Business reporting is the thermometer that gauges the pulse of a country’s economic performance.
Unlike other strands of journalism, business reporters must be ardent watchers of the diverse determinants of the behaviour of the economy – by offering instantaneous explanations on the economic crest and tide realities – to benefit policymakers and those in local and external businesses.
At the heart of all this is the constant gaze on the performance of a country’s currency, for this instantly and directly affects imports and exports.
There are many reasons why a country’s money may fall in value. Wait, what is currency depreciation? It’s a fall in the external value of a currency in terms of its exchange rate compared to major currencies. It’s caused by a raft of factors, including a deliberate move by the Central Bank to correct a misaligned exchange rate, or to respond to market pressure if the exchange rate is floating. It could also respond to an appreciation of the US dollar or other dominant foreign currencies.
A fall in the world price of a country’s major export may also lead to a slump in the value of its currency in comparison to other major foreign currencies. This leads to a decline in export revenues and a fall in overseas demand for the exporting nation’s currency. Conversely, a surge in the value of a country’s imports may also cause a deficit on the current account of the balance of payments. This, then, leads to a net outflow of currency, causing exchange rate weakness.
When a country’s inflation increases, the value of its money compared to other major foreign currencies decreases, making imports more expensive. Another cause of currency depreciation is political instability, which can lead to lack of investor confidence, causing capital flight and reduced foreign investment. Then there are those wayward chaps called currency speculators who can bet against a currency if they see or anticipate its weakening, causing it to double downwards further in value. Enough of Currency Depreciation 101, a basic lesson for business reporters.
It’s for this reason that The Media Observer was miffed when, on November 19, 2024, Kigali-based publication, Taarifa, went to town with a story titled, ‘Rwandan Franc Depreciates by 16.3% as Central Bank Governor Addresses Parliament’. Barring the contemporaneous ambiguity in the title, an average reader expected the writer to explain the main factors for the money’s heavy slump against major international currencies. Why?
President Paul Kagame’s administration is known for attracting important foreign investors, especially in the realm of information and technology. A slump in the Rwandan Franc would, invariably, put a dumper on the value of its main export, coffee, even as it buoys up the spirits of foreign investors.
Let’s listen to Taarifa in its first two paragraphs.
Para 1: The Rwandan Franc (RWF) depreciated by an unprecedented 16.3% against the US dollar during the 2023/2024 fiscal year, sparking concerns over the country’s economic stability. The Governor of the National Bank of Rwanda, John Rwangombwa, revealed the alarming figures while addressing the Senate on pressing financial and economic challenges.
Para 2: This marked a significant increase from the previous year’s 5% depreciation and was attributed to global factors such as the lingering effects of COVID-19 and the Russia-Ukraine conflict. “The prices of Rwanda’s main exports—minerals, coffee, and tea—declined, reducing foreign exchange earnings. This widened the trade deficit and affected the exchange system,” explained Rwangombwa.
A keen reader expected a detailed explanation on how Covid-19, the Russia-Ukraine conflict and reduced earnings from the country’s main exports led to the slump in the value of the Rwandan Franc compared to the US dollar. That wasn’t delivered. Instead, Taarifa took an unpromising tangent, wallowing in a wayward sidewalk as to the reaction of the members of the Senate on the sad news.
Para 3: The Senate also raised concerns about commercial banks issuing loan agreements in English, a language not widely understood by many Rwandans. Senator Evode Uwiringiyimana warned that this practice could lead to clients signing agreements they do not fully comprehend, potentially exposing them to excessive interest rates and unfavorable terms.
There was no story there. Blaming a language for devaluation of a country’s currency is annoyingly pedestrian.
Rwanda has four official languages: Kinyarwanda, French, English, and Kiswahili. Kinyarwanda is the national and the first language of almost the entire population. French had been the language of administration from Rwanda’s time under colonial Belgian rule, between the World War I and independence in 1962. Since the 1994 genocide, the complications of relations with successive French governments and the return of numerous Tutsi refugees from Anglophone Uganda meant an increase in the use of English by a higher proportion of the population and administration. In 2008, the government changed the medium of education from French to English. It is now considered a primary language among other foreign languages.
Editors at Taarifa should have known that Rwangombwa’s response to the senators’ linguistic concern was not only incorrect. It was also unconstitutional. Listen: “Governor Rwangombwa acknowledged that such practices violate banking regulations, adding, “This issue must be addressed to ensure compliance and protect consumers.”
Lesson learnt? Business reporters must read widely so that whatever they write congruently informs businesses and policy making. The Taarifa goof on the depreciation of the Rwandan Franc is symptomatic of a strand of reporting chained to conveyor belt responsorial. It’s pedestrian, numb and unhelpful. It must be shunned.
