Caleb M Fundanga: Zambia's economic overview and its accountancy
profession
Remarks by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the 2010 Zambia
Institute of Chartered Accountants Annual Ball, Lusaka, 24 April 2010.
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The President - Zambia Institute of Chartered Accountants (ZICA),
Mr. Chintu Mulendema
The President - Eastern, Central and Southern African Federation of Accountants,
Mr. Koos Du Toit
The President International Federation of Accountants, Mr. Robert Bunting
The Secretary & Chief Executive - Zambia Institute of Chartered Accountants,
Mr. Hapenga Kabeta
The Chief Executive Officer - Eastern, Central and Southern African Federation of
Accountants, Mr. Vickson Ncube
Distinguished Members of ZICA
Members of the Press
Ladies and Gentlemen
I am greatly honoured to have the opportunity to join you this evening and to say a few words
on the important role that the accountancy profession plays in our economy. The importance
of the accountancy profession has indeed been highlighted following the recent global
financial crisis in which a lack of appropriate governance arrangements and clarity about the
inherent risks taken by financial institutions contributed to the near collapse of financial
markets in the developed economies. Clearly the accountancy profession has an important
role to play in ensuring that the regulatory response to the crisis leads to more robust and
transparent financial institutions that serve the needs of households and firms and avoids the
build-up of systemic risks.
May I take this opportunity to commend ZICA for the tremendous progress it has made in the
development of the accountancy profession in Zambia. I am aware that the number of
qualified accountants in the country has continued to grow with ZICA boasting a total of
3,606 members as at December 2009 compared to 2,938 in the previous year. This is no
doubt a testimony to the growing number of institutions that are offering quality accountancy
training courses. The growing number of accountants is also a reflection of the economic
achievements the country has scored in the recent past. It is worth noting that as the
economy continues to post positive economic growth, the country's need for accountants will
also increase.
Distinguished Members, allow me at this moment to briefly highlight the performance of the
economy in 2009. Although projections of GDP growth for 2009 had been revised
downwards to 4.3% on account of the effects of the global financial and economic
melt-down, preliminary data indicates that the economy posted a real GDP growth rate of
6.3% compared with the 5.7% recorded in 2008. Almost all key sectors of the economy
recorded positive growth except for restaurants and hotels which saw negative growth due to
lower tourist and business travel arrivals during the financial crisis.
Annual overall inflation slowed down, reverting to single digit level of 9.9% in December 2009
from the 16.6% recorded in December 2008, and was in line with the original end-year target
of no more than 10%. This outturn was attributed to the decline in both annual food and
non-food inflation.
In the external sector, Zambia's external position showed remarkable improvement as
reflected in the build-up of gross international reserves to 5.1 months of import cover in 2009
from 2.1 months of import cover in 2008.
Zambia's overall balance of payment position is expected to remain favourable in 2010 due
to the rebound of copper prices on the international market as well as the expected increase
in copper production as some mines increase production to full capacity and the resumption
of production at some mines.
The rebound in the international price of copper in the second half of 2009 and the return of
foreign portfolio flows resulted in an appreciation of the exchange rate of the Kwacha by 4%
at the end of the year.
However, fiscal performance in 2009 was weak, mainly due to the global economic crisis,
which reduced domestic revenues. Despite this, Government remained within the
programmed domestic financing for the year.
Ladies and Gentlemen, the financial sector has remained resilient despite the adverse
effects of the recent global financial crisis. Currently, the Zambian financial sector is
characterised by high liquidity levels, reflecting tighter lending standards in the wake of the
lessons from the global financial crisis leading to marked decline in private sector lending. As
a result, the demand for the relatively risk free Government securities has increased causing
a decline in yield rates on Government securities. The decline in Government securities yield
rates and relatively low inflation experienced since the beginning of the year should
contribute to a decline in banks lending rates and thus stimulate borrowing by the private
sector.
Ladies and Gentlemen, the critical role the accounting profession plays in enhancing
economic development cannot be over-emphasized. One of the most important role the
profession plays in any organization is to provide accurate, reliable and high quality financial
information which communicates an organization's operating results, its overall health, as
well as raise the transparency of its various operating activities. The other role is the audit
function, both internal and external, which provides independent assurance of the information
produced by accountants and also reviews the control environment in which this information
is produced.
In a growing economy like ours, the need for high quality financial information is very critical.
Financial information provides the basis for all financial decision making at all levels of
economic activity, from households to large international organizations. Remember, there is
no high quality information without the work of accountants and that is one reason why
accountants play such a critical role in today's global financial system and the global
economy. You provide financial information that helps businesses and governments run
properly. You provide investors and creditors with reliable information for decision making.
You also provide assurance services founded on integrity and independence.
Distinguished Members, the vision of this country is to become a prosperous middle
income country by the year 2030. In order for us to attain this vision, we need to improve the
financial infrastructure in Zambia. The Government intends to achieve this through the
implementation of the Financial Sector Development Plan. An improved financial
infrastructure will result in efficient capital and money markets which will in turn attract foreign
investment into our economy. However, in order to attract and retain foreign investment, we
need to have the ability to provide investors with transparent information that will result in
efficient investment decisions, higher returns and greater investor confidence. Without
confidence, investors will simply find somewhere else to invest their money. High quality,
investor oriented and transparent financial reporting attract both seekers and providers of
capital. This is where accountants come in, to ensure the provision of reliable and
transparent financial information to potential investors and other users of financial
statements.
I am certain that as members of ZICA you take pride in helping
Ladies and Gentlemen,
improve the financial sector in Zambia. This is done through standard setting. I recognize the
fact that Accounting standards provide the foundation for the production of high quality
financial information. I am aware that ZICA has adopted International Financial Reporting
Standards (IFRS's) in full and that all members of ZICA are obliged to ensure compliance
with IFRS. However, it is unfortunate that despite ZICA adopting IFRS, it is not a legal
requirement under the Securities Act, the Insurance Act, the Banking and Financial Services
Act and also at the Lusaka Stock Exchange.
Nonetheless, I wish to state that efforts are underway to make IFRS a mandatory
requirement for financial institutions. It is important for this provision to become a legal
requirement in order to enhance the credibility of financial statements that are being
produced by institutions governed by the various laws. I wish to state here that as much as it
is important to follow international standards, these need to be reviewed for their relevance
and practical application locally. It is also important to look at their relevance to small and
medium enterprises where compliance may place additional burdens on operations.
Ladies and Gentlemen, as we discuss the harmonization of various laws, I would like to
bring up the issue of money laundering. The Prohibition and Prevention of the Money
Laundering Act (PPMLA), enacted in 2001 requires all persons, whether corporate or
unincorporated, to comply with its provisions. Although the Act does not impose specific
obligations on accountants, they are expected to comply with its provisions. It has been
noted from the recent court cases on abuse of office and corruption that professional entities
such as law and accounting firms have been used as a channel to launder some of the
proceeds of crime. As we are all aware, one of the duties of accountants is to know the
sources and application of the resources in their organization. Therefore I don't think it is
unfair to say that in most organisations, where money is being laundered, an accountant is
involved.
As we speak, the PPMLA is being reviewed, and it is expected that the amendments to
PPMLA as well as the new law for the establishment of the Financial Intelligence Unit will
impose some reporting requirements on accountants. To maintain the reputation of your
profession, all accountants should uphold good ethical and professional standards as
custodians of financial resources. There is also the need to ensure that financial matters are
prudently managed in organisations for we have seen an increase in reported cases of
accountants involved in unlawful practices which does not reflect well on the profession.
Notwithstanding, allow me to commend ZICA for the hard work leading to the enactment of
the Accountants Act in 2008. This is a positive development for the regulation of the
Accountancy profession in Zambia. I note that the Act prescribes the relevant qualifications
for accountants and also provides for disciplinary action against accountants found guilty of
misconduct and corrupt practices. It is my sincere hope that the enactment of the
Accountants Act will deter potential offenders and will also ensure that accountants found
guilty of malpractice receive the appropriate punishment.
Distinguished Members, I further wish to commend ZICA for the development of the local
qualification, the ZICA Accountancy program which has been in existence since 2006. This is
a positive achievement for ZICA as it provides affordable training to accountants. I am
encouraged by the statement in your annual report that you intend to make the ZICA
qualification the most preferred in the market. I urge ZICA to ensure this program is relevant
not only to Zambia but to our neighbouring countries in order to provide an alternative to the
costlier international professional training courses. This is a potential area of foreign
exchange earnings for this country. The competitive strength of our country can only be
proven by our ability to sell in the most demanding of international markets.
As I conclude, let me challenge ZICA and all its members to assist in promoting efforts to
improve the financial capability and financial education in Zambia. I particularly would like to
urge ZICA to partner with Non-Governmental Organisations as well as the Ministry of
Education in promoting financial education in schools and other institutions of learning in
rural areas. This sort of collaborative approach provides an excellent model for how
professionals should put their expertise to good use in local communities across the country.
At this time when the world economy is at crossroad, I am sure the accountancy profession
is positioned to take a leadership role in helping to steer our way out of the financial crisis,
through high-quality accounting and auditing standards; through high-quality ethical
standards and through an understanding and support of the growth of Small and Medium
Enterprises.
Ladies and Gentlemen, I thank you for your attention.