Word on the streets is that FIFA is considering banning the Vuvuzela from stadia during the 2010 World Cup matches in South Africa? Apparently European television stations, and one Xavi Alonso, have complained that the Vuvuzela is "noisy".
One normally associates noise complaints with, say, sleepy neighbours angrily asking that you turn down the music at 01:37am on a Sunday morning. Or some nutcase blaring loud music through their inconspicuous white iPod headphones in a library, while you desperately try to swot for your Quantum Physics exam.
But complaining about noise in a 50,000 seater football stadium during a match is pushing it. Surely this is far within the borders of ridiculous! It is a football game for Pete's sake, not a convention for the Noise Abatement Society!
So what exactly is a Vuvuzela? This is a question worth answering to give perspective to its defense. Wikipedia describes it simply as an "air horn" which "emits a monotonous noise like a deep foghorn or an elephant".
Since a stadium is not exactly an opera house with an elegantly dressed conductor directing an orchestra, the collective tune of 50,000 Vuvuzelas from excited football fans generates an interesting dissonance. There is no rhythm. Instead, the tune is thoroughly disjointed and off-key, yet it impressively captures the massive euphoria of a football match in South Africa. The sound - the atmosphere - cannot be described, it can only be experienced, and nothing could represent the ebullient essence of South African football better.
As a matter of fact, in many ways the Vuvuzela has transcended the stands of the football grounds. It now actually represents the sound of joy, celebration and merriment in other spheres of hard working South Africans lives! I remember a number of years ago when a major accounting firm I worked for in Johannesburg won a very significant public sector contract, the serenity of the beautiful open plan office usually punctuated only by the sound of mouse clicks and a water fountain, was joyfully disrupted by the sound of a Vuvuzela! Clearly a call for celebration.
Some genius from the Corporate Finance department of that company even made it a point to signal big wins by filling up his lungs then expelling all 5 litres of its air into a yellow Vuvuzela, resulting in an awesome tune of a win! For that company, and I imagine many others too, the Vuvuzela was indeed the official sound of success!
Come to think of it, there is not a mass celebratory event in South Africa these days that does not include the distinctive sound of the Vuvuzela. From New Year celebrations to political rallies. The Vuvuzela was especially loudest on Saturday, 15 May 2004 - the day FIFA announced South Africa would host the 2010 World Cup. The soundtrack to the mass jubilation was the Vuvuzela!
Such irony, then, that FIFA would even consider banning it during 2010 World Cup matches.
Football without the Vuvuzela in South Africa can only be compared to, perhaps, cutting off hands at the wrists and expecting claps? Sep Blatter defended it best when he said, "It's noisy, it's energy, rhythm, music, dance, drums. This is Africa. We have to adapt a little."
I actually believe there are more distracting things on the pitch that footballers comfortably contend with all the time. Not least the abusive language from fans and for some especially in the English Premiere League, Petr Cech's loudly orange jersey!
If European TV stations and that Xavi Alonso really want "peace and quiet" during a football match, they should restrict their matches to the Cockfosters Benedictine Monastery ... during a laryngitis outbreak!
Saturday, 20 June 2009
Wednesday, 17 June 2009
Dora - back in, Political timing - out!
For a typical Zambian day, June 17, 2009 has certainly had a more than usual level of political activity.
A few hours after Judge Phillip Musonda found that the Dennis Chirwa tribunal exercised "excessive jurisdiction when it invoked Article 54 sub-section 3 to declare Ms. Siliya in breach of the constitution," President Banda appointed her Minister of Education.
Zambia is not known for such expediency, not especially with anything Government related! One or two people I know would certainly wish ZESCO reacted with similar haste in resolving power failures? Unsurprisingly, reaction to the news of Dora Siliya's reappointment to Cabinet was instant! It was especially evident on social networking sites and the blogosphere.
One of the more poignant status updates on facebook read - "It is futile to believe our leaders will understand that legal decisions are seldom in line with political legitimacy or acceptability..."
Really?
The question that begs to be answered is whether it is always in a society's interest for its leaders to seek first political "legitimacy and acceptability"? Political legitimacy and acceptability are, in politics at least, rather fuzzy notions that cannot empirically be determined to be universal. What I may consider legitimate and acceptable may be reprehensible for the next citizen? A Harvey Milk, for example, may certainly think so?
It is only reasonable then, that an appropriate perspective is applied to the developments of the day. As I recall, the Dennis Chirwa tribunal was appointed to "probe alleged breach of Parliamentary and Ministerial Code of Conduct Act by Minister of Communications and Transport, Dora Siliya."
When it made its finding known, most so-called pundits and pub legal eagles were of the view that the tribunal's findings were ambiguous. However, the "universal" opinion was that Dora Siliya had been found in breach of the constitution by disregarding legal advice from the Attorney General. It is against this opinion that Ms. Siliya applied for judicial review challenging the "Tribunals' powers to invoke constitutional provisions which are a preserve of the High Court."
Under the circumstances, applying for a Judicial Review was well within her rights. This is especially true in a supposedly just society as is Zambia. The idea, one would like to believe, is for an accused to have the right to defend oneself, and if successful, be absolved of the charge. The implication of Judge Musonda's ruling earlier in the day is that she is fully absolved of the charge.
It would seem hypocritical to laud a judicial process only when the outcomes are punitive to the defendant. Surely Judge Musonda's ruling was not beyond the comprehension of Dora Siliya's protagonists. If Dora Siliya was not in breach of the Ministerial Code of Conduct, surely she now qualifies for consideration and reappointment to Ministerial office?
I suspect it would be a dangerous double standard to refuse to recognise her innocence in the matter simply because she once stood accused.
Why then would this seemingly logical sequence of events raise the ire of many. One word - timing!
The combination of a mistimed appointment - shortly following the ruling - and the unforgiving court of public opinion where Dora Siliya, it appears, remains guilty, and possibly perceived to be incompetent, means this has been a political faux pas by President Banda!
It is conceivable that easing her slowly back into Government would have resulted in possibly less outrage. What would it have hurt had she been re-appointed after, say, 3 months once the matter had played itself out, and the public attention had moved on as it always does.
Undoubtedly this matter will be fodder for debate in the coming days. The question is, should President Banda have fashioned his decision to reappoint Dora Siliya to cabinet on the court of public opinion, as some would have hoped? Certainly a more interesting debate is whether Presidential appointments to Cabinet should be subject to Parliamentary approval?
A few hours after Judge Phillip Musonda found that the Dennis Chirwa tribunal exercised "excessive jurisdiction when it invoked Article 54 sub-section 3 to declare Ms. Siliya in breach of the constitution," President Banda appointed her Minister of Education.
Zambia is not known for such expediency, not especially with anything Government related! One or two people I know would certainly wish ZESCO reacted with similar haste in resolving power failures? Unsurprisingly, reaction to the news of Dora Siliya's reappointment to Cabinet was instant! It was especially evident on social networking sites and the blogosphere.
One of the more poignant status updates on facebook read - "It is futile to believe our leaders will understand that legal decisions are seldom in line with political legitimacy or acceptability..."
Really?
The question that begs to be answered is whether it is always in a society's interest for its leaders to seek first political "legitimacy and acceptability"? Political legitimacy and acceptability are, in politics at least, rather fuzzy notions that cannot empirically be determined to be universal. What I may consider legitimate and acceptable may be reprehensible for the next citizen? A Harvey Milk, for example, may certainly think so?
It is only reasonable then, that an appropriate perspective is applied to the developments of the day. As I recall, the Dennis Chirwa tribunal was appointed to "probe alleged breach of Parliamentary and Ministerial Code of Conduct Act by Minister of Communications and Transport, Dora Siliya."
When it made its finding known, most so-called pundits and pub legal eagles were of the view that the tribunal's findings were ambiguous. However, the "universal" opinion was that Dora Siliya had been found in breach of the constitution by disregarding legal advice from the Attorney General. It is against this opinion that Ms. Siliya applied for judicial review challenging the "Tribunals' powers to invoke constitutional provisions which are a preserve of the High Court."
Under the circumstances, applying for a Judicial Review was well within her rights. This is especially true in a supposedly just society as is Zambia. The idea, one would like to believe, is for an accused to have the right to defend oneself, and if successful, be absolved of the charge. The implication of Judge Musonda's ruling earlier in the day is that she is fully absolved of the charge.
It would seem hypocritical to laud a judicial process only when the outcomes are punitive to the defendant. Surely Judge Musonda's ruling was not beyond the comprehension of Dora Siliya's protagonists. If Dora Siliya was not in breach of the Ministerial Code of Conduct, surely she now qualifies for consideration and reappointment to Ministerial office?
I suspect it would be a dangerous double standard to refuse to recognise her innocence in the matter simply because she once stood accused.
Why then would this seemingly logical sequence of events raise the ire of many. One word - timing!
The combination of a mistimed appointment - shortly following the ruling - and the unforgiving court of public opinion where Dora Siliya, it appears, remains guilty, and possibly perceived to be incompetent, means this has been a political faux pas by President Banda!
It is conceivable that easing her slowly back into Government would have resulted in possibly less outrage. What would it have hurt had she been re-appointed after, say, 3 months once the matter had played itself out, and the public attention had moved on as it always does.
Undoubtedly this matter will be fodder for debate in the coming days. The question is, should President Banda have fashioned his decision to reappoint Dora Siliya to cabinet on the court of public opinion, as some would have hoped? Certainly a more interesting debate is whether Presidential appointments to Cabinet should be subject to Parliamentary approval?
Thursday, 29 May 2008
Xenophobic Violence in South Africa: Poetic Justice?
Even for a person, unlike me, with marginal interest in International affairs, the recent violence against African foreigners in South Africa could not have gone un-noticed. Come to think of it, I never thought I would one day use the term "African foreigner" to describe Africans residing in another African country? Surely President Mbeki's "I am an African" poem was enough to instil in us sufficient doses of Ubuntu to make us realise we are all African? As it turns out, President Mbeki's immediate audience, the South Africans, have not been too studious. Could there be a justifiable reason to this errant behaviour on the group that ought to be class A students for President Mbeki?
Rather unfortunately, attacks based on bigotry and prejudices are not unique to South Africa. Almost at the same time as some residents of Alexandra - a township in Johannesburg - were attacking African foreigners, so too were some residents of Milan in Italy, attacking European foreigners in their midst.
Wait! Xenophobic attacks in Italy? In Europe? Against Europeans?
Yes! Yes! Yes!
However, what was most pertinent for me was not the fact it took President Mbeki more than a week to condemn the xenophobic attacks, which he did. Or, that one of his Ministers took aim at what he termed, "lumpen proletariat" - a statement which obviously earns him the medal for silly, and so yesterday, political spin - as a "third-force" behind these attacks? What struck me was the intersection of similar reasons advanced for the attacks, both in Italy and South Africa, by that so-called "third-force." These similarities notwithstanding, the responses by politicians in either country seemed uniform only at a solitary point - "Stop the violence!"
In Italy, by all reports, the politicians seem to agree with the "third-force" that immigrants are the source of crime and various other vice. Their solution, deportations? They have been swift to enact laws enabling authorities to deport "undesirable" immigrants. 500 have so far been deported according to reports.
In South Africa, on the other hand, it seems unfashionable for politicians to even consider the reasons advanced by the "third-force." But what exactly are the reasons?
Well, like some Italians, some South Africans believe African foreigners are the major source of the high crime-rate gripping that country; that foreigners are driving down wages by their willingness to work for next to a pittance; that foreigners are unjustly benefiting from the governments welfare programs such as housing?
On the first reason - crime - it does not help that foreigners have recently made headlines in high profile criminal cases. Ananias Mathe - a career criminal and un-sarcastically termed “the slippery fugitive”, boasting an endless string of hideous crimes to his name, happens to be Mozambican! Then the Jeppestown massacre - an infamous hold up where four police officers were killed, the perpetrators were, reportedly, mostly Zimbabwean! Of course these examples pale into insignificance to the very high incidents of violent crime in South Africa. However, they play to the psyche and perceptions that foreigners are mostly responsible for violent crime in South Africa?
What about the charge that African foreigners are driving down wages by their willingness, out of desperation, to take any job at any price? Without any empirical evidence or detailed facts, it seems understandable that any community would feel threatened by "foreigners" perceived to be driving down wages or usurping jobs that the locals believe they rightly deserve? Obviously, the emotive question pitting "merit" against "entitlement" cannot be explored in the absence of hard facts on number illegal immigrants in South Africa? Ironically for South Africa, the debate placing "merit" against "entitlement" has variously been explored by protagonists of Affirmative Action who argue that it is pseudo or reverse discrimination that rewards un-deserving Black South Africans at the expense of qualified White South Africans. This is obviously a contentious and undoubtedly curious extension of the argument, but one a discerning mind may not shy away from exploring further?
Finally, the "third-force" justifying xenophobic attacks by arguing that African foreigners un-justly benefit from government social welfare programmes such as housing? One then wonders whether the criterion for housing is determined by fluently expounding the Zulu words for "knuckles" or "sphincter muscle?" It is at this point that the words of that South African Minister in describing these xenophobic attacks come to mind - "...the workings of a lumpen proletariat..." Ridiculous as this choice of words may be, they offer a laughable, albeit refreshing, explanation of the ridiculous and savage attacks on foreigners that has gone on in South Africa lately?
The question still remains, why, unlike the Italian government, has the South African government shied away from the question of deporting illegal immigrants? The answer may lie in that "I am an African" poem whereupon it describes the South African constitution as follows:
It creates a law-governed society which shall be inimical to arbitrary rule.
It enables the resolution of conflicts by peaceful means rather than resort to force.
It rejoices in the diversity of our people and creates the space for all of us voluntarily to define ourselves as one people.
As an African, this is an achievement of which I am proud, proud without reservation and proud without any feeling of conceit.
If only the author of the poem had the same vigour to translate his words into action, to give hope, like many generous South Africans have already, to the many Zimbabweans escaping political torment in Zimbabwe yet now falling victim to the actions of that "…lumpen proletariat…?" If only?
Rather unfortunately, attacks based on bigotry and prejudices are not unique to South Africa. Almost at the same time as some residents of Alexandra - a township in Johannesburg - were attacking African foreigners, so too were some residents of Milan in Italy, attacking European foreigners in their midst.
Wait! Xenophobic attacks in Italy? In Europe? Against Europeans?
Yes! Yes! Yes!
However, what was most pertinent for me was not the fact it took President Mbeki more than a week to condemn the xenophobic attacks, which he did. Or, that one of his Ministers took aim at what he termed, "lumpen proletariat" - a statement which obviously earns him the medal for silly, and so yesterday, political spin - as a "third-force" behind these attacks? What struck me was the intersection of similar reasons advanced for the attacks, both in Italy and South Africa, by that so-called "third-force." These similarities notwithstanding, the responses by politicians in either country seemed uniform only at a solitary point - "Stop the violence!"
In Italy, by all reports, the politicians seem to agree with the "third-force" that immigrants are the source of crime and various other vice. Their solution, deportations? They have been swift to enact laws enabling authorities to deport "undesirable" immigrants. 500 have so far been deported according to reports.
In South Africa, on the other hand, it seems unfashionable for politicians to even consider the reasons advanced by the "third-force." But what exactly are the reasons?
Well, like some Italians, some South Africans believe African foreigners are the major source of the high crime-rate gripping that country; that foreigners are driving down wages by their willingness to work for next to a pittance; that foreigners are unjustly benefiting from the governments welfare programs such as housing?
On the first reason - crime - it does not help that foreigners have recently made headlines in high profile criminal cases. Ananias Mathe - a career criminal and un-sarcastically termed “the slippery fugitive”, boasting an endless string of hideous crimes to his name, happens to be Mozambican! Then the Jeppestown massacre - an infamous hold up where four police officers were killed, the perpetrators were, reportedly, mostly Zimbabwean! Of course these examples pale into insignificance to the very high incidents of violent crime in South Africa. However, they play to the psyche and perceptions that foreigners are mostly responsible for violent crime in South Africa?
What about the charge that African foreigners are driving down wages by their willingness, out of desperation, to take any job at any price? Without any empirical evidence or detailed facts, it seems understandable that any community would feel threatened by "foreigners" perceived to be driving down wages or usurping jobs that the locals believe they rightly deserve? Obviously, the emotive question pitting "merit" against "entitlement" cannot be explored in the absence of hard facts on number illegal immigrants in South Africa? Ironically for South Africa, the debate placing "merit" against "entitlement" has variously been explored by protagonists of Affirmative Action who argue that it is pseudo or reverse discrimination that rewards un-deserving Black South Africans at the expense of qualified White South Africans. This is obviously a contentious and undoubtedly curious extension of the argument, but one a discerning mind may not shy away from exploring further?
Finally, the "third-force" justifying xenophobic attacks by arguing that African foreigners un-justly benefit from government social welfare programmes such as housing? One then wonders whether the criterion for housing is determined by fluently expounding the Zulu words for "knuckles" or "sphincter muscle?" It is at this point that the words of that South African Minister in describing these xenophobic attacks come to mind - "...the workings of a lumpen proletariat..." Ridiculous as this choice of words may be, they offer a laughable, albeit refreshing, explanation of the ridiculous and savage attacks on foreigners that has gone on in South Africa lately?
The question still remains, why, unlike the Italian government, has the South African government shied away from the question of deporting illegal immigrants? The answer may lie in that "I am an African" poem whereupon it describes the South African constitution as follows:
It creates a law-governed society which shall be inimical to arbitrary rule.
It enables the resolution of conflicts by peaceful means rather than resort to force.
It rejoices in the diversity of our people and creates the space for all of us voluntarily to define ourselves as one people.
As an African, this is an achievement of which I am proud, proud without reservation and proud without any feeling of conceit.
If only the author of the poem had the same vigour to translate his words into action, to give hope, like many generous South Africans have already, to the many Zimbabweans escaping political torment in Zimbabwe yet now falling victim to the actions of that "…lumpen proletariat…?" If only?
Friday, 24 August 2007
The Woolpit Wiff
Diary entry on 02 July 2007.
The day had started off pretty un-eventfully. I had spent my first night in my new accommodation and I still had that hotel room feeling. That visitor feeling you get after waking up in strange surroundings on your first day in a hotel room. So it was that at 4am in the morning I awoke to sunlight beaming into the room from under the black blinds that I had, earlier the previous night, tried furiously to roll down as far as possible. It felt rather odd that the pedantic landlord had got such a basic design detail so wrong. The blinds did not cover the height of the windows. These were not blinds, they were giant mini-skirts that were clearly not fitted to cover all the details. I felt my privacy whittle away. I would be exposed! Ah well, I concluded, it was a small detail and one I would deal with later the next morning.
Indeed, 4am and the "blinds" were the first thing I was dealing with. Yes, the small detail of allowing light from the rising sun dead onto my face woke me up at least a whole hour earlier than I had planned.
I had a business trip to Suffolk County later in the morning so I set my alarm clock to first go off at 5am. As I am a notorious addict of the "snooze" button, I placed the alarm clock no less than 4 feet from the bed. This was self devised failsafe design to make sure I would at least have to move more than a couple of muscles to hit snooze. The obvious idea being that significant body movement would wake me up. From past self-observation and experience, even the act of heaving about my entire frame - all 12 stones and 206 bones of it - to get the alarm would still not be enough to wake me up, I elected a second failsafe - set 3 alarms at 15 minute intervals on two different phones, both placed 4 feet away on either side of the bed. "Genius", I had thought to myself, happy in my designs. It was that a little before midnight that I had gone to sleep frustrated with the "failing blinds" but satisfied that my "state of the art" wake up mechanism would see me wide awake by no later than 5:30am Monday morning.
So there I was, 4am - awake! And not by my elaborate network of well placed mobile phone alarms set to go off in an hour, no, but by the failing blinds barely covering the windows. Feeling I needed the extra hours rest, I garnered as much ingenuity as I could master half asleep, to cover my face from the light with two pillows and angle myself back into sleep.
“Gosh!” I exclaimed as I jolted out of bed confused by the bright sunlight and momentarily delusional from these unfamiliar surroundings. The sun now brightly light the room and my African senses suggested I was experiencing mid-morning sun rays! I raced the entire length of 4 feet to my phone to check the time. 6:41. Yes, “Gosh!”
At the very minimum, I should have been on the Jubilee line well on my way towards London Bridge station for a connection onto the Northern line. The Northern line would take me to King's Cross - St. Pancras station. It was here that I would board the train to Bury St. Edmunds via Cambridge at 7:45am. Had I woken up at 5:30am as planned, I would have covered the 1 hour 50 minutes trip to Bury St. Edmunds and followed that by an approximately 15 minute taxi ride to Woolpit, Suffolk County by 10:00am in time to settle and prepare for a series of meetings with the first scheduled for 11:00am.
As it had turned out, covering my head with the pillow to shield from the sunlight had effectively sealed off my ears to the multiple alarm mechanisms designed to wake me up! Classic scenario of perfect safety design made irrelevant by operator behaviour. In this case I had been both designer and operator - the failure was a huge blow!
Realising that missing the train would set-off a series of highly undesirable events; I rushed to the shower to perform a high school ritual purposefully called "The Portrait". This involved washing the face, neck and armpits only. Perhaps the name was suggestive of getting clean only those parts of the body that would be visible if you had a portrait taken - face, neck and shoulders? This was not a time to fuss about missing my ritual of the full body morning shower. This emergency called for drastic measures and "The Portrait" seemed a perfect tool in my arsenal of unsavoury options horned in at boarding school all those years ago.
7:15am, The Portrait taken hurriedly and spotting a Pierre Cardin - super 140 - grey/brown micro pin-stripped suite over a white combed cotton Viyella double cuffed shirt, morning paper under my arm, laptop and travel bag beside me, I stood by Canning Town station waiting for the Jubilee line to take me to London Bridge. This was a classic Londoners look. Finally, I had arrived - I was a Londoner!
With a Jubilee line train every three minutes, I didn't have to wait long.
8:03am, nearly 20 minutes after my scheduled time of departure, I had arrived at King's Cross - St. Pancras station alighting from an over crowded Northern line train. I still had to make my way to the actual train platform, collect my e-ticket from an ATM style vending machine and then pray that there was another train whose locomotives were trained towards the direction of Suffolk County.
8:11am, the answer to my pray was flashing on the huge psychedelic information board ahead of me. There was an 8:45 train to Cambridge from where I could connect onto a train to Bury St. Edmunds - my destination. It wasn't until 7 minutes prior to departure that "9A" flashed under the column headed "Platform".
The journey had begun!
Ntheye Lungu.
The day had started off pretty un-eventfully. I had spent my first night in my new accommodation and I still had that hotel room feeling. That visitor feeling you get after waking up in strange surroundings on your first day in a hotel room. So it was that at 4am in the morning I awoke to sunlight beaming into the room from under the black blinds that I had, earlier the previous night, tried furiously to roll down as far as possible. It felt rather odd that the pedantic landlord had got such a basic design detail so wrong. The blinds did not cover the height of the windows. These were not blinds, they were giant mini-skirts that were clearly not fitted to cover all the details. I felt my privacy whittle away. I would be exposed! Ah well, I concluded, it was a small detail and one I would deal with later the next morning.
Indeed, 4am and the "blinds" were the first thing I was dealing with. Yes, the small detail of allowing light from the rising sun dead onto my face woke me up at least a whole hour earlier than I had planned.
I had a business trip to Suffolk County later in the morning so I set my alarm clock to first go off at 5am. As I am a notorious addict of the "snooze" button, I placed the alarm clock no less than 4 feet from the bed. This was self devised failsafe design to make sure I would at least have to move more than a couple of muscles to hit snooze. The obvious idea being that significant body movement would wake me up. From past self-observation and experience, even the act of heaving about my entire frame - all 12 stones and 206 bones of it - to get the alarm would still not be enough to wake me up, I elected a second failsafe - set 3 alarms at 15 minute intervals on two different phones, both placed 4 feet away on either side of the bed. "Genius", I had thought to myself, happy in my designs. It was that a little before midnight that I had gone to sleep frustrated with the "failing blinds" but satisfied that my "state of the art" wake up mechanism would see me wide awake by no later than 5:30am Monday morning.
So there I was, 4am - awake! And not by my elaborate network of well placed mobile phone alarms set to go off in an hour, no, but by the failing blinds barely covering the windows. Feeling I needed the extra hours rest, I garnered as much ingenuity as I could master half asleep, to cover my face from the light with two pillows and angle myself back into sleep.
“Gosh!” I exclaimed as I jolted out of bed confused by the bright sunlight and momentarily delusional from these unfamiliar surroundings. The sun now brightly light the room and my African senses suggested I was experiencing mid-morning sun rays! I raced the entire length of 4 feet to my phone to check the time. 6:41. Yes, “Gosh!”
At the very minimum, I should have been on the Jubilee line well on my way towards London Bridge station for a connection onto the Northern line. The Northern line would take me to King's Cross - St. Pancras station. It was here that I would board the train to Bury St. Edmunds via Cambridge at 7:45am. Had I woken up at 5:30am as planned, I would have covered the 1 hour 50 minutes trip to Bury St. Edmunds and followed that by an approximately 15 minute taxi ride to Woolpit, Suffolk County by 10:00am in time to settle and prepare for a series of meetings with the first scheduled for 11:00am.
As it had turned out, covering my head with the pillow to shield from the sunlight had effectively sealed off my ears to the multiple alarm mechanisms designed to wake me up! Classic scenario of perfect safety design made irrelevant by operator behaviour. In this case I had been both designer and operator - the failure was a huge blow!
Realising that missing the train would set-off a series of highly undesirable events; I rushed to the shower to perform a high school ritual purposefully called "The Portrait". This involved washing the face, neck and armpits only. Perhaps the name was suggestive of getting clean only those parts of the body that would be visible if you had a portrait taken - face, neck and shoulders? This was not a time to fuss about missing my ritual of the full body morning shower. This emergency called for drastic measures and "The Portrait" seemed a perfect tool in my arsenal of unsavoury options horned in at boarding school all those years ago.
7:15am, The Portrait taken hurriedly and spotting a Pierre Cardin - super 140 - grey/brown micro pin-stripped suite over a white combed cotton Viyella double cuffed shirt, morning paper under my arm, laptop and travel bag beside me, I stood by Canning Town station waiting for the Jubilee line to take me to London Bridge. This was a classic Londoners look. Finally, I had arrived - I was a Londoner!
With a Jubilee line train every three minutes, I didn't have to wait long.
8:03am, nearly 20 minutes after my scheduled time of departure, I had arrived at King's Cross - St. Pancras station alighting from an over crowded Northern line train. I still had to make my way to the actual train platform, collect my e-ticket from an ATM style vending machine and then pray that there was another train whose locomotives were trained towards the direction of Suffolk County.
8:11am, the answer to my pray was flashing on the huge psychedelic information board ahead of me. There was an 8:45 train to Cambridge from where I could connect onto a train to Bury St. Edmunds - my destination. It wasn't until 7 minutes prior to departure that "9A" flashed under the column headed "Platform".
The journey had begun!
Ntheye Lungu.
Monday, 20 August 2007
Relative perceptions of crime in South Africa
Aside from the issue of AIDS, arguably one of the most controversial topics in South Africa, and by anyone remotely interested in South Africa, is crime. It seems impossible to discuss the country without the topic of crime, amongst other perhaps equally controversial topics, cropping up? Having lived in South Africa for 7 years and recently relocated to England, I am still baffled by the exceptional and convoluted emotions that crime in South Africa seems to conjure up! Some views of South Africa are so bewildering that sometimes I wonder whether it is the same South Africa that was home for so many of my blissful years.
The obvious and inescapable verdict from the court of public opinion both within and without South Africa seems to be that it is a country awash with utterly unfettered criminal activity. A country where criminals roam free, turning ordinary hard-working folks into victims with impunity and authorities labelled passively complicit to the crime wave. Of course there is no defence to this view. All one need do is pick up any newspaper, listen or watch to any news bulletin. Such brazen crimes as blowing up ATM machines with commercial explosives or executing cash heists with Hollywood style car chase choreography in Johannesburg rush hour traffic and it strikes you - crime is rife in South Africa.
Well, that’s a story you have heard, and that is the story you hear from some self proclaimed "crime refugees" from South Africans now living in England? Hearing an impassionate damnation of South Africa from one that left in 1998 seems rather decrepit an excuse, especially because it always seems to be the case that the victim was some close relative, or friend, rather than the protagonist directly.
Having freshly come from South Africa, with the horrid stories of crime still fresh on my mind, I wondered if in fact most of the "crime refugees" were now living in crime-free paradise. Of course it had been a lot easier to follow the crime headlines in South Africa, not only because I am, was, an avid listener of SAfm radio, but also because the bulletins of alarming, albeit flamboyant, newspaper headlines designed to instil fear posted along streets poles. Perhaps more effective at maintaining that reality is smiling newspaper vendor standing near "Robots" flashing the headlines directly into your windshield?
That was Johannesburg. Now, with half my life in London being spent in the tube commuting to and from work, the only real access to news has been through freely available, slapstick editorial quality, morning and evening papers. Alas, not long into my stay here I discovered that there was something oddly familiar about the headlines in the papers in London, at least the ones I was reading. Day after day, horrific crime headline after horrific crime headline. In fact, in one particular week in early July, it seemed like entire crime articles from South African papers had been plagiarised, verbatim, and posted into the London papers.
My interest in understanding crime in the UK was further spurred on by an article in the August 19, 2007, Sunday Times issue where it was reported that 64,000 muggings in the UK involved a knife in 2007 alone. That's a daily rate of 175 robberies at knife point? Armed with this shocking revelation, I decided to investigate further the crime rate in a country many South African "crime refugees" chose to escape the crime in South Africa.
My discovery could not have been more astounding, here's why;
Population:
UK - 60,776,238 South Africa - 43,997,828
Murder:
UK - 850 South Africa - 21,995
Sexual Offences:
UK - 47,163 South Africa - 53,008
Vehicle theft:
UK - 792,800 South Africa - 99,963
Assaults:
UK - 541,300 South Africa - 535,461
Burglaries:
UK - 622.044 South Africa - 394,557
Fraud:
UK - 232,800 South Africa - 67,076
Other:
Excluded from this analysis
Total:
UK - 5,170,830 South Africa - 3,422,740
Overall, and rather interestingly, one is equally as like to be a victim of crime in one form or the other in either South Africa or the UK. Without diminishing the grave reality of murder, on all other crime activities, the numbers seem to suggest that South Africa does not deserve this ill perception of a country adrift with all manner of crime than does say, the UK. So if in fact, South Africa is not that much worse off than the UK on almost all crime indicators, why is there such a stark difference in perceptions?
What immediately comes to mind is the analogy depicted by Steven D. Levitt in his book - Freakonomics, where he contends that perceptions of crime or violence may be driven, not by reality, but perhaps by a collective psyche of fear arising from other factors.
This may be the case here too. Something other than the factual realities maybe driving the adverse perceptions of crime in South Africa, compared to other countries like the UK. What is particularly striking to me is that even though there is a real need to fear being murdered in South Africa, there should be an equal fear of other forms of violent death in the UK, such as falling victim to a terrorism attack. In this case one would naturally expect the many South African "crime refugees" to flee London as it has been perceived to be a target for terrorists. For some reason, this is not the case. In conversations about crime in South Africa where the UK is portrayed as a safe haven for raising children, the threat of terrorism is hardly mentioned. Is this perhaps because South Africa's murder rate alone (at 0.5 per 1,000 people) dwarfs the likelihood of violent death as compared to the UK? Perhaps.
Ntheye Lungu.
The obvious and inescapable verdict from the court of public opinion both within and without South Africa seems to be that it is a country awash with utterly unfettered criminal activity. A country where criminals roam free, turning ordinary hard-working folks into victims with impunity and authorities labelled passively complicit to the crime wave. Of course there is no defence to this view. All one need do is pick up any newspaper, listen or watch to any news bulletin. Such brazen crimes as blowing up ATM machines with commercial explosives or executing cash heists with Hollywood style car chase choreography in Johannesburg rush hour traffic and it strikes you - crime is rife in South Africa.
Well, that’s a story you have heard, and that is the story you hear from some self proclaimed "crime refugees" from South Africans now living in England? Hearing an impassionate damnation of South Africa from one that left in 1998 seems rather decrepit an excuse, especially because it always seems to be the case that the victim was some close relative, or friend, rather than the protagonist directly.
Having freshly come from South Africa, with the horrid stories of crime still fresh on my mind, I wondered if in fact most of the "crime refugees" were now living in crime-free paradise. Of course it had been a lot easier to follow the crime headlines in South Africa, not only because I am, was, an avid listener of SAfm radio, but also because the bulletins of alarming, albeit flamboyant, newspaper headlines designed to instil fear posted along streets poles. Perhaps more effective at maintaining that reality is smiling newspaper vendor standing near "Robots" flashing the headlines directly into your windshield?
That was Johannesburg. Now, with half my life in London being spent in the tube commuting to and from work, the only real access to news has been through freely available, slapstick editorial quality, morning and evening papers. Alas, not long into my stay here I discovered that there was something oddly familiar about the headlines in the papers in London, at least the ones I was reading. Day after day, horrific crime headline after horrific crime headline. In fact, in one particular week in early July, it seemed like entire crime articles from South African papers had been plagiarised, verbatim, and posted into the London papers.
My interest in understanding crime in the UK was further spurred on by an article in the August 19, 2007, Sunday Times issue where it was reported that 64,000 muggings in the UK involved a knife in 2007 alone. That's a daily rate of 175 robberies at knife point? Armed with this shocking revelation, I decided to investigate further the crime rate in a country many South African "crime refugees" chose to escape the crime in South Africa.
My discovery could not have been more astounding, here's why;
Population:
UK - 60,776,238 South Africa - 43,997,828
Murder:
UK - 850 South Africa - 21,995
Sexual Offences:
UK - 47,163 South Africa - 53,008
Vehicle theft:
UK - 792,800 South Africa - 99,963
Assaults:
UK - 541,300 South Africa - 535,461
Burglaries:
UK - 622.044 South Africa - 394,557
Fraud:
UK - 232,800 South Africa - 67,076
Other:
Excluded from this analysis
Total:
UK - 5,170,830 South Africa - 3,422,740
*the figures are incidents of reported crime in the respective countries.
A slight glance at the data and the most disconcerting reality is that one is roughly 34 times as likely to get murdered in South Africa as in the UK. However, one is a little over 6 times more likely to suffer vehicle related crime (including theft) in the UK than in South Africa. The UK is also worse off than South Africa in burglary and fraud at equally just a little over 1.5 worse than South Africa.Overall, and rather interestingly, one is equally as like to be a victim of crime in one form or the other in either South Africa or the UK. Without diminishing the grave reality of murder, on all other crime activities, the numbers seem to suggest that South Africa does not deserve this ill perception of a country adrift with all manner of crime than does say, the UK. So if in fact, South Africa is not that much worse off than the UK on almost all crime indicators, why is there such a stark difference in perceptions?
What immediately comes to mind is the analogy depicted by Steven D. Levitt in his book - Freakonomics, where he contends that perceptions of crime or violence may be driven, not by reality, but perhaps by a collective psyche of fear arising from other factors.
This may be the case here too. Something other than the factual realities maybe driving the adverse perceptions of crime in South Africa, compared to other countries like the UK. What is particularly striking to me is that even though there is a real need to fear being murdered in South Africa, there should be an equal fear of other forms of violent death in the UK, such as falling victim to a terrorism attack. In this case one would naturally expect the many South African "crime refugees" to flee London as it has been perceived to be a target for terrorists. For some reason, this is not the case. In conversations about crime in South Africa where the UK is portrayed as a safe haven for raising children, the threat of terrorism is hardly mentioned. Is this perhaps because South Africa's murder rate alone (at 0.5 per 1,000 people) dwarfs the likelihood of violent death as compared to the UK? Perhaps.
Still I ponder why no one in the UK seems to worry, at least outwardly, on the possibility of voilent death by terrorism. Even recently after the failed attempted attacks, the city population seemed to carry on as normal. As if the threat only existed in some distant land, South Africa perhaps. Clearly the irony for me is why it is more acceptible to face such danger without as much flinch in the UK. Needless to say, I am yet to stumble upon a South African "crime refugee" ready to emigrate from the UK out of fear?
Whether or not the numbers would suggest a grossly exaggerated view of crime, it is time for South Africa to embark on a whole-hearted fight against violent crime! With that should be a public relations aspect akin to “We will not succumb to violent elements in our society. Our lifestyles and our resolve to go out and improve our economy will not falter.” This has been the spirit in the UK since World War 2, it is the spirit now, and it is a spirit that exudes a positive perception in a society!Ntheye Lungu.
Sunday, 19 August 2007
Zimbabwe crises should be addressed by SADC!
Leaders of the Southern African Development Community (SADC) have been a huge disappointment in addressing the Zimbabwean crises. There is a lot of denial, dragging of feet and plain dismissal of the plight of Zimbabweans. What has not been understood, or perhaps accepted, is that Zimbabwe is under siege from within. The State has laid siege on the people of Zimbabwe and the results have been devastating - destitution, intimidation of ordinary citizens through arbitrary arrests and lynching by state police, interference in the markets through price fixing. Press freedoms and more generally, freedoms to self expression, have long since disappeared in Zimbabwe.
Its not an exaggeration to point out the Zimbabweans are worse off now than they were 5 years ago? What’s there to exaggerate about quadruple digit inflation, hitherto unheard of unemployment levels, shortages of almost all major commodities especially food, rising levels of corruption. Name any negative economic indicator or outcome and it is currently playing itself out in Zimbabwe. Perhaps the SADC leaders use a different barometer to determine adverse circumstances in a country. Surely if SADC leaders believe that the problems in Zimbabwe are exaggerated (i.e. "not that bad") it could only mean, by deduction of their reasoning, that they believe economic circumstances in their own countries are understated (i.e. "excellent"). Could this possibly explain why most SADC leaders are dismal performers on the economic front? Are they convinced that as long as their own countries are relatively better off than, say, Zimbabwe, which according to them is "not as bad as it seems", then they themselves are surely performing well?
It is impossible to comprehend this denial of the realities in Zimbabwe by our SADC leaders or lack of resolve to confront President Mugabe about how he is managing the affairs of Zimbabwe. The cowardly position taken by SADC leaders has been to drift between two flawed positions: I). Let Zimbabweans resolve their own problems. It is a sovereign country and we need not interfere. II). we resolve issues the African way - Quiet Diplomacy?
None of these positions is actually tenable. In the case of the former, to suggest that the people of Zimbabwe should resolve their own problems on their own is akin to the police sending a physically abused wife back to her abusive husband with the advice, "we can't really help you. It's your house, you have to help yourself." The message the SADC leaders are sending is that as long as the atrocities are being perpetrated by an African leader upon his own citizens, in an "independent" country, then no one need interfere. This position may point to a deeper problem, that of a lack of real leadership in Southern Africa.
The latter position, which argues for quiet diplomacy, would have been a little more plausible had it not been for the fact that the leaders have been "quietly diplomatic" with President Mugabe for 5 years, without results. It’s pretty obvious to anybody with at least peripheral intelligence that President Mugabe, individually, is a significant factor in the Zimbabwe crises. There is, therefore, a real need for SADC to confront him directly and impose specific sanctions against him and his leadership in his neighbourhood - SADC. Instead he is being courted as a hero making his attitude towards his own people even more callous.
What bothers the discerning observer is that ALL SADC leaders, in their own countries at least, seem to be proponents of the very freedoms being denied the Zimbabwean people. How can they allow such a contradiction where on one hand they proclaim to be champions of democracy, whilst on the other, condone and perhaps applaud dictatorship right next door?
It does not instil confidence in our region, SADC, whose leaders seem to merely cheer on as Zimbabwe implodes. It may be Zimbabwe today, South Africa, Zambia or Mozambique tomorrow. What is certain, with the lessons we are learning from the cowardly attitude of SADC leaders, is that we would be sure to know that there would be no one in our neighbourhood - SADC - courageous enough to help us fight a rogue leader terrorising us from within! How encouraging?
Ntheye Lungu.
Its not an exaggeration to point out the Zimbabweans are worse off now than they were 5 years ago? What’s there to exaggerate about quadruple digit inflation, hitherto unheard of unemployment levels, shortages of almost all major commodities especially food, rising levels of corruption. Name any negative economic indicator or outcome and it is currently playing itself out in Zimbabwe. Perhaps the SADC leaders use a different barometer to determine adverse circumstances in a country. Surely if SADC leaders believe that the problems in Zimbabwe are exaggerated (i.e. "not that bad") it could only mean, by deduction of their reasoning, that they believe economic circumstances in their own countries are understated (i.e. "excellent"). Could this possibly explain why most SADC leaders are dismal performers on the economic front? Are they convinced that as long as their own countries are relatively better off than, say, Zimbabwe, which according to them is "not as bad as it seems", then they themselves are surely performing well?
It is impossible to comprehend this denial of the realities in Zimbabwe by our SADC leaders or lack of resolve to confront President Mugabe about how he is managing the affairs of Zimbabwe. The cowardly position taken by SADC leaders has been to drift between two flawed positions: I). Let Zimbabweans resolve their own problems. It is a sovereign country and we need not interfere. II). we resolve issues the African way - Quiet Diplomacy?
None of these positions is actually tenable. In the case of the former, to suggest that the people of Zimbabwe should resolve their own problems on their own is akin to the police sending a physically abused wife back to her abusive husband with the advice, "we can't really help you. It's your house, you have to help yourself." The message the SADC leaders are sending is that as long as the atrocities are being perpetrated by an African leader upon his own citizens, in an "independent" country, then no one need interfere. This position may point to a deeper problem, that of a lack of real leadership in Southern Africa.
The latter position, which argues for quiet diplomacy, would have been a little more plausible had it not been for the fact that the leaders have been "quietly diplomatic" with President Mugabe for 5 years, without results. It’s pretty obvious to anybody with at least peripheral intelligence that President Mugabe, individually, is a significant factor in the Zimbabwe crises. There is, therefore, a real need for SADC to confront him directly and impose specific sanctions against him and his leadership in his neighbourhood - SADC. Instead he is being courted as a hero making his attitude towards his own people even more callous.
What bothers the discerning observer is that ALL SADC leaders, in their own countries at least, seem to be proponents of the very freedoms being denied the Zimbabwean people. How can they allow such a contradiction where on one hand they proclaim to be champions of democracy, whilst on the other, condone and perhaps applaud dictatorship right next door?
It does not instil confidence in our region, SADC, whose leaders seem to merely cheer on as Zimbabwe implodes. It may be Zimbabwe today, South Africa, Zambia or Mozambique tomorrow. What is certain, with the lessons we are learning from the cowardly attitude of SADC leaders, is that we would be sure to know that there would be no one in our neighbourhood - SADC - courageous enough to help us fight a rogue leader terrorising us from within! How encouraging?
Ntheye Lungu.
Saturday, 18 August 2007
Subprime market crisis as explained to my 3 year-old niece
Other than what I am sure you have all heard, read and figured out already, here's my take on the matter. Basically, the recent crisis on the global financial markets has been in the making for a while now. Investor confidence created by the longest sustained period of global economic growth may ultimately have lead to the market shocks as has been experienced lately. What Allan Greenspan once termed "consumer exuberance" resulting from "irrational" confidence in the markets seems to have affected large scale investors?
With a good market performance forecast, from all manner of experts, investors "bought" into the credit market of major global lenders - both wholesale and retail banks (Credit Derivatives come to mind). These large scale investments, usually by Hedge and Mutual Funds, created a substantial amount of liquidity in the global economy (particularly the more advanced economies) affording banks to grow their loan books by offering more credit to the consumer. Naturally, with “excess” liquidity available to lend out, banks became all too willing to extend credit to less than stellar borrowers, albeit at a premium. Banks would thus "ease" their traditional prerequisites of a good credit history and stable financial circumstances for borrowers before credit could be extended. To mitigate the inherent risks of lending to these markets, banks would assign a premium rate that is higher than the prime lending rate (prime is the rate at which retail banks lend to the consumers “normally”) This practice, of adding a premium on prime to poorly credit-rate scoring borrowers, is what we have now come to know, rather infamously, as subprime lending? Of course, it is worth mentioning that this measure was in addition to the loans being secured by investors, as aforementioned.
There is a strong argument supporting the idea of making money available to a wider base through sub-prime lending. Some of the arguments for include consumer driven economic growth and an avenue for individuals to recover from short term financial crises. However, the opponents argue that the substantial amounts of liquidity available in the market as a result of sub-prime lending leads to inflation. The latter seem to have won over Central Banks around the world, particularly in the past 20 months. Central Banks have responded as naturally as a Central Bank would to the risk of inflation - raise the REPO rates. Simply put, REPO is the interest rate at which central banks lend money to retail banks. In South Africa, for example, The Governor of The Reserve Bank (SARB), Tito Mboweni, has argued that the double digit growth in property prices, record boom in sale of motor vehicles amongst others, is a result of "reckless lending practices" (in other words, subprime lending) that banks in South Africa have been exercising. The fear of the resulting inflationary pressures on the economy has led to a successive series of REPO rate increases and the enactment of specific laws to reduce "reckless lending practices" (i.e. subprime lending). The trend has been mirrored in both the US and UK where Central Banks have raised interest rates over, at least, 5 quarters.
The push for higher interest rates by Central Banks is designed to discourage excessive borrowing by consumers. However, and more significantly, the result has been that the people, who had obtained credit easily on a subprime market, cannot now afford to pay back their debts. In lay terms, more people are defaulting on credit card repayments, vehicle loan financing and mortgages (home loans), which in most economies constitutes the largest segment of consumer debt. The very risk that subprime lending was meant to mitigate is now materializing.
Remember, and as mentioned, the main reason that banks were offering these subprime credit facilities to consumers was because their loan books were "secured" by large scale investors (Mutual Funds, Hedge Funds et al). So when, since mid 2006 for that matter, the largest credit market (USA) began to show significant signs (in %) of defaults on mortgages, it became clear that the investors would lose money on the loan books they had secured from the banks. Put differently, the investors would have to cover the defaults in the market because the risk of the banks' loan books is on their books (an understanding of Credit Derivatives helps explain this)?
With the imminent losses in the credit market now clear and present, the obvious question that begs to be asked is, if the investors (Mutual Funds, Hedge Funds et al) are securing the banks loan books, who, in turn, is securing the investors investment on these loan books? In other words, who insures the insurer? Who holds the ultimate risk? So even though the signs of a “credit crunch” have been clear since mid 2006, what has not been clear is who, ultimately, is exposed to this risk. Basically, banks and investors alike have been caught up in a deadly embrace in determining the risk exposure in their books.
The panty dropper was when, last week, BNP Paribas announced it was suspending its hedge funds as it would not definitively ascertain who had ultimate custody of exposure on the securitised debts. Major players on the markets such as Goldman Sachs and other large hedge funds in the USA took similar actions.
This series of reactions necessarily means that large scale investors were no longer willing and/or able to "secure" the banks' loan books. As a consequence, banks become less “able” to extend new credit to the consumer. This has seriously restricted the availability of liquidity in the markets. To address these liquidity problems, The European Central Bank (ECB) and the Securities and Exchange Commission (SEC) have each injected hundreds of Billions of Dollars to provide this much needed liquidity in their respective markets.
So why is this affecting the market, you may ask? Well, a number of reasons really. One of them is that the complex world of large scale investment funds, Hedge Funds for example, means that some investors in these funds can pull out their investments with a short term notice. This necessarily means that the Hedge Fund has to have liquidity for when the investor calls on her investment. In order to obtain this liquidity, they have had to sell off other investments, including equity on the large stock exchanges like New York Stock Exchange (NYSE), London Stock Exchange (LSE), Johannesburg Stock Exchange (JSE) etc. This sell off has resulted in a depressed market. The two days, 14th and 15th August, particularly experienced heavy selling on the NYSE and LSE because the tenure of 45 days before an investor can call on their investment in an investment fund (these deals are way too complex to explain here, perhaps after I leave the Isle of Man and downed a few single malts?). So the selling in the last few days is to settle for September 30 / October 1. This is just one of the reasons, there are many more.
What about currencies? Well, some of the most leveraged investors in the US and emerging markets are Asian investors. Asian investors had borrowed the low yielding Yen to invest in higher yielding currencies like the British Pound Sterling, US Dollar, Aussie Dollar and even Rand. The selling off of Sterling, Dollar, Rand assets on the LSE, NYSE and JSE respectively has triggered a sell off of their investments in these currencies. It only makes sense because the value of their investments in these high yielding currencies was decreasing and thus their Yen borrowings would become more expensive. In the currency sell off, major currencies and currencies in some emerging markets have weakened as the yen has strengthened?
The ultimate fear is that all this may cause a global recession arising from a diminished confidence in the markets coupled with high interest rates. When this happens, investors resort to commodities such as Gold. Who knows, this could ultimately help shore up some African economies where commodities are mined? This again is not clearly understood and is influenced by exogenous factors beyond the understanding of this blog.
I hope this has been helpful! It's as much as I can provide on a lull mind! Ask me after about half a dozen Johnnie Walker doubles.
Ntheye Lungu.
With a good market performance forecast, from all manner of experts, investors "bought" into the credit market of major global lenders - both wholesale and retail banks (Credit Derivatives come to mind). These large scale investments, usually by Hedge and Mutual Funds, created a substantial amount of liquidity in the global economy (particularly the more advanced economies) affording banks to grow their loan books by offering more credit to the consumer. Naturally, with “excess” liquidity available to lend out, banks became all too willing to extend credit to less than stellar borrowers, albeit at a premium. Banks would thus "ease" their traditional prerequisites of a good credit history and stable financial circumstances for borrowers before credit could be extended. To mitigate the inherent risks of lending to these markets, banks would assign a premium rate that is higher than the prime lending rate (prime is the rate at which retail banks lend to the consumers “normally”) This practice, of adding a premium on prime to poorly credit-rate scoring borrowers, is what we have now come to know, rather infamously, as subprime lending? Of course, it is worth mentioning that this measure was in addition to the loans being secured by investors, as aforementioned.
There is a strong argument supporting the idea of making money available to a wider base through sub-prime lending. Some of the arguments for include consumer driven economic growth and an avenue for individuals to recover from short term financial crises. However, the opponents argue that the substantial amounts of liquidity available in the market as a result of sub-prime lending leads to inflation. The latter seem to have won over Central Banks around the world, particularly in the past 20 months. Central Banks have responded as naturally as a Central Bank would to the risk of inflation - raise the REPO rates. Simply put, REPO is the interest rate at which central banks lend money to retail banks. In South Africa, for example, The Governor of The Reserve Bank (SARB), Tito Mboweni, has argued that the double digit growth in property prices, record boom in sale of motor vehicles amongst others, is a result of "reckless lending practices" (in other words, subprime lending) that banks in South Africa have been exercising. The fear of the resulting inflationary pressures on the economy has led to a successive series of REPO rate increases and the enactment of specific laws to reduce "reckless lending practices" (i.e. subprime lending). The trend has been mirrored in both the US and UK where Central Banks have raised interest rates over, at least, 5 quarters.
The push for higher interest rates by Central Banks is designed to discourage excessive borrowing by consumers. However, and more significantly, the result has been that the people, who had obtained credit easily on a subprime market, cannot now afford to pay back their debts. In lay terms, more people are defaulting on credit card repayments, vehicle loan financing and mortgages (home loans), which in most economies constitutes the largest segment of consumer debt. The very risk that subprime lending was meant to mitigate is now materializing.
Remember, and as mentioned, the main reason that banks were offering these subprime credit facilities to consumers was because their loan books were "secured" by large scale investors (Mutual Funds, Hedge Funds et al). So when, since mid 2006 for that matter, the largest credit market (USA) began to show significant signs (in %) of defaults on mortgages, it became clear that the investors would lose money on the loan books they had secured from the banks. Put differently, the investors would have to cover the defaults in the market because the risk of the banks' loan books is on their books (an understanding of Credit Derivatives helps explain this)?
With the imminent losses in the credit market now clear and present, the obvious question that begs to be asked is, if the investors (Mutual Funds, Hedge Funds et al) are securing the banks loan books, who, in turn, is securing the investors investment on these loan books? In other words, who insures the insurer? Who holds the ultimate risk? So even though the signs of a “credit crunch” have been clear since mid 2006, what has not been clear is who, ultimately, is exposed to this risk. Basically, banks and investors alike have been caught up in a deadly embrace in determining the risk exposure in their books.
The panty dropper was when, last week, BNP Paribas announced it was suspending its hedge funds as it would not definitively ascertain who had ultimate custody of exposure on the securitised debts. Major players on the markets such as Goldman Sachs and other large hedge funds in the USA took similar actions.
This series of reactions necessarily means that large scale investors were no longer willing and/or able to "secure" the banks' loan books. As a consequence, banks become less “able” to extend new credit to the consumer. This has seriously restricted the availability of liquidity in the markets. To address these liquidity problems, The European Central Bank (ECB) and the Securities and Exchange Commission (SEC) have each injected hundreds of Billions of Dollars to provide this much needed liquidity in their respective markets.
So why is this affecting the market, you may ask? Well, a number of reasons really. One of them is that the complex world of large scale investment funds, Hedge Funds for example, means that some investors in these funds can pull out their investments with a short term notice. This necessarily means that the Hedge Fund has to have liquidity for when the investor calls on her investment. In order to obtain this liquidity, they have had to sell off other investments, including equity on the large stock exchanges like New York Stock Exchange (NYSE), London Stock Exchange (LSE), Johannesburg Stock Exchange (JSE) etc. This sell off has resulted in a depressed market. The two days, 14th and 15th August, particularly experienced heavy selling on the NYSE and LSE because the tenure of 45 days before an investor can call on their investment in an investment fund (these deals are way too complex to explain here, perhaps after I leave the Isle of Man and downed a few single malts?). So the selling in the last few days is to settle for September 30 / October 1. This is just one of the reasons, there are many more.
What about currencies? Well, some of the most leveraged investors in the US and emerging markets are Asian investors. Asian investors had borrowed the low yielding Yen to invest in higher yielding currencies like the British Pound Sterling, US Dollar, Aussie Dollar and even Rand. The selling off of Sterling, Dollar, Rand assets on the LSE, NYSE and JSE respectively has triggered a sell off of their investments in these currencies. It only makes sense because the value of their investments in these high yielding currencies was decreasing and thus their Yen borrowings would become more expensive. In the currency sell off, major currencies and currencies in some emerging markets have weakened as the yen has strengthened?
The ultimate fear is that all this may cause a global recession arising from a diminished confidence in the markets coupled with high interest rates. When this happens, investors resort to commodities such as Gold. Who knows, this could ultimately help shore up some African economies where commodities are mined? This again is not clearly understood and is influenced by exogenous factors beyond the understanding of this blog.
I hope this has been helpful! It's as much as I can provide on a lull mind! Ask me after about half a dozen Johnnie Walker doubles.
Ntheye Lungu.
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