Comedy of Errors at Bank of Zambia: Meaningless Appointments

By Hjoe Moono

The world over, Central Banks perform three main functions. First, they formulate and conduct monetary policy with the objective of keeping monetary expansion and inflation under control, and guiding bank credit to productive activities so as to aid economic growth.

Second, they are responsible for regulating commercial banks and non-banks financial institutions. Thirdly, they are supposed to manage the exchange rate so as to ensure relative stability as well as maintain domestic level price stability.

Zambia’s Central Bank, the Bank of Zambia (BOZ) has a mission statement that reads:
*”The mission of the Bank of Zambia is to achieve and maintain price and financial systems stability for balanced macroeconomic development”.*

Clearly this fits well in performing the main functions of prudential and effective central banking. Those three functions feed into the crucial roles in the financial and economic management of the country. As monetary and exchange rate policies play an important role in macroeconomic management of the country, and a well-functioning banking system is almost a prerequisite for smooth economic development, the future of the economy is vitally linked with the effectiveness and efficiency of the Bank of Zambia.

Over the years, in recognition of its importance, the BoZ had been strengthened through professional appointments of its governors and boards of directors and from its internal restructuring which saw an increase in the number of highly trained employees in most, if not all divisions and departments.

However, since September 2011, we have seen some regressive legislative measures and decisions taken on considerations of expediency, and, at times, lack of sound leadership. These have inhibited the BoZ from playing its role effectively.

Firstly, we saw the retirement of Dr. Caleb Fundanga (PhD-Economics, Konstanz University, Germany), who, with his combination of Dr. Denny Kalyalya (PhD-Economics, University of Massachusetts, USA) as Deputy Governor for Operations and Dr. Tukiya Kankasa Mabula (PhD-Law, University of London, England), showed us how effective Central Banking should be conducted, and indeed, prizes came Zambia’s way for prudential monetary policy conduct and outstanding central banking.

For six months after the firing of Dr. Fundanga after September 2011, the BoZ had no Governor. A caretaker governor, Dr. Bwalya Ngandu (PhD. Psychology, University of Birmingham, England) was appointed. We voiced concerns not against Dr. Ngandu-he is a fine academic, rare Rhodes Scholar– but against his suitability for the role.

We argued that though educated well, his education was not in line with the requirements of central banking and as such, he was the wrong candidate for the Governor role nor even deputy governor in charge of operations. However, all went on as usual, and then came the appointment and subsequent ratification by Parliament of Dr. Michael Gondwe, he too, a fine academic with a PhD in Law and experience in regional lending.

With that, the entire trio in charge of monetary policy formulation, implementation and general economic welfare was composed of people that did not have any training in what they were charged with doing. It was here that the comedy in central banking begun.

If the recent continued depreciation of the kwacha and depletion of reserves, inconsistencies in statutory instruments is anything to go by as an evaluation of the performance of BoZ since 2011 then we can safely say that BoZ under PF has been inefficient, and therefore reflects inefficiencies on those charged with economic governance of our country.

We feel that, with all due respect, unfortunately, at this critical moment, the incumbent Governor does not possess the necessary qualities to lead BoZ in the right direction. Coupled with the current Minister of Finance, we feel the economic team in the PF is unable to grasp the long-run implications of the current economic situation and the inadequacies of its ad hoc policy patchwork.

But then, to add insult to economic governance injury, we hear the PF government has appointed an ill qualified individual to take on the role of Deputy Governor-Operations after sending Dr. Ngandu to mainstream government as Permanent Secretary.

Again, let us ask ourselves, can we effectively run economic governance institutions like a cheap labour factory where anyone can do anything the boss says? What happened to professionalism at BoZ in just a few years of the PF? While we may have had concerns over the appointment of Dr. Bwalya Ngandu, his experience with the Development Bank of Zambia where he served as Director was a good source of comfort.

But if it is true that on Monday 10th March 2014, a new Deputy Governor who just completed an online masters degree (details to be confirmed) and was until his appointment a Centre Manager in one of the small branches of the Zambia National Commercial Bank/Rabo Bank along Cairo Road in Lusaka’s Northend, then it is a shame to the appointing authority, who, as stipulated in the BoZ Act is the President.

However, in all this, where are the presidential advisers? Where is the Minister of Finance to advise? Who is even proposing these names for the president? Has the country suddenly run short of well qualified economists to run the Central Bank? Was the PF government not prepared with good enough a team for such important roles before its assertion to power? Hasn’t the government, over the last three years noted many well trained and experienced economists that can function well at the central bank? Is there more to this appointment than meets the eye?

We think Zimbabwe next door is a clear example to learn from when ill qualified people are appointed to central banking just because they may have some political connections with the ruling elite. With an already poorly performing kwacha, we are wondering what the value addition will be in bring a former branch manager to run the core business of central banking.

We liken this to elevating, without experience and qualifications, a mere Magistrate to deputy Chief Justice before one can even qualify to be an advocate of the High Court of Zambia. The recent development has clearly created hindrances in career development of the professional staff already at BoZ.

We have no problems with appointments at all. What is important is that they are not illogically appointed. There must be value addition to the functions of the BoZ from such appointments. In such tough times when our economy is on the blink of failure, with the kwacha soon to hit the historic $1=K6, surely such “comedy” appointments could be reserved for later when we need a good laugh.

We had hoped, and propose that while the Governor has to be ratified by Parliament, in the case of Deputy Governors, their appointment should be taken away from the president and handed over to the board of directors of the BoZ to minimise the interference of the president’s office in the effective functioning of the BoZ.

Furthermore, Deputy Governors should be appointed from within the career stream of the BoZ. This will both strengthen the input of institutional memory in high level decisions and to assure a career prospect to the professional BoZ staff. In fact, that was the practice prior to September 2011 for a long time in the BoZ that has lately been ignored leading to demoralisation of the career staff and undermining experience gained in central banking.

The mid-level professional staff is the backbone of any effective organisation. For this reason, the BOZ also needs to pay more attention to the professional staff from within and avoid the practice of large scale outside entry at senior levels. With a pool of well qualified and dedicated economists at BOZ, outside sourcing of skills which are already in-house demoralises the career staff and reduces the promise of career progression and skill development in the long run.

Given the need for better understanding of the audacity of BoZ tasks, every governor should feel the need for a strong team of economists under the leadership of a qualified and experienced Deputy Governor in charge of operations to develop policy conclusions based on solid economic analysis and research. The new appointee lacks such skills, and should not have been even thought of as a candidate in the light of this, never!

That said, world over, historically, economic weakening has occurred due to systematic economic mismanagement by opportunistic and insincere leaderships that indulged in widespread insincerity which thrives in weak institutions and thus breed corruption.

The weakening of institutions such as BOZ should not be entertained, we will all pay the price of mismanagement, whether PF or not. If the new appointment is aimed at serving the interests of Zambians let us note that a mere change of faces will not change the situation. There has to be a drastic change in the purpose of, and approach to, governance. If the PF government begins to look for quick fixes and wastes time on easy solutions it will run out of time.
*There are no easy solutions, no quick fixes and no magic wands. Those who think in those terms are living in a fool’s paradise. The PF government should learn from history and not repeat it. Slogans should be replaced by deep thinking and mere politicking by statesmanship. This is an opportunity to regain the confidence of the people: save us from you!*

In the matter of the exchange rate, the BOZ has been reacting to the developments in the market rather than controlling them.

The president went further to say:

Demand and Supply is Working! That the market is at play.
Our government has surrendered its responsibilities of economic governance to some deity called ‘Free-market’ who doesn’t even exist! There has been no attempt to integrate the exchange rate policy with the fiscal and monetary policies. That our foreign exchange reserves have rapidly been depleted, we are yet to see the trick to restore economic order.

Perhaps in conclusion, a warning is in order here. There are some ever-present opportunistic and self-serving economists who would claim that they know better than most others and pronounce that those who are giving warning signals about the economy such as we are doing are wrong. These have been seen in the corridors of power before and represent a group that is always hungry for appearance on television and in newspaper columns and to attract the attention of those in power, thereby offering themselves to “serve” the country.

Some may be in government already. The PF should be cautious of such. There is no magic wand to save the economy from the looming crisis, and only a determined government that undertakes structural economic reforms will bring some hope of economic recovery, and there is an opportunity for the PF to do this and more.

It is also the responsibility of the aspiring political leadership to make the ordinary people aware of the deep-rooted economic problems and their difficult solutions and not to take them for a ride with false promises as before. We are all affected