The new dawn government has recognized that a world class financial services sector is critical to attracting investment in the economy. What has it promised to deliver and how will it do so? The manifesto highlights four components it will address.
Firstly, the introduction of legislation that lowers the cost of financial services. “This includes legislation that encourages the provision of services such as retail banking, credit ratings, credit finance, consumer finance and other types of finance at affordable rates.”
In his speech during the opening of the 1st session of the 13th National Assembly, President Hichilema said, “to enhance the competitiveness of our local enterprises, we will reduce transaction costs of doing business by streamlining the number of licenses and permits required to operate a business in the country, as well as the time it takes to obtain them. We will also promote the use of electronic registration and payment systems.” To complement the financial service provision, the President created the first ever Ministry of Small and Medium Enterprises (SME’s) Development aimed at facilitating the creation and growth of SME’s. Focusing on micro, small and medium enterprises, he added, “This will be supported by broad-based education and skills development.”
The second aspect of the Manifesto caters to Zambia’s financial sector development and digital economy by creating “strong data protection laws and reduced barriers to entry for innovative new entrants in the financial technology space (FinTechs).”
In the wake of growing FinTech in the country, the United Nations Capital Development Fund (UNCDF), BongoHive Innovation and Technology Hub in collaboration with Bank of Zambia (BoZ), Securities and Exchange Commission (SEC) and the Zambia Information Technology Communication Authority (ZICTA) conducted a 3 session webinar attended by over 90 people where they shared information on each regulator’s role in the industry, what regulation they applied to the sector and how they monitor businesses offering digital financial services. According to the report by UNCDF, “many FinTech entrepreneurs are often unaware of the regulation or policy requirements for their innovation, or the industry at large” and “…the Regulatory sessions were a rich learning platform for those who participated because although most regulators in Zambia have an open-door policy with the industry, FinTechs often do not have the right contacts or adequate knowledge about how to engage with regulators.”
The Ministry of Technology and Science has thus engaged both public and private sectors in enabling the digital economy environment. Lusaka Securities Exchange (LuSE) and MTN Mobile Money have taken the lead by partnering to enable customers trade local stocks using MTN mobile money services. As the 4th Industrial Revolution unfolds, reliable connectivity and data storage are essential; hence the need to invest in optic fibre and telecommunications for enhanced service delivery. The Ministry has engaged Paratus, an African telecommunications company who will be assisting with reliable connectivity and local data storage. Paratus launched a new world-class-data centre supporting digital businesses from digital surveillance and security equipment to 24-hour on site controls.
The third focus centers on governance, “focusing on legislation aimed at improving the corporate governance environment, strengthening qualifications for directors and board appointments and insolvency laws to guard against abuse of the process by political players. In addition, existing laws relating to illicit financial flows will be strengthened.”
A recurring theme for the new dawn government has been zero tolerance of corruption. The President, Mr Hakainde Hichilema reiterated during the 13th National Assembly stating the will to de-politicise appointments, ensuring that the merit principle is strictly adhered to. In enhancing transparency and accountability in national affairs the government will, “introduce specialised fast-track stolen assets recovery mechanisms and courts for corruption and economic crimes, enhance media freedom and access to information by facilitating the establishment of a media self-regulatory framework, and enacting legislation on access to information.”
In the Ministerial Statement on Zambia’s public external debt situation, Dr. Situmbeko Musokotwane stated that, “the Ministry of Finance and National Planning will continue to publish quarterly debt statistical bulletins on the ministry’s website. The debt statistical bulletin reports on public debt in a more comprehensive manner, covering central government, government guaranteed debt and SOE’s external non-guaranteed debt.”
The last component outlined in the Party Manifesto of 2021-2026 is, “strengthen the capacity and autonomy of the central bank (Bank of Zambia) so as to reduce political interference and enact strong investment banking regulations to ensure that investors such as pension funds are protected from rogue private and public players.”
On one hand, the government has not yet revealed how it will strengthen the autonomy of the BoZ, but the central bank released its Monetary Policy Committee Statement, maintaining the Monetary Policy Rate at 8.5 per cent. This decision was premised on the marginal decline in inflation based on the favourable outlook for the exchange rate and improved prospects of fiscal consolidation with the acquiring of an International Monetary Fund (IMF) program.
On the other hand in the Presidential 1st session of 13th National Assembly Speech, it was stated that, “to address the existing challenges in our pension system, we will undertake comprehensive reforms in pension fund management and administration. This will resolve the plight of pensioners and secure their rights.”
Consequently, a combination of the lower costs of borrowing, a streamlined system of requirements to operate a business, free flow and access to market information with an investment in education and skills development will see a growth in local investment. Particularly in the category of entrepreneurship, with the SME’s, this will be as stated by the President , “the main engine for job and wealth creation”. The future being digital will not only improve efficiency in delivery of financial services but also boost research and development in technology. Good governance could see fewer leakages of finances and transparency will foster greater accountability on leaders. An independent central bank will better implement strict fiscal and monetary policies, allow for better monitoring and regulation of financial intermediaries and quick dissemination of information. If inflation continues to decline as forecast, Bloomberg reports that “this could ease pressure on the monetary policy and give room to support the economy’s recovery”. The prices of consumer goods will drop thereby increasing the purchasing power of citizens and lowering the cost of living, which all look forward to.