Uncalculated risk dents the economy

Pauline Dikuelo | Friday July 24, 2015 14:15

For the past years, the country has lost millions of Pula due to uncalculated risk management. This has been evidenced by the continued failing of construction infrastructures, which have led to government spending millions of Pula in constructing and repairing them with the hope that they will in turn contribute to the development of the country, thus boost the economy.

A good example is the failure of the construction of the Morupule B power plant. Stadia and buildings have also fallen apart just a few years after being built, which forced the government to spend more millions to repair the damage caused.

Speaking during the Commercial Risk Africa’s second southern conference that was held yesterday, United Nations Programme Leader for Sustainable Insurance, Butch Bacani said that on a global scale developing countries are vulnerable in experiencing disaster risk.

Bacani said the insurance industry plays a key role in addressing the uncalculated risk as they have the expertise and are usually risk followers.

According to Bacani, based on the reports of the United Nations Environment Programme (UNEP), Africa’s sustainable development is hindered by many situations even though the environment is conducive.

“Africa has weak project preparation and execution capacity, weak financial inclusion, undeveloped banking and insurance systems and are highly dependent in overseas for financial assistance, which need to be developed.

There are many challenges that needs to be developed,” he said.  Bacani, however, said there are some solutions that can address the situations saying the UN were quite happy that African countries are making an effort, suggesting that they need to have an inclusive credit and insurance, sustainable stock exchanges, lender and investor liability.

Chief Underwriting Officer for African Trade Insurance (ATI) agency Jef Vincent said there are some mitigating factors that affect the business industry noting that international banks are scared to take risk with African banks.

“Exporters are scared to sell into the African markets because they are not familiar with the market and its potential.

This makes it difficult for African countries to attract them,” he said. Vincent further said the African market has unfair competition and there is a lot of fraud that is being practised noting that about half of the claims that ATI has paid are a result of fraud.

He added that lack of reliable information sources in Africa also hinders international investors to come and take a risk with the continent saying that no one will be prepared to take risk on something they do not have information on.

Africa has achieved sustainable economic growth in the past decade as the real GDP increased by five percent, but major socio economic problem revenue is almost half of the Sub Saharan Africa where they still live in extreme poverty since 76 percent of households are not connected to the grid, while 70 percent lack adequate sanitation.