Opinion: Why Crane Bank’s Take-Over Is Important To You

Posted: 2016-10-21T12:50:09Z Read: 3,289 times
Opinion: Why Crane Bank’s Take-Over Is Important To You

WHY CRANE BANK’S TAKE-OVER IS IMPORTANT TO YOU – ECONOMY IS IN SHAMBLES

If you studied economics in secondary school, you have definitely heard about the Great Depression. If you have forgotten, it was between 1929 and late 1930s when the world economy slumped to its lowest level ever.

There are two theories that explain the great depression. One was the KEYNESIAN THEORY which in simple terms argued that massive decline in income due to high unemployment led to low expenditure. (That rings a bell because the highest population in Uganda is the youth and unemployment stands at 83%. Many of the youths are in what you could call disguised unemployment idling days away in small-time second hand clothes boutiques and mobile money stalls).

The Keynesian theory argues that when the economy is slow, the private sector cannot produce enough (because there is not enough consumption) hence equilibrium at low levels of economic activity.

Keynesians argue that governments have to run at a deficit during an economic crisis by increasing government spending and cutting taxes. (In Uganda’s case, taxation is on the increase to cover donor deficits, bleeding the common man further, while the big government expenditures are going to Chinese who repatriate them to their own economies … you all know the several China Railways Groups that are taking our billions in the numerous construction projects especially roads).

The second theory explaining the Great Depression is the MONETARY THEORY. This theory argues that the depression was caused by a banking crisis that caused one third of all banks to vanish, a reduction of bank shareholder wealth and monetary contraction (reduction in money in supply) by 35%. The US’ Federal Reserve (USA BoU) watched on instead of lowering interest rates and injecting more liquidity into the banking system to prevent it from crumbling.

Apparently the Federal Reserve allowed big banks like New York Bank of United States to fail, which produced panic and widespread runs on local banks with people wanting to withdraw their money as they had lost trust in the banking system. The Federal Reserve should have provided emergency lending but it watched on. As a result, big businesses could not get new loans forcing them to stop investing. When they stopped investing, there were no jobs for everyday people.

Both theories point at where Uganda is now, which means the economy is in crisis. That means that when Bank Of Uganda takes over Crane Bank you should be concerned. Those in private business are already feeling the pinch with less revenue coming in. Most companies are cost cutting, which trickles down to even the small supplier. Everyone is being served a smaller pie. Companies are taking longer to pay suppliers as they hold onto the available cash for more urgent expenditures. It becomes a vicious cycle where everyone is delaying to pay everyone. Employees’ salaries are coming late as a result of this and some are losing jobs in “restructuring” process. Landlords’ rent is delayed which means they cannot go on with their real estate business, which means the casual labourers also have no jobs. Ask people in the once booming real estate land selling business. The bubble burst, fewer people are buying. You must have heard of Jomayi’s troubles.

Many in the private sector can’t take Crane Bank’s woes lightly because they are struggling to keep businesses afloat. Most people “excited” by Crane Bank’s troubles are corporates who pick a salary at the end of the month. To them economic crisis is the boss’ problem, that’s if they realise it at all. What you don’t know is that your boss has a long list of suppliers who are not paid and he is struggling to keep the company afloat. If he was to pay all debtors at a go, there would be nothing left for you. You are paid because you are priority. Some of your friends are not priority and they haven’t received their salary in months.

It is time for President Yoweri Museveni to fasten his seatbelt and start the STEADY PROGRESS journey. It has to get off the campaign billboards.

Written by Henry H. Ssali
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ournalist/Founder Of Matooke Republic