Is this the end of the capital error in East Africa?

At the beginning of last year, whilst at a send-off party in London for a Ugandan friend that worked for Citigroup Bank in New York, I remember a Morgan Stanley employee, so tipsy yet confident of his abilities and apparent access to capital, bragging that he would one day buy the Central Bank of Uganda.
Stocks are plummeting worldwide; Africa will certainly feel the brunt of it
Stocks are plummeting worldwide; Africa will certainly feel the brunt of it

At the beginning of last year, whilst at a send-off party in London for a Ugandan friend that worked for Citigroup Bank in New York, I remember a Morgan Stanley employee, so tipsy yet confident of his abilities and apparent access to capital, bragging that he would one day buy the Central Bank of Uganda.

“This lot are mismanaging the tills in Uganda. I am going to sort these guys out!” proclaimed the chubby banker amidst some hilarity. At that time the conversations revolved almost entirely on how good the times were.

On the eve of 2009, meeting the same East African expatriates in London and the mood is suddenly sombre and very nervy.

You can almost smell the fear. Collapse, catastrophe and calamity this time round seemed to be dominant of all subjects financial.

Recently, I was at Parker Macmillan’s in Barbican, where well-to-do East Africans in the Diaspora were busy boozing under the auspices of celebrating all things Bantu.

Amidst everything, the question: “will we survive?” somehow managed to occupy centre stage. One Kenyan banker recently made redundant by the situation summed up the mood to me using Nairobi slang: “Mambo ni Mbaya jama! kwahivyo sahi ni raundi mwenda tuu!” (The going is tough my friend!), staggeringly pointing to his jug of “DAWA”, a cocktail drink that was specially served aplenty on the night. 

At nearby tables, punters seemed determined to discuss neither entrepreneurship nor new business ventures but to engorge enough grilled meat and booze to put ancient Roman gluttons.

“Is this it?” I remember being asked by a Rwandese friend, a poet now based in London. So I began.

The last few months have demonstrated to us all, even the staunchest defenders of the “free market” philosophy are now agreeing with me, is that the greed-driven neo-liberal system that for so long has been forced upon us has lost its charm and is now both fiscally and intellectually bankrupt.

The economic situation we are facing, according to a recent Observer editorial, “is as serious as a war”. The total UK personal debt stands at an eye-watering £1.4 trillion, making Rwanda’s $1.4billion external debt seem like a drop in the ocean.

It has however led some analysts here to start calling for a nationwide “credit card amnesty”. Britain’s living standards have already begun falling at a rate faster than any other O.E.C.D member states, its GDP per capita of $35,243 (£23, 913), which is exactly twenty times that of Kenya ($1800) and almost one hundred and twenty times that of Burundi ($300) looks set to reduce significantly.

In East Africa, where our economies are directly pegged into the international financial system has meant that we are directly affected by the squeeze in international liquidity, According to Professor Njuguna Ndung’u, the governor of Central Bank of Kenya (C.B.K) “projections shows that Africa’s real GDP growth rate is expected to decline from 6.2% to 4.6% in 2009, while in East Africa growth rate is projected to fall from 8.4% in 2008 to 6% this year”. 

Furthermore, the U.N has warned that remittances to Africa, worth $40 billion a year could be an early casualty of the ongoing European and American financial crisis.

In Kenya as is the case in other East African Community member States, remittances have been a powerful anchor for the economy.

In 2007 alone, Kenya received 1.3 billion U.S. dollars in remittances. But the flow is already slowing down.

Elsewhere in Sub-Saharan Africa, where the average per capita income is around $600-$700 in comparison to thousands of times over in the developed nations (for instance US $46,373 or Germany $41,531) the majority of citizens live on the bottom end of the economic pyramid.

Therefore the options for them unlike their counterparts in the OECD regions where the ‘welfare’ state “protects”, the current financial crisis (brought about by greedy European and American bankers), is not a question of giving up luxuries, it means living in absolute poverty.

The decrease in demand of raw materials from Africa will result in cut down of supply of finished goods from rich nations; this in turn will invariably increase the prices of products.

Aid and assistance that the developed countries give to Africa will now also reduce because they are trying to bail out their economies, this means that H.I.P.C (Highly Indebted Poor Countries) such as Uganda, Rwanda, Burundi and Tanzania in East Africa whose budgets are heavily reliant upon aid will suffer a lot more. Kenya, although not a officially a H.I.P.C, its economy is import-dependent, and is still nursing the effects of the post-election crisis earlier last year has seen its inflation and food prices rise, partly because it relies heavily on the European, Asian and American economies for remittances, tourism and development aid and the sale of tea, coffee and horticulture exports.

A lot has and undoubtedly will continue being written about the current global financial crisis and indeed the state of capitalism. 

However, for me, the analyses and commentaries of two imminent social scientists, Alex Callinicos and Dani Nabudere have stimulated my interest.

I first came across professor Callinicos’s brilliant book ‘Against the Third Way’ back in 2002. In the book, Callinicos, who is now professor at Kings College London, foretells the financial calamity that lays ahead. 

He developed a fundamental critique of the ‘Third way’ philosophy that was so promoted by the likes of Tony Blair, Bill Clinton and Gerhard Schroder. 

In Africa, he links the said philosophy to the likes of the former South African president Thambo Mbeki and more recently by Yoweri Museveni of Uganda.

Callinicos argues that ‘Third Way’ governments have continued the neo-liberal policies of their conservative predecessors, by promoting the interests of multinationals through privatisation, thereby allowing social and economic inequalities to continue growing. 

Those who want to see ‘real’ change, argues Callinicos, should be challenging the logic of the market rather than, like Gordon Brown and George Bush, extending its domination.

Back in Eastern Africa, mounting food deficits, a sharp decline in living standards and rising energy costs are all tell-tell signs that the impact of the ongoing global financial crisis, has trickled down the East African political vein and is soon bound to also tickle labor unrest- especially given the World Food Summit’s latest worrisome estimation, that for every one percent increase in the price of food, there is an additional 16 million people who will go hungry.

Professor Dani Nabudere of Afrika Study Centre in Mbale, Uganda, as if to reiterate Callinicos’s contention, has also argued that the current crisis lays at the very foundations of the global capitalist system and thus emphasizes that it should be analysed from that angle.

“What is at the core of the crisis is the over-extension of credit on a narrow material production base.

This is in a situation in which money has become increasingly detached from its material base of a money commodity that can measure its value such as gold”, argues Nabudere.

According to the professor, this is why the present financial crisis is also a reflection of the energy and food crisis, because oil and food products such as wheat, rice and other commodities have been subjected to speculative trading to back up paper money many years in the future.

Meanwhile at Parker Macmillan’s, with my Chardonnay at hand, “the future”, I told my Poet friend, “remains anyone’s guess. One thing that I can perhaps say with certainty about the state of capitalism is that it will never be the same again”.

Ronald Elly Wanda MCIJ is a political scientist based in London.

Ronald Elly Wanda
16 Wellesley Road,
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London.
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