SS: You have served as Governor of the Bank of Namibia for five years and you were recently re-appointed for a second term. What are some of the successes you have enjoyed and what are some of the challenges you have encountered?
IS: It is up to you, the media, to say what our accomplishments are; we can’t beat our own drum. What I can do is speak about challenges. Our challenges are many and one of them is to reconcile the demands of the stakeholders. As a regulator of commercial banks, I expect banks to make money otherwise they will create problems, but what is the right level? Where do you strike the balance?
What we have been trying to do is strike a balance regarding the level of fees and it has not always been easy. When you go to the banks, they say, ‘no but we need to price the service correctly, because it cost us money to do this.’
For instance, we faced challenges when we did away with cash deposit fees, to create access to finance and banking services. It was a serious fight, with banks asking why they should do away with cash deposit fees. Eventually we agreed, but it has not been easy. It took about two years to negotiate that and it was one of the challenges. Yes, services cost money, but what is the right price to charge?
We are now busy with something called ‘cost saving’, trying to determine how much it costs to set up an ATM to determine ATM charges. It’s not a straightforward exercise, but we are trying to come up with a measure on how much it cost and compare prices, allowing us to come up with a well-informed conclusion.
SS: Are the super profits recorded by banks in Namibia normal? Are they not defeating the financial inclusion initiative and is the central bank doing enough to create a balance?
IS: Have we done enough? Probably not. Have we started? Yes, we have started and I believe we have made progress on access. Have we reached the destination of the journey? No, we still have a long way to go, but it is not an easy exercise. What we have started doing is negotiating on basic grant accounts and cash deposit fees and the push back was not easy, and it has cost us money. We have now decided to do the cost saving survey, which has only been done in two countries in the world so far - Denmark and Portugal.
We hired someone from Denmark who structured the survey for us and we have started doing that. The specific service we are looking at right now is only the ATM services. The reason behind this survey was to find a particular service that interacts with low income earners or customers and once we get around that, we can now have a better idea of whether the price which the banks are charging is cost effective.
SS: Regarding this particular cost saving project, when do we expect it to be finalised and is it being implemented on a phased approach?
IS: We are taking it phase by phase, and ATMs this year will be phase one. Whether we will find that the ATM fees are excessive, we don’t know yet. When are we going to reach an agreement with the banks? I also cannot say for now.
SS: Is there a standard fee for ATM usage at the moment, as banks charge different amounts?
IS: There is no standard fee, but our view is, if one is charging N$5,00 for a service, why should another charge N$8, 00 for the same services. We also don’t want to control fees, because the banks also have to make money, but we just don’t want them to be over-charging.
The other challenge we have is a skills shortfall, where the BoN is competing with commercial banks for qualified, experienced staff.
We train the staff, but they are offered better remuneration and opportunities, especially by commercial banks and we cannot compete because we cannot pay the kind of bonuses that the commercial banks pay. Although our staff turnover has not been very high, a number of our talent has been approached by commercial banks with employment offers.
SS: Considering your concerns raised and looking at what happened at SME Bank, and also at FNB, does the bank look at talent or does it look at nationality when it comes to skills?
IS: First of all, as a regulator, we are not really hard on foreigners; that is not our mandate and that is not something we put a lot of emphasis on. For us, what is important is the skills. Are you fit for the job?
SS: Looking ahead, considering you have just entered your second term, when you look at the horizon, what do you see? Do you see a bright future ahead for you and the bank?
IS: Challenges will always be there, I don’t know what tomorrow holds, so for me what is important is having the right people, with the right mind-set, who are able to solve problems, because there will always be problems.
It is about being prepared to solve problems and having the necessary skills to carry out tasks, hence our training programmes. This is why we spend a lot of money financing our people for on-the-job training and for studies. The idea is to build up skills so that we have problem solvers, especially over the next three years, considering on the economy side, things may be hard.
SS: Does the downgrading of South Africa to junk status, going to be a problem for the country, and is it something that keeps you awake at night?
IS: South Africa is a very important neighbour. All neighbours are important, but South Africa is too important. If things go wrong there, we are going to definitely feel the impact. We are already feeling it now on the exchange rates. With a weak rand, oil becomes expensive and such commodities move everything. Food becomes expensive, cost of borrowing also goes up, and everything just becomes expensive.
SS: Once again, I have to ask you about delinking from the rand; unfortunately it is a debate that cannot go away. At what particular point, are we thinking about delinking?
IS: For now it is off the table. The question we should always ask is, what do I want out of this arrangement? When do I know that this arrangement is looking good? The exchange rate is a price for your exports and imports, so if you have an exchange rate which is going to make your exports less than competitive, that arrangement is not working for you.
If you have an exchange rate that is too weak that you have to get everything from outside and your inflation is in the forties, like we have seen in other countries, then the exchange rate is not going to work.
So you need to figure it out for yourself, when do I know that this exchange rate is working, so those are the things we look at. We do not have a problem with our exchange rate. Are we still able to sell our minerals outside or are they too expensive? Are tourists still coming to Namibia?
At the moment, this is working for us, so in terms of that, those are the things we evaluate and take into consideration. We do this assessment on a regular basis, and we still believe that the current exchange rate is still giving us better deals than any other.
SS: People speak about the junk status being a game changer, do you agree?
IS: No, it is not a game changer. Again, I am evaluating the objective of my exchange rate, the inflation, exports and imports. If that changes, then it will be a game changer. Countries like Brazil have been downgraded for the past three years or so, did they collapse? No, they did not, although they are struggling. Unless things happen in South Africa and things deteriorate, that is when we will start doing something about it, otherwise nothing changes.
SS: Let me take you back to the article that appeared in the weekly newspaper, Confidente, last week. The huge salary increases. Is this true?
IS: Well, I do not know what they calculated? As far as I know, the increase I got was seven percent for the year 2015/2016. Let me give you the context. Our contracts came to an end last year, and when a contract is renewed then you stay in the position, but once it is not renewed you leave office. Then once you get a new contract you get a once-off gratuity of 75 percent of your monthly salary for five months served. So that gratuity was then paid out and this depends on what the board and the finance minister thinks, it is not our decision. In terms of our performance contract, we were also entitled to a bonus. Whether it comes to 40 percent like they say, I do not know.
SS: You took over the running of SME Bank and announced that the bank’s board of directors had been removed, but recently you seem to have backtracked from your earlier stance. Can you please explain your decision?
IS: We have not backtracked, nothing has changed, but the matter is still sub judice; that is all I can tell you for now.
SS: There has been speculation that you and President Hage Geingob do not see eye-to-eye because of the move that you took in taking over control of SME Bank. How is your relationship with the President? Does he support you in tackling the SME Bank saga?
SS: The problem is that there are people who think that we have not acted on time, because the bank’s financial reports were not submitted on time. However, there are so many things we needed to put into consideration before we reached that step. We cannot assume control of a bank only because of delayed financial statements. The law has a provision that says if one cannot finalise their financial statements within a prescribed time, there are procedures that can be followed to ask for an extension, and SME Bank has been doing that. So if you just assume control on that basis, I will lose that matter immediately because I will be sued. People just think that you can act on little things.
If people don’t follow measures, of course you take them to task, but you don’t know what we did. You don’t know the kind of engagements that we had with the SME Bank. I don’t expect people to know what we are doing, of course things are done in private and we cannot share that with you.
So suddenly we operate in fear and don’t do our work because the president is involved. If that is the problem, then what changed because the president remains there?
My relationship with the president is fine, nothing has changed. I don’t see anything different after our enquiry into the SME Bank.