Gvt and business must cooperate to mitigate COVID-19 impact: Matete

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IN June last year, Nedbank appointed Nkau Matete (NM) as its managing Director, making him the first Mosotho to hold the top job at the bank.

Mr Matete this week spoke to Lesotho Times (LT) editor Herbert Moyo concerning his time at the bank so far and the challenges that lie ahead. Mr Matete touched on the economic impact of the coronavirus pandemic.

He said it was important for the government to engage the business sector and all other stakeholders before announcing any policy interventions. He said failure to consult “can lead to unintended consequences”.  Below are excerpts from the interview.

LT: It’s been 10 months since your appointment as managing director of Nedbank. How would you describe your experience so far?

NM: It has been rough but I am getting the hang of it. Banking is very different from other sectors and has its unique nuisances that I have had to grapple with. But overall, I am enjoying the challenges of the new environment.

When you get into a new environment the first thing is to observe and understand the culture. I did not have that luxury. I had to hit the ground running. This banking sector is small but also very competitive. Every bank is working hard to gain a market share and protect what they already have.

We have been working hard at getting close to our clients. If you are close to your clients, you are able to forge partnerships and anticipate their needs even before they come to you.

LT: How has Nedbank performed in the prevailing harsh economic environment?

NM: Nedbank had a fairly balanced year. A fortnight ago we published our financial performance as required by regulations. On some aspects we did very well while there are some areas where we did not have a good year. We are pleased that our loans and advances book is growing. We saw a growth of 12 percent from last year. Our headline earnings are lower than the previous year.

Though this is not a fair comparison as 2018 had exceptionally high once-off items. Looking at normal earnings and comparing like with like, we achieved a growth of 13 percent.

We are pleased to maintain our strong culture of responsible lending. Our strategy is driven by a strong control environment, client obsession and staff obsession. We believe with these pillars we have a strong base to ride the COVID-19 pandemic.

LT: How is the Coronavirus affecting the economy in general?

NM: Very badly Ntate. Before the Coronavirus our economy was already on a back foot. The pandemic has added salt to the injury, so to speak. The hardest hit is going to be small and medium enterprises. The economy is expected to contract without a doubt.

LT: How is the small and medium enterprises (SMMEs) sector affected?

NM: Unlike big corporations, SMMEs do not have reserves or large savings that they can tap into during hard times such as this COVID 19. They also do not have the luxury of many shareholders who can be called upon to inject capital (in times of crises). These are usually one man show entities and they operate from day to day. They will definitely need some relief from national government.

LT: What is the impact of the coronavirus on the banking sector and Nedbank specifically?

NM: The banking sector is dominated by foreign-owned banks. These banks are adequately capitalised. Depending on how long the crisis lasts, I can safely say most banks will initially weather the storm. Liquidity within the banks is also strong. But the first test on the banks will be liquidity.

Liquidity in simple terms means the cash available within the bank to pay for goods and services or to meet obligations like payment of salaries. What is going to happen and has already started happening is that most businesses and individuals will default on their payment of loan instalments.

This will increase impairments generally, leading to banks being cautious and cutting down on granting of loans. Unless a stimulus package of some sort is introduced, that will sadly be bad for the economy.

We have seen the closures of textile factories and other businesses which have not been deemed essential by the government.

LT:  In you view, what should the government do to mitigate the impact of COVID-19?

NM: It was sensible for the government to impose the lockdown. You will have seen that this has become the trend throughout the world. Even in most African countries where the spread of the virus is still very low, lockdowns are now in place.

So, there is no doubt that the government was right to impose the lockdown. I am sure our government is considering interventions and it is only fair to give them space to come up with relief packages. Within affordability, I am sure some sort of grants or cash subsidy will be considered.

You must remember there are people like the informal sector who make their living in the streets and literally live from hand to mouth. It will be very difficult for such people to survive three weeks of lockdown without some help.

LT: What kind of interventions should the government specifically consider to industry, banks and SMMEs?

NM: Definitely grants or cash subsidies. It was a welcome relief to hear government saying they will assist businesses with payments of rentals. That will go a long way in helping these businesses get back to their feet quicker. My personal view is also that government must start with faced relaxation of lockdown restrictions.

To start a business-like mining from scratch requires a lot of money. I would really urge government to consider engaging some of the mines to see how they can still ensure safety of people while allowing production to resume. Unlike developed economies, Lesotho cannot afford a total collapse before restarting trade.

LT: What would be the impact of a cut on interest rates in practical terms? Will it be felt and by who?

NM: A cut in interests has the effect of making credit cheaper in simple terms. So those companies with loans will be paying reduced interest for their existing and new loans. This is not necessarily good news for the banks though. In the immediate term there is loss of income. Remember interest is income for the banks.

LT: What should employers do to mitigate the impact of the coronavirus on the economy?

NM: I would say the first priority must be the employees. If the employers can at least ensure payment of salaries, the economy will not come to a halt. The challenge will be on the small employers like shops and construction companies as well as textile factories that employ a chunk of people. It is very unlikely these factories will keep paying their employees without any assistance.

LT: How long do you think it will take businesses to return to normal after the coronavirus pandemic?

NM: That is anybody’s guess. The future is uncertain and I think it is going to be very tough before it gets better. The government and the business community need to pull in one direction and in a coordinated manner to speed up the recovery and get the economy working again.

Unfortunately, at the moment there is very little of that. I am not aware of any business sector that is part of the meetings with cabinet ministers and officials at ‘Manthabiseng Convention Centre. The banking sector is not represented.

My view is that every sector must be represented. If not, those (government ministers and officials) who sit at the ‘Manthabiseng Convention Centre must have consultative forums with all stakeholders. Consultations are made so that when a policy intervention is mentioned, it has input from the affected sector. Lack of consultations can lead to unintended consequences.

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