Discreet appointments impede efficiency

Governor of the Central Bank of Swaziland (CBS) Martin Dlamini yesterday lamented discreet appointments into certain development finance institutions’ boards and said it not only hindered the assessment of such institutions but also impeded efficiency.
Dlamini was addressing a forum of the Association of African Development Finance Institutions (AADFI) at the Happy Valley Resort and Casino. Dlamini said SwaziBank was the only development bank in the country and the fact that it was wholly owned by the government meant it had to comply with guidelines and principles set by government.
He said due to the 100% ownership by government, the bank fell short in terms of independence.
He said the Board of Directors were appointed by the minister in charge of the relevant portfolio and the Central Bank only received the names of the appointed individuals, which made their role of monitoring and regulation difficult.
“It deprives us as an oversight authority of the right to assess these individuals and spell out whether they do have the relevant skills necessary for them to perform their duties to acceptable standards,” he said.
This is in turn, said Dlamini, compromised performance, irrespective of the fact that they retained the role of being an oversight authority over the institution. “The Central Bank evaluates operations of SwaziBank to ensure that it operates within acceptable standards and adheres to corporate governance,” he said.
Dlamini added that the Prudent Standards, Guidelines and Rating System would help the Central Bank evaluate the soundness of the financial sector, as well as ensure prudent management of finances of DFIs on the African continent. These institutions, said Dlamini, have to develop risk management guidelines through maintenance of statutory credit ratios with the Central Banks.
“We believe the objectives of PSGRS would strengthen DFIs and protect their integrity as financial institutions,” he said.

…recession exposed
need for reform

The Governor also said the world economic crises drastically changed the landscape in the financial sector and exposed the need for reform of the financial sector.
Addressing AADFI delegates at Happy Valley Resort and Casino yesterday, Dlamini said the recession, had a substantial impact on the financial sector. He said the need for international financial regulations could not be over-emphasised at this time, hence lauded the PSGRS principles developed by the AADFI.
“The most important aspect of the PSGRS is that it accommodates the emerging economies. The crises have ushered an era of cyclical trends, which has ensured excessive risk for lending institutions. The need for response through appropriate mechanisms like the PSGRS therefore remains of prime relevance,” he said.
On another note, Dlamini observed that the non-performance of loans during the recession had increased financial distress, which led to banks being stricter in extending loans due to the acute shortage of finances as a result of failure to repay.
The Governor also emphasised the importance of DFIs in supporting economic development through providing much needed finance to entrepreneurs and other organizations that sought to carry-out development projects.
Overall, the presentation by the CBS Governor was outstanding as it received a round of applause from the delegates. Chairman of AADFI, Geoffrey Qhena went to extent of requesting Dlamini’s presentation to be made available to his organisation’s members.