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THE SECOND COMING W.B Yeats
Law & Politics
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: a waste of desert sand;
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Wind shadows of the indignant desert birds.
The darkness drops again but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?
Trump Paints Dark Portrait of Damaged Nation Only He Can Save via @bpolitics
Law & Politics
Donald Trump gambled that Americans share his vision of a nation
teetering on oblivion, casting himself as a renegade outsider who is
the last, best hope to stand up to a discredited and depleted
"I am your voice," he told a cheering convention hall in Cleveland as
he accepted the Republican presidential nomination. "I say these words
to you tonight: I am with you, and I will fight for you, and I will
win for you."
"People are hearing the message," he said. "I think you will see next
week that the polls will show that the convention was successful."
"I am your Voice." @Realdonaldtrump #RNCinCLE
Law & Politics
With dark imagery and an almost angry tone, Mr. Trump portrayed the
United States as a diminished and even humiliated nation, and offered
himself as an all-powerful savior who could resurrect the country’s
standing in the eyes of both enemies and law-abiding Americans.
“Our convention occurs at a moment of crisis for our nation,” an
ominous-sounding Mr. Trump said, standing against a backdrop of
American flags. “The attacks on our police, and the terrorism in our
cities, threaten our very way of life. Any politician who does not
grasp this danger is not fit to lead our country.”
Mr. Trump nearly shouted the names of states where police officers had
been killed recently, as the crowd erupted in applause, and returned
repeatedly to the major theme of the speech: “Law and order,” he said
four times, each time drawing out the syllables.
“These are the forgotten men and women of our country,” said Mr.
Trump, a billionaire with a mixed record of job creation and layoffs.
“People who work hard but no longer have a voice — I am your voice.”
“I have a message to every last person threatening the peace on our
streets and the safety of our police: When I take the oath of office
next year, I will restore law and order to our country.”
''To every parent who dreams for their child, and every child who
dreams for their future, I say these words to you tonight: I’m with
you, I will fight for you, and I will win for you,” Mr. Trump said.
We have entered a new Era of Populism and President Trump is a real
Transcript: @realDonaldTrump on NATO, Turkey's Coup Attempt and the World @nytimes
Law & Politics
Donald J. Trump, the Republican presidential nominee, discussed his
views on foreign policy in Cleveland on Wednesday with David E. Sanger
and Maggie Haberman of The New York Times during the Republican
National Convention. Here is an edited transcript of their interview.
TRUMP: With massive wealth. Massive wealth. We’re talking about
countries that are doing very well. Then yes, I would be absolutely
prepared to tell those countries, “Congratulations, you will be
SANGER: That suggests that our forward deployments around the world
are based on their interests — they’re not really based on our
interests. And yet I think many in your party would say that the
reason that we have troops in Europe, the reason that we keep 60,000
troops in Asia, is that it’s in our interest to keep open trading
lines, it’s in our interest to keep the North Koreans in check, you do
that much better out away from the United States.
TRUMP: I think it’s a mutual interest, but we’re being reimbursed like
it’s only in our interest. I think it’s a mutual interest. …
SANGER: We were talking about alliances, and the fundamental problem
that you hear many Republicans, traditional Republicans, have with the
statement that you’ve made is that it would seem to them that you
would believe that the interests of the United States being out with
both our troops and our diplomacy abroad is less than our economic
interests in having somebody else support that. In other words, even
if they didn’t pay a cent toward it, many have believed that the way
we’ve kept our postwar leadership since World War II has been our
ability to project power around the world. That’s why we got this many
TRUMP: How is it helping us? How has it helped us? We have massive
trade deficits. I could see that, if instead of having a trade deficit
worldwide of $800 billion, we had a trade positive of $100 billion,
$200 billion, $800 billion. So how has it helped us?
SANGER: Well, keeping the peace. We didn’t have a presence in places
like Korea in 1950, or not as great a presence, and you saw what
TRUMP: There’s no guarantee that we’ll have peace in Korea.
SANGER: Even with our troops, no, there’s no guarantee.
TRUMP: No, there’s no guarantee. We have 28,000 soldiers on the line.
SANGER: But we’ve had them there since 1953 and ——
TRUMP: Sure, but that doesn’t mean that there wouldn’t be something
going on right now. Maybe you would have had a unified Korea. Who
knows what would have happened? In the meantime, what have we done? So
we’ve kept peace, but in the meantime we’ve let North Korea get
stronger and stronger and more nuclear and more nuclear, and you are
really saying, “Well, how is that a good thing?” You understand? North
Korea now is almost like a boiler. You say we’ve had peace, but that
part of Korea, North Korea, is getting more and more crazy. And more
and more nuclear. And they are testing missiles all the time.
TRUMP: In a deal, you always have to be prepared to walk. Hillary
Clinton has said, “We will never, ever walk.” That’s a wonderful
phrase, but unfortunately, if I were on Saudi Arabia’s side, Germany,
Japan, South Korea and others, I would say, “Oh, they’re never
leaving, so what do we have to pay them for?” Does that make sense to
HABERMAN: Can we switch to current events, recent events?
TRUMP: You understand what ——
SANGER: I do, I do.
TRUMP: You always have to be prepared to walk. It doesn’t mean I want
to walk. And I would prefer not to walk. You have to be prepared and
our country cannot afford to do what we’re doing.
HABERMAN: How closely did you watch last week as events were unfolding
in Turkey with the coup? Is there anything you would have done
differently in how it was handled?
TRUMP: The coup never took place — the coup was not successful, and
based on the fact, and I give great credit to him for being able to
turn that around.
TRUMP: Yes, some people say that it was staged. You know that?
SANGER: We’ve heard.
TRUMP: I don’t think so, but I do give great credit to him for turning
it around. You know, the first hour, it seemed like it was over. Then
all of a sudden, and the amazing thing is the one that won that was
the people. They came out on the streets, and the army types didn’t
want to drive over them like they did in Tiananmen Square when they
sort of drived them over, and that was the end of that. Right? People
said, I’m not going to drive over people. The people came out of their
homes, and they were not in favor of what the military was doing. So
that was quite impressive from the standpoint of existing government.
I will say this: I think Turkey can do a lot against ISIS, and I would
hope that if I’m dealing with them, they will do much more about ISIS.
SANGER: Erdogan put nearly 50,000 people in jail or suspend them,
suspended thousands of teachers, he imprisoned many in the military
and the police, he dismissed a lot of the judiciary. Does this worry
you? And would you rather deal with a strongman who’s also been a
strong ally, or with somebody that’s got a greater appreciation of
civil liberties than Mr. Erdogan has? Would you press him to make sure
the rule of law applies?
TRUMP: I think right now when it comes to civil liberties, our country
has a lot of problems, and I think it’s very hard for us to get
involved in other countries when we don’t know what we are doing and
we can’t see straight in our own country. We have tremendous problems
when you have policemen being shot in the streets, when you have
riots, when you have Ferguson. When you have Baltimore. When you have
all of the things that are happening in this country — we have other
problems, and I think we have to focus on those problems. When the
world looks at how bad the United States is, and then we go and talk
about civil liberties, I don’t think we’re a very good messenger.
SANGER: So that suggests that you would not, as, say, President Bush
did, the last President Bush, make the spread of democracy and liberty
sort of a core of your foreign policy. You would say, “We need allies,
we’re not going to lecture them about what they do inside their
TRUMP: We need allies.
SANGER: And lecture inside their borders?
TRUMP: I don’t know that we have a right to lecture. Just look about
what’s happening with our country. How are we going to lecture when
people are shooting our policemen in cold blood. How are we going to
lecture when you see the riots and the horror going on in our own
country. We have so many difficulties in our country right now that I
don’t think we should be, and there may be a time when we can get much
more aggressive on that subject, and it will be a wonderful thing to
be more aggressive. We’re not in a position to be more aggressive. We
have to fix our own mess.
SANGER: You said that they could be much more helpful with ISIS. I’m
sure perhaps they can. The big difference they’ve had is that we’ve
been supporting Kurdish forces that have been very effective ——
TRUMP: I’m a fan of the Kurds, you understand.
SANGER: You’ve talked about building the wall of course. Would you
amend or change Nafta?
TRUMP: Oh, without question.
SANGER: Tell us how.
TRUMP: Without question. Nafta ——
SANGER: Since your time is limited, let me ask you about Russia.
You’ve been very complimentary of Putin himself.
TRUMP: No! No, I haven’t.
SANGER: You said you respected his strength.
TRUMP: He’s been complimentary of me. I think Putin and I will get
along very well.
SANGER: So I was just in ——
TRUMP: But he’s been complimentary of me.
SANGER: I was just in the Baltic States. They are very concerned
obviously about this new Russian activism, they are seeing submarines
off their coasts, they are seeing airplanes they haven’t seen since
the Cold War coming, bombers doing test runs. If Russia came over the
border into Estonia or Latvia, Lithuania, places that Americans don’t
think about all that often, would you come to their immediate military
TRUMP: I don’t want to tell you what I’d do because I don’t want Putin
to know what I’d do. I have a serious chance of becoming president and
I’m not like Obama, that every time they send some troops into Iraq or
anyplace else, he has a news conference to announce it.
SANGER: They are NATO members, and we are treaty-obligated ——
TRUMP: We have many NATO members that aren’t paying their bills.
SANGER: That’s true, but we are treaty-obligated under NATO, forget
the bills part.
TRUMP: You can’t forget the bills. They have an obligation to make
payments. Many NATO nations are not making payments, are not making
what they’re supposed to make. That’s a big thing. You can’t say
SANGER: My point here is, Can the members of NATO, including the new
members in the Baltics, count on the United States to come to their
military aid if they were attacked by Russia? And count on us
fulfilling our obligations ——
TRUMP: Have they fulfilled their obligations to us? If they fulfill
their obligations to us, the answer is yes.
TRUMP: Well, I’m not saying if not. I’m saying, right now there are
many countries that have not fulfilled their obligations to us.
SANGER: You’ve seen several of those countries come under cyberattack,
things that are short of war, clearly appear to be coming from Russia.
TRUMP: Well, we’re under cyberattack.
SANGER: We’re under regular cyberattack. Would you use cyberweapons
before you used military force?
TRUMP: Cyber is absolutely a thing of the future and the present.
Look, we’re under cyberattack, forget about them. And we don’t even
know where it’s coming from.
SANGER: Some days we do, and some days we don’t.
TRUMP: Because we’re obsolete. Right now, Russia and China in
particular and other places.
SANGER: Would you support the United States’ not only developing as we
are but fielding cyberweapons as an alternative?
TRUMP: Yes. I am a fan of the future, and cyber is the future.
TRUMP: Oh, I would love to have a good relationship where Russia and
I, instead of, and us, and the U.S., instead of fighting each other we
got along. It would be wonderful if we had good relationships with
Russia so that we don’t have to go through all of the drama.
SANGER: You would keep Assad there if he’s also fighting ISIS?
TRUMP: I don’t want to say that, I have a very specific view on Assad,
but I think we have to get rid of ISIS before we get rid of Assad.
SANGER: So you agree with President Obama in that regard?
TRUMP: Look, Assad hates ISIS; ISIS hates Assad. They are fighting
each other. We are supposed to go and fight them both? How do you
fight them both when they are fighting each other? And I think that
ISIS is a threat that’s much more important for us right now than
Assad. You understand what I’m saying?
TRUMP: From the convention? The fact that I’m very well liked. Look, I
got more votes than anybody in the history of the Republican Party.
Almost 14 million votes. I got 37 states. Kasich has one. As an
example, Ted had, you know, not many. Thirty-seven states. Now, with
the roll call, I had 44 states. It was 44 to seven and the seven was
everybody else: 44 to seven. It was 44 to six because we are including
the different islands. And when you are in that hall and you see those
people, like yesterday, my daughter called up, she said, “Dad, I’ve
never seen it — it’s total love.”
HABERMAN: Which daughter?
TRUMP: I don’t get love from the media. Instead of reporting like it
is. But I think that people are starting to see what’s going on,
because I really believe there’s a movement going on and it’s a
movement based on common sense, it’s a movement based on law and
order, it’s a movement based on compassion, based on a lot of
different things. Based on trade.
SANGER: This is an America First day you are having out there.
SANGER: We talked about that a little bit at the last conversation.
Does America First take on a different meaning for you now? Think
about its historical roots.
TRUMP: To me, America First is a brand-new modern term. I never
related it to the past.
SANGER: So it’s not what Lindbergh had in mind?
TRUMP: It’s just, no. In fact when I said America First, people said,
“Oh, wait a minute, isn’t that a historical term?” And when they told
me, I said: “Look, it’s America First. This is not ——”
SANGER: You were familiar with the history of the phrase.
ISIS Trying to Topple Saudi King with Attack on Mohammed's Mosque
Law & Politics
Current and former U.S. officials say a recent ISIS attack on the tomb
of Mohammed in Saudi Arabia -- Islam's second holiest site -- shows
the terror group is now directly challenging the kingdom's ruling
family and trying to topple the monarchy.
"The Saudi king's tiles include 'Protector of the two Holy Cities,"
said one senior U.S. counterterrorism official. "The message of the
attack is that that protection doesn't exist."
The kingdom's two holy cities, Mecca and Medina, are home Islam's two
holiest sites, the Qabba in Mecca, which millions of pilgrims visit
every year, and the Mosque of the Prophet in Medina, which holds
Said the counterterrorism official, "If [the royal family] can't
protect those places -- and people traveling to those cities from
across Islam - it calls in to question the fitness of their ruling
power and its legitimacy."
"The Islamic State of Iraq and the Levant (ISIL) has become a
potentially destabilizing factor that has direct implications for
security in the Kingdom. ISIL has voiced openly its desire to take
over the Kingdom of Saudi Arabia (KSA)."
Glencore Digs Out of the Abyss Fortune Magazine
The commodities behemoth faced a crisis last year as prices of metals,
grains, and petroleum products—as well as the company’s stock
price—plummeted. A rare inside look at how the secretive Swiss giant
survived and how it plans to thrive again in a post-boom world.
Shimmering below our eight-seater plane in the dazzling African light
is a mammoth hole gouged out of the terrain of the Democratic Republic
of the Congo. From the air, the green and black hues offer just a hint
of the huge mineral wealth lying under one of the poorest, most remote
countries on earth. Yet it is only after we have landed on a tiny
airstrip and bumped along in an off-road vehicle for half an hour past
mud-brick houses that the full extent of those riches becomes clear.
From the rim of the pit, the rock 450 feet down at the bottom looks as
if it has been drawn with neon Crayolas, its green popping against the
“Some of the richest ore bodies anywhere are in Congo, and one of them
is here,” says Pedro Quinteros, an engineer from Peru who has
excavated minerals for decades on three continents and now serves as
CEO of Mutanda Mining, the nine-year-old cobalt and copper facility
we’re visiting. Here parts of the ore, he says, can be up to 30%
copper. “In my country it is 1% copper. In Chile it is less than 0.5%
copper,” he says with a note of awe, peering down to the bottom of the
wide pit, where 110-ton trucks scoop up the rock and soil and then
rumble back to the top carrying their priceless haul. “I have never
seen anything like it in my career.”
As unique as this bounty is, so, too, is the company that owns it:
Glencore. To most regular folk, the company’s name is largely unknown,
and that’s not by accident. The commodities behemoth’s headquarters
are far from the frenzy of Wall Street and the City of London, in the
sleepy, low-tax town of Baar, Switzerland, near Zurich. In the quiet
atmosphere inside Glencore’s four-floor glass-and-steel complex there,
traders and managers move markets while looking out on rolling hills
with cows grazing on them, the very picture of a Swiss chocolate box;
indeed, visitors are offered fine Swiss chocolates preserved in
climate-controlled wooden boxes.
RAW DATA: Stephen Jennings New Zealand Initiative Dinner Lecture: 'The Market Path To Prosperity'
I once saw a graduation address advising Massey students to “take big
bites” in life and “chew hard”. I think relative to most of us, if not
all of us, that is what Stephen has done. And what a difference it
This has included large-scale enterprises in investment banking,
consumer finance, forestry, agriculture and urban development. In the
process I’ve lived through and survived – just – two of the biggest
crises in the history of emerging markets.
Foreigners sometimes talk about having a ring-side seat in emerging
markets; my experience is more akin to full participation in the
protracted ruck of early stage development – and try to think of the
days when rucking was an integral part of the game!
Many find Africa’s complexity disorientating. Moreover, structural
change is inherently slow and can become frustrating. But it is the
underlying forces for change that will shape the future.
U.S. Maps 1MDB Fraud Trail From Kuala Lumpur to Hollywood
More than $3.5 billion traveled a trail of fraud from Malaysia through
a web of shell companies, with some fueling a spending binge on Monet
paintings and luxury real estate and at least $700 million flowing
back into accounts controlled by Malaysia’s prime minister.
Some of the money was handled by international banks including Goldman
Sachs Group Inc., JPMorgan Chase & Co., Standard Chartered Plc and
Deutsche Bank AG. A chunk of it funded a Hollywood blockbuster, “The
Wolf of Wall Street.” More than $13 million of it was wired to an
account at a Las Vegas casino by a stepson of Malaysia’s prime
minister who gambled with an unidentified actor whose description
matches that of Leonardo DiCaprio.
It’s all laid out in a dozen filings Wednesday by U.S. prosecutors who
detailed an alleged scheme of international money laundering and
misappropriation stretching from 2009 to 2015. The Justice Department
is seeking to seize more than $1 billion worth of assets it says went
through U.S. banks from Malaysian development fund 1Malaysia
Development Berhad, known as 1MDB, and was ultimately used to
illegally acquire assets.
“Unfortunately and tragically, a number of corrupt officials treated
this public trust as a personal bank account,” Attorney General
Loretta Lynch said at a news conference in Washington. The civil
action and asset seizures represent the “largest single action ever
brought” by the Justice Department’s six-year-old Kleptocracy Asset
Recovery Initiative, she said.
Lynch declined to comment on the identity of the unnamed top Malaysian official.
The diverted cash was used to purchase a breathtaking catalog of loot
that prosecutors moved on Wednesday to seize. There’s a stake in the
Viceroy L’Ermitage Beverly Hills Hotel as well as homes, condos and
penthouses from Los Angeles and Beverly Hills to Manhattan’s Central
Park South to London’s Belgravia. There’s a $35 million Bombardier
jet, as well as more than $200 million worth of art -- a pen-and-ink
drawing by Vincent Van Gogh (“La Maison de Vincent a Arles”) and two
Claude Monet paintings, including a pastel study of water lilies,
“Nympheas Avec Reflets de Hautes Herbes.”
And in a twist worthy of Hollywood, the U.S. is also laying claim to
profits and royalties from a movie about wealthy abandon: It says that
more than $100 million in funds from 1MDB went to finance 2013’s “The
Wolf of Wall Street,” by Red Granite Pictures Inc. -- a production
company co-founded by Najib’s stepson, Riza.
A new 'floating' exchange rate was fixed. But that may be changing @TheEconomist
SOMETIMES the worst is not bad enough. Or such is the case for
Nigeria’s currency, which nosedived by 30% when the central bank first
removed its peg to the dollar on June 20th. The naira is now this
year’s poorest-performing currency in Africa. Internationally, only
the currencies of Venezuela and tiny Suriname have fared worse. Yet
were it truly free, it would be weaker still.
In fact, the naira’s free float seems to have lasted exactly a day.
Since its sharp drop on the first day of its devaluation, the currency
has more or less flatlined at about 282 per dollar (see chart). This
is rather odd given the pent-up demand for dollars after the central
bank governor, Godwin Emefiele, restricted the supply in a bid to
defend the currency at its old peg of 199 to the dollar. Many analysts
expected it to plummet as low as 350 when businesses hoovered up a
backlog exceeding $4 billion.
Bankers say this stability came about after the central bank sold
dollars and traders were bullied by it to keep to an unofficial peg.
“If you want to sell or buy higher than the managed peg, life will be
made difficult,” says the former CEO of a bank.
By the time The Economist went to press it had reached 295 to the
dollar, its lowest ever official rate. This is still about 20%
stronger than on the black market—which is surely a more accurate
representation of the naira’s worth.
The central bank’s policy of defending the naira has been disastrous,
creating shortages of products such as milk and fuel and bringing
factories to a standstill for want of imported inputs. The economy
contracted by 0.4% in the first quarter of this year thanks to cheap
oil and monetary mismanagement. The IMF expects GDP to shrink 1.8%
Worse still, inflation hit 16.5% in June—the highest rate in almost 11
years. With a weaker currency, it might surpass 20% by Christmas,
calculates Chris Becker of Investec, a South African bank. Whatever
happens, Nigerians will hurt more yet.
@NGRPresident should have seized the moment to devalue on Day 1.
This is a fundamental problem in Africa Policy Making Errors and
spinning out those errors for a very long time.
African banks Subprime savannah The Economist
AFRICA’S financial firms can claim many innovations, from M-Pesa, a
pioneering Kenyan mobile-money service, to the life insurance for
people with HIV offered by All Life, a South African firm. To these
can be added the first social-media bank run. Chase Bank Kenya, the
country’s 11th-largest (unrelated to America’s JPMorgan Chase), was
taken over by regulators in April after word of its impending collapse
spread on Twitter and WhatsApp, spurring panicked withdrawals.
The run highlighted the risks facing banks in a region that is seen by
many investors as one of the industry’s final frontiers. Whereas banks
in many rich countries have produced disappointing profits since the
financial crisis of 2008, African ones had until recently been
reporting stellar growth and juicy returns. Those in Ghana were
expanding their loan books at a breathtaking pace of more than 30% a
year. Banks in Mozambique, Zambia and Malawi were not too far behind.
And most were making good money, too.
Moody’s, a rating agency, reckons that average return on equity (a
standard measure of profitability) ranged from 20-25% in many African
countries, making their banks well over twice as profitable as
American ones and four or five times more profitable than Europe’s
limping lenders. Yet in many parts of sub-Saharan Africa these
mouthwatering profits are turning into losses as a result of falling
commodity prices, slowing economies and, in some cases, weak
Nigeria, Africa’s biggest economy, seems on the brink of its second
banking crisis in less than a decade. On July 4th the central bank
dismissed the management of Skye Bank, the country’s eighth-biggest
lender by assets, amid concerns that it had failed to keep thick
enough buffers of capital to absorb losses on its bad debts. Its share
price has plunged by about a quarter since the move. The shares of
other Nigerian banks are also sinking.
The central bank insists that “there is… no need for panic withdrawals
from any bank.” Yet Skye’s managerial maelstrom harks back ominously
to 2009, when the global financial crisis caused several of Nigeria’s
bigger banks to collapse. Back then the central bank replaced the
bosses of eight institutions. A state-backed agency known as Amcon was
established to swallow up bad loans; the sickliest outfits were either
nationalised or sold to other banks.
Today’s sticky issue is oil. During the financial crisis the price of
oil slumped only briefly before recovering strongly. Nigerian banks
subsequently lent billions to local businessmen to help them buy oil
and gas wells. These loans, about 25% of the country’s total, seemed
quite safe until the oil price began dropping in mid-2014; it is now
less than half what it was then. Militancy in the oil-pumping Niger
Delta has only made matters worse.
First Bank, Nigeria’s second-largest by assets, says that 18% of its
loans are non-performing. It may be suffering more than most, since
more than 40% of its loans went to oil and gas producers. The central
bank says that bad debts in the banking system as a whole have doubled
in the past six months, to 10%. Emmanuel Assiak of Africa Capital
Alliance, a private-equity firm, thinks the figure is really in the
low teens. “A lot of people are saying this is not 2009. Well it’s
worse,” says Ronak Gadhia of Exotix, an investment bank. “Back then,
they didn’t have the exposure to oil.”
Banks are also under pressure elsewhere in the region, often for
similar reasons. In Ghana non-performing loans have jumped to more
than 16% of the total after slumping commodity prices and a plunging
currency forced the central bank to ramp up interest rates. It raised
them by five percentage points, to 26%, a level at which almost all
borrowers will struggle. Zimbabwean banks hold lots of government
bonds that will probably never be repaid. They have only staved off
runs by limiting withdrawals.
In Kenya, however, banks face a different set of stresses. Weak
regulation, exacerbated by the proliferation of small banks, is taking
a toll. Three banks have been placed into receivership in less than a
year by Patrick Njoroge, the respected governor of the Central Bank of
Kenya, as a series of ruinous insider-lending scams have come to
light. Mr Njoroge alleges that the managing director of one bank
siphoned off 38 billion Kenya shillings ($335m) via 20 shell companies
over 13 years . The full scale of the heist was discovered a few days
after his funeral. At Chase Bank, the victim of the social-media run,
directors had signed off on some 8 billion shillings in loans to
Mr Njoroge seems determined to clean up Kenya’s banking system. But
elsewhere in Africa regulators still seem willing to turn a blind eye
to problems. Forcing banks to admit to rising bad debts could lead to
painful collapses and to strained public finances if governments have
to step in with bail-outs. But ignoring them might be even worse in
the long run. As it is, businesses in Africa struggle to obtain enough
capital to grow: despite rapid loan growth, most African countries
still have low banking penetration. Allowing zombie banks to limp on,
too weakened by bad loans to make any new ones, would only worsen
Africa’s desperate shortage of credit.
Kenya Airways records country's worst ever loss @FT
The airline reported a net loss of Ks26.2bn ($258m) for 2015-16, up
from Ks25.7bn in the previous financial year, as its results were hit
by a series of one-off items including charges linked to a poor fuel
Kenya Airways is seeking to recover from a failed expansion strategy,
and, in spite of the record-breaking loss, analysts drew encouragement
from an improvement in the company’s underlying performance.
The airline’s operating loss narrowed from Ks16.3bn in 2014-15 to
Ks4.1bn in 2015-16, and Eric Musau, analyst at Standard Investment
Bank, said: “From an operating perspective I think they’re really
improving. They’re headed in the right direction and I don’t think
they have anything major left to clear.”
But shares in Kenya Airways, which has now recorded four successive
years of losses, fell more than 8 per cent on Wednesday to Ks4.35. The
stock has dropped 87 per cent in the past five years.
The largest shareholders in the company are the Kenyan government and
Air France-KLM, the Anglo-Dutch airline group.
Mbuvi Ngunze, Kenya Airways’ chief executive since December 2014,
acknowledged it had been “a very tough year” but highlighted how the
airline’s revenue had increased 5 per cent in 2015-16.
“We are still growing even in difficult times,” he said. “We are still
operating, and confidently so, even with results that are losses.”
Under Kenya Airways’ turnround strategy, the national carrier of east
Africa’s largest economy has shrunk its fleet by almost one-third, and
sold its valuable take-off and landing slot at London’s Heathrow
It plans to lay off some 600 employees, 15 per cent of the workforce,
as it seeks to return to profit.
The slimmed-down company contrasts sharply with bold plans unveiled
five years ago to become Africa’s dominant airline.
Aly-Khan Satchu, a consultant, said he was giving Mr Ngunze “the
benefit of the doubt”.
“However he is in the last-chance saloon and has to turn the numbers
around this year,” he added.
One-off items accounted for Ks17bn of Kenya Airways’ losses in 2015-16.
These charges included foreign exchange losses that were exacerbated
by capital restrictions imposed in Nigeria, Angola and South Sudan.
Most African currencies have been much more stable this year, which
should help Kenya Airways.
Mr Satchu said a recovery in Kenya’s tourism industry after four years
of declining visitor numbers should also help the airline.
Kenya Airways’ performance compares unfavourably with that of
Ethiopian Airlines, which last year recorded a net profit of $148m. It
is entirely state-owned, however, and the Ethiopian government does
not take dividends.
KQ has little room for missteps #KQResults @TheStarKenya
Kenya Airways had rallied by 11.76 per cent over the two sessions
preceding the release of the full-year earnings yesterday morning at
Pride Centre, Embakasi. This was in fact
the second set of earnings delivered by the CEO Mbuvi Ngunze. The
headline numbers show loss after tax of Sh26.2 billion versus Sh25.7
billion recorded in full year 2015, despite a 5.4 per cent improvement
Direct costs were reduced by 10.8 per cent to Sh67.9 billion, and this
was mainly attributed to declining fuel prices. I have advocated
(sometimes forcefully) that KQ should remove all its fuel hedges
because the airline’s job is to run an airline and not to trade oil,
which they have done poorly.
Finance costs grew by 48.9 per cent to Sh7 billion, and its worth
noting that the balance sheet is now fully loaded with debt (Afrexim
Bank and China Exim Bank via National Treasury refer).
‘’Notably, current liabilities stood at Sh73.5 billion, 2.5 times the
company’s current assets of Sh29.7 billion. The current ratio weakened
to 0.4 times from 0.5 times recorded in full year 15,’’ said kestrel
Ngunze spoke to a future return to profitability in 12-18 months. It
is imperative and absolutely in the national interest that he
Peering through the headline optics, you will note that KQ took a
Sh9.7 billion foreign exchange hit. This speaks to the outsize
currency volatility we have seen across sub-Saharan Africa.
International airlines, for example, have stopped flying to Nigeria
and Angola, among other destinations, exactly because of their
inability to get paid and the forex devaluations they have incurred.
These airlines have exercised a ‘stop-loss’ and it has been costly. I
think KQ has an outstanding opportunity to capture market share as
these international operators retreat, but that will require a
super-sophisticated Treasury function.
Other costs increased eight-fold to Sh10.8 billion (foreign exchange
losses of Sh9.7 billion). Net cash generated from operating activities
improved fivefold to Sh6.4 billion which speaks to an improving
operating level picture.
Clearly down-shifting capacity from 43 planes to 36 was also expensive
because KQ was a seller in an over-supplied market. It is clear to me
that a number of Middle Eastern operators are on the prowl and would
see KQ as a neat fit. Qatar is probably in the lead as it tends to be
in most of these big-ticket SSA situations.
KQ is a highly levered play and there is very little room now for any mis-steps.
There is clearly a strong tourism-related correlation, and that has
bounced off its lows which should support. So these results have a
little of something for everyone. Pessimists will see a glass half
Optimists might argue that there is a glimmer of a recovery. The next
12 months are simply crucial.