Market watchers were cautious this week in welcoming the new central bank governor Moses Pelaelo with some expecting him to continue with the low interest regime left by his predecessor while others preferred to wait and watch. As things are, all eyes will be on him for some time. KABELO ADAMSON reports.
As the new Bank of Botswana (BoB) began his role on Friday following the retirement of the Linah Mohohlo the day before, industry sources say the man is likely to continue where Mohohlo left off.
Moses Pelaelo, who has been one of Mohohlo’s deputies, was confirmed this week as the new governor by President Ian Khama. He started his duties on Friday, heralding a new dawn for the central bank which among its duties is to regulate commercial banks operating here as well as issuance of banking licenses. After deputising Mohohlo for a decade, it remains to be seen what new changes Pelaelo is likely to bring into the banking industry, particularly on issues of supervision and regulatory where some commercial banks have been found to be contravening the procedures. Those whose banking licenses applications have been rejected may be hoping for a better luck under him, but those close to the financial industry believe Pelaelo is likely to continue where Mohohlo left.
The central bank currently supervises 10 commercial banks and three statutory banks, with commercial banks dominating the industry as measured by a share of total assets, total deposits and total loans and advances. “It is still early to call, but looking at how he was closing working with the former governor and the position which he was holding before, he is likely to look more into issues of compliance and regulatory requirements as well as capital adequacy, making sure that the banks hold suitable amount of deposits,” said an executive at one of the leading commercial banks in the country who preferred anonymity. The areas that the bank executive mentioned have concerned the previous governor including policy implementation among others.
In her foreword in the 2015 Banking Supervision Report, Mohohlo said overall in 2015 banks were compliant with key prudential requirements as expected and were resilient and where incidences of non-compliance occurred, corrective action was instituted, not least through consultation and engagement with the banks concerned.
Another market analyst predicts that Pelaelo is likely not to change much as currently the interests’ rates are at lowest of the cycle with no further room for further downward adjustments. “It is good for him though that he is coming in at a time when the monetary policy is very stable with inflation under control,” the analyst said on Friday over the phone. Observers believe having worked closely with Mohohlo, who herself has been credited with the stable monetary policy; Pelaelo is more likely to maintain the status quo. This week the Monetary Policy Committee meeting - Mohohlo’s last - kept the bank rate unchanged at 5.5 percent while inflation slightly rose from never seen levels of 2.6 percent in August to 2.8 percent in September 2016, which is within the central bank’s medium term objective range of 3-6 percent.
Application of banking licenses
Though it is still considered still early to make conclusions as Pelaelo just started duty on Friday, it is expected that those who have applied for banking licenses before and rejected will approach the central bank again with renewed hope under the previous regime while other statutory banks are also undergoing demutualization with the hope of turning into commercial banks. According to the supervision report, in 2015, 10 banking license enquires were made, but by the end of the year none of those had formally submitted an application for a banking license. The central bank had the year before rejected one banking license application which the concerned institution took it up with the minster who also upheld the BoB decision.
Who is Pelaelo?
A Bachelor of commerce graduate from the University of Swaziland joined BoB in 1990 as Senior Bank Examiner in the Banking Supervision Department following a 6-year career as Assistant Lecturer and Lecturer in accounting and management study programmes at the Botswana Institute of Administration and Commerce and University of Botswana. Pelaelo who also has in his possession a Master’s degree in Business Administration from the University of Miami (USA) which he obtained in 1987 became the Deputy Governor in 2006 and before that he held several positions in the bank including the position of Director of Banking Supervision Department before taking a three year sabbatical in 2003 to join the Bank for International Settlements (BIS) in Basel, Switzerland where upon his return he became the Deputy Governor.