Afsar Ebrahim : Disruption is the new normal

We are sailing towards 50 years of independence and looking back, we have grown into adulthood with a matter of pride. We have evolved from a monocrop economy to an international financial services centre of substance and repute. Our democratic system, legal framework, education have contributed to this result. The vision and commitment of our political leaders and the entrepreneurial culture of the private sector have led this transformation seamlessly.However, the future (next five years) will see a degree of disruption in business that we have never experienced. The disruption risk is causing many sleepless nights to business leaders who are alert to this risk. The globalization as we have known is gradually fading, the political scene is changing with emerging disruption in democratic society. It seems there is a new political agenda with more inwardly focus policies.

Globalization have made Corporations more powerful than Government. CEOs of businesses are gradually becoming cult heroes and even attaining status of super stars: Bill Gates, Richard Branson, Marc Zuckerberg are more popular than a Hollywood or Bollywood star. Rupert Murdoch and Warren Buffet are so powerful that they can influence economic policies. Are they managing or creating political risks? The family feud at TATA in India has even caught the attention of the Prime Minister. Here, luckily we are well poised with our public - private partnership model and this minimize the political risk disruption. However, we are exposed to outside political risk like Brexit which will certainly have an impact on an export led economy like ours and will take a new dimension if France follows the same route.

The political disruption also creates a high degree of hypocrisy. We are at the receiving end of media bashing because of our low tax policy. This bashing does not seem to be targeting British Virgin island, Jersey or Delaware.

“The UK is a tax haven,” said Bermuda’s deputy premier and finance minister, Bob Richards, citing non-dom laws that allow foreign nationals to live in Britain without paying tax on overseas income. “You have more billionaires resident in London than any place on earth. They are not here for the weather, they are here for the tax climate. We have a double standard going on here. (Guardian 6 February 2017)

In order to minimise disruption risks, businesses are combining their efforts. BAT acquiring Reynolds, Bayer merge with Mosanto, AT & T with Time Warner. Here, the amalgamation of GML IBL was a major transaction ; so was the acquisition of IFS by SANNE which adds credence to the healthy state of the Global Business despite prophets of doom claiming death of the sector. As business grows cross border, Mergers & Acquisitions (M&A) become the order of the day to create sustainable shareholders value. To minimise disruption, economies of scale is a key competitive advantage and all stakeholders will gain. Building up economies of scale, require M&A both locally and cross border.

The next wave of disruption will be technological. We all remember our pride when we bought our Nokia 3310 in 2000. This was a major handset, a game changer for the company and a life changer for the users. In 2007, APPLE launched its iPhone… The rest is history. This is the best of the past that we shall have to carry forward. The challenge for businesses is how to stay relevant in the wake of such disruptions. Technological disruption will increase the velocity of transaction and reduce the lifetime of product and businesses. The agility that is required as disruption and innovation become two sides to the same coin, it is bound to make the economic activity challenging both in terms of successes and in terms of failures.

Futurist Ray Kurzwel in his famous book The Singularity is Near: ”Singularity is a future period which the pace of technological change will be so rapid, its impact so deep, that human life will be irreversibly transformed. Although this epoch will transform the concepts that we rely on to give meaning to our lives, from our business models to the cycle of human life”. It will be difficult for Mauritius to escape this. Unless we reboot our mindset, we shall be left behind.

Every business from Professional Services Firm (Auditing, Legal, Architect, Engineering, Advertising), Healthcare, Banking, Insurance, Retail, Hospitality, Media and services in general will be disrupted. New entrants will completely change the rule of game with barriers to entry falling easily and competitive position will be sustained over a short period of time until the next generation of technology surfaces. We are looking at a lifetime of 3-5 years for a complete overhaul. NOKIA took seven years to be sunk by iPhone. This time frame in today’s environment is considered long term. Businesses will be redundant if they do not adapt to technological advances.

A recent World Economic Forum report predicts that by 2025 10% of GDP will be stored on blockchains or blockchain related technology. It will facilitate transactions by eliminating middlemen and bringing huge degree of efficiencies. This creates new challenges for risk management for financial institutions, let alone for the auditors which are third line of defence in ensuring internal controls are safeguarded. We are looking at instant control mechanism. IBM, Microsoft and Oracle are already at the forefront of this technological innovation. Are we seeing intellectual property confining to a handful of global players? Will Winston Churchill famous quote becoming a reality: ”Empires of the future will be empires of the mind” which may need rephrasing to monopoly of the mind!! How does Mauritius Inc. raise to this challenge?

Kenya GDP per Capita is $1,522 compared to Mauritius GDP per Capita which is close to $9,500. Yet with M-PESA, Kenya does not lead Africa but the world in mobile payments. More than 17 million people in Kenya use it and 25% of its GDP flow through this system. This is both innovation and disruption. MCB Juice is a step in the right direction but is yet to gain popularity like Kenya and yet in Mauritius, we boast about our level of education and “smart” island. We are not as smart as we think as we are playing catch-up with Kenya when it comes to technology. Our report card says ”Can do better” yet we have the right policy, the right infrastructure, the right business framework, the right operators and all we need is a bold entrepreneurial flair which has served us so well up to now to be channelled in a positive business disruption to bring technology to work for us.

As customer expectations are growing and demanding more and more personalized services, the technological development is going to be the key source of competitive advantage in the next few years. Corporates will have to give equal importance to a CIO as it does to a CFO and business leaders will have to ensure that their IT Strategy not only covers business development as growth without IT as an enabler will be few and far between but the IT Strategy will also have to raise awareness of risk management for potential disruption.

Michio Kaku sums it well in his book PHYSICS OF THE FUTURE: “In the future, we will make the transition from being passive observers of the dance of nature, to being choreographers of nature, to being masters of nature and finally to being conservators of nature. So let us hope we can wield the sword of science with wisdom and equanimity, taming the barbarism of our ancient past.”