Linah K Mohohlo: Governance beyond the financial crisis
Keynote address by Mrs Linah K Mohohlo, Governor of the Bank of Botswana, at the
Botswana Institute of Accountants 6th Biennial International Conference, Gabarone,
3 June 2010.
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President of the Botswana Institute of Accountants, Mr Dixon-Warren,
Deputy President of the Institute of Chartered Accountants, England & Wales, Mr Parrit
CEO of the Eastern, Central and Southern African Federation of Accountants, Mr Ncube,
Chief Executive Officer, BIA, Mr Majinda
Heads of Private and Parastatal Organisations,
Distinguished Men & Women of the Accounting Fraternity, Ladies and Gentlemen
I wish to thank the Botswana Institute of Accountants for the honour bestowed on me as I
officiate at the opening of this 6th Biennial International Conference. I extend a warm
welcome to all the guests and delegates and, for those from places afar, I implore you to feel
at home in the City of Gaborone.
I am informed that this Conference coincides with the 20th Anniversary of the Institute, which
will be celebrated tomorrow. Allow me, therefore, to take this opportunity to congratulate the
Institute for almost coming of age at 20. You need not be reminded that with the maturity that
goes with a two decade lifespan, comes increased responsibility for the greater good of all
concerned and for the country.
beyond the
As I share some thoughts with you on the Conference theme of "Governance
Financial Crisis", I will highlight the importance of good governance, using as a backdrop, the
recent experience of the global financial crisis, which was a prelude to the economic
recession from which the world is cautiously recovering. I will point to the lessons derived
from the crises and highlight some remedial reforms, and the expected role of the accounting
profession in this endeavour. I will then make reference to the governance framework that
has continued to stand the country in good stead.
Before I delve into the conference theme, I wish to hazard some notable observations about
the accountancy profession. As you are aware, accountants can be the butt of many a joke
and often disparagingly referred to as "bean counters" or "number crunchers". In my view,
which I believe is shared by many, accountants are a lot more than that. Accounting
professionals are increasingly taking on responsibilities beyond their traditional role. As
technology continues to make accounting procedures more efficient, these responsibilities
include line management, business strategy, workplace productivity, revenue and profit
maximization, and related others.
This means accountants need a far wider set of skills. This evolution comes as demand for
professionals with broad based business skills and industry knowledge is rising. On top of
this, interpersonal and communication skills are becoming a key advantage as businesses
rely more on interdepartmental cooperation that involves all business competencies to be
strategically aligned to maximise output. In many instances, an accountant has to manage
these processes with senior and middle management.
Therefore, although the appointment of an accounting professional is possibly the single
most important decision towards ensuring business sustainability, increasingly, recruitment
agencies tend to look beyond accounting qualifications.
Those who have invested in their careers, developed critical business, communication and
strategic skills, will stand tall in what is becoming a highly competitive environment.
Accountants can no longer be grey people who remain behind closed doors lacking in social
skills. They are going to have to be seen and heard as they earn their keep along with
professionals of other disciplines.
Distinguished Ladies and Gentlemen,
The theme of the Conference - Governance beyond the Financial Crisis - is timely since
most countries, Botswana included, are recovering from the effects of the global financial
crisis, which precipitated the deepest recession in a generation. The theme speaks to the
need for introspection; more importantly, it calls for exchange of views on the lapses in
governance that originated from a few market players, particularly in the US.
It is now well known that the first sign of a progressive buildup of gross disregard of the
basics of good governance in the US was the asset bubble that was fueled by the virtual
absence of risk management and personal financial prudence. There was also lack of
transparency, accountability and supervisory oversight standards. It was forgotten that what
is legal is not necessarily ethical. The asset bubble gave rise to high commodity prices with
consequences for global inflation in the first half of 2008. When the bubble burst, it resulted
in the financial collapse of major multinational financial institutions; then came the credit
crunch and a crush in share prices; economic recession was upon us; and there was a sharp
drop in international trade, that was followed by a deterioration of government finances and
job losses.
The consequent painful experience has given rise to an opportunity to seek remedies and
avoid the possibility of a double dip recession.
I am encouraged that the accounting fraternity, which had a fair share of the blame for the
recent global financial and economic misery, is also alive to the need for corrective action. I
have no doubt that your deliberations at this conference will advance the debate on the role
that your noble profession can play in enhancing good governance in the period ahead.
Work on the redesign of the global financial architecture and inclusive governance of world
affairs is in progress at various fora, including at the World Economic Forum, G20 and at
specialised professional bodies such as the Botswana Institute of Accountants.
A common theme running through the various efforts that are expected to eventually
beyond the Financial
coalesce is that "Governance Crisis" should, at a minimum, enhance
transparency of institutional functioning at Board and management levels, as well as at
operational and technical levels. Furthermore, accountability should be the order of the day
and, in particular, the hierarchy of responsibilities and roles of institutional structures should
be clearly defined. This arrangement should eventually reinforce checks and balances as
part of risk mitigation; it should prevent a potential conflict of interests, while ensuring
fulfillment of fiduciary responsibilities and avoiding dereliction of duty. In the end, however,
transparency and accountability must be buttressed by a set of institutional values and
ethical codes of conduct, such as honesty, selflessness and integrity of the highest order.
The importance of this Conference and its theme lie in the fact that they are part of the bigger
picture of national and international efforts towards putting in place a new and more robust
global financial architecture.
I have no doubt that you will share views on how you can become agents of transformation.
At national and international levels, each one of you is called upon to meet high standards of
technical competence. You are called upon to adhere to strict and uncompromising ethical
standards, adopt a broad institutional and/or corporate perspective in your work, advise on
policy and operational issues, and play custodial and trusteeship roles that demand moral
courage.
You are challenged to be world class technical experts in financial analysis and to
communicate your findings and their implications. You are also challenged to keep abreast
with changes in your profession, such as the international accounting and financial reporting
standards, and advise your principals in a timely manner.
The benchmarks for excellence in all these areas are set by international technical standards
and evolving best practices. Of all the professions, yours is no stranger to the need for
lifelong learning as you update your professional skills. You are more keenly aware than
most of yesterday's expertise and knowledge is today's ignorance. Going forward, you are
called upon to get more involved in cross-cutting issues of good governance and economic
development.
Distinguished Ladies and Gentlemen;
Now that I have dwelt on the desirability and virtues of good governance, and the expanded
role of the accounting profession in strengthening good governance, let's examine how the
domestic governance framework benefited the country and the domestic banking sector
generally at the time of the global recession.
Without fear of being contradicted, I can confirm that the domestic banking system escaped
the first round of the direct adverse effects on asset quality at the time of the international
financial crisis. The reason for this can be found in the robustness of the regulatory and
supervisory framework. For instance, Board and senior management of banks are vetted
before appointment, and care is taken to ensure that appropriate decision-making structures
and related committees are in place, including adequate risk management and mitigation
strategies. The regulatory framework also ensures that lending practices are devoid of
conflict of interests; and consultations are undertaken with external auditors in a bid to
ascertain operational and financial propriety. Without the rigorous enforcement of strict
regulatory requirements, the banking sector would have been saddled with unbearable
problems of, among others, nonperforming assets.
The less-than-severe impact of the global recession on the country's economy vindicated the
importance of good economic and financial governance over the years. Without the careful
and prudent budgetary and overall management of the country's resources, it would not have
been possible to implement the fiscal stimulus that moderated the severity of job losses.
Over time, Botswana has been able to avoid the so-called "resource-curse"; this is the
inverse relationship between the vastness of resource endowments and a country's level of
socio-economic prosperity. Inflation has, by and large, been relatively low and well managed;
thanks to the benign inflationary environment at a global level.
Honoured Guests, I conclude by underscoring the importance of the need to redouble efforts
in strengthening the existing governance infrastructure and redressing the inadequacies.
History must not be allowed to repeat itself so far as the ravages of the financial and
economic crises are concerned. Needless to add, the accounting profession has a lot to offer
in this endeavour. Indeed government entities and the corporate world need accounting skills
more and more each passing day. I have no doubt that you will respond with added
enthusiasm and renewed sense of duty.
It is now my honour to declare the 6th Biennial International Conference of the Botswana
Institute of Accountants officially open.
I wish you fruitful deliberations, and I thank you for your attention.