Financial regulation is stuck in an impasse. Not only has the regulator been without a leader since the bogus campaign by the finance ministry to engineer the former CEO’s exit under false charges, it has also been without direction since the clash.
This may seem like a storm in a teacup but in a country where financial experts are few and far between, leadership at the regulator is arguably one of the most important functions to ensure transparency and accountability of the financial services industry. Several recent incidents illustrate just how quickly the financial wagon gets off the tracks when the country’s regulator has been incapacitated to do its job.
Even under the very able guidance of its former CEO, Namfisa still suffered from a lack of capacity and of experts - real experts that can hold their own when, for instance, they are dealing with the Financial Services Board in South Africa, and that command the technical ability to understand, implement and enforce the more obscure legal minutiae that, above all, determine the soundness of the local industry. Namfisa simply never had a large enough number of capable-enough minds to control and regulate the complex world of international and local finance. Then the minister went and chopped the one head that was able to steer the boat.
That the ministry’s vendetta against the former CEO has cost it dearly is clear. Many thousands of dollars in legal fees have been wasted so far, and with every hearing, fresh mud gets flung into the faces of the finance high brass at the ministry. But the tenacity with which the ministry has persued the witch hunt is amazing, and it seems as if the process will continue to be driven on a basis that flies in the face of all reason. Meanwhile, the person that suffers is the ordinary citizen who depends on the financial regulation to safeguard his or her interests, investments, and above all, retirement provisions.
The lack of leadership and clear direction at Namfisa is fast showing up as more and more cracks appear in the wall of financial mediation.
The issue of marketing South African unit trusts is just one example. By all indications, it is unlawful to market a foreign fund to local investors if said fund is not registered in Namibia and approved by Namfisa. Various other funds, - money market, bonds, property and venture capital, also regularly appear on the spread of products offered by some local brokers. To sell these funds in Namibia is illegal, but to the average investor who, in most cases, acts on the word of his broker, the distinction between a Namibian-registered product and a foreign funds is often unclear, not well-defined, and worse, not divulged by the intermediary.
On top of the lack of capacity, Namfisa also suffers from an operational point of view in the sense that it has few teeth. The regulator can declare certain funds undesirable but it has limited capacity to enforce investment regulations. In certain hair-split instances, it has absolutely no legal leg to stand on hence trying to take a case to court becomes another futile exercise.
Namfisa is supposedly governed by a board but it remains an open question who on this board represents which other parties’ real interests. The Namfisa board certainly does not constitute a gathering of the most prudent and diligent financial minds. So what does it help us to have a regulator when there is a blatant and patent unwillingness from either the board of the line ministry to regulate, control and enforce legislation in the financial services industry.
This may have been a far more serious calamity were the commercial banks dependent on guidance from the regulator. Fortunately they report to the Bank of Namibia where there is no shortage of capable minds spread among an impressive number of keen individuals who know their discipline and their work.
The sad part is that while the impasse at the regulator continues, the ordinary investor is running the risk of unscrupulous intermediaries. As yet there still is no FAIS legislation in Namibia. Most intermediaries voluntarily adhere to the South African law and all the bigger companies are forced, and checked, by their South African parent companies, to comply with FAIS legislation.
We worry about money laundering and international fraud but we forget to protect our own citizens when the regulator fails to do its job.