Nigeria Content Online

A union
representing workers at Kenya’s sole power supplier started a strike on
Monday to protest against their employment terms, its secretary general
said.

Kenya Power has
been involved in a protracted dispute with the Kenya Electrical Trade
and Allied Workers Union (KETAWU), which claims that more than a third
of the workers are on casual terms, in violation of the country’s
labour law.

Ernest Nadome,
secretary general of the union, told Reuters by phone that 6,000
workers had downed tools after Kenya Power failed to honour this year’s
collective bargaining agreement.

“We are demanding our rights. We will not be cowed by threats,” he said.

South Africa’s gold production fell 6.4 percent in 2010 to 191,833.7 kilograms, the Chamber of Mines said on Monday.

South Africa was
the world’s largest gold producer for most of the last century up until
2006, but output has been hit by dwindling grades and stoppages of
mines and shafts for safety-related reasons as companies mine ever
deeper.

Some South African
gold mines reach depths of around 4 km. The main gold mining firms in
South Africa include the world’s No. 3 and Africa’s top gold producer,
AngloGold Ashanti, fourth-ranked Gold Fields and fifth-placed Harmony
Gold Mining Co.

Some
market operators at the Nigerian Stock Exchange (NSE) have criticised
the recent proposed extension of trading period by another two hours.

Emmanuel
Ikazoboh, interim administrator of the NSE, announced last week that he
will increase trading activities by another two hours within the next
two months. The move will take trading hours to seven. The NSE had last
December extended the trading hours from 9.30 am to 2.30 pm, against
the former 9.30 to 12.30 pm.

Mr.
Ikazoboh said the previous extension was done to give foreign investors
opportunity to participate in the market, adding that another extension
would further attract more foreign participation in the market.

“Within
the next one month or two, I am going to increase the trading hours
from 9:30 am to 4:30pm. This is to increase volumes and allow American
investors to trade in our market,” he said.

However,
Ola Yussuff, chairman of the Association of Stockbroking Houses of
Nigeria, said that the NSE should direct its efforts at building up the
base of local investors by “encouraging local investors to come back
into the market.”

“If
foreign investors are coming to the market, I think that is a welcome
sign. But our own position is that the NSE should encourage local
investors to also come to the market. As things are now, local
investors’ participation in the market is less than ten per cent
whereas in other jurisdictions, like in the United Kingdom and America,
you have 70 to 80 per cent local participation.

“Having
foreign investors is not bad, but it shouldn’t be at the expense of
local investors. If we have our way, we would direct more energy on
getting the local investors,” Mr. Yussuff said.

“Foreign
investors will only come here when there is something to be gained. As
soon as there is any slightest problem in our economy, they are out.
This makes the volatility of the market high.

“Therefore,
it is the local investors of every country that keeps its market alive
so that when foreign investors want to go, it doesn’t affect the market
negatively,” he added.

David
Amaechi, an executive member of the Shareholders Association of
Nigeria, said the planned trading extension may be a setback.

“There
is still fear that investors’ confidence is yet to be guarded jealously
in the market. It is these same foreign investors who pulled out their
funds, leaving our market to crash. More attention should be given to
us who plan to stay longer in the market,” Mr. Amaechi said.

Workers’welfare

Asked
if the NSE is considering the welfare of its staff in the proposed
plan, Wole Tokede, the Exchange’s spokesperson, said, “Since no staff
of the Exchange is complaining about the development, how the
(proposed) trading extension affects the staff should not be anybody’s
concern.”

However, Mr. Tokede said, “The management of the Exchange will not
create any policy that will affect the health of its workers. I also
believe that there is no sacrifice too much for the NSE staff to pay in
order to make the market progress.”

The National
Pension Commission (PENCOM) said the recent review of its investment
guidelines for pension fund assets was done in order to allow for
investible funds to be channeled to critical sectors of the economy.

The revised
guidelines, which were released on December 16 last year, were designed
to enable pension funds to be used to intervene in correcting the
infrastructure deficit in the country.

According to the
review guidelines, the list of assets in which the funds can be
invested include bonds, debentures, redeemable/ convertible preference
shares, and other debt instruments issued by corporate entities,
including asset backed securities and infrastructure bonds.

Section five of the
reviewed guidelines states that pension fund assets can be invested in
infrastructure projects through eligible bonds or debt securities,
subject to the infrastructure project being “awarded to a
concessionaire through an open and transparent bidding process, is not
less than N5 billion in value, and managed by concessionaire with good
track record.”

According to
PENCOM, such projects must be in accordance with and meet due process
requirements of the Public Private Partnership (PPP) Policy, as
certified by the Infrastructure Concession and Regulatory Commission
(ICRC), and approved by the Federal Executive Council (FEC).

Investment in critical sectors

The Central Bank of
Nigeria (CBN) governor, Sanusi Lamido Sanusi, disclosed recently that
it was collaborating with PENCOM on ways to unlockthe huge pension fund
for investment in critical sectors of the economy. He said rather than
expose the Nigerian economy to cheap dollar loans, which could prove
costly in the long run, it was better to access cheap funds locally.

“Part of it has
been working with the Pension Commission to see how we can unlock some
of the N2 trillion we have in pension funds into infrastructure and
power in a manner that works.

“If we put up
guarantee worth N400 billion and the pension funds puts down N400
billion 20 year money into power and infrastructure, the maximum risk
it will take on the Central Bank balance sheet is N20 billion bond, and
N400 billion generates 4,000 megawatts,” Mr. Sanusi said.

The reviewed
investment guidelines said such funds can only be invested in
infrastructure bonds, subject to a maximum portfolio limit of 35 per
cent of the pension assets under management, with a maximum of 15 per
cent being in infrastructure bonds.

Such investment
shall have a maturity date that is prior to the expiration of the
concession and have a redemption procedure, in the event of project
suspension or cancellation.

The commission said
the review was done in order to give backing to any institution that
wants to invest in the infrastructure development.

“We do not have the
power to direct the PFAs on areas to invest. What we have only done is
to review the guidelines so that those who want to invest in the sector
can do so.”

A statement from
the commission said the emphasis of the review was to allow PFAs to
invest in bonds which would be floated by the CBN targeted at power and
infrastructure development.

“PENCOM did not sign any understanding directly with the CBN. What
we just told them is if you want to raise money for power sector, issue
bonds, and if it makes sense to the PFAs, they will invest in them.”

Experts have stated
that high oil price, which is expected to shore up the nation’s foreign
reserves, may also have harsh effects on consumers’ pockets and
companies books.

The high oil
prices, which experts foresee would last through March and April and
moderate sometime midyear at the expense of consumers’ disposable
income, would soon begin to have some indirect rippling effects.

Oil prices have
been rising especially since January, due to the unrest in the Middle
East and experts are of the view that high oil prices imply higher
Automotive Gas Oil (AGO) and Low Pour Fuel Oil (LPFO) prices.

“Our oil price
outlook suggests Automotive Gas Oil (AGO) and Low Pour Fuel Oil (LPFO)
prices will remain high. According to our economists, our base case for
the oil price is that it will stay at around $110 per barrel through
March and April 2011, before moderating to $90/bbl in the second half
of 2011,” Akintola Akinbamidele, research analyst, Renaissance Capital,
an investment bank, said.

In 2003, the
Nigerian government had deregulated the downstream segment of the
petroleum industry, with the exception of Premium Motor Spirits PMS,
permitting petroleum marketers to compete favourably and to import and
sell at market rates.

The deregulation of
the sector thereby created competitive scenery that forced down prices,
unlike when the Nigerian National Petroleum Corporation had a monopoly
on importing and selling. However, high oil prices are now implying
higher automotive gas oil and low pour fuel oil prices.

This, Mr. Akinbamidele said, has translated into an average 35 per cent increase in AGO prices in the local Nigerian market.

“The depot price of
AGO from an independent retailer averaged at N90-95/litre in 2010. We
have seen an uptick in prices, with the average price of AGO sold by
independent retailers now at N145-155/litre,” Mr. Akinbamidele said.

The gainers and losers

Many fast moving
consumer goods (FMCG) companies, like other industrial users in the
Nigerian space, depend totally on self-generated power, which can be
fuelled by AGO, LPFO, coal or, more recently, natural gas. Compared
with the cheap cost of power from the national grid, which remains
unreliable, experts say the cost of running a generator averages at
30-45 per cent of an FMCG company’s production costs.

Experts say these
fast, moving consumer goods companies that have invested in the
generation of power through the use of gas turbines are in a better
position to protect themselves from the price shocks expected for AGO
and LPFO and therefore, are in a better position to reduce the net
impact of the increase in AGO prices (assuming any attacks in the Niger
Delta do not interrupt the gas supply).

Mr. Akinbamidele said consumers are also going to feel the pinch.

“We expect higher
energy costs to eat into the disposable income of the average Nigerian,
especially as a sizeable proportion of the population use kerosene
(which is deregulated and is currently priced at about N105/litre, up
from an average of N70-80/litre in 2010) for its cooking needs, rather
than more expensive cooking gas. PMS is a regulated product segment, so
we do not expect any direct impact on its price, which we expect to
remain flat at N65/litre.

“We are of the view
that the ability of FMCG companies to pass on increases in the cost of
raw materials and commodities to their customers, in absolute terms, is
minimal, as any significant price increase would result in consumers
shifting to cheaper alternatives,” he said.

“These are
short-term setbacks, in our view, and we maintain our positive outlook
on the FMCG segment over the medium to long term,” he added.

Egypt’s government
is reviewing a proposal to increase the size of a fund set up to help
small investors who bought shares on margin or credit before political
turmoil led to the bourse closing, a market official said.

The stock exchange
has been shut since January 27 amid a popular uprising that forced
President Hosni Mubarak out of power after 30 years. The exchange said
it would reopen before the end of the week but has not specified the
date.

Analysts say the
government has been reluctant to reopen the bourse out of concerns
about the economic repercussions of shares tumbling and capital flight
abroad. Rules have already been put in place limiting how much a share
can fall each session and many particularly small investors have
petitioned officials for support.

A fund worth 250
million Egyptian pounds has already been set up to offer loans to small
investors who were involved in margin trading or who used credit. “We
are now in the process of discussing with the Ministry of Finance
options to increase this amount but until now, we have not succeeded,”
said Mohamed Abdel Salam, chairman of the stock exchange’s Clearing
Settlement and Central Depositary.

Prime Minister
Essam Sharaf on Sunday approved changing rules to the country’s Capital
Markets Law to ease margin calls by brokerages, to limit volatility
when the bourse opens. When the client’s debt reaches 70 percent of the
shares’ value at the end of trading each day, brokerages will require
investors to pay margins or present more collateral, the Egyptian
Financial Supervisory Authority (EFSA) said on its website.

Brokers had
previously been required to make margin calls at 60 percent. Brokers
can also now sell a client’s shares when debt reaches 80 percent of
their value, instead of 70 percent. “If we open it a little bit to 80
percent, this will relieve the brokers and make them think not to sell
before they reach the 80 percent,” Abdel Salam said.

Under exchange
rules, market investors could borrow money on margin through brokers by
using shares they held as collateral. The loans were limited to 50
percent of the market value of the shares on the day the loans were
signed and could be used only to buy the 30 stocks in the benchmark
index.

The heads of EFSA
and the bourse met Finance Minister Samir Radwan on Monday to call for
him to expand the fund, Abdel Salam said, adding he expected a big fall
when the market opened. “Nothing will be enough to prohibit the numbers
of selling orders at the beginning of the market. It is my opinion –
that of course the market will lose in the first two days,” he said.

For shares in the
benchmark index, the bourse has said it will suspend trade for
half-an-hour if it declines by 3 percent and for the remainder of the
session if it falls by 6 percent.

Egypt’s economy
nearly ground to a halt during weeks of protests. Some of its main
sources of foreign exchange, including tourism and foreign investment,
have collapsed. Many factories continue to operate below capacity. MSCI
said in February Egypt would risk being excluded from its emerging
markets index if the market did not reopen before MSCI reviewed its
status in four weeks.

The Senate will
this morning commence the third reading of the Petroleum Industry Bill
(PIB) after it deferred deliberations last week.

The postponement
last week was due to the failure of senators to form a quorum,
apparently as a result of the ongoing political campaigns. Last
Tuesday, only 23 of 109 senators, 10 short of the required minimum to
form a quorum, attended the sitting, which was presided over by the
deputy Senate president, Ike Ekwerenmadu.

Senate
spokesperson, Ayogu Eze, stated last week that the Senate would pass
the Bill today provided there is a quorum of members. Of the 23
senators in attendance, only three were running for re-election.
Truancy in the Senate has caused delays in the passage of bills.

Recently, the
Anti-Money Laundry Bill suffered a setback twice due to the absence of
Ibrahim Ida (PDP, Katsina State), who headed the committee that handled
the review of the Bill. Also, the Tobacco Control Bill, which suffered
a similar fate recently, is still pending before the Senate due to the
absence of Iyabo Obasanjo, whose committee authored the Bill.

Delaying the Bill

Since the PIB was
introduced into the two chambers of the National Assembly in December
2008, it has suffered series of delays due to disagreements on the
provisions of the Bill by various stakeholders. The memorandum
submitted by the Federal Government to both chambers of the National
Assembly identified 14 critical gaps in the draft bill and sought to
close those gaps with about 165 amendments.

After several
interactive sessions with various interest groups, a total of 56
changes were reportedly made by the petroleum industry through the Oil
Producers Trade Section (OPTS), 36 by Federal Inland Revenue Services
(FIRS), 7 by the World Bank/IMF, and 66 by other stakeholders,
including the labour unions.

Host communities,
indigenous oil companies, and federal lawmakers from the oil producing
Niger Delta had during the public hearing on the Bill, insisted that
they will not support the law unless some sections providing for the
interest of the communities were amended to accommodate their interests.

Other relevant
parties of the industry have also raised some serious concerns over the
bill through its period of legislation. It is, however, not clear if
the issues raised by the various interest groups were addressed in the
Bill.

The management of
the Nigerian National Petroleum Corporation (NNPC) at various times had
claimed that government may have been losing about $55.4 million (about
N8.31 billion) monthly as a result of the continued delay in passing
the PIB by the National Assembly.

Chairman of the
Senate panel that reviewed the Bill, Lee Maeba (PDP, Rivers State),
said the benefits of PIB to the Nigerian economy and the petroleum
industry were enormous.

“It will ensure a
strong and virile regulatory framework for overall efficiency of the
petroleum industry, maximisation of the benefits of exploitation of
Nigerian petroleum resources through increase in government take,
overcoming government’s cash call problems, and promotion of
availability of gas for electricity production,” he said.

The Petroleum Industry Bill (PIB) is conceived to repeal the
Petroleum Act of 1969, and consolidate about 16 other petroleum
industry laws into one single, transparent and coherent document. The
objective is to establish a comprehensive legal and regulatory
framework for good governance, transparency and accountability with
regard to operational and fiscal terms for revenues management, and
removal of confidentiality clauses in licences, leases and contracts in
the nation’s petroleum industry.

Bureau of Public Enterprises (BPE) yesterday said it has
formally written to Omen International Limited, the reserve bidder in the
ill-fated bid for the national telecoms carrier, Nigerian Telecommunications
Limited (NITEL) and its mobile subsidiary, MTel, to take over the company.

Spokesman of the Bureau, Chukwuma Nwoko, said the company was
invited to come forward to come forward to re-validate its bid to give the
Federal Government the right to commence negotiations with its management to
take up the offer for the privatisation of the company.

Omen International Consortium had emerged the reserved bidder
during the February 16, 2010 financial bid exercise organised by the BPE and
supervised by the National Council on Privatization (NCP) with an offer price
of $956 million.

Several deadlines

Consequently, the Bureau said it has also written to New
Generation Consortium indicating that its former status as preferred bidder for
the national carrier had lapsed, following its inability to pay up 30 per cent
bid security for its $2.5 billion offer at the expiration of several deadlines.

The bid security, which involved the payment of $750 million
within ten calendar days of receiving NCP’s letter of notification of the
approval for its selection as preferred bidder, expired on December 21, 2010.

But, in the correspondence, the BPE said the invitation of the
reserve bidder was in accordance with the provision of Section 3.4.3 of the
Request for Proposal (RFP) sent to all bidders for the privatisation of the
telecommunications outfit, which give bidders a maximum of six months validity
after submission, except bid proposal is extended.

“Since your bid was submitted February 16th, 2010, it expired
August 15th, 2010. We, therefore, wish to invite you to revalidate your bid
bond of 4th April, 2010, if you are still interested in the transaction,” the
bureau said in the letter to Omen Consortium.

It was gathered that the decision by BPE to invite Omen
Consortium was sequel to the adoption of the proposal of the ad-hoc committee
constituted to review the confusion that trailed the sale, which had
recommended either the invitation of the reserve bidder to come forward and
take up the bid, or for the bid process be made to start afresh.

Not much to cheer about

But according to Lanre Opayemi, an Abuja-based finance analyst,
“there is not much to cheer about the prospects of the invitation succeeding,
as Omen Consortium was also entangled in the controversy surrounding the
involvement of Minerva Group as financial advisers to two companies involved in
the bid, in violation of the bid guidelines.”

Mr. Opayemi said he would be surprised if Omen Consortium would
still be willing to go ahead with the transaction on the same terms and
conditions prior to the cancellation of the bid, as much has happened,
particularly concerning the valuation of the assets.

We live in a very
materialistic world and, sadly, Nigerian society is one that
increasingly seems to favour instant gratification over hard work. With
a growing number of people living well above their means and images of
beautiful people living extravagant lifestyles, decked in expensive
designer clothing, and driving state-of -the-art cars, it is no wonder
that these images are affecting a young and vulnerable generation.

For young
Nigerians, from the minute they graduate from college or university,
the pressure is on. This segment of the population are sometimes
obsessed with the need to have an attractive car, designer clothes, a
job with a prestigious firm, and if they don’t have the money to live
“the” lifestyle, they are increasingly prepared to lease, borrow, and
in some cases will even consider doing unscrupulous things to maintain
a certain standard of living.

Without having
worked a day, some of our youth feel that they are nothing and will not
be accepted unless their appearance fits the bill; they are tying outer
image to personal value and self worth.

Where does the pressure come from?

There are a variety
of factors that drive this mindset. Parents are a major influence on a
young person’s attitude to money as they are natural role models for
their children. As money management is not routinely taught in school,
if their parents are poor money managers or exhibit an extravagant
lifestyle of over-indulgence, their children are likely to imitate
them.

The media and
advertising naturally have a huge influence on spending patterns.
Prolific advertising and product placements are so sophisticated that
you are convinced that you must acquire the product.

Many young people
interviewed however, say the greatest influence on their excessive
spending was their friends who put pressure on them to keep spending,
even when they have run out of money.

It is true that our
friends do have some influence on all of us in what we do, but it is of
grave concern if young people are being persuaded by their peers to
spend money they simply don’t have.

The trappings of
success are becoming more demanding and expensive each day.
“Necessities” now include designer handbags and shoes, trainers, the
most expensive Brazilian hair, the latest smart phone or BlackBerry, or
the largest flat screen television; and now the iPad 2 has come unto
the necessity list.

Who is paying for the shopping sprees?

This “must-have”
culture is putting pressure on parents. Who is paying for the $1,000
handbags and the first or business class tickets for a young
21-year-old youth corps member? As they strive to impress their peers
with expensive clothing, jewellery, and cars, parents are footing the
bill to help their children keep up with the “popularity contest”.
Whilst the children are still living at home, the problem can be
papered over and ignored, but when they move out into the “real world”,
they often feel a sense of entitlement and try to keep up a lifestyle
that took their parents decades to build.

Sadly, many parents
may unknowingly be jeopardising their children’s ability to succeed, by
over-funding them through young adulthood, and making it difficult for
them to fend for themselves in later life.

Overspending by
this generation has damaging implications both for consumer debt and
future savings habits and threatens their long-term financial health.
As they build up debt from overspending when they are young, it could
be a challenge for them to build wealth for their future.

At such a young
age, when they are just beginning to earn a salary and manage finances,
it is vital to start to establish a good savings habit and enjoy the
advantage that time brings to investing.

Who are the Jones?

But who are the
Joneses and why do so many people live their lives in fear of what they
think and do? No one really knows who they are, but they always seem to
set the pace for so many of us. The expression “keeping up with the
Jones’” is used widely today and dates back to 1913.

The name “Jones”
was chosen by the artist, Arthur Momand, as it was a common surname
that highlighted the common nature of social rivalry and image
consciousness. It makes reference to the desire to keep up appearances
of affluence and wealth as others around us.

The problem of
excessive spending is not limited to the younger generation; indeed
they learnt it from us. We often equate the worth of a person with what
they have acquired by way of money and material possessions, such as a
house, a car, jewellery, how often they take vacations, where their
children go to school, and so on.

If we are not able
to keep up, we then feel inferior on a socioeconomic level. It has
become a sorry way of life as it puts us in a precarious position. We
fail to recognise that there is so much about the Joneses that we
cannot see; we are thus influenced by perceptions or what we “think”
that they might have.

Keeping up with the
Joneses can creep into your life and you may have fallen prey to
spending patterns that have increased your debt. Whilst debt can be an
excellent tool when applied to acquire certain assets that are likely
to appreciate in value, funding luxuries with debt limits your choices
because you are constantly caught up paying for yesterday’s shopping
instead of securing tomorrow.

If portraying an
image of luxury is more important to you than acquiring long term
financial freedom and security, there will eventually be consequences.

Stop comparing
yourself to others. There will always be people that simply have much,
more than you do. If you constantly try to outdo them, you put yourself
under overwhelming pressure and undermine your own future financial
security.

Particularly for
young people who, with focus and discipline, have the potential to
create lasting wealth over a long time frame, it is such a waste to be
distracted by the trappings of success; they are only trappings.

Stay focused on your goals and objectives

We live in a
society where so many people appear to be competing instead of focusing
on their own goals and objectives. The good news is that, thankfully,
there are many young hard working, successful men and women who are
aggressively seeking a healthy and prosperous future through discipline
and hard work. Acquiring and maintaining long-term wealth is a process
that usually comes without short cuts.

Look critically at
your own particular situation, set your own priorities, and try to
improve yourself through self-development and education. Focus on what
is really important to you and stop worrying about the distraction of
what the Joneses are doing.

It takes courage
and a lot of self-confidence to cope with peer pressure. Too many
people learn this lesson the hard way by ending up in debt and with no
savings.

If it gives you any comfort, the Joneses are broke. If you are busy
trying to keep up with them, please stop. The Joneses are probably
trying to keep up with you!

I was pleasantly
surprised, in a conversation last week, to learn that of the many
concerns over the Central Bank of Nigeria’s (CBN) repairs to and
reforms of the banking sector, the nationality of the would-be buyers
of the banks rescued by the apex bank is the more troubling.
Transparency of the accounting treatments of the intervention funds did
not make the grade. According to the IMF, the original financial
intervention in 2009, by the CBN (N620 billion) in support of the 10
banks and its subsequent quasi-fiscal interventions in designated
sectors in support of a recovery in the market for credit, “pose on and
off-balance sheet risks…that should be undertaken, if at all, within
the context of the federal government budget”.

Related
reservations have been entertained over government’s attempts to pass
on some of its responsibilities for developing domestic infrastructure
on to the Nigerian Sovereign Investment Authority. Worries abound too
about how much of the Asset Management Company of Nigeria’s (AMCON)
purchase of the industry’s dodgy loan portfolios will feed into
monetary aggregates, and thence into domestic prices.

However, none of
these mattered to my interlocutors. Unease centred on protecting the
“national interest” from the beady gaze of “greedy” foreign investors.
According to the lead argument, top on the list of interests to be
protected are shareholders. And it mattered nought that a majority of
these shareholders had been complicit in the significant value erosion
that had taken place in the banks before the CBN’s August 2009 special
audit of the industry. Indeed, it is a long walk to health, from the
negative equity, and huge non-performing loan books that most troubled
banks’ balance sheets carried then, to the current valuations of their
shares on the stock market. Moreover, because of the CBN’s efforts,
these shareholders may yet come off better than they had reason to
expect a year ago, if external investor interest in their banks pushed
valuations up the more.

Shareholders gain
two things in addition. Unlike previously, no bank failed in the
current round of distress. Secondly, we all have learnt a lesson or two
about the importance of a strong governance suite for the management of
the companies in which we have financial interests. Admittedly, the
corporate governance sphere includes legitimate fears over minority
shareholder interests. As the banks’ recent experience indicates, this
has nothing to do with the complexion of the major shareholding
interests. In the absence of a strong regulator, there will always be
benefits from gaming the system, and a disposition to do so.

Incidentally, the
regulator in question in this instance is not the CBN. For as long as
these banks remain quoted companies, the operative environment that
either helps or impedes the progress of good governance will largely
remain the SEC and NSE’s call. So for shareholders, there are real
welfare gains to be had from investor interest in the banks. Foreign
investors have the added advantage of bringing in new money, new
management competences, and the latest technology.

But are they good
for staff? If they are not nepotistic, and choose to run efficient
shops, the short-term response is a resounding “no”. The choice before
your average executive is simple. Depending on the product and customer
service preferences, it would always pay to automate. Costs are driven
inexorably downward, and the space for human error is minimal. So if
the same value may be obtained from three staff, which was previously
delivered by five, stronger returns will accrue to that organisation
that can ask the two individuals who are surplus to requirement to go.
A major proviso here: the welfare effects depend on the relative costs
of labour and capital. This is good, because with cheap labour, the
incentive will always favour labour-intensive solutions. The only
drawback is that then, you are at the bottom of the production
ecosystem. That is how the private sector should run. Those who
bellyache over the fate of staff who lose their jobs as entrepreneurs
search for more efficient ways of doing business should turn instead to
the public sector. A bigger economy, including through best of breed
fiscal and monetary policies, and an education sector that ensures
constant retraining opportunities are baseline requirements if labour
is to be both mobile and productive.