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Drop It, Lets Talk Fintech

Onkabetse Gwamulumba

We are at war! Batswana seem united and law abiding than ever. There is desirable tranquil and peace. As citizens of our beautiful Botswana, once again we find ourselves blessed with very decisive leadership, cooperation by pressure groups and real time information dissemination by journalists and analysts who always find time to refill their pens and share objective information. This support has seen us benefit and get the great health care and support one can ever ask for under the circumstances. With that said, I salute all of you infantry men and women in the health, retail and security sectors, and your commanders alike; as you have risked it all to fight this faceless monster at the fore front where the battle is hot!

Catch-up. Circa November 2019 a small unknown rogue warrior from a clan of Corona Viruses named COVID-19 ravaged a City of Wuhan in China, and 6 months later it has unceremoniously declared itself as the adversary of the World in an unofficial World War 3 having infected 3.42 million and killing 243,000 people as at 03 May 2020. Talk of World War 3, this was long fantasized, touching on nuclear war, machine war and biological war. In all these fantasies, possible economic ramifications were faint and remotely permutated. In real life post 2008 crisis, risk strategies were employed branded as lessons learnt. Business Continuity Plans were at the forefront of the risk strategies, and truth of the matter is that pre COVID-19, they had somewhat lost the spotlight and the oomph. They had become ignored and treated with less importance as our Chiefs. They got relegated to storerooms and gathered dust – and almost waned into oblivion. Most of their contents were forgotten. In hindsight, had we put our serious thoughts into the Business Continuity Plans and made sure we advance them each year broadening the scope, 11 years later from the world recession, we would have not been found wanting as we did. Hopefully, we learnt something.

Heads-up. COVID-19 has erased the economic gains & efforts we have made overtime. We have seen Bank of Botswana come to the rescue of the Banks and the Economy with a decisive monetary policy stance; among others injecting P1.36 billion in liquidity (money available to the market) and stimulating borrowing by reducing bank rate by 50 basis points (1% = 100basis points). Without regurgitating closing summaries of the Governor, he remarked, and I quote “…improving total factor productivity, structural reforms, export competitiveness of domestically produced goods and services as well as governance arrangements remain paramount in promoting sustainable and inclusive economic growth”. I hope I am not confusing my audience, I would like to gain status achieved by Milton Friedman who was referred by Phil Donahue (TV Host) as “a man who will never be accused of making economics confusing” and in the process decipher this whole 4th Industrial Revolution concept.

Let us now play the Economics Sport
Recessions will always come. We must embrace this. The oldest recorded recession dates to the 1st century in Roman Empire when there was a financial panic in AD33 during the reign of Emperor Tiberius. Many economic recessions would occur thereafter. Our interest is what happened after each of these recessions. I want us to look at about three recessions and look at the economic action that followed thereafter.

Credit Crisis of 1772: This was simply a banking disaster driven to greater heights by panic. A certain Horace Walpole was quoted on a letter to Mann on 1 July 1772 “…will you believe in Italy, that one rascally and extravagant banker had brought Britannia, Queen of the Indies, to the precipice of bankruptcy! It is very true, and Fordyce is the name of the caitiff…” It was after this disaster that Bank of England considered Systemic risk. Bank of England is said to have responded swiftly and decisively using centrally a concept known as Lender of Last Resort (LLR). The Great Depression 1929-39: lauded as the most severe economic disaster of all times, lasted 10 years. This was triggered by a financial disaster that culminated in Wall Street crash of 1929. This would later be blamed on an economical concept known as laissez faire to which the political analysts believe President Hoover recklessly subscribed to. Laissez faire originates from France and legend has it that it came about a meeting between French Finance Minister and Businessman known as Le Gendre. The Finance Minister asked Le Gendre how best the Government could help commerce, and he responded “laissez nous faire” – meaning “let us do (it)”. President Roosevelt would later succeed Hoover and put in more regulations to the market, scraping-off some non-functioning policies and have a very sound macro-economic policies; these interventions managed to reverse the painful 10 years. The financial crisis of 2007-08: most of us experienced this crisis Live. We saw it unravel. The major cause was like that of The Great Depression. Lack of oversight or insufficient regulation. Post that we saw many regulations being flooded in markets across the world. Risk Management would also gain traction as a field and the extent of its coverage incredibly significant and in headlines. In the US there was a strong bailout for “too big to fail Corporations”.

What role can 4IR play post COVID-19
It is noticeably clear from the discussion above that both BoB and Government at large need to have sound regulations and dynamic approach to economic management. Risk Management application needs to be broadened to cover other key areas such as health, natural disasters, and threat to Globalization, furthermore Risk Management must be a continuous exercise not a once off document/policy that then gets shelved. One of the factors cited as having caused great depression is high wage policy that the President believed in. The concept being that if people have high wages, they will have capacity to spend. We must be careful in how we aim to boost our economy going forward. In my view we must start from scratch. The starting point must be merging data and have one “big data”. Why must I be demanded certified copy of Omang when dealing with Government? We must create industries, eliminate red-tape, and have an enabling environment (E.g. All license processes must be done online). Then manage inflation and balance it with sustainable growth. On the eve of COVID-19 putting us on lockdown, truth is that our economy was somewhat struggling with growth (look at indicators such as Diamond prices, GDP Growth, Fiscal Budget).

In terms of 4IR preparedness, BoB is already ahead of the curve having published comprehensive governance regulation to electronic payment services (EPS) which is known as electronic payment services regulations 2019. 4IR presents a dawn of hope and evidently has played a key role in managing COVID-19. We saw development of initiatives such as online permit application within few weeks and it has worked effectively for both the consumers (public) and the regulator (MoHW). The banks came and offered reduced rates and free rates for usage of their online & USSD platforms for bill payments and banking activities. This in a way helped the economy to “hold on”. Imagine what could be happening if the banks were still stuck in the traditional banking without aggressive drive to go digital and BoB clueless about EPS or digital banking; it could be chaotic. In all economic outlook reports, be it by Ministry of Finance or IMF, the outlook is negative. My thinking is we will recover by Q3 and Q4 2020; after all it is a guess game. I am alive to the fact that our economy is 75% dependent on imports from South Africa and that our three largest buckets of income (Diamonds, Tourism & Tax) are affected. I think as bad as COVID-19 is, it becomes a blessing in a sense that it now accelerates utilization of technology and citizen empowerment. The President has committed that a citizen empowerment law will come into effect in Q3 2020. We have seen Parliament proceedings being streamlined live on social media, which gives us first account of what our representatives do at Parley. On Tuesday 05th May 2020 Parley is said to be having an emergency physical meeting. In my view this is where I now blast our technocrats. They are doing little to advance the growth of this country. I watched video conferencing by the Bank of Botswana Governor – it was terrible. How do we find ourselves in this position? It tells me that the President did not want to risk this meeting by video conferencing as we are simply not ready – and it would defeat the urgency and to some extent derail objectivity of the meeting. As embarrassing as it sounds, I agree with him!

We must start looking at this video conferencing business with seriousness it deserves. I have read several social media posts in which people seem to be comfortable with this new normal especially around few people at funerals, few people at wedding ceremonies, ordering online (e-commerce), online bill payments, tele/video medicine & video meetings. These are opportunities offered by 4IR and they will go a long way in quickly turning around the fortunes of our economy. On Sunday as I was doing my shopping, I was shocked to learn that two of the big shops I went to have no toothpicks on their shelves! As presented in the introduction of the column, 4IR is a fusion of previous revolutions, and COVID-19 has just demonstrated how hopeless in self sustenance we are. We cannot be importing toothpicks. To boost our economy, post COVID-19 we simply must get serious. We need to develop industries and we need to own production lines in the e-commerce industry. Let us stop thinking that a Business Plan is the answer to our economic interventions. In fact, let us just scrap this Business Plan requirement for green fields. This fundamental flaw has put our diversification efforts at the mercy of lazy uninspired middle class, and in the wave let the rich get richer for they can swiftly finance ideas without delay and inept paraded as Business Plans. We have seen very beautifully written Business Plans funded and only for the business to fail miserably. This is because we are using the wrong “academic” solution for the problem we have. We need to think afresh!

Industries that must embrace 4IR in Botswana: inspired by Big Data? – see you next week!

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