16 July 2012

Zambia: Govt to Fortify Anti-Dollarisation Order

THE Government will re-issue Statutory Instrument (SI) number 33 of 2012 that introduced a ban on quoting of goods and services in dollars and other foreign currencies based on the Bank of Zambia (BoZ) Act of 1996.

According to deputy central bank governor Bwalya Ng'andu, this is because the BoZ Act of 2012 does not exist. Dr Ng'andu said the Government would re-issue the SI in question but that all the contents would remain unchanged.

Recently, the Zambia Association of Manufacturers (ZAM) argued that the SI was supposed to be enacted as a guideline to the existing laws, stating that the BoZ Act of 2012 where the SI in question was based did not exist.

But Dr Ng'andu said in Lusaka that the error would be rectified and that SI number 33 of 2012 would be re-issued based on the existing Act.

He emphasised that all domestic transactions should be settled in local currency, adding that the United States dollar should not be used as a hedging instrument.

The objective of the SI is to reinforce the use of the Kwacha, which is Zambia's legal tender, in domestic transactions, as it is the trend in all other countries.

"Business entities and institutions should now focus on how they will manage their transition period," Dr Ng'andu said. He was responding to Stockbrokers Zambia Limited's and Imara Securities' concerns raised during the seminar. With regard to the minimum capital requirement, Dr Ng'andu said the increment in capital requirement was not meant to make any commercial bank collapse but to strengthen the financial base of the banks, thereby safeguarding the interests of depositors.

"You cannot compete effectively with a low capital base and what we are trying to do is to develop an internal robust financial sector that is going to withstand the external factor. The increase will also make the banks more resilient to external and economic shocks.

"We are not going to kill any bank; we have 19 registered commercial banks and we have engaged with the individual banks. I know for one that Stanbic has managed and we have engaged other banks," he said.

Dr Ng'andu said the two documents, the Central African Stock Exchange handbook 2012 and Imara African Banking Compendium should be weighed against the knowledge that the capital markets were a different kind of market.

"Unlike other markets where participants deal in tangible goods, the raw material for capital markets is information.

"It is information that gives that transparency to the market which builds confidence in the minds of investors about the actions and motives of the players in the market," he said. Dr Ng'andu said without information, investors and analysts' capacity to make meaningful decisions would be impaired.

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