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Corporate governance and international standards reduce the risk and obstacles in doing business, says Jackie Tong, Ernst & Young, South Africa.
 Do you see the resurgence of China and India as threat or an opportunity for Africa?
I see it as an opportunity, but I think it’s something that both governments and business need to manage. The opportunities in my view are the creation of employment; there’s an opportunity to create new industry or products for consumers; and then there is a chance to strengthen existing industries or sectors of the economy. But taking all of that into account, looking at China, if you want to do business in China, you’ve got to do it through a joint venture with Chinese partners. In Africa we need to find a way where we can encourage foreign investment, be it from China or India or anywhere else, but have a process where as Africans we can share in the wealth being created and ensure exchange of the skills and knowledge.
For me there is the positive, but you need to balance it to make sure that there is sustainable improvement and that there is benefit for both the companies coming in and for the local community, government and businesses.
Concretely, what did the “Year of Africa” deliver?
Concretely, I can’t say it has delivered anything yet. What is has done is raise awareness around the needs in Africa and it specifically made promises around debt relief, around increased aid and what we are all looking at is the Investment Climate Facility and how it gets rid of some of the obstacles around doing business in Africa. I think 2005 is going to be judged on what we deliver in 2006 and beyond.
Where lies the biggest opportunity for growth for the financial services industry in Africa?
I think it lies in banking mostly. Africa is largely still a cash society, so in retail banking there are opportunities around cash and debit cards. Even in South Africa where we have a fairly sophisticated banking environment, there is a new product around mobile phone banking which makes banking a lot more accessible. If you have a mobile phone, as loads of people in Africa have these days, your bank is in your hand rather than in a building somewhere.
| If we look at commercial banking, there are opportunities in mergers and acquisitions like we’ve seen in South Africa and like we see in Nigeria with the change in regulations where banks can build new brands, they can expand both their retail and their commercial offers. And some of the experts will tell you that changes in banking regulations are usually followed by changes in the insurance industry. There are opportunities in the insurance sector for the range of services being offered through that and there’s an opportunity to help Africa as we encourage an attitude of savings, be it trusts or life cover. There have got to be opportunities to expand this range of service offerings across the continent. |  |
"In Africa we need to find a way where we can encourage foreign investment but have a process where as Africans we can share in the wealth being created and ensure exchange of the skills and knowledge."
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Investors often perceive doing business in Africa as risky. What can the financial services sector do to lower or spread real and perceived investment risk?
Is the risk so much different in Africa that it is in any of the other emerging market?. That’s the question I would throw out – is it any bigger risk or just a very different environment that we need to be aware of. There is work to do around perceived versus real risk. We need to challenge that and talk to the companies that are operating in Africa and that engage in risk management and see how they are actually doing business. It’s more about creating a different model that addresses the risk and helps with growth.
There is another piece to this. The more we have regulation, the less the risk, especially in the financial services sector. There is a role that the financial services sector can play in encouraging the adoption of and compliance with international standards. And they can work with governments and regulators and service providers like us to encourage business and governments to train on these standards, to talk about them and look at what else they have to do - good old aspects of corporate governance.
African governments need to understand that the need to create the right environment. It’s corporate governance and international standards that take some of the obstacles around doing business. They are the only way investors are going to come in, be they direct foreign investors or donor funding. So I think governments have got some work to do, businesses have got some work to do in encouraging each other with peer pressure so that we all make sure that we’re doing what is needed and facilitating the process through sharing and training.
Public-private partnerships (PPPs) are often cited as key to implementing infrastructure projects in Africa. How could the finance community engage business in implementing such projects?
The first piece is knowledge sharing. You take a product like the infrastructure business which has a long-term outlook and business gets scared when you start talking about returns in the next couple of years. We are very quarterly results looking and the whole essence of PPP is that you make an investment together with government for the benefit of the country and for its people and the reward to business is going to come a little later.
And then I think the finance community needs to use its service providers and other service providers like ourselves who can help to break this down and make it attractive to business. That’s what business is missing. It’s a different mindset from your usual deal, but it’s something where the risks can be managed and you can be pretty clear on the returns. It’s just a longer term view rather than a short to medium term view. |
