Saturday 6 October 2012

The Legal and Economic aspects that are taking place in the banking sector have both positive and negative impact on the commercial banks, the general public and the government

By Andrew Bishop Mkandawire-Yr4 MC-Share World Open University Malawi

The Legal aspects are:
Commercial Bank Regulation;  
According to (Laws of Malawi 1989-(Part 11 (56) of Chapter 44:02) it is argued that the ‘Minister may, after consultation with the Bank, make regulations for the better carrying out of the objectives and purposes of this Act, or to give force or effect to its provisions, or for its better administration.

This shows that the regulation is more interested in success of the commercial banks.

Limited entry; to start up a commercial bank in Malawi, an investor can only enter the local banking market through merging and acquisition as recommended by the Reserve bank of Malawi through the Reserve Bank of Malawi Act.

According to (RBM 2008, p. 15), the legal stipulates of such conditions are

3.4.2 Merger A formal application by the merging banks/institutions addressed to the Governor of the RBM and signed by the Chairpersons and Managing Directors/Chief Executive Officers of each of the merging banks accompanied by the following:

 Proposed name of the successor bank (where a new entity will be formed). Resolution of each bank of the Boards and shareholders of the merging banks approving the merger. List of Directors, designation, curriculum vitae and interests they represent post merger.

List of significant shareholders of the existing banks, showing their physical/residential addresses, pre and post merger.

List of top management team of merging banks and their designations after merger.

Draft Memorandum and Articles of Association of the new bank or surviving bank (with proposed amendments if any).

Business Plan of the successor bank for the next 3-5 years showing how the integration process will be managed, future goals and operations, branch expansion, treatment of existing and surplus staff etc. 

3.4 Acquisition or Merger with an existing banking institution

Should a prospective investor opt to acquire or merge with an existing bank, the following
information will have to be submitted to the Reserve Bank of Malawi. Full details on mergers
and acquisitions are contained in the Guidelines on Mergers and Acquisitions document.



3.4.1 Acquisition A formal application by the acquiring institution/bank addressed to the Governor of the RBM and signed by the Chairman and Managing Director/Chief Executive Officer accompanied by the following:

A take over application stating clearly that the acquired bank(s) will cease to exist. An independent valuation/due diligence report on the bank to be acquired.

A sale agreement between shareholders of the acquired bank (seller) and acquiring institution (buyer) duly signed on a seal by both parties.

Memorandum and Articles of Association of the acquiring institution. Certificate of incorporation of the acquiring institution. Approval letters from banking regulator of the buyer (if a bank) confirming that the buyer has adequate resources to finance the transaction.

Board resolutions of the acquiring and acquired institutions approving the acquisition.

And the fact that the government of Malawi through the Reserve Bank of Malawi controls commercial bank entry into local market through merging and acquiring, it may be argued that it is how it can best measure or assess its performance eventually ensuring cheaper mode of market entry

Political threats; this usually happens when a ruling party just demand the commercial bank to deposit its moneys into the party’s account without repayment. The bank usually does cough such moneys in far of being stopped to operate.

This can be argued that it lowers commercial bank’s profitability.

Economic
Low Capital; banks in Malawi are issued license to start operation when they meet a minimum amount of total capital.

3.3.4 Assessment of Bank License Application. (RBM 2008, p. 14) argues that in assessing an application, the Reserve Bank takes into account all the above listed information as well as the requirements stipulated under Section 6 of the Banking Act. A banking license shall not be granted unless:

The proposed institution is incorporated as a company under the Company’s Act.

The proposed bank will be managed by at least two persons as executive officers, and,

The proposed institution demonstrates  that it will be adequately capitalized at all times and meets  the minimum start up capital  requirements of Malawi Kwacha equivalent of US$5.0 million for a bank, and US$1.5 million for a leasing company or discount house. Use of borrowed funds as start up capital to be invested is discouraged.

It can be argued that if currently there are 11 commercial banks there total minimum capital invested in the banking industry is MK13, 750, 000, 000 or MK13, 750 billion against 14.5 million people. This figure minus banks administration costs is small to serve the developing country which lack financial resource. For example, the MK13, 750 billion divided by the 14.5 million people, everyone would get MK948. 28 loan. It is therefore conspicuous that is why Malawian banks are found difficult to issue loans. It is not only the issue of collateral but they do not have enough money to invest. A better bank would rash to fund a profitable idea fully assessed to would bring more assets other than insisting on little assets already available for collateral. A developing country has more unbroken, unused and unsaturated business opportunities and markets.   

More GNP loss of local wealth; there is observation that although the number of banks look so attractive (11 banks), only New Building Society, Malawi Savings Bank and National Bank of Malawi provide wealth accumulation to the nation of Malawi as 70% of their ownership formality is Malawian. This means that Malawi loses wealth to 8 countries that own Ned, OIBM, Standard, Eco, International Commercial, Inde, FDH and FMB banks.

Low income generations of civil servants; many civil servants and the general public particularly that belong to the lower social class having more national population than the middle and upper social class do not use much of the banking service.  However it can be detected that it is because they receive little that cannot be spared for savings. This may reduce bank utility and bank industry growth. For example, in Malawi the minimum wage for workers is MK176 per day (MK5, 456. 00 a month) which some have called it a mockery to Malawians as (www.zodiakmalawi.com) argues that in the midst of the high cost of living the approved MK176 minimum wage for Malawian laborers is a mockery to them, the Center for Social Concern, a Social arm of the Catholic Church, has said in Mangochi. In contrast The International Labor Organization establishes minimum rates for able seamen.  From January 1st 2012 the minimum monthly wage for seafarers is 555US$ (MK138, 750.00 a month) US dollars, rising to 568 US dollars on January 1st 2013 and to 585 US dollars on December 31st 2013. Consolidated monthly wages, including overtime and annual paid leave, are 975 US dollars and will rise to 998 US dollars and 1,028 US dollars respectively (www.fedee.com).
The legal and economic issues discussed above have Impact in a positive and negative way.
For example, the positive impact may be that the two are enabling the baking sector help Malawians save and safely keeps their money thereby enhancing strategic use of finances. The two factors are also important in enabling local business professional find jobs in respective commercial banks.

The negative impacts are that the interest rates are high for people like middles and lower classes people. And the fact that banks are allowed to invest a minimum of not more than MK1.2 billion, they may realize little profit to grow the banking industry to meet the banking service currently high in rural areas. The same problems may affect the entrepreneurial growth. Many people may not access bank loans if banks may remain investing less. 


REFERENCES

Laws of Malawi (Part 11 (56)) 1989, Chapter 44: 02, Reserve Bank of Malawi Act, Office of President & Cabinet

RBM 2008, The Malawi Economy and Its Banking System, Reserve Bank of Malawi, Lilongwe
  
Federation of European Employers’ 2012, FedEE Review of minimum wage rates, viewed 27th September, 2012, http://www.fedee.com/pay-job-evaluation/minimum-wage-rates/

Mababa, D 2012, ‘K176 Minimum Wage a Mockery to Malawians’, Zodiak Online, 19 March, p. 2, viewed 27th September, 2012,   http://zodiakmalawi.com/zbs%20malawi/index.php?option=com_content&view=article&id=4622:k176-minimum-wage-a-mockery-to-malawians&catid=1:latest-news&Itemid=109

Friday 14 September 2012

Why PR is Important in a Formal Organization-By Andrew Bishop Mkandawire (AB Deevado)-MC Yr 4-Share World Open University-BT Campus


Why PR is Important in a Formal Organization
By Andrew Bishop Mkandawire (AB Deevado)-MC Yr 4
4th May, 2012 Share World Open University-BT Campus

(Names stated in this document are not real except that of the author. It was an assignment submitted to SOUM)
                                             
Abraham Wapona Kisebe
Chief Executive Director of GT Detergents  
Andrew Bishop Mkandawire
Chief Executive Director of ADEEVA COMMUNICATIONS Ltd Co
AC’s 2012/03/20-77

WHY PUBLIC RELATIONS IS ESSENTIAL TO AN ORGANIZATION AND WHY THE PR MANAGER SHOULD BE APPOINTED AS PART OF THE SENIOR MANAGEMENT TEAM

 
TO:
POSITION:
FROM:
POSITION:
RR#:

SUBJECT:             



Introduction
Public Relations is an integral stake of every organization that ensures that management has a strong back bone on which information and communication can be a tool to position the strength and the opportunity of the organization. This becomes possible because the PR functions work to build and maintain good relations with mutual understanding and benefit with the organization and its publics. 

This was reflected in a meeting that was held on 2nd February, 2012 which was participated by GT Detergents and ADEEVA COMMUNICATONS (ACs) Ltd Executive Boards where it was appreciated that PR is a vital tool worthy to be part of the organization’s management setting and operations.

And here is the report by the ADEEVA COMMUNICATIONS Ltd, the hired communications consultant, that expresses why Public Relations is essential to an organization and why the PR manager should be appointed as part of the senior management team.

Terms of Reference
ADEEVA COMMUNICATIONS Ltd as a communications consultant was mandated by GT Detergents Executive Board to compile a report that will show how PR as a profession and a PR Manager can benefit the Detergent Manufacturer.

Procedure
To gather relevant data for the report to be comprehensive and professional with sole aim of proving out why PR is essential to the organization as well as why it is necessary to have an internal PR Manager that have to be appointed as part of senior management team, Books and Internet have been used. These books have reputable and accredited authors and publishers and the websites used are referred. These are indicated in inside referencing and at the end of the text or reference list.


Findings
The AC’s found that the following are necessary reasons why GT Detergent has to have the PR functions and an internal PR manager who has to be appointed in its senior management. The sections a, b and c illustrate this relevance of PR.

a)                  PR has many transferable benefits that are realized when it is used in an organization. These benefits make no sense when PR is absent. They are highly appreciated when PR is practically experienced in an organization setting. For example:

It create and sustainably maintain relationship with publics; this is true from the virtue of understanding the concept of PR where almost in every definition it is argued that this profession revolves around two key words Communication and Management which all aim at ensuring that mutual goodwill or understanding and probably benefit for a sustainable period of time is achieved. This means the organization stands close to its stake holders through information flow.

Three definitions from Jefkins, PRISA and Baran provide evidence of the above explanation. ‘PR is an art and social science of analyzing trends, predicting their consequences, counseling organization leaders, and implementing planned programs of action which will serve both the organization’s and the public interest’ (Jefkins 1995 p. 08); Public Relations is the management, through communication, of perceptions and strategic relationships between an organization and its internal and external stakeholders (www.saaci.co.za); and ‘PR is the is the management function that focuses on the relationships and communications that individuals and organizations have with other groups (called publics) for the purpose of creating mutual goodwill’, (Baran 2012 p. 308).   .

PR also helps to Manage Stakeholder Mapping. Stakeholder mapping is the effort of an organization that helps to identify active and non-active stake holders (those individual, groups and organizations that have interest in the operating business). Because PR keep communicating with these stakeholders, it becomes easier to identify those who are direct, connected and external stakeholders that an organization can communicate to effectively achieve its objectives through press conferences, press visits, lobbying just to mention a few. For example, external stakeholders like investors, financial lending institutions, just to mention a few institutions and customers, can easily be communicated and their needs and wants known through the Two-Way-Symmetrical Model.  (Odedele 2008) The Two-Way Symmetric model represents a public relations orientation in which organizations and their publics adjust to each other. It focuses on mutual understanding and two-way communication rather than one-way persuasion.

Usually it is the influence of stakeholder mapping that guides the need for Total Quality Management.  In this Communication internally and externally the organization becomes the major tool to carry the day, meaning to help business achieve its objectives and goals. The TQM concept is the is Holistic approach to long-term success that views continuous improvement in all aspects of an organization as a journey and not as a short-term destination. It aims to radically transform the organization through progressive changes in the attitudes, practices, structures, and systems. TQM transcends the 'product quality' approach, involves everyone in the organization, and encompasses its every function administration, communications, distribution, manufacturing, marketing, planning, training, (www.businessdictionary.com).
PR helps the business to reduce costs. Public Relations unlike advertising reach its publics with little cost and this stretches the organizations marketing function. For example, the PR messages mostly are treated in the media as news which are covered freely. Press Releases, Documentaries, Notices are some such forms. And sometimes the media can cover a function like a Trade Fair in form of exhibition about the new product at a cost of covering news of their media organizations. This money saved can help to fund marketing efforts and programs like research on identifying the new market.

PR functions saves money or minimizes costs with fact that it avoids litigations the business could commit and pay for damages and compensations. This becomes avoidable because PR advocates for ethical operation in business. Business Ethics can be defined as ‘a set of principles prescribing a behavior code that explains what is good and right or bad and wrong; it may even outline moral duty and obligations generally’, (Chryssides & Kaler 1993 p.51).

This becomes possible because business ethics are necessary to businesses as they enable the business operate in accordance to business stakeholder interest; helps the business meet quality standards within and outside the business; enables the business define good or bad operation of duty, task or project, leading to the formulation of code of ethics; guides the business to abide by business laws and policies of individuals, organizations and government; and conform with principles of economic structure and system available and ratified in a legalized market.

This further creates good image and reputation which increases PR messages from such an organization to be received by publics with high credibility which fasted reaction or response to the communication flow.

PR helps to avoid price competition. In short this means that before a product is offered to the market, consumers are communicated to base the understanding of the price the market can afford. This helps then to publicize or create awareness of the product price before it hits the market. This does not compete with any product or service price already or coming into the market. Through business research which helps to identify needs of the market, this research also helps to forecast the future of the business performance in terms or relations, sells, accessibility of raw materials just to mention a few factors. Forecasting can be argued that it is in strategic context, any attempt whether qualitative or quantitative, and usually based on past performance, to predict future outcomes and trends in the internal and external environments of an organization in order to limit the risks involved in devising and implementing a strategy (Cole 1997).

 PR helps and organization looks larger. Through media coverage that continuously keeps disseminating messages of the organization to the public, it maximizes publicity of the firm’s image. This attracts attention of the public and perception that is created represent that the organization is big in terms of operations and responsibility to the public. Mostly when the publicity is positive with good communication flow of productive and public interest news about on going or to be introduced events, the organization looks larger. For example, recent commotion on minority gay rights between the  civil society and the government, the Human Rights Consultative Committee showed up to be a larger organization because it was dominantly covered in the media to be on fore front advocating for legalization of gay rights.

b)                   Public Relations is essential to an organization because it has effective activities that enrich PR programming. These activities are:

1.      Government Relations; lobbying officials and government departments on legislation or fair policies in the industry the GT Detergents operating.

2.      Publicity; giving out information of what GT Detergents has or how it is involved in a activity done to the public via the available cost-effective medium

3.      Communication; a message central to getting instant feedback from audience on any activity done or to be done

4.      Employee Relations; usually to lessen the gap between employees and their immediate bosses through active interpersonal linkage within chain of command and span of control and enhancing their commitment and hard work through participation, involvement and hands-off where necessary and allowing their work environment flexible. This counsels management on vital matters affecting the organization.

5.      Public Affairs; creating a beneficial mutual understanding between community, government officials, civil society, pressure groups, etc. 

6.      Community Relations; making sense and considering those who are surrounding GT Detergents like residences, and all stakeholders within and outside Malawi.

7.      Minority Relations; recognizing the importance and right of defined minority groups like the old, children, disabled, etc

8.      Financial Public Relations; bridging good and successful talks between investors, banks, shareholders and owners of organization.

9.      Industry Relations; associations, unionism and organization corroborated work activities are more recognized to the public than solo. This is vital

10.  Press Agency; attracting and responding to public queries before they interrogate the organization, even ask about an issue publicly or privately known.
 
11.  Promotion; positioning an idea, activity or organization to make the public know, believe or adopt the idea like image of the organization

12.  Media Relations; treating media as a tool of disseminating communication messages

13.  Issue Management; moving public opinion on large scale to take supportive position of the organization

14.  Propaganda; injecting ideas with aim to get quick public reaction usually to support the concept given by the organization.

15.  Advertising; to attract audience with messages for them to own, possess or support the product or service with profitable exchange.

c) Finally, PR is both an art and science. There are many issues to be discussed here but the following two statements represent why PR is an art and science respectively.

PR is an art because it uses skills to select things like strategies, tactics, objectives, designs, messages, personnel, media, tactics and equipment to manage a certain program. For example, it builds its communication frame work from a scratch to make it informative, comprehensible and memorable. For example a PR department will have graphic designer and Video editor and producer whose duty will be to come up with ideas and then turn them into a visual picture where the PR can place text to make the graphic have complete meaning. The video editor and producer will also turn the shooting script into a documentary for example of how pregnant rural women are struggling to seek maternal health care. The preparation of the shooting and editing script, the writing of news releases and the presentation of PR messages to the public via the media, all derive from the duty and power of art in PR at most to enrich personnel with compositions of different forms of communication. Brochures, Newsletters, House Journals, etc, are sources of art in PR practice.

Public Relations is science because it plans, organizes, controls, implements and evaluates its programs which were implemented. These are managerial roles and functions. And usually evaluation is a scientific term that goes together with means of solving business problems like research. Research in public relations belongs to the faculties of social sciences and economics and commerce. For example the organization failure to market its products/services may cause the business to partner with internal or external PR consultants to help find the cause of the problem and possible solutions to it through a joint venture called Marketing-Public Relations. This according to (Belch and Belch 2004 p. 566) is referred to public relations activities designed to support marketing objectives as marketing public relations (MPR) functions. The marketing objectives that may be aided by PR activities include raising awareness, informing and educating, gaining understanding, building trust, giving consumers a reason to buy, and motivating consumer acceptance.  MPR ads value to the integrated marketing program in a number of ways: building market excitement before media advertising breaks; creating advertising news where there is no product news; introducing a product with little or no advertising; providing a value-added customer service; building a brand-to-customer  bonds; influencing influential’s; and defending products at risk and giving consumers a reason to buy.

Therefore we can prove that PR is vital to an organization. To prove this further, there are five major components that make the locomotion of business possible whether profitable or non-profitable. These are International Business/Marketing, Strategic Planning and Control, Financial Aspects of Business, Integrated (Marketing) Communication, and Case Study. This reflects that Communication in an organization is vital and inevitable for the organization to achieve its objectives and goals sustainably.  

For example, PR supports all features or departments in the organization including Marketing. In International Business therefore PR can help to position the organization and its products and services in a foreign country to create awareness and market education before the actual start up of the firm commences. This is the concept of PR Export Trade within Financial PRs. 

To a detergent manufacturer organization, such PR Export activities can help to identify news foreign markets thereby generating more foreign currency that can even help the government of Malawi through tax that it can support its social services. But at most this can give opportunity to extend efforts of expanding the business either locally or as a multinational organization. This in example can be achieved through execution of Ansoff Growth Strategies where Market Development, Product development, market Penetration and Diversification strategies can be completed.   

And for the business to be accurate in designing communication strategies to support business objectives and goals achievement, a professional PR Executive need to be employed and be appointed to the senior management of the business. This person is unique because: is a qualified professional on communication programming able to develop communication programs; can help strategizing and carry out communication programs; can help choice of media and techniques to be used; can forecast the consequences of a communication program; can control costs by scheduling cost effective communication techniques; and at most can counsel the management on how ethical, and legal communication should be conducted within and outside the organization.

For example, the internal flow of communication among employees can boost employee relations and commitment to job as team works and employee integrity can be motivated. This can lower levels of conflicts and whistle blowing. The latter according to (Weiss 2003, p. 246) ‘is the attempt of an employee or former employee of an organization to disclose what he or she believes to be wrong doing in or by the organization’; and (Chryssides & Kaler 1993, p.304) define whistle blowing as the ‘activity of ‘going public’ with pieces of information which are normally regarded confidential within the firm, but the disclosure of which is deemed to be in the best public interest’. 

Conclusion
Therefore it is conspicuous that PR affects the entire internal and external parts of the organization. And it has been shown that its functionality is sensitive to relations, perceptions and needs and wants. When these are well served among the publics, it gives the organization strength which generates the ability to control the market and the opposite leads to failure to control the market which leads to loss of market share. Further than this, PR enable the organization to forecast its future trends. This helps to prepare for success.
Recommendations
Therefore it can be argued that Communication and Management are Inclusively Inseparable. With this notion it is then necessary for an organization to have PR department and ITS professional Manager should be appointed to the senior management because these communications activities go together with strategy formulation, implementation and control. His presence will quicken accuracy and effectiveness because he will have the opportunity to propose, play roles of advising and counseling the senior management on better means of approaching communication activities and programs as some discussed in the FINDINGS.


Andrew Bishop Mkandawire
0888 11 36 23


Chief Executive Director of ADEEVA COMMUNICATIONS



REFERENCES

Baran, SJ 2002, Introduction to Mass Communication, 2nd Edition, Boston: McGraw Hill

Belch, GE & Belch, MA 2004. Adverting and Promotion, 6th edition, Washington, Mc Graw Hill

Chryssides, GD & Kaler, JH 1993, An Introduction to Business Ethics, London: Thompson
Cole, GA 1997, Strategic Management, 2nd edition, London: Thomson

Jefkins, F 1995, Public Relations Techniques. 2nd Edition, Boston: Butterworth-Heinemann

Odedele, S 2008, Public Relations and Communication Management in Africa, Lagos: Petros-Faith Public Relations Consult

Weiss, JW 2003, Business Ethics, 3rd edition, Canada: Thomson

 ‘Business Dictionary’ 2012, Total Quality Management, Viewed 24th March 2012, http://www.businessdictionary.com/definition/total-quality-management- TQM.html. [22/01/12]

‘Southern African Association for the Conference’ 2012, PRISA Public Relations Definition, Viewed 27th February, 2012, http://www.saaci.co.za/content.asp?pageID=349

Which another PR topic you long to get discussed. Leave a comment.

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