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 (WHO) 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 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 (SMEs). 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 Publisher’s Note in FORBES AFRICA 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. Bank 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. &nbsp;



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 (DFIs) by pro rata 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 three years on all national debt for developing countries. Secondly, to shut all capital markets and exchanges for two years, stop all exits from private investments for two years (rather invest in venture and growth capital), no dividends are paid by listed companies for two 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, SMEs 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 two 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 <a href="https://www.yourdictionary.com/Hippocrates">Hippocrates</a>, is known to have said: “For extreme diseases, extreme methods of cure, as to restriction, are most suitable.” 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 better good.



– The writer is the Founder and Publisher of FORBES AFRICA

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Desperate Times Call For Desperate Measures: What Could Be Done For The Greater Good

What are the big corporates thinking? Raghu Malhotra, the Dubai-based President of Mastercard Middle East &amp; Africa, on developing clear frameworks for the current crisis, and why digital transformation is more important now than ever before.



Addressing the challenges of Covid-19



We absolutely find ourselves in a place where we are mandated to think differently about how we interact with the world around us. And it’s not just the challenge, but the scale of it that’s so astounding. Organizations need to play a vital role in enabling commerce critical to sustain people’s health and wellbeing.



Technology has always played an important role in how Mastercard addresses challenges, and that is even more true today. Through technology, we are better able to support all the partners with whom we interact in this ecosystem – governments, public sector, private companies, small businesses, fintechs, mobile network operators, retailers, merchants and consumers.



We developed a clear framework to address the impact of Covid-19 – containment, stabilization, normalization and long-term plans for eventual growth. We have been accelerating and enhancing our innovative services and solutions that can help businesses and governments in the region and around the world to assess, react and plan through the current crisis. We are now seeing signs that global economies are starting gradually to move into the stabilization phase.



Of course, first and foremost among the many challenges has been the cost to human health and wellbeing. We have committed to no job losses as a result of Covid-19. As an inclusive company, we know it’s paramount to consider diverse perspectives. We are encouraging learning, development and volunteering as our people combat challenges, but also discover new strengths.



Contactless payments and changing consumer behavior



Consumer behavior changes as people adapt to new environments. In order to observe social distancing, people are opting for digital and contactless modes of payment that are safe, secure and fast. While countries and sectors worldwide are at different stages of contactless deployment and usage for daily shopping habits, Mastercard saw the number of contactless transactions in South Africa grew 13X in March 2020 compared to March 2019 in grocery and pharmacy categories.



Contactless is definitely here to stay. In our consumer sentiment study from April this year, 78% of respondents in South Africa said they will continue to use contactless post-pandemic. The study revealed that since the beginning of Covid-19 in South Africa, 89% of South African respondents have been using contactless to pay for groceries, 60% for pharmaceutical items, 39% for other retail items, 15% for fast food, and 8% for transport.



When we look at the trends and data of growth in digital payments and online shopping, it’s significant. According to Mastercard data, for every $100 spent in Middle East and Africa (MEA), half was spent on e-commerce in May compared to a third of this figure in February this year.



Prioritizing inclusion



For everyone to benefit, we must include everyone – that’s why financial inclusion is so important. The digital economy is going to keep growing, and to ensure we advance real, genuine, inclusive growth, we need to make access easier and simpler. Bridging the digital divide is essential to enabling financial inclusion. Cash remains a drawback to financial inclusion and growth, which is why it’s so important for all partners to work together to build communities that are less reliant on cash and better positioned to take advantage of digital growth.



Our goal is to reach 1 billion people by 2025, including millions of small businesses and women entrepreneurs. Over the past five years, Mastercard has already reached 500 million people in 80 countries through 350 collaborative programs, including Kasha, an e-commerce platform in East Africa optimized for women’s health and personal care.



It offers confidential and convenient service, online and offline digital ordering and delivery to both urban and low-income rural areas. The digital marketplace for farmers via the Mastercard Farmers Network (MFN) and a digitized school payment ecosystem through the Kupaa initiative are other examples.



Mobile network operators play an enormous part in financial inclusion as we have a long-lasting partnership with these telcos, as well as fintechs and e-tailers, to reach people – especially those who don’t have bank accounts, as these are the people who will benefit from a digital wallet to transact with mobile money through QR codes and Virtual Card Numbers. Mobile money has transformed the landscape and almost half (45%) of all mobile money activity happens in sub-Saharan Africa. Technology is helping us achieve things previous generations could only dream of.



Helping SMEs reinvent themselves



Nine in 10 businesses in sub-Saharan Africa fall into the SME category, so they are incredibly important in driving growth for African economies and providing livelihoods for millions of people. Their success means sustainable prosperity for Africa’s entrepreneurs and going digital is a crucial part of this process. In Africa, online sales currently represent only 1% of total retail sales, so there are opportunities for Africa’s small businesses as they go digital.



One of the many initiatives we are supporting includes helping small businesses in Nigeria to set up digital money accounts and accept QR payments using Facebook Messenger and a Masterpass QR bot. In addition, we partnered with Letshego in Mozambique to pilot Community Commerce in order to digitize low-value transactions for shopkeepers of informal convenience shops. In South Africa, Mastercard has partnered with fintechs like uKheshe and iKhokha and other financial services providers, to offer low-cost digital payment solutions to SMMEs and the unbanked to fast track financial inclusion.



Over the next five years, Mastercard has pledged $250 million in financial, technology, product, and insights support to small businesses across the globe. These include measures such as helping small businesses with cash flow to sustain operations, providing access to credit, making insights available for decision-making and securing solutions to go digital, or grow in digital.



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<blockquote class="wp-block-quote">&#8220;Nine in 10 businesses in sub-Saharan Africa fall into the SME category, so they are incredibly important in driving growth for African economies and providing livelihoods for millions of people. Their success means sustainable prosperity for Africa’s entrepreneurs and going digital is a crucial part of this process.&#8221;</blockquote>



Shaping the digital economy



At its core, the digital economy is an extremely powerful, transparent tool that enables social welfare grants for pensioners, working capital to SMEs, secure revenue streams, more convenience and lower costs for citizens. Our multi-rail approach is at the heart of how Mastercard is positively transforming the future of the digital economy. Through product introductions and acquisitions, we are reinforcing our value propositions in terms of government, account-to-account, and business-to-business payments. Additionally, we have rolled out technology for real-time transfers in bill payments and payouts, and prioritized security technology to help guard against increased fraud risk. We are participating in as many payment flows as we can to stay ahead of the changing landscape, delivering essential choices to banks, businesses and consumers.



Africa remains a top priority for Mastercard and we strive to help create a more connected continent that can continue its digital transformation and reach its full potential. We have been committed to progress in Africa for over 45 years, we are able to stay connected to Africa’s unique challenges and tremendous opportunities, as well as its inherent possibilities to succeed.



– Interviewed by Renuka Methil

IMG_0601

From The C-Suite: ‘The Digital Economy Is An Extremely Powerful, Transparent Tool’

It was
recently reported by ratings agency S&amp;P Global that the coronavirus
outbreak has plunged the world into a recession. On the home front, a sudden
surge in COVID-19 cases in the country resulted in the President of South
Africa imposing a 21-day country-wide lockdown, starting from Thursday, 26 March
2020. Combine this with the fact that the country also recently announced to be
in its third recession since 1994 it’s safe to say that many businesses are
beginning to feel the effects of the pandemic.



The impact of the coronavirus on small
businesses is likely to be substantial, especially for local businesses who are
already feeling the pinch, as financial and market uncertainty can easily
translate into an emotional crisis that can overwhelm our systems. However,
help is on the way as the Department of Small Business Development announced
that a Debt Relief Fund has been set up to assist small, medium and micro
enterprises impacted by COVID-19.



While this
relief is welcomed, it is still vital for leaders to step up. The
world has been through crises before, but during these significantly difficult
times, the economic impact may be as severe or possibly worse. As such, those
in leadership positions must use past crises as examples and apply what was
learnt to keep the country on course and minimise the impact of the pandemic.



Karl Westvig,
CEO at<a href="http://www.retailcapital.co.za/" target="_blank" rel="noreferrer noopener"> </a><a href="http://www.retailcapital.co.za/" target="_blank" rel="noreferrer noopener">Retail Capital</a>, has pinpointed the visible areas that are affected
and outlined a few pointers to help small business owners weather the storm.



Liquidity



The first
victim of panic is liquidity – banks, asset managers and funders stop lending.
When they cannot calculate the potential risk, they will not lend.&nbsp; Therefore,
it is critical to shore up cash by drawing down on available facilities and
suspending any unnecessary investments. Reduce expenses and manage cash flow
daily.



Get Your Best
Team on It



When a
business is growing, we tend to shift our best people into roles linked to
growth and new initiatives. In a crisis, these people need to move into the
highest priority roles. These roles would include collecting from customers,
raising facilities or engaging key clients.



Morale and
Communication



People need
leadership. This would include authentic and regular communication about the
situation, what the business requires and how this will be achieved. You can’t
control the circumstances, but you can control the response and actions. This
will create more certainty. 



Hands-on



Events evolve
quickly and every day is critical. Leaders must be hands-on. They have to be in
touch with customers, suppliers, funders and staff. They have to collect data
on everything – the mood, the financial metrics, even customer stories. Some of
the best information is anecdotal, not just big data. 



Policies



It’s tough to
lead when you don’t understand all the underlying levers. These can change in a
crisis. What worked in a stable environment can go out of the window in an
instant. The best approach is to start again, listen to customers and then
adapt your policies within your framework.



“This is not a manual on how to handle the current crisis, but hopefully, the points mentioned above can add to what you are already doing. In simple terms, it is easy to be overwhelmed, so tackle a few things very quickly and with commitment. This will create certainty and lead to action. The alternative is paralysis,” concludes Westvig.

Tag: SMEs

FORBES AFRICA SOCIAL MEDIA

Desperate Times Call For Desperate Measures: What Could Be Done For The Greater Good

From The C-Suite: ‘The Digital Economy Is An Extremely Powerful, Transparent Tool’

5 Tips For SMEs To Counter The Covid-19 Crisis