African,
and several cooperating
transactions as well as cash
!
Limited market
the Financial Sector
resources, some portions
Botswana, Namibian, and
partners, the Swedish
usage and thus circulation in
knowledge of financial
Development Plan (FSDP)
bumpy and others smooth, it
Tanzanian figures from
International Development
general. After all, are we not
services and products.
approved by Cabinet in June
has been a lot of work. In
similar studies showed access
Agency (SIDA) and the UK's
in the ICT age? This would
2004 lapsed at the end of June
2006, the senior management
levels above 50 percent.
Department for International
facilitate an avenue for access
The FSAP Mission listed a
2009. Going forward, in view
floor, notable within and
Development (DFID), offered
While it was appreciated that
to additional financial services
number of recommendations
of the outstanding activities
outside the Bank for being
the levels of economic
technical and financial
and products. The
for further reforms in order to
and the recommendation of
result-oriented, effected some
support in December 2004.
development were different,
Government, which has
address the weaknesses that
further policy reforms, partly
administrative changes which
it was a sign that a lot needed
Agreements were signed and
played a very positive and
had been obser ved. In
due to dynamics arising from
allowed a dedicated
to be done to improve access.
in March 2005, a review
enthusiastic role in the FSDP,
addition, the Government of
the global economic crisis, a
Secretariat team to be put in
After all, without financial
meeting to consider the
has already set a target to
the Republic of Zambia had
FSDP Phase II project proposal
place. The summar y of
access, the average Zambian
implementation approach
increase the level of access to
also embarked on a Poverty
document has since been
results, or the to-do list, below
could not grow their
with various stakeholders was
50% by end 2009 and the
Reduction Strategy Paper
developed for discussion, and
will reflect the level of
businesses, borrow for
called at which 12 specialised
follow up on the FinScope II
(PRSP) which also set out
will provide basis for seeking
progress made over the
working groups were set up
investment or building, or
survey, whose results are due
various interventions for
further technical and financial
programme period. For ease of
(with two of these having
even use what would appear
before the end of this year,
improving the economy.
support for an extension to the
reference, the status has been
been added months later) and
to be basic ATM and Point of
should provide an indication
Based on the two reports and
FSDP programme (up to
summarized to either indicate
Sale (PoS) services.
Chairpersons elected.
of the current levels achieved
Bank of Zambia's own review
December 2012) from the
done (or completed); partially
It is, therefore, interesting to
Working Group Secretaries
towards meeting this goal.
of the financial sector, a
Government and other
done (and of a significant
hear some public sentiments
were subsequently appointed
Yet despite the various
technical committee was
amount of work); work in
To be continued in the next edition
6
FEATURES
nd
Monetary Policy Statement for 2 half unveiled
unveiled its Monetary Policy
Statement for the second half
of this year. The statement
reviews the performance of
monetary policy over the first
half of 2009 and outlines the
formulation of monetary
policy during the period July
to December 2009.
The statement also discusses
the major challenges which
may impact on the conduct of
monetary policy during the
second half of 2009, and
consequently outlines the
policy actions that the Bank of
Zambia is likely to take.
According to the Statement,
Monetary Policy is anticipated
to remain focused on
achieving the end-year
inflation target of 10%. In this
regard, the Bank of Zambia
will take appropriate
measures to ensure that the
end-year growths in reserve
money and money supply are
within the programmed limits
of 14%.
A summary of the Statement
says significant challenges
remain to the achievement of
the inflation and money
supply targets. It further says
the second round effects of
the global financial and
economic crisis are still
impacting the Zambian
economy.
These effects include lower
fiscal revenues that present
increased pressures for higher
than programmed domestic
financing of the budget, the
lagged effects of the sharp
depreciation in the exchange
rate and the potential upward
adjustment in inflation
expectations, and shocks to
the domestic economy arising
from higher electricity and
fuel costs.
T h e M o n e t a r y Po l i c y
Statement, however, says
countervailing factors which,
if they materialise, will
support the monetary policy
objective.
These include the improved
outlook for copper prices,
which should support
increased copper earnings,
the stabilisation of the
exchange rate of the Kwacha
against the major global
currencies, and the likelihood
of a significant augmentation
in foreign exchange reserves
from the proposed allocation
of Special Drawing Rights
(SDRs) by the IMF.
“In the second half of 2009,
the Bank of Zambia will
introduce the overnight
lending facility (OLF) to
operate on a repo or
collateralised (secured) basis.
The OLF will be a Bank of
Zambia's overnight lending
facility to commercial banks
with adequate collateral to
back the loans obtained on an
overnight basis,” the report
says.
The proposed collateral for
use on the facility will be
Government securities, that
is, Treasur y bills and
Government bonds with less
than 180-days to maturity.
The OLF facility once fully
implemented, is expected to
improve the commercial
banks management of short
ter m liquidity, enhance
m o n e t a r y p o l i c y
implementation, contribute to
money market development,
and provide a mechanism that
can act as an early warning
system to detect emerging
liquidity problems in the
banking sector.
The Statement adds that the
monetary policy formulation
and implementation will
continue to be guided by the
Government's broad
macroeconomic policies as
outlined in the new MediumTerm Expenditure Framework
(MTEF) for the period 20102012, which is broadly in line
with the Vision 2030. For the
two year period to December
2011, the Bank of Zambia will
aim at reducing annual
inflation to no more than 9.0%
at the end of 2011.
“The monetary policy
framework will continue to be
reviewed to enhance the
efficacy of monetary policy,
taking into account the
current developments in the
global financial markets and
their implication on the
domestic economy. In this
regard, the Bank of Zambia
will review its monetary
policy framework in the
period ahead in light of the
recent impact of external
shocks on inflation outturn
and macroeconomic stability
in general. The broad thrust of
this review is to assess the
costs and benefits of moving
from the strict use of a
monetary aggregate as the
anchor of monetary policy to a
short term interest rate,” the
report says.
During the first half of 2009,
monetary policy was focused
on achieving the end-year
inflation target of 10.0%. It
was envisaged that in the first
half of the year, both reserve
and broad money were to
grow by no more than 2.6%.
To achieve this, the Bank of
Zambia (BoZ) was to rely
mainly on the use of Open
Market Operations (OMO).
This was to be complemented
by the auctioning of
Government Securities and
prudent fiscal management.
In the period under review,
overall annual inflation
declined by 2.2 percentage
points to 14.4% as at June
2009 from the 16.6%
recorded in December 2008.
However, this was above the
end-June 2009 projection of
12.2%.
The underlying inflationary
pressures emanated largely
from the increase in non-food
inflation. This in turn was
mainly driven by the passthrough effects of the
weakening of the Kwacha
against the US dollar. On the
other hand, food inflation
declined due in part to the
maize price stabilisation
programme in the first
quarter of 2009 and improved
supply of many food items
from domestic sources,
following the onset of the
2009/10 crop marketing
season.
Average reser ve money
declined by 2.7% to K3,213.7
billion at end-June 2009,
which was 5.3 percentage
points lower than the
projected end-period growth
of 2.6%. The decline in
reserve money was mainly
driven by the increase in net
sale of foreign exchange.
Similarly, M3 growth declined
to 0.2% in the first half of
2009 from the 20.3% growth
registered in the second half
of 2008 and was 2.4
percentage points below the
projection of 2.6% for endJune 2009.
In the foreign exchange
market, demand pressures,
which had led to the Kwacha
depreciating during the
second half of 2008,
continued into the first four
months of 2009. The reversal
of portfolio flows in
Government Securities and
the stock market continued.
These, with the combined
demand for food imports and
servicing the financing facility
for oil procurement,
particularly during the first
four months of the year,
exerted significant pressure
on the exchange rate of the
Kwacha against major
currencies to depreciate
during the first quarter of
2009. Consequently, the
Kwacha recorded a broadbased depreciation against
the major trading currencies
in the first quarter of the year.
This development was despite
the Bank of Zambia's active
participation in the foreign
exchange market through the
sale of foreign exchange.
Against the US dollar, the
Kwacha depreciated by
16.0%, to settle at a monthlyaverage of K5,660.35 per US
d o l l a r, b y A p r i l 2 0 0 9 .
S i m i l a r l y, t h e K w a c h a
depreciated by 14.6 per cent,
15.2 per cent, and 26.2 per
cent against the Pound
sterling, euro, and South
African rand to K8,319.35,
K7,441.26, and K626.62 per
unit of these currencies,
respectively.
However, over the second
quarter of 2009, the Kwacha
recorded some recovery,
reflecting improved investor
sentiments following the
progressive recover y in
copper prices from the
beginning of the year. The
recovery was also supported
by the Bank of Zambia's
aggressive policy response of
increasing net sales of foreign
exchange.
The Bank's net sales of foreign
exchange during the first six
months of 2009 rose to US
$256.5 million from US
$184.0 million in the last half
of 2008. Further, the Bank
acted to curb speculative
currency trades by issuing a
directive to commercial banks
to desist from lending local
currency with a maturity
period of less than one year to
non-residents. These
interventions also helped
restore stability in the foreign
exchange market in the last
quarter of the period under
review. Hence, the exchange
rate appreciated to a monthlyaverage of K5,281.64/US$ in
J u n e 2 0 0 9 f r o m
K5,660.35/US$ as at April
2009.
Against the Pound sterling,
Euro, and South African Rand,
the Kwacha recovered by
recording appreciations of
2.0%, 4.7% and 1.2% to
K8,150.33, K7,095.00, and
K618.92 respectively.
Preliminary data indicate that
Zambia recorded a
merchandise trade surplus
(c.i.f) of US $ 58.5 million
during the first half of 2009
compared with a merchandise
trade deficit of US $535.8
million recorded during the
second half of 2008. This was
mainly explained by a 37.8%
decline in the merchandise
imports bill that more than
offset the 19% decline in
export earnings. Zambia's
current account deficit
narrowed to US $207.2 million
from US $1,184.5 million in
the second half of 2008.
The fiscal sector is one other
area apart from the external
sector where the adverse
impact of the global financial
crisis and economic recession
has been significant as
reflected in the reduced
Government revenues.
Earnings from key sectors
such as mining, tourism and
manufacturing have
plummeted since the advent
of the crisis.
Further,
revenues from trade in
general and imports in
particular, have also been
adversely affected.
A c c o r d i n g l y, f i s c a l
performance was weak during
the first half of 2009. Tax
revenues were significantly
below projections, largely
reflecting lower trade taxes
and donor inflows.
Notwithstanding this, the
central Government recorded
a lower budget deficit than
programmed, mainly achieved
through a substantial
compression of expenditures,
with likely adverse effects on
the implementation of various
social and infrastructural
programmes envisaged in the
2009 budget.
Total domestic financing, thus
remained under control
during the first half of the year.
During the review period,
yield rates on Government
securities were generally
stable but commercial banks
lending and deposit interest
rates increased marginally
while savings rate remained
unchanged.
Training update
The following members of staff successfully completed their
studies;
No
01
Name
Mr Anthony
Musonda
Department
Financial
Markets
02
Ms Orita
Mutoloki
Regional
Office
03
Mrs
Mirriam
Kamuhuza
Mr Francis
Ilunga
BCPS
Ms Besnat
Mwanza
Bank
Secretariat
04
05
Bank
Supervision
Institution
University of
Cape Town ,
RSA
University of
Birmingham,
UK
Brandeis
University,
USA
University of
Applied
Sciences in
Berlin,
Germany
Nelson
Mandela
Metropolitan
University,
RSA
University of
London, UK
06
Mrs Helen
Banda
PMS
07
Ms Melina
Malipilo
NBFIS
University of
Leeds, UK
08
Mr Leonard
Mulilalila
Regional
Office
University of
Zambia
09
Mrs
Chileshe
Sindazi
Regional
Office
University of
Zambia
Course
PhD in
Economics
Period
July 2005August 2009
MSc degree in
International
Money and
Banking
MA Degree in
International
Economics
Masters
Degree in
Economics
Oct 2007Sept 2009
Masters
Degree in
Business
Administration
Feb 2008Sept 2009
Masters
Degree in
International
Corporate
Governance,
Financial
Regulatory &
Economic Law
Masters of
Arts Degree in
Accounting &
Finance
BA
Development
Studies
BA Public
Administration
Oct 2008Sept 2009
Aug 2007Sept 2009
Feb 2008Sept 2009
Sept 2008Sept 2009
May 2007May 2009
May 2007May 2009
Outgoing Reserve Bank of South Africa Governor, Mr Tito Mboweni receiving a farewell gift from his Zambian counterpart, Dr Caleb
Fundanga at a Committee of Central Bank Governor's meeting held in Pretoria recently
IMF approves US $256
From Page 1
George Tsibouris said Zambia's
Balance of Payments was
expected to be reinforced by
the appreciation of the
Kwacha and the bumper maize
harvest of 1.9 million tonnes,
which will gradually help to
bring down inflation.
Zambia and the IMF agreed on
a framework for the 2010
budget which continues to
focus on increased spending
on priority capital projects and
social sectors, while
maintaining consistency with
macroeconomic stability.
improvements recorded in
other sectors of the economy.
In a statement issued at the
conclusion of a mission visit to
Zambia, the IMF said the
improved outlook of the
Zambian economy was already
being reflected in the
appreciation of the Kwacha
since May, a development
which may see a higher gross
domestic product growth this
year than previously
estimated.
Mission Chief for Zambia
7
Meanwhile, World Bank
Country Manager for Zambia,
Dr. Kapil Kapoor has said
Zambia has not been affected
much by the current global
economic recession and will
this year record substantial
economic growth compared to
other countries in Africa.
Dr. Kapoor said Zambia had an
advantage of recording
significant growth during the
period of the global recession
although the country needed
to increase its economic
growth to about seven to eight
percent in order to impact
significantly on people's
welfare.
He said Zambia should revisit
some of its major sectors and
address challenges that were
hampering private sector
investment and significant
diversification of the economy.
Dr. Kapoor said Zambia needed
to change its investment policy
to achieve substantial
economic growth.u
FEATURE
Corporate Governance in the Financial
Sector: Relevance & Application
has unfettered power and
and management. The fit and
that there is an appropriate
proper criteria should include,
balance of power and
but may not be limited to: (1)
authority on the board
the contributions that an
which is, interalia, usually
individual's skills and
reflected by separating the
experience are likely to make to
roles of the chief executive
the safe and sound operation of
officer and chairman, and
the bank, and (2) any record of
by having a balance
criminal activities or adverse
between executive and
regulatory judgments that in
non-executive directors;
the supervisor's judgment
!
Principle 10 - The board
make a person unfit to uphold
should regularly review
important positions in a bank.
processes and procedures
Moreover, supervisors should
to ensure the effectiveness
determine that the boards and
of its internal control
senior management of
systems, so that its
individual institutions have in
decision-making capability
place processes to review the
and the accuracy of its
fulfilment of their duties and
reporting and financial
responsibilities. It may be
results are maintained at
helpful in this regard for
high levels at all times;
supervisors to meet with
!
individual directors and senior
should regularly assess its
managers as part of the
performance and
ongoing supervisory process.
effectiveness as a whole,
Another important element of
and that of individual
supervisory oversight of bank
directors, including the
safety and soundness is an
chief executive officer;
understanding of how
!
corporate governance affects a
should appoint the chief
bank's risk profile.
executive officer and at
Supervisors should not only
least participate in the
evaluate corporate governance
appointment of senior
policies and procedures, but
management, ensure the
also evaluate banks'
motivation and protection
implementation of these
of intellectual capital
policies and procedures.
intrinsic to the
Supervisors should expect
corporation, ensure that
banks to implement
there is adequate training
organisational structures that
Assistant Bank Secretary Litigation, Dr Leonard Kalinde with Corporate Governance Guru, Professor Mervyn King at a workshop facilitated
in the corporation for
include the appropriate checks
by the renown good governance authority in Lusaka recently
management
and
and balances. Regulatory
employees, and a
guidance should emphasise
Continued from last issue *
banking business. This
financial sector with the
corporation's purpose and
succession plan for senior
accountability and
By Leonard Nkole Kalinde
facilitates ascertaining the
ultimate objective of
values, determine the
management;
transparency.
in place. In developing
financial stability of bank
promoting sound and efficient
strategy to achieve its
!
guidance, the central bank
shareholders, and in turn
financial systems.
purpose and to implement
should ensure that all
Conclusion
should recognise that banks
limits the likelihood of
In order to encourage good
it values in order to ensure
technology and systems
Corporate governance criteria
and non-bank financial
granting bank licences to
corporate governance in
that it survives and
used in the corporation are
cannot be effective if it is only
institutions will need to adopt
persons likely to put bank
commonwealth countries, the
thrives, and ensure that
adequate to properly run
on paper. Proper, sound, and
different approaches to
operations in jeopardy;
Commonwealth issued fifteen
procedures and practices
the business and for it to
effective corporate governance
corporate governance that are
!
The responsibility for
main principles of corporate
are in place that protect
remain a meaningful
criteria are those that
proportional to the size,
corporate governance is
governance in 1999.
the corporation's assets
competitor;
incorporate a punishment and
complexity, structure and risk
placed on the board of
According to these principles
and reputation;
!
reward system. Meaning, it is
profile of the bank. The
directors and management
the responsibility of effecting
!
should identify key risk
necessary to review and
supervisory process should
of a bank. They are
good corporate governance in
should be able to monitor
areas and key performance
correct any practices that have
take this into consideration in
expected to create the
institutions rests on the Board
and evaluate the
indicators of the business
proved wrong. There should
evaluating bank and non-bank
right compliance culture
of Directors. Therefore to
implementation of
enterprise and monitor
also be an implementation
corporate governance.
and ensure that
ensure that institutions in the
strategies, policies,
these factors;
mechanism which is capable of
In this regard, the Basel
responsibilities are
financial system practice good
management performance
!
undertaking corrective
Committee on Banking
properly delegated and
corporate governance, it is the
criteria and business
should also ensure
measures.
Supervision published
continuously monitored;
responsibility of the Board of
plans;
annually that the
The Central Bank's ability to
guidance in 1999 to assist
!
Supervisors are given the
Directors to observe the
!
Principle 5 The board
corporation will continue
implement its policies and
banking supervisors in
responsibility to 'promote',
following:
should ensure that the
as a going concern for the
decisions within the financial
promoting the adoption of
'review' and 'evaluate' a
!
Principle 1
The board
corporation complies with
next fiscal year.
sector serves as a corrective
sound corporate governance
bank for compliance with
should be able to exercise
all the relevant laws,
The central bank should also
and disciplinary mechanism.
practices by banking
the principles of corporate
leadership, enterprise,
regulations and codes of
consider corporate governance
The institutions' board of
organisations in their
governance. The
integrity and judgment in
best business practices;
as one element of depositor
directors and their general
countries. The strategies and
supervisor is required to
directing the corporation
!
protection. Sound corporate
assemblies also need to be
techniques which they
have procedures to
so as to achieve continuing
should ensure that the
governance considers not only
committed to undertaking
consider to be basic sound
evaluate whether directors
prosperity and to act in the
corporation communicates
the interests of shareholders,
corrective measures when
corporate governance that
and senior management
best interest of the
with shareholders and
but also the interests of
necessary.
supervisors should adopt
are “fit and proper” for
business enterprise in a
other stakeholders
depositors. The central bank
The Central Bank also needs to
include the following:
those positions.
manner based on
effectively;
should determine that
be effective in implementing
!
The responsibility of bank
t r a n s p a r e n c y,
!
individual banks are
measures when discovering
supervisors is made clear,
accountability and
should serve the
The Commonwealth also
conducting their business in
malpractices in the financial
the gist of which is to keep
responsibility;
legitimate interests of the
recognizes the role that
such a way as to not be
sector or in the performance of
an eye on and improve
!
shareholders of the
corporate governance plays in
detrimental to the interests of
boards of directors, without
corporate governance
should ensure that
corporation and account to
promoting robust and efficient
depositors. Therefore,
using double standards. Banks
within the banking system.
through a managed and
them fully;
financial systems and has
depositors' interests should be
and non-banks financial
Bank regulators have a
effective process board
!
subsequently issued
considered in conjunction with
institutions need to be efficient
legal obligation to protect
appointments are made
should identify the
guidelines on Corporate
any applicable deposit
to survive especially in the
interests of all
that provide a mix of
corporation's internal and
Governance in the Financial
insurance systems, the need to
international arena.
stakeholders not just
proficient directors, each
external stakeholders and
S e c t o r, t h r o u g h t h e
avoid “moral hazard” which
Hence, the financial sector
managing the relationship
of whom is able to add
agree a policy, or polices,
C o m m o n w e a l t h Wo r k i n g
may result from particular
needs to find ways to meet
between shareholders and
value and to bring
determining how the
Group. These guidelines are
approaches to consumer
inter national recognized
management;
independent judgment to
corporation should relate
considered as part of the
protection, and other relevant
criteria. Everyday there are
!
Regulators assess
bear on the decision
to them;
Commonwealth's corporate
principles.
new concepts. The financial
shareholders to see
making process;
!
governance programme and
The central bank should obtain
sector needs to continually
whether they are 'fit and
!
should ensure that no one
are intended to foster good
necessary information to
adapt its standards and
proper' to engage in
should determine the
person or block of persons
corporate governance in the
evaluate the expertise and
practices so that it can compete
integrity of proposed directors
successfully across the globe.
Celpay holds Mobile Banking 'Indaba'
Celpay has called on the Bank
of Zambia to set up an
association for mobile banking
that will function like the
Bankers Association of Zambia
(BAZ).
The proposed association will
be made up of industrial
players which will have a clear
mandate, terms of reference
and will give practical
recommendations to both the
Bank of Zambia and the
Communications Authority on
mobile banking.
The request was contained in a
Celpay Report of
Recommendation of the 2009
Mobile Banking Conference
presented to the Governor of
Bank of Zambia Dr Caleb
Fundanga at the Central Bank.
The report said the proposed
association would encourage
greater participation and
collaboration of the banking
sector which would address
issues of diversification of
banking strategies to dilute
complexity in product offering
and address critical gaps in
financial service provision.
It would also adopt the best
and shared practices with
other markets such as those in
East Africa, specifically in
Kenya and Tanzania for the
capitalization requirements of
Banks to be reviewed as the
conservative levels which are
a reflection of broader pattern
in Africa.
The association recommended
that a tiered approach to Know
Yo u r C u s t o m e r ( K Y C )
principles be adopted in order
to ensure an enabling
environment that will assist
mobile payment solutions
companies and their
customers. The report further
recommended that a target be
set for consumer penetration
of mobile banking services to
ensure that mobile banking
and the provision of financial
services to all becomes an
agenda point into the future,
with a suggested target that
by the end of 2010, mobile
banking customers would
exceed 10% of all bank
customers.
And in conclusion, Celpay
Zambia Limited said it was
proud to have taken the
initiative to host the first ever
industry event and wholly
embraces the proposal from
the Bank of Zambia Governor
that this event becomes an
annual event and should be
fully committed to the
realization of the above
mentioned outcomes.
8
From Page 2
if the system was to be
implemented successfully,
there was need for employees
to embrace the change process.
He added that successful
implementation of this system
would require a plan for change
awareness programmes as well
as training and re-training of
employees. The system is
meant to promote best
practices in employee
information management.
To ensure smooth operation of
the system, 14 champions (one
from each department), were
identified to spearhead the
system usage. The champions
were trained in the use of the
System so that they could in
turn help train employees in
their respective departments.
Refresher courses are also
being conducted to ensure that
all employees are familiar with
the system. In addition, human
resources department has set
up a help desk function to assist
in the smooth implementation
of the change-over. Queries
relating to the system are being
attended to by employees on
the help desk. Another help
desk will soon be established in
the Information and
Communications Technology
Department.
FAQ
Frequently Asked Questions
Foreign exchange is being
What is the Role of the
Mr Kanguya Mayondispent on importing some
Central Bank in Economic
Head Publublic Relations
items that do not benefit the
Growth?
!
Being the countr y's
economy. Why doesn't the
central bank, BoZ
Bank restrict items that
endeavours to promote
should be brought into the
economic growth and
country as it were?
development by ensuring
!
Restricting the quantity
that there is price and
of goods that can be
financial systems
brought into the country
stability.
implies that the country
Therefore, the BoZ's main
is imposing some form of
focus is to formulate and
controls. Capital controls
implement appropriate
are not usually efficient
monetary and supervisory
ways of distributing
policies aimed at ensuring
economic gains.
price and financial systems
stability.
Stability in prices and the
How Does the Central Bank
financial system in an
Operate?
economy is recipe to effective
!
The Bank of Zambia (BoZ)
planning, high investor
is the central bank of the
confidence (leading to
country and is owned by
investment), and an efficient
the Government of the
and effective payments
Re p u b l i c o f Z a m b i a
systems facilitative of
(GRZ). In this regard, the
increased economic activity.
BoZ is not a commercial
All these are necessary for
institution, and
economic growth and
therefore, it does not
development.
provide regular banking
the bank is doing?
in expansion in investment,
management to ensure
Banking and Financial
Monetary Policy: the actions
services nor does it
Bank of Zambia holds
increased production and
appropriate monetary policy
Services Act, 1994, in
undertaken by the central
accept deposits from the
monthly Media Meetings
ultimately economic growth
for mulation and
order to ensure and
bank to control money supply
general public. Its
where the Governor or his
and development.
implementation. The role is
promote a safe and sound
in order to attain long-term
clientele are the
representative briefs the
derived from the Bank of
financial system".
sustainable economic
Government, commercial
Press on a number of
Zambia Act of 1996, Section 4
The NBFIS department has
Financial Stability
growth, therefore has to
banks and other central
developments in the Bank's
which states that the primary
three Divisions as listed
Financial system stability is
facilitate the creation of an
banks.
operations. In addition to
role of the Bank of Zambia is
below.
the avoidance of disruptions
enabling economic
The day-to-day
this, there is a fully-fledged
to formulate and implement
Regulatory Policy Division
to the financial system that
environment by maintaining
administration of
Public Relations Division that
This Division performs the
are likely to cause significant
price and financial systems
monetary policy is the
issues Press statements on
policies that will ensure the
following functions:
costs to real output. It is
stability.
responsibility of the BoZ.
important developments in
maintenance of price and
-Co-ordinate legislative and
fundamental to economic
The monetary authorities
Within the BoZ,
the financial sector and the
financial system stability so
regulatory amendments to
growth, as monetary policies
take measures in order to
formulation and
economy at large as and
as to promote balanced
the BFSA
are transmitted through
influence the economy by
implementation
when they occur. This
m a c r o e c o n o m i c
- Develop procedures for
financial systems. In fact, a
regulating the amount of
monetary policy are tasks
Division is also open to the
development. This role is
monitoring compliance with
financial system is a vehicle
money in circulation
carried out by the
public for any information
articulated in Bank of Zambia
the regulations, guidelines
through which monetary
(liquidity). The principle is
Economics and Financial
that they may require
mission statement.
and directives issued under
policies are transmitted to
that money in circulation
Markets Departments,
concerning activities of the
the Bank of Zambia Act and
influence economic activity.
must not be in excess nor
respectively. Formulation
Bank.The public can also
the BFSA.
If the system is unstable,
What does the NBFIS
should it be too little.
obtain a publication on
- Suggest policy changes to
monetary policy will be
department do?
super visor y policies
economic statistics called
regulations and guidelines on
ineffective. In addition,
!
The Non-Bank Financial
Price stability
aimed at financial
fortnightly statistics.
various prudential issues,
efficient financing of
Institutions Supervision
Price stability refers to a low
systems stability are
through research and
economic activities (i.e.
Department's main
inflation rate level, say single
responsibilities of the
inquiries among relevant
settlement of financial
What is the Role of the
functions are derived
digit that will over the
Bank Supervision and
authorities
obligations) also requires a
Economics Department of
from its mission
medium-term sustain
N o n - B a n k Fi n a n c i a l
- Conduct technical
strong and reliable financial
statement which is to
The Bank of Zambia?
economic growth. In
I n s t i t u t i o n s
evaluations of applications for
system.
"license,
regulate
and
The
role
of
the
Economics
Mr Kanguya Mayondi, Head - Public Relations
addition, stability in the
Departments.
licenses to provide regulated
What polices does the Bank of
supervise non-bank
Department is to provide
foreign exchange market is
financial services and
Zambia has to ensure that the
financial institutions
economic information and
important in achieving price
The functions of the BoZ are
activities under the BFSA
public is informed about what
registered under the
advisory services to the BoZ
stability. The objective of the
as follows:
Bank in this respect is to
A) F o r m u l a t i o n a n d
ensure that a non-volatile but
implementation of sound
competitive exchange rate is
and appropriate
achieved. If the exchange
lmonetary policy;
rate remains uncertain and
B) F o r m u l a t i o n a n d
time and cost. It is amazing
achievement of their vision,
By Patrick Luvota
inflation continues to be high,
that this important part of
mission and strategic goals.
An organization is an organism
implementation of sound
human resources management
This means that at every stage
just like a human being. It is
it makes long-term planning
and appropriate
is mostly ignored in most
of the organisation's life, plans
born, it will grow, and it could
for both consumers and
supervisory policies;
organizations for various
must be made and
expand or shrink as the case
investors difficult.
c) M a n a g i n g f o r e i g n
reasons, yet it is common
implemented to guide the
may be, and it may also die.
Interest rates are key to
reserves and debt, and
knowledge that organizations
organisation into the desired
Like humans, organisations
efficient allocation of
promoting of an efficient
that do not plan for the future
future.
also have desires and wishes of
resources for savings and
exchange system;
labour
requirements have
There
are
many
types
of
plans
where
to
be
in
future
and
how
investment. Low and stable
d) Licensing, regulation and
fewer opportunities to survive
an organisation can make,
to get there. This may be
interest rates create
supervision of banks and
the competition ahead.
particularly in the acquisition
difficult to achieve if not
conducive credit conditions,
financial institutions;
It is worth noting in the first
and utilization of resources. It
backed by appropriate
which improve accessibility
e) I s s u a n c e a n d
paragraph preceding the
is a fact that human capital is
implementation plans. Taking
and availability of credit to
management of the
emphasis on 'linkage to
the most important resource
a seemingly eerie example,
t h e p r o d u c t i v e s e c t o r.
national currency;
strategic planning and
an organisation has, hence the
one's desire and wish for an
Improved access to credit by
f) Promotion of an efficient
business planning' and on the
need to plan for it. This is often
honourable funeral at the end
Mr Luvota
the private sector will result
payment system;
'arrangement and alignment of
done using Human Resources
of his or her life can be preg) Bank to Government of
employees' In the second
Planning (HRP) techniques
planned. Burial and funeral
considered by most HR
For Further Details or Clarification
the Republic of Zambia
paragraph, this brings us to the
which help organizations
expenses can be specified in
practitioners who concentrate
contact:
(GRZ);
Head of Public Relations
conclusion that
human
mitigate against anticipated
advance to eliminate
on the mundane duties of
Head Office, Bank of Zambia,
h) Economic advisor to GRZ;
resource planning is
labour supply problems.
confusion, differences of
hiring, training and firing.
P
.
O.
Box
30080,
Lusaka
10101,
Zambia
and
essentially the process by
opinion and difficult decisions
In order to execute human
Tel: + 260 211 228888/228903-20,
i) Acting as a fiscal agent of
which management ensures
Importance of human resource
on the part of family members.
resource planning, you need to
Fax: + 260 211 221764/237070
that it has the right Human
Having a plan or pre-arranging
planning
the Government.
have a sense of both the
E-mail:pr@boz.zm
Capital capable of completing
a funeral may seem a difficult
There are many ways to
current external environment,
Views expressed in this publication are not necessarily
those tasks that help the
and emotional task, but there
explain HRP but suffice to say
and anticipate things that may
those of the Bank of Zambia Management or the Editor
organization reach its strategic
can be peace of mind for an
that it links the management of
happen in the future in the
objectives. Forecasting future
people to the organization's
labor market place. You can do
Head Office
Regional Office individual who knows that his
Bank of Zambia,
Bank of Zambia, or her wishes will be followed.
labour demand and supply is a
vision (wishes), mission
this via an external scan or
Bank Square, Cairo Road
Buteko Avenue, This shows that planning is
critical element of the strategic
(desires), goals and objectives,
environmental scan that
P. O. Box 30080
P. O. Box 71511
planning process. HRP and
very important to our everyday
as well as its strategic plan and
addresses the following
Lusaka 10101, Zambia
Ndola, Zambia
strategic planning become
budgetary resources. A key
strategic issues and questions.
Tel: + 260 1 228888/228903-20,
Tel: +260 2 611633-52, activities.
effective when a reciprocal and
goal of HRP is to get the right
What is the current external
Fax: + 260 1 221764/237070
Fax: + 260 2 614251 There is also peace of mind for
Telex: Za41560, E-mail:pr@boz.zm,
Telex: Za30100, E-mail:pr@boz.zm, organisations that put in place
interdependent relationship
number of people with the
environment? What elements
Website: www.boz.zm
Website: www.boz.zm measures to manage not only
exists between them.
right competencies (work
of the current environment are
Produced and Published by the Public Relations Division, current, but also future issues
Unfortunately, this important
attitude, skills and knowledge)
relevant to the company?
and exciting element is seldom
that could impinge on the
in the right jobs at the right
Bank of Zambia
To Be Continued
Human Resource Planning a Vital Tool
9
FEATURE
From Note Examiner to Manager
Mr Kalaba
Pe o p l e w h o b e l i e v e i n
themselves manage to realise
their dreams. Those who
believe that it is hard or even
impossible to rise from a low
rank to a significant position in
an organisation ought to get
inspiration from Newton
Kalaba who joined the Bank as
a Note Counter and within a
period of nine years rose
through the ranks to the
position of Manager Banking.
Determination and single
mindedness helped him
realise his dream.
His aspiration was to become
an accountant and defying all
hurdles, he set himself to
realise that dream. Kalaba
joined the Bank as a Note
Counter at BoZ 2 in November
1999 and rose to the position
of Manager - Banking at BoZ 6
level in 2008. On how he
joined the bank, Kalaba said he
res
ponded to a
Bank of
Zambia
advert
for Note
Counter
s and
five
o f
the
m were
selecte
d. At the time when he joined
the Bank, he possessed an
Association of Accounting
Te c h n i c i a n s ( AAT )
qualification and was just
starting the Association of
Charterd Certified
Accountants (ACCA) studies.
Upon completing his
secondar y education at
Chifubu secondary school,
Kalaba joined Vision Hire in
Ndola as a salesman after
which he joined Zambia
Consolidated Copper Mines
(ZCCM) as a Trainee Plant
(Mechanical) Fitter at the
Luanshya Division. He joined
ZCCM with the aim of being
assisted in pursuing further
studies considering that the
mining giant was one of the
companies that had a good
sponsorship programme for
further studies in the country.
When the Government
embarked on a privatisation
program and ZCCM was
earmarked for privatisation,
Kalaba became apprehensive
about his future in the mining
industry. He later enrolled for
A
level studies at a
correspondence college based
in Zimbabwe in an effort to
position himself for an
accountancy programme in
the future. When
this programme
became too
expensive
for him, he
became a
part time
camerama
n
t o
supplement
h
i
s
education
a l
expenses. He later resigned
from the mines after which he
enrolled at the Accountancy
Training College. He did his
internship at the Bank of
Zambia in the Internal Audit
department and his project
report was rated among the
best at the college. Kalaba
attributes this achievement to
the help of Damson Mumbi,
Godfrey Musonda and Percy
Ntema both of Internal Audit
department at the time. He
adds that this contributed to
him being honoured with the
Best Student award at AAT
final level.
Being conferred with the best
student award in itself
marketed Kalaba as he was
offered employment by the
then DNP Chartered
Accountants, now called
M o o r e s Ro w l a n d a s a n
Accounts Assistant.
He
operated from the
DNP
Lusaka office for one month
before being transferred to the
Ndola office.
Upon joining the Bank, he
continued with the ACCA
course which he completed in
2004.
He is currently
pursuing an MBA with the
Herriot Watt University and
the Institute of Chartered
S e c r e t a r i e s a n d
Administrators (ICSA) course.
From the Currency Section
where he served as a Note
C o u n t e r, Ka l a b a w a s
transferred to Finance
department as an
Accounts Assistant
Payroll at BoZ 3 level. He
was later promoted to the
position of Assistant
Accountant Staff payments
at BoZ 4 and then to
Accountant Financial
Accounting at
BoZ 5. He
w
a
s
promoted to
his current
position as
Manager
Banking in
2008.
About his
personal
l i f e ,
Kalaba
elaborated on what he does in
his spare time. Kalaba is
married to Phanny and they
have three children, among
them a set of twins, Kasuba
and Kalumba. The youngest
one is called Kondwani.
He was born in Kitwe and he is
the second born in a family of
three men. He completed his
primary education at Ndeke
primary school in Kitwe after
which he went to Nkana junior
secondary school where he did
his grade 8. He moved to
Kansenshi secondary school in
Ndola for his grade 9 after
which he proceeded to
Chifubu secondary school for
the last three years of his
secondary education.
Between 2006 and 2008,
Kalaba served on the ACCA
Zambia branch committee as a
committee member before
being nominated as vice
president. In 2007, he served
on the Badminton Association
of Zambia committee as
National treasurer. He also
ser ved as a committee
member of the Ndola Golf club
between 2006 and 2008 in the
capacities of Bar chairman and
later Membership chairman.
His performance on the Ndola
Golf Club committee earned
him a place on the 2007
Finance bank sponsored
Zambia Open Golf
Tour
namen
t as a bar coordinator and on
the Zone Six Committee as an
accommodation and transport
coordinator.
Kalaba is currently the BoZ
Social Club Committee
chairman. He has paid tribute
to members of staff for the
support that his committee
has received. 'We are trying to
transform the social club into a
high standard leisure
institution. Already we have
renovated the Kwacha bar and
restocked it with new quality
bar stools and cocktail tables.
We have also procured a fitting
music system for the club,' he
added.
The Kalaba led club house
committee has also embarked
on paving of the drive way
which is envisaged to be
completed by mid December
2009. He told the Zambanker
that renovation works in the
external toilets as well as
resurfacing of the executive
lounge were also in progress.
During his chairmanship, the
club has also conferred
honorary membership to eight
members who have shown
commitement to the club.
These are Mr Peter Banda in
recognition of his
contribution as past
Club Patron, Mr
Alex Chewe, Mr
Ben Mumba,
Mr George
Simwanza,
Mr. Cosmas Soko and Mr.
Jonathan Misapa as past Club
chairmen, Mr Peter Mayuka
and Mr John Banda based on
their commitment.
On how he manages to balance
work and the extra curricular
activities that he is involved in,
Kalaba said the support from
his colleagues both at work, at
club committee level,
committee members of various
associations and also from his
wife were a major factor in
ensuring that stakeholder
expectations were met. He
also explained that
expectations from
stakeholders make one to
perform in a certain manner.
He said having worked under
different supervisors from
different institutions, with
diverse objectives has made
him to perform his tasks with a
certain minimum level of
quality acceptable by all. As
such, he responds to pressure
accordingly.
Because he believes in time
keeping, Kalaba says he takes
pride in people who are time
conscious.
He said he ensures that he
keeps time at all times and
encourages others to be
mindful of time as they
carryout their tasks.
In his leisure time, he said he
enjoys playing chess, scrabble
and also listening to music. On
future plans, he says he wants
to contribute to national
development by engaging in
agricultural activities.
On what encouragment he
would give to others aspiring
to reach his level and beyond,
Kalaba advised that it was
important for people to direct
their actions and strengths at
activities that impacted
positively on other people's
lives. He elaborated that even
if one had nothing to give,
motivating and speaking
positively in other people's
lives would make a difference.
'There is always something
positive about every person,'
he said.
Kalaba said he was grateful to
God that he had met people in
life who were so positive about
life, appreciated him and told
him how much more they
thought he could achieve and
those people helped him to be
where he was, as they believed
that he was able to achieve
greater things in life.
The most exciting moment in
his life was when he was
honoured as the most
conscientious employee. He
said he felt ver y much
appreciated.
The Kalaba family
10
NEW FACES/ OBITUARY
VESS
During the period 1 July,
2009 to 30 th September,
2009, four members of staff
separated from the Bank
through the Voluntary Early
Separation Scheme (VESS).
Those who have left are Mr
Victor Mukuka of Human
Re s o u r c e s , M r C h a r l e s
Mutembo of Internal Audit,
Ms Leah Zulu of Banking,
Cur renc y and Payment
Systems and Mrs Patricia
C h i b o m b a o f Fi n a n c e
Department.
Mr Mukuka's last day of
rd
service to the Bank was 3
July 2009, while his last
appointment was that of
Librarian. Mr Mukuka joined
st
the Bank on 31 March 1992.
Mr Mutembo's last day of
service to the Bank was also
3rd July 2009 and he worked
in Internal Audit Department
as Senior Internal Auditor. He
joined the Bank on 3rd March
1986.
Ms Zulu left the Bank on 22nd
July, 2009, at the position of
Section Officer - Cheque
Processing and Customer
Service. She joined the Bank
on 20th October 1982.
Mrs Chibomba's last day of
service to the Bank was 30th
September 2009. She worked
as Secretary to Director Finance, and she joined the
Bank on 7th January1983.
The Zambanker wishes the
VESS takers every success in
their future endeavours.
List of Banks and Other Financial
Service Providers
Licenced Under The Banking and Financial Services Act, Cap 387 of the Laws of Zambia
A.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
P O Box 32344, Lusaka
238733/5
229285-6
222046/229242-60
Stand No. 22768 (Formerly FTJ Chiluba Institute) Corner Great East/Thabo Mbeki Roads
221355
NON BANK FINANCIAL INSTITUTIONS LICENCED BY BANK OF ZAMBIA
Mr Mukuka
Mr Mutembo
Mrs Zulu
temporary basis.
Mr Lumponge holds a
Bachelor of Commerce
Degree in Economics and
Supply Chain Management
from the University of
KwaZulu-Natal in South
Africa. He also has the ACI
Dealing certificate. Mr
Lumponge completed his
secondar y education at
Kabulonga Boys High School
in 2001.
The Zambanker wishes Mr
Lumponge success in his new
appointment.
Mrs Theu
multiple injuries following a
road traffic accident in Isoka
district. He joined the Bank
on December 15, 2003 as a
security officer in the
Security Division at Regional
office.
Mr Sichilima was
promoted to the position of
senior security officer
operations and transferred to
Head-office
on April 28,
A.
1
2
3
4
5
6
7
8
9
10
11
LEASING COMPANIES
ALS Capital Limited
Afgri Leasing Services Limited
Commercial Leasing (Z) Limited
Commercial Capital Corporation Ltd
Executive Financial Services Limited
Industrial Credit Corporation Limited
IMS Financial Services Limited
Leasing Finance Company (Z) Limited
Madison Premier Finance Company Ltd
Alios Finance Zambia Ltd
Stechas Financial Services Zambia Ltd
POSTAL ADDRESS
P O BOX 31986, Lusaka
P O Box 75543, Ndola
TEL.
0211-222807
0211-240331
0211-229427
0211-225429
0211-230631
0212- 611233
0211-286562
0212-618844
0211-255121
0211 256592
0211-222736
FAX
0211-236726
0211-240321
0211-229428
0211-225429
0211-230634
0212-618621
0211-286565
0212-615481
0211-255121
0211-256682
0211-222736
B.
1
2
3
BUILDING SOCIETIES
Finance Building Society
Pan African Building Society
Zambia National Building Society
0211-239755
0211-220690
0211-229191
0211-239756
0211-220688
0211-225510
C.
1
2
3
4
5
6
7
8
9
10
MICRO FINANCE INSTITUTIONS
Bayport Financial Services Limited
Blue Financial Services Zambia Limited
Bomach Finance Limited
Butala Finance Limited
Capital Solutions Limited
Cetzam Financial Services Limited
Elpe Finance Limited
FINCA Zambia Limited
Letshego Financial Services Limited
Meanwood Finance Limited
Private Bag E760, Lusaka
0211-212772
0211-232082
0211-222802
0211-235273
0211-231983
0211-222991
0211-237505
211-251828
0211-257741
211-236165/7
0211-212713
0211-232083
0211-223039
0211-235130
0211-231986
0211-222961
0211-237505
211-251736
0211-257735
211-236170
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
Mtawila Financial Services Limited
Microbankers Trust
Microfin Africa Zambia Limited
Nedfin Limited
Pelton Finance Limited
Pulse Financial Services Limited
Royal Microfinance of Zambia Limited
Unity Finance Limited
Yakabutala Musa Limited
Genesis Finance Limited
Microcredit Foundation Limited
Prime Circle Microfinance Limited
Kungoma Financial Services Limited
Credit Finance Limited
Wide and Deep Services Limited
P O Box RW 51269, Lusaka
C/O Lukona Chambers, Lsk
P O Box 510637, Chipata
P O Box FW 260, Lusaka
26 0955 830005
0211-290852
0211-227691
0211-234306
0211-237031
0211-233137/8
0211-228455
0211-233084
0977 494340
211-845653
0976 294311
0211-281694
260 211 235195
260 211 233420
260 211 252185
26 0977 832000
0211-291393
0211-227694
0211-234307
260 211 222202
260 211 252185
D.
1
DEVELOPMENT BANKS
Development Bank of Zambia
0211-222821
0211-228576
E.
1
SAVINGS AND CREDIT INSTITUTIONS
National Savings and Credit Bank
0211-227534
0211-223296
F.
1
OTHER FINANCIAL INSTITUTIONS
Credit Reference Bureau Africa Limited
0211-224263
0211-224257
G.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
LIST OF BUREAUX DE CHANGE
APT Bureau de Change Limited
Atics Bureau de Change Limited
A and I Bureau de Change Limited
Becky's Bureau de Change Limited
Bimm Bureau de Change Limited
Bullion Bureau de Change Limited
C & A Bureau de Change Limited
Casha Bureau de Change Limited
CFB Bureau de Change Limited
Challenge Bureau de Change Limited
Choice Bureau de Change Limited
Chuvic Bureau de Change Limited
Citizen Bureau de Change Limited
Dondou Bureau de Change Limited
EL Thomas Bureau de Change Limited
Elite Bureau de Change Limited
Flex Bureau de Change Limited
FS Bureau de Change Limited
Forex King Bureau de Change Limited
FX Africa Bureau de Change Limited
Golden Coin Bureau de Change Limited
Goldfield Bureau de Change Limited
M & T Bureau de Change Limited
Mill Bureau de Change Limited
NyamiNyami Bureau de Change Ltd
Northmead Bureau de Change Limited
Roseco Bureau de Change Limited
Runnymede Bureau de Change Limited
Saints Bureau de Change Limited
Sterling Bureau de Change Limited
Stero Bureau de Change Limited
Struts Bureau de Change Limited
Swift Bureau de Change Limited
Unifinance Bureau de Change Limited
Variety Bureau de Change Limited
Walk Tall Bureau de Change Limited
Zampost Bureau de Change Limited
Zanwiche Bureau de Change Limited
Gobena Bureau de Change Limited
RADOX Bureau de Change Limited
Crusade Bureau de Change Limited
Dilt Bureau de Change Limited
Presans Bureau de Change Limited
Floodgates Forex Bureau de Change Limited
P O Box 60660, L/stone
P O Box 23110, Kitwe
P O Box 60987, Livingstone
P O Box 51086 RW, Lusaka
P O Box 60936, L/stone
Private Bag 383X, Lusaka
P O Box FW 467, Lusaka
0211-225637
0211-223443
0211-224350
0211-228217
0211-220647
0211-235196
0211-235543
0211-232923
0211-226588
0211-229369
0211-220262
0213-327011
0211-221394
0212-232017
0211-222879
0213-322660
0211-225316
0211-222064
0211-236730
0211-232363
0211-235850
0211-233847
0211-251438
0211-235974
0213-322489
0211-290426
0977-108060
0211-261978
0211-227939
0212-620825
0211-222736
0211-256378
0211-223012
0211-237575
0211-235445
0212-621929
0211-220563
0211-233282
0211-287262
0211-227864
0211 264601
0211-228749
0211-221993
0211-223443
0211-224350
0211-228394
0211-229149
0211-235196
0211-235543
0211-223160
0211-231787
0211-229358
0211-220262
0213-322524
0211-230411
0212-232017
0211-222879
0213-322660
0211-231344
0211-223879
0211-236730
0211-232276
0211-235851
0211-233847
0211-251438
0211-235974
0213-322489
0211-290426
0211-220567
0211-233282
0211-287262
0211-227864
0211-264601
0211-228749
0211-234658
0211-234658
Mrs Chibomba
Mr Lumponge
Obituary
The Bank of Zambia has lost
two members of staff since
the publication of the last
Zambanker. The two who
died are Mrs Ireen Lwanga
Theu and Mr Lee Sichilima.
Mrs Ireen Theu died on 4th
September 2009 at St John's
Medical Center after an
illness. Mrs Theu joined the
Bank on September 28, 1992
as a clerk Staff Ledgers in the
Banking Department.
Following the fine-tuning
exercise in 2005, she was
appointed to the position of
Section Officer Waste in the
Banking, Cur rency and
Payment Systems
Department, the position she
held at the time of her death.
Mrs Theu was pursing a
degree with the Zambia
Institute of Chartered
Accountants at the time of
her demise. She is survived
by a husband and two
children.
Mr Lee Sichilima died on
September 26, 2009 from
Head Office Address
Tel No:
P O Box 35273
234541, 232991-3
235350
228858-66, 227659- 61
224280/6/7
229025-8
Stand No. 22768 (Formerly FTJ Chiluba Institute) Corner Great East/Thabo Mbeki Roads
221808/ 229733 42
229303-6
P O Box 36187
224653/225080/ 228074/224652
227227-8
Licenced Under The Banking and Financial Services Act of 1994 (and as amended in 2005)
New Face
In its continued efforts to
steer the Bank towards
excellence, the Bank has
added one new employee to
its establishment since the
publication of the last
Z a m b a n k e r. T h e n e w
employee is Mr Chiba
Lumponge who joined the
Financial Markets team on a
three (3) year fixed term
contract. Mr Lumponge
joined the Bank on July 27,
2009 after working in the
Bank's Finance and Financial
Markets department on a
Commercial Banks
Names of Banks
Access Bank Zambia Ltd
African Banking Corporation Zambia Ltd
Bank of China Zambia Ltd
Barclays Bank Zambia PLC
Cavmont Capital Bank Zambia Ltd
Citibank Zambia Ltd
Ecobank Zambia Ltd
Finance Bank Zambia Ltd
First Alliance Bank Zambia Ltd
First National Bank Zambia Ltd
Indo-Zambia Bank Ltd
Intermarket Banking Corporation Zambia Ltd
International Commercial Bank of Malaysia
Investrust Bank Zambia Ltd
Stanbic Bank Zambia Ltd
Standard Chartered Bank Zambia PLC
United Bank for Africa Zambia Ltd
Zambia National Commercial Bank Ltd
Mr Sichilima
2009. At the time of his
demise, Mr Sichilima was
working on his dissertation
for the Master's Degree in
Business Administration
which he was undertaking at
the Copperbelt University on
a part-time basis. He is
survived by a wife and two
children.
May their souls rest in peace.
11
0211-233136
0211-228456
0211-221179
211-845653
0211-281694
0211-261958
0211-227939
0212-621415
0211-222736
0211-268320
0211-222788
0211-227342
0211-233481
Our Vision
To be a modern, dynamic, credible and effective central bank
Bank of Zambia
ZAMBANKER
A Bank of Zambia Journal
SEPTEMBER 2009
Bank of Zambia 45th Anniversary
BoZ clocks 45 years
As the Bank of Zambia cruises down
the 45th anniversary lane this year, the
country's Central Bank has had as
much to reflect upon, as it has much to
smile about. From the time it was
established in 1964, successive
controllers of the Zambian banking
sector have overseen the significant
growth in terms of numbers and
players, accelerating from a mere three
banks at inception to the current
eighteen registered institutions.
The payments system also seen a lot of
changes, especially with the advent of
the computer age. This has brought
with it several electronic payment
methods like the Real Time Gross
Settlement System (RTGS) and the
Direct Debit And Credit (DDAC), which
have done much to ensure that
payment are faster, easier and more
convenient.
Another mark has been the expansion
of the operational base, from the old
building (which now hosts the Passport
Office in Lusaka) inherited at the time of
the country's attainment of
Independence, to the Executive
building officially opened in 1975. This
was later complimented by the Annex
Building behind Freedom House on
Cairo road.
There is also the Regional Office in
Ndola which was opened in 1979
primarily to oversee the Bank's
operations in the Northern part of the
country.
Over the past 45 years, the Central
Bank has in addition witnessed 12
persons serve the institution as
Governor. This spans from the days of
the first Governor of the Bank of
Zambia, the late Mr H.C. Hallet through
to the current tenure of Dr Caleb
Fundanga.
In marking 45 years of its existence,
Zambanker held an interview with Dr
Fundanga to reflect on some of
developments which have been
recorded to date.
Below is the verbatim interview
between the Zambanker and Dr
Fundanga:
What is the significance of the 45th
anniversary milestone to the Bank
of Zambia?
An anniversary is important because it
provides an opportunity to reflect on
past activities and evaluate
performance against set goals. In this
context, it gives us an opportunity for
the Bank of Zambia to let the public,
particularly the young generation and
visitors, know how long the Bank has
been in existence and how it has been
performing with regard to its mission It
is time to show case the achievements
realised over the period of existence.
An anniversary also provides a platform
for future planning.
Since Zambia's independence in 1964,
the Bank of Zambia (BoZ) has
undergone significant changes. These
changes have been induced by
Zambia's domestic socio-economic
policies and also developments in the
global environment. Prior to the 1992
economic reforms, the BoZ's monetary
policy involved multiple objectives.
These included, among others,
financing agriculture and parastatal
companies, and providing guarantees
for export marketing. Undoubtedly,
these presented the Bank with
conflicting roles as a monetary
authority. In addition, during the same
period, monetary policy was largely
characterised by administrative
controls on interest rates and the
exchange rate and relied heavily on
direct methods of monetary control
such as the reserve ratio. These
methods of operations were consistent
with Government policies and efforts of
industrialization, economic growth,
employment and income generation.
The Bank was identified as the leading
institution in supporting such
initiatives. Consistently, the country's
fiscal policy was dominant of monetary
policy in that the Government relied on
borrowing from the Bank to meet fiscal
deficits that arose especially given the
fact that Zambia's financial markets
then were grossly underdeveloped to
be able meet Government financing
needs. The Bank, in conformity with
market reforms that the Government
initiated in 1992 embarked on
restructuring its processes that saw it
move towards the use of indirect or
market-based structures and systems
of monetary operations as opposed to
direct instruments that were dominant
in the previous era. In achieving this,
key reforms were undertaken that
included the deregulation of interest
rates, removal of capital controls and
Dr Fundanga
The currency structure of 1964
At independence in October
1964, the newly created
Bank of Zambia inherited
the Federal Currency from
its former colonial masters.
The Federal Currency was
still in existence after the
dissolution of the Federation
of Rhodesia and Nyasaland
in 1963. The Federation was
dissolved to pave way for
the independence of Zambia
and Malawi in 1964. The
Federal Currency known as
the Rhodesia pound, shilling
and pence comprised of
three (3) banknotes namely:
10 pound (£10), 5 pound (£5)
and 10 shilling (10s) and
three (3) coins namely: 2
shilling (2s), 6 pence (6d), 3
pence (3d) and 2 pence (2d)
Post Independence Era
The currency structure of
1965
In 1965 the newly created
Bank of Zambia issued its
first Zambian Currency that
comprised both notes and
coins. The family of
banknotes and coins
comprised the Zambian
pound shilling and pence in
the following denominations:
£10, £5, 10s, 2s-6d, 3d and
2d. In addition, a 5d coin was
issued in 1965 as a
commemorative for Zambia's
independence in 1964. The
Zambian Currency was to
eventually replace the
Federal currency pound,
shilling and pence. However
in order to ensure a smooth
transition, the Federal
Currency and the new
Zambian Currency continued
to circulate side by side until
15th December 1965 when
the Federal Currency was
withdrawn from circulation.
1968 -1972
The Zambian Kwacha came
into being after a government
policy decision to decimalise
the national currency. The
To Page x
i
liberalization of the foreign exchange
market. Also, the Bank of Zambia had to
refocus its objective from being
multiple to a focused one being to
“formulate and implement monetary
and supervisory policies that will
ensure price and financial system
stability so as to ensure balanced
macroeconomic development”.
The Bank of Zambia's monetary policy
formulation and implementation has
since 1992 continued to be guided by
the Government's broad
macroeconomic policies and now
i n c l u d i n g t h e M e d i u m -Te r m
Expenditure Framework, which are
anchored on market based principles.
This has resulted in the Bank achieving
broad based gains on the
macroeconomic front that include:
Lower inflation of single digit in 2006,
2007 and part of 2008 and it is
expected to revert back to single digit
in 2010. Prior to 1992, inflation was
high and was artificially kept away from
reaching the hyper level largely due to
price controls and subsidies;
Stable exchange rate, which is market
determined and ensures a fair amount
of liquidity in the foreign exchange
market. The relative stability of the
exchange rate achieved under the
flexible exchange regime has
contributed to lowering inflation
through the exchange rate passthrough to domestic prices, especially
after 2005;
Relatively lower interest rates following
the declining trend in inflation. There is
room for them to reduce even further as
the economic fundamentals continue
to improve;
Broadening the spectrum of
government securities both in terms of
variety and maturity. The Government
securities market is fairly developed
compared with the period prior to the
1992 economic reforms. This has
improved implementation of monetary
policy using open market operations;
and
Stability and growth in the financial
sector through improved supervision of
financial institutions and
implementation of the Financial Sector
Development Plan.
As stated earlier, an anniversary also
provides a platform for future planning.
As we reflect beyond 45 years of
existence, it is important to bring to the
fore what we are planning to introduce
in our financial system. The Bank of
Zambia is considering the introduction
of the overnight lending facility (OLF)
to operate on a repo or collateralised
(secured) basis. The OLF will be a Bank
of Zambia's overnight lending facility to
commercial banks with adequate
collateral to back the loans obtained on
an overnight basis. The proposed
collateral for use on the facility will be
Government securities, that is,
Treasury bills and Government bonds
with less than 180-days to maturity.
The OLF facility is expected, among
others to:
Help improve the commercial banks
management of short term liquidity by
providing an extra channel where they
can obtain an overnight credit subject
to the provision of adequate collateral;
Enhance monetary policy
implementation since it is expected
that the rate on the facility would be
used in signaling the monetary policy
stance through adjustments in the rates
prevailing on the facility. It is further
expected that the standing facility will
contribute to inducing banks to hold
lower levels of precautionary balances,
thereby enhancing the Bank's open
market operations (OMO);
Contribute to money market
development through enhanced
stability of the inter-bank money market
and increased liquidity; and
Provide a mechanism that will be used
as an early warning system to detect
liquidity problems of particular banks at
an early stage.
The Bank will also be introducing a
framework to facilitate secondary
market trading of Government
securities and other debt instruments.
This will provide additional liquidity to
investors and provide information that
will assist to improve the efficiency of
financial market operations and thereby
enhance our OMO.
To promote financial stability, the Bank
of Zambia is revising the lender of last
resort policy and to align it with
accepted international standards so
that it remains effective and relevant
under prevailing circumstances. In
addition, the Government is working on
a financial sector contingency plan,
which will deal with problems of a
systemic nature.
The Government through relevant
institutions including the Bank of
Zambia will be implementing the
second phase of the Financial Sector
Development Plan whose objectives
among others, is to improve access to
credit and reduce the high cost of
borrowing.
How important are the past
economic structures of the
country's economy (preliberalisation and liberalised) to the
challenges of monetary policy
formulation?
The critical thing about the past
economic structures to the challenges
of monetary policy formulation were
price controls, which distorted relative
prices and high money supply induced
by Government's recourse to the central
bank in order to finance its growing
budget deficit. The main purpose of
monetary policy is price stability. In pre
liberalised era, monetary policy was
assisted by price controls so that when
these were removed, there was need to
create a new monetary policy regime
that would rely on the use of market
based instruments in tandem with the
obtaining market economy.
After price liberalisation, the CPI
increased and its changes manifested
into hyper inflation of over 200% by
July 1993. This phenomenon posed a
big challenge to the monetary
authorities who had to come up with
tools of monetary policy that were
going to drive inflation downward.
Monetary policy had to use a
combination of both direct and indirect
instruments of monetary control to
primarily bring down money supply.
This was complimented in some cases
by prudent fiscal operations.
Do you think the establishment of the
Financial Sector Development Plan
(FSDP) and the subsequent extension
of the FSDP have helped operations of
the Central Bank and the national
economy? Please explain.
Response: The Financial Sector
Development Plan (FSDP) was
developed as a national strategy
following a widely-held consultative
process, to address a number of
identified weaknesses in the financial
sector. It was approved by Cabinet in
June 2004 as a five year programme
covering the period 2004 2009.
The vision of the FSDP was that the
Zambian financial system will develop
to become a stable, sound and market
based financial system that would
support efficient mobilisation and
allocation of resources necessary for
economic diversification, sustainable
growth and poverty reduction.
To Page viii
Bank of Zambia 45 Anniversary
The Bank of Zambia
Board of Directors
Past Governors of the Bank of Zambia
LATE H. C HALLET
DR JUSTIN B ZULU
LATE VALENTINE S MUSAKANYA
1964 - 1967
1967 - 1970
1970 - 1972
MR. CHRITICLES MWANSA
LATE BITWELL R KUWANI
LATE LUKE J MWANASHIKU
DAVID A R PHIRI
1972 - 1976 AND 1981 - 1984
1976 - 1981
1984 - 1986
MR LIKOLO NDALAMEI
LATE LEONARD CHIVUNO
LATE FRANCIS X NKHOMA
JACQUES A BUSSIERES
1986 - 1987
1987 - 1989
1990 -1992
MR DENNIS CHIWELE
DOMINIC MULAISHO
DR JACOB MWANZA
1992 - 95
1995 - 2002
Bank of Zambia Senior Management
DR. DENNY H.
KALYALYA
DEPUTY GOVERNOROPERATIONS
DR. FRANCIS
CHIPIMO
ACTING DIRECTOR ECONOMICS*
DR AUSTIN MWAPE
DIRECTOR - BANK
SUPERVISION
DR. TUKIYA
KANKASAMABULA
DR. CALEB M.
FUNDANGA
DEPUTY
GOVERNORADMINISTRATION
GOVERNOR
ACTING DIRECTOR
FINANCE
FINANCIL MARKETS
MR. CHISHA
MWANAKATWE
MRS. EDNA
MUDENDA
DIRECTOR NON-BANK FINANCIAL
INSTITUTIONS
SUPERVISION
DIRECTOR BANKING,
CURRENCY AND
PAYMENT SYSTEMS
MR. MATHEW
CHISUNKA
MS. FREDA
TAMBA
MR. PETER
BANDA
-
BANK
SECRETARY
MR. HOBBY
KAPUTA
MR. DAVID
MWAPE
DIRECTOR HUMAN
RESOURCES
DIRECTOR INFORMATION
AND
COMMUNICATIONS
TECHNOLOGY
MR. MORRIS
MULOMBA
MR. SIMON
SAKALA
MS PRUDENCE
MALILWE
DIRECTOR REGIONAL OFFICE
DIRECTOR - RISK
MANAGEMENT
DIRECTOR INTERNAL AUDIT
ii
MR DAVID
NKHATA
DIRECTOR PROCUREMENT
& MAINTENANCE
The Role of the Economics Department
developments (money
Introduction
supply and credit);
Before we look at the role of
3. R e a l s e c t o r
t h e E c o n o m i c s
developments
Department, we need to
(economic growth in the
understand the role of the
economy);
Bank of Zambia (BoZ).
4. E x t e r n a l s e c t o r
The primary objective of
development (balance
the BoZ, as indicated in the
of payments); and
BoZ Act Number 43 of 1996
5. F i s c a l s e c t o r
is to formulate and
developments.
implement monetary and
B a l a n c e o f Pa y m e n t
supervisory policies that
Division: The division is
achieve and maintain price
responsible for the
stability and promote
production of the balance of
financial systems stability.
payments for Zambia. The
Price stability is achieved
division is also responsible
by using monetary policy.
for the monitoring the
Supervisory policy, on the
Poverty Reduction and
other hand, addresses
Growth Facility (PRGF)
financial system stability.
agreed between the
Matters related to
Government of the
monetary policy in the Bank
Republic of Zambia and the
are handled by the
International Monetary
Economics and Financial
Fund (IMF); as well as the
Market Departments.
processing and monitoring
T h e E c o n o m i c s
of Zambia's foreign debt
Department is responsible
payments and balance of
for the formulation of
payments support from
monetary policy, whilst the
cooperating partners.
Financial Markets
Research Division: The
Department is responsible
division is responsible for
for the implementation of
the conduct of research on
monetary policy.
economic and financial
topics that facilitates the
Department's specific role
formulation and
in the Bank of Zambia is to
implementation of
provide economic
information and advisory
responsibility to:
!
Attend to non-contentious
include:
policies.
services to the BoZ
!
Organize and ensure the
legal matters such as
!
The successful
The division is also
management to ensure
proper recording of the
contracts, legislative
management of corporate
responsible
for coordination
appropriate
monetar
y
activities of Board and
drafting and rendering of
events;
of research activities
policy formulation.
Committee meetings;
legal opinions.
!
Forging alliances with the
between BoZ and other
The Bank of Zambia,
!
Review and keep up-tomedia and key external
date with developments in
stakeholders;
Litigation: - The litigation
research institutions such
through the Economics
corporate governance and
!
Implementing community
division provides a
as Universities.
Department also provides
promote strong corporate
outreach programmes.
comprehensive legal, advisory
Conclusion
economic advice to the
gover nance practices
Each of the divisions is headed
and litigation service to the
The fundamental role of the
Government of the
throughout the Bank;
by an Assistant Director who
Bank.
Economics Department is to
Republic of Zambia (GRZ)
!
Advise and assist the
reports to the Bank Secretary.
The role of the litigation
generate policy relevant
on a wide range of a wide
Board of Directors with
Currently the staffing in the
division is to ensure that the
information
and analytical
range
of
issues.
respect to their duties and
department
is
as
follows:
Bank is able to carryout its
work that helps to
responsibilities;
Mathew Chisunka, Namwandi
activities and fulfil its mission
formulate monetary policy
The Structure of the
!
Serve as the main source
Hamanyanga Ndhlovu,
within the parameters of the
and to achieve price
Economics Department
of governance expertise to
Leonard Nkole Kalinde,
law.
t h e B o a r d a n d
Kanguya Mayondi, Yvonne
stability (low and stable
Management on current
Chembe, Fireman Pumbwe,
Public Relations: - The Public
inflation); and to provide
Department has four
developments and
Geoffrey Chilufya Mulenga,
Relations division is
policy advice to the
operating divisions:
compliance;
Besnat Mwanza, Miriam N C
concerned with the
Government of the
1. I n f o r m a t i o n a n d
!
Carr y out any other
Lupindula,
Silvia Siwale
dissemination of information
Republic of Zambia on a
Statistics Division;
appropriate duties and
Mulenga, Marvin Ilunga,
pertaining to the Bank's
wide range of economic
2.
M
a
c
r
o
e
c
o
n
o
m
i
c
responsibilities as may be
Pa t r i c k L u v o t a , J a n e
operations and maintenance
issues.
Analysis
Division;
assigned by the Board,
Kumwenda, Faith Makeleta
of a positive public perception
Currently staff in the
3. Balance of Payment &
Board Committees and
Nkhoma and Priscilla B K
of the Bank. Responsibilities of
department are as follows:
Debt Division; and
Senior Management.
Mwale.
the Public Relations division
Dr Francis C Chipimo, Dr
4. Research Division
Noah Mutoti, Ivan Zyuulu,
Dr Maxwell Chibelushi
Information and Statistics
Musongole, Dr Emmanuel
M Pamu, Alice M Konga,
responsible for the
Jacob Lungu, Mulenga J J
collection and management
Musepa, Christabel M N
of economic statistics
Mwananshiku,
Mwika
relevant for the
Mwenechanya Sampa,
formulation and
Andygean Mukuka Luombe,
implementation of
Chungu
Ka p e m b w a ,
monetary policy and the
Francis Ziwele Mbao,
provision of advisor y
M u b a n g a N Fr e d r i c k
services to the Government
Mushimba,
Nambula
of the Republic of Zambia.
Wamulungwe,
Charles
Macroeconomic Analysis
Mpofana,
Abel Chola
Shimba, Chisala Ngandwe
primarily responsible for
Kauta, Elita Zulu Chita,
the production of analytical
Hobby Simuchile, Brenda
reports that are the basis of
Mwanza, Mutemwa
monetary policy decisions
Malimba, Peter Zgambo,
by senior management of
Steven Musuku,
Martin
BoZ. The division also
Sholooka Mwiinga,
provides response to
Gandson Moyo,
Bright
general queries on
Munthali, George Kaping'a,
monetary policy and the
Steven Kalanda, Oliver
Zambian economy from
Ndhlovu, Royd Manenga,
inter nal and exter nal
Joe Sichalwe, Kamyalile
clients. Key areas of
Simuchimba Chileshe,
analysis include:
Miriam Zimba, Frazier
1. Price developments
Mulilo, Wilson C KPhiri and
(inflation);
Jane Nakoze.
2. M o n e t a r y
Bank Secretariat Department
The Bank Secretariat
department comprises three
divisions, namely; Board and
Advisory, Litigation and
Public Relations Divisions.
The department is headed by
the Bank Secretary.
The department is
responsible for providing
quality and timely
secretarial and legal support
services to the Bank of
Zambia, as well as
facilitation of effective
i n t e r n a l a n d ex t e r n a l
communications. The
department's duties and
responsibilities are
organised as follows:
Board and Advisory: division provides secretarial
services to the Board, subcommittees of the Board and
a select number of
management committees.
The division has the
iii
The Structure and Functions of the Finance Department
transaction and settlement
processes, recruit qualified
accountants and build capacity
in existing staff.
This was meant to address the
inadequaciesy identifiedn these
areas as a reason for which had
resulted in non production of
audited financial Statements for
prior years.
DEPARTMENTAL MISSION
STATEMENT
The Finance Department exists
to fulfil the following main key
result objective:
“to Provideestablish and
Maintain an Effective
Accounting and Financial
Management Service to the
Bank of Zambia”.
ORGANISATION STRUCTURE
The establishment of Finance
Department provides for 44
members of staff consisting of 1
Director, 3 Assistant Directors,
6 Senior Accountants, 7
Accountants, 8 Assistant
accountants, 15 Accounts
Assistants, 1 Secretary to the
Director, 1 Stenographer for the
Assistant Directors and 1 filing
clerk.
BRIEF BACKGROUND
The Finance Department was
created in 1994 following the
renowned Bank of Zambia
Restr ucturing Programme
under the auspices of the
International Monetary Fund
(IMF).
Prior to 1994, the Bank had an
Accounts Department whose
function was mainly to process
payments for suppliers of goods
and services as well as running
the staff payroll and payments
of other staff related benefits.
Transaction processing in
Accounts department was
manually done and the final
payroll processing was
outsourced to ICL Zambia. With
regard to human resource,
there were no professionally
the foreign operations and
government securities
departments' settlements
functions were transferred to
Accounts department under the
new name of Finance
Department.
Following the establishment of
Finance department, the Bbank
embarked on an exercise to
automate accounting
qualified accountants.
Foreign exchange settlements
were a preserve of the Foreign
Operations Department whilst
Government securities
settlements were handled by
the then Government Securities
Department (now a division in
Financial Markets department).
However after the Bank wide
restructuring exercise of 1994,
Internal Audit Department
I n t e r n a l Au d i t i s a n
independent, objective
assurance and consulting
activity designed to add
value and improve the Bank
of Zambia's operations.
It helps the Bank of Zambia
achieve its objectives by
bringing a systematic,
disciplined approach to
evaluate and improve the
effectiveness of risk
management, control and
governance processes. The
purpose, authority and
responsibility of the
Department are set out in the
Internal Audit Charter which
was approved by the Bank of
Zambia Board.
Internal Audit was initially set
up as a function of the Finance
Department before becoming a
fully fledged department. At
the time of its inception as a
department it was headed by a
Chief Internal Auditor. During
the early years the Department
which at the time was called
Audit Office, was commonly
referred to as the “Watchdog
Department”. Audit then was
perceived to be a policing
activity rather than one
designed to provide
independent, objective
assurance and consulting
services. Over the years
however, the Department has
evolved to become a modern
day internal auditing function
that aims to add value to the
Bank's operations.
Today, the Internal Audit
Department of the Bank of
Zambia is headed by a Director
and has a total staff
compliment of nineteen (19),
consisting of seventeen (17)
professional audit staff and two
(2) administrative staff. All
professional staff in the
Department are members of
the Institute of Internal
Auditors (IIA) and are thereby
bound by the IIA's Code of
Ethics and the Professional
Practices Standards.
The Internal Audit staff are also
bound by the Bank of Zambia
values, policies and
procedures. The Director
I n t e r n a l Au d i t r e p o r t s
functionally to the Finance and
Audit Committee of the Board
and administratively to the
Governor.
In keeping with the present day
audit function, the Department
conducts its audits in
accordance with the
To Page vi
iv
accurately and timely and also
that receipts from local
customers are recorded
accurately in the Banks records.
This section also performs
theprovides Back office
functions for securities trading
and money market operations
activities carried out by the Bank
of Zambia, through Financial
Markets Department.
FOREIGN RECEIPTS &
PAYMENTS SECTION
T h e Fo r e i g n Re c e i p t s &
Payments section performs the
Back Office function for foreign
reserves management and the
Banks foreign currency
transactions with local
commercial banks initiated in
Financial Markets Department.
Further tThe section ensures
that all foreign transactions are
accurately recorded in the Banks
records.
COMMUNICATIONS &
SETTLEMENTS SECTION
The primary function of the
section is to effect accurate and
timely settlement of authorised
foreign exchange payments on
behalf of the Government,
Commercial Banks and the Bank
of Zambia and to effectively
manage the SWIFT operations.
DIVISIONS
In order to achieve its key result
FINANCIAL MANAGEMENT &
objective, the Department is
INFORMATION SYSTEMS
headed by the Finance Director
DIVISION
and is sub-divided into three
The division is headed by an
divisions, each headed by an
Assistant Director.
Assistant Director:. The
OBJECTIVE
following are the three
To prepare and monitor cost
divisions:
effective short term and long
!
Financial Accounting
term strategic budgets, provide
!
Receipts & Payments
timely management information
!
Financial Management &
for decision making and ensure
Information Systems
information systems operate in
a manner that will enhance
FINANCIAL ACCOUNTING
quality decision making and
DIVISION
control.
The division has two functional
Assistant Director and is
sections each headed by a Senior
divided into three functional
Accountant:
sections each headed by a
Senior Accountant:
FINANCIAL MANAGEMENT
SECTION
RECONCILIATIONS SECTION
The main function of the section
This section operates as an
is to provide quality financial
internal control tool to provide
infor mation for effective
reasonable assurance in respect
management decision making
of the accuracy of the
and control.
underlying records of the
The main functions of the
general ledger through
section include:
identification of errors,
!
Budgeting This includes
omissions, misstatements or
the production of the Bank
frauds
of Zambia annual budget
and the periodic review
FINANCIAL REPORTING
thereof.
GENERAL LEDGER SECTION
!
Budgetary Control
This
The General Ledger Financial
involves the monitoring of
Reporting section is responsible
the budget performance
for the production of monthly
and provision of quality
management accounts as well
information for effective
as annual statutory audited
management decision
financial statements. This
making and control
section also ensures all financial
(Variance analysis).
information is captured in the
!
Fixed Asset Accounting
Bank's information systems
involved with the
currently T24 and Sunsystems.
maintenance of an up to
date and accurate record of
PAYROLL SECTION
the Bank of Zambia fixed
The main function of the payroll
assets.
section is to process all staff
I N F O R M AT I O N S Y S T E M S
related emoluments and ensure
SECTION
they are accounted for
Major functions of the section
accurately and fairly in the
include:
financial statements
!
Ensuring that the
information systems for
RECEIPTS & PAYMENTS
data generation, data
DIVISION
capture, data processing
and report generation
Assistant Director who is
operate in a manner that
assisted by one Senior
will produce accurate,
Accountant in overseeing all the
timely, relevant and reliable
sections.
information that will
The Receipts & Payments
enhance decision-making
division provides a back office
function for foreign exchange,
for management and other
government securities, money
external users.
market operations and
!
Ensuring the harmonisation
procurement transactions for
of the various information
the Bank.
systems in the Bank that
The Division has three distinct
impact on Finance
sections headed by accountants
Department.
namely:
!
Ensuring that originating
documents are well
LOCAL RECEIPTS &
structured and user friendly
PAYMENTS SECTION
for ease of data input and
This section ensures that
minimization of data entry
payments to local suppliers of
errors.
To Page xii
goods and services are made
Non-Bank Financial Institutions Supervision Department
Introduction
The Non-Bank Financial
Institutions Supervision
Department was established in
September 2001 out of the split
of the Financial System
Supervision Department
(FSSD). The split was aimed at
enhancing oversight of NonBank Financial Institutions
(NBFIs) in order to protect
depositors and foster stability
of the financial system. This
was because over the years the
non-bank financial sector had
expanded, became more
innovative and begun to take
on greater risks. Additionally,
in a bid to strengthen
supervision and regulation of
NBFIs, the Banking and
Financial Services Act (BFSA)
was amended during 2000.
This amendment increased the
number of NBFIs under the
supervisory ambit of the Bank
of Zambia.
Designated
institutions brought under the
supervisory ambit of the BoZ
following the amendments to
t h e B F SA i n c l u d e d t h e
Development Institutions,
Building Societies, Credit and
Saving Institutions and
Microfinance Institutions.
Departmental Staff
Establishment
The Department was created
with a staff establishment of 34
comprising: 1 Director, 3
Assistant Directors, 8 Senior
Inspectors, 19 Inspectors, 2
clerical officers, 1 secretary and
1 stenographer. This structure
has remained the same since
establishment.
Mission Statement
The Bank of Zambia (BoZ) is
responsible for formulating and
implementing monetary and
supervisory policies that will
ensure the maintenance of
price and financial system
stability. The BoZ discharges
its responsibility of ensuring a
stable financial system partly
through the NBFISD whose
mission statement is to 'license,
regulate and supervise nonbank financial institution
registered under the BFSA in
order to promote a competitive,
safe and sound financial
system'.
Asset quality, Management,
Earnings and Liquidity). The
CAMEL ratings are then used
to determine whether each
financial institution operating
is Strong, Satisfactory, Fair,
Marginal or Unsatisfactory.
This off-site surveillance
method is designed to
accomplish the procedures of
the most important evaluation
tool known as “Early Warning
System” which helps detect
emerging financial problems in
financial institutions timely.
Inspections Division
The functions of the Division
are mainly to conduct on-site
inspections to assess the
following:
!
integrity of prudential
returns;
!
c o m p e t e n c e o f
management of NBFIs;
!
adequacy of risk
management policies; and
!
adequacy of accounting
and management
information systems;
Structure of the Non-Bank
Financial Sector
The BoZ is mandated to
supervise non-bank financial
institutions with the exception
of pension funds and insurance
companies and securities firms
that are supervised by the
Pensions and Insurance
Authority and the Securities
and Exchange Commission,
respectively.
As at 30 September 2009, the
formal non-bank financial
sector under the supervisory
authority of the BoZ included
the following categories of
financial institutions:
Mbuzi,
Maibiba
Mulala,
Suzyo Namonga Ndovi
Akatama, Mizinga Moonga,
Richard
Chirwa,
Mutale
Francis
Mulenga,
Banji
Zifa Joseph Mpande, Marshall
Mwansopelo,
Joseph
Munyoro,
Maulu O,
Hamunjele, Musapenda Phiri,
Stephen Zulu, Lizzie Daka
Milambo, Francis Mulenga
Muma, Melina M Malipilo,
Berington
Ka l i m u k w a ,
Elizabeth Kapila
Zulu,
Mashinda Nicholas Chisongo,
Kapaso Mumbi, Sylvester M
Kabwe, Lilian N Chiselebwe,
Audrey Mwila
Kalukango,
Gladys M Shezongo and Wilson
Mazimba.
The Historical Development of Payment Systems in Zambia
Building societies 3
Leasing and finance
companies
12
National Savings and Credit
Bank
1
Development Bank of Zambia
1
Microfinance institutions 25
Bureaux de change 44
Plan (FSDP)
The NBFISD is also the
Secretariat coordinating the
implementation of the
Plan (FSDP).
The main
objective of the FSDP is to
address current weaknesses in
the financial sector.
iv. t e c h n o l o g i c a l
tribute which was not
Kazembe should have used
INTRODUCTION
infrastructure
(e.g.
consumed by the court, was
Katanga crosses as a form of
The evolution of payment
c o m m u n i c a t i o n s
traded for other goods. The
currency as these were widely
systems in Zambia has come a
infrastructure. ATMs, Point of
neighbouring Tonga tribes
used in the proximate region
long way from the barter
Sale, RTGS, Computers).
though to a large extent selfof Katanga. With the coming of
system, where goods and
Functions of the Department
Evidently, an efficient and
sufficient, were also engaged in
colonialism, these payment
services were exchanged for
The NBFISD executes its
secure payment system has a
trade of livestock and crops for
methods were largely
other goods and services; to use
critical role in ensuring that an
such goods as hut poles, iron
superseded by notes and
of copper crosses; followed by
regulatory and supervisory
economy is successful by
ore, arrow shafts, honey and
coins.
use of banknotes and coins; to
responsibilities through 3
facilitating trade and exchange
dried fish.
modern day use of electronic
divisions:
Relations with other
of value.
The barter system however
payment instruments.
All
PAYMENT SYSTEMS DURING
!
Regulatory Policy;
Regulatory Bodies
could not sustain the growing
these for ms of payment
COLONIAL ZAMBIA
!
Financial Analysis; and
The NBFISD co-operates
trading activities between and
systems have had their own
The colonial period was
!
Inspections.
closely with other regulatory
among the traders due to a lot of
merits and demerits as
PRE-COLONIAL ZAMBIA
characterised by European
agencies and government
inherent limitations, which
discussed in subsequent
During this era, the barter
Nations entrenching their
Regulatory Policy Division
departments that have related
include among others:
sections. However, what is clear
system was the predominant
interests in Africa. Zambia
!
Processing licence
responsibilities including, in
i. the exchange of goods had
is that the development of each
form of payment system. This
came under the control of
applications;
particular:
to take place at the same time,
of these payment systems has
involved the exchange of goods
Britain and was administered
!
Reviewing existing and
!
The Pensions and
as payment could not be
been greatly influenced by
or services for other goods and
by the British South African
formulating new
Insurance Authority (PIA),
deferred;
socio-economic factors
services. For instance, in the
Company until April 1924
legislation;
which is the government
ii. The process of exchange
prevailing at a particular
seventeenth century the Bisa
when it became a British
!
Enforcing compliance with
regulator set up under the
was cumbersome. It depended
moment in time such as
people who dwelt between the
protectorate.
legislation;
Pensions Scheme
on mutual coincidence of needs;
political, economic,
Luapula and the Zambezi rivers
The payment instrument used
!
Conducting research; and
Regulation Act, 1996 to
one trader had to find another
technological, and legal.
hunted ivory over a wide area
during this period was largely
!
Managing NBFIs in
regulate and supervise
trader who had goods they
Before this paper could discuss
and traded it at Portuguese
notes and coins. In 1896,
statutory custody and
pension and insurance
needed and who had goods they
the development of payment
markets at Tete and Zumbo. The
African Banking Corporation,
liquidation.
schemes in Zambia;
needed and who was also
systems in Zambia, it is
Bisa also sold their ivory around
a private bank began to issue
!
The Securities and
willing to exchange them for
imperative to define the term
Lake Malawi to Yao Traders who
currency in the form of 1-100
Financial Analysis Division
Exchange Commission
the goods the other trader was
payment system. A payment
became adept at forming great
pound notes. Later, the
The functions of the Division
(SEC), which is responsible
offering;
system can be defined as a set of
caravans to transport ivory to
Southern Rhodesia Currency
include:
for the relevant legislation
iii. The values of the goods
instruments, procedures and
ready markets during the
Board was formed and began
!
Evaluating the financial
(Securities and Exchange
being
exchanged
could
not
be
rules
for
the
transfer
of
value
e
i
g
h
t
e
e
n
t
h
c
e
n
t
u
r
y.
I
n
t
o issue the Southern
condition and performance
Act), and for supervising
compared. Traders did not have
between economic agents.
exchange the Bisa received
Rhodesia Pound which also
of NBFIs sector through
the Lusaka Stock Exchange
a guarantee that the goods
Accordingly, any payment
Asian textiles and other wares.
circulated in Zambia.
analytical reviews of;
(LuSE); and
exchanged were of equal value;
system consists of four critical
In northern Zambia, the Mwata
In 1953, Zambia became part
!
Reviewing NBFIs
!
The Office of the Registrar
and
and intertwined components
Kazembe kingdom was also
of the Federation of Rhodesia
compliance with laws and
of Companies and Business
iv. Trade becomes more and
namely:
actively involved in trade. The
and Nyasaland and in 1955 the
regulations;
Names, which is
more difficult if less people are
i. a d e f i n e d g r o u p o f
kingdom played a key role in
Rhodesia and Nyasaland
!
Enforcing publication of
responsible for company
able to produce widely needed
institutions (e.g. banks,
conveying Lualaba copper to
Pound was issued as the
quarterly and annual
law and insolvency matters
goods like food as those
clearing houses);
the people of northern Zambia
currency of the Federation.
financial statements.
under the Companies Act.
producing these goods
ii. a set of instruments (i.e.
and Tanzania. Further down in
The colonial period saw the
!
Providing an early warning
Through a Memorandum of
Due to the limitations of the
banknotes, electronic funds
the south, the Lozi court served
entrenching of notes and coins
system for possible
Understanding, the BoZ is able
barter system, early forms of
transfers, payment
as the centre of exchange for
as the principal form of
emerging problems and
to exchange information with
currency such as copper crosses
c a r d s , c h e q u e s , c u r r e n c y,
various goods.
The
payment instrument. This
thus compliment the
the other supervisory
were adopted in certain areas.
copper ingots, cowry shells,
surrounding woodland tribes
system had several distinct
Inspections Division.
authorities.
Excavations at Ngombe Illede in
salt);
brought tribute to the court in
advantages over the barter
The analysis of financial
Southern Province indicate that
iii. rules and procedures (i.e.
form of game, hides, iron, cloth
system. These included:
statements and prudential
copper crosses were in use in
legal framework in form of
and honey while the valley
i. M o n e y a l l o w e d t h e
returns focuses primarily on
Chisha Mwanakatwe, Gladys
Southern Zambia. Further, the
payment system legislation,
peoples brought fish, grain and
equitable exchange of value;
the level and trend of key ratios
Chongo Mposha, Visscher M
northern Kingdom of Mwata
payment stream rules); and
baskets. The surplus from the
To Page xi
of CAMEL, (Capital adequacy,
Bbuku, Dr Chiara Chiumya,
v
The Role of Financial Markets Department
Introduction
T h e Fi n a n c i a l M a r ke t s
department was established
in 1994 as a monetary policy
implementation wing of the
Bank of Zambia. This followed
the economic liberalisation
under which the Bank of
Zambia introduced market
based instruments of
monetary control in order to
improve the management
monetary policy. Whereas
the overall Bank of Zambia
mission is to formulate and
implement monetary and
supervisory policies that
achieve and maintain price
stability and promote
financial systems stability,
the Financial Market
department implements
monetary policy and acts as
the fiscal agent for the
Government.
The main functions of
department are therefore to
forecast liquidity flows in the
Banking system, conduct
Open Market Operations
(OMO) auctions, manage
and the exchange rate as well
as conduct government
securities actions. The
department also undertakes
market studies and survey to
provide feedback on the
effectiveness of the monetary
policy actions.
Other functions include
monitoring commercial banks
compliance to statutor y
reserve and core liquid asset
ratios; maintain
departmental database and
records managements.
This brief note outlines the
structure and main functions
of the Financial Market
department and how these
functions fit into the overall
Bank of Zambia's mission.
Organisation Structure of the
Department
The Department comprises
two Divisions namely, Market
Operations (MO) and Market
Analysis (MA)
The responsibilities of the MO
Division are to act as fiscal
agent of the government (by
issuing government
securities and facilitating
payments of maturing
investments), manage
and exchange rate and
conduct Bank of Zambia open
market operations (OMO).
The MA is responsible for
monitoring and forecasting
the overall liquidity
conditions in the banking
system, monitoring
commercial banks
compliance of cash and
liquidity ratios, undertaking
research on developments in
the financial markets as well
as monitoring developments
in the capital market.
Brief Outline of the Functions
of the Department
Trading in Government
Securities
As an agent of Government,
the department is the front
office that undertakes all
primary issuances of
(Treasury bills and
government bonds). The
primary objective of
trading is twofold. Firstly,
government securities are
used as a fiscal tool by
facilitating gover nment
borrowing from the general
public for the purposes of
meeting its financing
requirements. Secondly,
government securities are
used for monetary policy
purposes particularly in
managing liquidity in the
banking system. The central
bank influences the reserves'
position of commercial banks
through the purchase and
sale of Treasur y bills.
Treasury bill auctions are
conducted weekly while
government bond auctions
are conducted monthly and
quarterly. The Bank also
occasionally offers advice in
respect of domestic debt
policy.
point of view was that it made
the management of liquidity
very difficult particularly
when large amounts were
involved as there was a
spontaneous supply or
withdrawal of liquidity from
the system.
However, under the current
Tender System, investors are
given the freedom to
determine the price or
interest rates on Treasury
bills.
The mechanism of
allowing investors to price
Treasury bills at the auctions
results in market determined
interest rates. With the
weekly tenders and a
limitation on access to the rediscount facility, the Bank of
Zambia is able to plan its
monetary operations properly
as liquidity injections or
withdrawals arising from
operations are known in
advance. In addition, the
management of government
domestic debt improves.
On the fiscal front,
gover nment is able to
determine its financing
requirements and borrow
systematically from the
market. In addition, the
government easily knows
financing costs with an
auction system in place.
Currently, weekly Treasury
bill auctions are carried out
for four (3) maturity
categories of, 91 days, 182
days and 273-days 364 days.
In addition, government bond
tenders are held monthly and
quarterly where 2, 3, 5 year
and 7, 10 and 15 year bonds
are issued respectively.
In December 1996, Bank of
Zambia made some
The Treasury bills and
Government bond Tender
System
The Treasury bill Tender
System was established in
January 1993 as part of the
financial liberalisation
measures aimed at
rationalising the
management of government
domestic debt. Prior to that,
the Bank of Zambia sold
Treasury bills on behalf of the
government at predetermined prices.
This
entailed that individual and
institutional investors were
merely price takers.
This
system of selling government
securities was incompatible
with the reformed economic
system in terms of domestic
debt, liquidity and monetary
management. Investors could
purchase bills on any day and
any amounts and re-discount
any amounts without
restrictions. The implications
of this from a monetary policy
Internal Audit Department
From Page iv
International Standards for
the Professional Practice of
Internal Auditing and has
automated most of its audit
work which has included the
use of Computer Assisted
Audit Techniques (CAATs)
and electronic “paper” files.
The Department also adopted
risk based auditing in 1999.
Risk based auditing entails
that greater focus is placed on
high risk areas thereby
providing greater comfort
regarding risk related controls
and activities while using fewer
resources.
Internal Audit Department also
liaises with the Risk
Management Department,
Strategic Plan Monitoring Unit
and other specialist parties
within the Bank that are set up
to assist Management in the
discharge of their
responsibilities.
The Department has a quality
assurance and improvement
program that is designed to
help it improve its performance
and consequently add value to
the Bank's operations.
The program also provides an
assurance that the internal
audit activity is in conformity
with the Standards and the
Code of Ethics.
Prudence Malilwe, Emmanuel
Malukutila,
Chalwe M
Lumbwe,
Lupondo Bubala
Dons, Roy Sikwibele, Morton
Miyanda, Modesto Musonda
Simutowe,
Hichilema
Mpooma, Kamoza Newstead
Lewis Zimba, Fortune Phiri,
Cosmas
Soko,
Hamilton
Chitete, Godfrey Kayembe,
Solomon Simutowe, Zaliwe
Chibeza
Nyoni,
Bertha
Muchengwa Chisola, John
Lyton
Banda,
Chibeka
Kapansha
Moongwa and
Vainess Chawe.
vi
modifications to the Treasury
bill and Government bond
trading procedures.
Only
commercial banks with
settlement accounts at Bank
of Zambia were allowed to
participate directly in the
primary market of
government securities. This
meant that the general public
and other institutions could
only purchase Treasury bills
and government bonds in the
secondary market.
The idea of restricting the
primary market to
commercial banks was to
facilitate and improve
secondary trading in these
instruments and to deepen
the government securities
market by making them more
accessible and liquid. To
complement this, the Bank
introduced a Book Entry
Securities (BES) Trading
System in 1997. The
introduction of the BES meant
that transactions in securities
could be undertaken without
the physical issuance of
certificates (i.e. certificates
were dematerialised). This
measure entailed the removal
of risk associated with
physical transfer of
certificates when transacting.
However, the exclusion of the
non-bank public on the
primar y market limited
competition in the
market. Commercial banks'
behaviour became
monopolistic in nature and
started charging high fees
since Treasury bills compete
with deposits. As a result the
determination of interest
rates became limited in
scope. In view of this, eligible
non-bank financial
institutions were re-admitted
to the primary market in April
1999. To further widen
participation at the primary
auctions, the BoZ re-admitted
individuals and corporate
entities in March 2001. In
addition, the Bank reintroduced the off-tender
window in November 2001
after its suspension in August
1996.
As part of measures directed
at enhancing secondar y
trading and improving the
attractiveness of bonds and
liquidity in the money
markets, the Bank of Zambia
allowed the flotation of
government bonds on the
Lusaka Stock Exchange
(LuSE) in March 1998. In the
same year, the 18-month
government bond, which was
suspended in 1995, was reintroduced in October. In
addition, both Bank of Zambia
and LuSE operate a computerbased register in the form of a
Book Entry System, which
documents and track
electronically the various
holders of securities.
Daily Open Market
Operations (OMO)
The most significant
monetary policy initiative
undertaken by Bank of
Zambia was the introduction
of daily OMO on 1st March
1995. The purpose of OMO is
to smooth short-term
liquidity imbalances and
consequently influence shortterm interest rates. This is to
ensure the smooth technical
functioning of the money and
payment system.
The Bank of Zambia uses the
following instruments to
manage liquidity under OMO
!
Auction of credit (Secured
Loans), purchase of foreign
exchange, and reverse repos
when injecting liquidity into
the banking system
!
Auction of deposits (Term
Deposits), outright sale of
Treasury bills on Bank of
Zambia portfolio, sale of
foreign exchange, and repos
when withdrawing liquidity
from the banking system.
Repos were launched in
February 2002.
Secured loans are used to
provide short-term liquidity
to the banking system.
Commercial banks that are
short of liquidity can purchase
funds from the Bank of
Zambia under a secured loan
arrangement by pledging
Treasury bills and bonds as
collateral. In addition, funds
can be provided to the market
under a reverse repo
transaction, which operates
more or less along the lines of
a secured loan. The main
difference between secured
loans and reverse repos is that
once reverse repos have been
undertaken, pledged
collateral in terms of
changes ownership to the
provider of funds, which is not
the case for secured loans.
Occasionally, the Bank of
Zambia also injects liquidity
into the banking system by
purchasing foreign exchange
from commercial banks.
When withdrawing liquidity
from the market, the Bank of
Zambia invites banks to place
their excess funds in interest
bearing Term Deposits. In
addition, funds can be
withdrawn from the market
through an outright sale of
Treasury bills on the Bank's
portfolio, repurchase
transactions or foreign
exchange sales to commercial
banks.
It is also important to note
that the Bank of Zambia OMO
market is a residual one for
reserves, meaning that the
operations are aimed at
supplying or withdrawing
reserves after commercial
banks have exhausted all
possible borrowing or lending
opportunities in the interbank
market. To make them more
liquid, Term Deposits are
transferable and also count as
part of core liquid assets.
Foreign Exchange Market
As mentioned earlier the
department is also
responsible for implementing
the exchange rate policy. This
function is discharged
through interventions in the
foreign exchange market,
which involves buying, and
selling foreign exchange, as
well as monitoring the
exchange rate with the
objective of achieving a stable
and competitive exchange
rate in order to foster
sustainable growth in the
economy.
The foreign exchange market
is a money market where
foreign currencies are traded.
The structure of this market
has evolved overtime and
currently consists of the interbank, bureau, retail and
corporate markets.
The Bank of Zambia
introduced the dealing system
in December 1993 with the
view to strengthening the role
To Page ix
The Role of the
Banking Division
INTRODUCTION
In accordance with the Bank of
Zambia Act of 1996, the
functions of the Bank of Zambia
are very similar to those of
other central banks. The Bank
is responsible for the issuance
of currency, management of
foreign reserves, provision of
monetar y and financial
services to the Government
and regulation and supervision
of financial institutions.
Banking, Currency and
Payment Systems Department
is responsible for all banking
and currency functions given to
the Bank of Zambia under the
Bank of Zambia Act. In
addition, the Department
contributes to financial
stability objectives through the
development and oversight of
payment, clearing and
settlement systems. The
Department has three divisions
namely, Banking, Currency and
Payment Systems.
BANKING SERVICES TO
GOVERNMENT AND
COMMERCIAL BANKS
As Banker to Government
As banker to Government,
Bank of Zambia maintains bank
accounts for Government
Ministries and Departments,
facilitates the deposit of
Gover nment revenue by
Zambia Revenue Authority and
other agencies and administers
credit facilities namely the
Enterprise Development
Project (EDP) and the Zambia
Agriculture Marketing &
Processing Infrastructure
Project (ZAMPIP).
The Bank maintains current
accounts for Government
Ministries and Departments
called “Control Accounts”.
Each Government
Ministry/Department
maintains one current account
with sub accounts. These
accounts operate as conduits
for the receipt of funds from
Central Government (Ministry
of Finance and National
Planning) and transfer of funds
to Ministries' mirror accounts
held at commercial banks.
These accounts do not have
cheque issuing facilities. The
mirror accounts maintained
with commercial banks are
used to facilitate payments of
transactions of a retail nature.
Collection of Government
Revenues
The Bank, as fiscal agent of
Government, facilitates the
deposit of revenue by Zambia
Revenue Authority and other
Government Departments and
Agencies. This is achieved
through direct deposit of cash
and cheques at Bank of Zambia
and through transfers of
revenue deposited at
commercial banks through the
RTGS system. To this end, the
Bank maintains Revenue
accounts, where all tax based
and non-tax based revenue
collected in the country is
deposited. Revenue collected
from towns outside Lusaka is
deposited with commercial
banks and transferred to Bank
of Zambia through RTGS. At
the end of each business day, all
revenues deposited directly at
Bank of Zambia and through
commercial banks are swept to
the main Government account
(Control 99). The Bank on
behalf of the Government also
maintains donor accounts and
special projects accounts.
Zambia Revenue Authority Tax
Payment Stream
Executive support staff
In order to improve efficiency
and allow speedy access to
funds by government, a Tax
Pa y m e n t S t r e a m w a s
introduced in 2007, which
enables tax payers make tax
payments easily from their
bank branches using the RTGS.
The Government receives tax
revenue immediately at Bank
of Zambia. The speedy
collection of tax revenues
enables Government to carry
out its activities more
efficiently as cleared funds are
made available.
As Banker to Commercial
Banks
As banker to commercial
banks, the Bank of Zambia
maintains bank accounts for
respective banks. These
accounts are used for
settlement of interbank
transactions.
Commercial
banks are required to maintain
a minimum percentage of both
their Kwacha and Foreign
currency deposit liabilities in
statutory reserve accounts
(non-operational and non
interest bearing) at Bank of
Zambia.
Provision of Intra-day Credit
Fa c i l i t y ( L i q u i d i t y ) f o r
Settlement of Payments on
RTGS
In order to enhance efficiency
in the RTGS system, Bank of
Zambia provides liquidity
facilities to commercial banks
for settlement of payments. To
this end, the Bank provides
intra-day credit to commercial
banks which they are required
to pay back by close of
business. This credit is secured
against securities (Treasury
bills) pledged and placed on the
RTGS. Failure to repay the
funds, results in the Bank of
Zambia rediscounting the bills
held by the defaulting bank the
follow in g b us in es s da y.
Commercial Banks are also
permitted to utilise funds on
the statutory reserves accounts
to settle their obligations
provided they fall within the
statutory reserves regime as
required.
In the event of any system
failure by a commercial bank,
the Bank of Zambia, under the
Authorised Settlement Agent
(ASA) agreement, provides a
back-up facility for processing
Inter-bank transactions on
behalf of the commercial bank
whose system has failed.
Bank of Zambia 'As Settlement
Agent'
Bank of Zambia operates as
Settlement Agent for the
Zambia Electronic Clearing
House (ZECHL) and Zambia
National Net Settlement
Service (ZAMNNSS) or Visa.
As settlement Agent for the
ZECHL, Bank of Zambia
receives the consolidated net
settlement positions of
member banks from ZECHL
and effects final settlement of
both Physical Interbank
Clearing (PIC) and Direct Debit
and Credit Clearing (DDACC)
figures in the Bank of Zambia
books.
As a pre-condition to
membership in the ZECHL,
commercial banks are required
to deposit and maintain
collateral with Bank of Zambia
at the values computed by the
Bank in the form prescribed in
the ZECHL rules.
The
collateral is reviewed monthly.
As settlement agent for Zambia
National Net Settlement
To Page viii
department are as follows: Dr
Caleb Mailoni Fundanga, Dr
Denny H, Kalyalya,
Dr
Tukiya Kankasa Mabula,
Sima c h e c h e W, D i nde,
Denny
Dumbwizi, Jacob
Lushinga, Boaz Musamvu,
Astridah
Katema,
Ruth
Mvula,
Nelly
Phiri and
Elizabeth M Banda.
Liswaniso Mulonda, Lazarous
Siluonde, Moffat
Kauma,
Graeme Mutantabowa,
Christopher Catherine Musantu
Mvula, Jones S Moyo, Francis
Phiri,
Sunday
Musonda,
William Mwaba,
Catherine
Tembo, Christopher Silavwe,
Wilson Munkombwe, Francis
Mpundu, James Mwag'omba,
Isaac Caswell Banda, Govati
Moses
Mbewe,
Andrew
Lungu, Angela
Mutale,
Tomaida
Zulu, Rimwell
Mushilingwa, Thomas Chilufya,
Isaac D Phiri, Venansio Zulu,
Kaluba Chakaba, Mwenya N
Chitika, Lackson M Mwanza,
Simon Mtonga, Dennis Kababa,
Seveliano Tembo, Stephen
Mwale, Charity Ndunda, Jean
Kasumba,
David S
Zulu,
Boswin Khondowe, Davyline
Mwiinga, Francis Bwalya,
Gerald M
Chileshe, Prisca
Kachinga Chitambala, Tobias
Mapenda, Zenge Nyimbili,
Mwila Lwele Mwanza, Helen
Lungu
Banda, Jonathan
Musowe, Fwila N Chipalo,
Joseph Zulu, Judith Zama,
Lukanga Muzeche, Vincent
Linyama, Mwango Kasutu,
Evaristo Chileshe, Miriam N
Banda, Judith C Mandumbwa
and Matakala Mabuku.
Musonda Simwayi, Kedrick
Sichilima Zombe, Anderson
Vo l k , A c k i m C h i t e m p a ,
Shadreck Mukuwa, Maleya C
K Phiri, Benson Chulu, Phinius
Chiholyonga, Oswell Mainda,
Gilder
Musanda, Ronald
Kandongwe, Love Mwale,
Kennedy Mukuma, Dismus
Ndakala, Donald
Mandeva,
Maxwell Mwape, Felix Sakala,
Bernard Nali, Richard Shumba,
Clement
Sumwaumwa,
Dominic Zulu, Ackim Tembo,
Evaristo Chinyanta, Willard
Mweene Chuulu, Rodgers C
Litho, Noah Zulu, Abraham
Kasapo, Lytons Luka
Chiwowa, Beldon Hamunjele,
Clement Mweemba, Eliya
Palata, Davies Chimota, Brian
Mcbride Kaite, David Alifas
Phiri, Miriam
Mukwasa,
Caroline Mashakalati, Victor
Chisenga, Pontino Phiri, Felix
Shantimba,
Maggie Zimba,
Conrad Liyanda,
Veronica
Lungu, Chipo Gura, Peggy
Chilembo, Memory Kaumba,
M u t u b a , M a e ke N j u n j u ,
Nickson Solochi,
Kristen
Kombe, Mulenga Simpito,
Walusiku Nawa Sikoma, Martin
Chinyama, Stephenson H
Namooya,
Lewis Lupupa,
Gloria S K Chongo and
Christopher Silondwa.
Procurement & Maintenance Services
The Department's main
objective is to provide quality
and timely procurement and
maintenance support services
to the Bank.
David Nkata, Raphael Phiri,
Kizzy Moonga, K Mweetwa,
Noah Lumba Tembo, Prudence
M w a l i , Va l e r i e M u l e n g a
Mufuzi, Brian Chipalo,
Security
The role of the Bank of Zambia
is to: provide security cover to
protect the bank's properties;
manage all security equipment
in operation; direct and control
security operations on currency
consignments; undertake
internal investigations into
cases of theft, fraud and other
vices for administrative action
and/or referral to the relevant
arms of the State for criminal
litigation.
vii
The Role of the Banking Division
From Page vii
Service, Bank of Zambia
receives the consolidated net
settlement position of the
member banks from Visa
Service and effects the funds
settlement between
participating member banks.
CHALLENGES
The Bank of Zambia in its
pursuit to achieve its objectives
of providing efficient banking
services to commercial banks
and Government has a number
of challenges and issues that
must be overcome.
Retail Vs Wholesale Banking
Bank of Zambia made a
decision to hive off retail
banking to focus on its core
functions.
This was after realizing that the
Bank was dedicating a lot of
resources to support functions
and services that were of a
retail nature. After extensive
consultations with
Government and a study visit
to the Central Bank of Malawi, a
decision was made to
restructure Government
accounts.
Government Ministries were
required to open mirror
accounts at commercial banks
so that the Control Accounts at
Bank of Zambia are used as
conduits for the receipt of funds
from central Government and
transfer of funds to the
commercial banks.
Government has on several
occasions made requests for
the Bank to revert to providing
retail banking. However the
Bank's position remains that
retail banking for government
and other government
agencies are best handled by
commercial banks that have
the branch structures to do so.
Information & Communication Technology
The Information and
Technology Department is
responsible for providing a
reliable and quality
information systems support
service to the Bank of Zambia
in order to enable the Bank to
meet its mission, objectives
and responsibilities.
David Chola Mwape, Gershom
Kombe,
Paul Mutakatifu
Lungu, Mwaba Clara Kasese,
Stephen Mkandawire, Wilson
Benson Chongwe, James K
Mbewe,
Linanga
Keeba,
Francis Kabaso,
Francis K
Mwala, Arnold N Chunga, Yobe
Nkhoma, Raphael Sabaana,
Moffat Kakupa, Mwauluka
Namukulo, Nchimunya
M u n j i t a , We b s t e r Sa a s a
Shamambo, Cliff Kaleng'a,
R u t h Te n d a i M a z o k e r a
Luwabelwa, Robert Banda,
Eddie
Kasengele,
David
Katete,
Edward
Bwalya,
Shubert Sinyinza, Mutumba
Mulope,
Kelvin Kalindo
Chella and
Lucia Tembo
Simukonda.
Human Resources
Direct deposit of revenue at
Bank of Zambia
In order for Government to
have quick access to revenue
collected by Zambia Revenue
Authority (ZRA) to fund its
operations, the Ministry of
Finance and National Planning
through Budget office issued a
directive for all revenue
collected to be deposited at
Bank of Zambia. Since all ZRA
revenue has to go through the
Bank of Zambia, sometimes
and especially at month ends,
the Bank of Zambia provides
late night banking to ZRA and
commercial banks to facilitate
banking of revenue collected.
To this end, the Bank is
required to remain open until
all the revenue collected
through out the country is
deposited at Bank of Zambia.
This arrangement has both
security and financial
implications on the Bank.
Concerns have been raised
over the safety of members of
staff who have to move late at
night after knocking off. There
is also risk on the Bank assets
as the Bank is required to
remain open to facilitate access
for ZRA staff and commercial
banks.
Cost implications include overtime payments to Banking staff
that remain to process the
transactions and all other
support staff that facilitate the
smooth operations such as
extra security personnel in
view of the exposure. The Bank
also incurs other overheads,
such as transport and meal
allowances for staff etc.
Internal Control challenges for
Government transactions
The Bank has a challenge to
implement effective internal
controls to manage or reduce
risk on Government
transaction specifically with
respect to cash deposits. There
has been an increase in the
number of cash related frauds
that are being investigated by
Drug Enforcement officers.
One mode of operation is where
fraud stars pocket monies
collected on behalf of
Government and produce false
deposit slips purporting to have
deposited the cash at the bank
of Zambia. To minimise this
type of fraud the Bank is in the
process of introducing Deal Slip
deposit slips which are
electronically generated and
are supposed to act as
transaction confir mation
documents.
There is also need for
Government to institute robust
preventive controls (separation
of duties as well as detective
controls (reconciliations) to
deter undesirable acts from
occurring.
FUTURE OUTLOOK
embarked on implementation
of an integration suite called
Gentran Integration Suite (GIS)
which will culminate in the
linking of various stakeholders
to the RTGS. The integration
suite is expected to provide a
straight through processing
link between the RTGS and T24
(formerly Globus) to ensure the
two systems are in sync. In
addition, the suite will
automate the ZRA Tax Payment
Stream by providing ZRA with
tax settlements from the RTGS
on a real time basis.
The Ministry of Finance and
National Planning is in the
process of implementing an
integrated Financial
Management and information
System (IFMIS). When
complete, this will be
integrated with T24 at the Bank
of Zambia through the GIS suite
and provide the Ministry with
real time access to their
accounts held at Bank of
Zambia.
It is envisaged that payments
currently done by Bank of
Zambia on behalf of the
Ministry will be initiated by the
Ministry itself.
The Bank of Zambia expects
the implementation of Gentran
Integration Suite (GIS)
software to be achieved by end
of year 2009.
Fu r t h e r, t h e B a n k h a s
embarked on a number of
projects to automate the
processing of transactions to
enhance efficiency and
improve service delivery to its
customers.
BoZ clocks 45 years
From Page i
The Human Resource
Department is responsible for
ensuring that the Bank is, at all
times, supplied with employees
who share the Bank's vision,
and are competent, versatile,
and innovative with
commitment to delivering
quality service to the Bank and
other stakeholders.
The Department is also
responsible for the formulation
and implementation of polices
and procedures aimed at
creating and sustaining a work
environment, which attracts,
develops and retains a
motivated and committed
workforce. In line with the new
development in the
management of human capital,
the department has over the
years, evolved from one that
was primarily associated with
the traditional practices of
hiring and firing to the one
whose activities are aligned to
the strategic core business of
the Bank.
To this end, the Department
has facilitated the Bank's
adoption of a learning culture
by supporting continuous
professional development
through in-house and external
training and personal
development programmes. In
addition, the Department has
introduced innovative policies
and operational procedures in
order to keep abreast with
current and future market-best
practices by embracing good
corporate governance
principles in most areas of
human resources
management, including the
issues of HIV/AIDS and gender.
Hobby Mumbi
Kaputa,
Penelope Mapoma, Peter K
Mbewe,
Febby Mulambia
Mbangweta,
Grace
Chishimba,
Dorothy
Sinyangwe, Edward Chekwe,
Timothy
Phiri,
Ellina R
viii
Chikuka,
Zomba
Ng'ona,
Sylvia M
Mwewa,
Victor
Kalala, Patson Banda, Evans
Mayuni, Mutumba Mubiana,
Albert Chishimba, Kashweka
Kashweka, Bertisebba T Phiri,
Nakiwe Joan Bwembelo
Sichembe, Phenyster Kateya
Chikwashi,
Emmanuel
Musakabantu,
Masiliso
Lubasi, Charity K Mwenya,
Grace
Nachande,
Aswell
Phiri, Edson Zulu, Derick
Mwansa
Chola,
Patrick
Siakwasiya, Kalengo Njobvu,
Angela Mwelwa
Banda,
Charity Chituta
Kavamba,
Getrude Chansa Mulenga and
Nelly Cheelo.
During this initial five-year period,
the FSDP registered significant
achievements in the financial
sector, which have certainly had a
positive impact on the central
bank's operations and the
economy at large. The major
achievements under the FSDP
Issuance of the Anti money laundering
directives to all banks and non bank
financial institutions in August 2004,
which have increased awareness levels
by bank officers of suspicious
transactions;
The production of market information
through the FinScope demand side
study of 2005 which showed that only
33% of the adult Zambian population
have access to financial services and
products. This has given insights into
markets which have now been tapped
by the banks and non-bank financial
institutions and also areas where
interventions can be made for
enhancing financial inclusion;
Establishment of the first Credit
Reference Bureau in Zambia, in 2006
and the subsequent guidelines and
directives which would not only
facilitate more prudent lending but also
lower interest rates for good borrowers;
Amendment of the Capital Adequacy
Regulations of 1995 to provide for a
tiered capital structure in the financial
Sector and increasing the minimum
capital requirements for banks to an
equivalent of US$3 million to enhance
financial stability - and currently all
banks are compliant;
Enactment of the National Payments
Systems Act of 2007 to facilitate the
oversight of payments systems in
Zambia by the central bank, including
money transfers and mobile banking.
Since the enactment in June 2007, a
total of 21 payment system businesses,
15 payment system participants and 4
payment systems have been
designated;
Issuance of Corporate Governance
Guidelines to all financial institutions
and financial businesses in 2007 to
enhance the governance of institutions,
particularly those that take deposits
from the public;
Issuance of Risk Management
Guidelines to all financial institutions
and financial businesses in October
2008;
Issuance of longer term bonds in the
market (2 -15 years); and Review of
various financial sector legislation in
order to modernize them and thereafter
harmonise them to remove any
potential conflicts. So far, the statutory
laws for the state owned financial
institutions have been amended to
bring them under the supervisory ambit
of the central bank while the
Accountants Bill, which was enacted
into the Accountants Act on 24th
September 2008 was also done to
modernise this law.
Study on bank charges in Zambia in
2008 which offers recommendations
on the issue of the high cost of banking
in Zambia. This report has since been
discussed with the commercial banks
to try and address concerns on some of
the fees and charges considered to be
unreasonable. A formal plan of action is
To Page xii
The Role of Financial Markets Department
exc h a n g e r a t e s i n t h e
become critical.
these challenges and
will hold Bank of Zambia
Market Analysis
From Page vi
economy and thus facilitating
reserves;
This requires an appropriate
contribute significantly to the
T h e Fi n a n c i a l M a r ke t
of market forces and reducing
the price discovery process,
!
Diversification in terms of
match of the Bank's assets
overall objective of price
department conducts
the need for administrative
commercial banks determine
and liabilities.
stability and promotion of
geographic location of
liquidity forecasts and
allocation of foreign
their own retail and corporate
sustainable economic growth
reserves; and
monitors liquidity trends in
exchange.
rates as they intermediate
!
Overall limit for bank
for accelerated poverty
the banking system and
Optimum Currency Mix
At the dealing window, the
between market participants
exposure (individual bank
reduction in the country.
advises on policy measures to
The Bank has to maintain an
funds were allocated at the
on both the supply and
Indeed the Financial Market in
limits both in percentage
be undertaken to ensure that
optimal currency mix that
marginal rate determined by
demand side. In other words,
Zambia is still in its infancy
and absolute terms).
the flow of liquidity does not
reflec t s t he a s s et a nd
the lowest bidder once the
commercial banks freely set
stage, but with the strides
compromise the Bank's
liabilities profile. Other
funds on offer had been
up their own rates and
made and firm foundation laid
objective of price stability.
considerations are export and
Liquidity
exhausted.
margins. It is also important
thus far, there is no doubt that
The department also
import payment structure
To ensure liquidity, reserves
The advantage with this
to note that there are no
the department's place in the
undertakes selected policy
and the need to diversify
are invested in short-term
system is that the exchange
restrictions on both current
Bank's resolve becomes even
relevant studies aimed at
across currencies. The Bank
instruments
deposits
rate is market determined
and capital account
more important.
finding ways of improving the
has since embarked on the
(overnight, term and fixed
and therefore most problems
transactions following the
monetary operations of the
process to develop a strategic
deposits). Other instruments
a s s o c i a t e d w i t h
abolition of exchange controls
Bank.
asset allocation
are government securities
administrative allocation of
in January 1994.
Pe t e r
Banda,
Isaac
From time to time, reviews
It must be noted that the
issued by gover nments
foreign exchange were
The removal of exchange
Muhanga, Jonathan Mpundu
are made to determine the
reserves management policy
whose currencies are
eliminated.
controls facilitated the
Chipili,
Lazarous B
efficacy of monetary policy
is reviewed from time to time
represented in the currency
As with any system there
efficient allocation of foreign
Kamanga, Flora C Muloshi
measures. Studies also focus
to take into account the evercomposition of the reserves
were some weaknesses in the
exchange resources. This has
Ng'oma, Keith Amukusana
on money market policy
changing global financial
such as Treasur y bills,
dealing system and as such in
encouraged foreign
Katundu, Kombe Chito Soteli,
deficiencies and how to
environment.
Treasury notes and bonds.
July 2003 the Bank of Zambia
investments in that there are
J o h n M w i t a N s a ka n y a ,
remedy these shortcomings.
In order to better manage
This is to ensure the
introduced the Broad-based
no
restrictions
with
regard
to
Rainford
Chirwa, Anthony
risks
and
institute
good
efficiency
of
instruments.
In
Interbank System.
the externalisation of profits
Musonda Simpasa, Chola
corporate governance in the
other words investment
The Way Forward
The main objective of the
and dividends.
Milambo,
Emmanuel
overall management of
instruments in which the
As the financial sector
system is to improve the
Angomwile,
Alick Brian
reserves, the department was
Bank invests must be flexible
reforms embarked upon in
operation and efficiency of
Lungu, Goodson
Kataya,
M a n a g e m e n t o f
re-organised in 2008 and
in the sense that they can
early 1990s take root, it is the
the domestic foreign
Douglas Kalamatila, Alex
established a new unit, the
easily be converted into liquid
I n t e r n a t i o n a l Fo r e i g n
Bank of Zambia's intention to
exchange market through a
Chakufyali, Nancy Mwilwa
Middle Office unit, to provide
cash with minimum cost and
continue exploring ways and
Reserves
more transparent priceMalulu,
Malunga
Siwela,
independent
analysis
of
assist
in
reserves
cash
flow
means
to
further
deepen
and
The
other
responsibility
that
discovery process and to
Philippe Chilambe Masengo,
investment portfolio.
management.
broaden an array of marketthe department performs is to
facilitate professional and
Danny Kaliba, Agness Mwila
The main functions of the unit
based instruments.
manage international
ethical conduct of commercial
Changufu, Chiba Mutembo
are per for mance
The role of the Financial
Rate of Return
reserves held by the Bank of
banks treasury activities.
Lumponge, Jerry N Lungu,
management of investment
Markets department in this
As the revenue base of the
Zambia. With the increase in
Under the IFEM, all
Harriet
Lungu Chishimba,
portfolio,
risk
management
policy
goal
is
critical.
B
a
n
k
o
f
Z
a
m
b
i
a
h
a
s
the
level
of
reserves
in
the
commercial banks are
Chingeni Ndhlovu, Miriam N
and monitoring compliance to
Therefore, as new challenges
diminished in part because of
recent past the challenge has
designated as authorised
Matyola,
Kennedy Mwaba
market standards and
of monetary policy design and
liberalization and the
been to put in place measures
dealers and are obliged to
Chisha,
Henry Bwalya,
benchmarks. The unit also
implementation unfold, it is
reduction in foreign exchange
to ensure prudent
quote two-way prices at a
Glenda Musonda Mbewe and
monitors activities of external
the department's
earnings, the need to enhance
management of reserves and
spread not exceeding of
Chikonjiwe Mumba Mataka.
fund managers.
commitment to face up to
earnings on reserves has
building internal capacity to
ZMK20.00 on a nominal
undertake such a function.
marketable amounts ranging
The Bank has since developed
from USD500,000.00 to
an international reserves
USD1, 000,000.00.
m a n a g e m e n t p o l i c y,
In order to promote the price
restructured reserves
discovery process in the
management operations and
market all authorised dealers
introduced
an independent
operationally are required to
unit to undertake portfolio
perform the following
analysis, risk management
functions:
and monitoring compliance
!
quote two-way prices all
This is in contrast to the
the time, without
period prior to 1999 when
disclosing which side of
Bank of Zambia did not have a
the market they wish to
reserves
management policy
deal. The two-way pricing
and was merely engaged in
s y s t e m a l l o w s
cash management.
information to flow more
The aim of the international
symmetrically among
reserves management policy
market-players, thereby
is
to achieve reasonable and
encouraging competition
stable returns within the
and reducing market
safety and liquidity
distortions;
constraints. In order to
!
affirmatively deal on the
achieve this objective, the
prices they quote; and
Bank has put in place risk
!
be present in the market
management principles for
at all business times. The
the
different risk categories.
continuous presence of
This is to ensure that the risk
authorised dealers in the
exposures are minimised.
market improves the
Specifically, international
liquidity of the foreign
reserves management at
exchange market.
Bank
of Zambia focuses on
!
The BoZ official buying
three main goals namely;
and selling rates are
capital preservation (safety),
computed as simple
liquidity and return
average rates based on
(profitability).
commercial banks quotes,
Safety and liquidity are the
and are currently
basic investment objectives
captured and published
of Bank of Zambia whereas
on the BoZ website three
returns are second priority.
times in a day, that is, at
9.30 hours, 12.30 hours,
Security
and 15.30 hours. The
Safety (security) refers to the
Bank of Zambia Official
n
eed to preserve the
Daily Exchange Rate is
purchasing power of
thus expected to reflect
reserves. To ensure safety it is
the supply and demand
critical to prudently manage
conditions in the
exposure to credit and market
Interbank Market.
risk. Being national
The interbank is basically the
resources, reserves position
wholesale market and it is
must
not be subjected to
affected by commercial bank's
excessive risks. All Bank of
In line with part IX, Section
banks, so as to promote a safe,
Banda,
Dennis Mundia
MosesChatulika,
Eustace
retail supply and demand
Zambia investments must
55 of the Bank of Zambia Act
sound and efficient operation
Salufu, Lyness Phiri Mambo,
Mainza,
Sylvia Muyobe
conditions. So as much as BoZ
carry a minimum amount of
No. 43 of 1996 and section 78
and development of the
Kabinda Kakoma Kawesha,
Kalimukwa,
Beatrice
does not use the commercial
risk. To ensure that reserves
of the Banking and Financial
financial system.
Calvin L Habasonda, James
Nalutongwe Kalale, Raphael
banks' retail prices for rate
are not subjected to extreme
Services Act of 1994,as
Cur rently staff in the
M u n g a b o , O w e n m o o ka ,
Kasonde, Chanda L J
determination they
risks, the Bank's policy and
amended in 2000, Bank
department are as follows: Dr
Kabwe Kandeke, Fidelis S
Punabantu, Mankolo Beyani,
inherently influence the rates
guidelines that gover n
Supervision Department is
Austin Mwape, Norbert
Chamunda, Francis Ilunga,
Bornwell Shabwalala, Mable
at which commercial banks
placement of investments
responsible for licensing,
Mumba, Lameck Zimba,
Ephraim I Musilekwa,
Namakobo Sikanyiti and
quote on the interbank.
undertaking pr udential
Wilson C Kalumba, Kambole
Mbinga M Kafunya,
Musonda Kasoma
As a way of promoting market
!
Minimum credit rating of
supervision and regulation of
J Sikazwe, Monica Chama
Dionysius Makunka,
determination of the
AA for institutions that
Bank Supervision Department
ix
Zambia's Currency Structure 1964-2003 Colonial Era
FRONT
From Page i
Currency Act of 1967 saw the
birth of the Zambian kwacha
and ngwee replacing the
Zambian pound, shilling and
pence in 1968. The new
currency designated the
main unit as the Kwacha
comprising of 100 ngwee.
The new Zambian Kwacha
came into being in 1968 and
had the following banknotes
and coins in its family: K1,
K2, K10 and K20 banknotes
and 50 ngwee, 20 ngwee, 10
ngwee, 5 ngwee 2 ngwee and
1 ngwee in coins. The official
rate of the Kwacha was one
half the of the old unit
(pound) and or US$1.40. The
new K1 was equivalent to the
old 10s, while the £5 (Five
pound) banknote was
equivalent to the K10, the £1
was equivalent to the K2 and
the old 5s was replaced by the
newly introduced 50 ngwee
paper note.
In coinage the old 2s piece
was replaced by a 20 ngwee
while the 1s and 6d were
replaced by the 10 ngwee and
5 ngwee respectively. Table 4
below illustrates the
conversion of the old
currency i.e. the Zambian
pound shilling and pence to
the Zambian kwacha and
ngwee.
Table 4:
Conversion of Zambian
Pound, Shilling and Pence to
Zambian Kwacha and Ngwee
Denomination in Zambian
Kwacha and Ngwee
Zambian Pound (£) Z a m b i a n
Shilling (s) Zambian Pence
(d)
K20
£10
K10
£5
K2 £1
K1
10s
50ngwe
5s
20ngwee
2s
10ngwee
1s
5ngwee
6d
Source: Bank of Zambia
W e
b
s
i
t
e
(www.boz.zm/currency)
The Zambian kwacha
continued to be linked to both
the British pound and the
United States dollar and as
such the devaluation of the
US dollar on 15th August
1971 saw the Kwacha
appreciate through its link
with the British Pound (on
23rd August 1971). The rate
of the Kwacha was then fixed
at K1.7094 being equivalent
to £1.00. In December 1971
Zambia broke her currency
ties with the British unit. The
Kwacha was then linked to
the US dollar re-establishing
the official exchange rate at
K1 equivalent to US$1.40.
The devaluation of US dollar
in February 1973 saw the
Kwacha's gold reserves
reduced by 7.89 percent. To
cushion such shocks, the
Bank of Zambia introduced a
4.5 percent fluctuation range
for the Kwacha. During this
period the Zambian pound
circulated alongside the
Zambian Kwacha until 31st
January 1974 when the
SOME OF THE OLD ZAMBIAN BANKNOTES
change in the design of all the
banknotes in 1980. By 1980
the 50 ngwee paper note had
been completely withdrawn
from circulation.
Specimen
1986 -1991
Low copper prices and
continued increased fuel
prices on the world market
were some of the major
contributing factors to the
declining economy. Inflation
from the mid 1980's to the
early 1990's continued to
gallop at 3 digits. In order to
meet the public demand for
cash in the economy it was
necessary to introduce a
further banknote and in 1986
the Bank of Zambia issued
into circulation the K50
banknotes. Another addition
to the family of banknotes
was the introduction of the
K100 and K500 banknotes in
1991. During this period the
K1 was replaced with a coin
of the same denomination
while the K2 paper note
ceased to exist and was
eventually withdrawn from
circulation.
Adverse economic factors
continued to contribute
greatly to the depreciation of
the Kwacha which was
steadily falling by 1985 the
K1 was equivalent to
US$0.41
BACK
Specimen
1964 SERIES
FRONT
Specimen
BACK
Specimen
BACKSERIES
1964
Specimen
1964 SERIES
FRONT
Specimen
withdrawal process was
completed and the sole legal
tender became the Kwacha
and ngwee.
Post Socialist Era
1973-1974
Zambia political landscape
changed and gave birth to the
“One Party Participatory
Democracy in 1973”. To
commemorate this historic
event in Zambia's political
history the Bank of Zambia
issued a commemorative 50
ngwee coin to join the rest of
the nation in celebrating the
birth of the Second Republic
on 13th December 1973.
Other currency changes
included changing the colour
of the 50 ngwee banknote in
order to eliminate the
confusion that appeared to
exist between the 50 ngwee
banknotes and the new K5
banknotes; hence the multicoloured 50 ngwee banknote
made its first appearance in
April 1974 but was later
phased out of circulation.
During this period the
Zambian kwacha depreciated
a little against the US dollar
with the official exchange
rate at K1 equivalent to
approximately US$1.28. By
the late 1970's the Kwacha
had depreciated further and
was below USD$1.
1980
The currency structure in
1980 remained the same
with the highest
denomination still being the
K20; however there was a
FRONT
BACK
FRONT
BACK
1970 SERIES
FRONT
BACK
1972 SERIES
BACK
FRONT
Specimen
Specimen
1986 SERIES
FRONT
BACK
Specimen
Post Economic Liberalisation
Era
1992
In the early 1990's Zambia's
political landscape changed
yet again with the country
holding its first multiparty
politics in October, 1991. The
advent of multiparty politics
ushered in the Third Republic
and an era of economic
liberalisation. Under the new
liberalised economy the
government made policy
decision that led to the
changing of the features of
the Zambian currency from
bearing the portrait of the
Head of State to the current
features which bear the
famous Fish eagle and other
important national
monuments, wildlife and
birdlife that characterize the
rich culture and heritage of
the Zambian people. Apart
from changing the
appearance of the banknotes,
there were no additions to the
family of banknotes.
However changes included
the replacement of the K5
and K10 paper notes with
coins in the same
denomination. Smaller
denominations of coins were
slowly disappearing from
circulation and thus the
Specimen
1986 SERIES
FRONT
BACK
1987 SERIES
FRONT
BACK
Specimen
Specimen
1990 SERIES
FRONT
BACK
Specimen
Specimen
1990 SERIES
FRONT
BACK
Specimen
Specimen
1986 SERIES
lowest coin in circulation was
the newly introduced 25
ngwee. As inflation levels
continued to remain high, the
members of the public did not
readily accept coins given
their diminishing purchasing
power.
Hence increased
public demand for banknotes.
1996
As inflation continued to
remain relatively high and
the demand for cash in the in
the economy began to
increase, the Bank of Zambia
further introduced three
banknotes in May 1996
namely; the K1,000, K5,000
and K10,000. Continued poor
economic performance with
annual GDP growth
averaging 2- 4 percent in the
last decade contributing to
diminishing employment
opportunities among other
things were some of the
factors that further attributed
to the public's loss of
confidence in other forms of
formal payment instruments
such as cheque. Thus further
increasing the public's heavy
reliance on cash for many of
its transactions.
The huge demand for cash
payments by the public in the
economy was a major
contributing factor to the
steady increase in currency in
circulation (CIC) during the
same period from K65.4
billion in 1994 to K671 billion
in 2003 (i.e. representing a
926 percent increase).
During the mid 1990's the
Kwacha's depreciation
against the US dollar had
worsened with US$1
equivalent to approximately
K1000.
The current currency
structure of 2003
The current family of
Zambian currency includes
nine (9) banknotes namely
the K20, K50, K100, K500,
K1, 000, K5, 000, K10, 000,
K20, 000 and K50, 000. The
K20, 000 and K50, 000 were
introduced as high value
notes in September 2003. In
coinage, though not in
circulation, there are five (5)
denominations as follows:
25ngwee, 50ngwee, K1, K5
and K10.
Following the Board approval
in June 2000 to restructure
the national currency, the
Bank of Zambia embarked on
the implementation of the
currency restructuring
programme. The currency
restructuring programme
was to introduce a new family
structure to the national
currency.
This new structure was aimed
at making the Zambian
currency more responsive
and efficient in meeting
payment demands. In
addition, it was envisaged
that the introduction of the
two polymer banknotes
would bring about financial
benefits that would result in
reduced re order costs of
currency banknotes.
To Page xi
1972 SERIES
1983 SERIES
1985 SERIES
1988 SERIES
1989 SERIES
1981 SERIES
FRONT
BACK
FRONT
Specimen
Specimen
BACK
Specimen
COINS:
1974 SERIES
FRONT
Specimen
Specimen
1987 SERIES
FRONT
BACK
Specimen
1992 SERIES
Specimen
BACK
Specimen
1965 SERIES
COINS:
1992 SERIES
COINS:
1992 SERIES
COINS:
1992 SERIES
1976 SERIES
1986 SERIES
x
From Page v
ii. M o n e y w a s m o r e
convenient to use compared
with the barter system, as some
commodities used under the
barter system were heavy to
transport; and
Iii. Money enabled trading
parties to overcome the double
coincidence of needs principle,
which was a bedrock of the
barter system.
The use of banknotes and coins
as legal tender, however, had its
own disadvantages such as
theft.
Accordingly, cheques
were introduced as bills of
exchange to mitigate some of
these risks.
POST-COLONIAL ZAMBIA
In 1964, Zambia got
independence from Britain and
became a Republic. The Bank
of Zambia was created and took
over the responsibility of
providing currency for the
country.
The Zambian Pound was issued
and became the main payment
instrument in the country.
Subsequently, the Government
decided in favour of
decimalisation and designated
the main unit as Kwacha
comprising of 100 ngwee in
1967. Thus on January 16,
1968, the Zambian Pound was
replaced by the Kwacha with
the new Official Rate equal to
one half the old unit, or
US$1.40. The £5 note became
K10, the £1 note K2, then ten
shilling note one Kwacha note
and a new 50 ngwee note was
introduced to correspond to the
old 5 shillings, 2 shilling coin
became 20 ngwee, one shilling
coin became 10 ngwee and 6
pence became 5 ngwee.
During this period, the cheque
payment system grew in
relative importance as a means
of payment due to the
associated inefficiencies of
currency namely:
i. The high cost of minting the
money; and
ii. The high risk of keeping
cash as an asset as it can be
easily stolen.
Fu r t h e r m o r e , e l e c t r o n i c
payment instruments in the
form of telegraphic transfers,
mainly through Post Offices,
were also in use.
Increasingly it became clear
that payment systems in the
country were inadequate and
insufficiently served the needs
of the population. Payment
services were mainly provided
by commercial banks and the
Bank of Zambia. It also became
very clear that the payment
systems available had serious
inefficiencies. Cheques would
take as long as 7 days to clear
for local cheques and as long as
21-30 days for out of town
cheques.
Additionally, cheque frauds
became prevalent. Risks also
surfaced for the cheque clearing
process as clearing and
settlement were not separated
and were both done at Bank of
Zambia.
Consequently, commercial
banks acted as if Bank of Zambia
had guaranteed all settlements.
This coupled with the fact that a
manual book entry system was
used to maintain commercial
bank settlement accounts, very
often resulted in commercial
banks overdrawing their
accounts, with these positions
only being determined the
following day.
These inefficiencies resulted in
the drive to reform and
modernise the payment
systems.
This drive picked
momentum in the 1990s when
Government adopted a
liberalised market economy.
PAYMENT SYSTEMS AFTER
1990
Background
In 1991, Government signalled
a policy change from a centrally
planned command economy to
a free market liberalised
economy. With this change, it
was realised that the existing
payment systems were not
adequate to support a
liberalised economy.
A move towards more
electronic payment systems
was seen as desirable as such
payment methods are faster,
more efficient and more
convenient.
Consequently, in 1994 the Bank
of Zambia adopted a program to
reform and modernise the
payment system. The reforms
were divided into short term
improvements, medium term
improvements and long term
plans.
Short term improvements
The Bank of Zambia identified
priority areas for reform and
those aspects of the payment
systems that could be reformed
immediately.
I. Cheque Clearing
The cheque clearing system
was identified as one of the
areas which needed urgent
reform.
The clearing function was
separated from the settlement
function with the Transitional
Zambia Clearing House being
established in 1997 to conduct
clearing of cheques. This effort
largely removed Bank of
Zambia's exposure to
overdrawn commercial bank
accounts.
II. Cheque Standards
In conjunction with the Bankers
Association of Zambia, the Bank
of Zambia embarked on a
project to introduce cheque
standards. These efforts were
aimed at curbing cheque frauds
which had become rampant. In
this regard, cheque and paper
standards were developed.
These standards enhanced
security on cheques and
allowed for the introduction of
electronic cheque processing.
However, the Bank of Zambia
was eager to further improve
the payment systems.
Attention was therefore shifted
to the medium term
improvements.
Medium term improvements
To consolidate the reforms in
the cheque processing system
that had been implemented,
the Bank of Zambia in
cooperation with the Bankers
Association of Zambia focused
their attention on a number of
reforms. These included:
I. Cheque Clearing Rules
To further improve the cheque
clearing process, efforts were
put in place to introduce new
clearing rules which took care
of risks that remained in the
clearing process. These rules
set out:
a. Very clear entry criteria;
b. Rules for the management
of the clearing house; and
c. F a i l u r e t o s e t t l e
arrangements.
These rules were more robust
and largely addressed the
weaknesses that had existed in
the manual clearing process.
II. Automation of Cheque
Processing
Work commenced in early 1998
to automate cheque processing
from a manual processing
environment.
Magnetic Ink
Character Recognition (MICR)
processing was introduced with
all cheques required to have
MICR code-lines.
This allowed details of cheques
to be read by MICR readers
hence automating the process
of inputting cheque details.
Further, commercial banks
were now required to submit
electronic files for outward
clearing cheques to the Zambia
Electronic Clearing House
Limited (ZECHL). The ZECHL
was incorporated as a nonprofit making venture between
bank of Zambia and all
commercial banks in 1999 to
provide clearing services.
III. Direct Debits and Credit
Clearing
Apart from use of notes and
coins and cheques, very few
alternatives for making
payments existed for
companies and consumers.
Companies very often paid
The Historical Development of Payment Systems in Zambia
salaries to employees by means
of cheques or in cash. In this
regard, in 1999 work
commenced to introduce Direct
Debits and Credits Clearing as a
means of making payments
electronically. This payment
instruments could be used by
companies to deposit salaries
directly into employees'
accounts.
Furthermore, consumers could
now conveniently make
payments for utility bills by
issuing mandates to utility
companies eliminating the need
to queue up to pay bills on a
monthly basis.
IV. Mobile Phone Payments
In order to increase the choice
of payment instruments
available to consumers, Celpay
Zambia Limited was allowed to
introduce mobile phone
payments in 2003.
Celpay
Zambia Limited allowed
customers who had signed-up
to be able to purchase airtime,
pay utility bills or transfer funds
using their mobile phones. With
the introduction of mobile
phone payments, Zambia
became one of the earliest
countries to adopt mobile
phone payments in the country.
V. Automated Teller Machines
and Point of Sale Machines
Commercial banks also started
working on improving the
variety of payment methods
they offered to customers.
Consequently, banks began to
introduce Automated Teller
Machines, to allow customers
access their funds without
entering the branch, and Point
of Sale Machines which allowed
customers to make payments
for goods or services in
supermarkets, restaurants and
hotels as well as other
merchant organisations.
VI. Real Time Gross Settlement
System
Whereas the retail payment
methods available to
consumers were increasingly
being improved and the variety
being increased, interbank
payments remained behind.
Commercial banks would
exchange large values by
issuing manual instructions
which were then updated on the
books of the Bank o Zambia.
Consequently, the bank of
Zambia partnered with the
Bankers Association of Zambia
to implement the Real Time
Gross Settlement system
(RTGS) which would allow
banks to exchange large value
payments electronically in real
time on a transaction by
transaction basis.
To be Continued
Risk Management Department
Currently, staff in the department are as follows: Simon Sakala, Evans Kabunga Luneta, Juliet Chisembe Kawesha Mucheleka, Maximo C
Kangwa and Sheila Kasaro Mbewe.
Zambia's Currency Structure 1964-2003 Colonial Era
FRONT
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2003 SERIES
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xi
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BoZ clocks 45 years Regional office
From Page viii
envisaged to be in place by early 2010.
However, despite some of these
notable achievements, the low level of
financial access remains one of our
main challenges in facilitating
economic empowerment of many of
our citizens. Further, in view of a
number of outstanding FSDP issues
and the recent developments in the
global financial sector, Government
granted an administrative approval to
extend the FSDP beyond the initial
June 2009 timeline. A results-based
FSDP Phase II project document has
since been developed with assistance
from our cooperating partners and was
recently discussed (on 20 October
2009) with a number of key
stakeholders at a consultative meeting
in Lusaka. This was done as part of the
process to bring stakeholders on board
and build consensus on the way
forward. Following the consultations,
approval from Cabinet will be sought
during the last quarter of 2009 for the
extension of the FSDP programme to
run until December 2012.
The FSDP continues to be the country's
vehicle for financial sector reforms and
the Government of Zambia is
committed to achieving a stable,
efficient and inclusive financial sector
that supports all aspects of the
economy. The implementation of the
FSDP has gathered significant pace
and with the continued support
received from stakeholders thus far, we
are certain that the financial sector
reforms set out will be achieved.
How would you describe the
soundness of the financial system
45 years after coming into being of
the Bank of Zambia?
The Zambian banking sector has over
the last 45 years experienced
significant growth both in terms of the
number of players and size of the
market.
At independence in 1964, there were
only three banks in operation, all of
which were foreign owned. By 1980,
there were six banks in operation
increasing to 14 in 1990. In 1997, the
number of banks reached 22 and in
2000 the number declined to 14
following a spate of instability in the
sector resulting in some bank closures.
The number declined further to 13 in
2004. Currently there are eighteen
registered banks.
In terms of size, total assets increased
from K1, 483.5 billion (1998) to K17,
579.3 billion at end September 2009,
whilst total deposits increased from
K4. 4 billion (1998) to K12, 432.0
billion at end September 2009.
Currently, the sector's financial
condition is satisfactory and all banks
are adequately capitalized whilst the
liquidity position has remained
satisfactory.
Over the last seven years, the capital
adequacy ratios averaged by 19.8% for
primary regulatory capital and 22.5%
for total regulatory capital.
As at the end of September 2009, the
sector's total assets were K17, 579.3
billion whilst the asset structure
continued to be dominated by 'net
loans and advances' at 41.7% of total
assets whilst 'investments in securities'
made up 18.5% of the total assets.
Other significant balances were
'balances with foreign institutions' and
'balances with Bank of Zambia' at
14.1% and 13.2%.
The quality of the sector's assets has
overly been satisfactory and although
gross non-performing loans peaked at
13.1% it has averaged 9.2% since
2002 thus remaining within acceptable
levels. The deterioration at the end of
September was largely on account of
an increase in the gross nonperforming loans especially in the
agricultural sector which arose as a
result of a deterioration the exchange
rate and defaults in the retail loan
portfolio arising from job losses in the
mining sector. Significant growth has
also been recorded in household debt
which as a proportion of total loans has
increased from 12.3% to 30.0%. As a
percentage of GDP, household debt
grew from 1.2% in 2006 to 4.3% in
2008.
Non-performing loans have however
been adequately provided for with the
'allowance for loan losses to minimum
regulatory requirement' ratio improving
to 103.2% whilst the 'allowance for
loan losses to gross non-performing
loans' averaged 88.0%.
Zambian banks earnings performance
has continued to be satisfactory with
'return on assets' averaging 4.5% and
'return on equity' averaging 37.7%.
Liquidity in the sector has remained
satisfactory with the proportion of
'liquid assets to total deposits and
short-term liabilities' (the 'liquidity
ratio') averaging 59.1% and the ratio of
'liquid assets to total assets' averaging
51.4%. Liquidity could however
become an issue in future due to a
notable increase in the loans to deposit
ratio which increased from 29.9% in
2002 to 66.3% at end September,
2009 and hence a deterioration in
asset quality could result in liquidity
pressures.
Picking two indicators, inflation
and interest rates, is there hope for
attaining reduced numbers?
Although there are inflationary
pressures towards the end of the year,
inflation in the remaining period to the
end-year will continue to trend towards
the 12.0% end-year target. In fact our
forecasts reveal that inflation is likely to
end the year below 12.0% (around
11.0% and better) if there is no
increase in the fuel prices. This is
despite risks from price increases on
manufactured goods in response to the
upward adjustments in electricity tariffs
in the month of August 2009; and
seasonal increase in prices of beef and
beef products.
With regards to interest rates, our
expectation is that they should start
falling as inflation trends downwards
and the fiscal situation improves.
What are the Central Bank's points
of focus in the short term and long
term?
Since the market reforms of 1992, the
focus of the Bank of Zambia has been
price stability on one hand and
financial system stability on the other.
Price stability is an issue of monetary
policy and the primary goal of
monetary policy is low and stable
inflation.
This is the Bank's long term focus. In
monetary policy there is a hierarchy of
goals divided into three levels. At the
lower level there is the immediate goal
and at the meso level there is an
intermediate goal while at the highest
level we have the ultimate goal of low
stable inflation.
To achieve the ultimate goal, there is
need for a nominal anchor through
which inflation expectations can be
pinned down or secured. In the case of
Zambia, the nominal anchor are the
monetary aggregates divided into
reserve money, which is the
operational target and then broad
money, which is the intermediate
target. Reserve and broad money
targets are short term and short to
medium term goals, respectively.
Reserve money targets are set in such a
way that will not cause broad money to
cause inflationary pressures.
This is on the understanding that there
is a direct and stable relationship
between reserve money and broad
money and that broad money has a
significant positive relationship with
prices.
There are a number of instruments that
we use on a regular basis in order to
influence reserve money towards the
desired target. These are indirect or
market based instruments stated
earlier, which are OMO and
Government securities.
The OMO instruments used at the
moment are REPOs and term deposits.
For instance, if reserve money growth
is out of target or threatening to be
above target, the Bank will use its OMO
instruments to absorb excess liquidity
from the banking system and the
opposite is true.
The role of the Regional Office
is to provide banking and
cur rency ser vices, and
facilities for trading
Government securities to the
northern region of Zambia.
The functions of the Regional
Office mirror those of the
Head Office, with most of the
departments represented.
Currently staff
at the
Regional Office are as follows:
Morris Mulomba, Patrick C
Malambo,
Pa t r i c k C
Mulenga, William Zimba,
Boniface S Malambo, Sendo
Mutukwa, John
Litaba,
Ronald
Bwalya,
Vernon
Siputuma,
Tisa
Banda,
Maurice
Katongo,
Felix
Goma, Mathias Samafuwa,
Charles Lubumbe, Mwila K
Cheelo, Kennedy Mutale,
Newton Chanda, Arnold
Zulu, John
Simutenda,
Sinsamala
Zulu,
Brian
Mulenga,
Daniel
Miti,
Shikundu
Fikoloma,
Mubanga Chipopola, Henry
Ngonga, Philip Zulu, Nelson
Kaluba, Rhoda P Musonda,
Lawrence Ndumba, Mbewe
Irene
Nkole,
Evans M
Chatupa, Esther N Sikazwe,
Everisto B Mwansa, Dorothy
Zulu,
Andrew K
Boma,
Mavis, Muyangana, Towela N
Lengwe, Jane Sibande, Tabita
M
Chaila,
Mweempe M
Sampa, Raphael Munsaka,
Masinge Masinge, Grace
Mwanza Longwe, Wallace
Bwalya,
Moses
Salinda,
Likezo Sililo, Bwembya E
Mulopa, Charles Mukuka,
Joseph
Daka,
Ackim H
Mweemba, Patrick T Dube,
Leonard Malasha, Munsanje
Saansa, Mary Walya Banda,
Rodgers Mwansa, Robert
Mtonga, Ednasi Nkosi, Gift
Haziyu, Gilbert Nyirenda,
Annie
Mugala,
Philip
Te m b o ,
Lovemore F
Chakatala,
Priscilla L
Hachoombwa, Brian Bwalya,
Maureen
Jere, Mwiza M
Mhango, Chisha Kanchule,
Elvin Sindala, Bilton Kunda,
Lydia
Namwila,
Misozi
Mapala Chileshe, Munalula
Kayama,
Stella
Phiri,
Kamima
Nguni, Bevlous
Milimo, Kelvin M Kapota,
Rosemary Kamfwa, Patrick
Bwalya, Actor J Kaambwa,
Mathews Zulu, Joseph D
Mutale, Lily Maonde, Joseph
Chidoma,
Mutale Kapolyo
Goma, Leonard
Mulilalila,
Grant Mwaba, Charles M
Hamalala, Felix Kapapula ,
James
Chipulu, Geoffrey
Mukupa, Licoln
Matenga,
Petronella K M C Mpundu,
Bruce Nalumino Chyapeni,
Maxwell Matapula, Esther N
Chumba,
Percy
Ntema,
Collins K Sankwana, Mukuka
R Puta, Agaster S C Mwelwa,
Joseph M Kawaya, Kamuti C
Sichilengi,
Jane
Kayesa,
Maybin
Masando,
Harry
Mulenga, Jonathan Misapa,
Diana Tembo
Chisulo,
Newton
Kalaba, Orita M
Mutoloki, Nayoto
Moola,
Marjory Mumba
Sisya,
Margaret K Siwale, Beauty
Mwansa,
Maureen B M
Muyaano, Pamela M Chonge,
Marvis C Kampeni, Chileshe
K Sindazi, Lombe Mulanda,
Rodrick Kaluya, Miriam
Mubwaluka Mutati and Abel
Mwale.
The Structure and Functions of the Finance Department
From Page iv
Levyson L, Phiri,
Jane
Kangwa, Rhoda Mbazima,
experts in identifying user
Simuyemba, Catherine Silume
Sylvia Chongo Banda, David
training needs for all
!
Ensuring that the software
Kadeyo, Rhoda Manda, Juliet
K A Nyirenda, Prisca Yeta
existing and new systems.
used is efficient and
K N Kambani, Cyprian Mumba,
Njolomba,
Desmond
relevant to the production
Jennipher C Chekwe, Jack K
Ntembelwa, Davies Mutengo,
of the required output and
Moyo, Mickey Phiri, James
I m a s i ku
Mwananumbi,
Chishimba Yumbe, Freda
that reports produced meet
Msiwila,
Chizaso Patson
Jennipher P Mpehle, Ngosa
Tamba, Belly H
Dubeka,
user requirements
Mhango, Luckness M Musisi,
Alex Chewe, Josephine C
Hamish I
Chipungu,
Eric
!
Ensuring that data and
Gabriel
Banda,
Lastone
Munsongo and Patrick Tentani
Masumbu, Felix Sinkala, Paul
system back-ups are
Lukanda, Florence M Pandala,
Banda.
Muyinda, Evans Mukonka,
performed on a timely
Francis
Nyungwi,
Susan
Facewell Chisha
Musonda,
basis. Liaising with IT
xii
12
SPORTS NEWS
SEPTEMBER 2009
Financial sector growth
factors outlined
Regional Director, Mr Morris Mulomba paid a courtesy call on 3rd Infantry Brigade Commander, Brigadier General Ken Kankiza, stationed
at the Brigade Headquarters in Minsundu, Ndola
Regional Office Social
Club patron inducted
Following the transfer of its
former Patron and Regional
Director, Mr Peter Banda from
Regional office to Head-office,
the Regional Office Social
Club hosted an induction
cocktail party in honour of the
new Patron and also Regional
Director, Mr Morris Mulomba.
During the same function,
seven members of the club
were conferred with honorary
membership.
Three of them were BoZ
employees, two were retired
BoZ employees while the
other two were non-bank
employees.
These were Peter Banda, Alex
Chewe, Jonathan Misapa and
Ben Mumba. Others were
George Simwanza, Peter
Mayuka and John Banda.
The seven were conferred
with the honorary
membership due to their
dedication and commitment
to the club.
In welcoming guests to the
cocktail, Social Club
Chairperson, Mr Newton
Kalaba informed the
gathering that the club had
been in operation since 1982.
He said that among its main
attraction was the well
equipped gymnasium which
was of a high standard relative
to other social clubs on the
Copperbelt.
He also boasted of a
committed workforce and a
supportive membership.
Kalaba further mentioned that
renovations that were in
progress, once completed,
would boost their pride
further. The works that were
still underway included
paving of the drive way,
renovation of external toilets
and renovation of the Kwacha
bar stools.
Kalaba also informed the new
patron that the Club House
was deprived of outdoor
facilities of its own. However,
he mentioned that this did not
limit the club's endeavour to
expose its members to various
disciplines.
The Social Club currently has
eight sports disciplines and
these include golf, football,
netball, chess and volleyball.
O t h e r s a r e b a s ke t b a l l ,
scrabble and pool.
The club is currently
considering introducing table
tennis and revamping the
darts club.
BoZ golf team thrashes opponents
The BoZ and ZRA Golf tournament Prize Giving ceremony was held at the Livingstone Royal Golf Club on 2nd August 2009. Dr
Abraham Mwenda (right) acted guest of honour.
The Bank of Zambia golf
team thrashes their Zambezi
River Authority (ZRA)
counterparts when they
clashed in a 36 holes
tournament played at the
Elephant Hills Golf club in
Zimbabwe and at
Livingstone Golf Club - 18
holes apiece.
In a write up to the
Zambanker, Regional Office
Golf Team captain Actor
Kaambwa said BoZ won by a
total of 284 points against
ZRA's 184 points. Kaambwa
said ZRA players were no
match for the seasoned BoZ
players.
He also said he was looking
forward to finishing ZRA off in
the second leg of the
tournament earmarked for the
Copperbelt. He further said
he was looking forward to
Regional Office vs Head office
encounter which he believes
would end in a disaster for
head-office. He says his team
has improved tremendously.
He further called on other
employees to consider joining
the sport. Kaambwa added
that playing golf was an
excellent pastime away from
the noise and other worries of
life.
The first
prize in the
individual category was won
by a ZRA player Zololayi Shoko
while the second prize was
won by a BoZ team player
Robert Banda.
PRODUCED AND PUBLISHED BY THE BANK OF ZAMBIA, PUBLIC RELATIONS DIVISION, GRAPHICS: CHISAMBA EVANS,
From Page 1
have adequate collateral to
back the loans. He added that
the proposed collateral for use
on the facility would be
Government securities, that is,
Treasury bills and Government
bonds with less than 180 days
to maturity.
Advantages of this facility
included the fact that
m o n e t a r y p o l i c y
implementation would be
enhanced as it was expected
that the rate on the facility
would be used in signaling the
monetar y policy stance
through adjustments in the
rates prevailing on the facility.
The facility would also
contribute to inducing banks to
hold lower levels of
precautionar y balances,
thereby enhancing the central
bank's open market operations,
contribute to money market
development through
enhanced stability of the interbank money market and
increased liquidity and also
provide a mechanism that
would be used as an early
warning system to detect
liquidity problems of particular
banks at an early stage.
On the current increase in the
level of foreign reserves
equivalent to five months
import cover, the first after
over 35 years, Dr Fundanga
said this would raise the
confidence in the economy
among investors. He added
that it would also enhance
Zambia's credit standing in the
international financial market
and help private firms to
borrow in the international
financial markets at a
relatively low cost.
On international and
domestic borrowing, the
Governor said Zambia had a
programme that guided the
level of domestic borrowing
per year taking into account
the need to avoid starving the
private sector of investible
funds.
For the international debt
stock, Dr Fundanga said the
level
was sustainable,
meaning that from the
export earnings the country
generated and given the
period and interest costs, the
country was able to service
the debt without creating a
serious strain or crisis to the
economy.
'Generally, Zambia's fiscal
deficit has been brought
under strict limits to ensure
sustainability of public debt
over the long run. In 2010,
Government will lower its
domestic borrowing to 2.0%
of GDP,' he said.
Heavy investment in
infrastructure and social
sector, yet revenues from the
domestic sources were still
low as a percentage of GDP,
attraction of more foreign
capital to leverage economic
growth given the little money
the country had and
diversifying the economy and
exports to shield the country
from adverse shocks
associated with dependence
on a mono product for export
earnings were some of the
challenges that Dr Fundanga
cited in relation to economic
growth.
Free-market economy 'bears fruit’
From Page 1
Private Sector External Debt
(PSED) grew by 42.4 percent to
US $3,042.0 million at end of
2007 from the US $2,136.0
million at the end of 2006 and
was three times higher than
the pre-survey position of US
$1,021.4 million.
About 75.0 percent of the stock
of PSED at end-2007 was longterm, and was mainly in the
form of loans and advances.
A larger share of PSED was
owed to affiliates compared
with non-affiliates. The survey
further revealed that the
mining sector was dominant,
while Switzerland ranked
highest among the major
source countries in 2007.
Another remarkable finding of
the study was the increased
expenditure on Corporate
Social Responsibility (CSR)
programmes of most of the
surveyed firms, which moved
to US $1,646.0 million in 2007
from US $211.0 million
recorded in 2006.
The report stated that the
increased CSR activity was
largely dominated by the
mining sector with the main
target areas being
environment, health and
safety.
Employment levels also
showed signs of improvement
in the study, with results
pointing to an increase by 10.3
percent moving to 69,992 in
2007 from 62,896 in 2006.
Under employment, the mining
sector dominated, accounting
for 47.9 percent.
The unskilled and skilled
categories ranked higher in
both years with a concentration
on the Copperbelt and in
Lusaka. On the lead influence
of investor perceptions, the
study revealed that the major
factors which determined their
initial decision to invest in
Zambia were the environment
and natural resource
endowment, followed by the
domestic political scenario.
Most respondents indicated
that the domestic
macroeconomic condition, the
domestic market size, fiscal
policy and financial system
stability had a positive impact
on their subsequent investment
decisions.
However, interest rates were
considered to have negatively
impacted on their investment
decisions.
Another draw back on the
investment decision of most
enterprises was the cost and
supply of electricity while the
cost of banking services was
also considered to have had a
negative effect on their
investments.
On the environmental and
health fronts of investment
decision making, only
HIV/AIDS and malaria had a
significantly negative effect on
investment decisions.
The Zambian Government's
promotion of a private sectorled free market economy, since
1991, called for economic
reforms that were and are still
aimed at the promotion and
facilitation of both local and
foreign investment.
These reforms were further
meant to stimulate economic
growth and development, and
to impact positively on both
poverty alleviation and
reduction.
In particular, the reforms were
characterised by the abolition of
price and exchange rate
controls, liberalisation of
interest rates, one hundred
percent repatriation of profits,
privatisation of some stateowned enterprises, and
removal of quantitative
restrictions on imports.
Trade reforms were aimed at
simplifying and harmonising
the tariff structure and free
entry to investment in virtually
all sectors of the economy.

ZAMBANKER- September 2009.CDR

Transcription

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