MINISTRY of Finance and National Planning Permanent Secretary Danies Chisenda says Development Bank of Zambia had to suspend its lending operations in 2018 due to lack of capacity and will only resume once the Bank is adequately recapitalised.

And DBZ Managing Director Dr Samuel Bwalya says as of 2019, the bank disbursed almost K1.5 billion worth of loans but only about 10% of these loans were paid with interest while 90% were not able to service their accounts.

Meanwhile, Bangweulu member of parliament Anthony Kasandwe has wondered if government technocrats are bewitched because they fail to perform once given an opportunity to do so.

Speaking when he appeared before the Committee on Parastatal Bodies, Monday, Chisenda said the bank was unable to sustain lending services.

“The auditor’s observation is noted. The committee may wish to note that the Bank relies on funding to further onward lend to its customers. Our ability to disburse loans was affected due to the African Development Bank (AfDB) drawn down on the $50 million credit line being cancelled by AfDB. The Bank had incorporated the expected interest to be earned from the booking of new loans in its budget using this line of finance. The committee may wish to note that the variance in interest income was mainly due to the following reasons: firstly, the reduced loan disbursement activity was as a result of the eventual cancellation of the African Development Bank (AfDB) Credit Line amounting to $50 million. With this cancellation, the Bank suspended its lending operations in 2018 to date and will only commence when the Bank is adequately recapitalised or secures new credit lines to support new lending operations. Suspending lending operations has adversely affected growth in interest income over the period under review,” said Chisenda.

And Dr Bwalya explained why DBZ failed to to secure a loan from the African Development Bank.

“Most of these loans were disbursed just around 2014 and 2017. The status as of 2019 was that most of the loans which were disbursed, almost K1.5 billion in total, only about 10% of these loans were paid interest and the other 90% were not able to service their accounts. There are so many reasons for this but internally, some of the promoters did not utilize the funds properly so that they can generate profit and pay back. Secondly, there has been no aggression to pursue these clients to pay loans prior the current efforts,” he said

“There was a time when the bank had no board and financial statements could not be approved. That could not fill the conditions that the African Development Bank wanted. As a response, government appointed a new board in 2019, and subsequently in 2020 a new management was put in place to ensure that collections were made. We have reported in 2020, the bank was directed to put in place strategies that will show a turnaround of this event. There has been incredible effort to hold the promoters accountable to pay interest. We are hoping to continue on this trend and see amounts recovered.”

Dr Bwalya said there had been significant laxity in the management of the bank.

“I must confess that most of these loans were disbursed between 2014 and 2019, the board was appointed in 2019 and the new management team was appointed in 2020. What we noticed is that there was significant laxity in the management of the bank before which led to poor performance. We will utilize stronger systems with commercial banks to be able to discharge our credit through apex lending. Generally in Zambia, there is poor lending culture and we need to look at ways of improving that,” he said.

“Most of our clients are doing business with government and when they are delayed payment, then that also delays our accounts. We have engaged the Ministry of Finance to look at these domestic arrears so that the bank’s loan book can be discharged. In 2019, debt recovery was about K28 million and in 2020, debt recovery increased significantly to K100 million. This year, we are projecting that we may collect about K278 million. We should then begin the loan operations again. We pursued the World Bank where we have been given 2.5 million dollars and gone to Saudi Arabia who have given us a 5 million dollars facility.”

Committee Chairperson and Zambezi East member of parliament Brian Kambita said it was unfortunate that the bank had 88 percent of non-performing loans.

“You are sitting on 88% of non-performing loans and there is all blame being transferred to a third party that is your clients, and proposed various reasons. Yet within your institution, your members of staff who are responsible for credit scoring before a decision is arrived at to actually lend to these clients. So the buck still stops with you as an institution. Will you then state the reasons why you have this level of non-performing loans? Have you taken a quick study to arrive at the key reasons that have led to your loans being non-performing loans including those political reasons?” he asked

Meanwhile, Bangweulu member of parliament Anthony Kasandwe wondered if government technocrats were bewitched.

“I also want to find out when it comes to government institutions, we have a lot of challenges in terms of meeting our mandate. I am assuming that probably, the same clients that owed money from the bank might have contracted other loans from other banks and probably they have settled it. What could really be the problem? I have always been asking. The same human beings that work in these government institutions fail to perform to the expectation of the people but when they are in private companies, they perform wonders,” he said.

“Where is the problem PS? Who is bewitching our technocrats and experts? Immediately they step foot in government institutions, it is a different game. I have been asking the same question to controlling officers but they seem not to know the answer. Is there a third hand that is making people in these government institutions such as DBZ not to perform?”

In response, however, DBZ Board chairperson Professor Pinalo Chifwanakeni said the problem started with members of parliament who enacted laws on how government resources must be managed.

“The problem starts from here as members of parliament and representatives of the people sit and enact laws. The first thing that we need to put in place is how to manage our national resources. If we can learn how to manage and not how to use them all, these national institutions will be managed the way the ones you are praising, the private institutions [are managed]. There has to be a relationship between productivity and input. It is a question of culture. In private institutions targets are set for you to get a bonus,” said Prof Chifwanakeni.

“So the culture of managing resources needs to start from here. You are the ones who run issues of national resources so if we start from here, laws of ownership, the attachments start from here. We are pursuing the borrowers of these funds. It is not an easy process of doing loan evaluations. Some are inflated when getting the loans and we cannot tell. The bank may not have an expert in valuation. When you try to dispose of the collateral, you find that they cannot recover the funds that were gotten.”