By Kombe Mataka
BANK of Zambia governor Denny Kalyalya says there are governors at BoZ that have been serving since independence without a specified tenure of office.
Speaking when he appeared before the parliamentary committee on national economy, trade and labour matters to discuss the consideration of the Bank of Zambia Bill No. 5 of 2022, Dr Kalyalya said there was need for clearly spelt out procedure of appointment and removal of governors.
“The other aspect that comes out in the bill is the institutional arrangements. Now one of the things that has been clearly spelt out are the procedures for the appointment and removal of the governor and deputy governors. Previously that was a grey area so to speak. Chair if you come to the Bank of Zambia you will see faces of governors who have occupied that position. You find that they are 15 in a space of 55 years, 57 years but if you look at the Auditor General (office) you are talking about four, that shows stability. So part of this arrangement is to ensure that we have stability in the governance of that institution,” he said. “The other aspect in the institutional arrangements is that we had for example, in 2020, a situation where when the governor was removed, it was very difficult to find an acting governor. A situation which was unfortunate because that should not be left to chance. The current law is proposing have a clear position where that will not be allowed to happen. The other one is the fact that for purposes of transparency and accountability, the governor and deputy governors have to declare their assets and liabilities 30 days following the enactment of the bill. This is to give transparency which also you honourable members are subjected to as public officers.”
He said the bill would also include two committees to enhance operations of the bank.
“Then operational matters, we have heard some comments on two particular committees that are being established. One is the monetary policy committee and the other one is the financial stability committee. Chair, these committees stand out. They are not subcommittees of the board. This is why they are being projected in the bill to be autonomous committees. We have heard some questions on how is it that the governor who is chair of the board can also be a chair of the committee. In any case, even in other countries when there is separation between the chair of the board and chair of monetary committee the governor does chair that,” he explained. “So this is to be established by law. The decision of the monetary policy is final. The board cannot alter once it is pronounced but there has to be accountability for that. In other countries individuals can appear publicly, individually, to defend what they stood for in those meetings.”
Dr Kalyalya said the bill would institutionalise operational autonomy, enhance the other aspects of good governance, which was previously dependent on the relationship that the governor had with the minister of finance.
“Chair, up to that point, the bank didn’t have any legally enshrined operational autonomy. The Bank operated mainly on the basis of the relationship the governor and then ministers of finance had. So if there was an unhappy relationship that also affected the operations of the institution but I am happy to say that even without that legal provision, since 1996, there had been some very good working relationship with the bank and the various ministers who occupied the position of minister of finance. But in 2016, the country saw it fit to actually to provide that (legal autonomy) in the law and that is what we have here as Article 213 subsection 5 which states that ‘the Bank of Zambia shall not be subject to the direction or control of a person or an authority in the performance of its functions’,” he said.
In his intervention, Pambashe PF member of parliament Ronald Chitotela feared that the BoZ was asserting powers which should ordinarily be for the Ministry of Finance.
“The bill is stating that the conditions that apply to a judge should apply to the BoZ governor when at recruitment stage the bill does not include on how. It just gives the powers to the President, the BoZ governor who is ratified by parliament but in the case of a judge there is a JSC, the Judicial Service Commission that advertises among judicial officers and they apply and JSC interviews and shortlists proposed nominees and submits the President. That is the process of scrutiny and recruitment. But here we seem more concerned to secure the exit process more than the entry process,” he noted. “In an event honourable (committee chairman Mutotwe) Kafwaya becomes president and appoints somebody who fails to perform, and because of the political nature we have where colleagues in parliament ratify and the party with the majority numbers ratifies, where if your party votes yes, you cannot go against it in an event that person fails to perform…The second issue is on the composition of the board. There is a representative from Secretary to Treasury but the details of the Act restrict that that sectary will not count for the purpose of the quorum and will not vote but meanwhile the Act empowers you to participate in debt management and to assist government in terms of debt management which is a department under Ministry of Finance? So that is an added responsibility you are assuming as a bank. In the committee you participate in terms of voting but you don’t want the Ministry of Finance to vote,” he challenged.
Chitotela said the 1996 BoZ Act does not allow to engage in business transactions.
“But the proposed bill is allowing to participate in business transactions both domestic and intentionally as a regulator but if for example Bank of Zambia chooses to buy shares in Zambia National Commercial Bank or Standard Chartered Bank, how do you intend to discipline or control the institution where you have interest?
According to the Constitution of Zambia you are mandated to be the chairperson of the BoZ and the BoZ is proposing to establish two sub committees, it gives a mandate to supervise and be a chair of those committees. Why can’t we propose that the deputy BoZ governor in charge of operations will be able to chair those? Why should it be the governor?” asked Chitotela.
But Dr Kalyalya said the proposed bill was a culmination of contributions from various relevant stakeholders.
And in response to Sinazongwe UPND member of parliament Gift Sialubalo who wanted to know why the enactment of the bill had become a priority after his firing in 2020, Dr Kalyalya said the matter had been on the cards since 2016.
Dr Kalyalya said the bill had undergone scrutiny by various sectors.
“…as regards the developments elsewhere regarding the operations of Central Bank, this is where we are getting our insights from. Yes, judges are appointed after recommendation from the Judicial Service Commission but there are other aspects which are different for example our judges have security of tenure which they can enjoy until they 67, up to 70 years. Here at most the governor will only have 12 years depending on when you were appointed. There are other constitutional officers which do not get scrutinised in that manner for example, the DPP (Director of Public Proseuctions). I could be wrong,” he said.
“What we are saying is when you are going in you are subjected to this double veto but when you are going out there is no veto. That is where the balancing is been…”
On the issue of him sitting on the board, Dr Kalyalya said, “it is important to keep an eye that there is coordination because you have to have coordination between fiscal and monetary policy. In fact outside the provision of the law there are memoranda of understanding which are drawn to govern that relationship so that you don’t leave things in ad hoc fashion.”
On assistance of debt management by the governor, Dr Kalyalya said: “this is a matter which has arisen. Many countries have gotten into debt problems and our country is no exception”.
“So received wisdom has it that you should involve those organs that are also responsible for some of the aspects of the fiscal [policy]. For example, in the proposed bill we are mandated to serve as a fiscal agent to the government which means we issue instruments of debt on behalf of the government. Surely wouldn’t you want to get some insights from a person who does that for you?” he said.
And BoZ deputy governor operations Francis Chipimo said the issue of debt has a direct impact on monetary policy hence the need for advice from the Central Bank.
“You have to have that collaboration with government in what happens,” added Dr Chipimo.
On participation of the Bank in business, Dr Kalyalya said, “This is carefully crafted that it is in furtherance of the objectives of the Bank. It is not that the Bank will work up one day and undertake some business activity. It has to be demonstrated that that is linked to the furtherance of the Bank. It is not any business honourable.”
Chitotela however insisted that there should be safety valves provided.
And Kafwaya argued that the governor would not be accountable if allowed to chair the board of the bank and the proposed subcommittees.
“This law is also providing that the governor can be removed on incompetence, but who is going to assess that competence? Who is going to assess the performance of the governor because you are literally the boss of everyone in the system?” asked Kafwaya.
Dr Kalyalya said the functions of the Central Bank would be to provide for price and financial systems stability.
“So in the bill it has been made very clear that, in an event that there is a conflict between the price and financial stability functions, price stability will take precedence. That specification was important,” Dr Kalyalya said.
Currently the Bank operates under the bank of Zambia Act number 43 of 1996 which as read together with the Constitution amendment Act number 12 of 2016 provides the legal framework for the creation and establishment of the Bank of Zambia.