Development Finance

Digital map of Africa continent

From ‘hopeless continent’ to Africa rising: What does the future hold?

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From ‘hopeless continent’ to Africa rising: What does the future hold?

Digital map of Africa continent

  • February 25
  • Tags Our News; Development Finance

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*This article was written by MBA students as part of a group assignment for the module Perspectives on African Frontiers. They are BTN Ramoshaba, GR Slabbert, GJ White, K Muthu, PW van Lill, and D Roostee.

Dr Nthabiseng Moleko, senior lecturer in Managerial Economics and Statistics at the University of Stellenbosch Business School (USB), recently hosted a panel discussion as part of the Perspectives on African Frontiers module on USB’s MBA, with four of Africa’s brightest minds. Her simple, poignant opening question was: Is Africa’s glass half full or half empty? A robust debate around topics like aid, education, corruption, and Information and Communication Technology (ICT) transformation suggested optimism about Africa’s future.

“We need to develop our own brands and value-added products.”
Andrew Mwenda

Dr Moleko questioned whether copious foreign aid had curbed Africa’s development trajectory. Andrew Mwenda, a Ugandan journalist and activist, stated the importance of understanding each African country’s idiosyncrasies and cautioned against characterising aid as good or bad. He questioned whether development could stem from foreign direct investment or aid and suggested developing human capital, especially in transforming raw materials into value-added products. Uganda exports cotton, which France uses to make luxury handbags, but only a fraction of the profit reaches raw material producers. Mwenda argued that “for Africa to prosper, we need to get past the overreliance on commodity exports. We need to develop our own brands and value-added products”.

“Education is key to unlocking the potential of our youth bulge.”
Jasmine Abrahams

This requires educational policies that grow Africa’s human capital instead of importing skills. UNESCO estimates that Sub-Saharan Africa requires 2.5 million new engineers to reach its Sustainable Development Goals. Jasmine Abrahams, sustainability manager at Ivanhoe Mines, argued that mismatched skills in the African workforce can be rectified through education, which is “the key to unlocking the potential of our youth bulge”.

Jabulani Sigege, creative consultant at Thing Three, identified that education and re-education could reduce the incidence of brutality and violence against women and children in Africa.

Related to the transformative power of education, Dr Moleko steered the discussion towards ICT transformation. Sigege stated that “technology is like a knife, a tool which can be used for good or bad – the onus will always lie on the users”. Mwenda added that Uganda has transformed into a cashless society through mobile money (27 million accounts), which has been “the revolution in the communications industry”. However, Public Enterprises Minister Pravin Gordhan, highlighted the need to be vigilant regarding data privacy issues.

Contrary to the ICT sector’s vibrancy and optimism, the discussion on State-Owned Enterprises (SOEs) and corruption was more critical. Dr Moleko stated that illicit private financial outflows from Africa total $1.2 trillion. According to South Africa’s custodian of SOEs, Minister Gordhan, the last decade amounted to “sheer greed and corruption” of individuals attempting to capture SOEs. Appointing capable CEOs and Boards is no panacea, and the required cultural shift is mostly met with resistance.

“If you want businesspeople who care for society, and not only about profits – become one.”
Minister Pravin Gordhan

Regarding Africa’s potential, Minister Gordhan emphasised that we are the purveyors of our own truth: “You are the hope for the future. If you want honest politicians in the future – become one. If you want businesspeople who care for society, and not only about profits – become one. And if you want society to look different from where it is today, 10 or 15 years from now, and give hope to people, then generate that in yourself, and you will see some of that happen.”

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Prof André Roux: For SA’s economy, things will have to get worse before they get better

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Prof André Roux: For SA’s economy, things will have to get worse before they get better

Turned-on Monitor Displaying Frequency Graph
Source: Lorenzo | Pexel

  • January 27
  • Tags Media Release, Development Finance

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This opinion piece written by Prof Roux, economist and head of USB’s Futures Studies programmes, appeared exclusively in Business Day.

After recording a horrific 16% contraction in GDP during the second quarter (compared to the first), there were tentative signs that the worst might be over for South Africa.

The number of daily new Covid-19 cases and Covid-19-related deaths had declined significantly, a vaccine roll-out was apparently imminent, and the harshest constraints imposed by the hard lockdown had been removed. By and large, the much-beleaguered health care sector had – perhaps unexpectedly – seemed to have coped fairly well with the demands imposed on it.

We know, of course, that we have since been engulfed by the “second wave”, stretching the capacity of both public and private hospitals to unprecedented extremes. The numbers of daily new Covid-19 cases and deaths are higher than ever before, and the acquisition of the vaccines has been delayed. Moreover, there is uncertainty about the efficacy of the current crop of vaccines against a mutating virus. Lockdown level 3 was announced at the end of December, imposing renewed restraints on our social and economic mobility and interaction. In addition, the commencement of the new school year has been postponed by almost three weeks.

Sadly, therefore, South Africa’s near-term socio-economic outlook is bleak. Even without the disastrous impact of Covid-19, the local economy was floundering in the wake of a toxic blend of – mainly self-induced – structural flaws. These included negative economic growth, chronically high unemployment, a yawning income and wealth gap, and a poverty rate that is unacceptably high for an upper-middle income nation.

This litany of woes was created individually and collectively by, inter alia, high and rising levels of public and household indebtedness; unabashed and unpunished rent-seeking behaviour in the public and private sectors; an inefficient labour market; education and health care dysfunctionalities; an unreliable supply of electricity; an infrastructure backlog; and a general air of apathy, and an unfathomable appetite for mediocrity and ineptitude.

For now, two issues will have a major bearing on the short-term performance of the economy:

  • The effectiveness of the health sector response in the next few weeks and months.
  • The extent and effectiveness of (mainly) government-driven stimuli to galvanise both the supply side (production) and demand side of the economy.

Regarding the health sector response, it remains to be seen whether the recent hardening of lockdown measures will be sufficient to cope with the current and future demands for intensive care. Presently, the received wisdom discounts this possibility.

Meanwhile, the economic stimulus packages have been underwhelming. Thanks to its historically conservative stance, the Reserve Bank has been in a position to meaningfully relax monetary policy. The same cannot be said about fiscal interventions. Past fiscal indiscretions have created very limited scope for any meaningful injections. In fact, thus far, the Covid-19 stimulus package amounts to barely 2% of GDP. By comparison, the United Kingdom, France and the United States have injected resources totalling more than 10% of GDP into their economies.

The finance minister is scheduled to read his budget speech in a few weeks’ time. Normally, one would expect a government to adopt a stimulatory fiscal stance during times of severe economic hardship. Now, however, the “wriggle room” for substantive stimulating measures is virtually non-existent.

“This year’s budget must show a serious and plausible intent to, at the very minimum, curb the accumulation of debt.”

In fact, this year’s budget must show a serious and plausible intent to, at the very minimum, curb the accumulation of debt. This requires a marked narrowing of the budget deficit by restraining the growth in government spending and/or raising tax revenue. The former will compromise the well-being of the poorer members of society. Given the very low economic growth expectations, the chances of organic growth in tax revenue are slim; this means that government will only be able to generate higher revenue through (upward) adjustments to existing tax rates.

All things considered, therefore, the weight of evidence points toward a disheartening combination over the next few months of a drained health care system, and rather innocuous economic interventions. This will undoubtedly leave in its wake an indelible mark on the economy. To be sure, we might record an economic growth rate of 3% this year (2021), but coming on the back of an expected 8% contraction in 2020, this means that the economy (GDP) will still be significantly smaller by the end of this year than at the end of 2019.

After that, barring any major shock, a growth rate of barely 2% is on the cards. At best, therefore, aggregate economic activity will be restored to its pre-2020 (mediocre) levels towards the end of 2023/ early 2024 – a hard landing is virtually unavoidable.

“Given all the available evidence, therefore, we should prepare ourselves for a period of severe economic hardship.”

Given all the available evidence, therefore, we should prepare ourselves for a period of severe economic hardship. The economy will not come to a complete standstill, but we will see some awful numbers over the next few years; such as intermittent negative quarterly growth rates.

Amidst all of this, a number of tough and, in some circles therefore unpopular, initiatives need to be taken. For instance, fiscal realism is called for, with consumers, the business sector, workers, and the unemployed paying the price for past fiscal recklessness, foolishness, and indiscretions. In addition, the country’s leadership needs to deal firmly and decisively with the legacy of the first decade of this century. Included here are:

  • The restoration of the autonomy and integrity of our democratic institutions (e.g., the Public Protector, the National Prosecuting Authority, the criminal justice system).
  • Improving the country’s stock of social capital (trust, goodwill, shared values).
  • Not just paying lip service to the notion of stamping out endemic corruption.
  • The rebooting of state-owned enterprises (SOEs) – especially Eskom.

“Things will first have to get worse for a while before they get better.”

Difficult trade-offs will have to be made (especially in trying to balance efficiency with equity), and immediate results are unlikely to materialise. And the challenges are exacerbated by the reality of factionalism within the ruling party.

Things will first have to get worse for a while before they get better. But if the right strategic decisions are made with conviction and clarity of purpose and intent, 2021 might just be the year in which we learn from the home truths starkly exposed during the last few months.

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we are Open sign

Short-term low growth is “new normal” but longer-term view holds positive signs

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Short-term low growth is “new normal” but longer-term view holds positive signs

White signage to show business is open
Source: Tim Mossholder | Pexel

  • January 27
  • Tags Development finance, Media release

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Guest lecturer in Corporate and Development Finance Jason Hamilton points to slow signs of recovery in global economic activity.

As the impact of the Covid-19 pandemic continues to ripple through 2021 and South Africa faces economic contraction and high levels of business risk, there are some positive signals that suggest business should be playing it safe for now while keeping an eye on the long game.

“When travelling over rough terrain it is often better to keep your eyes on the horizon as opposed to becoming obsessed with every pebble or rock in front of you,” University of Stellenbosch Business School (USB) guest lecturer in corporate and development finance, Jason Hamilton said.

Covid-19 could not have happened at a less opportune time for South Africa, already suffering from high consumer, corporate and sovereign debt, with credit ratings below investment grade, low savings rates and high unemployment. Although they were necessary, economic support and stimulus measures dipped the country deeper into deficit and lockdowns amplified the economic woes but there are reasons for optimism despite this negativity, he said.

Hamilton pointed to slow signs of recovery in global economic activity, with emerging market currencies strengthened by rising demand and commodity prices, and the rand, while still undervalued, expected to remain stable with some signs of strengthening in coming months.

“…we expect to see an increased appetite by global asset managers for emerging market fixed investment.”
– Jason Hamilton

“Inflation is expected to remain within the SA Reserve Bank’s target range and interest rates are likely to remain stable for this year. Globally, there has been an uptick in capital flows to emerging markets, which bodes well for South Africa, and we expect to see an increased appetite by global asset managers for emerging market fixed investment.”

Hamilton, a director at First River Capital, said the African Continental Free Trade Area (AfCFTA) which came into effect on 1 January 2021 was set to be a key driver of growth for the continent, a market of 1.3-billion people and a trading bloc worth at least $3-trillion – “an opportunity not to miss”.

On Covid-19 and low short-term growth

“The full impact of Covid-19 on global markets, the economy and society is yet to be experienced and understood. While the timelines and ability of vaccine roll-out plans remain unclear, it is expected for large-scale procurement and delivery by mid-2021. Until herd immunity through a vaccination programme has been achieved, not likely before 2022, the virus will continue to hamper growth.”

Pre-pandemic, key markets were already exhibiting major fault lines, said Hamilton, with rising debt and muted growth in the USA, the Brexit-embattled EU facing low inflation and economic activity, and “even China underperforming against expectations”.

“Lockdowns and global supply chain disruptions wreaked havoc, forcing governments to launch significant stimulus measures.”

“The impact of Covid-19 was profound. Lockdowns and global supply chain disruptions wreaked havoc, forcing governments to launch significant stimulus measures. According to the World Bank, the global economy contracted by 4% during 2020. There is expectation of a recovery with a forecasted 4% in 2021, primarily from emerging markets led by China, but the looming crisis as a result of the second wave of the virus and the challenges related to the roll-out of vaccines means that it is really unclear what 2021 may hold.”

South Africa’s economy contracted by 8% in 2020, one of the deepest globally, Hamilton said, and growth estimates for 2021, at about 2% are “not too great, especially coming off a low base”.

On market fundamentals: Focus on the long-term

Hamilton said that although global economic activity had started to show signs of recovery, a closer look at the global Purchasing Managers’ Index (IHS Markit) data indicates that “this remains precarious, and there has been continued slowing in many markets”.

South Africa’s PMI data (December 2020: Absa) is similarly positive, “but our fortunes will be tied to markets such as the US, EU and Asia, and will be impacted by a stunted global economic recovery”.

Local economic activity will also be hampered by continued electricity supply issues.

“On a positive note, inflation is expected to remain within the target range of the SARB, which affords greater fiscal and monetary policy wiggle room. Expected stable interest rates may even allow the Reserve Bank to lean against inflation if required. This is something we do not generally see globally, where rising production costs and Covid-19 stimulus has seen many markets running hot – something central banks are happy with over the short run, but the longevity of this approach is uncertain. There are clear signs of policy fatigue in the US and EU.”

Hamilton said this combination of factors made an exact determination of GDP growth difficult to achieve while South Africa’s economy remained sensitive to global market changes.

“A longer-term view may be required to gain a clearer understanding of the future.”

Market analysts Fitch Solutions expect emerging markets (excluding China) to take about two years to recover to pre-pandemic levels, while South Africa is projected to take as long as five years, and this lagging behind other emerging markets is a major concern that would contribute to greater social instability and could see capital flow to more attractive investment destinations.

However, Hamilton said, for context, developed economies such as France and the UK are also expected to take around five years to return to pre-pandemic levels.

“What we expect is an increased appetite by global asset managers for emerging market fixed investment, given the low yields found in the EU and US – but the preference may still remain with the Asia region given its better containing of the virus.

“All markets will have to consider two factors: The short-term recovery from the pandemic and the long-term position of the economy post-recovery. It is more prudent to work from the long-term position as an investor as opposed to try and predict and respond to a highly volatile and dynamic short-term view,” Hamilton said.

On the business environment

Reason to be optimistic over the long-term is tempered by expected “extremely tough” trading conditions for most companies over the next five years.

“As combatting the virus faces serious practical constraints, many markets can be expected to remain closed or partially-closed, continuing to limit the movement of goods and people for the coming 12 to 18 months.”

Hamilton said that companies that have weathered the storm so far have done so with significantly more debt, depleted financial resources and possibly diluted equity positions, seriously impeding their ability to access further funding for possible growth-oriented capital allocations.

“We can expect to see an increase in liquidations and business rescue filings in 2021 as the pandemic drags on.”

“Those with the deepest pockets and strongest balance sheets – thus larger companies – are best placed to access further local and global capital to survive and possibly thrive. But we can expect to see an increase in liquidations and business rescue filings in 2021 as the pandemic drags on.

“This will require companies to simultaneously take both a conservative and a pragmatic view in plans and budgets for 2021 – incorporating careful risk analysis and developing contingency plans – while also devoting capital to future growth opportunities.”

Hamilton said a rebound in merger and acquisition (M&A) activity was being seen globally, with the US posting record high levels, but this had not yet flowed over to emerging markets.

“We expect these figures to rise in emerging markets during 2021 as larger firms embark on consolidation drives and others seek to off-load non-core assets and manage debt levels. Companies will need to restructure their balance sheets in order to maintain a base from which to embark on growth paths and limit job losses.

“The risk is naturally for overleverage, which creates the opportunity for funding from venture capital or private equity funders to fill the gap of traditional equity and lenders. This is especially the case in the buy-out market, where we see great opportunities.”

Hamilton said investors globally retained appetite for those industries least impacted by the pandemic, such as pharmaceuticals, health, essential industries with low demand elasticity such as food retail, and others able to continue operating under lockdown conditions, with technology a “major winner”.

“The outlook on these industries (tourism, travel, alcohol and tobacco) remains negative until the virus has been brought under control.”

“In South Africa, the tourism and travel industries as well as the alcohol and tobacco industries have been hard hit by the pandemic and government measures to contain the virus. The outlook on these industries remains negative until the virus has been brought under control. In addition to the winners in healthcare and technology, locally we can also expect agriculture, energy, renewables and infrastructure to enjoy strong growth in the coming years.”

While the uptick in capital flows to emerging markets bodes well for South Africa, this is a highly competitive market and the country is competing for investment against China, India, Brazil and Mexico – “so the fundamentals remain that South Africa should focus on improving its attractiveness as an investment destination,” said Hamilton.

On the launch of African Continental Free Trade Area (AfCFTA) and Africa embarking on making itself a more attractive investment destination, Hamilton said the goal was to boost intra-Africa trade which remained extremely low compared to similar trade areas in Asia, Europe and the Americas.

“AfCFTA will be a key driver of growth for all nations on the continent and companies must ensure that they are in a position to benefit from this.”

“Africa is a market of 1.3-billion people and a trading bloc worth upwards of $3-trillion, but only 16% of current African exports are to other African countries, compared to 68% in Europe and 59% in Asia.

“AfCFTA will be a key driver of growth for all nations on the continent and companies must ensure that they are in a position to benefit from this. It is certainly not without practical and political concerns and issues, but a key investment drive should be made by local and global markets and companies to ensure that this agreement is successful. It is an opportunity that is too important to miss.”

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Implications of Covid-19 on infrastructure finance in Africa

USB News

Implications of Covid-19 on infrastructure finance in Africa

photo of train track subway
(Source: anna-m. w.)

  • November 24
  • Tags Media release, Covid-19, Development finance

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There is a significant infrastructure finance gap in Africa that is likely to widen due to the Covid-19 pandemic unless countries consider alternative financing techniques, says Dr Ashenafi Fanta, senior lecturer in Development Finance at the University of Stellenbosch Business School (USB.

“Infrastructure provides useful economic benefits and we need infrastructural development to achieve economic transformation in Africa. Many African countries are now looking at transforming their economies to reduce poverty and to create jobs.

Infrastructure provides useful economic benefits and we need infrastructural development to achieve economic transformation in Africa.

“We have three major economic sectors, namely the agricultural sector, the service sector, and the industrial sector. When countries develop, the usual path would be a shift from the agricultural sector to the service and industrial sector,” he says.

If we want to grow the industrial sector in Africa, we need to invest in the energy sector, transport infrastructure, ICT infrastructure and other critical infrastructural sectors.

“Structural transformation is very critical and infrastructure provides essential input into structural transformation. If we want to grow the industrial sector in Africa, we need to invest in the energy sector, transport infrastructure, ICT infrastructure and other critical infrastructural sectors.”

Dr Fanta says economic transformation also entails increasing labour productivity in all three sectors and achieving labour productivity can be done through infrastructural development, which is critical for economic transformation and economic recovery in Africa.

Impact of the pandemic on the global economy

Economic growth across global regions has decreased. “Many African countries have been experiencing fast economic growth so for these countries experiencing a decrease of 2, 8% is a big loss. There had been positive developments in poverty reduction across the globe but with the contraction of outputs, it’s going to reverse.

Investment in infrastructure can help in job creation and in boosting private sector activities.

“The health and economic consequences of the pandemic are likely to be worse in countries with widespread informality. This is a big concern for us in Africa because we have a large segment of the economy in the informal sector. The blow is the hardest in countries that rely on global trade, tourism, commodity export, and external financing. Investment in infrastructure can help in job creation and in boosting private sector activities,” he says.

State of infrastructure in Africa

Dr Fanta says the availability of infrastructural services and access of the population to infrastructure services in Africa is very low. Looking at the state of infrastructure for each sector reveals a gloomy picture:

  • In the energy infrastructure sector, a combined power generation capacity of 44 countries of Sub-Sahara Africa with a population of about 800 million is 92,27 GW (in 2012) less than that of Spain with a population of about 45 million, which is 105,27 GW. More than 640 million Africans have no access to energy, giving an electricity access rate of just over 40% for African countries – the world’s lowest.
  • In the transport sector, only 208 kilometres of roads in Africa are available per 1000 square kilometres of land area, compared to the world average of 944 kilometres per 1000 square kilometres.
  • In the water infrastructure sector, only 61% of Africans had access to clean water and 31% to adequate sanitation (in 2010).
  • The ICT sector, which is very critical for economic transformation, only has 19 million broadband internet subscribers in the entire sub-Sahara Africa region – about 6% of the total number of telephone subscribers.

“The financing deficit in Africa is also very large and according to a report by the Africa Development Bank from 2018, Africa’s total infrastructure needs amount to $130-170 billion a year, with a financing gap in the range of $68-108 billion,” says Dr Fanta.

Public finance is the primary source of funding infrastructural development in Africa. “However, there is increased pressure on public finances due to the bigger health expenditure following Covid-19 responses; governments had to make welfare payments to vulnerable households, and there was a loss of tax revenue as governments had to provide help to businesses that are struggling to stand on their own feet during the pandemic.

“Covid-19 had an impact on both the revenue and expenditure side of public finance and money that governments were going to put forward for investment in infrastructure will no longer be available,” he says.

Alternative sources of funding

Dr Fanta says borrowing money is not the answer. “Governments have already reached their borrowing limits. There had been a concern by international financial institutions including the International Monetary Fund (IMF) and the World Bank that many African governments are facing a debt crisis. As a result of Covid-19, many countries had to borrow a massive amount of resources from international as well as local markets and this has pushed the public debt beyond what governments can handle.

Many countries had to borrow a massive amount of resources from international as well as local markets and this has pushed the public debt beyond what governments can handle.

“The IMF already identified about 17 African countries that are in high debt risk. This is a concern because any further accumulation of debt will be detrimental to the countries,” he warns

Dr Fanta suggests the following alternative funding mechanisms to provide funding to infrastructural development that will be useful for economic transformation as well as economic recovery:

  • Infrastructural bonds: This is a debt but they will be linked to specific infrastructural projects and not added to public debt. These bonds are designed to attract funding specifically to a particular infrastructure, for instance in the energy or transportation sector without placing further pressure on public finances.
  • Development impact bonds: These are bonds where private sector entities contribute funding to kick start an infrastructural activity or investment. They will agree to generate return only if a particular development goal is met. If a development goal is met then donors will pay out the private sector entities the principal plus return or principal plus
  • Commodity-backed loans: Private sector entities are invited into infrastructural investments programmes with expectations that in the event the infrastructural asset fails to generate a return, then the commodities can be used in settling.
  • Tapping into pension funds: These funds in Africa are not well-developed except in a few countries including South Africa, Nigeria, and Kenya. Pension funds are very cautious in investing in infrastructure. There are initiatives in Nigeria where credit guarantees are made available to entice pension funds to invest in infrastructural facilities.

 

***

USB is a triple-accredited business school and offers a cluster of internationally accredited Development Finance programmes – PGDip, MPhil and PhD – to implement sustainable solutions to develop Africa where it matters. All programmes are offered via its immersive, flexible Blended Learning format from 2021.

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New report launched: Bold steps to stimulate a changed economy and renewal of South Africa’s growth trajectory

USB News

New report launched: Bold steps to stimulate a changed economy and renewal of South Africa’s growth trajectory

  • October 13
  • Tags Media release, Development Finance

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An alternative economic strategy for South Africa, proposed by Dr Nthabiseng Moleko and Prof Mark Swilling, could see GDP doubling in 10 years, 10 million people moving out of poverty, and unemployment cut by two-thirds to 12% by 2030.

South Africa’s response to the Covid-19 crisis is an opportunity to reconfigure, restructure and rebuild the economy by departing from more than two decades of post-apartheid economic policy which has seen lacklustre growth and not achieved significant gains in economic equality, says a report released by the University of Stellenbosch Business School (USB) and the Centre for Complex Systems in Transition at Stellenbosch University.

Continuing on the current path, reliant on “mainstream economic thinking and use of existing micro-economic solutions” is unlikely to deliver different outcomes in the future, while the proposed alternative strategies are geared to diversifying the economy to support inclusive economic transformation, labour-intensive growth and a globally competitive and sustainable economy.

Titled New wine into new wineskins: An alternative economic strategy for South Africa’s economic reconstruction, the report and proposed alternative economic framework are a collaborative effort by policy-makers, economists and academics from diverse public, private and research institutions convened under the Social Justice M-Plan by Prof Thuli Madonsela, the Law Trust Chair in Social Justice at Stellenbosch University.

To overcome the stagnation of the economy, which has been deepened by Covid-19 and the national lockdown, the South African government must boldly look to drafting new economic policies that can deliver on the vision set out in the National Development Plan (NDP), the report says.

Following workshops in Stellenbosch in late 2019, an economic working group led by Prof Mark Swilling, Distinguished Professor of Sustainable Development in the Stellenbosch University Centre for Complex Systems in Transition, and Dr Nthabiseng Moleko, Development Economist and Senior Lecturer: Managerial Economics and Statistics at USB, developed the proposed strategic interventions to support the emergence of an inclusive, equitable and sustainable economy.

The alternative economic framework is driven by strategic interventions in industrial policy with a target of doubling the contribution of manufacturing to GDP, prioritising labour-absorbing sectors, and boosting domestic food production and rural development. The framework envisages shifting policy on investment and mobilising domestic capital, fiscal policy aggressively targeted at higher economic growth, building state capacity for innovation and governance, and re-shaping empowerment policies to achieve real growth through redistribution.

Sluggish economic growth and the triple crisis of unemployment, poverty and inequality have worsened during the Covid-19 pandemic, but the strategic interventions proposed in the alternative economic framework have the potential to use the current crisis spending to generate inclusive growth, the report says.

Dr Moleko said Covid-19 and lockdowns around the world could trigger an economic disaster worse than the global financial crisis of 2008, with South Africa’s economy expected to contract 7.2% in 2020.

“How government chooses to allocate relief funds in efforts to support economic recovery and longer-term growth can either deepen existing systemic structures or liberate South Africa’s people and the real economy to drive transformative economic change.”

Dr Moleko said the collaborative, multi-stakeholder exercise had produced alternative solutions to South Africa’s economic challenges packaged in seven strategic policy interventions and had used economic modelling techniques to develop scenarios and analyse the potential impact of the interventions on achieving the growth targets of the NDP.

While the “business as usual” scenario for the next decade sees the economy stuck in low growth with continued high rates of unemployment, poverty and inequality; modelling of the impact of the recommended policy interventions indicates “an inclusive growth path that will deliver real and significant benefits to the private sector and working-class and poor families”, she said.

“It shows that a significant portion of the poor would be able to improve their living conditions, that unemployment would decrease significantly and that the private sector would benefit from a significant expansion of the domestic market. Direct benefits accrue to government through a declining debt-to-GDP ratio and an increasing average investment-GDP ratio. Indirect benefits include a growing sense of social cohesion that could promote stable capital accumulation.”

Strategic interventions summarised

The alternative economic framework proposes a new model of the state, “enabled by enhanced coordination and supported by domestic capital mobilisation with a reduced reliance on external capital markets and financial flows”.

Industrialisation as a key growth driver
On industrialisation as a key growth driver, the report recommends the establishment of an Industrial Council to enable coherent planning across the various institutions falling under the Department of Trade, Industry and Economic Development. Although under a single umbrella, agencies such as the Industrial Development Corporation, Small Enterprise Finance Agency and the National Empowerment Fund use different incentives and policy instruments, leading to fragmented and ineffective programmes.

The alternative framework sets a target of doubling the contribution of manufacturing to GDP by shifting from primary sector activities to high-value-added goods and processing of agricultural products.

A phased approach would initially develop highly labour-intensive sectors, adopting a more capital-intensive growth path over the longer term and transitioning to technology-based industrial development.

Labour-absorbing strategies
Arguing that South Africa’s unemployment challenges are due to ineffective interventions rather than lack of funding, labour-absorbing strategies are proposed to address the lack of unskilled and semi-skilled jobs and the mismatch between skills production and labour demand.

Sectors with potential to absorb large numbers of unemployed people – including agro-processing, plastics, metals, construction machinery and the transition to renewable energy – should be prioritised, with education and skills programmes aligned to their needs.

Sectors that do not hold the potential to absorb much more labour – chemicals, machinery and equipment, and agricultural and transport machinery, for example – but that still play a key role in value chains should be supported through employment-generation conditions in state procurement programmes.

Rural development and domestic food production strategies
Alternative rural development and domestic food production strategies are needed to address high levels of economic inactivity, unemployment, food insecurity and dependence on social grants in rural areas, and to grow the share of black farmers in the agricultural sector.

Alternative strategies would link the rural farming economy to upstream and downstream value chains, and improve access to markets, including by providing state-subsidised credit to small-scale farmers.

Investments, domestic resource mobilisation and private sector participation
A “radical shift in approach” to investments, domestic resource mobilisation and private sector participation is proposed to support expansion of manufacturing sectors and stimulate long-term economic growth.

The new approach would include reconfiguring the role of the Public Investment Corporation, development finance institutions and public and private pension funds to mobilise domestic financial resources and drive growth through redistribution and structural reform.

Enabling debt instruments that will grow industrial and productive capacity and generate positive social outcomes are recommended, along with imposing a tax on “idle capital” to encourage corporations to reinvest rather than stockpiling capital.

Strategic fiscal measures
Strategic fiscal measures should link government expenditure to economic output and the impact on poverty, inequality and unemployment, while fiscal stimulus packages would revive supply side sectors, boost industry and drive competitiveness.

Advancing economic recovery can be achieved through inflation targeting, quantitative monetary easing and lower interest rates, rather than by increasing public expenditure and tax cuts.

Fiscal stimulus should focus on sectors such as energy and those that can generate greatest socio-economic impacts over both short- and long-term, achieving poverty alleviation alongside growth. Non-debt fiscal stimulus interventions are also recommended, including redirecting the investments of the PIC and development finance institutions, zero-rating certain items, increasing grants and restructuring the tax system.

Build state capacity
A new paradigm to build state capacity is needed to reverse the “hollowing out” of already limited capacity due to state capture and create a successful developmental state. This should focus on enabling effective relationships of trust between the state and stakeholders, particularly private business and civil society, and shifting to “good enough governance” that can adapt to changing dynamics.

Government officials should be supported and rewarded for innovative risk-taking (for the right reasons) and be able to work through partnerships to achieve their mandates.

Economic growth through redistribution
State-led transformation interventions such as Broad-Based Black Economic Empowerment (B-BBEE) have failed to achieve equitable participation in the economy, and the alternative framework proposes a number of strategies for economic growth through redistribution.

An empowerment model should be driven by the Preferential Procurement Policy Framework Act to encourage and provide fiscal support to rural and township enterprises to participate in national and provincial procurement programmes.

Land transfers for agricultural and manufacturing use should be finalised in order to support the emergence of a new class of farmers and industrialists, while amendments to the Competition Act are recommended for fast-tracking to limit oligopolies and open access for locally-owned retailers in small towns, villages and townships.

“The recommended interventions aim to stimulate, stabilise and strengthen the economic framework to realise a socially just and sustainable economy. Shifting the economy will require the consistent implementation of stimulus-orientated policies that aim to expand aggregate demand and supply while growing productivity, employment levels, and income and expenditure at the business and household levels. This provides the foundation for enhanced participation in the economy, particularly by the most marginalised,” Dr Moleko said.

Click here to download the report.

The M-Plan is a Marshall Plan-like initiative aimed at catalysing progress towards ending poverty and reducing inequality by 2030, in line with the National Development Plan (NDP) and Sustainable Development Goals (SDGs).

The name is in honor of Palesa Musa, an anti-apartheid activist who at the tender age of 12 was one of the school children that were arrested, detained and tortured for challenging the apartheid government.

The M-Plan seeks to foster social accountability and social cohesion, mobilise corporate and civil society resources to fund socio-economic inclusion and foster civic responsibility.

It aims to leverage data analytics to enhance the state’s capacity to pass laws that reduce poverty and inequality and to foster a culture of data based decision-making, focusing on assessing and predicting the likely social justice impact of planned policies, legislation and plans as well as those already in operation.

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Sino-African relations: Opportunities and risks for Africa

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Sino-African relations: Opportunities and risks for Africa

  • August 24
  • Tags Africa Rising, Perspectives on African Frontiers, Sino-African relations, industrialisation

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A panel of experts on African matters discussed opportunities, risks, and the future of Africa’s vis-à-vis relationship with China. The panel agreed that the Sino-African relations are beneficial to both Africa and China, though not equally. But how exactly is Africa benefiting from the Sino-African relations and how can the continent leverage this relationship to exploit her boundless opportunities and resources?

The panel discussion, organised by the USB as part of a group assignment for the module Perspectives on African Frontiers and facilitated by Dr Nthabiseng Moleko, convened online on 5 August 2020. The panel included Dr David Monyae of the Centre for Africa-China Studies at the University of Johannesburg; Shuvai Nyoni, Managing Director of the African Leadership Centre in Kenya; Thapelo Lippe, Managing Director of The RightSource, and Fumani Mthembi, Managing Director of Knowledge Pele.

According to Dr Monyae, Africa is part of China’s strategy, and the continent needs to know what she wants from the relationship with China, given the several programmes China has for Africa. “Africa needs to generate her view and stay away from the fights between China and the West,” he said.

Looking at China’s journey to industrialisation, which is perceived as green unfriendly, can Africa incorporate China’s lessons into her growth development plans? Mthembi indicated that though Africa has abundant reserves of coal, embracing renewable energy technologies would be the best way forward because they are cost-effective and green friendly. “However, this may not be the ideal choice for most African countries, looking at the already existing coal generation capacity and the cost of importing renewable energy technologies,” she said.

She added that the continent needs to look into renewable energy as a form of industrialisation, for instance, manufacturing solar panels and wind turbines in Africa.

On the issue of risk, security and trades, Dr Monyae stated that there is a myriad of lessons Africa can glean from China in dealing with the environmental crisis and climate change. He further indicated that Africa must embrace innovation and new technologies and exploit her abundant fossil fuel reserves in an environmentally friendly manner.

“Africa needs to solve issues such as the Inga dam in the Democratic Republic of Congo and the Renaissance Dam in Ethiopia, for her to be energy sufficient. Africa must also start adding value to its raw materials before exportation; both policies and local entrepreneurship would drive such changes,” he said.

On issues of Africa’s youth bulge, and the socio-economic implication thereof, Nyoni indicated that the opportunities lie around high education as there is an increasing number of African youths studying in China. “Africa needs to find ways of harnessing such opportunities to her benefit,” she said.

Regarding digitisation, Lippe stated that technology is an enabler for economic growth and that there are massive opportunities in the information and communications technology (ICT) sector that the African continent can tap into, especially using China’s Huawei 5G technologies. Dr Monyae added that Africa needs to start developing its own ICT technology instead of supporting either the West or the East.

 

*This article was written by the 2020 full-time MBA students as part of a group assignment for the module Perspectives on African Frontiers.

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Africa's prospects

Experts on Africa’s prospects under ‘Africa Rising’ concept

USB News

Experts on Africa’s prospects under ‘Africa Rising’ concept

Africa's prospects

  • MAY 28
  • Tags Africa, economy, African Frontiers, Africa Rising, 4IR, Entrepreneurship

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The takeaway from the panel discussion was that economic growth in Africa was incumbent on leadership.

How can Africa consolidate its resources to reap the full benefits of the Fourth Industrial Revolution (4IR)? This was the prominent theme during a recent panel discussion that was led by Dr Nthabiseng Moleko as part of the MBA module, Perspective on African Frontiers, where business leaders and academia met to deliberate on Africa’s contemporary and prospective opportunities.

It drew panellists such as Dr Louis van Pletsen (Founder and Director – InAfrica Holdings), Dr David Monyae (Co-Director – UJCI), Wilmot Magopeni (Executive Head & Business Development – Africa Insurance at FNB) and Andrew McLachlan (Managing Director Development – Hilton Group).

They also discussed strategies that the continent could pursue in order to strengthen its economic acumen including the value of leadership towards growth. China as a catalyst in African development was also discussed.

Dr Louis van Pletsen mentioned that Africa has a competitive advantage in its resource and capabilities. These include the youngest population (50% is younger than 25 years) and various mineral resources. Proper usage of these resources would enable Africa to make its economic mark in the world. However, Africa currently does not refine its raw materials and is also experiencing a brain drain of the younger innovative generation who have the capacity to increase the continent’s refining ability.

He also stated that Africa is more entrepreneurial than any other entrepreneurial society, arguing that there are millions of people involved in the informal sector. This signals a unique ability for entrepreneurship to thrive in Africa.

Dr David Monyae had strong views on trade barriers and argued that these barriers should be lifted completely. Andrew McLachlan’s view was that Africa needs connectors such as hard and soft infrastructure.

The overall view is that Africa must appeal to a broader set of commodities. Economic leaders need to open up to the global environment and African industry is underserved when it operates in isolation. There is a necessity for African economies to coordinate trade as a region so as to reap maximum benefits and for trade to be mutually beneficial. Coordination is critical towards the sharing of industry knowledge, technology, human resources and capital.

McLachlan was of the view that Africa needed to pull its resources strategically in order to usher in 4IR. Magopeni agreed with this sentiment and argued that Africa ought to consolidate capital, reliable trade partnerships as well as risk and rewards principles in order to facilitate unprecedented growth opportunities. McLachlan also highlighted that Africa has a potential to leapfrog technologies due to the lack or cost of infrastructure, meaning Africa is almost forced to leapfrog many barriers.

The panellists had a positive view that beyond COVID-19, Africa ought to take advantage on the usage of technology with Dr Moleko stating that “COVID-19 was an opportunity for us to rebuild, reconfigure and restructure Africa”.

The takeaway from the panel discussion was that economic growth in Africa was incumbent on leadership. Leadership in the 4IR need not only abide by democratic institutions of integrity and ethics but also with entrepreneurial vigour and strategisation. However, contemporary leadership on the continent is not promising on this front which means a new wave of leadership may be required to fill in this void.

USB’s MBA therefore become all the more relevant in this regards as the programme is earmarked to turn managers into entrepreneurs and 21st century leaders. These prospective leaders should be able to learn from the current mistakes and occupy the gaps that exist within the continent’s path towards harnessing the glory of 4IR.

*This article was written by MBA students as part of a group assignment for the module Perspectives on African Frontiers.

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Africa industrialisation day

The outcry for Africa to industrialise is growing louder!

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The outcry for Africa to industrialise is growing louder!

Africa industrialisation day

  • Nov 11
  • Tags UN’s Sustainable Development Goal (SDG), Africa Industrialisation Day, African Union

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This Africa Industrialisation Day we reflect on the pace at which Africa is developing. Most African nations are eager to industrialise given the associated benefits of job creation, economic resilience and technological diffusion. However, it is the agglomeration and development of industrial clusters in Africa that will ultimately lead to progress.

The UN’s Sustainable Development Goal (SDG) 9 aims to ‘build resilient infrastructure, promote sustainable industrialisation and foster innovation’. Within the development financing space – the African Development Bank has ranked industrial development as one of ‘top priorities’ whereas, the World Bank Group has sustained its promotion of ‘creating the conditions for a more competitive manufacturing sector’ in Africa as a response to dependence on commodities. Overall, how African countries push the pace of industrialisation depends on how well they address the ‘bottlenecks’ at policy, regional and continental levels. This is why it’s very important for policy makers and donors, alike to identify as well as establish appropriate development strategies and related mechanisms to accelerate Africa’s industrialisation agenda.

The African Union’s first 10 years of the implementation of the Agenda 2063 focuses on regional integration. It advocates for Regional Industrialisation Hubs through a framework that supports value chains, business development and services, innovation and incubation, entrepreneurship to create wealth and employment and strengthen informed advancement of the regions private sector; this is in line with the UN’s SDGs:

SDG Goal 8, indicator 8.2, aims at achieving higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labour-intensive sectors.

An additional Goal 9, indicators 9.2 and 9.3, speak to the promotion of inclusive and sustainable industrialisation (by increasing manufacturing value added as a proportion of GDP and per capita and manufacturing employment as a proportion of total employment) and increasing the access of small-scale industrial and other enterprises to financial services, including affordable credit, and their integration into value chains and markets.

African industry generates an average of US $700 of GDP per capita, barely one-fifth of East Asia’s US $3 400.

According to the Africa Development Bank, Africa’s lack of industries is largely responsible for its low standing in global development. The continent is said to be the weakest link in an interconnected global economy.

Africa’s industrialisation strategy has followed a familiar pattern starting with inward looking policies (such as import substitution) post-independence, followed by outward policies that liberalise trade. This pattern led to a boom in state-led/ state-owned manufacturing entities and a subsequent destruction of the same as a result of liberal trade policy reforms, leading to job losses and a decline in the share of the sector to GDP in many African countries (see for instance Ethiopia, Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania, Uganda). Thus, while closing borders worked for the USA and China, Africa’s gains from a similar strategy were only short-lived. Moreover Africa’s development partners like the World Trade Organisation advocate for open borders. For this reason, Africa needs to accelerate its integration agenda along with the promotion of ‘Boosting Intra-African Trade’ (BIAT) priorities.

Africa needs to accelerate its integration agenda along with the promotion of ‘Boosting Intra-African Trade’ (BIAT) priorities.

So how should Africa industrialize in the new world order? African governments will need new approaches to industrial policy with regional and/ or continental dimensions in consideration of the operationalisation of an African Continental Free Trade Area (AfCFTA).

A recent study by UNU WIDER’s Manufacturing Transformation of developing and developed economies, shows that agglomerations and industrial clusters or industrial parks provide a window of opportunity towards closing Africa’s industrialisation gap.

Evidence from Cambodia, Vietnam and Tunisia suggest that African governments can foster export-oriented industrial agglomerations by concentrating investment in high-quality institutions, social services, and infrastructure in a limited physical area such as an export processing zone (EPZ).

Such an industrial agglomeration, UNU WIDER argues, would be designed to serve the global market. Thus, within the framework of trade liberalisation, countries should use trade policy to promote the international competitiveness of domestic enterprises; improve export competitiveness of such enterprises; diversify markets and increase exports; and accelerate economic integration.

As instruments to industrial development, industrial parks require long-term investments. This partly implies that the African governments must collectively strengthen and harmonise their public policies to attract long-term investors, including private sector

Current experimenters like Ethiopia and Senegal who have raised funds for their industrial parks, show that sustainable industrialisation is achievable through a strong link between infrastructure development and inclusive and sustainable industry innovation.

Evidence from Ghana points to the role of the private sector not only for sustainable financing but for industrial production that is driven by the application of science and technology. Researchers argue that the industrial policy should therefore aim at promoting agro-processing, facilitating the development of commercially viable export and domestic market-oriented enterprises in the rural areas, improving agricultural marketing and enhancing access to export markets, and improving the competitiveness of domestic industrial products. At regional level, the Costed Action Plan for SADC Industrialisation Strategy and Roadmap provides an example of possible regional value-chain clusters among countries, a model that could be replicated in other regions on the continent.

Africa can leverage its current endowment to make the industrial clusters or parks model a success. Industrial clusters usually attract ‘specialised trading firms’ – this could benefit small and medium domestic firms thus enabling the very firms’ access to regional and continental markets following the operationalisation of AfCFTA.

Africa’s rapidly growing population provides a demographic dividend for labour – the industrial cluster model allows the matching of ‘youthful’ workers to jobs, while learning on-the-job facilitates the diffusion of knowledge. Further, a consumer boom due to a growing middle class, provides a ready market in Africa – the operationalisation of the AfCFTA presents a market of 1.2 billion people.

Given the significant benefits from agglomeration, it is important that firms cluster across borders to stimulate the much-needed economic transformation.

The actualisation of this, according to UNIDO, requires that the continent strengthens its institutions, knowledge of global value chains, value-add to agriculture and mineral beneficiation through manufacture in order to participate in the global value chain, invest in skills development to leapfrog technology and, finally, leverage development finance.


Dr Lwanga Elizabeth Nanziri is a Senior Lecturer in Development Finance at the University of Stellenbosch Business School (USB). Her research interests include Development Economics, Financial Inclusion for Households and Firms, Behavioural Economics, Gender and Welfare, and Public Policy Analysis. She is the director of the Association for the Advancement of African Women Economists in South Africa, and has served as the Chief Executive Officer of the South African Savings Institute, founded by the Ministry of Finance and the Industrial Development Corporation.

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The future of banking What to expect from SA’s banking sector towards 2035

The future of banking: What to expect from SA’s banking sector towards 2035

USB News

The future of banking: What to expect from SA’s banking sector towards 2035

The future of banking What to expect from SA’s banking sector towards 2035

  • Oct 07
  • Tags Banking, South Africa, Futures, Masters, Research, Innovation, Technology, Foresight

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In comparison to 2018 the South African banking industry landscape will look vastly different towards 2035. South Africa’s banking will be characterised by digital banking solutions unimaginable today due to the continued influence of key factors and trends in future.

“We live in a world where billions of people are hyper-connected to one another as well as to everything found in the contextual environment in which they actively participate. This unprecedented global network of connectivity creates a platform for real time and seamless transfer of innovation and technology,” says Ruellyn Willemse-Snyman of the University of Stellenbosch Business School (USB).

Willemse-Snyman completed her Master of Philosophy (MPhil) degree in Futures Studies* at USB and said the banking industry is one of the many industries that will experience multiple iterations of continuous change in decades to follow.

We live in a world where billions of people are hyper-connected to one another…this unprecedented global network of connectivity creates a platform for real time and seamless transfer of innovation and technology.

“Combining the interconnectedness with the rapidly changing needs of customers, and the continuous introduction of new technology indicates that years to come will be characterised by influential disruptive transformation never experienced before,” she says.

This will have two major influences on the banking landscape; namely, causing continuous client behaviour changes and constituting the building blocks for the digitisation of the banking industry landscape.

She says the current South African banking industry is dominated by five major banks of which four (ABSA, Nedbank, FirstRand and Standard Bank) are categorised as traditional banks, whilst Capitec, the latest entrant to the market, has disrupted the South African banking industry landscape since it was established 18 years ago.

“The continued introduction of change as well as new digital-only banks, such as Thyme Bank, BankZero and Discovery Bank, will lead to an increasingly complex and competitive banking industry landscape in South Africa towards 2035,” she says.

Her research proposes four possible alternative futures scenarios for South African banks in 2035:

  1. The money machine: supporting the banking needs of a large percentage of the South African population through agile digitised information technology systems constituting the core operational platform of the banks.
  2. On the high road: banking solutions personalised for the need of the individual made possible through new inventions such as big data analytics and artificial intelligence whilst being supported by Agile Information Technology Systems.
  3. Tall order: an environment characterised by banks trying to satisfy the banking needs of the bulk of the South African population using Legacy Information Technology Systems that are lacking the required agility to be able to incorporate the change necessary to bridge the gaps.
  4. Slowly, but surely: a scenario describing a banking environment focused on serving the banking needs of the individual who expect personalised banking functionality whilst having to rely on functionality available on Legacy Information Technology Systems.

Her research found that the digitisation of the banking industry and the continued presence and application of innovative banking solutions and enabling technology, necessitates the establishment of new regulations in order to counter the increase in security risks. The continued change in client behaviour, in turn, requires banks to continuously reinvent themselves in order to continue to satisfy the need of their clients.

The influence of SA’s economy and politics

Willemse-Snyman says it is difficult to determine the future impact of the South African economic and political environments on the banking industry landscape due to the interconnected nature of the two domains.

“South Africa’s economic structure is poised to strangle growth for the foreseeable future, and as a counter, the political environment will be dominated by rhetoric and policies geared to addressing the causes of low growth, the circumstances facing the poor and means to stimulate growth.

…the banking industry will need to address its image to that of a bank for the people.

“Banks have been considered for a long time as servicing the privileged and this will be in the crosshairs as politicians compete for the populist vote. Consequently, the banking industry will need to address its image to that of a bank for the people. Against the backdrop of low economic growth, banks will need to innovate solutions that break from the normal model of risk requiring returns as this mechanism underpins the exclusion of the poor,” she says.

“Banks will have to innovate solutions that mitigate the risks associated with their clients, which may include the adoption of a digital core operation platform enabled by technology and innovation as well as innovative business models.”

She adds that the political environment will look to banks to make up for their shortcoming in stimulating growth and redistributing wealth. “The former requirement will require banks to provide loans and products to stimulate capital formation with the second requirement looking to digitisation of banks to redistribute corporate profiles to the consumer.”

Willemse-Snyman says the core operational platform of the banking industry towards 2035 is most likely to be characterised by an agile digital ecosystem of interconnected entities. The adoption of digital solutions create a complex system requiring the reinvention of security and regulatory measures.

“The key solution to combating cybersecurity is through the establishment of partnerships between banks and third parties such as RegTechs that can supply financial solutions enabling clients to have access to digital financial solutions. This will provide clients access to their banking functionality whilst providing the privilege of a strictly controlled banking environment,” she says.


 

*This year marks 21 years of Futures Studies as a portfolio of academic programmes and research field at the University of Stellenbosch Business School. Futures Studies has helped many reap the rewards of making prudent decisions through innovative sense-making, long-term planning and unique approaches. It is the first Futures Studies programme presented in Africa, and still among the only ones in the world.

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Nigerians heed the call to grow Africa using development finance

Nigerians heed the call to “grow Africa” using development finance

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Nigerians heed the call to “grow Africa” using development finance

Nigerians heed the call to grow Africa using development finance

  • Oct 01
  • Tags Development, Finance, Africa, Growth

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“Six of the fastest growing global economies are African economies, with the phenomena of productive value added sectors and services being the driver of some of these non-mineral rich countries,” said Dr Nthabiseng Moleko, USB lecturer and Commissioner on the Commission for Gender Equality, at a recent Alumni Association event of the University of Stellenbosch Business School (USB).

The World Economic Forum (WEF) has shown Tanzania, Mozambique, Rwanda, Ethiopia, Democratic Republic of the Congo (DRC) and Cote d’Ivoire are among the world’s fastest growing economies since 2015.

USB held its West Africa Alumni Association Chapter with several former students who are now leaders in industry, executives and innovators. The theme for the event was titled, Grow Africa using development finance. Alumni attended and expressed their intent of making development impact on the continent.

“We are responsible for our own growth and development, we must determine our own narrative and we owe it to the next generation to restore the broken walls of Africa.”

Isa Omagu, former USB Advisory Board Member and Chairperson of the Alumni Association, said: “Nigerians are also innovating using the shared agency infrastructure framework, which drives financial inclusion and strives to empower the previously disadvantaged using microfinance, micro-pensions and micro-insurance.”

USB’s Alumni Association hosts these sessions on the continent to continue promoting networking opportunities for alumni with the intention of developing leaders that will transform the continent. Current Chairperson Shayo Imologome led the Alumni Association team, who voluntarily gather and meet to further develop their nation.

“Africans cannot afford to rest and expect their development and growth to arise from another source.”

Says Moleko: “We know that Africa is mineral rich yet most economies are not diversified showing massive reliance on a single commodity, with price fluctuations adversely affecting most of our national output. We have not focused sufficiently on growing productive and value adding sectors. We also need to drive domestic capital mark mobilisation, even using pension funds and capital markets to drive national development goals. The misnomer that development does not lead to profits must be changed and allocation to the infrastructure asset class has shown positive spinoffs and returns.

“A continent awash with underdevelopment, infrastructure shortages and high levels of unemployment should use its finance and debt for its own development and drive value adding sectors rather than merely driving consumption based growth,” she said.

The attendees engaged robustly and it was collectively confirmed that Africans must unite and commit to financing and driving their own development. The importance of innovation, ethical leadership, risk management, long term vision and resourcing our own development were key themes discussed by the attendees. Existing challenges were opportunities and it is the role of the citizens to also take charge of the economies; to drive the growth agenda.

“Africans cannot afford to rest and expect their development and growth to arise from another source,” Moleko argued. “We are responsible for our own growth and development, we must determine our own narrative and we owe it to the next generation to restore the broken walls of Africa.”

***

The Guardian Nigeria also published this article. Read more here: https://guardian.ng/news/nigerians-heed-the-call-to-grow-africa-using-development-finance/

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