The Economy...Intangibles ......our stupidity
The economy is like faith. it is moved by factors that are not tangible.Hence, many developed economies around the world have Business Confidence indices i.e. the higher the business confidence, the better the economy's performance.
The current crisis will eventually subside.My guess is that by the end of March we will have a solution to the problem.However, whether that solution will be palatable to all, i don't know.You may NOT like the taste of Quinine but it can cure malaria.(get the drift?)
The lack of confidence means that even if normal business resumes in Eldoret,Nakuru,Kisumu and Mombasa and the displaced return, the local community won't make substantial investments in those areas.
For Kisumu, the likes of United Mall are unlikely to be built for a while.Uganda underwent a similar situation for about ten years after the end of the Bush war in 1986.For instance, the average Ugandan proffessional started building and buying houses from around year 2000.Over 10 years after the end of the war.
Once,peace is restored most people in Kenya won't be sure how long they can live before the next violent outbreak.Don't expect them to build 10 bedroom mansions or build retirement homes.Hence, expect the next Kenyan fad will be to have a second/third home in Dubai.UK and South Africa are ruled out beacsue the former has too mant taxes and the latter has Jacob Zuma and Power rationing.
The legal cost to business/economy.
Hernando De Soto's book 'The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.'said that it is because the poor in developing countries don't have property rights and cannot monetise/mortgage their assets(land) for capital.
The current crisis has made Title deeds void i.e. the fact that you have a title deed or lease certificate is useless as long as the locals in an area won't allow you to live or develop a certain area.Hence, you well tended 5 acre tea and dairy farm in the Rift Valley, can't get you a loan at the nearest Bank.
The losers in the current situation are:
Banks/Lenders
Do you think you can auction any land/houses pledged as security in Kisumu or Eldoret? If you do, then can you get a market price for it?
Society
Since, you can't got to court for legal redress or to the elders(there aren't any around), what do you do to solve your problem?You guessed right, a small proportion of people(the stupid ones) will take the law into their hands.
Court Process
In the current state,even if you obtained judgement against a debtor how do you enforce it or collect it? It is difficult to attach property in the current environment.As a result businesses will become more averse to granting Credit which is the KY Jelly that enables consumption in the economy.Less lubrication(read credit), less economic growth
Money Moves! Burna Boy Turns Up the Vibes in “Bundle By Bundle” Music Video
-
A few days after dropping his latest single, “Bundle By Bundle,” Burna Boy
has delivered a music video that’s all about abundance, celebration, and
high-...
1 hour ago
%20(15).jpeg)
8 comments:
I think provided we don't rush to sellotape solutions the economy will start growing. One thing the last 5 yrs have done is given entrepreneurs and businesspeople everywhere the feeling that you can make money in Kenya.
Ob lenders/banks, correct me if I am wrong, but I thought many no longer use land as collateral? Some like Equity tend to use your milk earnings for example...
Pesa, you put up great points:
We buy into the future earnings; the political impasse will adversly affect those earnings of firms in sectors such as tourism, financial services and the industrial sector.
If one has a 4+ year time horizon, now would be the time to buy, otherwise stay out.
Expect higher deliquencies and less net interest income from banks. Enhanced risk management by banks will limit loans applications that use land as collateral.
Savvy investors should be looking to buy bad uncollectible/bad debt now from financial institutions willing to clean up their balance sheets and hope they can profit from enforce collection practices/using courts when things normalize.
I like your positive attitude. On my part, I'm struggling to come to terms with all this and can't seem to see an end in sight despite praying for it. Best bet is still to pick stocks at the right price, opportunity to start a biashara might have to chill.
For me my concern is all this talk about the Courts being useless. Our court system has always left a lot to be desired but so have many civil service offices and even parliament. We can't now fold our arms and get rid of the 3 arms of government.
I have faith in the law and in the rule of law and feel that it will prevail. That is the only way. If this comes to pass, Y, who was chased away from his 5 acre farm in X District, will mainatin his rights over the land even if T, from the noted district, has settled on it. Whereas Y may not feel safe settling there, he'll have the inallianable right to decide what to do with it. His options may not be many-fold but at least he has options.
Unlike restoring peace, restoring confidence in the economy is a much harder task.
From the little I've heard we seem to be headed into a balkanization state.
It is this that I'm worried about because people think they can do without the other tribes.
I call it death by a thousand cuts because that is how failed states are created.
@mainat:Yes, the use of land as collateral(in 'safe' areas will increase).Using earnings as collateral may vanish beacuse what happens if your farm and the dairy plant are both burnt down?
@fedha:I agree on all points except on buying debt.Under the current crisis enforceability of debt/court obligations is impossible in some areas.
@mwasjd: this is the best time remenmber good times for a country arrive when least expected.No country has ever ushered in a new aera in pomp.That's why i was sceptical when the original rainbow came in under a cloud of optimism.
@tat:No the law will prevail in the long term BUT in the short term a mild dose of disorder.
If in doubt ask the people who took over Asians property in Uganda under Idi Amin.
@:SSembonge:U R right, peace may come relatively quickly but confidence will take a little longer.The economy need more confidence than peace, just look at Colobia little peace lots of confidence
@SSembonge:I meant Colombia
Post a Comment