THIS IS WHAT WALL STREET JOURNAL HAS TO SAY : In Africa, Calls for Heavenly (Currency) Intervention Why Has Ghanas Cedi Plunged? Some Look to the Devil, or Mythical Dwarves ACCRA, Ghana—A rising U.S. dollar has stirred many pastors here into nightly prayers for their fallen currency to rise again. I command the resurrection of the cedi! In the name of Jesus! preached evangelist Nicholas Duncan-Williams of a megachurch called Action Chapel, recently. Then he addressed Satan: Take your hands off the central bank! African countries are having a devil of a year, due in large part to the slump in their currencies. From Gambia to Zambia, sharp drops against the U.S. dollar are making imported goods more expensive, forcing shopkeepers to raise prices, slowing business at many of Africas gleaming new shopping malls, car dealerships and fast-food restaurants. In Ghana, the cedi lost 11% against the dollar in the first two months of 2014. Some radio personalities blamed the free fall on the devil, others on mythical dwarves who practice witchcraft in the forest. These dwarfs, the black magic is what has made the cedi lose value, Anita Desooso, a political organizer for the ruling National Democratic Congress told private radio station Adom FM recently. Economists blame the currency weakness on more worldly reasons, such as the U.S. Federal Reserves decision to trim its bond-buying program. That has helped drive up the dollar against currencies globally. But compounding these pressures from afar is a problem of Africas own making: big budget deficits. Many African governments preside over a rising and demanding middle class and face evermore competitive elections. Yet their revenue still mostly comes from exports of raw materials like gold, oil, platinum, iron or copper. And global prices for those commodities are falling. That means African revenue is falling. But government spending generally isnt. Zambia increased civil-servant wages by 50% last year, while prices for its key export copper fell 7%. That fueled a budget deficit that the International Monetary Fund thinks hit 8.5% of gross domestic product last year, nearly double the governments 4.3% target. As the outlook has dimmed, investors have fled. Last week, Zambias kwacha fell to a record. South Africa faces a similar crunch. Its rand lingers near five-year lows to the dollar, just as officials are preparing a massive, import-heavy infrastructure overhaul. For months, Nigerias central-bank governor warned that his country also could find itself scrambling for revenue: Nigeria is more than anybody else in big trouble, said Lamido Sanusi, comparing Nigeria to peer oil exporters. On top of Nigerias weakening currency, he said nearly $11.5 billion in oil savings has vanished in a fit of election-year spending. President Goodluck Jonathan recently ousted Mr. Sanusi, removing a voice of dissent, and sending the naira to a record low. A decade of dazzling growth has swept through Africas biggest cities, leaving about 1,000 KFCs by Yum Brands Inc. and 380 megastores from Wal-Mart Stores Inc.s South African unit, Massmart Holdings Ltd., according to the companies. Advertisements in Accra offer freshly tiled condos at a princely sum of $3,000 a month. Now, the question is whether those shops and restaurants can survive their customers diminished buying power. Ghana was the second-fastest growing economy of 2011, and Africas fastest, thanks largely to a bonanza of retail expansion. That binge of activity left the capital bedecked with shopping malls, U.S. hotels like Holiday Inn and Best Western International Inc. and with helipad-topped condominiums that overlook shacks...
Posted on: Tue, 11 Mar 2014 17:43:32 +0000
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