Where we have tried to add value in recent years has been in promulgating the London Approach abroad and in working to develop the framework in the light of recent innovations and developments in global financial markets. Several issues have loomed large. One is the applicability of the unanimity requirement given the proliferation in the number and type of creditors in any large international workout. Another is the lack of a formal moratorium over all or part of the period of resolution of a company’s problems, as distinct from the informal standstill of the London Approach during the initial period of collecting all available information and evaluating the company’s long-term prospects. More broadly, the extent to which the Approach is affected by developments such as securitisation, loan trading and credit derivatives is exercising our minds and those of others closely involved in corporate workouts. These issues raise potentially very tricky questions. For example, loan trading arguably makes the creditor co-ordination problem more challenging, but at the same time provides an exit route for those unwilling to be involved in the restructuring and an entry for specialist turnaround investors. Credit derivatives raise a different set of issues, because they need not involve transfers of the company’s debt until, in the case of physical settlement, a credit event occurs. The knowledge that debt will change hands following a credit event might, however, affect the incentives facing the company, its ”pre-credit event” creditors and its potential ”post-credit event” creditors in unpredictable ways.
For instance, in the mining sector, the supply of goods and services has been taken up by private companies including those that can be classified as SMEs. Similarly, the transport sector, which was dominated by Government through the United Bus Company of Zambia (UBZ), Zambia Railways and Zambia Airways, etc, is now largely run by the private sector, consisting mostly of small and medium entrepreneurs. One can go on to mention the tourism, manufacturing, real estate, construction and others. This development is of great benefit to the economy in general and individual entrepreneurs in particular. Therefore, small- and medium-scale enterprises have the potential to make a significant contribution to the growth of the economy, thereby improving the economic welfare of the population. As you may know, SMEs in Zambia often have a direct impact on community development. Since they are usually based in places where the owners live, they draw upon the community for their workforce and rely on it to do business. They provide employment, particularly for low-skilled workers, as well as women and the youth, who usually make up the greatest proportion of the unemployed. However, this sector has faced difficulties in accessing credit for working capital and expansion of their investments. Mr Chairman, even if more SMEs wished to modernise their plant and equipment, they would find it hard to do so because of the difficulty of obtaining financing. Many banks choose not to provide credit to SMEs as they are perceived to be more risky and yet less profitable.