News from Abidjan

I’ve just talked to a few friends in Abidjan and here’s what they are saying:

• In a neighbourhood in Yopougon last night, houses where people of the ethnic group Dioula live were again marked with crosses.  They had a neighbourhood meeting about it, where the non-Dioulas of the neighbourhood denied any involvement in the markings. My friend thinks some non-Dioulas did the markings but don’t want to acknowledge it for fear of retribution.
• Gunshots heard today on the first Yopougon bridge leading to the Plateu district.
• Jet fighters flyovers over Abidjan heard yesterday.
• No water or electricity in Abobo confirmed by several people I talked to.
• The Ivorian FDS forces are mostly standing by, no longer supporting Gbagbo like before. Twitterer “Mareeblanche” writes: Abidjan:Ble Goudé au jeunes patriotes:”les fds ont echoué,a vous de faire le travail!traquez les rhdp partout en abidjan”! [Ble Goude to the Young Patriots militia: “The FDS have failed, it’s up to you to do the work! Hunt down the RHDP everywhere in Abidjan”]  which, while alarming, would support what my friends are saying.
• The pro-Ouattara “Commando Fognon*”  is in control of Abobo. *Fognon means wind in Dioula.
• Many new roadblocks manned by pro-Gbagbo militia set up in Abidjan, very hostile to foreigners and Ivorians with names from the northern part of the country.

What’s going on in the Ivory Coast?

Twitter says

It looks like Abidjan and other parts of the Ivory Coast are in a state of open conflict, but with difficult working conditions for journalists and media coverage focusing on Libya, it’s hard to get good information on what’s going on.

Here’s stuff I’ve read on twitter (#civ2010) but not seen in any other media:

• Gbagbo has introduced false CFA Franc bills printed in Argentina.
• A UN patrol has been attcked in Abobo with heavy losses for the UN.
• Fighter jets have been seen flying over Abidjan.
• Two communities are fighting in Aboboté: Ebrié against Dioula.
• Standoff between UN/French forces and FDS in Sebroco. One UN soldier killed.
• FDS Armoured vehicles controlling major intersections in Abobo
• Water and electricity cut off in Abobo

If true, some of this should show up in regular media soon – especially reports about killed UN soldiers.  With twitter you do get the news first, but you also get a lot of stuff that turn out not to be true.

What’s going on?

Here’s stuff I’d like to know:

• To what extent are Gbagbo’s forces targeting unarmed civilians?
• What are the UN and French forces doing? Do they manage to overcome the blockade ordered by Ble Goude? Are they managing to protect civilians at all, and where?
• In theory, in Abidjan, Gbagbo’s security forces, army and militia should be militarily superior to the “Commando Fognon”, the pro-Ouattara urban guerilla/militia.  How superior are they in practice?
• Who controls Abobo and Anyama?
• What’s the extent of the inter-ethnic clashes?  And are they really clashes, or more like murder of the Dioula population?
• Are the banks still open and functioning in Bouake?
• Who controls Zouan-Hounien – did Gbagbo forces take it back?

And to conclude here’s a cartoon from South Africa (not sure of the exact source) that at least includes not only the arab world uprisings, but also the Ivory Coast:

Crisis Update

Impact of the crisis on my business

The spreadsheet where I keep track of cashflows in the real estate business has unfortunately, but unsurprisingly gotten a little bit more interesting lately. Things were fine and dull until November, but then the crisis hit and not everybody managed to pay their rents.

What’s happened is that the tenant of the main house has managed to hold up pretty well, mostly thanks to the main tenant living in France and having family using the house in Abidjan.

The shops in the same compound as the house, on the other hand, are heavily impacted by the crisis.  The one selling clothes says that nobody buys clothes since the crisis started and is contemplating terminating the tenancy.  The other one selling cooking gas does not manage to resupply stocks and has no gas to sell.

The apartments in Yopougon are doing remarkably well.  There have been missed rents, but all of them paid in February and the business activities the tenants conduct for their livelihood seem to have slowed down a bit, but not stopped altogether.

 

From my perspective a few lost rents during the crisis is no big deal, and I think everybody except the shops will manage to catch up once the crisis ends. That is, if it ends within a few months.  If it keeps going for many months or years, it’s a different story.

Impact on the Ivory Coast

As to how the crisis impacts impacts the Ivory Coast, it looks a bit like those in the informal sector with small scale entrepreneurial “getting by” activities are doing relatively better than the middle class or government employees who are hit hard by the ongoing banking collapse. The former group don’t have bank accounts and don’t depend on whether Gbagbo manages to pay salaries or not.

On the other hand, when middle class people are hit by the crisis it means they cut down on their middle-class consumption,  whereas poor people have to cut down on the number of meals they eat per day.

Hyperinflation

Mugabe Style

I have been doing some reading up on hyperinflation. The obvious way it could happen in the Ivory Coast is if Gbagbo somehow manages to create a new currency and starts printing it Mugabe-style to cover all his regime’s needs. A more far fetched way, but scarily not entirely unconceivable, is if the Euro countries don’t sort out their budget deficits and the ECB keeps on massively printing euros to buy Portoguese/Irish/Greek/Spanish government bonds. Then the CFA zone would import euro inflation.

Aside of the above scenarios, the effects of the current very unusual situation in the Ivory Coast with a banking system collapse and dramatically decreased trade and business activities, are very similar to the effects of hyperinflation.

What about real estate?

One of my favourite financial bloggers Gonzalo Lira has written extensively about hyperinflation, often with a starting point in the Chilean experience 70-73.  I think many of Lira’s points, such as real estate prices dropping, and prices of basic consumable necessities for life increasing, are applicable to the Ivory Coast.

As for real estate, sellers are often hesitant to drop prices which become “sticky to the downside”. If sellers don’t have any problems with their immediate needs, and expect the crisis to end and things go back to normal, then real estate prices won’t drop very much.  However with the days passing, the economy worsening and Gbagbo showing no signs of letting up, it looks plausible that Ivorian real estate prices could drop in the same way as in Chile in 73.

Here is an excerpt from a Lira post entitled Hyperinflation – What it will look like :

After all, if the prices of consumer goods and basic staples are rising in a hyperinflationary environment, then asset prices should rise as well—right? Equities should rise in price—since more money is chasing after the same number of stock. Real estate prices should rise also—and for the same reason. Right?

Actually, wrong—and for a simple reason: Once basic necessities are unmet, and remain unmet for a sustained period of time, any asset will be willingly and instantly sacrificed, in order to meet that basic need.

To put it in simple terms: If you were dying of thirst in the middle of the desert, would you give up your family heirloom diamonds, in exchange for a gallon of water? The answer is obvious—yes. You would sacrifice anything and everyting—instantly—in order to meet your basic needs, or those of your family.
So as the situation in Chile deteriorated in ’72 and into ’73, the stock market collapsed, the housing market collapsed—everything collapsed, as people either cashed out of their assets in order to buy basic goods and staples on the black market, or cashed out so as to leave the country altogether. No asset class was safe, from this sell-off—it was across-the-board, and total.

A true story: In ’73, at the height of the Allende-created hyperinflation, an uncle of mine, who was then a college student, was offered an apartment in exchange for his car. That’s right—an apartment. He owned a crappy little Fiat 147—a POS if ever there was such a thing—but cars in Chile in the middle of that hyperinflation were so scarce, and considered so valuable, that he was offered an apartment in exchange. To this day, my uncle still tells the story—with deep regret, because he didn’t follow through on the offer: “That Fiat was in the junkyard by ’78, but that apartment still stands! And today it’s worth nearly a half a million dollars!” Actually, I think it’s worth a bit more than that.