<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1110" height="740" src="https://www.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-1110x740.jpg" alt="" class="wp-image-380641" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-1110x740.jpg 1110w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-300x200.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-820x547.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-768x512.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-1536x1024.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-scaled.jpg 2048w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-696x464.jpg 696w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-1068x712.jpg 1068w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-1920x1280.jpg 1920w, https://cms.cnbcafrica.com/wp-content/uploads/2020/09/GettyImages-1214403320-600x400.jpg 600w" sizes="(max-width: 1110px) 100vw, 1110px" /><figcaption>Stock charts on the background of skyscrapers. Financial system concept &#8211; stock photo</figcaption></figure>



We inherently believe that if we had a chance to change the world we would do something dramatically different. In reality, when people get into positions of power, they get bogged down with the mundane and eventually become conformists; it’s easier to adapt than to change. Having lived through five economic cycles over the last 30 years, I asked myself what I would do differently if I had control of the world at a time when the world economy is gutted by the pandemic and the World Health Organization has stated that the worst is yet to come. With these onerous terms of reference, one is compelled to think of extreme measures to provide relief to the dire and helpless situation that the majority of the people around the world find themselves in.



In any crisis what becomes most critical is the availability and flow of money within our economies particularly to the small and medium-sized enterprises (SME’s). It’s recognized that almost 70% of employment comes from the SME sector. However, in difficult times, the cash-tap dries up and money flows to this all-important sector dries up. Commercial banks are best known for the adage “offer an umbrella when there is no rain” and as entrepreneurs in the SME sector will validate this as banks ask for 100% cash collateral when things get tough.



That is risk mitigation 101. When unemployment is at 30% and when almost 70% of the global population is at risk, there is this select group of institutions that continue to do well. These are a majority of the listed companies and the financial services sector in general. I am quoting from my publishers note in June 2020:“Continuing to look at our magical numbers, global GDP is flirting around $100 trillion and total global debt is around $250 trillion (give or take a few trillion). The market capitalization of the 60 main exchanges in the world is around $70 trillion. In terms of profitability, just the S&amp;P 500 companies were projected to deliver approximately $1.5 trillion in profits in 2020, the global banking sector would deliver profits of $250 billion to $300 billion and the technology sector approximately $356 billion.



These numbers are larger than the GDPs of most countries. The numbers for Africa are not as high but there are thousands of businesses that are doing well and will continue to do so after the pandemic is over. It’s therefore, clear that while we have problems from time to time, we also have the resources to fix them; many times over. Hence, it’s time for us to go back to the drawing board and start from zero by redefining our purpose, the difference we need to make and the legacy we will leave”.



Let’s also put two other terms of reference on the table relating to banks. Banks closures and failures on account of bad debt write-offs, non-performing assets or over leveraged balance sheets seldom come from bad loans to the SME sector or to farmers in the agricultural sector.



History is a witness (as Google can validate) that the majority of causes come from lending to large corporates, poor governance and through fraud. Secondly, even in crisis, as central banks reduce interbank rates, commercial banks seldom pass this on to the SME sector; beneficiaries are once again people who can afford the higher interest rates.



Rather than rearticulate I want to quote from the same note in June: If we are to be truly reincarnated, the script must be rewritten and inequality must be the first value for rehabilitation. In reality, even though resources are abundant, the gaps have continued to widen and the levels of poverty have increased. This is largely because of how we have developed the economic value chain;people that make the most money are the financial engineers who are trading stocks and not those sweating in the field manufacturing products and delivering services.



The cocoa bean, sugar or chicken farmer make 6% of the amount that the retailer makes selling the finished products, who in turn makes 50% less than the equity trader, who makes the most money trading on the stock. Anna, the tea lady in our office in Johannesburg, was charged an annual interest rate of 26% by one of the top banks to pay the college fees for her only son; no recourse. This is exploitation and needs to change through radical reforms of our entire banking system and the capital markets to harbor on making them very efficient but not for profit; the profit needs to be reinvested at the grassroots level. We need more farmers ploughing the fields, as at the end of the day, we cannot eat “paper stock”. Let’s agree that governments cannot be the answer to all the problems. Governments can provide stimulus, change policies and even print money (if that is indeed a solution) but at the end of the day the real cash that is available is in the financial system to include capital markets. Even when the entire world economy has come to a standstill, the people who continue to make profits are those that are feeding off the financial services trough.



My over simplified list of actions, as radical as they may sound are mild in contrast to what is needed today. I would increase the capital of all Multilaterals and Development Finance Institutions (DFI’s) by prorata contributions from the wealthy nations, but ensure that in turn they (including the World Bank and IMF) reduce lending rates significantly and waive interest for 3 years on all national debt for developing countries.



Secondly to shut all capital markets and exchanges for 2 years, stop all exits from private investments for 2 years (rather invest in venture and growth capital), no dividends are paid by listed companies for 2 years, ensure all cash raised in funds goes into growth capital, interest cap on loans to individuals at the lowest income bracket, and 100% of profits from banks, insurance, credit card, listed companies, investment banks, audit firms, consultancies, and property development companies is channeled back to government coffers to support the core sector industries particularly agriculture, healthcare, SME’s and infrastructure (including low-cost housing).



To plug some loopholes no increases in salaries or any bonuses or incentives provided to any employee (other than the lowest income groups) for 2 years. It may put a small percentage of people through minor but endurable inconvenience but 70% of the world will see some measure of improvement. The Greek physician Hippocrates, is known to have said &#8220;For extreme diseases, extreme methods of cure, as to restriction, are most suitable.&#8221; This when translated by many people in history has led to a common phrase “desperate times call for desperate measures”. Well, the time for procrastination is over and it is time to act. If I had the reins of the world, I most certainly would take draconian measures for the greater good.

Stock charts on the background of skyscrapers. Financial system concept

OPINION: Desperate times call for desperate measures to save our economies

I was privileged to join the Hogan Lovell conference on Championing Africa in July. An important discussion was around creating a positive environment during crisis and some very inspirational ideas were exchanged. True leadership is continuing to do exceptional things even during challenging times.



Everyone is dealing with similar challenges today; what makes a prodigious leader who is able to manage through fear unknown to our times? There are some countries that have walked the talk and none better than the UAE that has been our home for the last 31 years. The region has seen the worst crisis with oil prices flirting at the lowest in a decade,tourism coming to a standstill, EXPO 2020 and a host of other conferences being postponed, the airline industry being annihilated and a massive exodus of expatriates resulting from job losses.



 The initial response caused by uncertainty was no different than in all other parts of the world; the fear of the unknown was evident in the decision making. The gloom from Europe and the US gave cause to get into a huddle to find short term solutions mainly to slow down the spread of the pandemic. 



The initial shut downs followed by the easing of restrictions, brought back a sense of relief and confidence but more than anything there were several factors that gave citizens comforted. The first was the visibility of the leaders. From time immemorial, soldiers on the battlefield fought relentlessly as long as saw their flag flying; it gave them hope. In today’s context, this confidence comes from leaders who have the fortitude to stand before their people and give them an accurate picture of the crisis; the good and the bad.



The UAE leadership kept everyone updated regarding the healthcare facilities and challenges, causes for the spread but more importantly the tangible steps being taken to address the pandemic.



 The second was the integrity of the community in general. The UAE is the unprejudiced home to 150 nationalities and a melting pot of cultures. It was overwhelming to see people help each other in small but meaningful ways. The governance in the country was strengthened to a point where predatory or mercenary conduct was completely nonexistent; there have been no examples of covidpreneurs or carpetbaggers during this period. There is nothing worse than witnessing the soulless profiteering from the misfortune of others.



 The third was in catalyzing community activities and fund raisers to help the needy. Campaigns requesting contributions of US$ 2 per meal were initiated to provide millions of food packets to the needy. These not only helped people that were suffering, but the orders were placed with small business owners who could provide the food packets at a time when restaurants were closed. The government does not have the resources to meet every need of its constituents but act as a catalyst to bring stakeholders together and achieve multidimensional results.



 The fourth was the celebration of stories of personal sacrifice and selflessness, initiatives of the public and private sector and the announcement of new initiatives and projects. At every opportunity, the government recognized citizens who had helped others, the sacrifice of healthcare workers, the police department and many other stakeholders. It regularly announced the infrastructure and healthcare plans that were being prepared and the resources being deployed in dealing with the pandemic. Being an economically developed nation, the UAE has also assisted countries as far away as Brazil and has received the appreciation from global leaders. Additionally, as some projects and activities (EXPO 2020) were being delayed, the country announced and celebrated the launch of Orbiter Hope, its Mars Mission, on 19th July 2020 and its nuclear energy project that would supplement the energy needs of the country.



 The fifth example was in finding opportunities in the crisis. Other than ensuring that the services including judicial and immigration remained uninterrupted there was an effort from the government to ensure that it stayed alert to the changing environment and adapted to the needs of the present. The situation in March was very different and armed with the knowledge of what worked and what didn’t the government took bold decisions to manage some of its crisis sectors.



 The badly hit Emirates and Etihad airlines remained open for business by taking stranded passengers from different parts of the world and rather than focus on the crisis and layoffs, the only messaging was on the various initiatives that were being taken and the routes being opened. Similarly, the country will now play host to the annual Indian Premier League (IPL) cricket tournament which is a star studded tournament usually held every year in India. This will turn around the complete hospitality industry from September to November this year. Additionally, as the Chinese government is facing difficulties finding friends, the UAE will play host to scores of companies that are setting up to take advantage of the geographic location and connectivity of the country.



 Finally, the government recognized the value and proactively engaged media to ensure that the messaging was accurate, timely and balanced. Nothing is more damaging than misinformed or irresponsible media at a time of crisis and it is in the hands of the government to ensure that proper touch points are established to provide information so that there is no speculation on critical matters. This element of external communications is so important to provide comfort not only to your own people but also to the international community that is engaging at different levels; tourism, investments, trade, commerce,sports etc. We need to learn from what people around us are doing right and stay positive. Roy T. Bennett said it aptly in his book, The Light in the Heart, “Instead of worrying about what you cannot control, shift your energy to what you can create.” The only way to span a crisis is to stay positive and innovate.

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OPINION:Remaining Positive in Crisis

We all possess an invisible crystal ball that works illimitably in our minds. For most, it is the subconscious belief that conditions are going to get better; the next day will eclipse the last and so forth. I call it the optimist’s theory of mitigation; we subconsciously coerce our minds to believe that over time, all risks can and will be mitigated. This is what makes us human.



As I ponder over this theory and historic events, I cannot but ruminate on the current Covid 19. We have seen nothing like this before. The only people who have any recollection of something similar are centenarians who would have then been at least teenagers during the Spanish flu in 1918. Not many left! The Spanish flu did not originate in Spain as many believe, the flu actually started after World War 1 and was first detected in US troops who spread the pandemic.



There are volumes written about the causes and the impact of the H1N1 virus that spread influenza across the globe. Even at that time the infection spread across the world with 500 million people contacting and about 50 million people dying from the virus. Those are scary numbers. At that time there were no advanced medical facilities, Intensive Care Units or mechanical life support systems and/or ventilators. It took approximately 12 months for the pandemic to stop; it is widely believed that it was not a vaccine or a cure that eradicated the pandemic but it ceased after people had either died or developed immunity. What the flu taught humans was that in keeping with Murphy’s Law, things will go wrong and the impact of these pandemics will be severe; both humanity and economics will be casualties of exponential dissemination. However, as humans we have always prevailed and come out stronger.



What appears to be consistent remedies to containment but not eradication are social distancing, hygiene, wearing masks, lock downs and flattening the curve measures that were adopted in 1918 as they are being done today. Time and again, nature reminds us through various outbreaks that something sinister can happen. In the aftermath of the Spanish Flu, a lot of research was done on the pandemic but in reality, no vaccine can be developed in advance for a virus that constantly mutates itself.&nbsp; It is not surprising that we managed to contain various pandemics like the Asian flu in 1957-58, AIDs since 2001, H1N1 or the Swine Flu in 2009-10 and Ebola from 2014-16. The question therefore is not only whether there is a way out but is there a way we can prepare better. We come back to the age old malady that we tend to learn from what we have done right and not from what went wrong.



What are winners that will come right at a time like this is innovation led by technology. The revolution will be meteoric. Even for dinosaurs like me, the adaptation to these times has been expeditious. Managing a business spanning 3 continents by sitting on my desktop was never conceivable. The mind has once again proven its superiority over matter. If we believe we will surpass any crisis.



There are no right answers during a crisis. How did our leaders act when they were faced with the question of risk to their citizens? Do we enforce lockdowns or do we allow normalcy and then to what degree? Does what work in one country necessarily work in another? History will judge each one as we are living through a period where there are no immediate answers. It’s frightening that even the most learned ones revel in the theory of “being less wrong” than others. More realistic is the fear that the only solace we will find is when our bodies and businesses face the test of immunity; immunity that is the only answer for survival and continuity.



But this is the sad reality of our current time. As we continue to experiment through this ordeal, I encourage everyone to revert to my optimist’s theory of mitigation; we will find a way out and let no one judge anyone particularly our leaders (save a few) on what course they selected, as they risked a lot in making the choices that impact the lives of billions. Never before as leaders have we had to take one day at a time to course-correct. It is unprecedented in our lifetime. Let us stand together, follow the law in letter and spirit, contribute towards the destitute, celebrate each success and exonerate our failures as there is light at the end of this tunnel; we simply need to revel with optimism.

Clarification on COVID-19 “hotspots” as SA moves to level 3 lockdown

Rakesh Wahi

OPINION: Desperate times call for desperate measures to save our economies

OPINION:Remaining Positive in Crisis

The Optimists Theory of Mitigation

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Rakesh Wahi

OPINION: Desperate times call for desperate measures to save our economies

OPINION:Remaining Positive in Crisis

The Optimists Theory of Mitigation

News Tips

Advertise With Us

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