Monthly Archives: April 2010

Book Review: Islamic Banking – A $300 Billion Deception

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The book arrived shorter than I expected at around 60 pages, and was probably longer than it needed to be. The author outlines his major points early on and supplements them with some interesting real-world examples throughout the work. Unfortunately, he also repeats many of the key messages more times than is necessary.

Typos and grammatical errors are widespread. Seriously, get a decent editor and proofreader.

A key message from the book is that lending is not risk-free as some proponents of Islamic finance purport. Restricting interest-based lending means many transactions simply won’t take place. Somehow, the author misses the extension of this message when he recommends a cap on interest charged to prevent usury – nowhere does he consider that this will similarly restrict lending to high risk borrowers since at times higher interest rates are required to reflect the risk.

Overall, a good read, most importantly for those who have not yet understood the flaws of the adolescent Islamic finance industry

In the footsteps of the Footsteps of Mr Kurtz

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cover of In the Footsteps of Mr KurtzAny company, person or country looking to invest in Africa must read Michela Wrong’s book, “In the Footsteps of Mr. Kurtz: Living on the Brink of Disaster in Mobutu’s Congo” .

The book details the history of the Democratic Republic of the Congo from its pre-Stanley (yes, that Stanley) days before east African Muslim traders were replaced by European explorers through to the eventual downfall of Mobuto Sese Seko and the arrival of Laurent Kabila in the mid-90s.

The “Congo Free State” became the personal possession of King Leopold II of Belgium, the only monarch to actually own a colony. Even against the backdrop of typical colonial abuses, it seems King Leopold was a particularly nasty character, taking his Belgian subjects along for the ride even as he pillaged the depths of Africa.

Continue reading →

Return to mumbling (redux)

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Since my recent post outlining how the distraction Eskom’s proposed higher charges distracted us from more important considerations such as their underlying efficiency, new evidence has emerged validating another point from my original post, Mumbling in the Dark.

The DA has released a confidential report outlining how Eskom has been selling heavily discounted electricity, sometimes at increased discounts at the same time as increasing charges to ordinary users. This effectively makes the point I made around inappropriately lower tariffs being more of a problem than possible tariff hikes. Moneyweb reported on this too.

Return to mumbling

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In a previous post, Mumbling in the Dark, I argued that too much attention was being paid to Eskom’s proposed increased charges and too little at 5 separate points, the first being their actual cost of production.

It seems that NERSA has been looking at this and has discovered some areas where Eskom was incorrectly estimating their future costs. The numbers are large, but not so large in the greater budget of Eskom. This is more like a snowflake on an iceberg than anything meaningful, but it does show the value of looking at the real issues.

Airline safety rules damage profitability

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example Warning signsThe safety rules and rigorous enforcement of these regulations damages the profitability of the entire industry – just not in the way you might think.

Regulations and Big Bank Buildings

Why have banks historically had impressive  marble-slathered floors and columns, high ceilings and ornate, heavy front doors? Would you really deposit your salary and savings into an operation run out of a caravan parked on a corner on your way to work?

The fixed, permanent high-investment nature of the impressive buildings is one way that banks can  communicate their seriousness, their high investment requiring a long-term relationship with a large customer base to recoup their upfront costs and their inability to up and off and disappear with all their assets overnight. This communication of financial strength and longevity gives customers the confidence to trust in them and bank with them.

If you’ve thought about this for more than a few seconds, you should be asking an important question. “How do Internet-only banks, with their apparent lack of real, physical assets and high upfront investment in their operations support this argument?” Continue reading →

Book Review: How The Mighty Fall

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cover of How The Mighty Fall

How The Mighty Fall

Jim Collins set out to write an article on how successful companies fail. For some reason, probably commercial, he decided to turn it into a short book.

He should have stuck with the article idea.

While the ideas presented are certainly interesting, there is nowhere near enough material to justify R290. Almost half the book is “appendices” covering, very weakly, some of the victims of the financial crisis and providing background data and information that gave rise to the conclusions reached.

I usually quite like the idea of having all the information available so the conclusions don’t have to be taken on blind faith. I just don’t see why these couldn’t be provided for free on the web or something.

I was also very disappointed to not see a greater distinction drawn between failure of large, geared financial services firms that take on too much, poorly understood risk and other enterprises with very different reasons for failure. I’m starting to doubt how much Jim Collins even knows about financial services firms and what led to the recent troubles!

Read it for sure, but read it quickly and make sure you’re reading a borrowed copy from some mug like me who actually paid full-book-price for a long article.