New Gambia Transactional Or Transformational?

December 1st ushered in a new lease on life for Gambia and Gambians. Gambians registered their dissatisfaction with the former administration and severely punished them at the polls. Furthermore, Gambians displayed a sense of urgency paving the way for the new Gambia by having a zero tolerance attitude towards Jammeh and his incessant antics during the self styled political impasse. Now that the dust has settled and our euphoria has waned off, we have lofty expectations in rebuilding the country we all claimed to love. Gambians are yearning for transformative change whereby we do away from the culture of business as usual (transactional) to the business of transforming from what was to what ought to be.

I have been keenly following developments in the new Gambia particular that of public policy with a bias on economic management. I do hope that this administration leverage on the expertise of well meaning Gambians with requisite competence in revitalizing this economy because a poor showing of the economy will undoubtedly punish them in subsequent election cycles. In order for this economy to thrive, the government must be mindful of 3 economic fundamentals
i. Fiscal Consolidation (Scaling down the budget especially recurrent expenditure and rationalizing government operations and fleet management)
ii. Debt Resolution (Debt Rescheduling, Creation of longer term debt instruments etc.)
iii. Growth (Boosting growth leaders such as agriculture, Tourism and Fisheries)
Having said that, I am very disturbed with the economic rationale of the Ministry of Trade regarding their facilitation of flour imports to the Gambia and I therefore want to seek answers to their haphazard yet troubling economic pronouncements that will not only affect their sector but all other sectors of the economy. I hereby opined without hesitation and with a high degree of certainty that an importation strategy will not help develop the economic base of our country. Economies need growth drivers and key amongst these drivers are local production/ manufacturing. The policy employed by the Ministry of Trade, Employment and Industrialization is not only adverse to the macro economy but goes against the set objectives of the ministry. The Ministry is task with spurring growth hence creating employment and their promotion of imports goes counter to job creation. Secondly, the Ministry is tasked with the promotion and development of an industrial environment and the promotion of imports over local production deter our march to industrialization. Public policy must have a medium to long term view and that being the case, the Trade Ministry must not focus on immediate price reduction and that is nothing but a gimmick. I saw a trouble yet patronizing advert on the Point publication of July 24, 2017 praising the President and Minister for a job well done in allowing importation thereby reducing prices. First of,  prices are generally sticky and it takes a lag effect for prices to filter down the distribution channel before reaching the consumers. The only factor that may be responsible for a sudden drop in price is a price war orchestrated to assert market dominance. This implies that importers are willing to sell below cost to discourage local production thereby rendering the sector sterile. I want to respectfully inform the Honorable Minister and her Technical entourage that importation has its flaws starting with under invoicing which adversely affects custom valuation, curtailing of value transformation and job creation in the economy and the eventual degradation of our industrial ambitions. Most of the flour imported into the Gambia come from Western Europe and Turkey and they are highly laden with farm subsidies and this creates a distortion in pricing.

I therefore want to ask the honourable minister of Trade to clearly spell out the intended policy gains her Ministry wants to achieve in promoting importation over local production. Honourable Minister, your policy decisions generally have far reaching implications and am sure you were not cognizant of the fact that the major by product of a flour mill is the creation of animal feed meal precisely chicken feed. For your information, the Government of the Gambia aspires to have a vertically integrated poultry sector whereby we create our poultry from the hatchery to the food chain by generating all the inputs and production factors but your initiative is not only frustrating those efforts but it is scrapping the possibility of making Gambia poultry self sufficient. For this and other reasons, I urge you to have broader consultations before making such pronouncements in the future as mixed policy signals tend to put off investors because investment requires visibility and confidence. This new concern we trying to nurture called the #NewGambia begs for transformative processes not transactional intermediation. We do not want business as usual so let us look at the bigger picture and promote sustainable solutions that will underpin and bankroll our march towards economic independence. We do have merchant houses that have operated in Gambia for over a century and kindly show me one value creation they have added to our economy. I do hope my input is taken in good faith and in the interest of the greater good as Jeremy Bantham would have alluded to.



Nyang Njie

Management Consultant
Economist
Blogger

Mr Governor Of The Central Bank Is The Economy Stupid?

Good day Mr Governor! I have been keenly following the developments in the economy especially in the monetary space and the developments are a caused for concern. It is a noble feat to sanitize the economic space and institute prudent monetary management decisions but equally, the Central Bank's primary mandate is to foster price stability in the macro environment. I have noticed that the Minister of Finance has in effect declared a Statement Of Intent that the fiscal authorities will curb their appetite for borrowing. This Statement has been made good by the revision of the 2017 Government Appropriation Bill's deficit financing from approximately 4.8 Billion Dalasis to 1.7 Billion Dalasis. This is a commendable initiative worthy of mention but the manner in which the Policy Rate tumbled in a short spate of time is quite worrisome and in the medium term it can trigger undesirable consequences that are not in line with our monetary objectives.

The Policy Rate basically serves as a signaling tool and having it tumble from 20% to 15% by way of an announcement from the last Monetary Policy Committee Meeting of February 2017 represents a 500 basis points downward spiral. This signaling tool basically frame expectations of Bankers and other Economic Operators who have a nexus with the policy rate. Therefore the sharp drop has rendered the policy rate ineffective as a signaling tool. Equally, the governments prudent fiscal management has brought the T Bill rate for 1 year to 10.94% and 91 Day to 8.75%. My primary concern Mr. Governor is the sudden drop in the policy rate. This will have an adverse effect in the economy particularly in the Banking Sector. My fear is that the Central bank is attempting to align the policy rate with the current Tbill curve. Most Gambians view Treasury Bill as a store of Wealth and having the rates tumble so fast without prior warning makes TBills an unattractive investment proposition. This will make investors look into alternatives such as Foreign Currency (Euro, Dollar & Pounds). This in my view will cause significant misalignment in the economy as most people buying these currencies will not use it for transactional purposes but as a commodity and store of wealth. Consequently, this will put undue pressure on the dalasi as there will be too many dalasis chasing few hard currency thereby creating an economic anomaly that will distort price stability and subsequently inflation. Mr. Governor, I proposed that subsequent MPC meetings MUST review the policy rate with a view of an incremental change or easing of the rate over a period of time rather than a quick fix. Monetary Management albeit a Science comes with a finesse that caresses the economic variables that can trigger undue duress to the macro environment.

Mr. Governor, I consider the TBill rate as an operational rate and the pricing of this instrument baffles me as I can't identify a measurable matrix to ascertain the price associated with the Tbill pricing. Discretion is an enemy to policy formulation and monetary policy management is by no means an exception to this. Your recent position on the MPC is sending the a signal to the banking fraternity that they have to spur lending. Whilst this may be a well intentioned proposition, it can yield adverse effects that may affect the banking sector. A lesson not learned in the past will surely be repeated in the future. I therefore hope that your understanding of Central Bank Independence doesn't negate the fact that you can periodically, consult private practitioners for our opinion on prudent monetary management alternatives.

Telecommunication Liberalization- A Must In The New Gambia

Gambians have been anxiously waiting to see the liberalization of the telecommunication sector since the advent of the third republic. Telecommunication is a vital component of our economy as it not only facilitates trade but also link service providers and markets thereby reducing the information asymmetries that were prevalent before the introduction of mass communication platforms like GSM networks. The people of the Gambia have been short changed and overpriced due to prohibitive government policies that breeds inefficient service delivery mechanisms, corruption and the inaccessibility of destination Gambia from the rest of the world. The current Gateway arrangement with MGI needs an immediate cessation and should be replaced by the introduction of a viable liberal market that ensures Gambian telecom subscribers with an equitable service, priced at a reasonable tariff and of good quality. Liberalization of the telecom sector must be process driven to ensure that all stakeholder needs (Government, operators, subscribers and Public regulator) are all addressed adequately to foster an environment of high standards of service delivery and efficient pricing. The government must facilitate a transitional arrangement whereby the incumbent operator in this case GAMTEL assume the responsibility of managing the gateway on a temporal basis until the operators sort out their state of preparedness to handle their own carrier relationships internationally. This transitional period must not EXCEED 6 MONTHS. The following prerequisites must be adopted before the liberalization of the sector in order to avoid market chaos and unfair market positioning or the abuse of dominant market power.

1. Telecom Operators (GSM Companies) must first and foremost approach the sector in a holistic manner and not focus on the competitive nature of the business.
a. They need to work closely to usher guidelines and rules of engagement that will enhance the value proposition of the market and also promote price stability in order not to destroy value through tariff wars. Tariff wars will only give an edge to the subscribers in the short term but the loss in margin will make reinvestment of capital expenditure in the sector difficult thereby compromising service delivery mechanisms in the medium term difficult.
b. The Operators must have a preexisting arrangement with the Public Regulator (PURA) for the issuance of their licenses once the transitional period with Gamtel expires. This will allow a seamless transition from the interim arrange to a full fledge liberalized market. The licensing regime must not be an undue burden to the operators and ideally, the regulator can augment the existing GSM license to a unified license thereby covering all aspects of the telecommunication business process.
c. The sector must agree on the imposition of a price floor for all outbound and inbound international calls. This will reduce the incidence of price wars and heavy handed market positioning by operators.
d. The operators must individually calculate the economic loss incurred by the operators by way of the MGI contract with government. A demand note must be presented to government to recover all losses associated with the MGI contract
2. The Government of the Gambia must be committed to the liberalization track by supporting the process in good faith. It is the responsibility of the state to protect the interest of the greater good at all times and this includes the termination of the MGI contract because it goes against the grain of our strategic national interest. The government of the Gambia being the custodian/party to the MGI contract must endeavor to do the following;
a. Terminate the arrangement with MGI forthwith
b. Facilitate the recoveries of all financial losses due to the operators
c. Task Gamtel to operate and manage a national gateway for a period of six months
d. Work with PURA and Operators to institute a competitive tariff for destination Gambia including a price floor to avert price war amongst operators
e. Pursue legal action against MGI and government officials who are found culpable in the MGI arrangement
f. Establish a gatekeeper arrangement through a clearinghouse model to ensure revenue assurance for government and illegal sim box connections and by passes
3. The Regulator PURA is vital in the transition and final liberalization process of the telecommunication sector. The erosion of confidence by the operators and the general public on the efficacy of PURA as an effective regulator must be rebuild. Therefore, the following actions must be undertaken by the regulator to not only sanitize the sector but protect the esteem Gambian subscribers from poor service quality and excessive pricing models.
a Facilitate the acquisition of gateway licenses to all operators without undue bureaucratic hurdles
b Enforce a price floor mechanism for international call tariffs
c Monitor and ensure quality of service delivery and promote fair play and competition amongst operators
It is to the national interest to not only sanitize the sector but accord Gambians with international best practices for services delivered to the general public. I do hope that the vested parties adhere to these stringent guidelines in furtherance of a buoyant telecommunication sector.