Business24 Newspaper 26th April, 2021 by Business24 Online

MONDAY APRIL 26, 2021

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NO. B24 / 186 | NEWS FOR BUSINESS LEADERS

MONDAY APRIL 26, 2021

Importers and exporters association warns against towing levy Kwaku Kyei Ofori, Deputy Director of NITA

‘75% internet penetration likely within a decade’ By Eugene Davis ugendavis@gmail.com

he Deputy Director of the National Information Technology Agency (NITA), Kwaku Kyei Ofori, has said the country’s goal of a 75 percent internet penetration rate is attainable in less than a decade. Cont’d on page 3

LMI Holdings woos manufacturers to Ghana’s largest industrial park By Joshua Worlasi Amlanu By Patrick Paintsil p_paintsil@hotmail.com

he Importers and Exporters Association of Ghana has called for pragmatic interventions from the government, other than the

imposition of a towing levy on motorists, to tackle the surge in road accidents and deaths in the country. The association identified driver fatigue as a major cause of road accidents and recommended the construction of mandatory rest

ECONOMIC INDICATORS EXCHANGE RATE (INT. RATE)

POLICY RATE

14.5% 14.77%

OVERALL FISCAL DEFICIT

11.4% OF GDP

AVERAGE PETROL & DIESEL PRICE:

4.2% GHC 5.13

macjosh1922@gmail.com

MI Holdings, the company which has built Ghana’s largest industrial park— the Dawa Industrial Zone—says it has offered incentives to local

Cont’d on page 2 INTERNATIONAL MARKET

US$1 = GHC 5.7606

GHANA REFERENCE RATE PROJECTED GDP GROWTH RATE

stops for long-haulers as well as the use of spare drivers on long-distance journeys. “We wish to express our displeasure at the planned implementation of [a] towing levy being advanced by private

BRENT CRUDE $/BARREL NATURAL GAS $/MILLION BTUS GOLD $/TROY OUNCE

CORN $/BUSHEL

$543.75

COCOA $/METRIC TON

$123.55

COFFEE $/POUND:

Cont’d on page 3

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Editorial / News

MONDAY APRIL 26, 2021

Editorial

Let’s walk the AfCFTA talk

he Africa Continental Free Trade Area is one of the best things to happen to the continent. The potential to transform the continent is enormous. Considering the effort put into the creation of one of the world’s biggest free trade areas, countries on the continent must position themselves to take advantage. But the benefits inherent in the AfCFTA can only be realised through hardwork and deliberate government policies. According to a study commissioned by the Business Sector Advocacy Challenge Fund (BUSAC Fund), government should ensure that the domestic competitiveness of Ghanaian firms forms the foundation of Ghana’s AfCFTA overall competitiveness strategy. The report, titled, “Ghana’s Competitive Potential in The AfCFTA: A Country Competitiveness and

Opportunity Assessment Report,” was undertaken by research and advisory firm, Konfidants. The study sought to provide a broad understanding of Ghana’s trade competitiveness in the continental market, map out markets with the greatest potential within AfCFTA for Ghana’s key industries and products, and make recommendations for boosting the country’s performance in the AfCFTA. With an emphasis on valueadded goods only, the analysis focused on seven product groups that were selected in consultation with industry players and government, namely: agro-processed goods, plastics, pharmaceuticals, mineral oils, textiles, metal manufactures and cosmetics. The country’s competitiveness was analyzed in two main

segments: competitiveness in the African export market (External Competitiveness), and competitiveness in the domestic market (Domestic Competitiveness). Michael Kottoh, the Lead Consultant for Konfidants, presenting the findings and recommendations, said Ghana’s intra-Africa exports value ranking (out of 54 countries) in the seven products studied is generally impressive. This paper shares in one of the recommendations of the study that while Ghana has made inroads in the Ecowas market, there is the need to diversify to other markets with equal potential. As a country, we equally have to also work on factors such as high interest rate, among others, that prevent local companies from becoming competitive.

Importers and exporters association warns against towing levy Continued from cover

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individuals through government,” Samson Asaki Awingobit, Executive Secretary of the association, said in a statement issued to the media. “We wish to state unequivocally that already the business community is going through challenges brought about by the ravaging coronavirus. To this end, any further levy on Ghanaians and the business community in general will further deepen the woes of the business community and bring untold hardship to Ghanaians by extension,” he added. Four years ago, the government had attempted to impose a towing levy on all motorists to fund the removal of broken down vehicles on the roads, but it suspended the policy after a public outcry against the measure. However, the idea has regained currency lately following an alarming increase in road accidents and facilities in the first three months of the year. The association admitted that the worsening road accidents situation calls for concern and immediate action from the government, but added that it must not come at a cost to individuals and businesses, as its impact on the economy would be

Asaki Awingobit

dire. “The association rejects the planned implementation of the towing levy, which, when successful, would have debilitating effects on the business community and Ghanaians in general,” the statement said. It added: “It must be placed on record that the business

community has not been consulted on this, and we deserve to know the cost component of this levy and how it is going to ameliorate our road traffic situation and prevent accidents. We also need to be involved in the roadmap for the implementation of such a levy if necessary.”

MONDAY APRIL 26, 2021

‘75% internet penetration likely within a decade’ Continued from cover Available statistics reveal that the internet penetration rate in Ghana presently stands at 50 percent; however, the government is striving to achieve a penetration rate of at least 75 percent. Speaking at the second edition of the virtual Mobile Technology for Development (MT4D) conference, Mr. Ofori said: “Looking at the population of 30 million-plus in Ghana, there are a lot of people who are just not connected to the internet or computer-savvy. These people might not be able to use the internet for now, but looking into the future, by 2030 to 2035, the younger generation coming up in the age of technology will change the narrative. This generation is heavily dependent on the internet for almost everything they do, [and] we will see a rise in the internet penetration rate past the 75 percent.” He also predicted that internet usage will grow after the pandemic due to changes that will take place in the world of work and in

education. “The post-pandemic world will also mean that more online universities will spring up, where a lot more students can be admitted online than the traditional system of classroom schooling. Things will change and the internet will be at the centre.” The government, through the Communications Ministry and NITA, is driving the agenda of the collective use of ICT in all sectors,

which Mr. Ofori reckons can position Ghana to benefit from the 4th Industrial Revolution. He said it is important that every Ghanaian, especially the unserved communities, have access to meaningful connectivity that is affordable and constant. This, he added, will facilitate access to information and knowledge sharing that will enable the average Ghanaian to improve and enhance their daily

life. “When we hit the 75 percent target, our data will be critical; therefore, our infrastructure and security will have to be beefed up,” he said, adding that the right use of the internet was key to staying safe online, which can be achieved, he explained, through the proper education of internet users on cyber-ethics and the regulations governing the cyberspace in Ghana.

LMI Holdings woos manufacturers to Ghana’s largest industrial park Continued from cover manufacturing companies to locate at the park, which is sited off the Accra-Aflao road. Speaking during a media tour of the park, Mr. Uriel Marquaye,

the Business Development Manager of LMI Holdings, said the company has already signed an MoU with the Ghana Chamber of Pharmacy for the allocation of 132 acres of land within the industrial zone to

pharmaceutical manufacturing companies. Such companies will be given special incentives to locate in the zone, he added. “Covid has taught us that it is time for Ghana to intensify its manufacturing, not only to build resilience but to also be in a capable position for a possible

future pandemic. Dawa is doing well to support local companies.” Currently, the zone—which initially covers 2,000 acres of land—has six companies on site. This is envisaged to expand to about 2,000 at full capacity. Mr. Marquaye said the zone will also have a textiles village to support the development of the garment industry, while other industries like automotive manufacturing, steel fabrication, food processing, and warehousing and logistics are expected to be developed there. The zone’s operations will lead to the creation of 80,000 direct jobs and 250,000 indirect jobs, he added. “The advantages are enormous for the country in terms of infrastructural development and attracting foreign direct investment,” said Mr. Marquaye. The Dawa Industrial Zone is served by a dedicated ultramodern 330MV substation, one of the largest in West Africa.

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Companies

MONDAY APRIL 26, 2021

Castrol Ghana maintains prices on lubricant in all new GTX promo

he preferred ONE-STOP global brand for Lubricants in Ghana, Castrol has demonstrated its customer centric services with the all-new promo of it high premium GTX products. Castrol is the leading brand with the highest OEM approvals in industrial lubricants such as lubricating oil, greases, metal working fluids, control fluids and other manufacturing, mining, marine and automotive lubricants in Ghana. Under the all-new Castrol GTX promotion, Castrol Ghana has maintained prices on its high premium GTX products. What is certain is that Castrol GTX is more than just an ordinary oil as it is liquid engineering.

The company’s customers are sincerely heaping commendations on the petroleum marketing company for maintaining prices on its products especially their high premium GTX products at a time when prices of competitors products have been increased. Prices have been maintained on all GTX products, which is matched with open market prices of other competing brands. Castrol® GTX® compared to other lubricants of less quality is a premium conventional motor oil that allows for longer oil change interval and has been helping to extend engine life since 1968. Its Double-Action formula clears sludge and prevents new sludge formation. Castrol® GTX® lubricants

enhances the good performance and efficiency of motor engines, minimizes hazardous gaseous emissions, and helps to properly clean motor engines or machines that may have been clogged by particles. Castrol® GTX® is now available in 4L gallons to ensure affordability for smaller engine cars that require less than 5L for oil change.

The current promo allows retailers and consumers to enjoy a free 1.5 litre Coca-Cola bottle when you make a purchase of every 1 carton/16 or 20 liters of Castrol® GTX® products from an authorized castrol distributor. Stakeholders should look out for more exciting promos from Castrol Distributors or retailers near you.

Resilience, resurgence and results: AVCA’s Annual Private Equity Summit returns

lobal and African dignitaries, institutional investors, fund managers and entrepreneurs opened the African Private Equity and Venture Capital Association’s (AVCA) 17th annual conference today. The live virtual programme brought together more than 350 key private equity and venture capital practitioners from over 50 countries around the world, to discuss the trends and developments shaping Africa’s investment landscape in 2021 and beyond. Nana Addo Akufo-Addo, President of the Republic of Ghana, launched AVCA’s virtual conference week. Introducing the theme “Resilience, Resurgence and Results” with a keynote address, he commended the private sector’s role in pushing Africa’s economy forward, building an inclusive and sustainable future. He continued, saying, “Closer collaboration and cooperation between the public and private sector is required to achieve Africa’s resilience and resurgence.” The conference programme proceeded with a panel exploring Africa’s revival post-covid, recovery timelines and the regional variation of its impact. Panellists, including Hurley Doddy, Co-Chief Executive Officer, Founding Partner, and Managing Director, Emerging Capital Partners, debated the

role private investors should play in accelerating the continent’s recovery. Khaled Ben Jilani - Senior Partner, AfricInvest shared how private equity could safeguard the livelihoods of MSMEs in Africa. He underlined the areas best impacted by the pandemic, citing that new players in crossborder payments, digital lending, medical logistics, last-mile delivery and cross-border logistics will continue to be challengers to existing companies in years to come. Genevieve Sangudi - Partner, Alterra Capital Partners, emphasised the importance of “active portfolio management” with partners, and the value creation opportunities in the market. She detailed how the pandemic had “created new and increasingly critical products and services that have helped us overcome revenue downturns by generating new business opportunities, direct-toconsumer strategies and shaping geographic expansions.” These insights were followed by a session unpacking a range of evolving themes and emerging opportunities in African PE, such as genderlens investing and the growing trend of high exit/acquisition for African fintech start-ups. Fund managers examined the emerging economies in Africa with rising opportunities and the well-established African PE

markets such as Kenya, South Africa, Nigeria, Ghana, Egypt, and Morocco. In a panel session, high-profile speakers including Otunba Richard Adeniyi Adebayo - CON, Minister of Industry, Trade and Investment, Federal Republic of Nigeria addressed the recent regulatory and policy changes affecting private investment on the continent with Emma WadeSmith OBE, Her Majesty’s Trade Commissioner (HMTC) for Africa at the UK’s Department for International Trade and Tania Rödiger-Vorwerk, Director Private Sector, Trade, Employment and Digital Technologies, German Federal Ministry for Economic Cooperation and Development. On the same panel, David Marchick, Chief Operating Officer, U.S. International Development Finance Corporation (DFC), commented on direct equity investments made by DFC across the continent and shared expectations for US-African collaboration, saying, “We are interested in significantly increasing our US$4-5bn annual

average of commitments to Africa by 20%.” This year, AVCA celebrates 20 years of promoting investment in Africa. To mark the onward journey, the association announced its newly established committees, the Institutional Investor (LP) Committee and the Venture Capital (VC) Committee. The Institutional Investor (LP) Committee will support AVCA’s Board and leadership to achieve increased commitments from local and global LPs to African private equity and venture capital. Committee members include Clarisa de Franco, Managing Director & Head of Private Equity Funds, CDC Group (co-chair); Richard Okello, Co-Founding Partner, Sango Capital (co-chair), Hassane Muhieddine, Chief Executive Officer, Axian; Angela Miller-May, Chief Investment Officer, Chicago Teachers Pension Fund; Anthony Njoroge, Africa, Regional Lead, International Finance Corporation; and Catherine Cax, Director of Investments, Soros Economic Development Fund.

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Feature

MONDAY APRIL 26, 2021

Will the Fourth Industrial Revolution lead to large-scale unemployment?

By Bertus Buys and Prof Martin Butler

hen the impact of modern technologies like artificial intelligence, machine learning and robotics are discussed in a business or social context the conversation inevitably turns to the impact on employment. There are justifiable concerns that technology will lead to widespread unemployment or, at the very least, a workforce not ready for the types of opportunities provided. When technology changes the structure of economic activities some employment opportunities will be lost. This raises the question: Will this only be those jobs that are repetitive and rather simplistic, or will it have a zero net effect on formal employment? If anything, the Fourth Industrial Revolution’s significant impact on policy and strategy is intensifying the level of conversation that, up to now, has mostly been based on anecdotal evidence or historical reference. However, there are always lessons to learn from the past. In addition, we need explorative technological forecasting based on extrapolations from the past to make sense of the future.

Therefore, this study looked at the impact of technological innovation on employment over the long term to obtain a better picture of what the future might hold. The technological unemployment debate has split the academic world into technology pessimists and technology optimists. The pessimistic view is that innovation destroys jobs; it creates structural changes in the economy that drive unemployment in the unskilled labour market, while increasing employment in the skilled market. The optimistic view is that innovation creates a myriad of possibilities in the form of new employment, and also positively influences multiple support industries and sectors that already exist, with a net positive effect. Technological innovation and unemployment The media and management literature warn about the perils of technological unemployment. To move beyond the sensationseeking statistics, it is necessary to obtain a better understanding of the types of jobs gained and lost as a result of technological innovation. Four aspects are important when looking at the effect of

technological innovation on employment. Firstly, any study about economic impact could be done at product/process level, firm level and industry level. It is of course also possible to extrapolate industry level to country or larger geographical levels. Secondly, we need to take cognisance of the multiple dimensions of innovation. Thirdly, we need a longterm lens to look at highlevel correlations between technological developments and economic cycles. Finally, the types of unemployment need to be analysed to try and isolate technology induced unemployment from other large employment trends that could influence the data. The literature indicates four main types of unemployment: • S t r u c t u r a l unemployment: This is defined as the disparity between the jobs available in the market and the skills of the workforce. • F r i c t i o n a l unemployment: This is defined as the short-term unemployment experienced while people are looking for jobs. • Cyclical unemployment: This is defined as loss of work due to economic downturns. • Seasonal unemployment: This refers to unemployment as

a result of seasonal productive activities – like those typically found in the agricultural industry. According to early 20th century Austrian political economist Joseph Schumpeter, all types of unemployment could be ascribed to the creative destruction process. He explained that unemployment is mainly frictional; unemployment as a result of technology adoption was temporary and of a cyclical nature. In contrast, the Italian economist Pasinetti believed that structural changes in the economic system generated a technology-induced loss of employment. A global analysis of the 2008 recession indicated that job polarisation – referring to a structural change from low-skilled or unskilled labour to skilled labour – was typically concentrated during recessions which coincided with technological changes. One of the mostly widely used theories to investigate the interdependency between technological transformation and economic activity is the Kondratieff waves introduced by Russian economist Nikolai Kondratieff in his 1925 book The major economic cycles.

CONTINUED ON PAGE 17

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Feature

MONDAY APRIL 26, 2021

How online networking helps your job search

By Jeffrey Frankel

ith so much uncertainty in the world and people getting made redundant, for some people looking for a new job is going to be a full-time job in itself. If you are one of these unfortunate people currently out of work you need to make finding a new job the focus of your daily routine. You need to follow a detailed job search plan to ensure that your time is being used wisely. While applying for jobs is a major part of a job search, networking still remains one of the top ways job seekers find positions. It pays to build a variety of solid connections. During the pandemic, in-person networking is out of the question, so why not take this opportunity to change your networking tactics and focus on online networking. How Online Networking Helps Your Job Search With online networking, you have a wider reach than you would at an in-person event. People from all over the world can meet up in a professional, like-minded environment. Going online will give you the opportunity to meet and network with people that you might never meet otherwise. Creating a Successful Online Networking Strategy LinkedIn has become the go-to site for career-related networking. Beyond creating an optimised LinkedIn profile, be sure you’re taking full advantage of all it has to offer. Let LinkedIn automatically

make the “easy” connections by sending invites to everyone in your address book. Then, take heed of its periodic suggestions of other members you might know based on your information or background. LinkedIn also has a feature that allows your existing connections to introduce you to their connections. This helps you build your network when one of your current connections is connected to someone you want to meet. You can then ask that existing connection to introduce you. Consider Your Existing Network Before you reach out to possible new networking connections, reach out to your existing connections first. This is a great way to start building your online network. Starting with current contacts can offer a greater sense of support and connection simply because of the existing relationship. It can also allow you to catch up with former colleagues and peers. Try Chats and Groups You will also want to expand your network from existing contacts to new contacts. While that can sometimes feel intimidating, online networking makes it easier and less stressful for people to connect with new networking contacts. You can join social media groups and chats dedicated to your area of interest. Groups can be found on many social media platforms including LinkedIn, Facebook, Twitter.

Choose the Right Connections Before you reach out to any professional, consider if you’re reaching out to the appropriate person. There is often a hiaracy order of who talks to whom. If you are a mid-level professional trying to reach out to CEO, you may be spoiling your chances of forming any valuable connection. Connect with professionals on a similar career level to you, or who work on a team where they could be your manager. This way, you will make relationships with the people that truly matter—the ones who can influence hiring decisions and likely relate most effectively to your experience. In addition to online networking, joining a professional association in your area is a great way to network in your industry. Online Networking Now for Success Later Networking is one of the most complex aspects of being involved in the professional world. There are endless methods, tools, and platforms associated with networking, and it can be difficult to decide where and how to start. One constant about networking, however, is that it is about the practice of building relationships over time. Don’t wait until you are out of work to start networking. It’s something you should develop throughout your career. Take the time to successfully network online using the tips above, and the results will be worth the wait. Authored by: BforB Networking Clubs

Ghana

Business for Breakfast (BforB) is internationally recognised for creating successful networking meetings, events and training for referral marketing. Our global offices are in Ghana, Australia, Germany, Czech Republic, Spain, Slovakia, Ghana and headquartered in UK. We create an environment where you can build quality relationships within your group, backed up by an ongoing member support programme. BforB is committed to helping small to medium scale businesses expand. In our professional network, members meet regularly in business networks to develop relationships, support each other and to share and record referral business. We are here to help you get new business from quality business introductions and referrals made through our meetings. Contact us: | info@bforbgh. com | Facebook & LinkedIn: @ bforbghana | www.bforb.co.uk Contact us for more information on the programmes offered by the University of Stellenbosch Business School (USB): Dr Marietjie van der Merwe USB Representative marie@globalnatives.com +230 606 2341 / +230 5 701 1362 Click on the link for more details on the programmes: https://www.usb.ac.za/academicprogrammes/

MONDAY APRIL 26, 2021

Energy

MONDAY APRIL 26, 2021

Zimbabwe is to allocate funds for 100MW Wind Farm

iversifying the energy mix is a way to solving power problems in a country. Renewable energy is gaining tremendous grounds in becoming the go to source to generating electricity. However, understanding the challenges attached to renewable energy is a step towards making smart investment decisions. The Government of Zimbabwe intends to generate 100 MW from wind by 2025 and the government is in the process of securing funds for a viable feasibility study. The study will look at how viable such a project will be as well as set the exact locations for the project. According to Energy and Power Development Minister Zhemu Soda, Government is mobilising additional funds to undertake an assessment on possible sites for wind farms after initial bids for the project exceeded the budget earmarked for the project. The Zimbabwe Energy Regulatory Authority (ZERA) in 2017, invited bids from interested contractors to carry out a

feasibility study on potential sites where wind power stations could be established. The purpose of this was to set an accurate knowledge base to collect data on wind speed, direction and pressure for these few sites for a period of 24months at the hub height of 100metres. The data obtained was further going to be used to design largescale wind power projects, offgrid or mini-grid electric plants and the information to be used for climate research. However, in 2018 the project was put on hold because the bidder’s price quotes were far over budget. According to Soda in an interview, “There were issues of inadequate funds from the previous budget and we are now looking for additional funds to carry out a viable feasibility study which investors can bank on.” He also stated, “This will help us to meet our target of producing 100 MW from wind farms by 2025.” Should renewable energy

projects be State funded always? The areas where ZERA intends to conduct wind resource measurement include the Middle Veld from the south to the NorthEastern part of the country. These were selected, taking into consideration the terrain, land use, roads, water bodies, etc. How will the Government of Zimbabwe, handle the issue of Right of Way? The wind assessment programme was driven by a study conducted by the International Renewable Energy Agency in 2015 through the Africa Clean Energy Corridor Programme, which identified solar photovoltaics, concentrating solar power and wind energy zones covering countries in the power pools of Eastern and Southern Africa. Zimbabwe plans to reduce electricity from non-fossil fuels as part of efforts to meet its carbon emissions reduction targets by 2030 and also diversify its energy mix. The country is a signatory to the Paris climate change accord agreed in 2015, which largely

seeks to hold the increase of the global average temperature to below 2 °C. Renewable energy is steadily growing in Africa and some countries have already made significant progress in generating electricity as they move towards green energy projects. Will the region continue to see massive renewable projects? Or will financing be a challenge to ensuring these key energy projects, take off ? We believe the way forward is to have a very good feasibility study report, highlighting on all key areas to set the pace to the final execution of the wind farms. After all, what is the worst that will happen, if the wind farm is constructed and there is no wind to turn the blades? Writer: Donald Marshall Company: Mframadan Energy Management & Research Institute (M.E.M.R.I). Contact: 00233-24-4550854 Email: donaldamus@yahoo.com

MONDAY APRIL 26, 2021

International

MONDAY APRIL 26, 2021

ADB launches more than $1bn of ‘gender bonds’

he Asian Development Bank launched two ‘gender bonds’ in Canadian and Australian markets, worth a combined $1.1bn, the first such issues for both nations. A gender bond is a financial instrument issued to help draw private investment for schemes which aim to improve conditions for women and help tackle inequality. The latest two bonds will focus on financing projects which promote gender equality and women’s empowerment including support for financial inclusion for women. Pierre Van Peteghem, ADB treasurer, said: “We are thrilled with the strong reception to ADB’s first issuance of gender bonds in both the maple and kangaroo markets, which will help support ADB projects that promote gender equality and women’s leadership. “These efforts are even more imperative as we recognize that women and girls are among the groups most severely affected by the Covid-19 pandemic.” The Canadian bond is valued

at CAD750 million ($596m) with a seven-year maturity at a 1.5% interest rate, 39.3 basis points above the central government gilts. The Australian issue is valued at AUD700 million ($542m) with a four-and-a-half-year maturity with a 0.8% rate, 21.95 basis points above governments bonds. ADB said it is imperative that it contributes to accelerating gender equality across five areas, including economic empowerment, human

development, decision-making and leadership, poverty reduction, and resilience to external shocks. The development launched its first gender bond in 2017, valued at $90m, which financed eligible projects in the Asia Pacific region, and was purchased by by Dai-ichi Life Insurance Company. Earlier this week, the Bank of Canada announced plans to become the first G7 nations to scale back monetary policy support which began in response to the pandemic.

The central bank said that weekly net purchases of government debt will be reduced by $1bn (£570m) to $3bn (£1.7bn). In October, the Australian government said that it will take on record amounts of debt this year, peaking at AU$214bn. It forecast net debt to increase to $703bn, equivalent to 36% of GDP at the end of the financial year in June, and peak at $966bn, or 44% of GDP, in 2024. Publicfinancefocus.org

Impact of EU’s €18bn space programmes ‘unknown’

he European Commission has a poor understanding of the value for money provided by its expensive space programmes due to flawed methodology, according to the European Union’s spending watchdog. The European Court of Auditors criticised the commission for using its own methodology to measure the resulting benefits of the €18.3bn spent on space services up to the end of 2020. This methodology largely ignored an OECD handbook on

measuring the space economy, the auditors said in a report, as well as the EU’s existing method of calculating GDP. The EU currently has two major space programmes: Copernicus, which provides data from earth observation satellites, and Galileo, a global satellite navigation and positioning system. The commission failed to measure the benefits either programme had for public entities such as universities and national space agencies, the report said, leading to an incomplete picture.

But the measurements of the two programmes were even inconsistent with each other, the ECA found. “The methodology to calculate the benefits of Galileo differed from that of Copernicus,” the report explained. “Non-monetary benefits, such as the contribution to mitigating climate change or lives rescued thanks to [the technology], had been attributed monetary values, resulting in different assessments for the same benefits. “As a result, the economic

impact on growth and jobs may be underestimated, while the actual overall benefits of the programmes may be overestimated.” Delays to Galileo and insufficiently targeted actions to promote Copernicus data around the EU also contributed to failures, according to the report. “Technologically, the EU has succeeded in becoming a global player in terms of space-based earth observation and navigation services,” said Mihails Kozlovs, ECA member responsible for the paper. “But the EU lacks a comprehensive approach for supporting the uptake of its space services to fully capitalise on the significant public investment made.” Given the €14bn earmarked for the sector in the EU’s 2021-27 spending plans, the ECA said now is a useful juncture to decide what it wants to achieve. “As most measures for 202127 are still on the launchpad, we hope that our audit will mark the countdown to a new set of actions that can effectively help the EU to reap the full benefits of these valuable assets.” Publicfinancefocus.org

MONDAY APRIL 26, 2021

Feature

MONDAY APRIL 26, 2021

My worst forecasting mistake

By Stephen S. Roach

have been in the economic forecasting business for close to 50 years. I got my start in the early 1970s, on the research staff at the Federal Reserve in Washington, DC, before taking my crystal ball to Wall Street for over 30 years. For more than a decade, it has been the ivory tower at Yale – still dabbling in forecasting from time to time but mainly teaching, writing, and speaking. Over that long stretch, my forecasting record has been mixed. There were a couple of memorable calls at the Fed, where I warned of a sharp recession in the mid-1970s and intractable inflation later in the decade. But I look back with the greatest pride on my collaboration with Larry Slifman in building the Fed’s first “black box” forecasting model that I believe is still largely in use today. We worked around the clock for several weeks to program linked computer-based spreadsheets (unheard of back then) as a replacement for the single-iteration monthly exercise previously done manually on a Monroe calculator. Our socalled judgmental approach was the point-counterpoint to the Fed’s renowned large-scale econometric model. My Wall Street efforts were more thematic. I continued to forecast but focused more on bigpicture developments such as corporate debt and restructuring in the late 1980s, the productivity debate of the 1990s, global healing of a post-crisis world in the early 2000s, and then my sweet spot, China and its impact on the global economy. My Wall Street

forecasting record was good enough to maintain job security at Morgan Stanley, although there were several close calls. Attempting to predict interest rates was my least favorite part of the job. With good reason. I remember walking into the old Morgan Stanley investment banking meeting room and seeing a chart of my predecessor’s bond market forecast sitting upside down on the floor. I was determined to avoid that fate. When my favorite bond trader started calling me “dart man,” I made an executive decision to disengage and hire an interestrate strategist. Survival of the fittest, I guess. I should have known better when I came off the bench as a retired forecaster last summer and penned a piece with the now memorable title of “America’s Coming Double Dip.” I argued that the post-pandemic rebound – a record 33% annualized pop in GDP in the third quarter of 2020 following an equally sharp 31% contraction in the second period – was nothing more than an arithmetic yo-yo. But that brilliant insight wasn’t really the point. I went on to stress that the nascent recovery was likely to be aborted by a relapse, as had occurred in eight of the preceding 11 recessions since the end of World War II. A few months later, taking comfort from some economic indicators that had broken my way, I committed the most egregious forecasting sin of all: giving a date. I actually wrote that the coming double-dip was likely to occur by mid-2021. The worst forecasting mistake of my career? It sure seems that way. Rather than the relapse that

I was looking for, there is now widespread talk of an open-ended boom. My well-trained successor team at Morgan Stanley, which has been aggressive and right with their forecast of a V-shaped snapback from the COVID-19 shock, is now calling for a nearly 10% annualized increase in US economic growth in the first half of 2021. That’s not exactly the dip that I, their former team leader, was expecting. Had I still been in that chair, the cold sweats of my job-security nightmares undoubtedly would have returned. Wall Street forecasters quickly learn the rules of culpability. Like bond and stock traders, the “mark-to-market” mindset forces intellectual accountability on economists and, sometimes, even on market strategists. That’s when it pays to have a cogent analytical framework that tells you what went wrong and why. The double-dip call was premised on three considerations: historical precedent, lingering vulnerability, and the likelihood of another shock. The history of earlier business cycles was on my side. And with employment and real output remaining well below pre-pandemic peaks – especially for face-to-face activity in the allimportant services sector – there appeared to be a compelling argument for lingering vulnerability. Lastly, with a new surge of COVID infections in November, December, and early January triggering partial lockdowns in about threefourths of all US states, the case for another shock seemed reasonable. Putting it together, I concluded that it was only a matter of time before another dip

would occur. So, what happened? Basically, the shock turned out to be short-lived – also for three reasons: vaccines, human nature, and Bidenomics. Just as Americans signed up for shots, COVID infection rates plunged to just 26% of their early January peaks. That development, together with a sharply accelerated vaccination trajectory, pointed to soonerthan-expected herd immunity and a prompt end to the pandemic. Second, dismissing worrisome new COVID variants, impatient Americans and their compliant political leaders are breaking with recommended public health restrictions. And, third, the fiscal floodgates have been opened as never before: the $900 billion package of late 2020, followed by the $1.9 trillion American Rescue Plan in March, and now a proposed $2 trillionplus of additional stimulus for infrastructure writ large dubbed the American Jobs Plan. With the end of COVID in sight, all this has turned into a powerful pro-cyclical fiscal stimulus, which, together with ongoing unprecedented monetary accommodation, has made the boom a one-way bet. And those ever-fickle economic indicators that were heading down late last year have now broken to the upside with a vengeance. In the end, the confluence of science, politics, and the indomitable human spirit left my out-of-consensus doubledip call in tatters. It wasn’t my first forecasting mistake, but it is probably the most glaring. Mea culpa is an understatement. Back to the ivory tower.

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Will the Fourth Industrial Revolution lead to large-scale unemployment? CONTINUED FROM PAGE 17 The type of unemployment depends on where the economic system finds itself on the economic supercycle, also called the K-wave pattern or Kondratieff long wave. During the initiation of the upswing (recovery phase), the type of unemployment should be deemed structural as there was a mismatch between the skills required and the proficiency of the labour force. When the economic system entered the prosperity phase, unemployment was reduced, leaving predominantly frictional and voluntary unemployment. As the prosperity phase progressed, the type of unemployment became technological owing to the development of process improvement innovations. At the peak of the wave, the technological innovations reached their full maturity and, in conjunction with the start of the development of new inventions, initiated the recession. In the recession phase and throughout the depression phase, the main type of unemployment is cyclical. Technologically induced loss of employment usually arose in the later stages of recessions. Fears of such losses stemmed from the labour-saving goal of most technological innovations and were typically sparked in periods characterised by radical technological innovation. Empirical studies have been conducted to determine the effects of technological innovation on unemployment. Unfortunately, most studies were undertaken at individual firm level and do not take into consideration the creation of new industries and markets brought about by radical technological innovation. Both pessimists and optimists agree that shortterm unemployment follows in the wake of technological innovation. However, the debate about the long-term impact of technological innovation on employment continues. Taking a closer look at technological innovation Technological innovations have an impact on society, the

economy and unemployment. The innovation continuum ranges from radical to incremental. Radical technological innovation typically creates new industries and markets while incremental technological innovation improves what already exists and is usually labour-saving in nature. Radical or revolutionary technological innovation has a far more significant impact on economic activity, and therefore employment, than its incremental counterpart. We also need to distinguish between product innovation and process innovation. Process innovation improves the efficiency of the production process, or processes supporting the production process. Product innovation improves existing products or creates new products for the market. In general, process innovation is deemed a driver of unemployment because it can replace human workers in the course of optimisation practices. Product innovation, on the other hand, leads to employment growth owing to a growth in the market, at the firm level. Most studies on technological unemployment have used a microeconomic framework to determine its impact on firm level. The firm-level research and development expenditure, which serves as a proxy for technological innovation, can easily be related to a firm’s employment trends. However, a firm level analysis limits the ability to determine the net effect of radical technological innovation on, for example, another firm in another industry, since it affects multiple levels of the economy. Seeing the bigger picture Part of the reason why the impact of technological innovation on employment is still unclear is the fragmentation of the studies that have been undertaken. These studies cover different geographies, levels of investigation (firm, industry, sector, or country) and time frames. Very few studies are performed on a macroeconomic level, partly because it is challenging to find a suitable proxy for technological innovation and to control for codeterministic macroeconomic

factors. This is where a systematic literature review, as an academic research method, is well suited because it can integrate the results from a large number of empirical studies. This study used a longitudinal dataset – 213 data sets from 24 primary studies – to analyse the effect of technological innovation on employment. The analysis is thus done on a larger dataset gathered by multiple researchers, across various firms and industries, and in different sections of the K-wave. While the meta-analysis did not render significant results at a macro level, analyses at firm, process, and product levels delivered significant effect sizes with interesting results. What did the study find? Technological innovation creates employment at firm level. This study supports a positive correlation between technological innovation and employment, but only at firm level. It provides robust scientific evidence to counter some of the negative narratives about technological unemployment. The data required to explore the question on a macro level, and over a significantly longer period, is unfortunately still lacking. It was also found that product innovation has a generally higher positive impact on employment than process innovation. Both product and process technology innovation lead to increased employment at firm level. Despite process innovation having a small effect size, this counters the prevailing belief that technological innovation destroys jobs. Interestingly, the negative impact of process innovation prevalent in the current discourse is not supported by the data. Arguments that this could be unique to the Fourth Industrial Revolution due to automation do not hold true. Previous large-scale technological innovations have also led to process automation, just using different technological innovations. At a firm level, productbased technological innovation enables not only additional employment capabilities but also

strategic market benefits. Having the ability to keep up, or even outpace competitors, allows for better overall performance. It is imperative to manage the transition of the workforce. It is important to invest in the training and education of employees in order for the firm to leverage new product development without having to employ external people. It is recommended that policymakers in countries where unemployment is a concern should consider developing supportive initiatives that could help firms to expand or establish long-term product and process innovation abilities. This includes initiatives to facilitate the transition of the workforce – from an educational and skills development perspective – to coincide with shifts in technology. The combination of these two initiatives would require the collective effort of policymakers, major industry players, and academia. Overall, the key take-outs from this study are: • Technology does not destroy jobs; it shifts employment opportunities. • T e c h n o l o g i c a l development leads to various types of innovation during macro-economic cycles. • Process innovation does NOT lead to job losses as generally believed. In fact, the data shows it small positive effect size on job creation. • Unemployment is also the result of the failure to upskill people for new types of employment opportunities. Will the robots take over your job? Not likely. But you will need to acquire new skills to stay in demand in a digital world. • This article is based on the MBA research assignment of Bertus Buys, with Prof Martin Butler as his research supervisor. The title of the research assignment is The robot ate my job: A longitudinal literature review of the impact of technology on employment in the last 200 years. • Prof Butler lectures in Digital Enterprise Management and Technology Futures at USB. He is also head of Teaching and Learning at USB.

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Markets

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WEEKLY MARKET REVIEW FOR WEEK ENDING APRIL 16, 2021

CONTINUED ON PAGE 20 CONTINUED ON PAGE 20

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WEEKLY MARKET REVIEW FOR WEEK ENDING APRIL 1, 2021