FINANCIAL SERVICES REGULATORY AUTHORITY …

1 FINANCIAL SERVICES REGULATORY AUTHORITY ( fsra )Annual Report for the year ending31 March 2013 Introduction and MandateEditor s NoteChairman s StatementCEO s Highlights of Main fsra OperationsFinance and Corporate SERVICES Human ResourcesInsurance and Retirement Funds Division ReportCredit and Savings Institutions (CSI) Division ReportCapital Markets Division ReportSwaziland Stock Exchange ReportAnnual FINANCIAL StatementsAppendices CONTENTS 12 - 34 - 56 - 910 - 1213 - 1516 - 4748 - 5051- 5455 - 6061 - 8384 - 921. INTRODUCTIONFSRA MANDATEThe fsra hereby submits its first Annual Report covering the year 1 April 2012 to 31 March 2013. The structure of this report presents a consolidated position, incorporating all four fsra divisions as follows: DIVISION 1 CEO s office DIVISION 2 Finance and Corporate SERVICES . DIVISION 3 Insurance And Retirement Funds (IRF) DIVISION 4 Capital Markets (CM) incorporating Swaziland Stock Exchange (SSX) DIVISION 5 Credit and Savings Institutions (CSI).

2 The principal objects of the AUTHORITY are to foster, through regulation and prudential supervision of FINANCIAL SERVICES providers;a) the stability of the Swaziland FINANCIAL systemb) the safety and soundness of FINANCIAL service providersc) the highest standards of conduct of business by FINANCIAL service providersd) the promotion of fair competition between different FINANCIAL service providers for the benefit of stakeholderse) the fairness, efficiency and ordeliness of the Swaziland nonbank FINANCIAL sector, andf) the protection of the SERVICES REGULATORY AUTHORITY ( fsra ) Annual Report 2013 0102 FINANCIAL SERVICES REGULATORY AUTHORITY ( fsra ) Annual Report 2013 The much awaited integrated FINANCIAL SERVICES regu-latory AUTHORITY is finally here. The FINANCIAL SERVICES REGULATORY AUTHORITY ( fsra ) Act of 2010 was promul-gated and gazetted into law on 1 June 2010. Effec-tive 1 December 2010, the Minister of Finance appointed the Board of Directors of the fsra .

3 The Chief Executive Officer was recruited in November 2011 and assumed duties on 1 January 2012. This then led to the establishment of the fsra which is responsible for the regulation and supervision of all non-bank FINANCIAL it all beganIn the 1990s many SADC (Southern African Development Com-munity) countries liberalised their FINANCIAL SERVICES sectors as part of the economic structural adjustments programmes prescribed by the International Monetary Fund and the World Bank. These reforms included the removal of barriers that hin-dered competition from new FINANCIAL service providers. In a region characterised by small economies and markets, it is generally acknowledged that in order to deepen the gains from these markets reforms, regional economic integration is a de-sirable development strategy. Swaziland is a member of the SADC region, and hence fsra is a member of the CISNA (the SADC Committee of Insurance, Securities and Non-Banking FINANCIAL Authorities).

4 CISNA forms part of the Trade, Industry, Finance and Investment Di-rectorate within the SADC and reports to the SADC Commit-tee of Ministers of Finance and Investment through the Com-mittee for Senior Treasury Officials. CISNA was established in 1998. Membership of CISNA consists of the non-bank FINANCIAL SERVICES REGULATORY authorities supervising activities such as, 2. EDITOR S NOTEFINANCIAL SERVICES REGULATORY AUTHORITY ( fsra ) Annual Report 2013 03capital markets, collective investment schemes, insurance companies, retirement funds, credit and savings institutions and thier intermediaries in the SADC. CISNA s Vision is to facilitate the development and imple-mentation of a harmonised, risk based REGULATORY framework for member states in SADC that enables market growth and development, reduces the potential for systemic risk, informs and protects consumers, mobilises capital flows and contrib-utes to prosperity in the region.

5 fsra is therefore aligned to the CISNA s vision. Why the fsra ?Previously the activities of the Insurance and Retirement Funds Industries were supervised by RIRF, the Capital Market activities by the Central Bank of Swaziland, and the Savings and Credit Cooperatives were supervised by the Commissioner of Cooperatives establishment of the fsra completes the mandate of integrating the Non-Bank FINANCIAL SERVICES Regulation in Swaziland. It consolidates the mandate, such that the Central Bank of Swaziland concentrates on Banking Supervision and Monetary Policy, meanwhile the fsra concentrates on supervision of all Non-Banking FINANCIAL SERVICES activities in Swaziland. In this very first issue of the Annual Report published under the fsra , the following are the highlights of activities that took place during the year under review. In the Chairman s Statement, he highlights the activities that have kept our Board of Directors busy during the year under CEO then takes us through the journey of the activities that have taken place in the establishment phase of the AUTHORITY including its funding, FINANCIAL resources of the AUTHORITY , the physical set-up of the divisions, the logo and corporate image, the organisational structure, the rationale behind this setup as well as the transfer of staff from the Office of the Registrar of Insurance and Retirement Funds and the Central Bank of Swaziland into the legal employment of the report further highlights the following:The role of the Finance and Corporate SERVICES Division incorporating the Human major activities that have kept Insurance and Retirement Funds Division busy during the year.

6 This includes a review of the Industry FINANCIAL performance, analysing the players markets shares as well as level of compliance with the 30% local investment snap shot of the activities of the newly established Credit and Savings (CSI) division. Most of the institutions supervised by this division, namely, Credit Institutions, Savings and Credit Cooperatives were not previously regulated hence this division seeks to roll out a coordinated REGULATORY framework dedicated to the safe, orderly and sound position of regulated entities, without losing sight of the different specialised nature of their analysis of the activities of the Capital Markets Division which has been transferred from the Central Bank of Swaziland. The Capital Markets has been transferred from the CBS together with the Swaziland Stock Exchange (SSX). Enjoy reading this issue. We look forward to hearing from you with feedback on the items you would like us to include in future issues.

7 Should you wish to send us feedback, please feel free to email the editor on and MakhanyaEditor04 FINANCIAL SERVICES REGULATORY AUTHORITY ( fsra ) Annual Report 20133. CHAIRMAN S STATEMENTI wish to thank my fellow Board Members for the dedication with which they conti-nue to fulfil their fiduciary duties, and guidance they provide as we establish this AUTHORITY of national importance in the improvement of the Swaziland economy. FINANCIAL SERVICES REGULATORY AUTHORITY ( fsra ) Annual Report 2013 05 The year under review has been a very busy year for the Board of Directors of the fsra . The establishment and mandate of the Board is set out in sections (7-13) of the fsra Act 2010 which empowers the Board to have the overall responsibility for the oversight of the AUTHORITY . The Board performs its duties through the CEO, who is responsible for the day to day management of the activities of the AUTHORITY including the implementation of policies and directives as approved by the Board.

8 Section 12 of the fsra Act requires the Board to meet at least once every two months. During the year under review, the Board has been meeting more frequently than this requirement due to the volume of work required to be considered during the formative phase of the under review was categorised by the setting up of the fsra operational infrastructure. The Board, in a nutshell dealt with a number of issues, amongst others: the recruitment of the fsra CEO; who assumed duties on 1 January 2012; collaboration with other supervisory authorities with a view to giving effect to fsra s mandate; organisational structure; funding of the AUTHORITY ; establishment of the various board sub-committees and recruitment of other in Progress Board deliberationsAs the Board continues to work, the following are matters that are pending and are work in progress for the Board: the fsra Strategic direction, vision and mission; Strategy for the long term capitalisation or funding of the fsra ; the appointment of the FINANCIAL SERVICES Ombudsman in line with Section 74 of the fsra Act; the appointment of the Appeals Tribunal in accordance with Section 79 of the fsra Act.

9 The Operationalisation of the Swaziland Stock Exchange as an autonomous entity; the promulgation into law of the Capital Markets regulations that have been submitted to the Ministry of Finance for the legislative process to commence; and the drafting of pending laws and regulations required to complete the REGULATORY framework of of appreciationI wish to thank my fellow Board Members for the dedication with which they continue to fulfil their fiduciary duties, and guidance they provide as we establish this AUTHORITY of na-tional importance in the improvement of the Swaziland econ-omy. A word of appreciation goes to Mr Bongani Nxumalo, the CEO of fsra , who provided leadership and made it pos-sible for us to achieve these milestones. Mr Nxumalo subse-quently resigned at the end of April 2013. On behalf of the Board, management and staff, I would like to express our appreciation to the Honourable Minister of Finance Mr Majozi Sithole and his team for trusting us to lead such an organisation, as well as providing the necessary Muhawu I.

10 Maziya06 FINANCIAL SERVICES REGULATORY AUTHORITY ( fsra ) Annual Report 20134. CEO s HIGHLIGHTS OF MAIN fsra OPERATIONSThe main highlights of the year to 31 March 2013 are as follows: Organisational Structure overviewAt this stage of the development of Swaziland Non-Bank FINANCIAL Institutions (NBFIs), we felt there was a strong case to proceed conservatively with a more conventional, industry-based supervisory structure for the following reasons: The focus in these early years for staff will be to continue building on their skills in supervision and REGULATORY philosophy and this is likely to occur more quickly in groups specialising in particular industries than in a structure focused on cross-industry skilling; Regulation is new to some NBFIs such as SACCOs and they must be given time to acclamatise to the new regime. Industry focused supervision is more likely to garner support for the reforms than a one size fits all is for the foregoing reason our resultant preliminary organisational structure is sectorial with each division dedicated to supervising specific industries.