The lack of a centralised form of data that securities industry players can connect to get information about the transaction records of clients is a great challenge to fighting systemic risk.
Mr Kwabena Boamah, Chief Investment Officer of STANLIB Ghana Limited, said the absence of such data or information among financial market players allowed individuals and institutions to undertake multiple borrowing transactions thereby over exposing lending firms when their businesses collapsed or failed.
“So when we talked about systemic risk we are looking at a situation where one small failure leads to a broader impact that can bring down a whole firm and once that whole firm goes down it has ripple effects on other institutions,” he said in an interview at the 2017 Ghana Securities Industry Association’s Capital Market Week Seminar.
“That is what leads to systemic risk because we don’t have information that will help industry players make good investment decisions,” he added.
Mr Boamah said data and disclosure were so critical to help institutions to manage the risk because it would allow them to be able to cap the limit to the individuals and institutions to avoid a ripple effect when they blew up or one person failed them.
“Lack of data and lack of disclosure make it difficult to manage systemic risk and that is what actually leads to it because the institutions are not able to cap the limit to the financial institution and when they blow up or one person fails then it begins to have a ripple effect on any other person,” he said.
Aside the lack of data and disclosure, one thing about systemic risk was also the credit due diligence process, saying that the kind of robust or skills that the people in the institutions had to be able to access risk appropriately was important to manage the risk. He said the ability to access the risk was important to managing the risk, adding that if the ‘credit due process or the skills set was not strong it became difficult for an institution to be able to access the level of risk and to plan for it.’ Mr Boamah said in some instances institutions failed to do detail analysis because of the over confidence about the performance of the company.
“Another thing about systemic risk is when we begin to have that notion that an institution is too big to fail and probably to a large extent in the country it would be more of too trusting, that a financial institution is doing everything right and that they are not going to fail and instead of undertaking proper due diligence on them we rather renege on those due processes,” he said.
He stressed the need for capacity building of persons who handle the credit and evaluation processes to enable them develop the appropriate skill sets and the knowhow to end risk in the bud.
There is also the need to strengthen corporate governance since adherence to proper procedures by firms and institutions would in itself diversify systemic risk and bring about some soundness in the financial markets.
“Beyond the corporate risk and corporate governance we have the individuals themselves. It is time for strong ethical professionals who can put their work on the line because they believe in certain values and would not do certain things no matter what the board is saying they would hold on to those restrictions,” he added.
Victoria Falls municipality has applied for city status, with the local authority saying it has capacity and adequate infrastructure to warrant the upgrade.
The country’s prime resort town was conferred municipal status in 1999 and submitted an application for consideration to be a city early this year. Government dispatched a five-member commission headed by principal director responsible for urban and local authorities in the Ministry of Local Government, Public Works and National Housing, Erica Jones to assess the town’s suitability.
Jones said details of the commission’s findings will be contained in a report which will be presented to Minister of local government.
“The municipality has communicated very well and we heard wide evidence from all sectors including residents. We are therefore going to make a report and submit to the minister who will then make recommendations to President Mugabe,” she said.
She said details of the commission’s findings will only be known through a report to the local government minister. Town clerk, Ronnie Dube said Victoria Falls has a viable tourism industry that qualifies it for city status.
“We have made our submissions and all we can do now is hope for government to confer us with the status. Being the tourism hub, the town is strategic to the country and we also have capacity in terms of infrastructure and human resource hence we are hopeful,” said Dube.
Mayor Sifiso Mpofu said Victoria Falls has better facilities than some cities in the country. The town has a population of more than 38,000 people according to the 2012 census. The town boasts of 12 hotels and dozens of lodges that are complemented by a state of the art Victoria Falls International Airport.
Victoria Falls was accorded Special Economic Zone status early this year while plans are also underway to build a Disneyland-style theme park at a cost of $460 million with an agreement already having been signed with Chinese investors.
A familiar scene plays itself out daily whenever I visit my local 24-hour convenience store in the northern suburbs of Cape Town. Despite the early hour, there is a flurry of activity. A fleet of blue and white-striped cars parked in the lot tell me that the city’s traffic officials are also in the vicinity.
The South African Police Service make an appearance – two officers furtively dart in and out of the convenience store for their discounted coffee and leave in their brightly marked white pickup truck.
And last, private security – a fleet of them. A couple of them weave through the crowds in their bulletproof vests, their handguns strapped to their cargo pants, while the rest sit in their bright vehicles across the road. They do this every morning. They never seem to be off duty, always visible, always present.
Seeing this over and over has made me reflect on what “policing” actually means in Africa, and in particular the role of private security which, in many respects, provides more of a foundational order of safety than any forms of public policing on the continent. Very few countries on the continent keep consistent and reliable tabs on the size and nature of the private security industry. But it can safely be argued that the industry is deeply embedded in policing Africa – and that it is on the rise.
But private security is highly contested and beset by a number of problems. These include poorly paid guards with few or no benefits, skills or training who operate in conditions which are substandard and even dangerous.
The industry has been linked to criminal entities and accused of human rights abuses. It is accused of being either unregulated or under-regulated. Above all the industry has been charged with perpetuating inequalities in security provision, as only those who can afford it will benefit from it.
The future of private security is beset by two main challenges. The first is a conceptual one: is it a public or a private good? Is private security seen as a relevant player in policing?. And the second challenge is a regulatory one. What forms of regulation would be required to align private security with the public interest?
Private security is involved in a broad range of activities across the continent centred on protecting space, people, and assets. Their activities range from safeguarding communities to protecting ships at sea.
Private security companies range from tiny operators to those that employ thousands. One example is G4S, one of the largest on the continent with operations in 24 African and with 120,000 employees.
In South Africa the number of businesses in operation is just under 9,000, according to the Private Security Regulatory Authority. Almost two million security guards are believed to be in circulation, about half a million of whom are on active duty.
Many countries in Africa have reported an exponential growth in the industry over the past couple of decades In South Africa the number of companies have doubled in the last 12 years and now outnumbers the public police force by three to one.
There are many more examples across the continent – as numbers of private security personnel outnumber and outperform their public counterparts
There is a conceptual problem around private security. Western scholarship has conceptualised public policing as a service that provides a public good to citizens by being democratic, effective, accountable and equitable
Alternatively, private policing is conceptualised as only offering a private good, benefiting only those who can afford it. In fact the reality is far more complex. It is clear from research conducted on African policing in a range of countries that the public police more often than not provide policing that isn’t a public good because it’s corrupt, politicised or hostage to political patronage.
And some research shows that in fact the private sector may offer policing for a public good. It’s therefore not appropriate to link public or private policing with the provision of public or private goods because, in reality, public goods policing can be provided by a private entity if the conditions are right.
But what are these conditions? How can we harness the capacity of private security on the continent? And what needs to be in place for policing – both private and public – to provide for the public good and not solely private or vested interests?
The answer lies in regulation.
What forms of regulation would be required to align private security with the public interest? We cannot rely on state regulation alone – as the state may often be complicit in perpetuating the bad aspects of the industry – through, for instance, patterns of state ownership of private security companies and the industry being used to perpetuate political and criminal patronage.
What this means is that we should consider innovative possibilities in aligning private security to the public interest in ways that promote safety. There are plenty of examples we can learn from if we’re willing to remove our conceptual blinkers and recognise the value of private forms of policing and work towards transforming and regulating the bad aspects and harnessing the good aspects.
These are the issues that need to be addressed if we are to fully appreciate the capacity of the private sector in a way that benefits the continent, rather than undermining it.