It’s building trust even when it’s being undermined
This month has been about macro framing. I took a step back and leaned into a conversation with a world economics professor to get a view on how the transformations we are seeing across the corporate world are being impacted by wider transformations in society.
This is a huge subject. It takes in everything from the deterioration of trust in institutions; globalisation and the role of business in society. It was also a conversation that took place before bombs started falling across even more Middle Eastern nations and a world that was already turbulent became a maelstrom.
Comfort in continuity
What I took away was comfort that there will be some continuity; but it needs to be a choice. You might now be rolling your eyes in disbelief but bear with me.
One of the central tenets of transformation for me has been that if you focus on the Four I’s of Economic Transformation – Investment, Institutions, Infrastructure and Innovation – and get them embedded into the ground, you can build sustainably.
“…The pillars of fiscal consolidation, and renewed macroeconomic credibility are setting the stage for a more stable and attractive investment landscape.”
Only this month, I delved into PwC’s West African Economic Outlook report and I circled in red comments by partner George Arhinwho had honed in on Ghana. He wrote that the country is charting a path to recovery and as it does so, “…the pillars of fiscal consolidation, and renewed macroeconomic credibility are setting the stage for a more stable and attractive investment landscape.” This is economic theory seen in action; and it is working.
The challenges of the past
There’s no denying, though, that it was a very different world when INSEAD Professors Antonio Fatás and Ilian Mihov wrote the paper on this in 2009. However, it wasn’t a world without problems. In fact, we were in the grip of the Global Financial Crisis. As Bank Underground succinctly described it: “…the GFC was by far the deepest global downturn that has occurred in the post-war period. Indeed, so far, 2009 has been the only year since World War II in which world activity contracted relative to the previous year.” So is it still relevant?
Who better to ask than Professor Fatás himself and he offered hope. “I think to a large extent that model is still valid. Like any framework, it is obviously a large simplification of lots of things which are very complex. When you talk about growth of a country or a company, there are lots of issues that one cannot summarise in a slide”, he shared. However, he adds: “…the idea was to highlight factors, which are fundamental and which sometimes we ignore. If we go through a list of bullet points of what matters, the list gets longer and longer. We then don’t see clearly what blocks truly matter.”
Changing consensus
What has changed, he acknowledges, is consensus on what each of the Four I’s actually are. We still have institutions, for example, but the past few years have tested their relevance or revealed gaping chasms in the views of which are relevant at all. Look at the Trump Administration’s battering of the United Nations; and at a corporate level, the move away by some businesses from DEI initiatives that many of us believed were completely embedded. The very nature of governance has been questioned.
“Africa is paying too much to borrow. Calls to end the “Africa premium” – the gap between how Africa is assessed and the reality of its economies – can no longer be ignored.”
It’s not all negative though. It might force positive transformation. In an op-ed in the Financial Times, Bola Tinubu, President of the Federal Republic of Nigeria, called for the establishment of an Africa-owned credit rating agency. “Africa is paying too much to borrow. Calls to end the “Africa premium” – the gap between how Africa is assessed and the reality of its economies – can no longer be ignored,” he declared.
The current model is not working – it is opaque and subjective – and the institutions that have held sway for decades are not fit for purpose, he said, stating: “Fitch, Moody’s and S&P Global Ratings, the three dominant global credit rating agencies, wield outsized influence over Africa’s access to international capital. Their judgments shape investor behaviour, yet they consistently misjudge African risk.”
Africa owning Africa’s narrative
Transformation is needed and this would mean a move away from the “Big Three” for the continent, which would instead have its own credit rating agency. He writes: “When prices fall or markets tighten, African nations are downgraded swiftly and broadly – even when their reserves are strong, fiscal buffers are intact and debt profiles remain manageable. Downgrades then become self-fulfilling, raising borrowing costs and straining public finances.”
The “Big Three”, he added, would still be used by international investors for validation but the new agency could change investor perceptions of the continent. It would, as I have called for before, let the continent control its own narrative.
There will be many who disagree. However, everyone must acknowledge that the value of certain institutions is being questioned. There are discordant views now. As Professor Fatás surmised, it may have been that these views have always been held but now business (and political) leaders are not holding back (for better or worse).
In spite of all of this turbulence, business leaders can choose to steer a steady path. I don’t mean refuse to acknowledge that transformation is necessary. That is a path to destruction. But they can choose to remain true to their values, cultivate trust and set an example to their employees and clients alike.
“Surely now is the time for business leaders to proudly model behaviour that will trickle down; and hopefully even defy gravity to flood up too.”
I wrote earlier this week that business don’t exist in a vacuum. They play a key societal role – and not just financially or structurally. As a business leader, I want people to know what I stand for. I am
guided by my desire to connect people and bring about remarkable but sustainable transformation; but I am also steadfastly guided by my faith and my compass as a father, husband and global citizen.
People need to trust me as we work together to transform businesses. I need to earn and maintain that trust, which I do by constantly learning, developing my EQ and questioning my decisions. Surely now is the time for business leaders to proudly model behaviour that will trickle down; and hopefully even defy gravity to flood up too.
