….Why business sector needs Financial Inclusion and Fairness matters
There are three main barriers that hamper financial access in Namibia. The first is unfairness in the commercial sector, secondly the lack of funding for start-ups plus manufacturing and lastly, lack of funding for services oriented business. In this article we will look at the common characteristics, weakening financial outreach and barriers that need stronger re-adjustments.
In 2008 during the financial meltdown the American senate bailed out ten banks using state funds under the Federal Reserve to rescue them from a collapse. This move saved an avalanche of businesses and one of main enterprises was General Motors because they maintain other SME value chains that were vulnerable to the domino effect of this collapse. More than 50% of America’s GDP is earned via SME’s and killing them will be like committing suicide and hence the crunch the countries ratings remained good moderate.
The G20 summit is backed by the B20 summit, which is the preamble to G20 meetings. At the B20 or Business 20 multiple corporations from the G20 countries meet to discuss issues that hinder business and they get to express their shortcomings and provide directives for this strong lobby platform. This is a well-coordinated approach for dialogue and ensuring monetary welfare of this powerful nations.
The commercial sector in Namibia is at the core of every business and cash flow cycle and therefore they need have strategic and systematic interventions that highlights a developmental appetite for the nation. Finance alone can strengthen domestic companies in comparison to their foreign counterparts. Commercial banks must emphasise on development and not just immediate or short term gains of SME’s. They are tight-fisted and sometimes have complex, “apartheid-era” laws that needs critical reform.
The financial services sector struggles to promote fairness and this leads to further poverty and inequality for travailing and hard-working businesses while investing milliards into bank associated clients or favouritism opportunities. Most often small companies and individuals are squeezed out of lucrative deals because of limited bank support. However, I will reserve my praises to some local banks that create a good perception about SMS’s, as opposed to others.
Secondly, there is lack of funding for start-ups and innovative ideas in such a way that people are having ideas that are never fruitful enough to break them out of poverty they travail without adequate help of assistance. They remain on investment “shallow ground” and may never reach the “deep waters” of profit gains because of mistreatment. Also state owned development banks favour merchantile and tender related deals, which they fund faster than innovations or cutting edge ideas.
Hence in most bigger economies innovative ideas enjoy better financial benefits than in Africa. They have ability to create stronger value chains that leads to unique boom and upsurges. Tender related companies sometimes have a “money attitude” and not necessarily a “business attitude”. They use the money to earn middle men gains or they emulate other moguls by yielding to personal luxuries at the expense of the business. There is a mantra of “easy-come and easy-go”.
My observation is that the analytical stance of some financial entities are not practical at all, but only theoretical. They need to go out there and sense the business climate and embrace a new culture of inclusion. Their hidden-gusto and silence on the funding cliff has led to the downfall of many willing SME’s with a true “business sense”.
Lastly the lack of funding for the “services” oriented businesses is a huge setback for the country, because services make up more than 60% of our GDP. In every manufacturing of a good, services play a significant role and can create more employment and deepen value chains. Some services are Education, Health, Finance, Energy, Communication Technology, Transport and Tourism.
Under finance there is no funding to allow new players in auditing, insurance, forex, etc. Healthcare also faces serious money constrains to experience growth in the midst of opportunity. Strategically Namibia’s good governance contributed to “health-linked tourism” from Angola but it needs more resources, as well as specialized nurse and medical training for the businesses.
One simple intervention could be teaching nurses how to speak foreign or multiple languages. Transport plays a critical role in trade facilitation, the scope in rail is not wide enough and there is need to widening trade within the SADC region but the setback is transport funding to reach goods and people across the border at affordable costs.
My suggestion is that Namibia needs a critical state intervention to restructure the role of certain protected commercial entities and state owned enterprises to put emphasis on building SME capacity and local trade.
Globally the WTO does not apply specific remedies with which to boost financial compliance towards development and stricter repercussions to those who fail development and this leaves domestic policy makers with less power to regulate the sector, but certain rules can be adopted, designed or achieved in a small economy like ours. Without reform our Trade Balance will be very negative in light of other countries that facilitate services and goods exports through fair business funding.
Rodney Dan-Ao !Hoaeb is a Trade and Investment Researcher Committed to seeing a radical economic shake-up in Namibia.