25 Anniversary
2005 marks
a geat milestone in
the life of the
Central Bank of Lesotho.
It has grown from strength to strength, gone
through different phases of development. It has made a
significant progress in its endeavour to achieve its mission
of striving for a strong, diversified, efficient and effective financial sector in the country
Central Bank of Lesotho
“Two and Half Decades of Experience and Growth”
Published by
Central Bank of Lesotho
Corner Moshoeshoe & Airport Roads
P.O. Box 1184, Maseru 100, Lesotho
Tel.: +266 22 314281
Fax: +266 22 310051/22 310557
Email: [email protected]
Website: www.centralbank.org.ls
Copyright © 2005 Central Bank of Lesotho.
All rights reserved. No parts of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form
or by any means, electronic, mechanical, photocopying, recording, or otherwise, without prior permission of the publisher.
Design and production by Pheko Mathibeli, graphic designer, media practitioner & chartered public relations practitioner
Set in Palatino Italic and Optima, with Quark Xpress 5.0 on Apple Macintosh computer
25 Years of Experience & Growth
1
Contents
PART FIVE
PART ONE
Message from the Governor
4
6
PART THREE
Past Governors of the Bank
13
Mr. Ezekiel Kobeli Molemohi
13
Mr. Stefan Schoenberg
13
Functions of the Bank
7
Mr. Eric Lennart Karlson
13
Formulation and execution of monetary policy
7
Dr. Anthony Mothae Maruping
13
Supervision of financial institutions
7
Mr. Stephen Mustapha Swaray
14
Foreign reserves and exchange control
8
Mr. Esselen Motlatsi Matekane
14
Financial services
8
Issuing of currency
9
PART SEVEN
Advisor to Government on macroeconomics
9
Deputy Governors
15
Mr. E.Hae Phoofolo
15
Mr. Ezekiel Kobeli Molemohi
15
PART FOUR
2
12
PART SIX
PART TWO
Introduction
Board of Directors as at November 2004
Legal framework
10
Mr. Thabang Nyeoe
15
Financial Institutions Act 1999 (FIA)
10
Mr. Felix Mapholo Borotho
15
Insurance Act No. 18 of 1976
11
Mr. Esselen Motlatsi Matekane
15
Exchange Control Act 1987 (as amended)
11
Mr. Tabo Foulo
15
Mr. Peete Molapo
15
Central Bank of Lesotho
PART EIGHT
Expanded Executive Committee
PART THIRTEEN
16
PART NINE
Operations Department
25
Banking Operations Division
25
Currency Division
26
Governor’s Office
18
Development Finance Division
26
Board Secretariat
18
National Payment System Division
27
Internal Audit Division
18
Rural Finance Division
28
Public Relations Division
19
PART FOURTEEN
Research Department
PART TEN
29
Administration Department
20
Human Resources Division
20
PART FIFTEEN
Security Services Division
20
Supervision Department
31
Financial Institutions Supervision Division
32
Supervisory Policies & Regulations
33
PART ELEVEN
Financial Markets Department
23
Insurance Supervision Division
33
Reserves Management Division
23
Policy & Exchange Control Division
34
Securities Market Division
23
PART SIXTEEN
PART TWELTH
Information & Communications Technology Department
25 Years of Experience & Growth
24
Other Developments
36
25 years with the Bank
37
Inauguration of Lehakoe Recreation & Cultural Centre
38
3
Governor’s message
T
he year 2005 marks a great milestone in the life of the Central Bank of Lesotho
(CBL). Since its inception 25 years ago, the Bank has grown from strength to
strength, going through different phases of development. The theme for this
historic occasion is “Two and Half Decades of Experience and Growth”. The account
of the life of the Bank is contained in this document.
Since the early days of the Lesotho Monetary Authority, the Bank has made a significant progress in its endeavour to achieve its mission of striving for a strong, diversified,
efficient and effective financial sector, and of achieving and maintaining price stability. The financial sector crisis of the 1990s was however, a great challenge to the objectives of the Bank, yet the legislative reforms and restructuring of the Bank made it possible for it to renew its vigour in monitoring a sound financial sector in Lesotho.
Today’s occasion presents us with an opportunity to reflect on the achievements, successes and limitations of the Central Bank since its establishment. There is little doubt
that during the past twenty-five years, this institution has achieved a great deal, and has
had an immeasurable impact on the socio-economic development of this country.
In 2000, The Central Bank Act No.2 was promulgated, along with various other ancillary regulations. This piece of legislation has thus far enabled the Central Bank to freely
and independently exercises its responsibility of implementing monetary policy, in
conformity with international central banking trends, while at the same time maintain-
4
Central Bank of Lesotho
ing its responsibility of being accountable to the central government and other public
banks within Lesotho, which ensured that our banking industry conforms to interna-
authorities.
tionally accepted standards and practices. The Maseru Clearing and Settlement House
was instituted and the rules and regulations governing this body were established and
The successful completion of a number of blueprints is also worthy of our praise. Since
signed by all parties.
the closing down of the Lesotho Agricultural Development Bank, and the restructuring
of the Lesotho Bank, the Central Bank has faced the challenge to take a proactive role
The image of the Lesotho banking industry has also been greatly enhanced, to the
of taking the lead in rural intermediation.
extent that Lesotho cheques are more readily accepted in neighbouring states. The
modernisation project of the Lesotho National Payment System has also been initiated
Under the new Rural Savings and Credit Groups Scheme, the Central Bank takes the
as the foundation upon which we can continue to build to achieve appropriate and
responsibility of monitoring and strengthening rural groups engaged in income gener-
functional payment systems for Lesotho.
ating activities but with very slow capital formation.
The financial sector in Lesotho is gradually, though satisfactorily developing. The openUnder the general programme of financial sector reform, the Bank continued to inten-
ing of additional banks within the country is viewed positively, especially in light of
sify efforts to put in place an efficient system for the delivery of the export finance
competitive banking generally, and rural financial intermediation specifically. Yet the
scheme. The introduction of the Blueprint for the Export Finance and Insurance
Bank is conscious of the need for these developments to occur in a favourable eco-
Scheme has also been a welcome initiative. This initiative has been drawn to not only
nomic environment. To this end, the Bank recognises the importance of effectiveness
expand and diversify Lesotho’s export base, but importantly, to empower our local
of its monetary policy decisions, and their importance in economic development
exporters through provision of short-term funding and insurance to exporters, particularly small indigenous exporters.
The Bank has also succeeded in harmonising the banking sector within Lesotho. Under
our guidance the Lesotho Bankers Agency Agreement was signed by all commercial
25 Years of Experience & Growth
Governor
5
Introduction
T
he Central Bank of Lesotho (CBL) has its origins as the Lesotho Monetary
Authority. It was established through the Lesotho Monetary Authority Act No.
13 of 1978, though it started its operations in 1980. The Government had
solicited technical assistance from the then Federal Republic of Germany to establish
the office of the Commissioner of Financial Institutions, which became the forerunner
to the Authority.
In August 2000, the Central Bank of Lesotho Act No.2 of 2000 came into force. This
In its initial stages, the Authority interacted with the South African Reserve Bank and
new Act has conferred considerable autonomy to the Central Bank and defines a sin-
the Swaziland Monetary Authority on issues of exchange control management. These
gular objective for the Bank.
interactions were realised through tripartite quarterly meetings that rotated among
member states. The Authority was also, at this formative period, focused on the print-
The Central Bank enjoys a fair amount of independence in formulating and imple-
ing of the Maloti - the country’s currency - as well as the construction of its first prem-
menting monetary policy, yet without losing sight of its obligation to be transparent and
ises.
accountable for its actions.
In 1982, through the Act of Parliament, the name Lesotho Monetary Authority was
The Governor, who is also the Chairman of the Board of Directors, together with the
changed to the Central Bank of Lesotho and additional functions and responsibilities
two Deputy Governors, are appointed by His Majesty the King on the advice of the
were prescribed to the new institution.
Prime Minister. The Minister of Finance appoints the other non-executive Board
Members.
The Minister of Finance had over-riding powers over the affairs of the Bank, which he
exercised after consultation with the Governor. The Minister appointed the directors of
The Central Bank of Lesotho has a total staff complement of 196 and operates from its
the Board, and the law required that one of them should be the Principal Secretary for
head office in Maseru, the capital of Lesotho. This number excludes the Governors and
the Ministry of Finance.
six Heads of Department
6
Central Bank of Lesotho
Functions of the Bank
T
he principal objective of the Central Bank of Lesotho is to achieve and main-
Principal Secretary of the Ministry of Finance and Development Planning, and a rep-
tain price stability. To attain this goal, the Bank performs a number of functions
resentative of the business community.
in accordance with modern central banking practices. An important function
of the Bank is to formulate and execute monetary policy for Lesotho.
The broad responsibilities of the MPC are to:
Review the international and domestic
economic developments and their likely impact on the Central Bank of Lesotho’s abilConsider and formulate appropriate mon-
Other functions include issuing of currency, serving as a banker for the Lesotho
ity to achieve and maintain price stability;
Government and the commercial banks, acting as a custodian of the country’s foreign
etary policy responses in order to achieve and maintain price stability in the Kingdom
reserves and supervision of financial institutions. It also acts as an advisor to the
of Lesotho;
Government on financial issues specifically, and more generally on macroeconomic
work and adopt changes as necessary; and
issues.
regulations to govern its operations and for the conduct of its proceedings.
Formulation and Execution of Monetary Policy
Supervision of Financial Institutions
The primary responsibility of the Central Bank of Lesotho is the formulation and imple-
One of the main responsibilities of the Central bank of Lesotho is to ensure the finan-
mentation of the country‘s monetary policy.
cial strength and stability of the nation’s banking system.
During 2004, the Monetary Policy
Regularly review the Central Bank of Lesotho’s monetary policy frameDetermine its own procedural rules and
Committee (MPC) was established, to replace the Monetary and Exchange Policy
Technical Committee (MEPTC), which had been in existence since 1998.
Through the Department of Supervision, and in accordance with the Financial
Institutions Act of 1999, the Central Bank promotes the efficiency and effectiveness of
The Committee was established upon the realisation of the need to enhance account-
the financial sector, ensuring the integrity of the financial system through proper licens-
ability and transparency of monetary policy in Lesotho. The Committee consists of the
ing and supervision of financial institutions. The Bank conducts onsite examinations
Governors, 2 non-executive members of the Board of Directors, one of whom is to be
and offsite surveillance to ensure adherence to the prudential requirements and prop-
an economist or a person of recognised standing and experience in economics, the
er functioning of the banking system.
25 Years of Experience & Growth
7
Foreign Reserves and Exchange Control
The Central Bank executes external payments on behalf of the Government of Lesotho,
and the commercial banks.
Under the Department of Financial Markets, the Bank holds reserves with the objective
of preserving the value of these reserves, providing liquidity to meet external payments
for the Government, and earning a reasonable return on investments. The Bank is also
responsible for executing the foreign exchange policy of government.
In recognition of the need to develop and consistently review its programme for effec-
Financial Services
tive and efficient financial supervision, the Bank established the Bank Supervision
Technical Committee (BSTC) in 1998.
The Central Bank provides several important services to the Government and the commercial banks. As the banker for the Government, the Bank clears cheques drawn on
The Committee plays an important advisory role with regard to supervisory issues. It
the Treasury’s account. It also acts as a fiscal agent for the Government through sell-
comprises the Governor (as Chairman), Deputy Governors, Directors and senior offi-
ing and redeeming of the GOL Treasury Bills.
cials of Supervision and Research Departments.
In addition to the provision of teller facilities to the Government and supplying of curThe Committee meets once a week and is kept informed of all relevant supervisory
rency to commercial banks, the Central Bank operates a Clearing House for partici-
activities. The mandate of the BSTC was broadened in 2001 to cover even non-bank
pants in the clearing system.
supervision and the name of the supervisory committee changed to Financial
Institutions Supervision Technical Committee.
8
It further has the responsibility of ensuring an effective and efficient payment system.
Central Bank of Lesotho
To this effect, the Bank is currently engaged in reviewing the National Payment System
with the view to bring it in line with internationally accepted principles.
Issuing of Currency
The Central Bank has the sole right to issue and manage the national currency, the maloti. Through the commercial banks, it puts into circulation notes and coins for the public’s need for cash.
The Bank also has the responsibility to regularly sort notes which are no longer fit for
circulation; check for counterfeits and to replace mutilated notes. It also carries out
repatriation of foreign currencies and retrieval of national currency, maloti, from
abroad.
Advises Government on Financial and Macroeconomics
The Central Bank has a Research Department that is its technical arm. The Department
monitors economic developments with a view to analysing economic policies, and
recommending remedial measures as well as making macroeconomic analyses and
forecasts. The performance of banking and other financial institutions is also reviewed
and an analysis made of domestic and regional money and capital markets, as well as
international economic prospects
25 Years of Experience & Growth
9
Legal framework
he statutory authority of the Central Bank of Lesotho is derived from a number
T
The FIA 1999, with its implementing regulations, paved the way for the enforcement of
of enabling legislations. Central among them is the Central Bank Act No. 2 of
prudential banking standards and principles based on the internationally accepted
2000, which was promulgated along with various other ancillary regulations.
Basel Core Principles for Effective Banking.
This piece of legislation enables the Central Bank to freely and independently exercise
The regulations issued by the Bank address the key aspects such as capital adequacy,
its responsibility of implementing monetary policy, in conformity with central banking
income recognition on loans, asset classification, provisioning standards, lending and
trends, while at the same time maintaining its responsibility of being accountable to the
credit concentration limits. Below is a list of those regulations:
central Government and other stakeholders.
Financial Institutions (Risk-Based Capital Requirements) Regulations 1999;
Financial Institutions (Loan Portfolio Classification) Regulations 1999;
It specifically provides for and safeguards the Bank’s economic and financial soundness
Financial Institutions (Licensing Requirements) Regulations 1999;
through provisions that limit credit expansion, prohibit the Bank’s engagement in
Financial Institutions (Minimum Local Assets Requirements) Regulations 2000/2002;
quasi-fiscal activities, as well as ensures that the Bank is adequately capitalised and sol-
Financial Institutions (Foreign Currency Exposure Limits) Regulations 2000/2002;
vent at all times so that it can represent the country’s interest in the international finan-
Financial Institutions (Lending Limits) Supervisions 1999;
cial circles.
Financial Institutions (Prescription of Reports on Abandoned Funds and Properties)
Regulations 1999;
Financial Institutions Act 1999 (FIA)
Financial Institutions (Branching Requirements) Regulations 1999;
Financial Institutions (Internal Control Systems) Regulations 2000;
Concerted efforts exerted by the Central Bank of Lesotho over the years in drafting a
Financial Institutions (Liquidity Requirements) Regulations 2000/2001;
legal framework for effective banking supervision eventually culminated in the passing
Financial Institutions (Anti-Money Laundering) Guidelines 2000;
of the Financial Institutions Act 1999. This Act repealed and replaced the then twenty
Financial Institutions (Appeal) Regulations 2001;
five year old Financial Institution Act 1973 with its outdated and inadequate provisions
Financial Institutions (Ancillary Financial Service Providers) (Licensing Requirements)
on prudential supervision.
Regulations 2003;
10
Central Bank of Lesotho
Central Bank of Lesotho (Collective Investment Scheme) Regulations 2001.
Insurance Act No. 18 of 1976
The Insurance Act No. 18 of 1976 confers upon the Commissioner of Insurance
(Central Bank of Lesotho) powers to ensure compliance with its provisions by registered
insurers and insurance intermediaries, which inter alia, require that business be conducted on the basis of sound insurance principles. Thus supervision not only requires
a detailed scrutiny of the statutory returns but also other aspects of insurers’ business
such as the maintenance of statutory reserve fund, margin of solvency and proper
engaged to assist CBL. In reviewing the Insurance Act, CBL started by formulating a
investment of funds in general.
new insurance policy framework, with the aim of overhauling the regulation and supervision of the insurance industry.
In cognizance of the fact that the insurance industry in Lesotho is governed by old legislation, which has general shortcomings, CBL embarked on a strategy to review the
Exchange Control Act 1987 (as amended)
Insurance Act No. 18 of 1976. A task team, comprising members of the Supervision
and Research Departments, was formed.
This legislation governs foreign exchange transactions between sellers and buyers. The
principal objectives of this Act are as follows:
to ensure timely repatriation into
The team was charged with formulating a blueprint on the development of a policy and
Lesotho of all foreign currency acquired by residents;
new regulatory framework. In its endeavors to implement the insurance sector reform
currency through the transfer abroad, of real or financial capital assets in Lesotho and;
the Bank approached several donors for assistance, the World Bank, the International
to constitute an effective system of control over the inward or outward movement of
Monetary Fund and Commonwealth Fund Technical Cooperation. A consultancy firm
financial and real assets, whilst at the same time avoiding interference with the efficient
in the name of Financial Sector Reform and Strengthening Initiative (FIRST initiative) is
operation of the commercial, industrial, and financial system of the country
25 Years of Experience & Growth
to prevent the loss of foreign
11
Board of directors
A
s at November 2004, the Board of Directors has the following members: Mr.
Mr. E. M. Matekane, Governor and Chairman; Vacant , Deputy Governor I;
Mr. T. Foulo, Deputy Governor II; Mr. E. K. Molemohi, Non-Executive
Director; Mr. G. T. Monaheng, Non-Executive Director; Mrs. T. Chimombe, NonExecutive Director; Mrs. M. Moiloa, Non-Executive Director; Dr. M. P. Makhetha, NonExecutive Director.
Non-Executive Member
Mr. Ezekiel Kobeli Molemohi
Non-Executive Member
Mrs. Mantsekhe Moiloa
Governor & Chairman
Mr. Motlatsi Matekane
12
Non-Executive Member
Mrs. Thakane Chimombe
Non-Executive Member
Mr. George Thabo Monaheng
Non-Executive Member
Dr. Masilo Philemon Makhetha
Deputy Governor II
Mr. Tabo Foulo
Central Bank of Lesotho
Governors
Mr. Ezekiel Kobeli Molemohi
Mr. Stefan Shoenberg
5.6.1979 – 7.8.1982 Lesotho
8.11.1982
Monetary Authority. 8.8.1982 –
19.11.1988 – 15.5.1998. Prior to
hailed from the Bundesbank,
national of Sweden, he came to
his appointment, he served as
7.11.1982 CBL. Prior to his
Germany. He was seconded to
Lesotho as a representative of
Pro-Vice
appointment
the Lesotho
the Central Bank of Lesotho
SIDA, subsequent to his retire-
National University of Lesotho.
Monetary Authority, he had been
under the General Technical
ment from the Central Bank of
Prior to his appointment, he had
a civil servant in the Ministry of
Assistance Programme of the gov-
Sweden. Prior to that, he had had
been on the Board of Directors
Finance, where he left as Chief
ernment of the then Federal
a spell with the World Bank, and
since 1980. He was the longest
Financial Controller.
Republic of Germany.
the International Monetary Fund.
serving Governor of the Bank yet.
25 Years of Experience & Growth
8.11.1985.
He
9.11.1985
–
18.11.1988.
Dr. Anthony Mothae Maruping
A
to
–
Mr. Eric Lennart Karlsson
Chancellor
of
the
13
14
Mr. Stephen Mustapha Swaray
Mr. Esselen Motlatsi Matekane
9.11.1998 – 5.9.2001. The former
10.9.2001 to date. He joined the
Governor of the Bank of Sierra
Bank as Senior Economist. In
Leone. Before his appointment,
1995 he was seconded to the
he had been a a senior civil ser-
Ministry of Economic Planning as
vant in Sierra Leone, a lecturer at
Principal Secretary. He served as
the Forray Bay College, University
Deputy Governor from 1998 to
of Sierra Leone, a consultant in
2001.
the Monetary and Exchange
Governor in 2001, he served as
Affairs Department of the IMF.
Advisor to the Governor.
Prior
to
becoming
Central Bank of Lesotho
Deputy governors
Dr. Manfred Reichhardt
1979 - 1981
Mr. Hae Phoofolo
1981 - 1987
Mr. Felix Mapholo Borotho
1995 - 2000
Mr. Motlatsi Matekane
(also Advisor) 1998 - 2001
25 Years of Experience & Growth
Mr. Ezekiel Kobeli Molemohi
1985 - 1988
Mr. Tabo Foulo
2000 - Present
Mr. Thabang Nyeoe
1992 - 1995
Mr. Peete Molapo (also Advisor)
2001 - 2004
15
Expanded executive committee
Mr. Motlatsi Matekane
Governor
Mr. Tabo Foulo
Deputy Governor II
Mr. Mahlomola Makhupane
Director - Operations
Mrs. ‘Mankone Mofelehetsi
Director - Supervision
Mr. Thabo Makara
Director - Administration
Mr. Chinna Kannapiran
Director - Research
Mr. Peter Irgo
Director - ICT
Mr. Lefeu Ramone
Secretary to the Board
Mrs. Ntseliseng Mashologu
Chief, Public Relations
Mr. Lerato Khaka
Chief Accountant
Ms. ‘Mathabo Makenete
Director - Financial Markets
Mrs. ‘Malineo Motebang
Chief Internal Auditor (a.i.)
Please note that the position of Deputy Governor I is currently vacant.
16
Central Bank of Lesotho
Mr. Lesojana Leuta
President - Staff Association
Mrs. ‘Masebueng Letsie
Head - Banking Operations
Ms. Stella Phate
Head - Currency
Ms. Thandiwe Metsing
Head - SPRD
Mr. Fusi Morokole
Head - Insurance Supervision
Mr. Retsepile Elias
Head - Reserves Management
Mr. Mokoto Hloaele
Head - Securities Market
25 Years of Experience & Growth
Mrs. Ntee Bereng
Head - Rural Finance
Mr. Motlatsi Tabane
Head - Development Finance
Mrs. Makhalima Mohasoa
Head - FISD
Mrs. ‘Maketa Keta
Head - PEC
Mrs. ‘Makhopotso Molekane
Head - Human Resource
Mr. Teboho Malataliana
Head - General Services
Mr. Thabo Nkuatsana
Head - Security Services
Mrs. ‘Manneko Monyau
Head - Real Sector
Ms. Leonia Lephoto
Head - Finance
Mr. Tanka Tlelima
Head - Macroanalysis
Mr. Sam Mahooana
Head - ICT
Mrs. Thenjiwe Namane
Head - National Payment System
17
Governor’s office
he Governor is the Chief Executive of the Bank, and also Chairman of the Board
T
respect to secretarial services, the Division serves the Board and its sub-committees
of Directors. Two Deputy Governors assist him. The following Divisions report
including the Audit Committee, Remuneration Committee, Executive Committee, and
directly to the Governor:
the Expanded Executive Committee.
Accounts & Budget Division
Internal Audit Division
The Division, led by Mr. Lerato Khaka, started operations the day the bank was estab-
It was established in 1983 and is currently headed, on an acting basis, by Mrs. ‘Malineo
development and maintenance of sound account-
Motebang, while the incumbent Chief Internal Auditor, Mr. Jeremiah Nts’ekhe is on
lished. Its principal objectives are:
ing system for the Bank;
ments of the Bank; and
preparation and appraisal of the financial reports and state-
study leave.
co-ordination of the budgeting process.
The main objective of the Division is to be an effective provider of high quality audit
Initially, its started operating with manually driven accounting processes, which were
services to the Bank Management, the Audit Committee, and to provide independent
1995 – payroll system automation;
objective assurances and consulting services designed to add value and improve the
1999 – fixed assets register automation.
Bank’s operations. It helps the Bank to accomplish its objectives by bringing a sys-
However, studies and evaluations are ever continuing to finally reach total processes
tematic, disciplined approach, to evaluate and improve the effectiveness of risk man-
automation.
agement, control and governance processes.
phased out in critical areas in stages as follows:
1997 – budgetary system automation; and
It reports functionally to the Audit
Committee, and administratively to the Governor; an arrangement that facilitates inde-
Board Secretariat
pendence and ensures good governance.
It was established in 1998, and is headed by Mr. Lefeu Ramone. It is responsible for the
The Division has grown from strength to strength over the years, since its inception in
provision of legal and secretarial services to the Bank. Its focus on legal services is pri-
1983. It was established with the assistance of the IMF, and in 1996, it produced a
marily on the provision of advice on administrative and governance issues. With
Procedures Manual, which served as a guide on policies and procedures to be followed
18
Central Bank of Lesotho
during the audit process. Other developments include the establishment of the Audit
its image by providing information to its stakeholders.
Committee, a sub-committee of the Board, in 2002. This Committee is made up of
three non-executive members, two of whom are Directors of the Board.
The Division was established on the recognition by the Bank of the need to be fully
transparent and accountable for its actions and procedures. This principle requires that
The Audit Committee reviews financial reporting process, the system of internal con-
the Bank disseminates information to its stakeholders regarding policies, objectives and
trol, and management of financial risks, the audit process, and the Bank’s process for
activities. Transparency in this regard should enhance the Bank’s credibility and
monitoring compliance of laws and regulation and its code of business conduct. It
increase public support for it in the execution of its mandate.
plays an objective and independent role, operating as an overseer and a maker of recommendations. The Division went on to develop an Audit Charter in 2003, in order to
This principle was also borne out of the increasing demand for more information from
set out the nature, roles, responsibilities, status, and authority of the Internal Audit
the Central Bank by the public. This demand, coupled with changes and developments
Division within the Bank, and outline the Division’s work.
surrounding the Bank, as well as international trends towards higher degree of transparency and accountability have necessitated a more coordinated communication
In 2004, the Division received technical assistance from the Government of Germany,
process.
through GTZ/CIM, in the form of an expert to establish the Information Technology (IT)
Audit. The main objective of this type of audit is to undertake regular reviews of the
To this end, the Division has been engaged in a concerted effort to provide strategic
automated systems of the Bank, evaluate, appraise the systems, report the results and
coordination and management of the communication activities of the Bank. These
make recommendations to the Audit Committee and Management.
activities include holding of workshops and seminars for the different Bank stakeholders, media-related activities, such as radio programmes on the activities of the Bank.
Public Relations Division
The Bank is in a process of improving electronic means of communication by facilitating internal communication through the intranet, and designing its website in a man-
Established in 1998, it is headed by Mrs. Ntseliseng Mashologu. The overall objective
ner that will not only enable access to as much information about the Bank as possi-
of the Division is to create a better understanding of the Bank, and therefore enhance
ble, but easy navigation as well
25 Years of Experience & Growth
19
Administration
T
he Administration Department serves to provide support services to other
tivity levels. In 2003 the Department of Administration undertook an arrangement of
departments.
It comprises three Divisions, namely, Human Resources,
activities. These included revision of policies, regulations and administrative proce-
Security, Services and General Services. The new ICT Department was part of
dures, which were done as part of the review of the Bank’s Scheme of Service incept-
the Administration Department until year 2000 when it was transferred to the
ed in 1999.
Governor’s Office due to its strategic importance at the time of the Y2K changeover.
The Director Mr. Thabo Makara heads it.
As a result of the Schemes of Service, the Bank has expanded its training of staff to the
extent that to-date around 25 staff member are on long-term training to acquire first and
Human Resources Division
senior degree qualifications.
It focuses mainly on development and maintenance of personnel policies and ensures
Security Services Division
implementation of the same. It is also responsible for recruitment and staff training. It
is headed by Mrs. ‘Makhopotso Molekane.
It was established in 2002, following the mutual agreement between the Bank and the
Lesotho Defence Force (LDF) to terminate the latter’s Bank security engagement, fol-
In 1998 the Bank commissioned International Consultants to undertake a review of the
lowing consultations with the Government. However, the LDF is still in continued col-
Bank’s Schemes of Service on its behalf. This was aimed at examining all aspects relat-
laboration with the Bank on various other special security engagements.
ing to human resource management and to make recommendations to the Board of
Directors. As a result the Expanded Executive Committee (EEC), which is made up of
The Division started with the recruitment of the Chief Security Officer, Mr. Thabo
Senior and Middle Management as well as Staff Association representatives, was
Nkuatsana. Following his recruitment, three Senior Security Officers were recruited to
formed.
be tasked with the following specific roles; Safety, Training, Health and Environment,
Surveillance and Evacuation, and Investigation and Repatriation. The Bank security
This initiative was undertaken on realisation that employees play a vital role in execu-
staff is now in full complement and effective operation
tion of the Bank’s role and as part of means that could be utilised to improve produc-
20
Central Bank of Lesotho
General Services Division
The Division has two sections to carry out its support to other Divisions, namely
General Services and Maintenance. Its procurement function takes centre stage
It was established in 1984 as a unit in the Personnel Division. Mr. Teboho Malataliana
because the Bank out-sources goods and services for maintenance of its assets includ-
heads it. Its main responsibility was initially procurement of goods and services
ing buildings, machinery and equipment.
required by the Bank.
The construction of Lehakoe Recreation and Cultural Centre has been a most chalIt later grew and became a division and its responsibilities include management of the
lenging period for the Division. The final product is hailed as a world standard achieve-
vehicle fleet, arrangement of transport for staff on official travel, management of
ment for the country – not only in architectural design, but also in quality
immovable and movable assets.
25 Years of Experience & Growth
21
Financial markets
F
inancial Markets Department is responsible for management of the country’s
With developments in the Bank and the economy as a whole dictating a revision in the
reserves in accordance with Reserves Management Policy and for the develop-
manner in which the reserves were managed, the Board of Directors of the Bank
ment of domestic money and capital markets. The Director Ms. ‘Mathabo
approved a new Policy in March 2004, whose major emphasis lay in prioritising liq-
Makenete heads the Department. It comprises two Divisions as follows:
uidity management and enhancing the revenue earning potential of the reserves.
Reserves Management Division
Along with developments in the international financial markets, SWIFT substituted the
telex messaging system, which was in use from the early days of the Bank, in March
Headed by Mr. Retsepile Elias, operates under the ambit of Section 35 (1) of the Central
1993. This was intended to enhance the security of the Bank’s incoming and outgoing
Bank Act of 2000, which provides for the establishment and maintenance of an inter-
financial and non-financial messages.
national reserve of the Bank.
In terms of financial information, the Bank’s humble beginning was with the use of the
Over the years, the Bank’s management of the international reserve moved from just
Telerate system developing further to use of Reuters and Bloomberg.
liquidity management of the meager reserves to a more enhanced system under a structured framework which has identified the major risks with proper monitoring and
Securities Market Division
reporting system.
Led by Mr. Francis Hloaele, it started to sell treasury bills in April 1992. At that time
The growing levels of reserves necessitated this over the years, with the peak level
their nominal value was M154.1 Million. This came as a result of the Government’s
being reached in 2001.
decision to develop money markets in Lesotho in 1988.
The first Reserves Management Policy was developed in December 1997, which set the
The objectives of this policy were:
basis upon which the performance of the Division in terms of meeting the objectives
and creating alternative investment and borrowing instruments; and
of holding reserves could be measured.
ticipation in short term financial instruments.
22
to improve financial intermediation by expanding
to broaden par-
Central Bank of Lesotho
These objectives saw a significant success as evidenced by large numbers of the members of public who make savings in Treasury Bills.
In September 2001, the system of trading in Treasury Bills was restructed to focus more
attention on monitoring inflation that is domestically generated.
The specific objectives of the restructuring were:
between M200 and M250 million;
to attain a reserve money target of
to influence the discount rate on treasury bills to
move in line with regional interest rate movements; and
to attain a required target of
Net International Reserves.
For this new mandate, the Government in February 2001 made M500 million worth of
treasury bills available. This figure was increased to M700 million in February 2002.
The stated objectives have been achieved satisfactorily up to now
25 Years of Experience & Growth
23
ICT department
I
nformation and Communication Technology Department initially the Data
Processing Division was established in 1990 under the leadership of Mr. Mahooana
Mahooana. The main objective of the ICT function is to suport the strategic objec-
tives of the Bank by enabling the business processes through Information
and
Communication Technology (ICT) systems and infrastructure.
In an effort to further enhance the operations of the now vital information and communication systems of the Bank, the division was elevated to the level of the
The Division started with five people, two professionals and three other members trans-
Department with two main divisions effectively from January 2004.
ferred from other divisions to work as computer operators.
By cooperation with CIM (Centrum fuer Integration und Migration, Frankfurt am Main)
Since its establishment, the Division managed to transform the Bank in many respects
an integrated expert from Germany Mr. Peter Irgo was engaged as Director from 25th
the central computerized
June 2004 on a contract basis to aid the transition of the Department and to support
by introducing computerisation and by implementing:
Banking System, moving from a completely manual processing;
a high capacity
broad office automation by installing interconnected PC-
Local Area Network (LAN);
Workstations with software packages e.g. word processing and spreadsheets in most
business areas with provision of full support and training;
training of computer oper-
speedy implementation of future projects which include:
Master Information Systems Plan (MISP);
the implementation of the
derived from the Enterprise Architecture
Planning (EAP) exercise completed in October 2003;
design and Introduction of
National Payments Systems viz. Real Time Gross Settlement (RGTS and Clearing and
ators from very little or no computing experience to AS 400 and Midas operator, MS
Settlement);
implementation of a comprehensive Information Security Management
automation by providing satel-
System; and
adoption and Implementation of the ICT Governance model (CobIT).
Office trainers and technical support personnel; and
lite Application Systems:
budgeting system;
SWIFT Messaging system;
policy and Exchange Control System;
for auctioning Treasury Bills;
tion of the fixed asset register;
Bank’s Payroll;
IMF Book Entry System
automation of the library;
introduction of Internet access as well as;
opment of local banks clearing system.
24
in-house development of
The Bank is considering further advancements in deployment of Information and
automa-
Communication Technology and alignment to its own and business needs of the
the devel-
finance industry as being of strategic importance in the development of financial-technological infrastructure in the country
Central Bank of Lesotho
Operations
I
n 1980 when the Central Bank of Lesotho then operating under the name Lesotho
The Department of Operations is headed by Mr. Mahlomola Makhupane as the
Monetary Authority, commenced its operations, the Department of Operations did
Director.
not formally exist. The Divisions that should have comprised the Department, name-
ly, Accounts and Budget, Currency, and Banking, operated as independent units and
It presently comprises of the following Divisions, namely, Banking Operations,
supervised by different supervisors.
Currency, Development Finance, National Payment System, and Rural Finance
Divisions.
Towards the end of 1980 and beginning of 1981, the Department formally came into
being comprising of the above-mentioned divisions. In 1984, the divisions that com-
Banking Operations Division
prised the Department increased to four, when the Foreign Exchange Section of the
Accounts Division developed into a full Division.
One of the principal functions of the Central Bank of Lesotho is to provide banking
services to the Government and financial institutions. Provision of this service is done
In 1992 the Divisions within the Department increased to five, with the inclusion of the
through the Banking Operations Division, which is headed by Mrs. ‘Masebueng Letsie.
Securities Market Division. The situation remained the same until the year 2000, when,
as a consequence of a major structural change of the Bank, the Department decreased
The Division commenced its operations in October 1980. Its first task was to open
to three Divisions. The Accounts and Budget Division was transferred to the Office of
bank accounts for the three commercial banks operating in Lesotho at the time. Due
the Governor, and the Foreign Exchange Division developed into a full Department.
to logistical challenges facing the Bank at the time, the Government of Lesotho continued to operate its Bank Accounts with Standard Bank Ltd.
During 2004, the Bank experienced yet another structural change resulting in the transfer of Securities Market Division to Financial Markets Department, and transfer of the
Until 1991 when the accounts were transferred to the Central Bank of Lesotho.
Rural Finance, and Development Finance Divisions, from Supervision Department to
Accounting in the Banking Division and indeed for the whole Bank was mechanical
Operations Department.
until 1990 when it ws computerised.
25 Years of Experience & Growth
25
Currency Division
Government to initiate an export-led economy. The Central Bank was identified as an
appropriate institution to administer the Export Development Fund, to assist exporters
Another principal function of the Central Bank of Lesotho is to issue and manage the
through the Export Finance Scheme.
national currency. This obligation is carried out through Currency Division, which is
headed by Ms. Stella Phate.
The Scheme operated successfully to the extent of being hailed as one of the best in the
continent, between 1988 and 1994. It focused on activities such as textile manufac-
It was in 1978 when the Government of Lesotho decided to introduce the national cur-
turing, electronics, handicrafts, and asparagus, with electronics taking the major share
rency and an appropriate Act accordingly promulgated. The national currency was to
of the Fund.
circulate on a one to one basis with the South African Rand, which at the time, had
been the only currency circulating in Lesotho.
However, in 1995, problems relating mainly to the administration system of the
scheme, which was characterised by cumbersome procedures for accessing the fund,
The first ntoes that were introduced in 1980 were in the denominations of M2, M5, and
as well as the fact that the Scheme was accessed mainly by well-established large-scale
M10 while the coins were in the denominations of 01, 02, 05, 10, 25, 50 and M1. Due
foreign exporters, led to the suspension of the Scheme pending its revision.
to economic conditions and developments over the years, the Bank has had to introduce appropriate currency denominations in response thereto.
A revision of the operations of the current Scheme was finalised in 2000, and the new
Export Finance and Insurance Scheme, targeted mainly at the indigenous exporters is
Currently, the notes are in the denominations of M10, M20, M50, M100, M200, while
now in place, and fully operational. The Division is on a continuing campaign to pro-
the coins are in the following denominations; 01, 02, 05, 10, 20, 50, M1, M2, and M5.
mote the Scheme, geared specifically to the local exporters, and potential exporters.
Development Finance Division
In a related development, the activities of the Division were increased in 1990. Over
and above the Export Finance Scheme, the Division started to administer industries and
Headed by Mr. Motlatsi Tabane, it was established in 1988, upon realisation by
26
agro-industries line of credit.
Central Bank of Lesotho
Recently, Government decided to earmark some of the proceeds to the development of
convenience, and heightened security. This Committee started off with the revision of
the private sector. An account, administered by the Division has been opened, and
Clearing House Rules. On August 2000 a consultant was appointed as Project Manager
both the Government and the Bank are considering the operational modalities of the
to drive the National Payment System Modernization Project.
Development Fund.
In October 2000, all commercial Banks in Lesotho and the Central Bank of Lesotho
National Payment System Division
signed the Lesotho Bankers Agency Agreement and the Maseru Clearing and Settlement
House Rules. The purpose of these documents was to establish operating rules and uni-
This division was established in 2002 and is headed by Mrs. Thenjiwe Namane. Its pri-
form practices.
mary objective is to ensure a viable, safe, secure and efficient payment system. This
includes guiding the evolution of payment systems; enabling execution of monetary
In September 2000 a computerized settlement system was introduced to improve effi-
policy through timely and accurate information; ensuring a sound legal basis; adequate
ciency in the clearing process. Clearing periods were reduced significantly, and the
practices, and standards; ensuring finality and irrevocability of settlement; and identify
Saturday clearing session was introduced.
potential risks in payment system and apply suitable risk reduction measures.
With the establishment of the NPS Division, the progress of the LNPS Modernisation
The reform process of the Lesotho national payment system started in 1999 as a result
Project gained momentum and in 2003 a programme was made whose implementa-
of disturbances in payment system operations in the 1990s. It was again influenced by
tion resulted in the finalization of the Stocktaking and Situational Analysis of the cur-
the SADC initiative of payment system reform.
rent system.
A Steering Committee was established in 1999, and its primary objectives were as fol-
After the finalisation of the Stocktaking and Situational Analysis phase of the LNPS
highlight
Reform Project, a Vision document was formulated and duly approved by the NPS
to propose measures to improve the sys-
council. The vision states, “By 2015, Lesotho will have a widely accessible, secure,
tem in all respects providing for shorter clearing and settlement periods and to enhance
reliable and efficient payment and settlement system. The system shall facilitate and
lows:
to document current payment and clearing system in Lesotho;
strengths and weaknesses of the system; and
25 Years of Experience & Growth
27
support Lesotho’s development objectives”.
Rural Savings and Credit Groups (RSCG) to commercial banks.
It was then decided to solicit assistance of payment system specialists to prepare for the
The policy is a result of a discrepancy between savings mobilisation and resource util-
gradual attainment of the envisaged payment system. Three major phases requiring the
isation in rural and urban centres. Evidence of which is the co-existence of excess
expertise of consultants were identified as (1) Business Analysis and Conceptual Design
reserves in the banking sector.
of the Envisaged Payment System which will give an architectural overview of the new
payment system that will form a basis for the strategies to align the current with the new
The policy provides for linkage banking whereby RSCGs are to play a vital role, with
payment system, the business and technical specifications of the clearing and settle-
banks delivering credit. The rural sector in Lesotho has remained largely under-served
ment solutions to be implemented, (2) Establishment of the legal and regulatory frame-
by traditional banking channels.
work that will govern the operations of the envisaged system, and (3) The Acquisition
and Implementation of payment system solutions.
Since the close of Lesotho Agricultural Development Bank with its rural branch network, micro-lenders, cooperative societies and other non-formal financial entities have
Through the assistance of BANKSERV consultants and in collaboration with stakehold-
assumed the role of providing financial services to the low income households in the
ers, the conceptual design of the new payment system was produced together with the
rural and peri-urban areas. This situation challenged the Central Bank of Lesotho to
Strategic Framework. The implementation plan was finalized, spanning from 2005 to
take a proactive role in facilitating financial intermediation.
2008 within which period Lesotho would have introduced a Real Time Gross
Settlement System and established a legal and regulatory framework supporting a mod-
Rural Finance Division charged with the task of promoting rural financial intermedia-
ern payment system.
tion. Since these institutions, though playing such an important role in the financial
sector, operate without supervision by the Central Bank of Lesotho and their develop-
Rural Finance Division
ment is especially hindered by lack of clear and stable legislative framework, there is
It was established in 1997 with Mrs. Ntee Bereng as Head of the Division. The divi-
need to focus on this rapidly growing sub-sector
sion is charged with supporting rural based communities through a policy that links the
28
Central Bank of Lesotho
Research
ection 41 of Central Bank Act 2 of 2000 stipulates that the Bank shall serve as
S
prepared. Over the years the department has conducted various macro-economic sur-
an advisor to the Government. The Research Department specifically provides
veys. For instance, in 1997 it embarked on Foreign Direct Investment survey. In 1999
this advice to Government. In terms of structure, the Department of Research
the Department undertook Survey of Basotho Migrant Mine Workers III.
a Library. It is headed by Dr. Chinna Kannapiran who assumed duty on 17 December
In 1999 the Department was instrumental in the production of the Blue print for estab-
2003.
lishment of Money and Capital Markets, as well as the Blueprint for new Instruments
has three divisions, namely, Real Sector, Finance, and the Macroanalysis Division, and
of Monetary Policy. Furthermore, it conducted research in preparation for regulatory
The Research Department was established in 1980.
At its establishment, the
Department was manned by two staff members, over and above the director. The for-
aspects of rural intermediation policy and made proposals for amendment of Co-operatives Societies Act 2000, during the year 2000.
mer were at sub-professional level, with one responsible for collection of monetary statistics while the other performed secretarial duties. Later on, an expatriate under the
In addition, in 2002, efforts were expended in the preparation of a blueprint on the lib-
auspices of the International Monetary Fund (IMF), joined the Bank with the responsi-
eralisation of the capital account. In 2003, the Department worked hard to produce
bility to introduce a second function of the Department, which was to compile and
papers on “the comparative analysis of the cost of banking services in Lesotho”, as well
analyse balance of payments statistics.
as the “introduction of value added tax in Lesotho” which both offered searchlight and
illuminated the policy making framework in the country. Also in 2003, the Department
The functions of the Department increased later on, with the recruitment of two more
conducted a needs assessment survey for the Lesotho National Payment System reform
economists to handle compilation and analysis of Government Finance, and Money
project.
and Banking Statistics. It was at this point that the Bank began producing Annual
Reports and Quarterly Reviews.
The Department developed the Monetary Sector Model of Lesotho-CMA, Inflation
Model of Lesotho and Currency Economic Reordering Quantity Model during the years
A historical recast of the main achievements of Research Department reflects that sev-
2003 and 2004. The Migrant Mineworkers Compilation Survey, and the Transportation
eral economic surveys were conducted, models developed and policy advisory papers
Survey were completed during this period. Over and above these, a paper assessing the
25 Years of Experience & Growth
29
impact of Poverty Reduction Growth Facility (PRGF) was produced. The Department
and economic modelling and projections. All of these are in line with the Bank’s man-
negotiated with the IMF and got approval of funding for a Regional Technical
date of maintaining price (and financial) stability as well as being an economic advisor
Assistance for the Private Capital Flow Study in 2004 and this study benefited Lesotho,
to Government.
Namibia and Swaziland.
Finance Division
Through a well managed human resource base the Research Department has utilised
its professional staff in making invaluable participation on the arena of Development
The Division, led by Ms. Leonia Lephoto, has been established primarily to monitor
Planning. These include participation with other CMA countries and the joint prepara-
developments in the fiscal sector and financial sector in order to provide necessary
tion of the report on Common Central Bank for the CMA countries, as well as under
information for the formulation and implementation of monetary policy. The work of
the Technical Expert Group of the United Nations Economic Commission for Africa and
the division covers financial developments in both the private sector and the public
which prepared the report on “Incorporating Trade Policy in the Development Plans in
sector. The division is comprised of two sections, namely the Money and Banking
African Countries”. Additionally, the Department assisted the Ministry of Trade and
Section and the Public Finance Section.
Industry in the Preparation of the report on “Economic Impacts of AGOA in SubSaharan Africa”. Further participation was afforded in the Preparation of the Proposal
Real Sector Division
for availing funds under the Millennium Challenge Account.
The Division is one of the earliest divisions created within the Research Department. It
Macroanalysis Division
is headed by Mrs. ‘Maneko Monyau who is currently on secondment. It was created
to collect and analyse statistics on the real sector of the economy, namely national
This Division, which comprises the Balance of Payments (BOP) and Modelling and
accounts, employment and price data. The division has worked closely with the Bureau
Forecasting Sections, is currently under the supervision of Mr. Tanka Tlelima.
of Statistics in collecting data such as industrial statistics and compiling quarterly indi-
It is responsible for the collection, compilation and analysis of Lesotho’s balance of
cators to complement national accounts
payments statistics; international economic developments and financial markets issues;
30
Central Bank of Lesotho
Supervision
he Central Bank of Lesotho has the overall responsibility for the supervision of
T
regularly conducts both on-site and off-site supervision of banks, insurers, collective
almost the entire financial sector, which includes commercial banks, insurance
investment schemes and money lenders; and the Supervisory Policies and Regulations
companies and brokers, collective investment schemes, moneylenders and for-
Division (SPRD) which takes charge of licensing and developing policy papers, pru-
eign exchange dealers. This supervisory function is undertaken through the Department
dential regulations and statutory amendments. This re-organisation was part of a holis-
of Supervision headed by Mrs. ‘Mankone Mofelehetsi.
tic restructuring of the financial sector.
Over the years the institutional structure for supervision underwent an intensive evolu-
Developments in the Lesotho financial system continue to pose great challenges to the
tion process. In 1986 the Division of Bank Supervision was established, manned by
supervisory role of the CBL. Thus, to refine the supervisory apparatus, the Department
only one officer. Its functions were primarily to renew licenses and analyse prudential
is now structured around specialist divisions, namely Insurance Supervision Division
returns.
established in January 2004, the previously mentioned FISD and SPRD and finally
Policy and Exchange Control Division. The proposal is to add in future, one more divi-
In 1990 two more officers were recruited and an IMF Advisor was engaged to set up
sion – Other Financial Institutions Division. The Department now has a staff comple-
structures and procedures in bank supervision to streamline legislation and train staff
ment of eighteen (18) members.
in the Division. A significant milestone achieved by these officers was to put structures
in place and mount an aggressive enlightenment campaign to familiarize financial
The prevailing structure of the financial system is absolutely different to the one that
institutions with the objectives of the Division as well as with prudential returns and
existed twenty five (25) years ago. To-date CBL has licensed and monitors the opera-
the bank examination supervisory process. In 1993 the Division’s staff was increased
tions of four (4) banks, seven (7) insurance companies, eleven (11) insurance brokers,
by two more officers bringing the staff complement to five and was upgraded to a
one collective investment scheme and twenty five (25) money lenders.
department in 1996.
The number of banks and non-bank financial institutions has grown steadily. This
Under the guidance of an IMF advisor, a major reorganization of the Department in
upsurge in the number and variety of financial institutions has continuously challenged
1999 saw the creation of the Financial Institutions Supervision Division (FISD) which
the CBL’s capability to effectively ensure sustainability of a sound financial system.
25 Years of Experience & Growth
31
Against this background of emerging supervisory challenges, the Department of
nessed renewed interest of foreign investors in Lesotho. Several enquiries are received
Supervision has endeavored to keep abreast of the developments in the international
on an on-going basis from representatives of foreign banks, foreign as well as local
and regional financial community. It has developed expertise in supervisory and regu-
individuals, on the requirements for establishing a financial institution in Lesotho.
latory activities and has made significant strides in upgrading its capabilities.
To the Central Bank of Lesotho the advent of liquidation and privatization of Lesotho
Financial Institutions Supervision Division
Bank and the closure of LADB further deepened the necessity to re-enforce the supervisory framework, to strengthen the supervisory capacity and to focus on the whole
In this division, headed by Mrs. ‘Makhalima Mohasoa, a comprehensive infrastructure
enabling environment for a sound financial system; Accordingly, the Bank moved
for conducting on-site and off-site surveillance has been laid down and followed; both
swiftly to laying the ground work for the establishment of a Commercial Court in
on-site and off-site manuals have been prepared and put in use, and reporting guide-
Lesotho to curb the culture of non-repayment of loans, the culture that contributed sig-
lines have been issued to financial institutions. In recent years each bank is examined
nificantly to the down fall of the two state-owned banks.
at least once a year on a comprehensive basis. The critical functions of supervision are
managed.
The main objective for the establishment of a Commercial Court was to provide the
necessary structure for handling legal actions arising from transactions of a commercial
The inputs of the invaluable technical assistance from the International Monetary Fund
nature such as banking and finance (including small business loans), suretyship, insur-
are upheld by the commitment of management of the Bank in enhancing the capacity
ance, negotiable instruments, international trade and credit. Although the project take-
of the Supervision Department. The Bank management strongly supports the notion
off was sluggish the court is established and all necessary support was given such as
that effective supervision needs qualified and motivated supervisors.
seminars for introduction of commercial practice, judgement writing and introduction
of a new practice system for Court Messengers and Sheriffs.
Following the reform process that included the closure of Lesotho Agricultural
Development Bank (LADB), the restructuring and privatization of Lesotho Bank (LB)
Still linked with the efforts to strengthen the financial system and to enhance the super-
and the promulgation of the FIA 1999 and its implementing regulations, the CBL wit-
visory capacity, the Bank put in motion steps for the establishment of a credit bureau
32
Central Bank of Lesotho
in Lesotho. The main objective for the establishment of a credit information database
has managed this evolution process; actively participating in the review of the
is to strengthen supervision through the use of detailed loan information and ultimate
Financial Institutions Act 1973, the Insurance sector reform, and preparation of the
distribution to the financial system. It is also aimed at restoring the commercial bank’s
vision paper legal framework. Some of the Division’s responsibilities include licensing
confidence in the extension of credit, and would assist in the assessment of the credit
of Financial Institutions and monitoring their performance through assessing com-
worthiness of borrowers, both individual and corporate.
plaints received feom the public.
The developments in the financial system, which are characterized by increased com-
Insurance Supervision Division
plexity, have prompted the Bank to undertake an evaluation of the instruments that
could assist it to effectively manage the ever-widening financial system. The evaluation
The Divsion performs a supervisory role on insurance companies, brokers and agents.
has far reaching consequences on the institutional structure, legislative and superviso-
This involves adherence to the Insurance Act 1976 (as amended) and the Insurance
ry framework. The evaluation also addresses new institutional arrangements that are
Regulations 1985. For a long time the Supervision Department was mainly involved in
being considered for the financial system to enhance rural sector banking develop-
the renewal of licences and attending to enquiries by companies interested in setting
ment.
up insurance business in Lesotho. It was only in 2003 that the CBL made special efforts
to monitor the industry through both on-site and off-site surveillance. New ground was
Supervisory Policies and Regulations Division
broken in the examination of insurance companies.
The mandate of the Division is to develop an appropriate regulatory framework and
In line with the Bank’s strategy to strengthen supervision of the industry, Mr. Fusi
strategy that will guarantee the desired growth and efficient performance of the finan-
Morokole was appointed Head of the newly-established Division in 2004 and tasked
cial sector. Through the SPRD, headed by Ms. Thandiwe Metsing, the CBL has been
with the responsibility to put structures in place and streamline supervision of the
and continues to be engaged in an on-going re-engineering process to position itself
industry.
adequately to effectively discharge its crucial role of regulating the financial system.
The legal framework has evolved with more pragmatic changes in recent years; SPRD
25 Years of Experience & Growth
ISD from inception, adopted a risk-based approach to supervision. This approach
33
places strong emphasis on the understanding and assessing the adequacy of each finan-
Policy & Exchange Control Division
cial institution’s risk management systems, which are in place to identify measures to
control and monitor risk in an appropriate and timely manner.
It is headed by Mrs. ‘Maketa Keta, is charged with responsibility to control in-flows and
out-flows of foreign currencies. It is given additional responsibility of spearheading the
To-date guidelines, and new returns have been drafted, considered and approved by
fight against money laundering and to combat financing of terrorism. The Division
the industry. The first draft of the On-Site Operation Manual is to be reviewed by the
chairs the Anti-Money Laundering Task Team.
various structures of the bank and the Off-Site Operation Manual is in preparation.
As provided under Article 32 of the Central Bank Act 2000, the Central Bank of Lesotho
The Division has commenced submitting off-site reports to the Financial Institutions
administers foreign exchange controls through this Division. The principal law is
Supervision Technical Committee (FISTC) as well as submitting inspection reports to the
implemented through the Exchange Control Regulations, Legal Notice N0.175 of 1989,
Reports Review Committee.
and Exchange Control Rulings.
The following reports have been tabled before the respective committees:
Effective from 5th March 1997 Lesotho accepted obligations of Article VIII, section 2,
3 and 4 of the IMF Articles of Agreement. This meant that Lesotho undertook to cease
a) Off-Site Reports: Year end audited financial statements of six insurance companies
imposing restrictions on payments and transfer of current international transactions and
namely: Lesotho National Life Assurance Company; Lesotho National General
thereby contribute to multilateral payment system free of restrictions in discriminatory
Insurance Company; Alliance Insurance Company; Sentinel Insurance Company;
arrangements. These actions served to give confidence to the International communi-
Customer Protection Insurance Company; Metropolitan Lesotho Limited.
ty that the country will pursue sound economic policies.
b) On-Site Inspection: Metropolitan Lesotho Limited – Leribe regional office inspection
In 2001 there was a need to liberalise the foreign exchange market. As a result the
has been completed; Metropolitan Lesotho Limited Head Office inspection is on-going;
Bank has seen liberalisation of capital account. This has enabled market participants
Sentinel Insurance Company Inspection will commence on 22 November 2004.
to effect capital transfers to open domestic and offshore accounts. The objectives of this
34
Central Bank of Lesotho
liberalisation were:
to promote foreign direct investment and assist exporters to min-
imise foreign exchange risk, and
to place Lesotho at par with members of the
Common Monetary Area that had liberalised earlier.
Again in 2001 the Division continued its endeavors to take lead in anti-money laundering initiatives. This was realised by drafting of Money Laundering and Proceeds of
Crime Bill. In 2003 the bill was submitted to the Law Office for further action. The
enactment of this legislation is hoped to give assurance to the international community that Lesotho is committed to thwart all forms of economic and commercial crime
25 Years of Experience & Growth
35
25 years with the Bank
Mrs. ‘Masebueng Letsie
Operations
Mr. Mahlomola Makhupane
Operations
Mrs. Thakane Phooko
Administration
Mrs. Jane Monaheng
Governor’s Office
Mrs. Nseliseng Mashologu
Governor’s Office
Ms. Stella Phate
Operations
Mrs. ‘Mamonono Mapheelle
Administration
Mrs. ‘Mamalepa Mpota
Supervision
Mrs. Palesa Letete
Administration
Mrs. ‘Mathembile Dlangamandla
Financial Markets
Mrs. Ntee Bereng
Operations
Ms. Likonelo Sello
Operations
Ms. Rose Sekotlo
Operations
36
Central Bank of Lesotho
Lehakoe inaguration
O
n Friday 28 November 2003, the Right Honorable Prime Minister Pakalitha
Mosisili inaugurated Lehakoe Recreation & Cultural Centre. As he was to
point out that day, the facility came at the right time in the development of
Lesotho, as it would contribute in the urbanisation and industrialisation of Maseru; in
the promotion of and expansion of the tourism industry; and in building the competitive edge for the local athletes in preparation for international sporting encounters.
Initially, this facility was intended for staff of the Bank, on the realisation of the need
for them to engage in recreational activities at the end of a hard day’s work. The decision to construct it came consequent upon the review of the Schemes of Service, which
pointed to the importance of motivation of staff in ensuring that the Bank achieves its
objectives.
However, the Bank soon realised the wisdom of extending an invitation to interested
members of the public to join the club.
Today, the Centre is fully operational and membership is at a fee. It is used for various
Lehakoe Recreation & Cultural Centre
purposes including indoor and outdoor sporting events, daily work out, including hosting of Workshops and Seminars, as well as wedding receptions at the club house.
weights, cardio, & circuit training, aerobic classes, squash, indoor heated swimming
The Centre comprises outside facilities (hut including bar & snack bar, tennis courts,
pool, sauna & steam room), and the Club House (television lounge & gaming lounge)
volleyball courts, basketball courts, outdoor swimming), Gymnasium (spinning,
as well as the Cultural Centre
25 Years of Experience & Growth
37
Lehakoe Recreation & Cultural Centre - under construction and after completion
38
Central Bank of Lesotho
Right Honourable Prime Minster (front right), Honourable Minister of Finance & Economic
Planning (centre), and the Governor of the Central Bank of Mozambique (left)
25 Years of Experience & Growth
Governor Matekane making opening remarks
39
Honourable Prime Minister Pakalitha Mosisili cutting the ribbon on the inaguration
day of Lehakoe Recreation & Cultural Centre
40
25 Years of Experience & Growth
2
5
Today’s..
.....occasion presents us with an opportunity to reflect on the achievements, successes and limitations of the Central Bank
since its establishment. There is little doubt that during the past twenty-five years, this institution has achieved a great
deal, and has had an immeasurable impact on the socio-economic development of this country.
Central Bank of Lesotho
Corner Moshoeshoe & Airport Roads, P.O. Box 1184, Maseru 100, Lesotho
Tel.: +266 22 314281 Fax: +266 22 310051/22 310557 Email: [email protected] Website: www.centralbank.org.ls