ZICA advises gvt on debt management

By Staff Reporter

THE Zambia Institute of Chartered Accountants (ZICA) says debt needs prudent management as it has potential to constrain economic progress.

In a press statement, issued on Tuesday, highlighting various national matters for the fourth quarter of 2018, ZICA president Jason Kazilimani stated that debt ought to be properly managed.

“While we appreciate that debt is an important source of finance for development and is key for poverty eradication as well as improvement in infrastructure, it needs to be prudently managed,” Kazilimani stated.

“In the last eight years, we have seen the rapid accumulation of debt, which has put the country in the spotlight resulting in Zambia being classified as ‘at high risk of debt distress’ by the World Bank and IMF.”

ZICA cautioned that if not properly managed, the debt burden would constrain Zambia’s economic progress.

“It is important that as the country builds-up debt, there should also be equivalent increase in the productive assets of the economy to assist in repayment of interest obligations,” Kazilimani stated, adding that ZICA was keen on seeing growth in the carrying value of the Sinking Fund, which was established to facilitate repayment of the Eurobonds.

“In this regard, we welcome the minister’s announcement that government is in the process of instituting public investment management reforms to establish a comprehensive system for the appraisal of projects in order to ensure value for money. We hope that the new approach will closely link investment and responsible borrowing.”

On government’s social protection programmes, Kazilimani indicated that ZICA was alive to the fact that social protection was a key component of the social and economic landscape of any given country especially in third world economies.

“In Zambia, this covers the disabled, child and women headed households as well as the elderly,” he stated.

“We would like to applaud the government for having paid particular attention to this particular social sector. We are aware that the government has, over the years, scaled up the social protection and in particular the social cash transfer funds from five districts in 2003 to almost every district in the country to date.”

“However, we are concerned with the continued poor delivery of the programme as indicated in the recent Auditor General’s report. We would like to advise the government that the social cash transfer programme would only attain the social and economic objectives of alleviating poverty, especially in the rural areas if the mechanisms employed to redistribute the income were those that encouraged efficiency, effectiveness, transparency, integrity and accountability.”

ZICA advised government to introduce a standard delivery or implementation manual of all similar social protection programmes.

And Kazilimani, on corporate governance in State – owned enterprises, noted with concern the lapses or failure of corporate governance in some parastatals.

He stated that the scenario tended to create serious agency problems where managers, as agents, had pursued short-term interests at the expense of the public long-term best interest.

“In many instances, some public entities have operated without Boards in place for many years, which has led to serious governance failures and breakdown in risk management and control environment in these public entities,” Kazilimani stated.

“The Board of Directors of the water utilities companies were only appointed in November 2018 after a long time of operating without corporate boards.  In the eyes of the law, there shall always be a functional Board of Directors at all State – owned enterprises every time.  Whenever government dissolves a board of directors, another board should be appointed to replace it.”

He lamented the fact that at least 11 water utilities operated without Boards for a long time.

Apart from its mandate of regulating the education and practice of the accountancy profession in Zambia, ZICA has a statutory mandate to advise the government of Zambia on matters relating to national economic development.