It is pretty amazing to discover that many of the worlds biggest Banks could get taken in by the exploits of one well connected individual. It just goes to show how massive greed has corrupted the financial system all over the world and the full effect is yet to be felt by Emerging Economies such as Kenya.
Mr Jimnah Mbaru One of Kenya’s leading Financial Gurus, Chairman of Dyer and Blair has sounded the alarm bells on the state of the Kenyan Economy. He said the country has already suffered negative economic growths in the last two consecutive quarters; a clear indicator the economy was in a recession. Mbaru said other factors leading to the contraction of the economy include a decline in farm outputs, high cost of food as well as high transport costs due to high oil prices, which have prevailed recently. The question is how related is this crisis to the going ons in the West and how can the major financial players like Mbaru prevent a free fall.
Being part of a Business Consultancy(www.cymapk.com) that advices banks on how to implement IT solutions to monitor and track funds i know for sure that any offshore or foreign investments have to be tightly regulated to provide a safeguard for local Banking Industries. This failure to regulate in the west is really surprising and many are left wondering how this situation arose. Only time will tell perhaps.
My Irish friend Gerry called this the chicken’s coming home to roost. An old English saying that suitably depicts the state of many banks today.
How can we regulate against this greed ? How can we legislate against Pyramid or Ponzi Schemes which are still by commision legal in Kenya?
Here is the list of the Banks that have been affected worldwide.
Create your Financial Blog at http://www.whive.com
Read more at CNN: http://edition.cnn.com/2008/BUSINESS/12/15/madoff.arrest.exposure/index.html
Read more at the Standard: http://www.eastandard.net/business/InsidePage.php?id=1144001462&cid=14&
The finance markets are driven by trust and greed. From the case of Murdoff he was chairman of NASDAQ(trust) and the consistency of his fun to continuously return positive demands though highly unusual drove investors to invest with him on the premise that he was doing insider trade(GREED).
In Kenya we have a more or less similar scenario but what saves us is the lack of sophistication and scant information. Look for instance at some of the new or proposed IPOs hoards flock to them leveraged to the hilt. On the other hand well connected people take this opportunity to offload their protfolios at tidy profits. The latest in this barrage is Transcentury, there is an email circulating on an impending IPO for next year and now is the time to get in through a private offering. It seems very enticing until one looks at some basic information for example they are basing their offer price on 1.2X June 30 valuation truth be told the most share values have dropped by more than 50% since then.
The writing is on the wall but I beg to differ with Mr Mbaru because some of the indicators he points out are as a result of local conditions such as January clashes and not a direct result of international financial crisis. On the other hand Mr Mabru is a top ten shareholder in Transcentury so he might have a clue as to what is about to happen. Kenya being a cash based economy might actually be shielded from much of the devastation wiping out the west.
Economies run on sentiments and major players like Mbaru have a social responsibility to maintain positive outlook. One way of doing this is to increase their holdings in the stock market. Being in the boards of large companies they may also want to commit themselves to long term capital expenditure. Since also they have connections in politics they may seek to comfront social issues before we have another January 2008.
Thomas Kiarie.