As an entrepreneur who appreciates the challenges to surmount in order to build flourishing businesses with positive ramifications for society, the collapse of UT and Capital Banks can only be seen as a reflection of our respective individual negative traits, deficient national character and the weak state institutions coupled with our ineffective educational system. The collapse of these banks obviously brings to fore critical issues that, as a nation we must be bold, truthful and openly discuss them.
Though, it did not surprise industry watchers, their demise evoke feelings of sadness and job insecurity while raising questions about the ability of Ghanaians to really manage our institutions.
It is sad because the collapse of these two indigenous banks has become a set back to the effort of promoting indigenous Ghanaians to take control of our economy by building strong local institutions. One would have expected to hear of progress being made by local banks rather than the demise of local banks.
It is also sad because of the job losses inherent in the demise especially in the light of the complexities of the labour market, the unavailability of jobs and the potential to increase unemployment levels even though we don’t know our unemployment rates.
In spite of these sentiments, economic mismanagement, the failure of the central bank to assume its leadership role in our economic development, the proliferations of award schemes and our negative attitude as Ghanaians are all responsible for the current happenings. Invariably, these factors have combined to determine the kind of socio-economic environment that we currently find ourselves as a nation.
A critical look at economic development trends across the globe usually starts with emphasis on the agriculture sector, moves to manufacturing and lastly to the services sector. This development trend promotes the real sectors of an economy through the linkages between agriculture which provides the basic raw material for manufacturing and industrialization and the services sectors. The real sector of an economy will thus have the potential to create the numerous jobs for the people, provide commodities for the daily lives of the people, provide raw materials for the manufacturing firms, wealth for the people, a strong currency for the nation and eventually help extricate indigenes from poverty.
However, our country has adopted by default a reverse development model by placing emphasis on the services sector with no linkages to both the agricultural and manufacturing sectors. As a result, the business of selling and buying money has been very dominant in our economy. This is called the financecialisation of our economy. Everybody in Ghana now is either selling or buying money as a form of business. This explains why there are numerous people doing money lending, micro financing, savings and loans or commercial banking. While every money lender intends to be a micro finance, micro finance firms want to be savings and loans, saving and loans are looking at being commercial banks. These conversions are done without building enough capital base and a more robust corporate governance structures. Sadly, these finance houses are only funding the importation of rice, cooking oils and other consumables at the detriment of the most productive sectors of our economy such as agric and manufacturing.
A diversified economy on the other hand provides options for the people to do agriculture as a business, helps manufacturing to thrive and presents opportunity for banks to finance the productive sectors.
However, our political leaders have only paid mere lip services to our development. Over the years, Ghana has had several different development plans that have all sought to give us prosperity. All these plans have embraced the concepts of structural transformation, industrialization, investment, quality education and human capital development and the modernization of agriculture. The 7 year development of 1963-1970, Economic Recovery Program of 1984-1990, Structural Adjustment Program, Vision 2020 and the Better Ghana Agenda are just a few of the development plans. Yet, we are still engulfed in poverty.
Clearly, incompetence in managing our economy, lack of vision and direction by political leaders, weak state institutions, deep rooted and institutionalized bribery and corruption, ineffective educational system that produces timorous workforce with its resultant mismatch with industry have all teamed up to cause the collapse of these two banks.
Role of the Central Bank
The central bank of Ghana has been unable to assume its leadership role and importance as far as Ghana’s economic development is concerned. They have not been proactive in their policy and supervisory functions in the financial sector in particular and the economy in general. The primary role of the central bank to implement policies that provide consistent growth and employment and the stability of the financial system has been ineffective over the years. Perhaps, the central bank is only noted for organizing monetary policy committee meetings. One even wonders if they have an idea as to the total number of money lenders and microfinance firms operating in the country. Weak corporate governance, Incompetent management and board, weak supervision, lack of integrity, corruption within the banking sector, unchecked prevailing high interest rate regime and the springing up of commercial banks are all to be blamed. It is hence not surprising that directors of a bank will borrow money without paying, whiles staff of some banks also operate micro finance within their respective branches. We all can imagine the insecurity and frustrations that would have been unleashed to the nation if depositors had lost their funds in the UT/Capital bank saga. And so, to the extent that the Central Bank was able to salvage depositors’ funds and restore confidence among depositors, they need to be commended.
Attitude of Ghanaians
Our negative individual attitudes as Ghanaians are also to be blamed. Individual corruptible practices in our institutions, employment based on favoritism, managerial incompetence, untruthfulness, vindictiveness, victimization, dirty corporate politicking, stealing of funds with collaborators in the business world, lack of leadership, amorous relationship between bosses and their subordinates have all been accepted as part of our normal lives, and have permeated into our corporate fabric. Doing the right things in Ghana makes one either a bad person, very difficult, arrogant or controversial. You dare not report a colleague or superior who is either corrupt or does something wrong. Whilst some banks promote staff not on merit but on the whims or affection of a superior person, some business heads also take money from clients before credit applications are processed. It is therefore not surprising that staff members through their actions and inactions have contributed to the demise of these banks. Sadly, the intellectuals in this country have through our incompetence and corruption proven education to be a useless venture. Instead of being managing directors, we are gradually becoming damaging directors.
Numerous Award Schemes
Numerous awards programes have been institutionalized in our country recently. There is an award scheme for almost everything in our country today. The basis upon which individuals and institutions have won various awards are in some cases questionable especially when every discerning Ghanaian is aware of the monetization of these awards. Besides, we are unable to assess the impact that these awards have had on our economy and society. In the light of their imminent collapse, these two banks in the past three years have won various awards in the banking sector. How did they win these awards? Awards schemes are essentially to reward excellence and to generate a more meaningful and a broader impact on companies and society. However, awards have been used as a money making venture and as such, mediocrity has taken over in most of the awards.
Clearly, the factors above present a feeling of great disappointment and failure whenever one critically looks at our national life. It looks as if we have been condemned to perpetual conditions of poverty, underdevelopment and retrogression exemplified by lack of vision and leadership, economic mismanagement, incompetent corporate leaders, ineffective and weak state institutions, negative attitude of the people, institutionalized bribery and corruption and lack of integrity. Indeed, one can only conclude that the collapse of these two banks is a collective national failure rather than an individual institutional lapse.
By: Kelvin Kwaku Yeboah
The writer is a former Banker and Entrepreneur.