How might the global financial worries affect us here in Rwanda?

The news coming from some of the major global financial centers like New York, Hong Kong, London and Tokyo isn’t one that anyone who is interested in money-matters can be pleased to hear.

The news coming from some of the major global financial centers like New York, Hong Kong, London and Tokyo isn’t one that anyone who is interested in money-matters can be pleased to hear.

Reports are flying around that the US economy is close to a recession, and this is making everyone jittery. In fact, on Monday, global markets suffered their worst day since 9/11.

The Japanese stock markets benchmark Nikkei fell by 5.7% on Tuesday; German stocks fell for a seventh day, the longest losing streak since October 1999, the DAX index falling by 4.9% and erasing all of last year’s gains. Sydney’s market continued its longest losing streak for 26 years, closing 7.1% lower.

In China, the main Shanghai Composite Index closed down 7.2% at a five-month low, having lost 17% in the past six days of trading and in Mumbai, India’s main stock index, the Sensex fell 9.8% within minutes of opening, triggering an automatic one-hour halt in trading. On Wall Street things haven’t been much better, although the outlook is a bit rosier than before especially since the US Federal Reserve’s cut 0.75% in its benchmark interest rate.
Why am I going on and on about these economic figures? I remember one memorable quote from the annals of European history back in high school, although I’d be hard pressed to remember its author; it was “When France sneezes, the whole of Europe catches a cold”. Well, that was back in the early 19th century when Napoleon was terrorizing Continental Europe militarily.

There is now a bigger boy on the global block - bigger, badder and richer - the United States. If the US catches a cold, the world catches not flu but rather a virulent strain of tuberculosis, figuratively speaking of course; and sadly, it’s looking like the US economy is wheezing along dangerously. And the weird thing is that all this bad news came out almost out of the blue.

The first time I heard about the word ‘subprime loans’ late last year I thought it was one of those fancy Wall Street words that gave stock brokers their jollies but shouldn’t have given anyone else sleepless nights. Well, that word, along with its partner in crime ‘Mr. Credit Crunch’, is giving everyone indigestion.

The fact of the matter is that because of these two boogey words, ‘subprime and credit crunch’, westerners are growing more and more tight-fisted. The western businessperson cannot access credit facilities like loans because major US and European banks are suffering from the billion dollar losses incurred in the US housing market. The average American consumer, for whom the rest of the trading world relies on to consume imported goods, is also in dire straits. He cannot access any more credit to finance his insatiable appetite for consumer goods imported from the rest of the world because he’s finally reached his credit limit.

His home is being repossessed by the banks because of the collapse of the subprime market collapse.

What does this all mean to a Rwandan in Gatsibo District, or for that matter, in Nyarugenge?

As the 90s moved into 2000s, the world moved from being the fantasy ‘global village’ into being a real life network of business interests and mutual back-scratching. A Californian, who having a lot of money to spend, wants, for example, gourmet coffee instead of the usual bland Nescafe instant Coffee variety; because of this demand, suppliers in Maraba, Rwanda will produce the best coffee they can to provide for this demand.

It’s equally mutual; the Californian gets his caffeine fix and that farmer in Maraba gets money for school fees for his children.

But this complex economic edifice can come crashing down quickly. All it needs for it to do so is one thing really. If global consumers get nervous about their future prosperity, they will spend less and save more. That means no more gourmet coffee sales in the US at the present volume or biseke baskets by Rwanda. If we consider that coffee represents 75% of our export income then we can see how vulnerable we are.

I haven’t forgotten our tourism sector either.

The goal is to have high end tourism…well, we can’t have high end tourism if the ‘high-enders’ are becoming less high-end as a result of a worldwide recession.

So, we just might be in a world of trouble. Some analysts think that the world might avoid a recession but it seems as if a wave of pessimism has hit everyone. 

On a happier vein though, in an interview the billionaire investor George Soros has said it will be “very difficult to avoid” recessions in the US and the UK. According to Mr Soros, a significant shift of power and influence away from the US in particular and a shift in favor of the developing world, particularly China, is inevitable.

If that’s where global business is going…then we here shouldn’t be left behind because we cannot afford to dither about. Too much is at stake.


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