Business 24 Newspaper- July 13, 2020 by Business24 Online

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Guinness Ghana financials reveal large related party payments

Experts call for massive infrastructural investment in Africa’s energy sector Guinness Ghana is the largest beverage company in Ghana

BY NII ANNERQUAYE ABBEY

ver the past five years, the Ghana Revenue Authority has struggled to raise enough domestic revenue – a situation which has pushed the government to resort to borrowing to finance its activities. Even as the tax collector struggles, there have been concerns raised by activist groups like Tax Justice Network, among others, for government to pay attention to transfer pricing, profit shifting, and base erosion activities that reduce domestic revenue mobilisation. While activities like tax evasion are criminal in nature and punishable under the country’s laws, it is emerging that companies are exploiting some loopholes in the country’s laws to make payments to affiliates in jurisdictions with little to zero tax rates, thereby leading to lower tax rates in the country where they make their profits. Business24 has learned that Guinness Ghana Breweries Limited (GGBL) makes large payments to related companies in tax havens, which has the effect of reducing its taxable income in Ghana.

GGBL’s parent company is Diageo, one of the world’s largest drinks companies, which is based in the UK and has a history of disputes with tax authorities in different countries. GGBL, which is listed on the Ghana Stock Exchange, has over the past five years (20152019) generated nearly GH¢3bn in revenues to cement its position as the leading total beverage company in Ghana. Although its annual revenues have grown by more than 56 percent, the company has not always been profitable. It made losses in 2015 and 2016. Last year, the company recorded a profit before tax of GH¢32.5m, down from GH¢35.4m in 2018. GGBL’s publicly available financials indicate that it paid a total of GH¢14m as corporate income tax over the five-year period. However, GGBL also paid a total of GH¢232m in royalties, technical services fees and interest payments over the five years to overseas companies also owned by Diageo, of which GH¢79.6m was technical fees and royalties and the rest was the borrowing costs of a loan to GGBL. MORE ON PG 3

BY BENSON AFFUL

MORE ON PG 13

1,685.06

CORN $/BUSHEL

329.50

COCOA $/METRIC TON

2,384.00

COFFEE $/POUND:

+5.70 ($108.30)

COPPER USD/T OZ.

220.15

SILVER $/TROY OUNCE:

17.07

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EDITORIAL

Energy infrastructure key to continent’s development 1

Wash your hands 2

Cover your cough 3

African countries have been doing all they can to invest heavily in their respective energy sectors. Though any such investment is laudable, the approach offers very little going forward. Country specific investments constrain the possibility of a collective infrastructure where AU member states can benefit from each other to spur development. Experts, speaking during a webinar on “Covid-19 Response Strategies in Africa’s Oil and Gas Industry”, organised by the Africa Centre for Energy Policy (ACEP), advocated for more collaborative investment and diversification of the energy mix of member countries. Benjamin Boakye, the Executive Director of the centre, said this new normal provides opportunities for the continent.

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LIMITED Copyright @ 2019 Business24 Limited. All Rights Reserved. Editorial Team Dominic Andoh: Editor Eugene Kwabena Davis (Head of Parliamentary Business & Commodities) Benson Afful (Head of Energy & Education) Patrick Paintsil (Head of Maritime & Banking) Nii Annerquaye Abbey (Online Editor) Marketing Alexander Lartey Agyemang (Business Development Manager) Ruth Fosua Tetteh (Dept. Business Development Manager) Gifty Mensah (Marketing Manager) Irene Mottey (Sales Manager) Edna Eyram Swatson (Special Projects Manager ) Events Evelyn Kanyoke (Snr. Events Consultant) Finance/Administration Joseph Ackon Bissue (Accountant)

The International Energy Agency (IEA) has raised its annual forecast for crude demand to 92.1m barrels per day, up 400,000 barrels a day from its outlook last month, citing a smaller-than-expected secondquarter decline as lockdowns are eased in many countries. The agency said “the large and, in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside.” All these future projections should make countries works together to harness alternative sources of power to drive local development.

Experts call for massive infrastructural investment in Africa’s energy sector BY BENSON AFFUL

Wear a mask

The Executive Director of Africa Centre for Energy Policy (ACEP), Benjamin Boakye, notes that “For instance, where gas is stranded in Nigeria and it is relevant for consumption in Ivory Coast or Ghana, how do we integrate infrastructure to be optimal at dispatching some of the hydrocarbons to these countries— so that where transportation is becoming difficult we can send it through pipelines. “We need to provide infrastructure to ensure that, going forward, African countries can adapt to a pandemic situation like this in the future,” he said. Crude oil prices have been collapsing since the outbreak of the coronavirus disease, dropping from more than US$60 per barrel before the pandemic to just about US$40 presently.

Energy sector players are pushing for a paradigm shift in the industry post-Covid-19, whereby African countries will embark on massive infrastructural investment to ensure they can weather a future pandemic situation like the world is facing now. Speaking during a webinar on “Covid-19 Response Strategies in Africa’s Oil and Gas Industry”, organised by the Africa Centre for Energy Policy (ACEP), Benjamin Boakye, the Executive Director of the centre, said this new normal provides opportunities for the continent. “For instance, where gas is stranded in Nigeria and it is relevant for consumption in Ivory Coast or Ghana, how do we integrate infrastructure to be optimal at dispatching some of the hydrocarbons to these countries— so that where transportation is becoming difficult we can send it through pipelines. “We need to provide infrastructure to ensure that, going forward, African countries can adapt to a pandemic situation like this in the future,” he said. Panellists on the webinar included

representatives of national oil companies on the continent, who discussed what their various countries were doing to mitigate the impact of the pandemic. Leparan Morintat, Chief Executive Officer of the National Oil Corporation of Kenya, said although the company has had its share of the virus’ impact, management had to think outside the box to adopt measures to ensure the smooth running of the company. “We lobbied the government to classify petroleum companies as essential to enable our workers to move so that our operations would not be halted. We also made about 90 percent of our staff to work from home—so technology became very important to our daily work. “But what we found not to be appropriate that we had to stop is our exploration activity on block 14 T. We actually deferred our operation, so everyone who was working there was recalled back to their family till the virus is controlled in Kenya,” he added. James D. Yamaoh, the acting Chief Operating Officer of the Ghana National Petroleum Corporation, said there is very depressed demand for fossil fuel amid low foreign direct investment and a low

oil price, which has affected the corporation’s revenue. He said the drop in oil revenue has affected the share that government gives to the GNPC, and what was budgeted for them has subsequently been slashed. “In all this we have to renew our emphasis on diversification of energy sources and alternate revenue streams that, going forward, will help us as a national oil company.” Crude oil prices have been collapsing since the outbreak of the coronavirus disease, dropping from more than US$60 per barrel before the pandemic to just about US$40 presently. The International Energy Agency (IEA) has raised its annual forecast for crude demand to 92.1m barrels per day, up 400,000 barrels a day from its outlook last month, citing a smaller-than-expected secondquarter decline as lockdowns are eased in many countries. The agency said “the large and, in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside.”

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Guinness Ghana financials reveal large related party payments (…CONTINUED FROM COVER )

Guinness Ghana also paid a sum of GH¢166m as “human resource and project costs” to member companies of the Diageo group within the period. Related party deals Considering Ireland is the home of Guinness, it is not out of place for Guinness Ghana to source some services from there. However, Ireland is also a tax haven, as is the Netherlands. Diageo Great Britain’s accounts show that it pays a low rate of tax in the UK, while the accounts of the Irish and Dutch subsidiaries are yet to be made public. But the point has to be made that there is no suggestion that such payments to related parties are illegal, as Guinness Ghana may have received approval from the relevant authorities to have made such payments. Nevertheless, concerns have been growing around the world that such payments create a risk of tax avoidance – and Diageo’s own reputation does not help matters. GGBL did not reply to questions about these large payments to related companies overseas. Attempts made by this reporter to reach out to Ghana Revenue Authority to respond to questions relating to profit-shifting and transfer pricing were unsuccessful as messages were not responded to. MNCs’ ‘advantage’ Dr. Alex Ampaabeng, a Fiscal

Policy Specialist with OxfamGhana, said that multinational companies often exploit such transactions to cut their tax bills. (He was not commenting on GGBL’s case in particular). “Multinationals engage in all sorts of creative ways to reduce their tax liability. They tend to organise this through transfer pricing activities (intragroup dealings) such as the payment [between themselves] of technical and management fees, royalties, and loan interest. “The purpose is to ensure that more revenue is realised in lowtax jurisdictions. In most cases, developing countries lose out simply because of their high corporate tax rate, due to the limited taxing opportunities in their economies. This is a common practice, and in the past companies such as Amazon, Starbucks, Google have all been accused of profit shifting through some of these means,” he said. Tax avoidance is a particular concern for African countries which raise nearly 19 percent of their total tax revenues from corporate taxes, compared to only 9 percent in wealthy countries, according to new data from the Organisation for Economic Cooperation and Development which was published earlier this month. A recent Oxfam study of big UK companies’ tax payments from 1998 to 2017 came to the conclusion that Diageo “has consistently paid a very low cash tax rate” on its global profits. The report added:

“Although there could be more than one reason for this, in the case of Diageo there is arguably strong evidence for tax avoidance being a factor.” In addition, the company is reportedly paying an additional £143m in tax in the UK in 2018 after being challenged over some of its internal transactions, reportedly between its companies in the UK and the Netherlands. Same story in Nigeria There seems to a recurring strategy deployed by Diageo, as Guinness Nigeria has also made similar large payments to related companies. Guinness Nigeria paid N80bn to related companies over the last five years for “purchases, promotional support and other services”. (Although the company also earns some money by selling goods and services to other Diageo companies such as Guinness Ghana.) Meanwhile, Guinness Nigeria reported just under N28bn in profits before tax and paid just under N7bn in corporate income tax to Nigeria on these profits in the same period. More scrutiny Commenting on MNCs’ indulgence in related party transactions, a tax consultant and author, Kingsley Hayford, explained that: “The ‘arm’s-length principle’ of transfer pricing states that the amount charged by one related party to another for a given product must be the same as if the parties were not related. An arm’s-length price

for a transaction is therefore what the price of that transaction would be on the open market.” Impact on profitability and tax While such payments are not illegitimate, they contribute to the company’s high operational costs, leading to it declare lower profits in Ghana. Over the course of the five-year period, GGBL posted a cumulative profit before tax of GH¢28.6m. Assuming that over the period, the company had made no payments for technical fees, royalties and interest, this profit would have been in excess of GH¢260m, all things equal. This would have meant more money for the tax collector. Mr. Hayford believes that the tax authorities must endeavour to conduct regular audits of multinational companies and also get full appreciation of market value of key services to be able to determine the extent of evasion and surcharge the MNC. He also recommended regular training of tax authority staff to ensure that newer techniques are not used to evade tax or improve profit shifting. The taxpayer, he added, needs education on the proper reporting of such transactions and serious punishment to companies engaged in profit shifting. Finance Uncovered, a UK-based independent, non-profit journalism organisation, contributed to this story.

Shutting Parliament is shutting the country—Speaker BY EUGENE DAVIS

Concerns about the coronavirus scourge spreading within the House of Parliament, as some staff who have been asked to stay at home continue to frequent the House, have renewed calls for the closure of the legislature. However, the Speaker, Prof. Aaron Mike Oquaye, has insisted the House must sit, despite the pandemic, to ensure the continuous running of the state. In May, it was alleged that two Members of Parliament and 13 Parliamentary Service staff had tested positive for the virus, but this allegation was swiftly denied by the House’s Director of Public Affairs, Ms. Kate Addo. Subsequently, the country has

seen rising infections, with a number of government officials also contracting the virus. Both President Nana Akufo-Addo and Chief Justice Kwasi Anin-Yeboah are currently self-isolating after some of their staff tested positive for the virus. According to the Ghana Health Service, about 400 new positive cases of coronavirus are being recorded every day in the country. On Friday, Member of Parliament (MP) for Kumbugu, Ras Mubarak, enquired on the floor of the House what new measures had been taken for the protection of MPs and staff. Responding, the Speaker said Parliament’s chamber had been fumigated earlier, with a second fumigation exercise scheduled for Monday, July 13.

However, Prof. Oquaye expressed worry about some auxiliary staff of the House who continued to come to work in spite of instructions they had been given to stay at home. “I have been advised that a few people have broken the instruction,” he said. “Some staff insist on coming to the House, and one person said his honourable member told him to come. Honourable members, this is the last warning. If any person engages a staff by way of research assistant and all those people who have been asked to stay at home, that person will be disciplined,” he warned. On calls for the closure of Parliament, the Speaker stated: “Parliament is not like many other places that you can simply and

Speaker Oquaye says the legislature cannot shut down due to Covid-19

easily say we have suspended or closed down. Very soon the Minister for Finance is going to read the supplementary budget. If Parliament doesn’t sit, the country will shut down. There will be no money; it’s as simple as that. For Parliament, let us know we are in a very peculiar situation.”

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Vodafone invests in extensive fibre infrastructure rollout Vodafone Ghana has invested in an extensive fibre infrastructure rollout to provide seamless ultra-high speed fibre-to-thehome (FTTH) connectivity for its customers at home and at work. As part of this initiative, Vodafone has begun a campaign to upgrade customers on its copper-based broadband to its FTTH service for free. The campaign is part of Vodafone’s FTTH rollout strategy, aimed at progressively replacing its copper network nationwide with fibre. Vodafone’s fibre broadband service is already transforming communities in Ghana by enabling businesses and customers to do so much more . It offers far greater reliability and seamless connection across data and voice calls. As part of this campaign, Vodafone is upgrading customers in various communities within the Greater Accra Region onto its fibre broadband service for free. These communities include Abeka, Abelemkpe, Achimota, Adenta, Airport Residential Area, Ashongman, Asylum Down, Avenor, Awudome, Botwe, Bubuashie, Cantonments, Dansoman, Dzorwulu, East Legon, Fadama, Haatso, Industrial Area, Kaneshie, Kanda, Kokomlemle,

Kotobaabi, McCarthy Hill, New Town, Nima, North Kaneshie, Nungua, Osu, Oyarifa, Pig Farm, Ridge, Spintex, Tema Community 18 and 22, Tesano, Teshie, West Legon and Weija. Commenting on the initiative, Patricia Obo-Nai, Chief Executive Officer (CEO) of Vodafone Ghana said: ‘’We have a superior network and continue to invest heavily to make it even better for our consumers as well as businesses. We are excited to provide customers with additional value through our fibre broadband service. Connecting to this service gives customers 10 times the

internet speed they already get on copper. Fibre offers a completely new world of possibilities for businesses and consumers as they get to do so much more online, at the same time. The wider bandwidth makes it possible for more connected devices to be used at the same time, which means you can watch TV, take an online course, play video games, stream, download and many more. Customers in the other regions where our FTTH service is also readily available will be subsequently upgraded.’’ Customers can visit www.fbb. vodafone.com.gh or any Vodafone

Retail Shop to check availability of the service in their community and select a suitable plan from Vodafone’s portfolio of family packages. Vodafone’s family data plans offer broadband internet access for the entire household, unlimited evening and weekend calls to Vodafone numbers from customers’ landline as well as voice minutes and SMS allocations for up to four mobile devices. In addition to these, the customer can share broadband data with up to four (4) mobile devices depending on the selected package.

Collective effort needed to achieve SDGs amidst COVID-19 – NPC The National Population Council has advocated strong collaboration among key stakeholders as key to attaining national transformation and the United Nations Sustainable Development Goals (SDGs) in the era of the coronavirus pandemic. This was contained in a statement signed and copied to the Ghana News Agency in Bolgatanga by Mr Alosibah Akare Azam, the Upper East Regional Population Officer, as part of activities marking this year’s World Population Day. The Day is being celebrated in collaboration with the United Nations Population Fund (UNFPA) on the theme, “Putting the brakes on COVID-19: how to safeguard the health and rights of women and girls now”. The Regional Population Officer said the country, particularly the Upper East Region had made significant gains with regards to reducing maternal deaths and increasing patronage for family planning but the emergence of the pandemic posed a major threat to the efforts made so far. “In the Upper East Region, according to data provided by the Regional Health Directorate, maternal deaths have been reducing since 2017. The region recorded 46 maternal deaths in 2017, 32 in 2018, 30 in 2019, and six in the first

quarter of 2020. “Family planning acceptor rate, on the other hand, has been increasing slightly during the same period: 29.6 in 2017, 29.7 in 2018, 30.6 in 2019 and 37.4 in the first quarter of 2020,” he said. Mr Azam said while healthcare systems were fighting to cope amid the virus, sexual and reproductive health services were being given little attention, and gender-based violence heightened in some communities especially during the

lockdown period. The Population Officer further expressed concern about issues such as deep-rooted cultural beliefs and harmful practices, low male involvement in family planning and poor community involvement in adolescent sexual and reproductive health that were threats to the achievement of the SDGs and called for synergies among stakeholders to review policies and programmes to address the challenges. “Policymakers, stakeholders,

especially community, traditional and religious leaders, women and youth groups and the media and indeed all hands must be on deck to ensure that the transformative goals of zero maternal death, zero unmet need for family planning and zero sexual and gender-based violence and harmful practices are achieved in Upper East Region and Ghana by 2030, the deadline for achieving the Sustainable Development Goals,” he stressed. GNA

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AirtelTigo supports ‘Mask4All’ campaign with 5,000 pieces of face masks Telecom operator AirtelTigo has supported the ‘Mask4All’ initiative by the Coalition of Event Managers and Suppliers aimed at augmenting government’s efforts to curb the spread of the COVID-19 pandemic by distributing free face masks to the underprivileged. Disclosing the company’s support during a courtesy call by the Executives of the Coalition at the Company’s Head Office in Accra, The Chief Executive Officer of AirtelTigo, Murthy Chaganti, pledged his company’s support for the coalition during a courtesy call on him by members of the group. He said: “Covid-19 has changed the world as we know it. It has also made us realize that we have to win this battle against the virus together.” Research from leading health authorities indicates that a face mask is the simplest yet most important tool for preventing the spread of the virus. “We salute the initiative from the Coalition of Event Managers and Suppliers to give masks to

the underprivileged. AirtelTigo requests all to join hands in this noble initiative and help the underprivileged get access to masks that can prevent the spread of the virus,” Chaganti said. He remarked that the company will donate 5,000 pieces of branded AirtelTigo mask for the underprivileged in the society, adding that face masks combined with other preventive measures, such as frequent hand-washing and social distancing, will help slow the spread of the virus. The spokesperson for the Coalition, Kabutey Ocansey, said: “AirtelTigo has just demonstrated its commitment to the wellbeing of the people of Ghana in supporting the Mask4All initiative. We sincerely appreciate their contribution of 5,000 masks and entreat other Corporate Institutions and individuals to follow their worthy example as protecting the vulnerable among us against COVID19 is protecting ourselves.”

ICT emerges as major driver of Ghanaian economy in quarter one of 2020 The ICT sub sector has been identified as the major driver of growth in the first quarter of 2020, expanding by 77 per cent year-on-year. This was revealed by economists at Standard Bank in their June 2020 Flash Note of the African Markets Revealed (AMR) report. According to the note, the service sector influenced largely by the expansions of the ICT subsector, accounted for the growth of the Ghanaian economy in the first three months. “The Ghanaian economy grew by 4.9% year-on-year in Q1:20, which was higher than our expectation of 4.1% year-on-year. Interestingly, the services sector was the major driver of growth during this period; accounting for 73% of the expansion. The ICT sub sector was a major driver of growth in Q1:20, expanding by 77% year-on-year despite only accounting for around 3% of the economy”, the report noted. The report further noted that the expansion of the ICT sub-sector is expected to go on unimpeded due to the level of data penetration in the country coupled with the demands of the COVID-19 pandemic. “Ghana has the second highest data penetration rate in SubSaharan Africa and the fastest growing mobile money market on the continent. The tech start-up scene is also growing rapidly in the country. Given the limited impact on

this sector during the pandemic, we expect growth in the ICT sector to remain unhindered in subsequent quarters”, the report said. Most sub-sectors of the service sector have fortified their digital platforms to mitigate the effects of the COVID-19 pandemic and meet the expectations of their customers. Banks especially have been at the forefront of this digital drive with innovative online platforms to make banking seamless. Stanbic Bank, for instance, introduced the Enhanced Virtual

Assistance (EVA) platform to improve its customers digital experience, leading to an ultimate customer satisfaction without the risk of exposure to the corona virus. EVA is a banking chat robot (chatbot) that is powered by Artificial Intelligence. It provides account opening, profile management services and general banking enquiries. Through the platform, potential customers can open accounts instantly on social media channels such as Facebook and WhatsApp. These and many more innovations in the provision of essential services amid the COVID-19

pandemic is what according to the AMR report is driving the growth of the economy. The African Markets Report is a monthly report issued by the Standard Bank Group, parent company of Stanbic Bank Ghana and focuses on the economic and financial outlook of African countries. The report also reviews current economic situations and makes short to mediumterm predictions about African economies.

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Future of Banking

The modern way of banking

BY: EBENEZER ASUMANG (CGIA)

“Banks are to the economy what the heart is to the human body. They cycle necessary capital through the whole, and they are barely noticed until pressure, necessity, or crises.” Hendrith Vanlon Smith Jr, Author of Essays on the Banking Industry. Chris Skinner, chair of the Financial Services Club, perfectly captured the change between 20th century banking and 21st century banking when he said, “we built an industry on the physical distribution of paper in a localized world, and we’re now having to get to grips with the digital distribution of data in a networked world.” Banking has metamorphosed over many years from the first prototypes of 2000 BC when merchants of the world made grain loans to farmers and traders who carried goods between cities, towns and villages. Many people still believed banking had not changed significantly until perhaps onset of the digital revolution which is still permeating into all aspects of the industry. Economist William Scott`s book on banking outlined four (4) main services that commercial banks performed including: 1. The safekeeping of money and other valuables 2. The making of payments 3. The making of loans 4. The making of investments The implications of the changes in banking are enormous. As proof, let’s look at each of the four-services William Scott outlined in 1914 and how they’ve changed now.

1. The safekeeping of money and other valuables The method for safekeeping in the 21st century looks almost nothing like traditional methods. Money is mostly just a handful of digits on a network, and the safekeeping of that data doesn’t require big old physical vaults. It just requires secure digital storage space, which can be housed outside of a bank branch entirely. In addition, the need for a bank to store “other valuables” is pretty much non-existent. Enormous percentage of safety boxes are empty, and new branches frequently don’t even offer this service. Documents are stored digitally or in a safe at home without the monthly charges that come with a safety deposit box. Millennials have a hard time understanding the value of this service. 2. The making of payments Something similar is happening with payments. Square Cash, an app that allows users to send payments via email or phone, has added the ability to send cash via text message. In other words, what technology writer Walt Mossberg said is “the quickest, simplest method I’ve seen for sending money from one person to another” just got simpler. And with other companies like PayPal, Dwolla and Venmo at the forefront of the space, payments are sure to be untethered from banks more and more frequently. 3. The making of loans Generally speaking, this area of banking is largely the same as it was back in 1914. Lending is certainly still the stronghold of banks. With the advent of the Internet it’s easier than ever for people

to originate loans with a diverse set of individuals, all without the intermediation of a bank. Even with intermediation of banks in many circumstances, the “fast-tracking” of processing and the “nonexistent” of requirements make it simple for individuals to enjoy the benefits associated and with full access. In advanced economies, the rise of lenders including Prosper, Lending Club and Fundera is evidence that person-to-person lending works. 4. The making on Investments The popularity of automated investing has started to render active fund managers irrelevant. An article from the Wall Street Journal puts it bluntly: “Active fund management is outmoded, and a lot of stock pickers are going to have to find something else to do for a living.” The article continued: “The debate about whether you should hire an ‘active’ fund manager who tries to beat the market by buying the best stocks and avoiding the worst or a ‘passive’ index fund that simply matches the market by holding all the stocks is over.” Sooner or later, investments will trend toward automation. It’s cheaper and in pretty much all cases, the returns are better over the long run. Conclusion: Some bankers might look at that list and feel assured that nothing is different today. And in a sense, they’re right. The services outlined by Scott are pretty much the same in modern banking. But the methods for performing each of these services has changed and as a result everything has changed. In short, the 20th century was about paper and locality while the 21st century

is about data and networks. Bankers should ask themselves if they’re tied too much to 20th century methods in a 21st century world. It should be clear that the digital age won’t consist of banking as usual. The services that banks offered in 1914 when William Scott wrote Banking will continue to exist of course, but nothing will be the same in terms of methods. In the age of data and networks, the smartphone (not the branch) will eventually become the main banking hub and that will spell big changes for traditional banking institutions. Only banks that understand this and invest in 21st century technology will lead the digital banking revolution.

Ebenezer ASUMANG (CGIA) worked extensively in mainstream Banking & NBFIs. He is a Chartered member of the CGIA Institute, USA, a Google Certified Digital Marketer and an Author. www.ebenezerasumang.com info@ebenezerasumang.com 024 233 9145 LinkedIn – Ebenezer Asumang Facebook – Ebenezer Asare Asumang Twitter - @kwabenasumang Instagram – eben_asumang

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COVID–19 and liquidity challenges: A call for re-directing credit risk assessment BY: KENNETH OWUSU ASANTE AMPONSAH, CQRM

The Covid-19 outbreak has had a sharp negative impact on economies worldwide. On 24th June, 2020, the IMF projected a contraction in global real GDP of 4.9 percent in 2020. Fundamentals of some economic sectors and businesses have already failed and many more expected to follow a similar trend. Income levels have dropped and indebted household and sectors have been placed in positions where they might never be able to repay their debts in full - simply cash trapped. For the majority of borrowers, the probability of default has increased. Banks and financial service providers have been fighting to keep the economy active, particularly the SME sector, which is the engine of the economy running. The challenge to keeping millions of small businesses in operation is premised on the ability of the financial services sector to provide large amounts of liquidity to these businesses – as and when required. To this course, the Bank of Ghana reduced the reserve ratio by 2% and expects Banks to grant more credit with the extra liquidity released. However, a decision has to be made to strike the correct balance between customers or sectors that have already suffered business decline and those that are potential winners during this pandemic. This is not easy when the time window to provide this liquidity is very short, even less for many SMEs just to keep them afloat. The question then becomes if the industry players have the software and algorithms required to calculate pricing and valuations of collateral and ultimately provide loans and advances within the time frame Covid-19 has negatively affected the value of the data used in rating systems – making them almost unreliable. For instance, all the data relied upon to test a business’ credit risk becomes obsolete due to the immediate stress caused by the pandemic. An attempt to rate SMEs with balance sheet data before the crisis as well as the past 3 months’ data obtainable from the Credit Bureaus would no longer be relevant as it will fail to provide an accurate assessment of a business’ current situation. It goes without saying that in most cases, SMEs have generally prioritized salaries, paid their key suppliers, and delayed all the other payments including debt obligations.

Traditional scoring systems would interpret this negatively and provide these businesses with automatic downgrades, increased cost of funding and reduced access to new credit. Consequently, it is almost becoming difficult to distinguish the viable businesses from the façade of SMEs and this would negatively impact plans for economic recovery. The dependence on the capabilities of the financial sector’s risk management functions is in part, the answer to this ‘wahala.’ All banks, to an extent, use tools to calculate the credit risk of borrowers. These tools and systems were not designed to take into consideration “Acts of God” on the scale of this pandemic when originating loans, overdrafts, and other advances. Instead of manually gathering information from a variety of sources and submitting to a potential lender, can consumers permit lenders to get what they need directly and serve them in time? Instead of SMEs submitting reports that could be inaccurate by the time lenders see them, can Banks pull all relevant data from the borrowers’ bank and accounting system? Fortunately, there is a solution offered by new technologies such as open banking. Open banking would enable real-time, more personalized data on which to base risk and credit scoring. Open banking is the practice of sharing financial information electronically, securely, and only under conditions that customers approve of. The open skies agreements which were signed by countries and regions, allowed free movement of airlines across the world. With open-skies came increased competition that led to inefficient airlines going out of business or getting sold, consumer ticket prices decreasing and greater efficiency and choice for the consumer, all leading to a

surge in demand for air travel. The financial services industry stands at the same juncture today. Shared data can provide risk management teams with the ability to score a company on its capacity to generate revenue. A business’ liquidity and transaction data can be measured by the transactions in its bank account everywhere. It is this data that is the most relevant and important now. Financial transaction data, provided by open banking, would make it possible to check, in real time, the presence of liquidity in a bank account and its evolution up to the present time. With algorithms categorizing data across a number of areas – salary, utilities, rent, and so on. It is then possible to analyze expenses and cash outflows. This would produce a ‘super score’ that could look at high frequency data points as well as lower frequencies such as credit behaviour or balance sheet scores. The pandemic is speeding the need for more comprehensive, open data, scoring models for credit risk assessment. A firm interplay is immediately required between National Identification Authority, Bank of Ghana, Telecommunication Companies, Credit Reference Bureaus, and Fintechs. Collaborating to compete among all major players should be the new mantra if efficient and effective lending to viable sectors and households can be achieved. Open banking is already enabling these changes and the credit risk management function is being transformed as a result. OCBC Bank of Singapore became the first bank in South East Asia to launch an open API (Application Programming Interface) platform which enables open banking services. In the Philippines, Union Bank has done the same, and in Japan, Mitsubishi UFJ Financial Group and Mizuho have committed to this structure.

In the US, where open banking regulation is not imminent, banks like JP Morgan, Wells Fargo and Citi have recently launched open API platforms. The European Payment Services Directive (known as PSD2), to which all banks in Europe complied with by late 2019, removes the banks’ monopoly on information relating to customer accounts, and allows any firm to provide financial services to customers. Currently, due to the COVID – 19 pandemic mobile phone subscribers are allowed to use their existing mobile phone registration details to on-board for minimum KYC account. This is a signal of what is to come. Most Banks in Ghana need to reconsider or reassess the impending restructuring in financial services in Ghana with the dawn of fintech. Utilizing the advantages of open banking however, should not mean discounting the essence of strong laws and regulations for privacy, security, and user rights. Hence, there is the need for the Bank of Ghana to also establish clear institutional mandates and accountability while maintaining independent oversight to enforce legal and trust frameworks. As we head towards transition and recovery, it is clear that traditional credit risk management and scoring models should be re-assessed through enabled solutions that will benefit us all.

MONDAY JULY 13, 2020

Bankng

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GCB proposes GHc0.2 dividend per share for 2019 The Board of Directors of GCB Bank Ghana Limited have recommended the payment of GH¢0.2 as dividend per share to shareholders for the 2019 financial year, according to a statement it issued to the Ghana Stock Exchange. All shareholders registered in the books of the bank as at July 17 will qualify for the dividend, with the register to be closed by July 20. The ex-dividend date has been set as Wednesday, July 15, 2020, which means only investors purchasing GCB shares before that date will be entitled to the final dividend. Final dividend will be paid by Friday, August 14. The proposed amount will be announced to shareholders at the bank’s 26th annual general meeting which will be held virtually on 30th July 2020 and streamed live online via https:// gcbbankagm.com, and on its social media handles Facebook, Instagram, YouTube and Twitter as well as GTV.

GCB Bank is among the banks that have been able to withstand the shocks of the coronavirus pandemic with impressive firstquarter performance recording significant growth in all key indicators. Profit for the period was up

by 30percent from the same period 2019 figure of GH¢323m to GH¢421m in 2020. Revenue for the quarter grew marginally from GH¢1.3bn last year to GH¢1.6bn whilst its assets surged to GH¢12.4bn from the previous GH¢10.6bn that was

recorded in 2019. The bank was also able to mobilise GH¢9.3billion from its customer amid the torrid conditions, up from the GH¢8bn that was accrued for quarter-one 2019.

Camelot’s profit by four- Stanchart to hold virtual fold in 2019 AGM July 29

Mrs. Elizabeth Joyce Villars, Board Chairperson of Camelot Mrs. Elizabeth Joyce Villars, Board Chairperson of Camelot Publicly listed security printing, business forms manufacturing, and design facility, Camelot Ghana Limited, grew its profit for the 2019 financial year by an impressive 451percent over what was recorded in the previous year. The company registered an increased profit figure of GH¢169,688 from the previous GH¢30,802 recorded in same period 2018 whilst its assets grew from GH¢5.3m to GH¢9m between the periods. Other income realised from the transfer from its credit reserves almost doubled profit before tax, the company stated. Despite the sterling achievement, there will be no dividend payment for the period under review as a

well-advised decision from its board of directors. “This will enable our company position itself financially to confront the uncertainties envisaged in 2020,” Board Chairperson, Mrs. Elizabeth Joyce Villars, said in the company’s 2019 annual report, ahead of its virtual annual general meeting scheduled for July 28 The company has also taken advantage of the government’s flagship One District One Factory programme in a strategic product diversification move that will facilitate its transition to new product lines. “As projected, this investment will propel our company to higher growth and profitability in the niche and secure market of flexo printing,” Mrs. Villars added.

This year’s annual general meeting of the Standard Chartered Bank Ghana Limited will be held virtually and streamed live from its head office on Wednesday July 29, 2020, according to statement issued to the Ghana Stock Exchange. The bank joins a tall list of banks that have announced to engage their shareholders digitally amid the pandemic with the ban on public gatherings exceeding 100 persons still in force. Key among the resolutions to be passed at the meeting will be the name change to Standard Chartered Bank Ghana Plc in compliance with Section 21 (1) (b)

and Section 21 (15) of the Companies Act, 2019 (Act 992). The bank will also be seeking shareholders’ approval for the amendment of Rule 126 of the company’s constitution to allow the bank to pay interest on unclaimed dividends where mandated to do so by law and for such interest to be calculated in line with its policy. It will also request that Rule 127 of its constitution be amended to allow any dividend unclaimed for such period as may be prescribed under any applicable law to be dealt with by the bank in accordance with the provisions of the law relating to unclaimed dividends.

MONDAY JULY 13, 2020

Automobile

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Honda offers special pricing for Honda HR-V and City range The public can now own the state-of-the-art all new Honda HR-V and City range of vehicles for between 10 and 20 percent less and enjoy other discounts from the local dealers, The Honda Place Ghana Limited. Aside the heavily discounted price, The Honda Place, is also offering HR-V and City buyers free vehicle registration, one year free servicing or 20,000 kmswhichever comes first, a 10% discount of body parts & labour and assist prospective buyers with various finance schemes for credit purchase. Honda HR-V in focus The all new Honda HR-V, with a 1.8litre, 16-valve SOHC i-VTEC petrol engine, is one of the spacious mini SUVs on the market today. Its headroom --front/rear— measuring some 37.6 in and 38.3 in represents one of the most spacious on the market today. This model is ideal for drivers and passengers who crave more leg room to be comfortable while driving or commuting from one side of the city to the other or travelling between regions. The legroom --front/rear—measures 41.2 in and 39.3 in respectively. Given the heavy traffic that builds

up on major roads in the capital, where drivers and commuters can spend as much as two hours driving to the city centre, Honda HR-V’s legroom makes it the idea mini SUV for this terrain. The bold new HR-V delivers a multi-diemntional driving experince that’s small on compromise and big on fun. The Honda HR-V dashboard is designed for the delighful user experience of the driver and for the entertainment of passengers. Its multifuction stering wheel puts the audio and cruise control functions and the fingertips of drivers. A 6.8 inch touchscreen display audio with a USB audio port adds to the entertainment feel. Feel free to play your favourite Ghanaian song while driving. The dashboard includes the very latest technology that allows for automatic climate control and electrically adjustable door mirrors Indeed, the world’s best selling small SUV blends the beautiful lines of coupé with the practical space and toughness of an SUV. Its experior is aesthetic superior to competing models on the market. With taillights which has integrated LED Light bars give the HR-V a perculiar sporty look. It has a day time running lights that

adds to the beauty of this strong but very elagant vehicle. Loading or packing relaively large shopping bags, bicycles and other stuff after shopping or for a road trip is made easy by the ingenious 60:40 split seats that can dive down to the floor, making a large space truly vast. The seats can also be tip up to allow for sideways loading of objects such as bucycles. The Honda HR-V is the ideal mini SUV given its engine capacity, fuel economy, spacious interior, beautiful exterior and affordable price.

MONDAY JULY 13, 2020

Feature

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How women can power the green transition BYIRENE GINER-REICHL

he shift to sustainable energy gives societies a chance to tackle systemic gender discrimination. Fortunately, governments, firms, universities, and NGOs increasingly recognize the need to make the green transition more diverse and inclusive. The world needs to shift from the current fossil-fuel-based energy system to carbon neutrality. Most obviously, this will require countries to roll out renewable energy and integrate it into the electricity grid, boost energy efficiency, upgrade infrastructure, and refine the governance of electricity and energy markets. Less apparent, success will require that women are able to contribute to the transition on an equal footing with men. Energy transitions will differ depending on countries’ development priorities, the proportion of the population with access to power grids, the current energy mix, and projected demand. Some transitions may involve simply retrofitting old, unsustainable assets in order to reduce carbon dioxide emissions, while others may be part of a multifaceted development strategy for societal transformation, including gender equality and inclusion. But all countries should commit to creating jobs and leaving no one behind. Although the available data vary considerably, women probably represent – at most – one-third of the global sustainable energy workforce. And their share typically is much lower in the socalled STEM professions (science, technology, engineering, and mathematics) and in executive positions. Unsurprisingly, awareness of gender dynamics in the workplace also tends to be low. Moreover, policies that could help redress the current imbalance in the sector – such as flextime, parental leave, return-to-work schemes, bias-free recruitment and promotion, and genderbalanced boards and panels – are scarce. These barriers to the full participation of women are, first and foremost, an infringement of human rights, in particular women’s right to full and equal participation in the life of their communities. Governments therefore have a duty to eliminate discrimination against women and establish frameworks to help empower them and enable their advancement. In addition, the under-

representation of women deprives energy transitions of diverse talent, and thus impedes the transformational change required to achieve global climate targets and the United Nations Sustainable Development Goals. Conversely, the equal participation of women in the workforce is demonstrably good for business, the economy, social development, and the environment. These findings are not new. In its 2012 World Development Report, for example, the World Bank emphasized that gender equality not only is a core development objective in its own right, but also enhances an economy’s productivity and improves future generations’ prospects. And during the 2009 global economic downturn, a global survey by the consulting firm McKinsey & Company concluded that women leaders represent “a competitive edge in and after the crisis.” Likewise, having a higher percentage of women in decision-making positions increases innovation and profitability, decreases risk, and enhances sustainability practices. Green-energy transitions provide opportunities to tackle systemic gender discrimination and enable societies to reap the benefits of a more diverse workforce. That is partly because sustainable energy is a new and fast-growing field: the number of people employed worldwide in the sector is expected to increase from an estimated 11 million today to over 42 million in 2050. In addition, the scope of the transitions calls for a diverse range of skills, including civil engineering, environmental science, marketing, teaching, and

community action. The good news is that governments, firms, and universities around the world are implementing a wide variety of strategies to make the green transition more diverse and inclusive. For example, Rwanda’s 2003 constitution sets a mandatory minimum female quota of 30% for all decisionmaking bodies, including those related to sustainable development and energy. The mandatory quota sent a powerful signal to society and was more than doubly filled in both the 2013 and 2018 parliamentary elections, in which women won more than 60% of the seats. In the business world, Turkish firm Polat Energy recently took out a $44 million “gender loan” to finance the construction of Turkey’s largest wind farm. The loan terms will improve if the company demonstrates further progress toward gender equality relative to an initial baseline. Elsewhere in the energy sector, Wind Denmark has gone beyond the country’s already generous parental leave policy for both women and men, while ScottishPower is championing a “return to work” program. Likewise, wind turbine manufacturer Siemens Gamesa promotes flexible work arrangements and transparent pay-gap analysis, leading the United Kingdom’s government to certify recently that the company’s female employees in the UK earn 95% of what their male colleagues do. Academic institutions and NGOs are also playing their part. The Australian university UNSW

Sydney has reported a 78% increase in female first-year engineering enrollments since it launched its Women in Engineering Program in 2014. And the Global Women’s Network for the Energy Transition, an international NGO that offers networking, mentoring, and training programs for women working in the energy sector, recently published a study on how to make sustainable energy more gender-diverse. Energy transitions are essential to limit global warming and build a more sustainable future. Achieving them is in everyone’s interest. As countries everywhere embark on “building back better” after COVID-19, energy transition strategies should be a key element in any stimulus package. And they will be far more likely to succeed if women play a central role.

Irene Giner-Reichl, the Austrian ambassador to Brazil and Suriname, is President of the Global Forum on Sustainable Energy, co-founder and President of the Global Women’s Network for the Energy Transition, and Vice-President of REN21. Copyright: www.project-syndicate.org/

MONDAY JULY 13, 2020

Insurance

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Six possible reasons your Insurance Claim delayed or didn’t get paid (Part II Of II) SAMUEL KOFI OHENE Claims management and payment for an insurance firm is at the heart of the business. It is the reason insurance firms are required to hold reserves and capital in excess of the operations cost in order to honour insurance claims as and when they fall due. Many have argued that the best metric to measure the efficiency of an insurance firm will be its ability to settle legitimate claims as quickly as practicable. I agree to this school of thought, however, certain delays in claim payment arise and it casts a doubt on the legitimacy of the insurance business and the industry as a whole. In the first part of this article, three key reasons driving delays or repudiations in claim payment were mentioned. Reasons such as fraudulent claims and clients desiring to swindle insurance firms were purely the act of insureds. Other reasons such as policy exceptions, conditions and terms or a possible misspelling can be a gap in communication or understanding between the insurer/ broker and the insured. This could be deliberate or unintentional. The final reason mentioned in the part I had to do with non-disclosure or misrepresentation of material information on the insureds part. Insurance is a contract that thrives on utmost good faith, on both parties part. Withholding information deemed vital to an insurance firm’s decision may result in a claim repudiation when discovered. The information required on insurance proposal forms are deemed necessary because it helps determine whether or not to accept your risk, what price to rate it at and the relevant terms, conditions and exceptions applicable. Misrepresenting or not disclosing information on a proposal form can render a claim void upon investigation. In part II, I’ll mention three more popular reasons claims can be delayed or not paid at all. These reasons may not necessarily be technical, that is, directly related to the insurance contract. These reasons are caused by external factors and often driven by human behavior as well. 1. Company Culture To be honest, a number of insurance firms delay claim payments simply because they have a poor corporate culture of paying claims and on time. One may find smiling faces at the frontline (sales, front office etc), but the faces you encounter when processing your claim may not look as friendly as the faces you first saw when purchasing the policy. If there

is any portion of the insurance value chain that needs the friendliest of faces, I believe it should be at the point of claims. Claimants are mostly distraught about losing something of value, either a life or a property. The emotional peace of mind they encounter at the customer touch points when processing their claim is a non-financial benefit they will remember for a long time. Companies notorious for delays may often be as a result of winding bureaucratic procedures involved in claim reporting, through investigation to payment. For a number of companies, each claim is scrutinized to the latter. Even though the method of scrutiny ought to correlate with the amount involved, the type of policy and case in point, some may treat all claims as possible fraud until proven otherwise. This may actually increase claim processing cost and time for some firms sometimes even beyond the claim amount to be paid. The insurance regulators often have strict deadlines and guides as to maximum number of days to process and pay a claim after all relevant documents have been submitted. Competition in the industry has become key in making firms adopt a “customercentric” approach to claim payments and with speed. Robust underwriting at the point of sale has helped companies minimize time spent in investigating claims when turned in as well. These and more are helping to turn the wheels of unhealthy culture that exists in few companies with respect to claim payment. 2. Financial Constraints Claims are paid with funds, and as surprising as it may seem, insurance companies are not always as rich as some assume. A popular question many ask insurers in the industry is “What does the insurance firm do with all the premiums of clients who do not come for claims?” This notion gives many the impression insurance companies are very rich. Unfortunately a number of reasons can cause an insurance firm to be financially unstable and it can ripple down to affect claim payments as well. Poor investment management or asset-liability matching, uncontrolled management expenses, underwriting flaws resulting in writing bad risks, an actuarial related issue with policy pricing, or a systematic financial crises or major catastrophe can cause financial instability. The reason could be temporary, such as a liquidity issue, or more long term which affects the insurance firm’s solvency. A long lasting liquidity issue develops into a chronic financial issue which ultimately can make the insurance firm insolvent.

In the case of short term liquidity, there simply isn’t enough funds to meet the influx or quantum of claims that have come in within a period. It becomes close to impossible to pay all claims on the claims desk at once in this case and some claims may have to be deferred or scheduled for payment as and when assets are liquidated into cash or funds are realized to payout claimants. In the case of insolvency, the situation may become dire even as claimants get exasperated and may further drag the firm to court. These financial situations (whether company driven or external event driven) creates a situation of being asked to run with your hands tied at your back, a very difficult situation for an insurance firm with respect to claim payment. Insurance regulators however keep a close eye on the financial dealings of the insurance industry with appropriate risk management practices geared towards making the firms financially sound. This ensures clients are protected as well as the insurance firm with all of its stakeholders.

insurance firms will want to settle such disputes outside court since the firms goodwill is at stake. It does the firm no good for its brand to be mentioned in the courts too often. The claimant may file a complaint to the Insurance Regulator as well due to the dispute resulting from the decision or treatment of the insurance firm. As earlier mentioned, ideally, any insurance firm will want to avoid all such disputes sent either to the courts or to the Regulator. Claims which are disputed that end in the Regulators office or the law courts may take longer than average time to settle and hence becomes another reason your claim may end up being delayed. Do share your stories and real life situations if you have encountered any of the issues raised above as an insurer or an insured via my email provided below. Real life situations are often the best examples to learn from and to educate others.

1. Litigation Issues Insurance is a legal contract, backed by the laws of the state. The legal backing of insurance is not only due to compulsory insurance set in place to protect the vulnerable (such as liability insurance for motorists on the road). Like all contracts, disputes may arise when one party is not satisfied with the other on an issue. These issues may be settled outside of court, or may end up in court for settlement on the case. Litigation is one way an insurance claim may be delayed or not paid at all per the verdict of the court. Under normal circumstance, an insurance firm after assessing all relevant information pertaining to a claim will arrive at a decision, to repudiate or to honour the claim (at a certain sum). The claimant being presented with the decision may either accept it, or dispute it. Most (if not all)

Samuel Kofi Ohene is a professional risk analyst in the Insurance Industry, both General and Life Insurance. His specialties currently focus on actuarial and statistical techniques in financial and operations risk management. He has a background in insurance underwriting and claims management as well. For comments, contact him via email, sohene15@gmail.com

MONDAY JULY 13, 2020

Aviation

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Traveler Survey Reveals COVID-19 Concerns

he International Air Transport Association (IATA) released public opinion research showing the willingness to travel being tempered by concerns over the risks of catching COVID-19 during air travel. The industry’s re-start plans address passenger’s main concerns. Travelers are taking precautions to protect themselves from COVID-19 with 77% saying that they are washing their hands more frequently, 71% avoiding large meetings and 67% having worn a facemask in public. Some 58% of those surveyed said that they have avoided air travel, with 33% suggesting that they will avoid travel in future as a continued measure to reduce the risk of catching COVID-19. When asked to rank the top three measures that would make them feel safer, 37% cited COVID-19 screening at departure airports, 34% agreed with mandatory wearing of facemasks and 33% noted social distancing measures on aircraft. Passengers themselves displayed a willingness to play a role in keeping flying safe by: 1.Undergoing temperature checks (43%) 2.Wearing a mask during travel (42%) 3.Checking-in online to minimize interactions at the airport (40%) 4.Taking a COVID-19 test prior to travel (39%) 5.Sanitizing their seating area (38%). “People are clearly concerned about COVID-19 when traveling. But they are also reassured by the practical measures being introduced by governments and the industry under the Take-off guidance developed by the International Civil Aviation Organization (ICAO). These include mask-wearing, the introduction of contactless technology in travel processes and screening measures. This tells us that we are on the right track to restoring confidence in travel. But it will take time. To have maximum effect, it is critical that governments deploy these measures globally,” said Alexandre de Juniac, IATA’s Director General and CEO. The survey also pointed to some key issues in restoring confidence where the industry will need to communicate the facts more effectively. Travelers’ top on board concerns include: Cabin air quality: Travelers have not made up their minds about cabin air quality. While 57% of travelers believed that air quality is dangerous, 55% also responded that they understood that it was as clean

as the air in a hospital operating theatre. The quality of air in modern aircraft is, in fact, far better than most other enclosed environments. It is exchanged with fresh air every 2-3 minutes, whereas the air in most office buildings is exchanged 2-3 times per hour. Moreover, High Efficiency Particulate Air (HEPA) filters capture well over 99.999% of germs, including the Coronavirus. Social distancing: Governments advise to wear a mask (or face covering) when social distancing is not possible, as is the case with public transport. This aligns with the expert ICAO Take-off guidance. Additionally, while passengers are sitting in close proximity on board, the cabin air flow is from ceiling to floor. This limits the potential spread of viruses or germs backwards or forwards in the cabin. There are several other natural barriers to the transmission of the virus on board, including the forward orientation of passengers (limiting face-to-face interaction), seatbacks that limit transmission from row-to-row, and the limited movement of passengers in the cabin. There is no requirement for social distancing measures on board the aircraft from highly respected aviation authorities such as the US Federal Aviation Administration, the European Union Aviation Safety Agency or ICAO. “It is no secret that passengers have concerns about the risk of transmission onboard. They should be reassured by the many builtin anti-virus features of the air flow system and forward-facing seating arrangements. On top of this, screening before flight and facial coverings are among the extra layers of protection that are being implemented by industry and

governments on the advice of ICAO and the World Health Organization. No environment is risk free, but few environments are as controlled as the aircraft cabin. And we need to make sure that travelers understand that,” said de Juniac. No Quick Solution While nearly half of those surveyed (45%) indicated the they would return to travel within a few months of the pandemic subsiding, this is a significant drop from the 61% recorded in the April survey. Overall, the survey results demonstrate that people have not lost their taste for travel, but there are blockers to returning to pre-crisis levels of travel: A majority of travelers surveyed plan to return to travel to see family and friends (57%), to vacation (56%) or to do business (55%) as soon as possible after the pandemic subsides; 66% said that they would travel less for leisure and business in the post-pandemic world; and 64% indicated that they would postpone travel until economic factors improved (personal and broader). “This crisis could have a very long shadow. Passengers are telling us that it will take time before they return to their old travel habits. Many airlines are not planning for demand to return to 2019 levels until 2023 or 2024. Numerous governments have responded with financial lifelines and other relief measures at the height of the crisis. As some parts of the world are starting the long road to recovery, it is critical that governments stay engaged. Continued relief measures like alleviation from use-it-or-lose it slot rules, reduced taxes or cost reduction measures will be critical for some time to come,” said de Juniac.

One of the biggest blockers to industry recovery is quarantine. Some 85% of travelers reported concern for being quarantined while traveling, a similar level of concern to those reporting general concern for catching the virus when traveling (84%). And, among the measures that travelers were willing to take in adapting to travel during or after the pandemic, only 17% reported that they were will willing to undergo quarantine. “Quarantine is a demand killer. Keeping borders closed prolongs the pain by causing economic hardship well beyond airlines. If governments want to re-start their tourism sectors, alternative risk-based measures are needed. Many are built into the ICAO Take-off guidelines, like health screening before departure to discourage symptomatic people from traveling. Airlines are helping this effort with flexible rebooking policies. In these last days we have seen the UK and the EU announce risk-based calculations for opening their borders. And other countries have chosen testing options. Where there is a will to open up, there are ways to do it responsibly,” said de Juniac. The Survey The 11-country survey, which was conducted during the first week of June 2020, assessed traveler concerns during the pandemic and the potential timelines for their return to travel. This is the third wave of the survey, with previous waves conducted at the end of February and the beginning of April. All those surveyed had taken at least one flight since July 2019

MONDAY JULY 13, 2020

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African Economy

New report outlines path to accelerate quality infrastructure in Africa By 2050, Africa will be home to 2.5 billion people, almost twice as many as today. In the face of this formidable transformation, the continent urgently needs to accelerate the delivery of infrastructure -such as roads, bridges, energy, water and broadbandwhile ensuring its quality, according to a new report published by the OECD Development Centre and the African Centre for Economic Transformation (ACET), in partnership with the African Union Development Agency (AUDA-NEPAD). Quality Infrastructure in 21st Century Africa argues that traditional business models for project development have failed to deliver the infrastructure services needed to match the dynamics of Africa’s demographic growth and urbanisation. A basic infrastructure project can take up to 30, or even 40 years from conception to completion, by which time it no longer fits the needs of populations and economies. In order to reach the development

goals enshrined in the African Union’s Agenda 2063, strengthen regional and local value chains, and create more jobs for urban and rural populations, African governments need to design new ways of managing such projects, the report finds -such as by making infrastructure investment faster and less burdensome. This includes overcoming the shortcomings of the two main common approaches of their financial and technical partners: one that aims to help strengthen the institutional environment together with building the infrastructure, and the other that works to develop infrastructure rapidly, with institution-building seen as a local, evolutionary matter. Assessing the causes of delays in the development of infrastructure projects in Africa -including institutional capacity constraints, multiple regulatory and technical standards- the report proposes two overarching mechanisms to accelerate preparation, funding and implementation: • Expand the Programme for

•

Infrastructure Development in Africa (PIDA) Quality Label System to recognise quality infrastructure; Create a platform to enhance real-time peer learning and the sharing of good practices among African infrastructure professionals.

The recommendations will feed into the Programme for Infrastructure Development in Africa 2021-30. The report stemmed from the 18th International Economic Forum on Africa held in 2O18 in Paris, when President Nana AkufoAddo of Ghana called on the OECD

Development Centre and ACET to jointly establish a technical platform to facilitate a policy dialogue around optimising, accelerating and scaling up quality infrastructure in Africa. The report’s launch at a July 9 online event marks the culmination of the first phase of this joint collaboration. A second phase will follow. The report benefited from the support of the German Organisation for International Development (GIZ) on behalf of Germany’s Federal Ministry for Economic Cooperation and Development (BMZ).

Gabon COVID 19: Q and A with AfDB Country Manager Robert Masumbuko 1. The African Development Bank has just approved a EUR 100.5 million loan as budget support to help tackle COVID-19. What does it mean to the government and people of Gabon? A friend in need is a friend indeed: Gabon is faced with a double crisis of COVID-19 and fall in oil prices, the main source of income of the country. For the Bank to deliver this loan now means a lot, as the country’s battered public finances will immediately receive much needed budget support to mitigate the impact of the pandemic. The loan will boost the health sector, help to sustain livelihoods and shore up domestic business and industry to maintain the production system and pave the way for rapid recovery. It also sends a message that the Bank is confident in the medium term prospects of the country. With a total loan portfolio approaching USD 1 billion, Gabon has consistently been amongst the top five clients of the Bank, with projects in port infrastructure, agriculture, water, education to name a few. 2. What priority areas is this loan package targeting? COVID-19 is exerting strong pressure on Gabon’s national health

system as well as its oil-dependent economy. The Bank financing will go towards the three pillars of Gabon’s “Kill COVID-19” program, namely 1) the medical response – the acquisition of much needed medical equipment and the scaling up of testing and contact tracing, 2) the social response – food bank, payment of electricity and water bills for the poor, and 3) the economic response – Small and Medium-sized Enterprise (SME) guarantees and financing. 3. Looking ahead, what possible additional areas of support may be required? How will this affect Gabon’s relationship with the Bank? In addition to the budget support, the Bank is working on an $20 million agriculture emergency program, focused on shoring up the production of bananas and cassava, the country’s staple food. Currently, Gabon imports much of what its population eats. With the closing of the borders due to COVID-19, self-sufficiency has become an imperative. In addition, the Bank is accelerating the execution of its existing projects, notably its EUR 120 million water project that will ensure access to water for 70% of the population and improve sanitation

– a critical component of the fight against COVID-19. Gabon has historically been one of the Bank’s largest customers. The interventions of the Bank have ranged from infrastructure, public finance management, education, water & sanitation, agriculture and environment. Since 1976, the Bank has approved a total of 57 operations in Gabon for a cumulative amount of more than more than 1.365 billion CFA francs. The total outstanding commitments amount to approximately 536 billion CFA francs, and includes 15 operations distributed in the sectors of governance (57%), agriculture (14%), water and sanitation (14%), social (10%), and transport (5%). 4. Can you tell us about the Bank’s relationship with Gabon and how its response to COVID-19 is helping to strengthen ties, and will impact the Bank’s future engagement The African Development Bank is the first amongst the regional development banks and bilateral partners to have responded positively to Gabon’s call for support, providing 100 million euros in financing. In view of the urgency, the Bank simplified its procedures, allowing the financing to be made

available in less than two months. The Bank’s response has underlined its determination to enhance its close collaboration with Regional Member Countries in difficult times. The level of collaboration and cooperation that has led to this package has been remarkable, helping to ensure that the gains of the last 5 years, such as the NKOK – the special economic zone that has been a game changer in the wood forestry transformation and diversification of the Gabon economy - are not lost. Gabon has historically been one of the Bank’s largest customers. The interventions of the Bank have ranged from infrastructure, public finance management, education, water & sanitation, agriculture and environment.

MONDAY JULY 13, 2020

African Economy

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Okonjo-Iweala faces WTO General Council this week BY DELOITTE

igeria’s former Minister of Finance and the country’s candidate for the position of Director General, World Trade Organisation (WTO), is expected to make a presentation to the General Council of the organisation on July 15. According to the WTO’s timelines for the selection of a successor to its departing Director-General, Roberto Azevêdo, Okonjo-Iweala will be the second candidate to face the General Council, after Mexico’s candidate, Jesus Seade Kuri. There are eight candidates jostling for the plum job, and they will all make presentations to WTO’s General Council between July 15 and 17. The global trade body said in a statement yesterday that in recent weeks its General Council Chair, David Walker of New Zealand, had been consulting with members on the next stages of the process. The statement explained that under normal circumstances, the second phase of the process in which the candidates “make themselves known to members,” would take three months. “But following his discussions with members, it has been agreed that the phase two of campaigning will be shortened by one month and will expire on September 7. “On that date, the third and final phase of the process will begin. Under this phase, Amb. Walker, together with the Chairs of the Dispute Settlement Body (Dacio Castillo of Honduras) and Trade Policy Review Body (Harald Aspelund of Iceland), will consult with all WTO members to assess their preferences and seek to determine which candidate is best placed to attract consensus support. “This phase may involve more than one stage of consultations as members seek to narrow the field of candidates. Walker informed members that, as spelled out in the guidelines, the third Phase would last no more than two months,” the statement explained. Walker was also quoted to have said: “In order to provide clarity for both the candidates and the membership regarding these timelines, we will therefore proceed with Phase Two and Phase Three of the appointment process following the expedited deadlines.”

On May 14, Azevêdo had informed the 164 WTO members that he would be stepping down from his post on August 31, 2020, one year before the expiry of his mandate. Following consultations with members, Walker had announced on 20 May that a one-month timeframe had been agreed during which members would submit their candidate nominees. That deadline expired on Wednesday. Okonjo-Iweala, former Managing Director (Operations) of the World Bank, is a renowned global finance expert, an economist and international development professional with over 30 years experience, having worked in Asia, Africa, Europe, Latin America, and North America. She is at present the Chair of the Board of GAVI, the Vaccine Alliance. She also sits on the boards of Standard Chartered Plc and Twitter Inc. She was recently appointed African Union Special Envoy to mobilise international financial support in the fight against COVID-19, as well as Envoy for the World Health Organisation’s access to COVID-19 Tools Accelerator. The Managing Director of the International Monetary Fund (IMF), Ms. Kristalina Georgieva, also recently appointed Okonjo-

Iweala, to serve as a member of her newly-established External Advisory Group. She had a 25-year career at the World Bank as a development economist, rising to the number two position of Managing Director (Operations). Plot to Sabotage Okonjo-Iweala’s Campaign Uncovered Meanwhile, Okonjo-Iweala yesterday said she had uncovered an ongoing effort by, “some wellconnected Nigerians to sabotage her campaign as the country’s candidate for the WTO Director General. In a statement by her Media Adviser, Paul C. Nwabuikwu, she pointed out that as part of the campaign, the persons and their cohorts are peddling outright lies and distortions designed to invent a non-existent “scandal” in order to paint her campaign in negative light. “An example of this is the effort to misrepresent the campaign’s relationship with Mercury Communications, one of the organisations and individuals that have done voluntary, pro bono work for the campaign. “Mercury was never formally engaged by Dr. Okonjo-Iweala and its work for the campaign was

done strictly on volunteer basis. “Against this background, the attempt by these elements to manufacture a controversy in the local and international media by distorting the facts and creating falsehoods to link the campaign with some of Mercury’s current or past clients to push a false impression is contemptible. “It is sad that the elements behind this campaign are placing their squalid concerns above the interests of the country.” According to the statement, Okonjo-Iweala is humbled that her campaign is progressing in the right direction, adding that her candidacy has been embraced by many Nigerians, including a growing number of spirited volunteers. “She deeply appreciates the strong show of support by both the Presidency and Nigerians, despite the efforts of the persons engaged in this pull her down (PhD) exercise. She will continue to do her best to make her candidacy count for the country,” the statement added. In a related development, Mercury, in a separate statement, revealed that the organisation “does not and has never had a contract to represent OkonjoIweala’s campaign for WTO,” stressing that her campaign is comprised of volunteers. “A small number of Mercury employees are volunteering to help Dr. Ngozi in her campaign for WTO Director General. She is not a client of our firm and the campaign has never had a contract with Mercury. “An administrative error was made when the staff volunteered, leading to a precautionary LDA registration. This was cancelled because it was unnecessary,” the statement added. (Source: Thisdaylive.com)

MONDAY JULY 13, 2020

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Teleworking is not working for the poor, the young, and the women BY MARIYA BRUSSEVICH, ERA DABLA-NORRIS, AND SALMA KHALID

he COVID-19 pandemic is devastating labor markets across the world. Tens of millions of workers lost their jobs, millions more out of the labor force altogether, and many occupations face an uncertain future. Social distancing measures threaten jobs requiring physical presence at the workplace or faceto-face interactions. Those unable to work remotely, unless deemed essential, face a significantly higher risk of reductions in hours or pay, temporary furloughs, or permanent layoffs. What types of jobs and workers are most at risk? Not surprisingly, the costs have fallen most heavily on those who are least able to bear them: the poor and the young in the lowestpaid jobs. In a new paper, we investigate the feasibility to work from home in a large sample of advanced and emerging market economies. We estimate that nearly 100 million workers in 35 advanced and emerging countries (out of 189 IMF members) could be at high risk because they are unable to do their jobs remotely. This is equivalent to 15 percent of their workforce, on average. But there are important differences across countries and workers. The nature of jobs in each country Most studies measuring the feasibility of working from home follow job definitions used in the United States. But the same occupations in other countries may differ in the faceto-face interactions required, the technology intensity of the production process, or even access to digital infrastructure. To reflect that, the work-from-home feasibility index that we built uses the tasks actually performed within each country, according to surveys compiled by the OECD for 35 countries. We found significant differences across countries even for the same occupations. It is much easier to telework in Norway and Singapore than in Turkey, Chile, Mexico, Ecuador, and Peru, simply because more than half the households in most emerging and developing countries don’t even have a computer at home. Who is most vulnerable? Overall, workers in food and accommodation, and wholesale and retail trade, are the hardest hit for having the least “teleworkable” jobs at all. That means more than

20 million people in our sample who work in these sectors are at the highest risk of losing their jobs. Yet some are more vulnerable than others: . Young workers and those without university education are significantly less likely to work remotely. This higher risk is consistent with the age profiles of workers in the sectors hardest hit by lockdowns and social distancing policies. Worryingly, this suggests that the crisis could amplify intergenerational inequality. . Women could be particularly hit hard, threatening to undo some of the gains in gender equality made in recent decades. This is because women are disproportionately concentrated in the hardest-hit sectors like food service and accommodation. In addition, women carry a heavier burden of child care and domestic chores, while market provision of these services has been disrupted. Part-time workers and employees of small and medium-sized firms face greater risk of job loss. Workers in part-time work are often the first to be let go when economic conditions deteriorate, and the last to be hired when conditions improve. They are also less likely to have access to health care and the formal insurance channels that can help them weather the crisis. In developing economies, in particular, parttime workers and those in informal work face a dramatically higher risk of falling into poverty. The impact on low-income and precariously-employed workers could be particularly severe, amplifying long-standing inequities in societies. Our finding— that workers at the bottom of the earnings distribution are least able to work remotely—is corroborated by recent unemployment data from the United States and other countries. The COVID-19 crisis will exacerbate income inequality. To compound the effect, workers at the bottom of the income distribution are already disproportionately concentrated in the hardest-hit sectors like food and accommodation services, which are among those sectors least amenable to teleworking. Low-income workers are also more likely to live hand-to-mouth and have little financial buffers like savings and access to credit. How to protect the most vulnerable? The pandemic is likely to change how work is done in many sectors. Consumers may rely more on

e-commerce, to the detriment of retail jobs; and may order more takeout, reducing the labor market for restaurant workers. What can governments do? They can focus on assisting the affected workers and their families by broadening social insurance and safety nets to cushion against income and employment loss. Wage subsidies and public-works programs can help them regain their livelihoods during the recovery. To reduce inequality and give people better prospects, governments need to strengthen

education and training to better prepare workers for the jobs of the future. Lifelong learning also means bolstering access to schooling and skills training to help workers displaced by economic shocks like COVID-19. This crisis has clearly shown that being able to get online was a crucial determinant to people’s ability to continue engaging in the workplace. Investing in digital infrastructure and closing the digital divide will allow disadvantaged groups to participate meaningfully in the future economy.

MONDAY JULY 13, 2020

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No recovery without debt relief

BY MO IBRAHIM

Last month, the African Union launched the Africa Medical Supplies Platform to facilitate the production and provision of vital medical equipment – the latest achievement in an already impressive response to the COVID-19 crisis. Yet, in the same week, it was revealed that most of Nigeria’s federal government revenue was going to debt-service payments, and the country would be cutting public-health spending by 40% – even as COVID-19 infections continue to climb. The contrast is as tragic as it is stark. The world’s youngest continent is itching not only to stand on its own two feet, but also to provide global leadership. And it remains hamstrung by an old foe: debt. If Africa is to achieve its potential, its creditors must set it free. Debt relief works. Fifteen years ago this week, the G8 issued the Gleneagles declaration, relieving 18 “highly indebted poor countries” – Benin, Bolivia, Burkina Faso, Ethiopia, Ghana, Guyana, Honduras, Madagascar, Mali, Mauritania, Mozambique, Nicaragua, Niger, Rwanda, Senegal, Tanzania, Uganda, and Zambia – of debt totaling more than $40 billion.

No longer saddled with massive debt-service costs, countries were able to invest more in their own economies and people. Many of the countries that had received debt relief, such as Ethiopia and Rwanda, subsequently experienced significant upticks in economic growth. Standards of health care, access to education, and employment opportunities improved markedly. And countries improved their governance and benefited from greater stability – crucial to sustaining long-term growth. This progress is now at risk of unraveling. Though Africa has so far recorded a relatively low number of COVID-19 infections, it faces a severe economic crisis, with potentially far-reaching social and political implications. External demand, oil prices, tourism and travel revenues, and remittances have all collapsed. Investors have pulled $100 billion from emerging markets since the beginning of the pandemic – the largest-ever capital outflow in such a short period This is contributing to a deepening – and highly dangerous – liquidity crisis. African governments urgently need capital to stabilize economies hit by cumulative external shocks and to finance an adequate publichealth response. Yet, unlike the eurozone or the United States, most African countries cannot print money to get them through

the crisis. Moreover, their fiscal space remains limited, not least because they must continue to make large debt payments. This leaves their leaders with an impossible choice: cut spending on crucial services, as Nigeria has done, or default. Debt relief would save countries from this bleak scenario, freeing up the capital needed to fight the pandemic and stabilize the economy. World leaders already recognize this. In April, G20 leaders agreed to suspend some debt repayments for the world’s poorest countries for the rest of 2020. But it is nowhere near enough. Pledges must now be swiftly implemented and significantly expanded. Specifically, all creditors – bilateral, multilateral, and private – must implement an immediate debtservice standstill for all African countries until the end of 2021. As Vera Songwe, the Executive Secretary of the United Nations Economic Commission for Africa, has proposed, a special purpose vehicle (SPV) could also be created, modeled on the repurchase (“repo”) facilities that American and European central banks often use to support the smooth functioning of markets. This new lending vehicle, backed by the G20 central banks, would not only expand access to cheap liquidity; if designed well, it could also support the shift toward a

more sustainable growth model. The International Monetary Fund also has an important role to play. The creative use of its reserve asset, Special Drawing Rights, could go a long way toward supporting fragile economies. The world’s wealthiest economies have responded to the COVID-19 crisis with unprecedented fiscal measures. African countries must do the same. Ensuring that they can is not charity; it is a matter of shared interest. If African governments lack the resources to respond effectively to the crisis, the hard-won gains of recent decades will be wiped out; poverty will skyrocket; the virus will become increasingly difficult to contain; and social unrest will grow, particularly in countries like Sudan that are already struggling to end decades-long conflicts. This would exact a massive human and economic toll, and leave all of us living in an increasingly insecure world. The COVID-19 pandemic is a shared global challenge, and it demands a shared global response that addresses both the health and economic dimensions of the crisis. Debt relief for Africa is an essential feature of any such response.

Mo Ibrahim is Chair and Founder of the Mo Ibrahim Foundation. Copyright: Project Syndicate, 2020. www. project-syndicate.org

MONDAY JULY 13, 2020