President Rupiah Banda has said Zambia’s business environment has remained stable and has continued to attract foreign investors despite the effects of the global economic crisis.
President Banda said Zambia has continued to record foreign investment in a number of sectors, among them the banking sector in the recent past, noting that this was testimony that the country’s economy was growing.
Mr. Banda was speaking at Lusaka’s Intercontinental hotel today when he launched the First National Bank (FNB).
He said it was important that the economic growth was supported by an efficient and effective financial sector.
“Increased economic activity demands a wide range of banking products and services which should be tailored to meet the new business challenges,” he said.
President Banda said in the last three years, the banking industry in Zambia has been steadily growing in total assets averaging at 30 per cent annually.
“Of this growth, almost 60 per cent was on account of net loans and advances largely to the private sector. This suggests to me that the economy is growing,” he said.
President Banda said the banking sector was one of the most important sectors to the growth of the economy because it provides finance to individuals and corporate entities for business activities.
He said the opening of FNB-Zambia would further promote the existing businesses and provide an environment that is conducive for investment opportunities, which subsequently should stimulate economic growth.
He hoped that FNB would help reduce the cost of bank services in the sector.
The President also urged banks to be innovative in the ways of providing access to short, medium and long term finances to Zambians.
“I similarly urge all commercial banks to move away from “arm chair banking” to making credit available to deserving customers at affordable rates,” he said.
President Banda added that by performing an effective intermediary role, banks would complement government’s efforts to enhance economic development in the country.
He however expressed concern that banks were still lending money at high interest rates and bank changes in Zambia, the development he said was discouraging average Zambians from accessing financial services.
President Banda added that the high interest rates on bank borrowing and other bank charges, particularly on deposit accounts, have made loans very expensive thereby increasing the level of loan delinquencies in the financial sector.
“Arising from this and due to generally low rates on deposits, there is a real risk that both savings and investments may be discouraged and threaten the tangible progress our economy has thus far recorded,” he stressed.
He further said such high rates have since disadvantaged micro, small and medium enterprises, which are important to the national economic growth.
And FND-South Africa Chief Executive Officer, Michael Jordaan, said his bank decided to open branches in Zambia because of the country’s sound investment and business opportunities.
Dr. Jordaan said Zambia has continued to offer a friendly business and risk free political environment, despite the global economic crisis.
Meanwhile, South African High Commissioner to Zambia, Moses Chikane said the two countries have long historical political, social and economic relations.
Mr. Chikane the opening of FNB in Zambia was one way of strengthening the existing economic relations between Zambia and South Africa.
He observed that lack of access to financial services was a major hindrance to the growth of the private sector in any country.
He said FNB would increase the tax revenue base for the Zambian government and help alleviate poverty through job creation.
The new bank already employs 96 Zambian professionals and hopes to increase the number as it expands.
Mr. Chikane said improved financial services in the Southern African region will drive the countries to achieving the Millennium Development Goals by 2015.
And Deputy Minister of Finance, Chileshe Kapwepwe said the increased investments between Zambia and other Southern African countries was a manifestation of the South-to-South cooperation.
FNB originated from South Africa in 1838 and is present in Botswana, Namibia, Lesotho, Mozambique, Swaziland and now in Zambia.
In Zambia, the bank already has three branches, two in Lusaka and one in Ndola on the Copperbelt province.