The Bank of Botswana Amendment Bill, 2022 (Bill No. 11 of 2022), which aims to advance operational independence and improve bank governance, was approved by parliament on Monday.
The Bank of Botswana Amendment Act, whose comprehensive review was carried out in 1996, has to be amended, according to Minister of Finance Peggy Serame, who presented the bill for a closer reading. Serame stated that this is necessary to cater to emerging issues.
“Some of the provisions in the current act are outdated and it was necessary to amend the act to cater for emerging issues,”she said.
She pointed out that the model law of the Southern African Development Community (SADC) and other recent developments were taken into account during the review process, which also involved discussions with the International Monetary Fund (IMF). She said that consultations with Botswana stakeholders were also a part of the drafting process.
As one of the main economic institutions in the county, the bank, she said, it was done to provide strong legislation for the bank.
“I wish to underscore the importance of a robust central bank legislation as a basis for the establishment of and operation of a central bank as one of the key economic entities in the country. The central bank legislation is therefore critical in ensuring issuance and protecting the value of the currency through currency operations, monetary policy, exchange rate management, regulation of relevant financial institutions, and sound payments and settlements frameworks,” she said.
The minister noted that among other changes, clause 4 of the bill included three new sections to the act that dealt with the bank’s operational independence, its duties, and its authority to issue directives and circulars.
In order to “guarantee the financial soundness and sustainability of the activities of the bank,” clause 5 replaced section 5 of the act by raising the bank’s authorized capital from P25 million to P150 million.
She added that the bill’s clause 8 expanded the board’s authority and gave it greater responsibilities.
“Clause 8 amends section 8 of the act by broadening the functions of the board which shall include the power to approve the budget of the bank, assess risks and formulate contingency plans for the operations and security of the bank,” she noted.
According to her, clause 13 amended section 13 by, among other things, limiting the governor’s reappointment to a term not exceeding five years.
“The subsequent clause amended the act by inserting a new section on powers and functions of the governor,”she said.
She emphasized that clause 22, which changed section 29 of the act by raising the penalties for photocopying or reproducing bank notes from P1 million to P10 million, was one of the most significant revisions.
She added that clause 28, which revised section 41, raised the fines for financial institutions that fail to follow the rules of interest and credit or give the bank misleading information from P50,000 to P100,000. Penalties for refusing to lend money to the government were raised by the same clause from P5,000 to P10,000.
Support by other Members of Parliament
Dithapelo Keorapetse, Selebi Phikwe West Member of Parliament (MP), stated during the bill’s debate that he supported the legislation because, if properly implemented, the suggested amendments would guarantee the independence of the central bank, which is tasked with responsibly controlling monetary policy without interference from the government.
“We hope that the Bank of Botswana will as a result of the amended law, not be subjected to any form of control by the executive or other agencies,”said Keorapetse.
He also added that term limits for board members were necessary to bring the bank into compliance with good governance principles.
The measure has to expressly specify the operational independence of the bank, according to Mr. Keorapetse, who is also the Leader of the Opposition (LOO). In order to maintain openness and accountability, he emphasized the importance of using sound corporate governance when the bank sources money printing services.
“We have also suggested that high corporate governance standards should be adhered to in appointing companies to print money for Botswana,” he said.
Talita Monnakgotla, Kgalagadi North MP who also backed the bill, argued that it was critical to update the statute governing the Bank of Botswana to address new issues and developments.
As a key component of the nation’s economy, the bank, according to her, had to be independent in carrying out its mandate.
“I also concur with the proposal that board members should have a limited term to promote good governance,” she said.
After members of parliament debates, the bill moved on to the committee stage without any amendments to all the clauses. As a result, it moved on to the third reading the same day and was eventually approved by Parliament.
