Monthly Archives: February 2017

Foreigners welcome

By Rafiq Raji, PhD

Xenophobia, that odious human phenomenon, reared its ugly head in South Africa last week. With chilling consistency, the authorities have been all too happy to let it simmer for a while until, as it always does, it boils over. There have been such attacks before. Before this most recent one, violence erupted in April 2015 when Zulu King, Goodwill Zwelithini, bemoaned the presence of foreigners, African ones especially: they ‘inconvenience locals’, he argued. In supposedly peaceful protests a few days after the first violent attacks broke out in the week just past, police would eventually disperse the protesters – gangs and criminals really – with tear gas and rubber bullets. But only after the marauders had helped themselves to goods not their own. Apart from the longstanding structural issues, the violent attacks are a failing of law enforcement, arguably deliberate, since when the authorities later did their duty, order was restored. It is a phony peace.

South Africa, in its current state, is a tinderbox of sorts. A perfection if you are looking for unseemly ways to warm the cockles of the hearts of a longsuffering majority black poor, whose goodwill and commonwealth greedy politicians squander like there is no tomorrow. So how about we let those hungry ones make away with a few loaves of bread, teach the stingy ‘Paki’ shopkeeper a lesson for a change? And those bloody arrogant and loud Nigerians, only just come and already driving flashy cars and stealing our women. Such anti-immigrant sentiments sing like a chorus to the ears of locals and foreigners alike in South Africa: it is all too familiar. But to allow the opportunistic politicians and the few crooks and joblesss know-nothings rewrite the narrative in favour of their myopic xenophobia would be a great disservice to the warm and lovely people of South Africa.

The majority of South Africans love foreigners and are not xenophobic. And yes, most love Nigerians. And we love you too. I condemn with the utmost vehemence, the opportunistic Nigerian student union leaders, who instead of taking over the streets in protest over the poor quality of education at our universities, the many languishing unpaid and underpaid lecturers, and our thieving politicians, decided the way to retaliate the erring ways of a few nameless South African criminals, was to destroy the property of a South African company; which by the way employs many Nigerians. So they can now give ultimatums? Empty barrels. Foreigners are welcome here.

Kick welfare state
Too high unemployment in South Africa – about a quarter of the population is jobless – is a ticking time-bomb. That some poor black South Africans have chosen to take out their frustrations at foreigners, particularly those of African descent, is somewhat disingenuous. Economic power remains within the firm grasp of the minority white population. And if the politicians feel the slightest relief that their ‘problem’ has found a vulnerable target to vent at, how soon before they turn on them? They are not waiting to find out. Never one to miss a political opportunity, Jacob Zuma, the South African president (never mind that he waited a few days to voice his condenmnation of the xenophobia-fuelled violence) threw a well-timed bone at the poor crowd – lest it becomes an uncontrollable rampaging horde: land would now be expropriated from whites without compensation.

That this recent populist move is coming from the enfeebled ruling African National Congress (ANC) leader, one who has caused his party much grief no less, and who cadres would gladly be rid off as party president come December, is not entirely surprising. Still, it is a most significant policy departure for a centrist party that hitherto – and wisely so – sought to balance the often conflicting needs of capital and politics. Credit for this downswing should go to the ultra-nationalist Economic Freedom Fighters (EFF) and its firebrand leader, Julius Malema, most definitely. A few probably had a foreboding of things to come: President Zuma touted ‘radical economic transformation’ at his recent State of the Nation Address (SONA). But most likely thought it was just huff and puff from a leader whose power is waning: Mr Zuma probably has no choice but to stir up some populist support. Not anymore.

Even so, some hard truths need to be told. Having almost half of households on at least one form of welfare is hardly a recipe for enterprise. How is it that an able-bodied individual gets to expect a paycheck for doing nothing at the end of every month? Where would that person get the incentive to engage in productive activity? South Africa’s welfare system has to be reformed. Authorities must make welfare payments conditional on productive engagement. How about structuring welfare payments to unemployed able-bodied youths as loans? Intelligent solutions would be what stops the vicious cycle of poverty, despondency, xenophobia, and criminality amongst poor black South Africans.

Immigrants prosper
A man who decides to leave home in search of greener pastures is hardly going to reach his destination only to just sit idle. Many have responsibilities back home, with numerous relatives ‘casting and binding’ for their success. And failure. They have to succeed. Unfortunately, this sometimes mean they do so by hook or crook. Even so, many immigrants succeed the legal and proper way. A Nigerian who all of a sudden finds himself in a country with 24-hour power supply, a reliable transportation system, and cheap food, can have his productivity quadrupled without the slightest addition of effort. This is why many succeed abroad. Many come from a life of toil and strife. To immigrate in the first instance would have required years of saving, and in the extreme case, taking a loan. Getting a visa would have required enduring weeks – sometimes months – at embassies, accompanied with fasting and prayer. Tell me, when that person eventually makes it out, what do you think he or she would do? South Africa benefits from immigrants. When they are not playing to the gallery, its politicians acknowledge this fact. Many, many Nigerians and South Africans live and do business together with great warmth and affection. The few xenophobic ‘haters’ in our midst will fail.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. https://www.businessdayonline.com/foreigners-welcome/

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Stage is set

By Rafiq Raji, PhD

As has become the tradition days before his budget statements, at least for the last two, South African finance minister Pravin Gordhan has yet again been made to feel uncertain about his future. This time, it might not be a ruse. Brian Molefe, the disgraced former Eskom chief executive, it has been announced, would become a member of parliament; after erstwhile occupant of the seat he takes over, Abram Mudau, “stepped down voluntarily” for health reasons – he probably had little choice in the matter: it is alleged powers that be in the ruling African National Congress (ANC) party instructed him to resign. Others suggest it was only a matter of the date (30 January): asking officials to sign undated resignation letters at the outset of their appointments is common practice. Some party stalwarts from the Hartbeespoort branch in North West Province that Mr Molefe supposedly belongs to, and would represent in parliament, have raised a ruckus. No matter. In the greater scheme of things, the manner of Mr Mudau’s exit is irrelevant: he is out and Mr Molefe is in. And clearly, a great deal of effort was deployed towards the enterprise. Just so the intent is not misconstrued – as if that were not all too palpable already, Mr Molefe’s swearing-in has been scheduled for 22 February: budget day.

Cometh the scandal
So last week, the Competition Commission ruled that a couple of local and foreign banks colluded to rig trading of the rand. Almost immediately, the ANC and South African president Jacob Zuma condemned, in probably the strongest tone ever from either of them, what are largely white-led financial institutions. As if sensing the vehement response was a barely veiled swipe at its chief, the Treasury came out with a similarly aggressive rebuke of the banks’ misdemeanour. Did both sides hear themselves loud and clear? You would think they did. Apparently, one side didn’t think so. Njabulo Nzuza, the ANC Youth League (ANCYL) secretary, was unequivocal in his remarks to TV network eNCA: “our government deployee [Mr Gordhan], since arriving at Treasury, has not made sure there is restructuring…we want a different kind of calibre cadre that would dismantle the approach of protecting banks in South Africa”. The matter should not be trifled with, however. Market manipulation is wrong and especially costly when it involves a country’s currency. So, erring banks should indeed have their day at the Competition Tribunal. Still, it is too late to depoliticize the issue: Zuma loyalists have an axe to grind with the banks.

Man in place
There are worries Mr Molefe, should he get the post, might not be as stringent as the likely outgoing finance minister, Mr Gordhan – albeit one wouldn’t place too strong a bet on his ouster just yet: he has proved to be as hard a man as his principal. Still, Mr Zuma’s newfound zeal for “radical economic transformation” rests a great deal on having a ‘comrade’ at Treasury; especially as Mr Gordhan has thus far proved to be an effective bulwark against the type of populist measures that Mr Zuma’s imminent economic radicalism must necessarily put in place. If one were to be objective though, the type of working relationship that currently exists between both men is ordinarily not desirable: Mr Gordhan can literally do whatever he likes. With myriad corruption scandals plaguing the Zuma administration, however, the situation can hardly be described as ordinary. Fears about a potential plunder of the treasury in the hands of a pliant Zuma minister are not misplaced. And almost all of the potential candidates that Mr Zuma might tip to replace Mr Gordhan would probably struggle to command the type of palpable clout that the incumbent currently enjoys with rating agencies and influential market participants. But these considerations pale in comparison with Mr Zuma’s widely-believed existential goal of seizing total control of government and the ANC before party leadership elections in December. Mr Gordhan is in the way. And time is really now Mr Zuma’s most potent enemy – he has probably just six months to consolidate power. Things may move very quickly indeed. And the budget? A narrower deficit of 3.2 percent of GDP, say, for the 2017/18 fiscal year (starts 1 April) could be targeted – 3.4 percent is estimated for 2016/17 – analysts suggest. To achieve this, it is expected that taxes on income, alcohol and tobacco could be raised. Higher fuel levy and value added tax are also probable, it is believed. But with Mr Gordhan already being nudged out the door, the budget statement may be no more than a nice speech.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. https://www.businessdayonline.com/stage-is-set/

Future of Banking

By Rafiq Raji, PhD

This past week, I was a guest speaker at “Digital Banking Nigeria 2017” (8 February 2017), an event organised by India’s Infosys and Lagos-headquartered CWG Plc, information technology solutions providers. My speech was on the future of banking in Nigeria. That is, amid digital disruptions to an industry slow to catch up. 

About 40 percent of Nigeria’s 88 million adult population is financially excluded. Digital financial services (DFS), increasingly embraced by Nigerian banks and their customers, make it cheaper to increase the number of the banked, currently 53 percent. Research done by the Lagos Business School (LBS) – “Digital Financial Services in Nigeria: State of the Market Report 2016” – suggests mobile money adoption remains relatively tepid, however: 0.1 percent in 2015. This is despite mobile phone ownership of almost 90 percent. And some 20 million Nigerians would probably own a smartphone by 2018 – almost half of the banked adult population of about 47 million – some suggest. Of course, a distinction has to be made between mobile money, an electronic wallet service, and the use of internet banking services via smart mobile devices. The latter has caught on, with an increasing number of Nigerians using their mobile devices to transfer funds, pay for services and so on. And the former? Not so much. Only 1.2 percent of electronic payments in 2016 were done using a mobile channel, based on data from the National Bureau of Statistics (NBS). And even as point-of-sale terminals are now quite pervasive, only 1.2 percent of e-payments in 2016 were done using the channel. What about automated teller machine (ATM) cards? Just 8 percent. According to NBS data, the predominant electronic payment channels, in 2016 at least, were NIBSS instant payments (59 percent) and NIBSS electronic fund transfers (22 percent); both of which can be done via internet banking. For DFS to successfully increase the country’s GDP by 12.4 percent (US$88 billion) by 2025 as envisaged by McKinsey, a global consultancy, mobile money adoption has to rise significantly from current lows. But who will lead the charge? Bank-led mobile money operators, eight of the twenty-one licensed by the Central Bank of Nigeria (CBN), are able to serve their customers relatively cheaply; about half the cost of non-bank led ones, LBS research suggests.

Social financial networks
The fundamental thesis of my presentation was that the real threat to the banking industry may not be the so-called fintech companies and mobile network operators so much as the customers themselves. Two phenomena in particular: social networks and virtual currencies. MMM, a social financial network, though a ponzi scheme, and unabashedly so, has somehow managed to attract 3 million ‘sane’ Nigerians. And despite the CBN’s frantic efforts at curtailing the menace, its disintermediation effects continue. When warned of the risks of MMM, subscribers, as if in a trance, are almost fanatical in defence of the scheme. More importantly, note how almost 10 percent of the banked Nigerian population were successfully organized, albeit for a promised enticing return of 30 percent, for financial intermediation activities with no more than a website. And in a manner that effectively made the regulator impotent. Still, that even some ordinarily cautious Nigerians jettisoned reason to invest in the scheme points to a gap in the banking industry: savings accounts offer a paltry 5 percent. It also points to the possibility of financial intermediation outside of the traditional financial services industry. Banks beware.

Digital currencies
Bitcoin, a digital currency, is increasingly gaining ground as a store of value. (Incidentally, MMM subscribers can now give ‘help’ with Bitcoin.) And it is open-source: no central bank owns or controls it and anyone and everyone can use it. Imagine a scenario where bank account holders withdraw money en masse from their local currency accounts to buy foreign exchange for the sole purpose of acquiring bitcoin. The transactions they are used for thereafter are almost entirely out of the reach of central banks. Up to a point. In most developing countries – most African ones at least, where there are no bitcoin exchanges, the authorities are effectively powerless. But what about the countries where digital currency exchanges are domiciled, China, say? As it turns out, the People’s Bank of China (PBoC) announced last Thursday (9 February 2017) that it would close any of them that violated regulations, a move that caused bitcoin prices to drop sharply. African central banks are still looking on.

Open-source biometrics
Aadhaar, a cloud-based biometric identification system set up by the Indian government, initially to ensure that intended recipients (who get assigned a unique 12-digit number) of welfare payments are actually the ones that receive them, would this year have on record all of India’s adult population. Together with an online database of citizens’ documents (tax filings, bank statements, etc) called “India Stack” and a “Unified Payments Interface”, the digital ID and document ecosystem would, when fully operational, be nothing short of revolutionary for what is still largely an informal economy. Whether it is the acquisition of a phone line or job application, all that is required to verify a person’s identity is now no more than a fingerprint scan. In the Nigerian case, the Bank Verification Number (BVN) is analogous, but unfortunately not as useful. Having a BVN does not exempt you from onerous know-your-customer (KYC) checks if you wanted to open a bank account elsewhere. Besides, the so-called unbanked and underbanked Nigerians, who though may not have bank accounts, ordinarily own a mobile phone. And their biometric data? They reside with mobile network operators and their regulator. Banks of the future would be agile, open-source and collaborative.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. http://www.businessdayonline.com/future-of-banking/

Zuma’s long goodbye

By Rafiq Raji, PhD

Jacob Zuma, the embattled South African president, would deliver a State of the Nation Address (SONA) on 9 February. It would be his last as leader of the ruling African National Congress (ANC). That is, if all goes according to plan. To escape prosecution, President Zuma is desirous of a third term, insists Julius Malema, his unrelenting antagonist and “commander-in-chief” of ultra-nationalist opposition Economic Freedom Fighters (EFF) party. Although South Africa’s constitution sets a maximum of two five-year terms for the presidency, the ANC has no such limits. Still, should Mr Zuma choose to contest again for the leadership of his party, it would be highly unprecedented. But there was once talk about amending the country’s constitution to remove presidential term limits. In response, Mr Zuma defended the status quo, but did not categorically rule out the possibility. “We are very clear about the two terms,” Bloomberg reports him as saying in October 2015. [But] “countries move the way they want…there are countries recently that have gone to a referendum, the people have said: ‘we still want this man, we think this man is still useful.’ Its a democratic decision that is taken.” Mr Zuma addedSo one would be remiss to simply dismiss Mr Malema’s assertions as figments of his rather fertile imagination. And Mr Malema’s intelligence proved solid in the past. But considering how divisive Mr Zuma has been, it is somewhat odd that there could even be the slightest contemplation of his staying on from any quarter; albeit he may not entirely mind being tapped to “unite the party”, in light of currently sharp divisions – engineered by him no less, some would argue – within the ANC. But even for someone with Mr Zuma’s capacity for intrigue, such a scheme would literally require him to pull a rabbit out of a hat. Thankfully, it is an unlikely scenario.

Another Zuma?
An imminent cabinet reshuffle may be about. Pundits suggest one would only take place, if at all, after the SONA. To position his ex-wife and outgoing African Union Commission chairperson Nkosazana Dlamini-Zuma (tenure ends in April) for the ruling party’s presidency and who he has unabashedly thrown his weight behind, Mr Zuma would almost certainly appoint her to his cabinet it is believed. Already a formidable match for Deputy President Cyril Ramaphosa – who Mr Zuma clearly does not want to take his place – in her own right and having already secured the support of the influential youth and women’s leagues of the ANC, Ms Dlamini-Zuma would be almost assured of the much sought after prize consequently.

There are practical reasons why Mr Zuma may be averse to the candidacy of Mr Ramaphosa – who already has the support of key labour unions and so-called “white monopolist capital”. That is, even as he likely blames his deputy for some of his troubles. Never mind that Mr Zuma has proved to be his own worst enemy most of the time. More relevant though is that should Mr Ramaphosa clinch victory, he would necessarily move quickly to put his own allies in control of the party’s structures. Subsequently, especially with myriad corruption cases around his neck, it is not unlikely that Mr Zuma could be pressured to leave office before the end of his term in 2019. So, although the sun may have begun to set on Mr Zuma’s presidency, arguably the most tumultuous in post-apartheid South Africa thus far, he probably faces his biggest fight yet.

But who would Mr Zuma remove to let in Ms Dlamini-Zuma? Many suggest it could be Pravin Gordhan, his longsuffering finance minister. But how to do so without causing the kind of market disruptions that visited his abrupt firing of Nhlanhla Nene in December 2015 is the question Mr Zuma likely ponders. He could certainly resort to the same tactic he deployed in easing Mr Gordhan out of the treasury the last time he was at the helm: re-assign him to a less glamorous ministry. Even so, it may still be too risky for Ms Dlamini-Zuma to take his place afterwards. What if ratings agencies finally decide to downgrade South Africa to junk status just then, say? Not that ANC cadres give a hoot about such things. Still, why take the risk? Brian Molefe, the disgraced former Eskom (state-owned power utility) boss, whose credentials are otherwise distinguished, has been suggested as a probable candidate instead. After all, to quote that English writer John Bunyan, he that is down needs fear no fall.

Race not for hares
A factionalised ANC may be just ideal for the one or two grandees patiently waiting in the wings. Ms Dlamini-Zuma and Mr Ramaphosa may prove to be overly divisive. In their stead, Kgalema Motlanthe, who was briefly head of state between 2008-09, has been tipped as a potential consensus candidate. Party treasurer, Zweli Mkhize, is another viable alternative it is mused. And there have been grumblings from some of the ANC’s amazons. If indeed their time has come, why not have a proper contest amongst the many distinguished female party cadres, they argue. What about National Assembly Speaker Baleka Mbete? And defence minister Nosiviwe Mapisa-Nqakula? Is Lindiwe Sisulu, the human settlements minister, also not qualified? The hares have had a good start no doubt. But perhaps it is time to open up the field. Still, the tortoise must not be Mr Zuma.

Also published in my BusinessDay Nigeria column (Tuesdays). See link viz. https://www.businessdayonline.com/zumas-long-goodbye/