The head of the Bank of Zambia is a religious man. And he needs to be in a country that was until a few years ago infamous for corruption, the weakness of its central bank, the woeful inadequacies of its banking system, and generally low international regard for the national currency, the kwacha.
On this occasion however, Fundanga wasn’t referring to his nation’s Augean stables but to a Bank of Zambia-backed initiative to keep the streets of Lusaka neat and tidy. The initiative could be taken as a metaphor for Fundanga’s campaign to tidy up the banking system as well as to reform public finances. He’s had the job for seven years, an unusually long period in a nation where central bankers routinely fall foul of the government. It was Fundanga’s good fortune to start his run under the late Levy Mwanawasa, the anti-corruption president who died in 2008. Had he tried to implement reforms under Mwanawasa’s predecessor, the long-serving, big-spending Frederick Chiluba, the governor would probably have gone a long time ago.
Chiluba has been cleared in a six-year trial of charges of stealing USD 500,000 in Treasury bills while his wife was given three and a half years hard labour on other charges. A 2004 civil ruling brought by Zambia’s attorney-general, London’s High Court has ordered the ex-president to return USD 24m in looted funds.
The job of Zambia’s chief central banker is rather different from that of, say, the governor of the Old Lady of Threadneedle Street. The governor has a wide range of responsibilities that in other countries are parcelled out among different offices. For instance, not only does Fundanga’s BoZ have to worry about the entire financial sector from banks to building societies, insurers to microfinance, it has responsibility for the integrity of the kwacha, the implementation of a real-time payment system across the financial sector including the Lusaka Stock Exchange and, it seems, the state of national finances. In many ways the governor is the conscience of the entire financial system.
Among other reforms the BoZ is in the middle of a full-scale campaign to push banking services into the bush, mainly through telephone banking. Most of the Zambian population are “unbanked”, and “financial inclusion” is Fundanga’s goal. As many nations reel from the shockwaves of the global crisis, Fundanga is widely seen as a beacon of hope.
Foreign investors have just written off USD 11bn in the Congo while Nigeria’s central bank had to find USD 4bn to bail out nine of the country’s 24 banks for a series of disastrous loans to local businesses. You can be sure Fundanga has been on the phone to his Nigerian counterpart, the newly-appointed Lamido Sanusi.
It’s been a busy seven years for Fundanga. Back in 2002, just after Chiluba lost power, the IMF delivered a damning report on just about every aspect of Zambia’s banking system. It was particularly horrified by the way Chiluba’s government gave pay rises to the “defence forces” out of empty coffers during the elections. However its latest report gives good marks. A more stable interbank market for funds is under development. The currency was floated, and there are plans to seek a sovereign credit rating.
Further reforms are necessary. The IMF criticised the failure of ministries to stick to budgets. This is par for the course in Zambia, despite the governor’s efforts. The latest presidential elections that brought Rupiah Banda to power blew out the public finances once again.
Along the way the governor has received plenty of flak from his opponents for adopting western-style systems. One politician described him as “a blind follower of neoliberal dogma of the imperialists and neocolonialists”. That’s also par for the course for reforming central bankers in sub-Saharan Africa.