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African view: Credit-crunch proof? African view: Credit-crunch proof?
(about 4 hours later)
A novel way to avoid sub-prime mortgages - build your own homeA novel way to avoid sub-prime mortgages - build your own home
In our series of viewpoints from African journalists, Ghanaian writer Elizabeth Ohene explains how the continent managed to avoid the financial crisis for so long.In our series of viewpoints from African journalists, Ghanaian writer Elizabeth Ohene explains how the continent managed to avoid the financial crisis for so long.
As every reporter knows, there is an African angle to every story.As every reporter knows, there is an African angle to every story.
It either starts here or ends here or gets compounded here.It either starts here or ends here or gets compounded here.
And since it is impossible these days to avoid all these stories about financial meltdown/credit crunch/housing market collapse, I have no choice but to try to assess what impact these matters have had on this little corner of the global village.And since it is impossible these days to avoid all these stories about financial meltdown/credit crunch/housing market collapse, I have no choice but to try to assess what impact these matters have had on this little corner of the global village.
As for a collapse in the housing market, there is no housing marketAs for a collapse in the housing market, there is no housing market
First, the housing market and those sub-prime mortgages that started the problem.First, the housing market and those sub-prime mortgages that started the problem.
Well, over here, we do not do mortgages, sub-prime, toxic or otherwise. And, in these parts, we talk about building a house and not buying a house.Well, over here, we do not do mortgages, sub-prime, toxic or otherwise. And, in these parts, we talk about building a house and not buying a house.
And the building of a house has been known to take up to 10 years, giving rise to a phenomenon known as the uncompleted house - many examples of which you will see dotted all around the country.And the building of a house has been known to take up to 10 years, giving rise to a phenomenon known as the uncompleted house - many examples of which you will see dotted all around the country.
An occasional loanAn occasional loan
It goes something like this: You get some money, buy a few bags of cement and you start.It goes something like this: You get some money, buy a few bags of cement and you start.
When the foundation has been done, you celebrate, and when by the next year, the block-work reaches the window level, you celebrate with a few friends.When the foundation has been done, you celebrate, and when by the next year, the block-work reaches the window level, you celebrate with a few friends.
Africa could not remain immune from every part of the crisisAfrica could not remain immune from every part of the crisis
Then, slowly, ever so slowly you add on until one day, you finish, or not as the case might be and your children take it up and finish when you are gone.Then, slowly, ever so slowly you add on until one day, you finish, or not as the case might be and your children take it up and finish when you are gone.
If you are building a really posh house and you manage to line up a World Bank official or an oil-company employee to agree to rent it for the next five years, the bank might be persuaded to lend you some money to finish it when you get stuck half way through the roofing stage. The loan is at a commercial rate.If you are building a really posh house and you manage to line up a World Bank official or an oil-company employee to agree to rent it for the next five years, the bank might be persuaded to lend you some money to finish it when you get stuck half way through the roofing stage. The loan is at a commercial rate.
But mortgages really are not part of our housing scene.But mortgages really are not part of our housing scene.
Very few people have mortgages of any kind and as for a collapse in the housing market, there is no housing market.Very few people have mortgages of any kind and as for a collapse in the housing market, there is no housing market.
Building is such a traumatic undertaking, very few people actually sell their houses once they have finished building them.Building is such a traumatic undertaking, very few people actually sell their houses once they have finished building them.
Dream-home projectsDream-home projects
All the same, it seems even our peculiar housing situation has been impacted by the global situation.All the same, it seems even our peculiar housing situation has been impacted by the global situation.
There is a marked increase in the stock of uncompleted houses. Ghanaians who live abroad lead the house-building industry here.There is a marked increase in the stock of uncompleted houses. Ghanaians who live abroad lead the house-building industry here.
What business are you going to undertake that will bring returns to cover a 35% interest on the loan?What business are you going to undertake that will bring returns to cover a 35% interest on the loan?
Speak to any Ghanaian abroad and he has a project - in other words he is building his dream house.Speak to any Ghanaian abroad and he has a project - in other words he is building his dream house.
They do it in much the same way as those who live here. They send a $1,000 (£600) this year, $500 the next and after 18 months of doing two or three jobs, they send $5,000 and progress at the site mirrors the flow of these funds.They do it in much the same way as those who live here. They send a $1,000 (£600) this year, $500 the next and after 18 months of doing two or three jobs, they send $5,000 and progress at the site mirrors the flow of these funds.
Now many of these sites are silent. Many of the project owners have been laid off work and there are not many opportunities for them to do two or three jobs.Now many of these sites are silent. Many of the project owners have been laid off work and there are not many opportunities for them to do two or three jobs.
An African stimulus?An African stimulus?
Then there is the credit crunch, well, the credit explosion itself never really got here.Then there is the credit crunch, well, the credit explosion itself never really got here.
All those years that people in the developed economies were being harassed to take loans, no questions asked, the interest rates here were hovering around 18%.All those years that people in the developed economies were being harassed to take loans, no questions asked, the interest rates here were hovering around 18%.
Today, the bank base rate here is 28%.Today, the bank base rate here is 28%.
It is not exactly that the banks do not want to lend you money, even though it must be said that they are not exactly falling over themselves to try to.It is not exactly that the banks do not want to lend you money, even though it must be said that they are not exactly falling over themselves to try to.
But what business are you going to undertake that will bring returns to cover a 35% interest on the loan?But what business are you going to undertake that will bring returns to cover a 35% interest on the loan?
I have followed keenly the measures that the various Western governments have been taking to deal with this crisis and I have been telling myself this is one crisis I wish we had been part of.I have followed keenly the measures that the various Western governments have been taking to deal with this crisis and I have been telling myself this is one crisis I wish we had been part of.
I do not know any African country that would not be grateful for a stimulus package.I do not know any African country that would not be grateful for a stimulus package.
And I would have been very happy to experience one other manifestation of the financial crisis: Falling retail prices and governments begging you to buy cars at big discounts.And I would have been very happy to experience one other manifestation of the financial crisis: Falling retail prices and governments begging you to buy cars at big discounts.
Over here the prices keep rising and they never fall.Over here the prices keep rising and they never fall.
When news broke about the Nigerian banks and dodgy loans I knew we had finally made it. It is obvious we are now going into our crisis.When news broke about the Nigerian banks and dodgy loans I knew we had finally made it. It is obvious we are now going into our crisis.
This time around, however, nobody can say we brought it to the world.This time around, however, nobody can say we brought it to the world.
If you would like to comment on this column, send us your views using the postform below.If you would like to comment on this column, send us your views using the postform below.
A selection of the comments we have received so far:
Very interesting analysis. This is very true of housing construction here in Kenya- a Kenyan will put up a house in phases, sometimes its done win a lifetime. Very, very few Kenyans have access to mortgages and thus the effect of the crisis was only in terms of declined remittances. There are many half complete projects financed by what we call 'Kenyan diaspora', declined because of the economic crisis affecting the countries where these Kenyans are. But I wish, like Elizabeth, that the crisis stimulus package was here begging us to buy cars and houses and I wish their prices were coming down. Here in Kenya property prices have sky rocketed.Denis, Kenya
The article is very true of most West African countries but again the Ghanaian reporter like her fellow Western reporter has somehow managed to tag Nigeria negatively. 'When news broke about the Nigerian banks and dodgy loans I knew we had finally made it. It is obvious we are now going into our crisis' At least the Nigerian banks have demonstrated the willingness to clean up their industry unlike other countries including Ghana, who have neither recognised the flaws in their financial sector nor care much about it.Olu haastrup, Stevenage, Hertfordshire
Well the only problem I see is that the rich folks from developed countries won't be dropping their coins in our copper plates for a good long time to come. That is what global financial crisis means to us.Garikai Dzoma, Juliasdale, Nyanga, Zimbabwe
Elizabeth was spot on this article- she is a true African whenever she writes articles concerning the continent- she lives the story! Thanks!David Kanyoro, Kampala- Uganda
Interesting article, but down South,(Botswana and some neighbouring countries) it is not quite like that.In the case of Botswana we civil servants do have access to mortgages. I am a middle level civil servant and built my house 10 years ago and have now paid off the mortgage. The government in conjunction with the banks has developed a scheme by which civil servants can access money to build houses and pay back in ten years.(Of course assessments are carried out so that applicants do not chew more than they can swallow) A car scheme is also in existence and that is payable in four years.My house is not big(three bedrooms) but it is comfortable with all the fittings etc and was completed in three months.
Mortgage payments are deducted direct from the salary, however whenever I had a little extra I would throw it towards the mortgage so I managed to finish payments in seven years instead of 10. Now I sleep easy because although I called the house my own I always felt awkward knowing that in reality it belonged to a bank out there. I guess we should just count ourselves lucky.Mmabatho, Gaborone
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