By Mwenya Mofya,
SECRETARY to the Treasury Felix Nkulukusa says Permanent Secretaries will no longer be allowed to sit on parastatal boards effective January 1, 2022, pending law amendment.
And Nkulukusa says government could consider closing the Development Bank of Zambia (DBZ) because it is costing a lot of money, however, it would be difficult to do so as government would not have a financial instrument for economic development.
Appearing before the Committee on Parastatal Bodies, Wednesday, Nkulukusa said Permanent Secretaries would therefore delegate a representative to sit on parastatal boards, adding that this was an administrative measure to ensure separation between operations and oversight.
“In terms of permanent secretaries sitting on the board, the rules are that I do not sit on the board and neither do permanent secretaries because it compromises. The permanent secretaries oversee the operation of the board and the Act has specified that Permanent Secretaries will sit on the board. For example, the Act specifies that I sit on the Zambia Revenue Authority board, however, I will choose a representative in the Ministry of Finance who sits on the ZRA board so that I have an oversight in terms of administration,” he said.
“So while we are waiting for the alignment and amendment of the Act to be able to align to that, we thought we should take an administrative stance so that we can see how it works. So the permanent secretaries and since I am the chief controlling officer will not be sitting on the boards and will be issuing those instructions starting 1st January 2022. So we will put an administrative measure to make sure there is separation between the operations and the oversight.”
Luena member of parliament Mubita Anakoka raised concern over the current status of DBZ, describing it as a bottomless pit.
“The Auditor General’s finding indicates that DBZ is insolvent. If we are keeping DBZ in its current form, what will your office do differently to ensure that the company is able to deliver on its mandate? Has the government considered the possibility that DBZ represents a bottomless pit? If that is the case, is it very impossible to let it go? Is it not possible to think outside the box of doing things without DBZ?” he asked.
“It is consuming a lot of resources that could be used elsewhere. Most promoters failed to adhere to procedures. DBZ owes about K528 million in domestic arrears. What are we thinking in terms of enhancing regulations of DBZ so that fraudsters should not use the bank? It is very clear that DBZ has been used as a conduit for looting public financial resources. What are we going to do to mitigate that?”
Committee chairperson Brian Kambita also wanted to find out how much control government had over DBZ.
“How much control do you have in the Development Bank of Zambia? This institution is pathetically underperforming. According to this committee’s assessment, it looks to be deliberate and we are able to pinpoint who is responsible for the underperforming in that institution. The major reason why DBZ is underperforming is the underperforming loans which were wantonly issued.
They were issued with a lot of influence in such a manner that developers ended up having no capacity. These developers are then saying their underperformance is [because] they did business with the government who has not paid [them] therefore they cannot pay DBZ. Why hasn’t your office released funds?” he asked.
In response, Nkulukusa said government would implement a debt swap strategy in order to provide relief to suppliers and DBZ.
“The government owns about 97% of DBZ so we have overall control. Other shareholdings have the difference. On domestic arrears, this is one of the issues and there must be a separation. Someone should not go and say ‘I am borrowing the money and it is dependent on the third person paying me’.
If we did that then we will be creating a bad precedent. However, I want to confirm that it is true that there is this money owed to some of the suppliers of goods and services to the government who in turn owe DBZ. One of the initiatives in the budget speech was of the debt swap,” he said.
“For instance, DBZ has a loan book of about K1.6 billion. K528 million is claimed to be on suppliers to government while K270 million of that amount has been audited and confirmed and we are looking of doing a debt swap. We will get this amount supposed to be paid to suppliers who owe DBZ, we will do a cheque swap and pay this debt to DBZ and some taxes paid to ZRA. This is a policy objective and we are going to do it. The Minister will be coming with a supplementary budget with one of the proposals and provide fiscal space so that this can be done.”
Nkulukusa said government could consider closing DBZ because it was costing a lot of money, however, it would be difficult to do so as government would not have a financial instrument for economic development.
“On DBZ, can we do away with it? Probably yes, probably no. Yes, because it is costing government money. Probably if we did away with it we can save that money in the immediate term. No, because it is a financing instrument that we want to use for Zambia’s economic development.
We should be looking at DBZ and say ‘you have got these weaknesses, instead of going to lend these beneficiaries can you be an apex institution that creates a product and partner with a commercial bank that is able to monitor the promoters’? If we just kill it, we will not have a vehicle through which we can have strategic growth that we want to achieve,” he said.
“I totally agree that there has been a lot of political interference. Most of the people that have borrowed from DBZ have borrowed not with an intention to pay back. They did not matter whether their business suited or not. When you talk to the people in DBZ, they will tell you that even before the person who is borrowing money goes there, someone would have called and told them ‘there is this person coming, please can you assist them.’ The Minister told them under the new dawn government, whoever owes DBZ they should pay back.”
Nkulukusa said the new DBZ board to be appointed needed to be business minded and not allow the bank to be used for political expediency.
“First and foremost we need to clean their balance sheet and once their balance sheet is cleaned up, then we can have these partners that can inject resources in DBZ. DBZ can then have enough resources.
One of the ways to clean their balance sheet is to have this debt swap so that we can start improving their balance. We are telling DBZ that they should go and collect the resources without any interference from those people that have borrowed from DBZ,” he said.
“So far we have seen some improvement. For instance, in 2019, DBZ only managed to collect K50 million. In 2021, DBZ indicated that they are going to collect just about K100 million. So we are seeing some sort of improvement. We also need to change the mindset of the people and the board that will be put in DBZ so that they have a mindset of a business institution and not [be] used for political expediency.”
Meanwhile, Nkulukusa said the Secretary to Cabinet would issue a circular on the use of government vehicles.
“A circular should be issued with enhanced provisions to make sure that we have compliance. There will be no personal-to-holder vehicles. All vehicles will be utility vehicles. The directive that we got is that all senior government officials including Ministers will be entitled to only one utility vehicle.
The rest of the vehicles will be in the pool in case a vehicle goes to the garage and you can get one from the pool. The day that you will leave, you must leave the vehicle. If there is no provision for them to have these vehicles and there is no stay from the courts, then we should withdraw them,” he said.
“In the Ministry of Finance alone, I was counting in the car park, I saw a lot of vehicles carrying private number plates. The Secretary to Cabinet will be issuing a circular that unless it is for a specific reason, all vehicles should carry a GRZ number.
Whether it is a GRZ or private number plate, no private citizen is allowed to drive a government vehicle. For one to drive a government vehicle, you need to have government competence. So if there are private people driving a government vehicle, they are doing it illegally.”