A Weak Shilling for Our Benefit

I am sitted in some café with dad having some croissant and cappuccino for breakfast when I see currencies’ exchange rates on the TV on business news. Partly motivated by a biiiig International Finance document I have been reading, I hunch over my iPad and compose this write-up. The Kenyan shilling has been depreciating against the dollar overtime. I grew up a young boy, seen the dollar sell at around 36bob, (CBK website says it was trading at US$1/36.23Ksh in Jan 1993). I have also seen this rate hit an all-times high of Ksh105.75/US$ (Oct2011), and now stabilized at around US$1/86Ksh.

There are several explanations for currency depreciation. First, the persistent rise in prices-inflation (explained by the theory of purchasing power parity). Second, the National Trade Deficit (imports exceeds exports). As the trade deficit increases, the value of a country’s currency depreciate against the currency of the countries it is trading with. Third, the Monetary policy- (economic money supply). The Central Bank adjusts monetary policy in order to find equilibrium between the supply and demand by either printing more money or selling government owned securities.

Economists Ben Bernanke, Arthur Laffer, Dr. Aballa or me will tell you that currency depreciation is not necessarily a bad thing for an economy/country.

A weakening shilling…

Depreciation of a currency makes a country’s exports cheaper (theory of purchasing power parity) and therefore more competitive in the international markets (price leadership). Remember when the shilling hit a past US$1/105.75Ksh mark? Kenya has had currency depreciation that would have been good for the economy, swiftly, greatly, tremendously and absolutely!

But why were/are we not on the streets dancing?

A check on our Capital and Current Accounts (BOP) shows a deficit. Kenya brings in more goods than we export thus a weak shilling leaves our county’s wealth worse off, that’s why we are not in the streets dancing as the shilling depreciates even more.

More exports are good for a country. They not only improve the balance of payments-(BOP) but also increase the country’s economic wellbeing. A growing economy (due to more exports) coupled with good re-distribution policies should be good for all. Indeed, good to even the unemployed like me as well.

But can our good taxation system or fair redistribution policies change our current situation? No, I won’t bet.

Even if there was a surge in demand for our Kenyan exports in the international markets, we are limited on how much we can supply within a given time. We have limited capital and inputs to expand production. Land too is limited.

The benefits derivable from currency depreciation are complicated by the fact that we are net importers! 

Worse still, most of what we import consists of basic capital equipment, and other basics like food items. Can we really do without imports? The answer is NO. No man is an island. Therefore, given the depreciating shilling and the basic necessity to import; all of us are inevitably hurt due to high import prices, which should not be the case.

But we still got a way out!

The solution to the pun above would be to address supply constraints within the economy. Kenya can produce. Kenya can value-add her local products. Kenya can manufacture some products she has been importing. Kenya can export too. Kenya can make her BOP positive. Kenya can ensure increased and sustained supply capacity, competitive domestic pricing as well as increased capacity to meet surges in demand within and without the international markets.

And for this to work, there should be a reasonable openness in the economy and political policies, a relatively floating exchange rate, credit and a reduced risks of investments.

Let me resume my croissant, with the already cold cappuccino.

Building a De-Americanized World

A friend of mine, and a senior lecturer in the University of Nairobi commented that it is failure when some Kenyan governors go benchmarking to the United States while the real thing is happening in Machakos County.

One R. Alai, a blogger and critic posed that some Kenyan media houses and personalities brag of winning CNN (an American TV channel) awards as if CNN was Jesus Christ!

I recently read through the Kenyan Public Debt Management Report of 2005/2006 and realized that Japan was the leading bilateral creditor to Kenya at the end of June 2006 (18.4 percent of total debt) followed by France (4.3 percent) and Germany (3.2 percent). To be more credible, I also checked some current data. China is currently the leading bilateral creditor, followed by Japan, France then Germany.

America is not even classed among our lenders! Yet all the above figures are given in US dollars.

It is perhaps a good time for the befuddled world to start considering building a de-Americanized world or brace harder times!

China is setting the pace. Her emergence as a leading economic powerhouse is on the offing. During the US government shutdown, China called for ‘Building a de-Americanized World’, and went ahead to sign a $57Bn currency swap deal with the European Union Bank _ a Chinese focus on being world leaders. Key among her strategies is the creation of a new international reserve currency to replace the present reliance on U.S. dollars, a necessary step to prevent American bumbling from further afflicting the world.

China’s entry into emerging markets with a strong Yuan will favour her balance of payments and exponentially grow her economy. We should not be surprised therefore, next time you buy a ticket; you may not use the dollar but Yuan. It may not be soon, but the worlds’ dynamics are fast changing.

The self-serving US has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies.

Remember recently when the Kenyan shilling depreciated against the dollar and hit around Kshs.114/US$ mark? A situation not hitherto imagined! Many argued that the price of the dollar is a function of its supply and demand, but that ksh114 was beyond the market mechanism. There must have been something else to that! The rest of the world needs independence, and a currency that is disconnected from individual nations and is able to remain stable in the long run.

Toppling the dollar alone isn’t enough, but it is a bold first step.  Several cornerstones should be laid to underpin a de-Americanized world. Kenya has a role to play, and so is Uganda and other nations. USAid alone won’t build our nation, we need more productive structures. Thanks to the Kenyattas’ presidency that does not tolerate the US!

The world needs some independence from US reliance, but this is ultimately not the American problem, as the effects of the bubble may ultimately be seen when the bubble bursts: global recession which will make life bite, especially with the already biting Kenyan VAT Law.

The Wealth of Nations

I didn’t attend any of the Ivy League institutions but am proud to have passed through the hands of Dr. Baraza, a public finance guru. Most of the class time sessions were spent watching video clips, and there I got a different view to wealth.

 

Forget everything else I might write down here, but don’t forget this one thing: If you want Kenya to be rich, you must have great productivity. The value you produce in return for the inputs you consume is the only thing that matters. It doesn’t matter how many people, machines or resources you have.

All that matters is the equation connecting inputs and outputs. Talk of a positive value; a positive net present value.

The former president beat this particular drum for more than ten years: ‘’fanyeni kazi’’. I’ll keep beating it even louder until someone listens and we fix Kenya’s productivity problem. The inefficiency with which we use our human resources, incidentally, is not just about manual workers. The problem of meaningless, valueless jobs starts very high up.

Let’s shift to the Kenyan government and public offices.

Koigi wa Wamwere once allowed journalists to spend an entire morning in his office. There, they recorded his TYPICAL DAY:……”he reads the newspapers, checks the post and e-mail, he surfs the net, he speaks to his secretary, he calls home,………. many hours of barely worth activity. Later, the journalists leave, amazed by the sheer tedium of it all.

Inactivity in government and public offices.

One might ask: do people especially public servants, go into office and wait to be given work to do?

I ask this because with all the resources at their disposal I would think that these servants should be able to come with plans to better their ministries and offices. It is easy enough to blame the government for appointing these people and not making use of them, but I think it would be better to ask why they do not seem to have any personal initiative to work.

And the joke’s on us. Most of these servants carry off hundreds of thousands or more of our money (tax revenue) every month in salaries and allowances. They have staff joining them in doing nothing; they have guards guarding their inactive serenity; they have well-appointed offices in which to do nothing, well, doing nothing in style. Some, it is alleged, have up to four cars given to them by the state to ferry them around in supreme comfort so that they can do nothing in different places.

This problem begins from the top. We could sack all unnecessary/inactive officers and the only reverberations we would feel in the economy would be that of money being saved and available for investment. Allow me to call this The Wealth of Nations.

Bad work and jobs keep us poor and unskilled. We are poor because we do things badly. That’s all there is to it. Good work the otherwise. Every time I travel via Thika road I usually tweet/facebook that Vision 2030 is possible_(confirm from my tweets). Every time Dr. Alfred Mutua speaks on media: productivity, work well done

Jobs should be measured by the work done. More jobs are created when work is done well. Wages go up when work is done well. Companies prosper when work is done well. Standards of living rise when companies prosper and workers are paid more. Good jobs equal prosperity for all.

This is the Wealth of a Nation, but it’s quite a job to explain it.

Let’s keep tweeting @fredbursar

AN ACCOUNTING/FINANCIAL INTERNSHIP EXPERIENCE

Whether you're a budding analyst for a biiiiiiig accounting firm or dipping your toes into the commercial or investment banking world with a small Kenyan bank, a college internship (preferably with an internship stipend) can be a wide-open gateway into your dream accounting/finance industry post - if you handle it right.

 A good percentage of college/university graduates who participate in internships while still in school receive at least one job offer after their stint if over. Salary-wise, paid interns fare significantly better that other entry-level job applicants; such students have a decided advantage in the job market over those who did an unpaid internship or didn't do an internship at all. 

Internships usually have college students and graduates working in environments where their skills are put to beneficial use by firms that really need the help. There's no fetching coffee for optimal internships – it's real work companies want done. Paid interns spend much of their time engaged in 'real' work; employers prize that kind of hands-on experience. Conversely, unpaid interns spend more time on clerical tasks and less on the type of duties that employers value (I once tried an unpaid one which I quitted after a week).

What makes a successful internship for college accounting and finance major? Let's take a look:

Doing the Work You Were Trained to Do

A great internship depends on what field you enter, such as internal auditing, investment banking etc.. But by and large, being busy using skills you've learned and developed in the classroom define the best internship experiences. So if you're spending almost half your time doing challenging, rewarding work, your internship is on the right track.

How Many Hours?

College interns working in banks, brokerages and other accounting and financial services firms should aim for between 200 and 400 hours during their internship. Why? Because that's what hiring firms look for in terms of on-the-job interning experience.

What Pay Can You Expect?

On average, a paid internship means being compensated for about a third- half the salary (and no benefits) of an entry-level salary for a similar job. In addition, factor in what you're doing and where you are doing it. However, you shouldn't necessarily judge an internship on the size of the paycheck.

Signs of a Good Internship Program

College grads and students wondering what other elements comprise a good and beneficial intern experience should look for the following elements:

• A direct internship coordinator, whose full-time job is managing interns

• A written blueprint from the company explaining its policy toward interns and its goals in its internship program - you shouldn't have to ask, the firm should give you one

• An emphasis on challenging - and not menial - work.

• Opportunities to mingle with, and learn from, staffers and management at meetings, seminars, company dinners and training sessions on a regular basis

• An opportunity to speak with former interns at the financial services company, to get their perspective on the internship experience

What steps should you take to secure a good financial internship? Getting a decent internship at a bank, insurance company, or other financial services firm is all about preparation. In that regard, cross these items off your checklist first:

Check Your Status

The unemployment line is littered with the resumes of college graduates who didn't take care of business in vetting their online reputations. Money management firms are, above all, extremely cautious about whom they bring aboard to help manage client's money.

That's why it's a good idea to scrub your online persona swiftly and thoroughly. Watch out for risky pictures on Facebook or inappropriate Twitter comments. Some companies will be on the lookout for what they deem to be risky behavior; avoid it and remove any examples of such behavior online before you interview with a money management outfit. 

Start Your Networking File

Once you gain an internship, begin filing away the names and contact data for the professionals you meet along the way in your internship. It could be the contact who helped you win the internship, the broker or analyst who you've been assigned to help or the specific internship coordinator at your company. All can come in handy when push comes to shove and you’re looking for a job offer.

Above all, make sure to write personalized thank you notes to all the professionals who've helped you along the way. Civility and good manners count for a lot and in the accounting and finance industry and may even mean the difference between leveraging an internship for professional gain or not.

The Bottom Line

Most internships are generally more rewarding in terms of experience, and can get you further in your career. In the end you're better off if you can get any internship after all. The value of networking and experience goes far, whether you're earning a paycheck or not.