When he flew out to Vietnam on an official trip last month, Gaborone Bonnington South MP, Ndaba Gaolathe, was looking forward to tabling an urgent on the liquidity crisis upon his return. Back home he soon discovered that the motion had died prematurely because of what happened when he was thousands of kilometres away.
The story begins on March 23 when the MP noticed an urgent motion with the Speaker of Parliament, Gladys Kokorwe. As the media punditry, Gaolathe had diagnosed a malignant condition in the banking sector and through this motion, wanted “to assist navigate the ensuing liquidity crisis in Botswana’s banking system.”
The motion reads: “The current liquidity crisis in the banking system is compromising the ability of banks to lend money, as loanable funds have almost dried up even for credit-worthy borrowers. This ‘credit crunch’ is inhibiting economic growth or even job creation. The health of some key sectors of the economy is also at risk, with real prospects for retrenchments and widespread job loss. Hence measures that were implemented in response to historical excess liquidity need to be reconsidered in the light of changed conditions. Government and/or the Bank of Botswana [BoB] should activate measures to ease the liquidity crisis.”
The MP says that this “was a delicate, yet so vital a matter to raise in Parliament.”
“The delicacy of the subject derives from the complex nature of [BoB] and its mandate; and what made the subject exceptionally “vital” is based on the reality that failure to inject adequate liquidity in the banking system could compromise recovery of the Botswana economy or even lead to business failures and retrenchments that could subsequently become systemic,” he argues.
By his account, Kokorwe “was gracious … promptly treating this matter with the urgency it deserved.” Whereas the MP had expected the motion’s next port of call to be the chamber of the house, he found himself addressing a completely different audience from the one he usually addresses after noticing motions. “Within a day”, Kokorwe summoned him to her office where she convened a meeting between the MP on one side and the Minister of Finance and Development Planning, Kenneth Matambo, the Governor of the Bank of Botswana, Linah Mohohlo and her two deputies on the other. Gaolathe says that the purpose of this meeting was to discuss if there were merits in pursuing the motion on as urgent a basis as he had proposed.
“A technical and professional discussion ensued, at the end of which the Minister of Finance proposed that he be accorded time to mobilize his officials and monetary authorities (Bank of Botswana) to provide the All-Party Caucus with a full professional appraisal of the liquidity situation in Botswana. This, he argued, was necessary to provide Members of Parliament with a factual account on the basis of which they could nourish the debate, once the motion was brought to the floor. This was a fair request, an agreeable one, despite its effect of postponing a motion otherwise due on the Tuesday afternoon but now shifted to 7 April 2015, the date at which all the necessary briefings would have been conducted, and the Speaker, the Leader of Opposition, several MPs and I would also have returned from an official trip to Vietnam,” he says.
Kokorwe confirms that this meeting did indeed take place.
However, two days later, while Gaolathe was still in Vietnam, BoB held a press briefing at which Mohohlo sought to downplay the perception that there was any sort of credit crunch. It is interesting to observe how her statement and Gaolathe’s motion enclose “credit crunch” within quotation marks: “I welcome you to this press briefing, the purpose of which is to provide clarity on liquidity at commercial banks. This is in response to some recent articles in the local media which suggest that, among others, banks in Botswana are in financial difficulties and their customers face a “credit crunch.” and “This ‘credit crunch’ is inhibiting economic growth or even job creation.” While the former uses them to cast the term in an ironic sense, the latter does so to underline the author’s conviction that the adverse economic condition in question has taken hold. For obvious and understandable reasons, Gaolathe says that he cannot divulge precise details about what was discussed during the meeting in Kokorwe’s office. However, it is clear from these statements that they came out on opposing sides of the issue.
At the end of her statement, Mohohlo announced that BoB had decided to reduce the Primary Reserve Requirement for banks from the current 10 percent to 5 percent, with effect from April 1, 2015. Like everybody else outside the bank’s management, Gaolathe got to learn of this through the press. Making the point that he doesn’t want to divulge details of a closed-door meeting, he nonetheless reveals that during this meeting, the other party “did not inform me of any such plans, nor did they intimate any intention to that effect.” What will also raise eyebrows is that the briefing to the All-Party Caucus never happened and the motion itself has died of unnatural causes. Gaolathe says that although he plans to table “more than one related motions pertaining to monetary policy or the conduct of monetary policy” they will not be identical to the initial one.
Some will connect the dots and reach the conclusion that the government wanted to prevent an opposition MP with a refined knowledge of high finance scoring points against it on an issue that it is severely compromised on.
“The decision by the Bank of Botswana to act on this matter is commendable, and whether or not this is a decision made in response to the pressure applied by the proposed motion or not should not be of consequence,” says Gaolathe who seems unwilling to beat up on Matambo and Mohohlo on the way they handled this issue.
To the question of whether he feels they acted appropriately with regard to how they fulfilled their end of the bargain, the MP responds: “I do hope that he did, and I hope the Bank Governor did too.”
Elaborating on what makes any motion around the issue of monetary policy delicate, Gaolathe says that by their nature, central banks function well when they are independent and free from undue political interference.
“Their work is highly complex and requires deft technical experience and knowledge. That is why many countries do not allow for the interference with the tenures of bank governors. It is bad governance practice to tell experts what they should or should not do. Parliament’s role is to provide the big picture leadership. And indeed, the spirit of the intended motion was not to tell the Bank of Botswana what to do in the face of the ensuing liquidity crisis,” says the MP adding that the intention was to respond to a fact that is clear for all to see. “You do not need to read statistics or craft mathematical equations to observe that there has been no money in the system to fund viable ventures, or expansions of businesses. This is observable through the naked eye and ear. This could compromise the economy’s recovery and worsen the already apparent spate of retrenchments.”
Under such circumstances, Gaolathe says that parliament has a duty to ask the question “what is being done about this, and why is it taking time to make the necessary decisions whatever these decisions are?” Another question that needs to be asked is: “Are you not aware that procrastinating on such matters could have dire consequences on the economy?”
“This is what is meant by oversight of the legislature, and as a country we have neglected engaging our monetary authorities systematically in a formal way. Our duty is also to be check and balance against potential excesses of monetary authorities. Our duty as Parliament is also to nudge, not just the Bank of Botswana but the Ministry of Finance, to vigorously develop the quantum of the debt market and issue securities for a full range of terms, because the government will need to borrow extensively, efficiently and at low cost in the future. This arrangement could further assist monetary authorities to manage and calibrate liquidity conditions even more efficiently (and conduct monetary policy more effectively). As a law-making body, Parliament is also in an ideal position to assist in drafting laws that could facilitate the deepening and development of the financial sector in general,” he says.
