A new report by the International Labour Organization (ILO) has found that monthly wages fell or grew more slowly in the first six months of 2020, as a result of the COVID-19 pandemic, in two-thirds of countries for which official data was available, and that the crisis is likely to inflict massive downward pressure on wages in the near future. The wages of women and low-paid workers have been disproportionately affected by the crisis. Furthermore, while average wages in one-third of the countries that provided data appeared to increase, this was largely as a result of substantial numbers of lower-paid workers losing their jobs and therefore skewing the average, since they were no longer included in the data for wage-earners.In countries where strong measures were taken to preserve employment, the effects of the crisis were felt primarily as falls in wages rather than massive job losses.
ILO Director-General Guy Ryder
The Global Wage Report 2020/21 shows that not all workers have been equally affected by the crisis. The impact on women has been worse than on men. Estimates based on a sample of 28 European countries find that, without wage subsidies, women would have lost 8.1 per cent of their wages in the second quarter of 2020, compared to 5.4 per cent for men.
The crisis has also affected lower-paid workers severely. Those in lower-skilled occupations lost more working hours than higher-paying managerial and professional jobs. Using data from the group of 28 European countries the report shows that, without temporary subsidies, the lowest paid 50 per cent of workers would have lost an estimated 17.3 per cent of their wages.
Without subsidies, the average amount of wages lost across all groups would have been 6.5 per cent. However, wage subsidies compensated for 40 per cent of this amount.
“The growth in inequality created by the COVID-19 crisis threatens a legacy of poverty and social and economic instability that would be devastating,” said ILO Director-General Guy Ryder. “Our recovery strategy must be human-centred. We need adequate wage policies that take into account the sustainability of jobs and enterprises, and also address inequalities and the need to sustain demand. If we are going to build a better future we must also deal with some uncomfortable questions about why jobs with high social value, like carers and teachers, are very often linked to low pay.”
The report includes an analysis of minimum wage systems, which could play an important role in building a recovery that is sustainable and equitable. Minimum wages are currently in place in some form in 90 per cent of ILO Member States. But even before the onset of the COVID-19 pandemic the report finds that, globally, 266 million people – 15 per cent of all wage earners worldwide – were earning less than the hourly minimum wage, either because of non-compliance or because they were legally excluded from such schemes. Women are over-represented among workers earning the minimum wage or less.
“Adequate minimum wages can protect workers against low pay and reduce inequality,” said Rosalia Vazquez-Alvarez, one of the authors of the report. “But ensuring that minimum wage policies are effective requires a comprehensive and inclusive package of measures. It means better compliance, extending coverage to more workers, and setting minimum wages at an adequate, up-to-date level that allows people to build a better life for themselves and their families. In developing and emerging countries, better compliance will require moving people away from informal work and into the formal sector”.
The Global Wage Report 2020/21 also looks at wage trends in 136 countries in the four years preceding the pandemic. It found that global real wage growth fluctuated between 1.6 and 2.2 per cent. Real wages increased most rapidly in Asia and the Pacific and Eastern Europe and much more slowly in North America and northern, southern and western Europe.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Digital lease-to-own vehicle marketplaces that will help drivers acquire vehicles over time have been launched in Kenya by automobile startup Motoqaa. Established in June 2020, Motoqaa provides managed services for peer-to-peer lease-to-own contracts for vehicles in the taxi-hailing business. The startup, which manages a fleet of 28 vehicles, may be relatively new, but Munyua and co-founder Olivia Gachoya started working on the idea in April 2019, and have been in the taxi business since 2016.
Motoqaa
According to Motoqaa’s founder Mugambi Munyua “we source for drivers, collect payments and manage operations necessary to keep the vehicles and drivers on the road.” He added that Motoqaa has advanced our operations by building in-house technology to implement pay-as-you-go models for vehicles using devices that can immobilise or mobilise the vehicle based on the status of payment. Motoqaa believes that supporting car ownership will make participation in the ride-hailing economy more profitable for drivers, while also helping its finance partners make returns.
“Drivers would rather have the option to own the vehicles they use in the business. They are however locked out of the formal credit system. Partners are looking to build wealth or earn an extra income. They seek a return of capital and additional profit,” he said.“Both the drivers and partners are seeking to acquire wealth in different forms. Drivers are looking to acquire an asset and partners are looking at return on investment.”
The startup puts itself at the centre of this, sourcing for drivers with a high probability of completing a contract, and then managing payment collection, aided by technology. Self-funded thus far, the startup is targeting a seed round in mid-2021 as it plans to pivot its business model. “We would like to transition from a peer-to-peer model to a securitised asset financing model. This will allow us to scale faster and be more impactful to the community of drivers. The move will also see us earn revenue from marking up the vehicles ourselves,” said Munyua.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Africa has already made an indelible mark in the oil industry. It is home to four of the world’s top 20 crude oil producers — Nigeria, Angola, Algeria, and Libya — and these same four countries also have some of the largest oil reserves in the world. So far, it hasn’t made quite as much of a splash in the gas industry. The only African countries on the list of the world’s top 20 gas producers are Algeria and Nigeria, and one of the states that has the largest gas reserves is Mozambique, which is still several years away from bringing its major fields on line.
NJ Ayuk, Executive Chairman of the African Energy Chamber, CEO of pan-African corporate law conglomerate Centurion Law Group
But the gap between African oil and gas doesn’t have to be permanent. The continent’s gas industry is on the verge of real transformation, as the African Energy Chamber (AEC) notes in our 2021 Africa Energy Outlook, released earlier this month. I’d like to describe what forms that shift might take — and explain how the changes would benefit Africans.
Some of the change I expect is going to happen in the upstream sector — that is, in the realm of exploration and production. First, the continent’s current leading producers are likely to produce more. North African states such as Egypt and Algeria will account for part of this increase, as they are looking to ramp up development at existing natural gas fields. But another part of it will stem from programs designed to reduce the flaring of associated gas found in oil fields. Both Nigeria and Angola, for example, have plans to expand the use of associated gas. The former aims to deliver its production to the domestic market, while the latter is looking to split its production between the local market and the export-oriented Angola LNG project.
The upshot of these trends is that the list of Africa’s top gas producers will probably remain static until the middle of the decade. As the AEC’s outlook explains: “The (continent’s) top five crude oil producers — Nigeria and Angola from the west, and Algeria, Egypt, and Libya from North Africa — complete the top five natural gas producers for 2020 and 2021. These five countries contribute about 90% of the overall natural gas output from the continent for both (2020 and 2021), and the expected forecast suggests the share of these countries will remain the same going into the mid-2020s.”
At that point, though, new producers will start to play a more prominent role. Mozambique is due to launch its first greenfield project at Area 1 in 2024, and its offshore zone may become a major source of natural gas by 2025-2026. The Mauritania-Senegal offshore zone may follow a similar timeline, as the Greater Tortue/Ahmeyim blocks may begin yielding natural gas in 2023, followed later by the Yakaar-Teranga and BirAllah projects. What’s more, all four of the projects mentioned in this paragraph will support gas liquefaction plants capable of producing and exporting LNG.
By the end of the decade, then, there will be more than five countries accounting for the bulk of Africa’s total gas production. Nigeria, Angola, Algeria, Egypt, and Libya will be joined by at least three others —Mozambique, Mauritania, and Senegal.
Domestic Consumption vs. Exports
Meanwhile, consumption patterns are going to shift along with production patterns. Once again, this shift is likely to begin once the large new fields in the Mozambique and Mauritania/Senegal provinces come online.
The change may not be obvious on a macro level, because it won’t be evident in the split between exports and domestic consumption. That is, Africa will continue to use about 70% of the gas it extracts and will export continue to the remaining 30%. As the AEC’s outlook explains, though, the geography of African gas exports will not remain static.
“The pattern has been relatively stable since 2012 with about 70% serving local markets, 20% exported to Europe and 10% exported to Asia,” the report states. “The mid-2020s LNG startups are also expected to distort this picture by increasing the market share for East Asia LNG exports. This development is, however, not (a consequence) of local markets’ (rising demand), but rather the shrinking ability of North African countries to maintain their export capacity to Europe on the back of strong domestic demand growth. By 2030, the expectation is effectively for East Asia and Europe to be inverted, while domestic market share remains constant.”
In short, Africa is on track to produce more gas by the end of the decade but will keep the same share of the total for its own use. At the same time, Asia will replace Europe as the most important market for African gas exports.
Gas Means Jobs
These trends are interesting, but you may want to ask: What do they mean for ordinary Africans, for people who are less concerned with production data and trade balances than with questions about how to support their families?
They mean a great deal.
As I’ve mentioned, the 2021 Africa Energy Outlook report projects that African gas production is going to rise, especially after new fields come on line and ramp up development in the middle of the decade. It also anticipates that African gas consumption will rise, even if domestic consumption continues to absorb a full 70% of total production.
As production goes up, upstream operators will create jobs. They will need people to help them build, operate, maintain, and repair production, transportation, and processing facilities. They will also need people to administer their local operations. Additionally, they will need to meet legal requirements or contractual commitments for local content, so they will need to hire African contractors. Those African contractors, in turn, will need employees of all kinds, and so will hire African workers.
And as consumption goes up, even more jobs will be created. Distributors will need new pipelines to deliver the gas to end-users, so they will need people who can help them build, operate, maintain, repair, and administer those pipelines, along with associated infrastructure facilities such as storage depots. And even in the absence of pipelines, they will need to acquire tankers and containers so that they can bring gas to customers by road, rail, or river. Accordingly, they will need people to procure, operate, maintain, repair, and administer these operations.
Meanwhile, there’s more. The hiring of more African workers is sure to have knock-on effects. If, for example, employees of upstream operators need a way to get to a remote worksite, local transportation companies may be able to serve them. If so, those transportation companies may have to hire more people to drive their vehicles. Likewise, if African construction firms need to procure extra building materials to uphold their contracts with upstream operators, local suppliers may be able to meet their needs. And if so, those local suppliers may have to hire more people to handle their inventory.
In other words, as Africa’s gas industry grows, it has the potential to create thousands and thousands of jobs! Of course, some of them, such as construction jobs, will be temporary. Some of them will be more permanent, though, especially if the governments of gas-producing states work with upstream operators to develop local hiring and training standards that expand the capacity of the local workforce.
All the Way Down the Value Chain
But the knock-on effect doesn’t have to stop there. In my most recent book, Billions at Play: The Future of African Energy and Doing Deals, I urged African oil and gas producers to look as far down the value chain as they could. I advised them to pursue projects that treated hydrocarbons not just as exportable raw materials but as inputs for value-added operations such as fertilizer or petrochemical manufacturing. I also suggested that they look for ways to focus on gas-to-power projects with the intent of improving domestic electricity supplies — and not just because new power grids would benefit African businesses.
It is true, of course, that some African businesses will be able to create more jobs if they do not have to worry about blackouts. Likewise, it is true that gas-to-power projects will create jobs of their own in areas such as construction, operations, maintenance, and administration. But it is also true that African households need and deserve access to reliable energy supplies, regardless of employment levels — and that gas-to-power plans can help them!
I’m hardly the only person to reach this conclusion. When I wrote Billions at Play, several African countries had already rolled out ambitious gas-to-power schemes. Nigeria, for example, was in the process of implementing a program that promoted associated gas as fuel for new power plants. Since then, others have followed suit. For instance, as the AEC’s energy outlook notes, Senegal has unveiled plans for using its future gas production to generate electricity for the domestic market. Mozambique already has a couple of gas-to-power projects in the works, too.
But it shouldn’t stop there. I’d like to see more gas producers do this as they ramp up gas production in the second half of the decade. If they do, they will have accomplished something beyond merely increasing output levels. They will have taken concrete action to strengthen their economies and benefit their own citizens. And in so doing, they will have made their mark on the world!
NJ Ayuk is Executive Chairman of the African Energy Chamber, CEO of Centurion Law Group.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Africa’s biggest telecoms company, MTN Group is facing shares scandals accusations with over 400 MTN employees filed an application for condonation at the High Court, pleading to have a matter in which senior executives stand accused of swindling millions of empowerment shares to be heard in an open court. Current and former MTN staffers are demanding over 200 million shares allocated to them over a decade ago in an employee share ownership scheme, saying their portion of shares was misappropriated in a trust. The trust, Alpine, was set up by MTN as an investment vehicle for the employees.
Group CEO of MTN, Rob Shutter
In October last year, the staffers threatened court action after failed attempts to get information from MTN and the trust regarding the shares. The group has now filed its court papers; the heads of arguments were filed last week. The dispute has pitted Africa’s leading telecoms company against its own employees, who vowed to hold the company and Alpine Trust accountable.
At the core of the dispute is the allocation of more than 200 million shares from an initial 309 million shares that had been set aside for the employees. The employees, who go by the moniker Tsunami Group, claim that in late 2002, company Newshelf 664 purchased 309 million shares in MTN at R13.89 a share, and the agreement was that an employee would have to work for six consecutive years to receive 100% participation ratio. In addition, they claim after settling the debt, there were over 200 million shares that were never distributed. The employees say the estimated value of the shares was pegged at R35 billion.
The Alpine Trust – which was headed by five MTN executives, including MTN Group chairman Phuthuma Nhleko and former CEO Sifiso Dabengwa – held Newshelf’s shares on behalf of the scheme’s 3 260 beneficiaries. The Alpine Trust aimed to allocate 75% of the benefits to black MTN employees. But beneficiaries of the scheme have claimed the trust reduced the amount originally allocated to them without explaining its process.
The Tsunami Group claims the scheme remains incomplete and suspect, accusing MTN’s chairman and six others of “continuing breach of their common law duty to account; together with the dereliction of their duty of impartiality, including avoidance of conflicts of interest; and their duty of due diligence in maintaining prudent oversight of investments”.
In the head of arguments filed before Justice Marcus Senyatsi last week, advocate Greg Fourie SC, representing Tsunami, says: “The applicants claim that the capital distribution to them remains incomplete and, indeed, suspect. Over the course of several years and many queries, the applicants to date have been denied a full accounting by the respondent.”
In order to verify their “true financial position”, Fourie says the group sought the expertise of “leading financial forensic expert in financial accounting and tax, namely professor Harvey Wairner. He has confirmed to the applicants’ attorneys that the information supplied to them by the trust is too limited to verify whether the respondents have, in fact, short-changed the applicants.”
Perversely, he says, “bona fide attempt to obtain specific documentation required by Wairner from the respondents – to which they were in any event entitled to by law as capital beneficiaries − was rebuffed by the respondents’ attorneys as premature discovery.”
Furthermore, the heads of arguments say MTN and other respondents have sought to delay ventilation of the main dispute at every turn “inter alia by objecting to amendments to the notice of motion and the filing of further affidavits, challenging the mandate of the applicants’ attorney (despite the filing of over 200 powers of attorney) and now by opposing this application for condonation.”
In his heads of arguments, Fourie says: “The matter is now at the stage that the key issue in dispute, being whether a full accounting has been made by the trustees to the capital beneficiaries of the trust, has been comprehensively ventilated in various affidavits.” In response, Nompilo Morafo, MTN group executive: corporate affairs, tells ITWeb: “The claim is against Alpine Trust and its trustees in respect of its shareholding in MTN. No relief has been sought against MTN. Given that the matter is before the courts (sub judice), we cannot comment any further.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
Tax evasion has robbed African countries of billions of dollars that could have been deployed to tackle infrastructural decay and poverty across the continent. This was made known by a new report from a nongovernmental organization, Global Alliance for Tax Justice. According to the Report, the African country with the highest losses from corporate tax evasion is Nigeria, losing $10.57 billion per year. Following are South Africa ($2.71 billion), Egypt ($2.12 billion), and Angola ($2.05 billion). Sudan loses $644 million, Kenya $502.4 million, Mozambique $452 million, Morocco $451 million, Algeria $434.75 million, and Ethiopia $362.66 million.
Algeria Suspends Tax
Of all the countries in Africa that has been experiencing heavy losses through tax evasions, Morocco is on number eight with a cumulative loss value of $521,534,833 annually. The group in their 2020 report on global tax evasion notes that of this sum, Morocco loses $69,923,248 to offshore tax evasion.
With offshore wealth amounting to only $3.7 billion, Morocco accounts for 0.0% of global offshore wealth. Its offshore wealth represents 3.1% of GDP. Revenue loss from untaxed offshore wealth, however, amounts to $69.9 million. Morocco also loses $451,611,585 per year to corporate tax evasion, giving the country the eighth-highest corporate tax loss in Africa.
While Morocco loses more to corporate tax evasion than Algeria, it does not inflict any loss on other countries by enabling corporate tax abuse, according to the report. In contrast, Algeria inflicts $550,339,691 in tax loss on other countries by enabling corporate tax abuse, even greater than Nigeria, which is responsible for $112,521,003 in lost corporate taxes.
Given the global COVID-19 pandemic, the NGO emphasized where these lost corporate tax resources could have been spent. The report calculates Morocco’s corporate tax loss as adding up to 20.24% of its public health budget. The loss could alternatively cover the average salaries of 130,186 nurses.
The report ranks Morocco as the 72nd biggest enabler of tax evasion and financial secrecy in the world. In the top spots are the Cayman Islands, the United States, Switzerland, and Hong Kong. Morocco’s most vulnerable trading channel — the channel through which the country is most vulnerable to illicit financial flows — is outward foreign direct investments. The report considers vulnerability as the “average financial secrecy level of all partners with which the country trades with or invests in for that channel, weighted by the volume of trade or investment each partner is responsible for.”
Morocco’s trading partners with the most responsibility for this vulnerability are France (44%), Mauritius (8.9%), and Luxembourg (8.7%).
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
73% of consumers in Africa and the Middle East (MEA) are buying more online since the onset of the pandemic. This is one of the results of a Mastercard study. The study provides insights into how Covid-19 is driving e-commerce adoption in the region.
eCommerce
The report shows that cash payments are subscribed at a breakneck pace by buyers. The various digital and contactless solutions in this area are gaining more and more ground. Mastercard is also promoting the digital goods and services that are on the rise are data top-ups, clothing, food, banking, and healthcare.
Mastercard study Africa ecommerce Mastercard study Africa ecommerce
Social networks have played an important role in this unprecedented phenomenon. 70% of respondents say they have discovered new sellers on Facebook. They are 59% to have had this experience on Instagram. The study shows many other things useful for e-merchants. She has seen the participation of companies, financial institutions, etc.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
African telecommunications giant MTN recently released a statement. In it, the telecoms company claimed that its MoMo mobile money service recorded 42 million regular users in September. This crowd is spread across 16 different African markets. At the end of 2019 and mid-2020, they were 25 million and 38 million respectively.
MTN
In the second period mentioned, transactions were 11,752 per minute and had a value of $ 61 billion. The operator thus shows its ability to take advantage of the growth of mobile money in Africa. It is faster on the continent than in any other place in the world. MoMo is therefore a flagship product of MTN.
Initially dedicated to depositing, sending and withdrawing money, the service meets many more needs now. Its users can use it as an electronic wallet, to take out loans, take out an insurance policy and transfer money. A range of possibilities that explain its success. This, especially since MTN reduced transaction costs this year.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions. He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance. He is also an award-winning writer
The Ghanaian government under the auspices of the Ministry of Communications has launched the Rural Telephony Project which aims to provide voice and data services for over 3.4 million people in underserved and unserved communities. The project which is in partnership with Huawei is expected to improve the lives of rural dwellers and bring them to level with many in urban areas. This initiative, in partnership with China National Technical, is expected to save the government up to 70% of the cost of traditional cell sites and extend the national mobile communication coverage from 83% to 95% – greatly accelerating local economic development while improving people’s livelihoods.
The President of Ghana, Nana Addo Dankwa Akufo-Addo
The Ghanaian President, Nana Addo Dankwah Akuffo-Addo says that “Government is committed to ensuring that every Ghanaian, irrespective of tribe, religion, class, location or identity has access to affordable and reliable voice and data connectivity”.
“To this end, the Ministry of communications and the Ghana Investment Fund for Electrical Communication (GIFEC) working in partnership with mobile network operators, like MTN, Vodafone and Huawei is rolling out a rural telephony project to provide data and voice connectivity to 2016 rural telephony sites, strategically located in underserved and unserved communities across the country.”
Ursula Owusu- Ekuful, the Ghanaian Minister of Communications notes that “no one, irrespective of their financial, economic, social status or location should be deprived of access to quality telephony services hence government’s keen interest in making sure that the project is delivered successfully and they intend to roll out 1000 sites by December”.
“I must congratulate GIFEC, Huawei and the Mobile Network Operators for working together to deliver this project. As policymakers, we will continue to provide leadership in implementing solutions and programs to facilitate rural connectivity.”
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
There is ample evidence that the existing financial sector regulation architecture in Ghana is not fit-for-purpose
Ghana’s financial sector is in crisis. A crisis occasioned by the collapse of over 300 financial institutions; and which has affected every division of the financial sector. Universal banks, savings and loans companies, microfinance companies, capital market institutions, and insurance companies have been impacted.
Woelinam Dogbe, President of the Alliance for Financial Consumer Protection (AFCOP)
While the majority of the collapsed institutions were licensed and regulated, a few were unlicensed and ought not to have been in operation. The fact that the unlicensed institutions were allowed a free rein to operate until their eventual collapse, speaks volumes about the existing regulatory regime and the safety of financial consumers.
Experts have identified the causes of the crisis to be: weak regulatory supervision, unethical behaviour by managers of the financial institutions, and poor corporate governance practices. In the specific case of the unlicensed institutions, their illegal activities flourished because of dereliction of duty on the part of regulators.
The devastation caused by the crisis has been severe and widespread. Apart from financial losses, consumer confidence in the financial sector has been significantly weakened. Some consumers have lost their lives as a result of the trauma of having their life savings locked up in collapsed institutions.
Unquestionably, there is the need for a regulatory regime that is fit-for-purpose. One that prioritizes the need to ensure the safety of institutions as well as prioritize the need to protect consumers. Thus, the necessity of regulatory reform is imperative.
Presently, the regulators of Ghana’s financial sector (i.e. Bank of Ghana – BOG, Securities and Exchanges Commission – SEC, National Insurance Commission – NIC and National Pensions Regulatory Authority – NPRA) have through their actions and inactions demonstrated that they prioritize Prudential Regulation (“ensuring financial institutions remain strong”) to the neglect of Conduct Regulation (“ensuring the safety and fair treatment of consumers”).
This lopsided approach to financial sector regulation has resulted in consumers suffering unfair treatment and exploitation at the hands of financial service providers. Examples of the mistreatment of consumers include: unfair pricing practices, unconscionable loan terms, misrepresentation of risks associated with products, mis-selling, product pushing, poor handling of customer complaints, etc.
The reform of financial sector regulation in Ghana must institutionalize conduct regulation and afford it the importance it deserves. This will require strong commitment from government to sponsor the needed legislation. This is the surest way to ensure the financial sector is safe and works well for all.
State of financial consumer protection in Ghana
Financial consumers in Ghana continue to suffer at the hands of financial institutions because of manifestly weak market conduct regulation. The present crisis has further exposed the deep-seated disregard and lack of commitment to financial consumer protection in Ghana.
A careful review of the regulatory interventions and policy prescriptions that have been implemented or mooted following the crisis have centered on “saving the institutions” with very little focus on “protecting consumers”.
While it is important to protect the institutions; because the safety of the institutions has implications for the safety of consumers’ deposits and investments, it is equally important to proactively protect consumers and ensure they are treated fairly and are not exploited.
Financial consumers are vulnerable and need to be protected from elements within the financial sector who would want to take advantage of this vulnerability to cheat consumers to rake in abnormal profits.
There is a widespread practice within Ghana’s financial services industry where providers; particularly banks and SDIs, arbitrarily increase fees on products and services that consumers have already signed on to. For example, it has become an annual ritual for banks and SDIs to upwardly review fees such as account maintenance fees, card maintenance fees, transaction fees etc. The only obligation the central bank has placed on the banks and SDIs is for them to give customers at least a 30-day notice period before implementing the fee reviews.
The point is often made by financial institutions that, if consumers are unhappy with the fees being charged, they are at liberty to switch to another provider. This argument is at best, disingenuous and laced with mischief because, as things stand today, it is very difficult for consumers to switch banks or SDIs. For example; banks and SDIs mirror each other’s pricing; thus, when one bank or SDI introduces a new fee or increases an existing fee, the others follow. Therefore, if a consumer decides to switch, he or she will only be “jumping from frying pan to fire”.
Sadly, the regulators who ought to ensure consumers are treated fairly are themselves the guilty party. For example; the National Insurance Commission (NIC) recently implemented new pricing dynamics for motor insurance. The stated objective was to sanitize pricing practices and mitigate systemic risks resulting from price undercutting. Unfortunately for consumers, the consequence was a steep increase in premiums.
The steep premium increases priced out millions of consumers from comprehensive motor insurance cover. Consumers were made worse off and were exposed to severe loss as a result of being priced out. It took massive public uproar and resistance from insurance companies for the NIC to roll back some of the elements that caused the price hike.
It is important to note that, unfair pricing is only a minutia of the mistreatment consumers receive. Others include issues such as financial institutions pushing high risk products to vulnerable consumers. Product pushing and mis-selling exist but there’s no record of regulators punishing, naming and shaming institutions that have engaged in such bad behaviour.
Best practices in financial consumer protection in Africa
There are pockets of great examples of proactive financial consumer protection across Africa. Some regulators on the continent are living up to expectation and doing what is required to ensure consumers are protected and treated fairly.
One of the shining lights is the Bank of Zambia (BoZ). The BoZ in September 2018 issued a notice titled “Bank of Zambia notice to the public on the prohibition of unwarranted charges and fees directives of 2018”. In the said notice, the BoZ detailed a list of twenty-six (26) charges and fees that it had prohibited.
The charges and fees prohibited by the BoZ included: initial debit card issuance fees, debit card maintenance and renewal fees (annual, quarterly or monthly), commission on turnover activities on account, automated teller machine (ATM) surcharges, point of sale (POS) transaction charges (own bank customer and other bank customer), charge for balance and other account inquiries by a customer over-the-counter or any electronic platform, among others.
The Central Bank of Nigeria (CBN) is also worthy of applause. The CBN has taken some steps to ensure banks in Nigeria handle customer complaints in a timely and effective manner. It has instituted and published a fine grid for improper handling of customer complaints and delays in resolving customer complaints. The CBN’s policy of naming and shaming is commendable. When consumers see and feel that the regulator is acting and sanctioning errant institutions, their confidence in the financial system grows. The CBN recently sanctioned some errant banks and fined them as much as 2 million Naira (circa USD5,200) for breaching various consumer protection mechanisms.
Another regulator leading the way is the Central Bank of Egypt (CBE). When the coronavirus pandemic hit, the CBE championed several initiatives that not only focused on keeping the institutions afloat, but also rolled out deliberate interventions to bring tangible relief to consumers.
The CBE instructed banks to cancel ATM withdrawal fees and points of sale (POS) fees for six months. It also instructed banks to give 6 months repayment holiday to individuals and businesses impacted by COVID-19. Also, the CBE instructed the suspension of late fees (penalty interest). Furthermore, in an effort to reduce cash handling, all bank transfers within Egypt were exempted from fees and charges.
Challenges with Ghana’s financial sector regulation architecture
There is ample evidence that the existing financial sector regulation architecture in Ghana is not fit-for-purpose. The recent crisis has badly exposed this fact. Aside the loopholes in prudential regulation that are at the root of the crisis, the neglect of conduct regulation is a major cause for concern. This needs to be addressed, lest we risk another crippling crisis.
The major drawbacks of Ghana’s existing financial sector regulation architecture are:
The financial sector has become entwined; but still operates with siloed regulators. The financial sector regulators are biased towards prudential regulation and have limited capacity for conduct regulation. The financial sector lacks an effective institutional mechanism to set and enforce market conduct standards.
Ghana’s financial sector has evolved to the point where banking halls have become distribution points for non-bank financial products. Today, banks are distributing insurance, capital market, and pension products. Even mobile money operators are distributing banking, insurance and pension products. Thus, the financial sector has become vastly entwined. However, regulation has lagged behind the sector’s evolution. The sector still has fragmented regulators (i.e. BOG, SEC, NIC, and NPRA) operating in silos and overseeing both prudential and conduct regulation for their respective industries.
Having an entwined sector with siloed regulators presents peculiar dangers to consumers. It becomes a complicated proposition for consumers when, for example, they buy a non-bank product (i.e. insurance or capital market product) through a bank and are faced with a challenge that needs a regulator’s intervention to resolve. Or; when a consumer buys a pension product through a mobile money operator and is unfairly treated, knowing which regulator to approach can be unsettling and stressful.
Furthermore, when a novel ponzi scheme emerges, the siloed regulators pass the buck and are hesitant to take responsibility to stop harm to consumers. A classic example is the Menzgold scam that swept through the country a few years ago; and left in its wake millions of victims. In the Menzgold case, instead of the BOG and SEC taking decisive measures to shut down the scam, they pussyfooted and took to issuing statements to say Menzgold was not licensed to operate.
Secondly, the fact that the current architecture does not prioritize consumer protection is abundantly evident. Unlike in best practice examples from Zambia, Egypt and Nigeria where the BoZ, CBE and CBN respectively have been proactive in implementing effective measures to protect consumers and ensure they are treated fairly, the opposite is the case in Ghana.
The regulators in Ghana have adopted a laidback attitude towards the subject and have in some cases merely designated units as being responsible for market conduct, in an attempt to window dress the issue.
Thirdly, the financial sector lacks an institutional mechanism to set and enforce market conduct standards across the sector. As a result of the lack of standards, actions and inactions of financial institutions and regulators that are injurious to consumers are not flagged and nipped in the bud. Also, since there are no standards, bad conduct is allowed to fester to the detriment of consumers.
The absence of standards also breeds the consequence of consumers not being aware of their rights and remedies available to them. Thus, they are unable to shield themselves from exploitation and unfair treatment. Consumer education is poor; and mostly non-existent, because the regulators have shunned this duty of care.
Political Commitment
The reform of financial sector regulation can only happen with unalloyed commitment from government. The intricacies of Ghana’s political system make it such that, the required legislation to birth the reforms needs government backing and sponsorship.
It is therefore welcome news that Ghana’s main opposition party, the National Democratic Congress, through its leader, H.E. John Mahama, has promised to “establish a Financial Services Authority that will be responsible for ensuring that consumer markets work for consumers, providers and the economy as a whole” if voted into power.
It is hoped that the proposals made in this article will be adopted and incorporated in the reform of Ghana’s financial sector regulation architecture.
A proposed fit-for-purpose financial sector regulation architecture for Ghana
To forestall future crisis in the financial services sector and advance consumer protection, effective and fit-for-purpose regulation architecture is critical. It should be a regulation architecture that proactively identifies problems and nips them in the bud, one that severely punishes wrong doing, names and shames, and one that resolves the imbalances between prudential regulation and conduct regulation.
It is against the foregoing background that the following proposals are made:
Decouple prudential regulation and conduct regulation. This calls for discarding the current model that warehouses prudential regulation and conduct regulation in the same institutions. An effective and efficient decoupling of prudential regulation and conduct regulation will resolve the challenges enumerated.
Task the existing industry regulators (i.e. BOG, SEC, NIC and NPRA) exclusively with responsibility for prudential regulation. Thus, the responsibility for conduct regulation must be taken away from them.
Establish a single independent conduct regulator. The new entity will be the sole regulator of market conduct across the entire financial services sector; i.e. banking, insurance, securities and pensions. The proposed architecture is a unique adaptation of the Twin Peaks Model. In the typical twin peaks model that exists in counties such as the United Kingdom, Netherlands, New Zealand, Australia, and South Africa among others, there are two regulators – one focused on prudential regulation of the entire financial services sector and the other regulator focused on conduct regulation of the entire financial services sector.
In the United Kingdom, for example, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are responsible for prudential regulation and conduct regulation respectively. The two entities (PRA and FCA) were formed in 2013 in a wave of regulation reforms following the 2007 financial crisis. Hitherto, a single entity was responsible for both prudential and conducts regulation until the split in 2013.
In the proposed model for Ghana, each of the industries (banking, insurance, capital markets and pensions) within the sector will have independent prudential regulators. There may be too much disruption if an attempt is made to have a single prudential regulator for the entire sector at this point. Perhaps, in the next phase of reforms, having a single prudential regulator for the sector may be considered. For now, the focus must firmly be on a single conduct regulator.
The benefits of the proposed model – having a single independent conduct regulator and industry-specific prudential regulators – are evident.
The industry prudential regulators will focus on keeping the institutions sound. They will have the mandate to set prudential requirements and to ensure compliance. In addition, they will be clothed with the power to license institutions for their respective industries.
The single independent conduct regulator will ensure that consumers are protected across the entire financial services sector. It will ensure institutions conduct themselves properly in the market. It’s core focus will be on areas such as: product suitability and safety, fair pricing practices, resolution of customer complaints, among others.
No new product can be introduced onto the market without the prior approval of the conduct regulator. Neither can an approved product be modified without the express approval of the regulator. Before the conduct regulator approves a product, it must ascertain that the institution submitting the product for approval has been duly licensed by the appropriate prudential regulator. Such a regime will prevent scams like Menzgold, DKM, and the others from taking root.
The independent conduct regulator will have the power to stop an institution from operating in the market if it deems its products or practices to be harmful to consumers or other market players. More importantly, it will have the power to prosecute institutions and/or individuals if their activities pose a danger to consumers or if they are found to be behaving badly or to have behaved badly.
With the proposed single independent conduct regulator, consumers will have a single point of contact for all complaints or challenges they have with any financial institution. Thus, the challenge of having to contend with many regulators in an entwined financial sector will be eliminated.
The proposed regulator will set market conduct standards, proactively police the market to ensure it is safe for all participants, punish, name and shame offenders, and educate consumers on their rights as well as on how to protect themselves in the market.
Operationalizing the proposed architecture will be easy to do. Marshalling the needed human capital to staff the proposed independent conduct regulator should not be difficult. The various industry regulators currently have some staff who ostensibly are tasked with monitoring market conduct. These staff can be pulled out to form the nucleus staff of the new institution. The nucleus staff would need to be augmented with professionals with the requisite technical expertise.
If there’s a silver lining in the crisis that has hit Ghana’s financial sector, it is that it presents a golden opportunity to reform Ghana’s financial sector regulation architecture. The time to act is now!
Woelinam Dogbe, President of the Alliance for Financial Consumer Protection (AFCOP)
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
A new report has identified Kenya, South Africa, and Cameroon as the top three African countries most hit by mobile fraud in the continent. In a new survey carried out by cybersecurity company, Evina, these African countries face suspicious mobile-based billing transactions of 51%, 30% and 10%, respectively. Speaking on the findings, David Lotfi, the CEO of Evina said that “Africa’s youthful population that is mostly unbanked and using some 900 million mobile money accounts is particularly hard-hit by professional cybercriminals from around the world, who together cost Africa some $4 billion every year.”
David Lotfi, the CEO of Evina
Fraudsters are impacting the long-term sustainability of the digital advertising and mobile payments industries, in particular, by perpetrating thousands of mobile-based fraud attempts daily. Direct Carrier Billing (DCB) where users are billed for purchases directly on their phone bills is being impacted by two primary forms of mobile fraud: clickjacking where a fraudster intercepts a legitimate click and unknowingly directs the user to a website where sensitive financial and other details can be stolen, and malicious apps that seek to do the same.
While embedding malware in malicious apps can be a more refined fraudulent technique, clickjacking is a very basic type of fraud that has been around for at least five years and mostly eradicated in large parts of the mobile world.
“Fraud is a feasible obstacle to overcome and there really is no excuse for the fact that one in three mobile subscriptions attempts in South Africa, for example, is fraudulent. Fraudsters who continue – in 2020 – to steal Africa’s wealth can be beaten with the right tools that we already use to protect millions of mobile transactions every day,” adds Lotfi.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
