Watch out for the US dollar

[Nairobi, Kenya]
ONE THING that businesses in Africa have to be weary about is the state of the US dollar. Why? Because a lot of transactions (tourism, import/export, etc.) are conducted in said currency. There's an old wise saying in business: "Buyer beware." Well, I feel this saying is soon going to take on greater significance as the US dollar continues to lose ground to other major currencies: "Hey, can you pay me in Euros?" :-) What, you think I'm kidding around? Well, take a peek at this.

The dollar hit a 26-year low against the British pound and neared an all-time trough versus the euro on Wednesday as expectations of U.S. rate cuts contrasted with prospects for more monetary tightening in other countries.

The dollar was down across the board, hitting a 22-year low versus the New Zealand dollar on Wednesday and holding near Tuesday's 17-year low against the Australian dollar.

The fall in the dollar was exacerbated by below-forecast U.S. core consumer prices for March released on Tuesday. The U.S. data contrasted sharply with a jump in UK consumer prices that stoked expectations for a rate hike, driving sterling above $2 for the first time since 1992 when Britain was forced to exit the Exchange Rate Mechanism, and then higher still to levels last seen in 1981. {source: Dollar takes pounding, 26-year low}

Signs everywhere
Look at it this way. China and India are 2 economies that are booming due to their exports to the US. This means more US dollars are leaving the US, which also means that more of said currency is held in other countries where it was not originally printed. So now, who do you think has more influence over the US dollar...Americans or outsiders? Okay, here's some more food for thought on why the US dollar is going to the dust bin.

So people cast doubt on the "dollar-devaluation" theory. They found that the root cause behind the sharp rise of US trade deficits was not the greenback's high exchange rate, but the extremely low bank savings rate of Americans who excessively spend future money on current consumption. The comparatively weak demand for US goods in some sectors of the world market is also to blame. {source: RMB no scapegoat for US woes}

Oh, don't forget about that huge national US debt which is now hovering close to $9 Trillion. Yes, I said TRILLION. Furthermore, with more manufacturing jobs moving over to Asia, this means that a lot of good income paying jobs are being lost only to be replaced by low-paying, service-oriented jobs.In closing, my advise to African businesses is to start looking for an alternative currency to replace the US dollar when dealing with foreign transactions. Heck, don't be afraid to ask if you can be paid in Euros, Swiss Francs, or British Pounds. Why should your business suffer just because American politicians have mismanaged the US economy. :-)

Here's hoping to a very profitable future for all businesses throughout Africa.

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Related links:

• Loonie rises as U.S. dollar's woes mount
• US dollar weakens as euro hits record against yen
• US calm despite dollar's woes
• Airbus Woes, Weak U.S. Dollar Slash EADS’ Earnings
• Dollar woes versus the euro blamed for dearth of new cruise ship orders
• Dollar woes poised to carry over into next year

Are Online Lending Sites a Threat to Banks?

[Dar es Salaam, Tanzania]
WELL, I certainly think so. What has always annoyed me about our entrenched banking system is how most banks treat the little guy (or small business owner) who's looking for a loan to get started or expand an ongoing operation. I could never understand why banks fall heads over shoulders in order to lend money to individuals who simply don't need it, yet make it almost impossible for those who desperately require said funds - yesterday. Oh, I get it. I guess it's sort of like courtship. If you show your desperation too early on in the game, the suitor is not impressed and most likely will reject you. But if you have lots readily available options, then you stand to win yet more hearts. :-)

New loan sharks on the block
Well, it appears that things just got a little more interesting thanks to the power of the Internet and dynamic web applications which are created using popular web programming languages like PHP. Quite frankly, I am a big proponent of web-based applications because all one needs is access to a web browser, which has become the universal user interface. Because of this, new innovative lending sites such as Zopa.com and Prosper.com are about to make loan officers throughout the banking industry play a little what if analysis themselves. In other words, "what if more people decide to borrow money from these websites thereby leaving us out in the cold?"

According to this article in the International Herald Tribune, these 2 sites are disruptive to the current status quo.

We bring together people who have never met to lend and borrow," said Chris Larsen, co-founder and chief executive of the San Francisco-based Prosper, which has had 140,000 users since it started a year ago. "Somebody who has money should be able to loan it out and somebody looking to borrow should be able to find a lender."

Banking analysts suggest that these hyper-efficient operations, with few employees and no costly real estate, could force changes to established banks.

"As a researcher, these sites make me wonder if the core business model of financial institutions is changing," said Mark Meyer, an analyst at the Filene Research Institute, a Wisconsin-based group that studies credit unions. "We are talking about a potentially disruptive innovation in financial services." {source}

I'll comment more about this later, but right now I have to jet! :-)