HomeNewsLocalGvt introduces bill to regulate state debts 

Gvt introduces bill to regulate state debts 

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…amid fears it vests too much power in finance minister 

Mathatisi Sebusi 

THE government has introduced a public debt management bill seeking to empower only the Minister of Finance and Development Planning to procure debts on its behalf. 

The Public Debt Management Bill, 2024, seeks to concentrate powers to secure debt for the governmment on the Minister of Finance and Development, who could in turn delegate to other government officials to do so on his/her behalf. 

However, the draft law has been condemned by Public Accounts Committee (PAC) chairperson, ‘Machabana Lemphane-Letsie, as a gateway to abuse by those empowered to solicit debt on behalf of the government. 

She told the?Sunday Express?the draft law reminded her of the Frazer Solar debacle in which the government stands to lose more than M1 billion if its appeals in South African courts fail. This after former Minister in the Prime Minister’s Office, Temeki Ts’olo, under erstwhile Premier Thomas Thabane’s 2017-2020 coalition administration, signed an unauthorised multi-million maloti contract with Frazer Solar for the supply of solar products. 

The Public Debt Management Bill, 2024, which ironically seeks to address that problem, was tabled in parliament last week by Minister of Finance and Development Planning, Rets’elisitsoe Matlanyane. 

It has since been referred to the relevant portfolio committees for deliberations. 

Ms Lemphane-Letsie fears that the Bill will do exactly the opposite and breed more Frazer Solar cases. It also vests a lot of power in the finance minister. She would rather parliament was given the authority to sanction loans to the government. 

The draft legislation’s Statement of Objects and Reasons, as outlined by Dr Matlanyane, states that the draft law is intended to among others, regulate borrowing by ensuring that only authorised people procured debt for the government. 

The Bill, the statement notes, bestows sole authority on the minister responsible for finance to “borrow from foreign and domestic markets, repay loans, as well as to provide guarantees and loans with the approval of the cabinet”. 

That would ensure that only the designated minister “is accountable should things go wrong”. 

The Bill, it is said, further aims to enhance public debt management by introducing committees as structures that would “advise the Minister on public debt management policies and strategies”. 

Reads the statement, “The main purpose of the Public Debt Management Bill, 2024 is to make provision for the management of public debt in Lesotho. The Bill ensures that the financing needs and payment obligations of the Government are met in a timely manner, at the lowest possible cost and prudent level of risk. The Bill further ensures the development of an efficient domestic financial market. 

“The Bill gives legal recognition to medium-term debt management strategy and annual borrowing plan and ensures that public debt is structured. The Bill aligns with international best practices as is a requirement articulated by Debt Management Performance Assessment. The Bill clearly defines the circumstances under which the Government can contract debt and scope of public debt which is insufficient under the Loans and Guarantees Act, 1967 and the Local Loans Act, 2001.” 

Additionally, the draft Bill also sets out “the limit of total debt to be held at any given time from both foreign and domestic limits and safeguards that ensures liquidity”. 

It states that under the Loans and Guarantees Act, 1967 and the Local Loans Act, 2001 “the risk of contracting debt is high, and the Bill ensures that debt is contracted based on public debt solvency and liquidity ratios”. 

Perhaps seeking to address the Frazer Solar issue, the draft law also highlights that currently “there are no punitive actions against those who undertake unlawful borrowing, and this Bill proposes offences and penalties, where unauthorized and unlawful transactions have been commissioned, guarding against loss of public funds without accountability”. 

Therefore, the Bill proposes offences and penalties where unauthorized and unlawful transactions have been commissioned. It suggests that any person who contracts an unlawful debt for government, should be liable to imprisonment for a term not exceeding 25 years, or pays a fine not exceeding M250 000 or both. 

The Bill “consolidates the Loans and Guarantees Act, 1967, the Local Loans Act, 2001 and the Public Financial Management and accountability Act, 2011 to harmonise public debt management and operations”. 

“The bill makes provision for transparency in public debt operations as it mandates public debt auditing and strengthens public debt reporting and accountability to the Parliament.” 

The Bill, once enacted, would further ensure “development of an efficient domestic financial market and give authority to minister of finance, to borrow from foreign and domestic markets, repay loans, as well as to provide guarantees and loans with the approval of the cabinet, hence making her accountable to all loans taken on behalf of the government”. 

But PAC chairperson, Ms?Lemphane-Letsie is concerned. 

She stressed that while the initiative was a good move, some sections of the Bill sparked as they sought to bestow on the finance minister “a lot of power over public funds”. 

Ms Lemphane-Letsie, who is a proportional representation legislator (PR) by virtue of her political party HOPE’s single seat, said the Bill should be reviewed “as it seeks to give the minister of finance a lot of powers over state funds”. 

Her main concern, she said, emanated from the fact that the Bill made no proposition for the inclusion of parliament in soliciting government debt, bestowing powers only on the finance minister to do as they pleased. 

She said a loan which could possibly fall under the consolidated budget, should be sanctioned by parliament. When approval had been granted, then the finance minister would enact the Appropriations Act, with parliament’s support and authorisation, for such debt to be solicited. 

She said most countries had already adopted the practice whereby permission to procure loans for government, was sought from parliament “to avoid unauthorised funds and lack of accountability by culprits”. 

Section 11(1) of the Bill seeks to give the finance minister powers to borrow funds on behalf of the government, a statuary body, a public entity and a local authority. 

It also seeks to empower her to sign agreements or any other documents on behalf of the government, for purposes of borrowing funds and guaranteeing payments among others. 

Ms Lemphane Letsie said she was concerned about Section 11 (2) of the Bill, which states that “a minister can delegate any of the borrowing tasks to the Principal Secretary of the ministry or a senior public official”. 

She said that section was dangerous hence she could see Lesotho “going back to the Fraser Solar saga where a minister contracted an unauthorised debt and risked the country losing its assets”. 

Former minister, Tsólo, entered into a controversial and unauthorised contract with Fraser Solar, a German company, for the provision of solar power products. 

The government lost an arbitration case against Fraser Solar in?2021.  The arbitration award was upheld by the South African High Court?earlier this year.?The Lesotho government has since taken it on appeal to a higher court. 

After the judgement by the South African High Court, Fraser Solar announced that the total amount owed to them by the Lesotho government including interest was M1.2 billion/ €58 million. 

Section 11 (2) of the Bill reads “The minister may delegate in writing, any of his functions in this Act to the Principal Secretary of the ministry or such other senior public official consistent with existing laws and administrative practice, except the power to make regulations”. 

“This one is worse because it allows even a public servant to be delegated to take loans on behalf of the government. If we are not careful, we are going to have a disaster where principal secretaries and public servants take unauthorised loans,” Ms Lemphane-Letsie said. 

The section further allows the minister to appoint a senior official to sign agreements or documents on her behalf, and states that “the signing of the senior government official shall have the same legal effects as if it has been signed by the minister”. 

However, Ms Lemphane-Letsie intends to challenge the Bill at the parliamentary committee level. 

She said now that the Bill was before the relevant portfolio committee, she would “make sure to attend proceedings of the responsible committee and advice it on the dangers of the Bill and propose a review”. 

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