Doing business in the new normal

B7: What is Alexander Forbes' outlook for the Namibian economy as a whole, and for the financial services industry in particular?

MT: Economic growth has slowed down at a time when government debt remains high, while demographic changes and technological advances are reshaping the economy.

According to the Bank of Namibia’s economic outlook report of February 2021, Namibia’s economic performance is expected to improve during 2021 and 2022 with real gross domestic product (GDP) growth projected to be 2.7% and 3.3%, respectively, from an estimated contraction of 8% in 2020. The growth will largely be due to improved output in the diamond mining, agriculture and transport sectors.

Risks to domestic growth remain mainly due to the Covid-19 pandemic which will result in continued travel restrictions, which in turn will slow down recovery, particularly in the tourism sector. The prospect of subsequent waves of Covid-19 is also a concern. Other risks include the persistently low international prices for some of Namibia’s export commodities such as uranium. Unpredictable weather patterns are also a concern as Namibia is prone to floods in the northern parts of the country.

B7: How important is the financial services industry for the economy and how can it help to spur economic recovery?

MT: The financial services sector is key to the economic and social well-being of Namibia, in which Alexander Forbes is a key player. The sector is key to the country for the following reasons:

• Acts as an intermediary, by transferring resources between borrowers and savers;

• Provides liquidity, by enabling market participants to convert their assets into cash at short notice without a loss in value.

• Transfers the risks of the holders of real and financial assets to those best placed to manage them and for it to be used for risk taking in terms of innovation and entrepreneurship.

More importantly, the sector enables government to raise both short-term and long-term funds to meet both revenue and capital expenditure. Through the money market, government can raise short-term funds through the issue of treasury bills. These are purchased by commercial banks out of their depositors’ money.

In addition to this, government can mobilise long-term funds through the sale of government securities in the securities market which forms a part of the financial market.

The most important benefit for any government is raising finance without offering any security, and the financial services sector plays a key role in this regard.

B7: What are the major growth opportunities for the industry and how can it tap into those?

MT: With rapid globalisation and technological changes, financial service providers have to adapt by innovating and adopting applications and digital platforms that are risk-free, regulatory compliant and driven by customer needs. The development of a consumer-centric approach is essential in this regard.

Automating financial processes and concentrating on areas such as Microsoft Power BI Data Visualisation Tools and analytics, enhanced customer experience and risk and compliance management are some of the ways financial service providers can keep track of the increasing magnitude of changes and digitise the products and services provided.

B7: What are the biggest challenges facing the industry and how can those be tackled?

MT: Financial service firms are prime targets for cybercrime because of the sensitive data they carry. Each attack can result in extensive financial costs for companies and result in reputational damage. Therefore, to combat these challenges, they need to come up with innovative solutions to stay ahead of cybercriminals and at the same time ensure compliance with regulatory requirements.

When it comes to meeting the needs of consumers, it is now more important than ever for financial service providers to offer more personalised services based on consumers’ personal circumstances. Automation and digitalisation of services are also becoming increasingly important and a key competitive advantage.

Competition within the financial services industry is very strong and those companies which are continually adapting and innovating their service offering and how they meet consumer needs, will be able to not only retain but grow market share.

There is need for continued investment in technology such as robotics and other workflow automation tools to increase efficiency and reduce costs associated with operational, risk management and compliance. This includes modernising technology platforms and data storage to enable big data solutions, as well as provide a more efficient, customer-friendly experience across internet, mobile and physical locations.

B7: How much pressure has the Covid-19 pandemic put on the industry?

MT: The Covid-19 pandemic has disrupted many industries, with some proving to be far more resilient than others. The impact for the economy as a whole has been felt through a decline in GDP and significant job losses. Tourism, hospitality, construction and the informal sector have been particularly hard hit.

Risk sentiment in the industry has rapidly worsened which has prompted a series of repo rate cuts by the Bank of Namibia, relaxation of macro prudential requirements (such as the extension of due date for the submission of tax returns) and other programmes to support liquidity. Going forward, our fiscal and monetary authorities are expected to continue with an accommodative monetary policy and easing of macro prudential regulation to support the economy.

B7: How is the industry mitigating the impact?

MT: At Alexander Forbes, we have moved with speed to create a new Alexander Forbes and new ways of work.

We responded to the lockdown with speed and agility, with most of our employees in Namibia and across the group working from home. The company has also improved and enhanced our processes to meet the majority of all our client service level agreements and have monitored productivity.

Our new way of work will embrace flexible, transparent and productive working conditions with a transition to improved workflow, automation and work from home capability for most of our staff to ensure minimal disruption to our client servicing. Our clients remain at the centre of our business and we are committed to providing the most relevant and appropriate employee benefits and investment advice in these uncertain times

B7: How important is that government, the private sector and consumers work as a team to ensure sustainable economic growth?

MT: Collaboration between government, the private sector and consumers is important to promote peace and stability, while addressing trade obstacles, climate change, corruption, cybersecurity and the opportunities and challenges brought on by the Fourth Industrial Revolution. Government should act as an enabler for the private sector to help solve problems. By working together, the growing sophisticated financial needs of consumers can be met.

Specific areas government can enable is to enhance the ease of doing business with the aim of promoting foreign investment in the country. Economic policies need to strike a balance between supporting growth and creating the fiscal space to respond to economic challenges given the weak growth prospects and significant downside risks. This means executing on fiscal consolidation now.

Corruption needs to be tackled decisively to help raise additional resources and redirect them to growth-friendly areas, while restoring the integrity of institutions. This will in turn spread economic benefits more widely within and across the country.

This will enable profitable opportunities for investors in the private sector to take on the risks of introducing more innovative business solutions, new ways to deliver product offerings and services to fit consumers’ needs and promote sustainable economic growth.