2009

Ezedinachi Chinedu Obeleagu

Kennys Consult Limited
50 Zik Avenue Uwani Enugu P.O.Box 9548 Postcode 400009 Phone: 234-805-2804543 chinedu@kennysconsult.com

The Global Financial Crisis, Can Africa Assist; Yes We Can

This paper reflects on the current global crisis and why companies need to consider investing in Nigeria.

ORACLE Chairman Jeff Henley says having been a CFO through several downturns, I am a firm believer that sometimes a crises can provide you with an opportunity to transform your organization in ways that wouldnt be possible during good times, because circumstances demand that you create leaner, more efficient operations.

The inauguration of Senator Barack Obama as th the 44 president of the United States of America, signaled the emergence of a new world order challenging the entire world to look at issues, peoples and ideals from a point of view of inclusiveness. It is an open secret that the current unprecedented global financial crises triggered by the sub-prime crisis in the housing mortgage sector in the United States of America in 2007 has snowballed into a global crisis with financial (credit and currency), commodity and stock markets in turmoil leading to the drying up of liquidity and inspiring fear and uncertainty in most economies. Retail businesses and industrial firms, both large and small, are finding it increasingly difficult to obtain credits as banks have become reluctant to lend, even to old and previously reliable customers; Markets are under threat and individual governments are seemingly powerless, trusting as much to luck or reliant on forces beyond their control. Simply put, companies around the world are confronted by a perfect storm. This crisis almost unparalleled in its impact has created a set of "invisible scars" which are fear and shame. The fear being the extent of financial loss to be incurred, and the shame, the perceived fall in status for cash strapped companies and economies, not only within America but across the industrialized world as well. The rate at which this crisis is moving makes it almost impossible to assess the implications of the meltdown for the days ahead, let alone years to come. But although this crisis may be creating negative business sentiments and pessimism, but just as it was not all gloom and doom during the Great Depression of the 60s, this period will provide opportunities for seasoned companies who continue to act as though there is nothing wrong and that the public had money to spend to make great economic strides. Remember, for such companies, the very nature of the depression itself was an economic boom for them. Therefore, now is the time companies stand to benefit from aggressive market penetration through advertising and opening of new markets. This is because so many companies are at the moment cutting their spending on entering new markets, adverts and promotion and these cutbacks might make these companies to eventually drop out of public sight because their customers will feel abandoned thereby driving them to more aggressive competitors.

For example, Kellogg upstaged C.W. Post during the great depression since consumers didn't totally stop spending during the depression, most consumers just looked for better deals and the companies providing those better deals came out stronger after the depression; And when spending picked up, consumer loyalty to those companies remained. So, what will distinguish the companies that will do well during this meltdown if we take a clue from past crisis are those companies that will keep their name in front of the public and create brand name recognition even during this worst of times. ORACLE Chairman Jeff Henley says having been a CFO through several downturns, I am a firm believer that sometimes a crisis can provide you with an opportunity to transform your organization in ways that wouldnt be possible during good times, because circumstances demand that you create leaner, more efficient operations, Thats what happened to Oracle in the late 1990s, when our operating 1 margins were under pressure . The key is to measure opportunities against significant and 2 unknown risks says Robert Adamson, LL.B., LL.M. and Alan Willis, CA. Last year, Amazon CEO Jeff Bezos was asked by Business week to talk about his strategies for innovating through the downturn. There is no bad time to innovate, said Bezos. You should be doing it when times are good and when times are tough-and you want to be doing it 3 around things that your customers care about . The key to managing crisis, Sir Philip Hampton, chairman of Royal Bank of Scotland says, is to keep an eye on the long term while youre dancing in the flames. With the glaring evidence that world economies are even more interconnected and symbiotic than anyone really understands, and the threat that the links that bind countries
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The key to managing crisis is to keep an eye on the long term while youre dancing in the flames says Sir Philip Hampton, chairman of Royal Bank of Scotland.

Profit Magazine page 27 Vol. 14 Number 1 Feb. 2009 Smart IT Strategies for uncertain times. Robert Adamson, LL.B., LL.M. and Alan Willis, CA, Director Alert the Global Financial Meltdown questions for directors to ask is a publication of CICA's Risk Management and Governance Board. www.rmgb.ca. Profit Magazine page 29 Vol. 14 Number 1 Feb. 2009, Smart IT Strategies for uncertain times.

A no investment situation generates a vicious Trust Crunch circle, and that brings to a compression and ultimately to the freezing of any exchange in the economy. If the blood stops circulating even the healthiest individual will eventually die.

The rubble of every recession contains the seeds of its own regeneration. Physical and human capital of dying economic sectors doesnt vanish with them.

economies together are under strain; there is a need for entrepreneurs and investors to look beyond their boundaries. Gary Wright M.S.I. in his article The Global Financial Crisis; a way forward says, For the first time in the history of the financial markets, the solution to the problem lies outside of individual markets or governments to solve. Unilateral actions by governments will be fruitless in preventing this disaster from increasing. To stem the tide there needs to be conformity of actions domestically that dovetail into international actions to find solutions. Governments have to work together across all time zones and continents if we are all to achieve a soft landing, transcending normal adversarial politics and those nationalistic tendencies. This is the time for a global coming together and the eventual production of a financial system that recognises the global interdependencies of markets and economies on each other as the failure to solve this global disaster is far too 4 frightening to contemplate . Business investment across all time zones and continents is critical now and holds the key to productivity and future profitability since out of failure comes success and out of a crisis are signs of a future. Unfortunately, virtually everyone is looking for whom to bell the cat but actually trusting the stars and crossing their fingers trying to gain some comfort. Most investors are having a strong reluctance to undertake any investment at all due to general widespread fear but remember The rubble of every recession contains the seeds of its own regeneration. Physical and human capital of dying economic sectors doesnt vanish with them. These assets-equipment, property, workers-are re-released into the economy, where entrepreneurs, unless thwarted by taxes and regulations, scoop them up and inevitably find more productive uses for them. In the process, new companies are born and new jobs created offering, over time, far better returns and wages than before. This is not idle, theoretical 5 speculation says Shikha Dalmia. We must act now. And for one to effectively utilize his power to decide, he/she must
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understand the difference between reacting and responding. Since to react is a negative position while to respond is a positive position, we must take a positive stance on business investment and optimistically work towards it. Mary Crowley said we are free to the point of choice; then the choice controls the chooser.At times like this when investment risks are perceived to be too high, a no investment situation generates a vicious Trust Crunch circle, and that brings to a compression and ultimately to the freezing of any exchange in the economy. If the blood stops circulating even the healthiest individual will eventually die. The banks stop lending, even to themselves; consumer confidence plummets at its lowest, panic spreads across and creates damage to fundamentally sound businesses. The above curve gets flatter and it moves more and more to the extreme right of the graph. This deadly spiral 6 must be unlocked! Africa and indeed Nigeria because of the size of its market (the most populous country on the African continent with an estimated population size of 140.003.542 million people made up of Men: 71.709.859, and Women: 68.293.083 7 accounting for 47% of West Africas population, and the ninth most populous country in the world), remains a viable partner in our quest for a prosperous global economic enterprise. Moreover, there is a reasonable chance that Africa may survive the current world financial crisis less bruised and battered than some other parts of the world. This is because the very factors that damaged the continent in the past may now be working in its favour. Take the banking sector for example, businessmen and budding entrepreneurs have always moaned about the excessive regulations and conservatism of African banks; Controls on foreign exchange often preventing them from raising more money by investing in exciting financial instruments in the West; Foreign ownership of banks which is unusually limited (to less than 5% in Nigeria and South Africa). This very de-linkage from the Western financial
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Gary Wright M.S.I. The Global Financial Crisis; a way forward B.I.S.S. Research Ltd 2008 UK Registered Company Number: 03369427 Shikha Dalmia, No New Deals Let entrepreneurs and innovation stimulate the economy February 4, 20092009 Reason Magazine. All Rights Reserved.

EconoMonitor Go To European EconoMonitor Main Page How to Generate a New Wave of Prosperity. The formula of mixed government and private investments to reform the world Nov 26, 2008 World Bank Country Brief Last updated March 2008, The World Bank Group 2008.

Given the enormous multiplier effect investments in poor countries can produce and the untapped market potential, rich countries ignore market and investment opportunities in Africa at their peril.

system has turned out to Africas advantage. Our banks have almost no exposure to the subprime market causing such havoc elsewhere in the world. South Africas ABSA Bank is now worth more than UKs Barclays Bank even though the British bank has 53.96 per cent stake in ABSA. Regrettably, in global news coverage, Africa takes between 1 and 2 per cent, and even at that, 80 per cent of news on Africa is about wars, famine and corruption. My revisiting some of those negative barbs will do nothing but reinforce the very intention for which they were made to achieve. There are far more to report about Africa than that. For instance, many African countries have now embraced democracy. Guinea which recently witnessed a coup has been suspended from the subregional association on account of this. Nigeria is now in the 10th year of unbroken democratic rule. No matter how slow things appear to be, we are making progress. Oby Ezekwesili (World Bank Vice President, Africa) warns that Given the enormous multiplier effect investments in poor countries can produce and the untapped market potential, rich countries ignore market and investment opportunities in Africa at their peril. She cited the example of a telecommunication company from an European nation that turned down offers to invest at the onset of reforms in the Nigerian telecom sector in 2001, which comprised a mere half a million telephone lines when it was still a nascent market. However, when the sector began to prosper thanks to investments from less risk-adverse countries, the firm reversed course when it realized that is was missing out on an extremely profitable market, which by then had grown to over 60 million telephone customers. Yes we can upstage our competitors and realize our business objectives if we allow our mind, a sense of reasoning come to play. Let our emotions and sentiments be assigned to culinary and bed room choreography. We cant keep doing the same thing and expect to get a different result! Things dont work out just like that! This is the Challenge we are faced with. Challenges, a function of the living and those having something to do for posterity beckons on us to think positively about the prospects abundant in Africa particularly Nigeria. By leveraging Nigerias business potentials enhanced by the population figures, you will be able to make several times the improvements in overall profitability and cost reductions your

company desires. The divisive tendencies of the past promoted by the notion of developed/developing economies should be discarded for the betterment of enterprise. Yes we can leap out of this crisis if we encourage/harness those potentials in markets we have so often discarded. We must think globally when formulating our business strategy. It is one world! This is our chance to answer that call. This is our moment. This is our time - to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American Dream and reaffirm that fundamental truth - that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism, and doubt, and those who tell us that we can't, we will respond with that timeless creed that sums up the spirit of a 8 people: Yes We Can .

References

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Profit Magazine, Smart IT Strategies for uncertain times pg 27 Vol. 14 Number 1 Feb. 2009. Developed Countries Ignore Africa at Their Peril, World Bank Warns WASHINGTON, February 4, 2009 2009 The World Bank Group, All Rights Reserved. Legal. How to Generate a New Wave of Prosperity. The formula of mixed government and private investments to reform the world by Carlo Resta | Nov 26, 2008 Europe EconoMonitor Website Copyright 2009 Roubini Global Economics, LLC. Google Answers for Successful companies and industries during the Great Depression.

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President Barack Obamas election night victory speech delivered at Grant Park in his home state of Chicago Illinois before an estimated crowd of 240,000.

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From Crisis To Opportunity posted by John at http://oxfordhub.org/ Retrieved Thursday 21/01/2009

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Briefings The
Economist.com Africas prospects; Opportunity knocks Oct 9th 2008 From The Economist print edition.