From climate change to digitisation, there is no shortage of economic challenges facing the small island states of the Caribbean. But the region’s accountancy sector has the capacity to manage upcoming change. For many financial professionals, being a part of ACCA is integral to progress.
Making headway begins with a smart, strategic approach to building resilient economies for the region’s 44 million people, says Justin Ram, director of economics at Caribbean Development Bank (CDB). ‘On average a year, we lose about 2% of our GDP due to natural disasters – and when a country gets a direct hit from a hurricane it can be several hundred percent,’ he explains. ‘We spend a lot of money rebuilding and replacing infrastructure, which leads to high debt-to-GDP ratios; some countries are in excess of 150%.’
Building more robust houses and public facilities would help – but governments are overstretching themselves, he believes. ‘Caribbean governments provide too many goods and services that should be done by the private sector,’ he says. ‘We have to transform our economies so the private sector becomes a driver for growth.’
The global economy is fast-changing, and this has a major impact on the Caribbean
A major obstacle is the difficulty of trading, investing and manufacturing in many islands. Over the past decade several nations have plummeted in the World Bank’s annual ease of doing business rankings: between 2009 and 2019, St Lucia sank from 34th place to 93rd, Antigua and Barbuda from 42nd to 112th, and Trinidad and Tobago from 80th to 105th.
More e-governance would be a start, says Ram, adding that taxes could be better allocated, allowing the private sector to deliver more healthcare. Public funds saved could finance better schools that prepare young Caribbeans for a future that will involve them working in a world with artificial intelligence (AI).
‘Technical skills are important, but if more decisions are going to be made by algorithms, then we need to look at the real value skills that people can bring to complement the realities of AI, such as soft negotiating,’ Ram says.
One area where the region is showing leadership is in cryptocurrencies. Talks are under way about launching a digital Eastern Caribbean dollar (DXCD) for the eight nations which use the XCD. ‘There’s opportunity for cost savings for consumers if we can implement a digital component for trade in the region,’ Ram says. Currently, US dollars are often used. ‘A regional network would mean we keep more of the revenue here,’ he says, adding that blockchain technology could also be used for smart contracts in the energy and health sectors.
Shelly-Ann Mohammed, head of ACCA Caribbean, also talks about the need for relevant skills. ‘The global economy is fast-changing, and this has a major impact on the Caribbean. The accountancy profession must ensure its members have the knowledge, skills and abilities to help organisations sustain economic growth and compete nationally and internationally. The new business environment will require flexibility and relevance. Professional accountants must both maintain their technical excellence and supplement this with highly developed personal skills and professional qualities.’
While some Caribbean nations lack professional accountants, others have public finance capacity issues, she adds. ACCA Caribbean works closely with governments to help build capacity to ensure finance teams are equipped to meet local business demands.
ACCA in the Caribbean
ACCA has operated in the region for 50 years, and this year celebrates the 20th anniversary of opening an office in the Caribbean. With 5,400 members and 15,000 students, ACCA Caribbean’s focus is on the future and ensuring members are equipped for success. ‘We will be paying close attention to the issues that will impact the profession in years to come – such as digital technology, employability, and ethics and corruption,’ says Shelly-Ann Mohammed, head of ACCA Caribbean. ‘And we will work closely with our partners on initiatives to build capacity throughout the region, assuring sustainable continued growth.’
ACCA’s role will expand as businesses become more sophisticated, and barriers erode between internal and external reporting and financial and non-financial performance measurements, Mohammed believes, with accountants increasingly expected to ‘look beyond the numbers’. She explains: ‘They will need to interpret and explain them, provide insight and information, think and behave more strategically and become more involved in decision-making than before.’
While natural disasters remain the Caribbean’s biggest economic threat, according to the World Bank, and are estimated to have cost the region almost US$9bn between 1996 and 2015, many small tourism-dependent islands have seen steady growth over the past three years. GDP growth rates in 2017 averaged 1.7% in Caribbean service-oriented economies. Grenada’s 2018 region-leading performance of 5.2% continued a five-year positive trend thanks to economic reforms such as grassroots consultations and prudent management by investment funds. The region’s second fastest-growing economy last year was Antigua and Barbuda, where reconstruction efforts after 2017’s Hurricane Irma paved the way for 3.5% growth. And in Guyana, a 3.4% expansion was linked to increased construction activity in advance of the start of commercial oil production in 2020.
The CDB forecasts that the region’s GDP will grow by 2% in 2019, with construction, tourism and extractive industries such as gold and oil all expected to expand.
In Jamaica, where GDP has increased slowly on average, by 0.17% year on year over the past two decades, the country’s auditor general Pamela Monroe Ellis FCCA says the accounting profession is adding significant value to overall development.
Public sector personnel have developed a deeper appreciation of proper accounting standards and auditing systems in recent years, she says. ‘Early adoption of auditing and IFRS standards as national standards has improved the reliance that can be placed on financial reports,’ she says. ‘People can invest confidently knowing those standards are in keeping with international best practices.’
Much of that success can be attributed to ACCA’s formal relationship with the supreme audit institution of Jamaica, says Monroe Ellis. ‘ACCA has contributed to our capacity-building initiatives by offering fit-for-purpose training on an annual basis, at no cost to us. This approach is seen in other Caribbean countries too, and is one I believe must be lauded,’ she says. ‘In a very direct way, ACCA has contributed to the positive moves taking place within the accountancy profession in the public sector.’
Many of the issues facing today’s financial professionals are unprecedented, says Julie Reifer-Jones FCCA, the Antigua-based CEO of regional airline LIAT. ‘In the Caribbean, we’ve had to adapt to build resilience into our business models. We’re still recovering from 2017’s major hurricanes; we’re very vulnerable to climate change, and that’s impacted many companies,’ she explains.
There are also issues of derisking, with many financial institutions under pressure and indigenous banks struggling to operate in the global business space. ‘Some islands have been blacklisted as tax havens too,’ Reifer-Jones says. ‘The stigma is very harmful to the financial services sector, which is particularly important to the Caribbean.’
It will be incumbent on finance personnel to identify the impact of such issues and adjust to help create a ‘more relevant and resilient’ business environment, Reifer-Jones says, adding: ‘For the first time, they now have to factor in issues like risk of climate change into their analyses, projections and trends.’