A chain is only as strong as its weakest link
A lot of the news lately has been focused on South Africa’s possible downgrade to junk status. Some say that bit is inevitable, some are positive that we may be doing enough to avoid the feared drop.
Education is a major catalyst to growth, but a lack of education is also a catalyst for a downward slide into dark territory. The Insurance Institute of South Africa, along with iToo, recently launched their iToo Premium Learning Centre which has the core focus of increasing financial services education within the industry.
“The core priority of this training is to support and enhance skills and knowledge in the insurance industry,” says IISA CEO David Harpur.
Speaking at the launch of the learning centre, Delphine Maidou – CEO Allianz Global Corporate & Specialty (AGCS) Africa said that we need to fight for our position as a prime investment country.
Support is key
When we look at any downgrade to junk status, we are aware that a major contributing factor to the decision is the political landscape of the country and the faith that the public has in the policies that it implements/carries out.
Not only are we facing one of the biggest economic crisis of our time, but there is very little support from within the country to resolve the situation.
“People and businesses are getting scared of the socio political environment that they exist within and are moving out of the country. Whether this is a physical move or a movement of capital out of the country; this is sending a very bad message to international ratings agencies who are watching the country,” said Maidou.
“We do not need to sound the alarm bells of what will happen if we are downgraded to junk status. That has already happened. But we will see significant capital outflows, further currency depreciation, and the wholesale loss of investor confidence and increased borrowing costs. Can we afford to have this? Maidou asked.
Home is where the heart is
A lot has been said about the negativity associated with the current economic environment that we find ourselves in. But are there any positives?
“While there are a number of international investors who are sceptical about investing in South Africa, there are others who are seeing the opportunity that the country boasts. Africa is a growth market and when compared with other African countries, South Africa still has an established democratic government that has strong policies,” said Maidou.
We also have some of the top performing companies on the continent. Africa is the world’s fastest growing developing market, and 35% of the continents biggest companies are South African companies. When one looks at the insurance industry, 80% of the continents insurance premiums are held within South Africa.
“Investors need to see the potential that South Africa holds. Many companies can use South Africa as a springboard to expand into other countries on the continent, and they can get a good understanding of the challenges facing growth markets by operating within our borders,” said Maidou.
Turnaround strategies
There is a lot of truth in the positivity shown when it comes to South Africa. Sure we have challenges, but do they outweigh the challenges?
The major source of frustration is that South Africa sees itself as a young adult with all of the potential in the world to do good things, but we are being held back by a government who seemingly have lost touch with the people. We are all aware that the winds of change need to blow through the country, but we cannot be a nanny state and wait on government to facilitate this change. Mahatma Gandhi once famously said that we need to be the change that we want to see in the world.
One of the major areas where change needs to occur is in education and skills development. There needs to be a significant focus on this within the insurance industry if we want to re-enforce ourselves as a continental financial services giant.
There also needs to be a significant investment in infrastructure development. Gone are the boom years of 2010 where there was significant activity in this area. Maidou says that this spirit needs to be reignited and there needs to be involvement from the insurance industry across the whole value chain; from the cradle to the grave.
Finally, there needs to be an effective response to the changing climate and the decline in agricultural outputs across the country which has always been known as an agricultural powerhouse. Insurers need to focus their attention on the promotion of renewable energy projects and the supply of micro insurance which will help farmers in drought stricken areas.
Editor’s Thoughts:
We are increasingly realising that we are our own worst enemy. Government can no longer ignore the fact that it is compounding our economic woes, but we can also no longer say that we are also not contributing towards it. The local situation may look dire, but we need to have confidence in our own resilience and have the confidence in our own ability to avoid junk status. If we cannot believe in ourselves, who else will? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.
