“Good governance will attract investment flow”

After participating at the World Economic Forum (WEF) held recently in Davos, Kunle Elebute, National Senior Partner, KPMG, Nigeria and Chairman, KPMG West Africa, shared his experience with Hope Moses-Ashike saying that if the African countries are better governed, it will attract much more investment flow, increased economic activity, and among others create more jobs.

 
What were your key takeaways from the recently concluded World Economic Forum (WEF) in Davos, which you attended and how did the deliberations at the forum affect the issues in Nigeria?
The theme for the world economic forum was about responsive and responsible leadership. The discussion was around leadership in business, government and leadership in general. The event happened at a time when there is a transition from one president to another in the US. Also, we had a recent transition in UK. A big part of media splash was that the Chinese premier came to WEF for the very first time ever. Many business people felt that perhaps this was Chinese time because among the big countries in the world, China has shown responsible leadership. The US election went on a very upheaval manner; UK prime minister emerged on the back of Brexit. She was not elected by the people but was chosen by the party. France is going for an election. There was so much turmoil in Africa. At that time, we had issue with Gambia. However, Ghana that had successful election in one hand. So, there is global turbulence in the economy.
The question people are asking is does our generation have a leadership problem. Why is it that we are not able to have the kind of leaders that will take us to the next political experience of global economy? I think the topic was apt for the global economy in one hand and also political leadership. Secondly, this current leadership has posed a lot of uncertainty as to where exactly the global economy is going to. Donald Trump has so many different ideas that he wants to throw out, which may completely re-order future agreements.
If you listen to Trump’s inauguration speech, he talked about America first, before others. So, many countries are saying to themselves: ‘Let’s consider our own issues first, before the consider others.’ Whereas, we all grew up where the global economy was all about inter-dependency, helping each other, creating economic integrations, we had the North America Treaty Organisation (NATO), and creating security forces. Look at what happened in Gambia for example, Nigeria and Senegal had to send their soldiers down there and overnight, an ECOWAS force was put together. That was how the world evolved over time. But these leaders are saying they want to put their countries first before others. That creates a lot of uncertainties. People don’t know what the new world would look like in the next 15 to 20 years.
Therefore, Davos was about responsible and responsive leadership. Leadership that would be responsible to the people, and also to ensure that there are the right set of policies like climate change and other things that would ensure that the global economy continues to prosper. Again responsible leadership is about taking responsibility for your people, livelihood to ensure that poverty and hunger is reduced, ensure that there is right education for the people and creating jobs.
Do you not think that the idea of “America first” or “Ghana first” or “Nigeria first” will pose a challenge to regional integration across the globe?
It poses a challenge, but I think we have to take it from a different dimension as a country. We are a developing country and there are so many things we have not done to ensure that our people have standard of living that engenders employment. People go to university today and there is no certainty that they will get a job, even if they get a job there is no certainty of livelihood. We have no water, power, security of life and property is not guaranteed. That is not how I believe a country should evolve or develop.
One of the major problems we have in this country is lack of responsible leadership. What policies do you think should be put in place to overcome these challenges?
When you have leadership that is not responsible coupled with the fact that government controls so many things it makes the citizens and environment much more difficult to develop and evolve. So, my own philosophy is that government should stop what it cannot do. Government cannot run the airport. It should just concession the airports to those who can run it. It cannot run the refineries, Petrochemical plants, pipelines or power plant. It should hand over to private sector, whether they privatise them or concession them as the case may be it gets return. When the business is run properly or efficiently and profitably, it will make profit. Before the business can pay dividend to the shareholders, it must pay tax. So the first outcome of a profitable company is tax. It is after a company pays tax that it pays dividend from what is left over. In many cases the tax that government would get would be much more than dividend. So government return on any business enterprise is tax.
How can the private sector intervene in infrastructure deficit?
I can break down infrastructure into various components. There is power infrastructure, transport infrastructure and social infrastructure. Power infrastructure we know is electricity. We know we have not delivered on electricity. In transport infrastructure there is rail, road, airport and port. These infrastructures typically over the years, globally government used to be in control before but in the last 30 to 40 years in many countries across the globe; it has been proven and tested that private sector money and capital run railways, ports and roads.
If government is really serious, it needs to show some level of commitment. We did the ports under former president Obasanjo and we stopped. Okay, if today you wake up and do airports and couple of railways, then the private sector knows that the government is serious and wants to attract private investments because infrastructure is a long-term investment. Before someone can wake up and say he wants to commit his investments in 20-year infrastructure for railway or airport project, that government has to be seen as serious and committed. Both parties have to be committed towards that infrastructure. So, the first step is for government to show it can deliver on its promise, allow private sector to come in and let us see it work for few years.
How can government help improve liquidity at the stock exchange?
The Nigerian Stock Exchange is not a full representation of our economic activity because we don’t have upstream oil and gas, telecom and other companies on the stock exchange, in effect, there needs to be some sort of incentives for those companies to come to stock exchange. Until we have companies that represent key Nigerian sectors, including agriculture, oil and gas, telecom, on the exchange, the NSE is still small part of our larger economy. Why won’t companies come to the exchange? They will not come to exchange when they do not believe it will benefit the shareholders. They will not come to the exchange when they do not think the government regulation is creditable and stable. They come to the exchange because they are looking for finance and investment. If I can get finance and investment without being in the exchange, how will I come to the exchange? The whole philosophy of stock exchange is to grow the private sector. So the overall philosophy is that government wants to grow the private sector for the benefit of economic prosperity. If a country sees an exchange as a way to prosper the economy then why will people not come to the exchange? I do not know if you remember the history of Margaret Thatcher, former UK prime minister, she was the one who privatised the British Airways, British petroleum, British gas, she took them to the exchange and made sure nobody bought majority shares but the shares were sold to large population of the people and as a result many more businesses came to the exchange, more capital was flown to the exchange and the exchange prospered. But that was her own philosophy, which said private sector can run the economy than the public sector. For me responsible leadership in the political arena is to deliver economic prosperity to its people. If you cannot deliver economic prosperity, why are you in political office? That is how political office ought to be.
What is the future of the financial services sector in relation to block chain?
I am not an information technology expert. Block chain is a medium of exchange where two parties in a transaction, do not have to exchange money. Before the advent of money we used to use cowries and before cowries it was trade by batter.
So block chain is an advanced medium of exchange which is done through technology. We are not there yet because the regulation around block chain is not clearly defined. I think we are very far away from block chains. There are some block chain transactions happening around the globe, but we are still very far from it. You know, when something starts very small, as human beings, we should not rule it out. Something may trigger block chains to become dominant. After all, the dollar was not a global currency. It was gold that was the medium of exchange, until OPEC decided to start using dollar as a currency for buying and selling crude oil and suddenly, dollar became the medium of exchange around the globe. What would be the next global currency? Is it the block chains? Is it the Chinese currency? Nobody knows. So, these are all the things that are unpredictable. But in the main time, we need to fix our country. We need to get prepared for when these things would happen, so that we would be in a vantage position to take advantage of these when the need arises.
One of the issues in Lagos is population boom due to crisis in the North East. There has been influx of people into Lagos State. What do you think government should do to tackle this?
Migration is also a function of regional disparity. Regional disparity comes to focus where there is better education; better standard of living, better livelihood, and better infrastructure, human beings will migrate. Why is there migration from Africa to Western Europe? Why do people risk going across Saharan desert, risk going across Nigerian sea? It is for better livelihood. Why do people move from North East to Lagos? It is for better livelihood. It is because governance in Lagos has improved. Some of the roads in Lagos two years ago were poorly maintained. Today some of the roads are better. Does it not make it easier for me to do business? The answer is yes. Won’t I pay my taxes? The answer is yes. How can government tackle it? We are a federation of 36 states; every state has to do its own. Every state needs to also provide employment for its people, put infrastructure for its people, use the tax payers money to provides what the people need. How many states in Nigeria collect taxes? How many go to Abuja to collect money from federation account? There are some states or city where if you drive one side of the road, the other side is covered with refuse because the local government chairman there cannot collect refuse. Do you see refuse on the roads in Lagos? The answer is no. Is somebody not collecting the refuse and cleaning the road? The answer is yes. Are they not being paid? The answer is yes. What money are they using to pay them? It is tax payers money.
Are there signs that the economy would recover from recession in a short-term period?
There is the World Bank and the International Monetary Fund (IMF) forecast that Nigeria could recover this year and part of the reason is that the oil price which went down to about $30 per barrel, is beginning to pick up. Secondly also the issue of Bokoharam seems to have been taken care of. The issues we have now is Internally Displaced Persons (IDPs). It also shows that Nigeria has resolved some of its internal challenges. The impending matter is the militants in the Niger Delta. We need to solve that also so that we have constant production of oil. If we get the engagement right and solve the problem in Delta and production goes back where it used to be, that means we have more dollars in circulation, higher government revenue, increased liquidity and most importantly increased confidence in the economy. We need confidence in the economy to improve. As confidence improves, not just for foreign investors but also for domestic ones, the likelihood of more economic activity increasing is higher.
Is there any issue raised during WEF that can impact positively on the economy and also on KPMG business?
The theme responsive and responsible leadership is tied to governance. The higher the quality of governance in a country the better the outcome. If the African countries are better governed, it will attract much more investment flow, economic activity, create more jobs and where there are many more thriving businesses, KPMG comes in either to audit the company or to ensure they pay the right taxes or to help to consult or advice the business. Our business thrives where the company thrives. If a company does not thrive we will have challenges as well to be able to navigate the environment. It is a topic that cuts across countries and companies and communities. Even in small communities, if there is no good governance, there will be anarchy.
What should stakeholders expect from you as a result of your new role in KPMG Nigeria?
One of the things I am focusing on is trying to ensure we have better relationship with our clients because what is important to our business is to have very strong relationship with our clients. When the economy was booming, these clients were engaging us and paying us for services rendered, now that these same clients are finding it tough, this is when we need to have a much closer conversation with them.
This is when we really need to help them out of this situation. If we are successful in helping them, when the boom returns, who do you think they would rely on? KMPG. So we have to spend a lot more time speaking to our clients, understanding their issues and helping them to survive. We will spend much more time talking to our clients and encourage my partners also to do the same thing. It cascade all the way down to the lower level. Secondly there a number of what we call strategic growth initiatives that I found globally best for our clients. There are three areas we are focused on heavily in Africa and Nigeria as well- cyber security, data analytics and infrastructure. So, these are things we need to bring to the table to develop our economy and we believe we have the knowledge and skills to do that. If we don’t have them locally in this office, because we are part of a global firm, we can bring such skill from any part of the world, into this market.