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Thursday, October 9, 2008

world's economic crisis, a tanzanian perpective

GLOBAL ECONOMIC OUTLOOK ADVICE TO TANZANIANS, AND EAST AFRICANS
Dear My Countrymen,

At this point, many of you are aware of the Economic turmoil that has rocked the global economies. From the NYSE, LSE, to Hong-Kong Stock Exchange the cry is the same, and the pain is being felt in all sectors ; manufacturing, energy, agriculture etc.

Even though the problem may have started as Mortgage crisis in the US, and many thought it would have ended there, the reality is rather different, and the truth is painful and scary to hear. The data that has been available for almost two years now, pointed to the very situation we are in today. Middle analysts detected the problem raised their eye brows, but then their voices were too low to be heard by money hungry, bonus driven Wall-Street executives.

The big shots at the Wall-Street, driven by greed continued to cook their deals; duped European Bankers with bogus deals, who in turn spread the rotten credit deals in all global markets. Anyway, the damage has been done, and now faced with a reality of controlling the pain! And must consider the impact of the problem; how is it going to affect the common man in Tanzania and elsewhere in Africa!

Millions of people in the US who invested their lifetime savings in the stock market have watched their funds melt in their own eyes. A man or other a client, who invested his savings in the stock option plan, in one of the now gone companies, lost $4 million in less than a year; People are loosing their jobs, many businesses closing their doors, people can no longer afford paying their once owned expensive assets. Banks and many financial institutions are collapsing at an alarming rate. Millions around the world are rapidly depleting their savings.

Even though the Central Banks around the world have taken aggressive and swift measures to curb the problem by cutting interest rates and pumping almost a Trillion dollar rescue packages into their respective economies, so far the effort have not calmed the anxiety, the problem seems very deep entrenched than many thought.

That means, the meltdown was not limited to the Sub prime, it is in the credit, manufacturing and even retail.

When major banks cannot meet their Liquidity requirements as in the case of several fallen US banks, when Short term lending becomes a problem, when commercial paper is not attainable, the economy goes into its knees. Many companies depend on these short term instruments to finance their day to day operations, short term projects, as well as meeting their payroll needs.
And when they can’t secure these instruments, it means they stop their operations.
Likelihood of companies letting their employees go due to payroll problems are very real. LIBOR, a system used in the UK and partly in the US for inter-bank lending, whose rates have gone up, shows that we are in for a long and tough ride, raising the inability of Banks to issue loans to individuals and companies lacking highest ratings in the ratings circles.

The Global Markets are plummeting, due to the fact that, investors are worried, no individuals or companies want to put their investments in the risky market, and many (millions) are pulling out their investments. Consumers are scared to spend, and this is leaving experts without any cure to the disease, that is spreading globally.

Many of you know that Wall-Street or other financial markets are driven by speculation as you witnessed early during the year, when energy prices went off the roof in the Western World; this was fueled by speculation of war outbreak in the Persian Gulf, Economic boom in Asia Pacific, and India. Now that economic boom has taken a downward trend, so has the demand and the prices.
Speculation has now turned into fear for the worse,
These are symptoms of an economic recession, and even though further bear the hallmarks of the 1929 great depression, we are optimistic things will turn around before we get into a similar economic tragedy.

To our people, fear is the worst enemy of any human being. Do not fear or panic in these uncertain times. Go about your daily activities, and please.

*Abstain and cut OFF completely, all the unnecessary spending, and purchases
Do not rush into the bank to remove your deposits, because you will create an environment in which banks liquidity runs to zero, hence a collapse.

*Make sure you ask from your bank how much money they insure with the central bank as those in America and Europe, be assured that, All your deposits are safe. Bank of England and European Union Central Banks are currently in charge of all deposits

*Constantly check with your Bank to see how things are moving in terms of the safety of your deposits.

*I know many cannot afford depositing their monies into precious metals, but for those with excess cash, may want to consider this option as an alternative to safeguarding their most liquid assets (cash) and these valuables can be deposited in most of the banks, this will ensure economic continuity in the economy.
*Be careful, and not fall a prey of con artists with cure to any economic problem. Your trusted licensed banker and government monetary officials entrusted with the task should be the only persons to deal with.

Economists, policymakers and monetary experts in our country have perhaps taken measures, or have aggressive plans in place that will safeguard your savings, you must therefore be optimistic, at the same time must be cautious not to be caught off guard.
Since many of our third world countries are dependent on the West for Tourism, Export, and Aid to subsidize their Budgets, the impact may be soon be felt. The IMF has pointed for a deep recession.
Either way, how prepared are we?

The Writer Is a US-based,
Social Activist & Investment Banker,
of Tanzanian Origin.

[SOURCE: Michuzi Blog]

4 comments:

Mujwahuki said...

Many thanks for your timely brief!! This is the product of greedy capitalism, as ethical capitalism is faring well amid the current situation, indeed some ethical capitalists are giving a helping hand to some submerging institutions.

Buffet once said "...it is only when the tide goes out that you learn who's been swimming naked". Now we are witnessing those rushing to the government to cover their "utupu".

A lesson for potential investor in Tanzania or any country is that: don't ever invest in something you don't understand!! This is the received wisdom from all successful investors!

Problems in markets are amplified when investment is replaced by casino-like gambling, without a viable financial plan.

For retail and unsophisicated investors it is time to shop carefully for a trusted advisors who have Integrity, Intelligence and Energy. Someone said, if you miss the first character the other two will distroy you!!

Also, be extremely careful of the growing number of credit providing institutions. Debt, if abused can be very dangerous!!

Mujwahuki

Anonymous said...

Goals of investing in what you understand ni za risk averse people. Kama unataka absolute returns na lazima utashawishika na leverage kwani ndio hiyo inayokuza returns na inayoua returns. Mtu ana bilioni 1 akapoa bilioni 9 na analizipa utaacha kumkopesha tena? Beki nazo zina njaa zinata pesa ya chapchap. Sasa hapo ndio paliponoga na utamu kugeuka uchungu. Nunua nyumba leo $300,000 baada ya 2 years value ya nyumba inakuwa $550,000 unauza na kupata 250,000 from 0 down mortgage.Ukiwa na deal kama 20 za namna hiyo kwa mwaka 1 tayari wewe ni milionea na unaishi kwenye nyumba ya $2 million down payment $100,000 tu! ghafla kibao kinageuka nyumba inachukuliwa na bei ya nyumba ya $550G inashuka hadi $275,000! mtumeee!

Mliakuvana said...

Nadhani we have to be a little careful here, especially for us who are investing in Tanzania or Africa. See, the stock markets in Africa are mostly single entities with absolutely no connection to one another nor to the stock markets of the developed world - we can probably not experience the direct effects of their crash in USA, Europe and Asia, but it will affect us in other ways such as in the increase of food prices, fuel etc.

I have a feeling that to cover the loses in the developed world companies will start withdrawing funds from their African operations and eventually make it a little more harder for us in the third world to borrow. First world companies in Tanzania can include Barclay's Bank, Unilever, CITI Bank, etc etc.

My 2 cents.......

Anonymous said...

I am sure this problem will hit Africa and Tanzania ,and will hit it big.
We have a Dar stock exchange which operates local, but in whole- the money that we collect local, ends into Local banks, which also change them into USD value and invest them in any how, anywhere.All this circulation means that our local money in our local banks has to (at one time) leave those local banks and be invested.
This financial problem means that both in a short run and in a long run the value of USD in other global markets will be less. Which also means that our local madafu money that is in hold within our local banks will also lose its value.
We would be free of this problem if in any how as a , country (TZ) we are not in any need of US Dollars for any our financial activities and ,or not depending in anyhow US dollars for valuation in our local money.
The case is seen in China, despite it being the country that is offering all of the 700 billions dollars that are given to US bailout. It is starting to suffer by dozens of its factory being shutoff due to order cancellation from its buyers who are Americans for not having enough money now to purchase those un-needed (luxury)products.
I am sure Tanzania will be hit big time and more than any other sub sahara countries, with exception of Zimbabwe, because we dont have any sources to run even our budget.We are heavilly - financially dependants on those countries that now have the problems to top our yearly budgets.