Feeling the heat of the credit crunch

When the current international economic crisis unfolded several months ago, few people in the developing world understood the potential impact it has on countries like Rwanda. And those who did, largely looked at it from the point of view of a likely reduction in development aid from the western world. However, it has not taken long for some of us to come face to face with the reality that the world is truly on an economic downturn. For a few days now, soccer lovers in Rwanda have been wondering how pay TV, GTV, had started to become inconsistent in transmitting live European games, particularly those in love with the Premiership. I personally belong to that club. And so it happened that the so-called big four of European premier league were over the last weekend all involved in crucial games. As usual local fans rushed to their viewing joints, only this time round to be disappointed by the main broadcasting channel – GTV. Those who did not give up easily combed the city suburbs searching for alternative channels which were showing the matches. But for Gateway Broadcast Services – suppliers of GTV service – they were virtually out of business. In a January 30 statement, the company announced that its Board of Directors had unanimously approved a plan to liquidate the company. Reason: The current economic crisis. “Increased instability in global markets interrupted our ability to secure funding on an acceptable timescale and have left us no choice but to cease operations,” the company spokesman conceded in the communiqué. While this is just another international company to go burst in just days, it has signaled to us the reality about this crisis. Football federations in several African countries including Uganda, Tanzania and Kenya will all be directly affected because this company has been sinking considerable funding into football programmes in these countries. But the magnitude of the effects of the credit crunch in developing world is in no way comparable to the effects it is having in the developed countries. A friend of mine resident in the UK told me recently that he had just lost a job he got two months earlier because of the credit crunch. “Jobs have been lost, retailers are out of business because they have no money; and people are not buying stuff because they are broke,” explained. That is the grim reality that is forcing multinational companies to close shop, and Governments to approve billions of bailouts in frantic efforts to tame the recession. Some have publicly blamed the US for this crisis, the origin of it all, believed to be stemming from reckless lending pattern by banks and other financial institutions. Lack of prudency in the financial sector resulted in non-payment of mortgages, and this led to banks stopping lending to each other, and to people. Amid speculation, depositors rushed to banks to pick their deposits, further crippling economic activities. Since the financial sectors of countries like Rwanda are less connected with the international financial system, we are not likely to be as hard-hit as the developed world. But at least no one should rule out the possibility for the most difficult economic times in years. To avoid the worst therefore, the drivers of our economy need to be on their guard. It’s encouraging the Ministry of Finance and Economic Planning, and the National Bank of Rwanda (NBR) have announced they are keenly watching the developments in the global economy, and promised to do all possible to ensure that our economy is not severely hurt. But the private sector needs to be as watchful. Banks and cooperatives need to observe the rules, and debtors should honour their repayment schedules. The move by some local banks to threaten bad debtors to publish their names in the press besides legal redress in case of default is laudable. However, measures should be put in place to prevent speculation among depositors because speculation has played a part in the ongoing global recession. The author is Rwanda Workforce Development Authority (WDA) Marketing & Communication Specialist. Email: munyanezason@yahoo.com