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Satchu's Rich Wrap-Up
 
 
Monday 07th of January 2019
 
Morning
Africa

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The Latest Daily PodCast can be found here on the Front Page of the site
http://www.rich.co.ke

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Can land reform be a success? l @AJInsideStory
Africa


Presenter: Sami Zeidan
Guests
Derek Matyszak, senior researcher at the Instittute for Security
Studies Pretoria.
Aly Khan Satchu, CEO of Rich management and a emerging markets economist.
Joseph Ochieno, commentator on African affairs and former columnist
for New Africa Magazine.

Macro Thoughts

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24-DEC-2018 :: How much higher will the FED dial up rates? The markets are signalling not much more. Powell predicted two more quarter point hikes in 2019. A lot hinges on this outlook.
Africa


How much higher will the FED dial up rates? The markets are signalling
not much more. Powell [who has incurred Trump's wrath] predicted two
more quarter point hikes in 2019. A lot hinges on this outlook.

read more





@britishmuseum to return Benin bronzes to Nigeria @CNN @CNNAfrica
Africa


Benin bronzes on display at the British Museum in London. The museum
holds one of the world's largest collection of bronzes with around 700
pieces
Leader of the UK Labour party Jeremy Corbyn has said that if elected,
his government would be willing to discuss the return of "anything
stolen or taken from occupied or colonial possession."
But if the wheels are turning slowly, they do at least appear to be shifting.

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Omani researcher shows how mangroves fight climate change @timesofoman
Africa


Zakiya Al Afifi, who is currently doing her PhD in environmental
sciences from the University of York in the United Kingdom, is
studying the role of nature and man coexisting alongside each other,
and hopes to share her work with the authorities so they can use it to
benefit the country.
“Primarily a coastal tree, mangroves have several benefits to the
environment, such as coastal erosion prevention and mitigating the
effects of wave and storm energy,” said Al Afifi, speaking to the
Times of Oman. “They also host species of both ecological and
subsistence importance, for example in the case of fish.”

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"We live in the flicker -- may it last as long as the old earth keeps rolling! But darkness was here yesterday." - Joseph Conrad, Heart of Darkness
Africa


“It seems to me I am trying to tell you a dream--making a vain
attempt, because no relation of a dream can convey the
dream-sensation, that commingling of absurdity, surprise, and
bewilderment in a tremor of struggling revolt, that notion of being
captured by the incredible which is of the very essence of
dreams...No, it is impossible; it is impossible to convey the
life-sensation of any given epoch of one's existence--that which makes
its truth, its meaning--its subtle and penetrating essence. It is
impossible. We live, as we dream-alone...”
― Joseph Conrad, Heart of Darkness

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"It isn't that there's no right and wrong here. There's no right." - V.S. Naipaul, A Bend in the River
Africa


“Going home at night! It wasn't often that I was on the river at
night. I never liked it. I never felt in control. In the darkness of
river and forest you could be sure only of what you could see — and
even on a moonlight night you couldn't see much. When you made a noise
— dipped a paddle in the water — you heard yourself as though you were
another person. The river and the forest were like presences, and much
more powerful than you. You felt unprotected, an intruder ... You felt
the land taking you back to something that was familiar, something you
had known at some time but had forgotten or ignored, but which was
always there. You felt the land taking you back to what was there a
hundred years ago, to what had been there always.”  ― V.S. Naipaul, A
Bend in the River

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President Xi Orders Chinese Army To "Prepare For War" @zerohedge
Law & Politics


In just a few short days, China has proved that investors who have
been underestimating the geopolitical risks stemming from the
simmering tensions between the US and China over the latter's
territorial claims in the South China Sea and paranoia over the fate
of Taiwan - a de facto independent state that President Xi Jinping is
aggressively seeking to bring under the heel of Beijing - have done so
at their own peril.
Earlier this week Xi Jinping, the Chinese emperor for life president
provoked an angry rebuke from Taiwan's pro-independence president when
he demanded during a landmark speech earlier this week that Taiwan
submit to "reunification" with Beijing.
And as if tensions between China and the international community
weren't already high enough amid a worsening economic slowdown that's
hurting global economic growth and a tenuous trade "truce" with the
US,  in another speech delivered on Friday during a meeting of top
officials from China's Central Military Commission which he leads, Xi
took his belligerent rhetoric one step further by issuing his first
military command of 2019: that "all military units must correctly
understand major national security and development trends, and
strengthen their sense of unexpected hardship, crisis and battle."
"The world is facing a period of major changes never seen in a
century, and China is still in an important period of strategic
opportunity for development,” Xi said and added that China’s armed
forces must "prepare for a comprehensive military struggle from a new
starting point," Xi said adding that "preparation for war and combat
must be deepened to ensure an efficient response in times of
emergency."
Xi's order prioritizes training with a focus on combat readiness,
drills, troop inspections and resistance exercises.
It applies to all units of the PLA, including troops, academies and
armed police, and is designed to "ensure new challenges are met and
battles are won," according to a copy of the guidelines seen during
the television report.
In other words, Xi just ordered the Chinese military to prepare for war.
According to the South China Morning Post, the order "will kick-start
a year of enhanced military training and exercises." Which, of course,
will build on the expansive military exercises carried out in 2018,
where China flexed its military muscle in the South China Sea and
Strait of Taiwan to show foreign powers that might support Taiwanese
independence (i.e. the US) that China still takes the "One China"
policy very, very seriously.

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Xi orders armed forces to enhance combat readiness @XHNews
Law & Politics


Chinese President Xi Jinping, also general secretary of the Communist
Party of China (CPC) Central Committee and chairman of the Central
Military Commission (CMC), signs a mobilization order for the training
of the armed forces, the CMC's first order in 2019, at a CMC meeting
held in Beijing, capital of China, Jan. 4, 2019.

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"This is the Chinese Air Force. You have entered Chinese #ADIZ. Report your nationality and purpose of flight!" FIRST EVER! CCTV discloses how China's #PLA Air Force soldiers safeguard the country's sovereignty @globaltimesnews
Law & Politics


"This is the Chinese Air Force. You have entered Chinese #ADIZ. Report
your nationality and purpose of flight!" FIRST EVER! CCTV discloses
how China's #PLA Air Force soldiers safeguard the country's
sovereignty in the #EastChinaSea ADIZ which includes the
#DiaoyuIslands

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15-OCT-2018 :: War is coming @TheStarKenya
Law & Politics


Chinese military releases footage it says shows PLA fighter using
chasing foreign interloper from East China Sea air defense
identification zone. Chris Buckley 储百亮 @ChuBailiang

https://twitter.com/ChuBailiang/status/108137508973

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Chinese Professor Censored After Admitting Real GDP Growth Is Below 2% @zerohedge
International Trade


For the first time since it overtook Japan as the world's
second-largest economy back in 2011, China has displayed surprisingly
weak economic data that have somehow obscured the widely held, if
rarely discussed in public belief that these data, which are compiled
by the Chinese state, are largely suspect. Contributing to its goal of
maintaining order and stability at home, the Communist Party is widely
believed to doctor and goalseek its data to present a rosier picture.
Apparently, the notion that this is probably happening has become so
widely accepted that investors often lose sight of it.

To the consternation of Chinese censors, a presentation delivered by
an economics professor at Renmin University in Beijing sparked a
controversy last month when the professor claimed that a secret
government research group had estimated China’s growth in gross
domestic product could be as low as 1.67% in 2018, far below the
official rate.

Yet despite being scrubbed from Chinese social media and the mainland
Internet, the presentation has been viewed 1.2 million times on
YouTube (clip above), suggesting that Xiang's warnings are resonating
with everyday Chinese consumers, who are struggling with one of the
worst-performing stock markets of 2018, a collapsing shadow lending
sector, a crackdown on China's vast online peer-2-peer lending
infrastructure, and a currency that has weakened significantly over
the past 12 months.

To be sure, (almost) nobody is forecasting a recession in China or
even a slowdown to sub-5% growth over the next two years (for the
simple reason that Beijing would never allow such an admission due to
social instability fears).

But regardless of whether the presentation is accurate, it doesn't
change the fact that China's economy has slowed

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An overwhelming majority of Conservative activists made clear they were not bothered by the prospect of Britain leaving the @EU_Commission without a deal. Some 63 per cent said they would be happy with no-deal @thetimes
International Trade


Secondly, Mr Bale cited the @YouGov findings suggesting that 76 per
cent of Tory members believed that the warnings over the serious
consequences of a no-deal Brexit were “exaggerated or invented”
@thetimes

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Currency Markets at a Glance WSJ
World Currencies


Euro 1.1427
Dollar Index 95.962
Japan Yen 108.05
Swiss Franc 0.9841
Pound 1.2750
Aussie 0.7133
India Rupee 69.4043
South Korea Won 1117.83
Brazil Real 3.7155
Egypt Pound 17.8710
South Africa Rand 13.9407

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"A bill to remove four zeros from the national currency was presented to the government by the central bank yesterday and I hope this matter can be concluded as soon as possible," IRNA quoted central bank governor Abdolnaser Hemmati
Emerging Markets


Proposals to remove four zeros from the currency have been floated
since 2008, but the idea has gained strength as the rial lost more
than 60 percent of its value in 2018 despite a recent recovery
engineered by the central bank in defiance of U.S. sanctions.
The currency was trading at about 110,000 rials per U.S. dollar on the
unofficial market on Sunday, according to foreign exchange websites.

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Billionaire tycoon Vijay Mallya was once known as the "King of Good Times" was declared a "fugitive economic offender" by an Indian court @YahooNews
Emerging Markets


The special court in Mumbai declared Mallya an economic fugitive
following a request by India's financial fraud police that is
investigating money laundering charges against him.
The court is also due to hear another prosecution plea to seize
Mallya's properties.
The 62-year-old liquor baron fled the country in 2016 after failing to
repay state-owned banks more than $1 billion in loans that prosecutors
say was diverted to other businesses.
The owner of Kingfisher beer and head of the Force India Formula One
team is currently in the United Kingdom.

Frontier Markets

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07-JAN-2019 :: Why DR Congo delayed election results @TheStarKenya
Africa


"It's not the people who vote that count, it's the people who count
the votes." said Joseph Stalin.

The DR Congo held a long delayed election in December. Joseph Kabila
Kabange who besides sporting a whole new sartorial look of late has
been President of the Democratic Republic of the Congo since January
2001 and took office after the assassination of his father, President
Laurent-Désiré Kabila. Previously very cryptic and not prone to
engaging with the Press, President Kabila having anointed his
preferred successor Emmanuel Ramazani Shadary, was kicking back and
relaxing and giving ''exclusive'' interviews to all the World's Press
and in one interview alluded to Arnold Schwarzenegger's famous quote
''I'll be back.'' In fact, one report I read said he was proposing to
remain in the Presidential Palace and that his Dauphin Shadary would
occupy the residence of the Prime Minister. I have myself visited the
President's residence and on those premises sits a screen [broken and
frozen] from the era of President Joseph-Désiré Mobutu aka Mobutu Sese
Seko Kuku Ngbendu Wa Za Banga which screen was headlined the Bourse du
Valuers, which I was asked to rehabilitate and reinvigorate. I was a
little bit slow on the draw and did not appreciate the ''Dan Gertler''
style of operation, which required ponying up cash up front. I had a
Plan to turn the defunct Bourse du Valeurs into a Bovespa [which by
the way is the only stock market in the world wide which is posting
record highs]. The Congo is enormously rich but since the days of King
Leopold through Mobutu through the Kabilas has been a country where
''L'etat c'est moi'' applies and its Citizens have had to exist in a
World which Joseph Conrad aptly pronounced as

“The horror! The horror!”  in his book the Heart of Darkness.

V.S. Naipaul, in his book A Bend in the River [whose departure point
was Conrad's The Heart of Darkness] wrote “It isn't that there's no
right and wrong here. There's no right.”

Today, the Congo is once again key to the Global Economy in the c21st.
Once it was about Rubber and today its all about Cobalt [Copper and
Lithium]. Erik Prince who is raising a $500mn Fund to invest in the
supply of these metals said to the Financial Times

“For all the talk of our virtual world, the innovation, you can’t
build those vehicles without minerals that come from generally weird,
hard-to-access places.”

''When I see the R&D budgets of all the major automakers ploughing
huge money into hybrid or electric vehicles, I believe the demand
curve for the unique minerals that make up an electric car and battery
technology will be enormously high over the coming years,” Mr Prince
said.

Returning to the Elections, whose results release has now been
delayed. According to Africa Confidential and others, the Catholic
Church [certainly the most trusted Institution in Congo and seriously
ubiquitous] all indications are that the Opposition led by Martin
Fayulu has won this all ends up.

''Early results – which the regime is banning the media from reporting
– indicate a win for the opposition after government plans to fix the
poll went awry'' said Africa Confidential. AC added The Bishops’
Conférence Episcopale Nationale du Congo (CENCO) had organised up to
40,000 election monitors to scrutinise the conduct of the poll and
conduct a parallel vote tabulation. CENCO did not name the winning
candidate publicly, but declared that he had polled over half of the
votes in the presidential election. Martin Fayulu is the unnamed
winning opposition candidate, Africa Confidential’s church sources
say.  Rival opposition leader Felix Tshisekedi and the ruling
coalition candidate Emmanuel Ramazani Shadary are trailing with around
20% each, we hear (AC Vol 59 No 25, The Twelve Fixes of Christmas).
All these figures, and the detailed calculations underlying them, were
provided by CENCO to diplomats in Kinshasa on 2 January. But the fix
was not thorough enough, sources in Shadary’s Front commun pour le
Congo (FCC) told Africa Confidential. They said control of the poll
was lost because they did not pay off enough election officials.

If President Kabila's Man is at only 20% with the entire State
Machinery at his beck and call, then we are talking about single
digits in reality.  Therefore, we are actually talking a compelling
Victory for Martin Fayulu, an open and shut case as it were. The
President's Advisor Barnabe Kikaya Bin Karubi pronounced that the
coalition "firmly deplores...the partisan, irresponsible and anarchic
attitude of CENCO."  President Kabila summoned the Catholic Bishops to
Kinshasa and told them he wants he wants to leave a “united and
peaceful” Congo [@rarrigz]. Democratic Republic of Congo's electoral
commission have said they can’t publish the results on Sunday as
planned to avoid political unrest and that the result will be revealed
"next week" after accusing the country's Catholic Church on Friday of
"preparing an insurrection" by saying it knows the winner.

The Author Jason Stearns 'Dancing in the Glory of Monsters' tweeted

This could unfold in many ways. I find it v hard to believe that
Kabila/Shadary will accept defeat and step down @jasonkstearns
I also don't think they will be able to rig elections and move on, as
we now know that the Catholic Church, opposition and civil society,
will put up a fight @jasonkstearns
The most likely scenario is a protracted, potentially violent standoff
that plays out over months in halls of power and in the streets. It
could spill over into armed mobilization in eastern DRC Many civilians
are likely to be killed in this scenario @jasonkstearns

If President Kabila is determined to instal his preferred Successor
and the AU [which has only once pronounced against an Election [2008
Zimbabwe]] or SADC or its neighbours are not prepared to enforce the
will of the People then I would argue that the US [which has already
positioned 80 personnel in the capital of Gabon, , "to be in position
to support the security of United States citizens, personnel, and
diplomatic facilities" in Congo's capital] should remove President
Kabila from the Congo and instal the rightful Winner at the request of
CENCO. I am not a Believer in Regime Change and in fact President
Assad is the first Leader to have managed to repel the Merchants of
regime Change [The point about Syria is that the ''HeadChoppers'' did
not represent the will of the People] but this is a clear cut case,
where the will of the People is being subverted. Its egregious, its
outrageous. And the US has a National Interest [economic as alluded to
above re Erik Prince comments]. This intervention fits neatly with
Ambassador John Bolton's new Africa Strategy and unlike Iraq where
Dick Cheney said

"We will be greeted as liberators, they will throw rose petals at our feet"

I can guarantee you the People of the Congo will throw rose petals at
your feet.

$750b of a Defence budget can be put to good use here. If President
Trump and his team from Ambassador John Bolton through to Secretary
Pompeo want to regain influence on this vast Continent, this is that
moment just like it was for Muhammed Ali many years ago in Kinshasa.

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In a place (like here) where people are deeply skeptical of political elites, @MartinFayulu built his credibility from the Street up @tomperriello
Africa


In a place (like here) where people are deeply skeptical of political
elites, @MartinFayulu built his credibility from the Street up by
repeatedly risking his body, his finances, and his freedom to protest
corruption & support human rights and democracy.

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Fair Point @IanECox but enough is enough if the incumbent is at 20% with all the advantages of State Machinery then they are in fact at 0 or thereabouts -
Africa


Fair Point @IanECox but enough is enough if the incumbent is at 20%
with all the advantages of State Machinery then they are in fact at 0
or thereabouts ~ it’s time for @AmbJohnBolton @SecPompeo et al to step
up and this would be cake walk in fact @hervegogo

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Church claims sweeping opposition win @Africa_Conf
Africa


Early results – which the regime is banning the media from reporting –
indicate a win for the opposition after government plans to fix the
poll went awry
A showdown is looming after the country’s Catholic bishops announced
they knew who had won the presidential election on 30 December, as
anger builds after delays in the release of official results and the
shutdown of national communications.
Congo-Kinshasa’s election body – the Commission Electorale Nationale
Indépendante (CENI) – has said nothing so far. CENI president
Corneille Nangaa says the publication of preliminary results scheduled
for 6 January will be postponed, as tally sheets trickle in to the
regional centres for official tabulation.
The Bishops’ Conférence Episcopale Nationale du Congo (CENCO) had
organised up to 40,000 election monitors to scrutinise the conduct of
the poll and conduct a parallel vote tabulation. CENCO did not name
the winning candidate publicly, but declared that he had polled over
half of the votes in the presidential election. Martin Fayulu is the
unnamed winning opposition candidate, Africa Confidential’s church
sources say.
Rival opposition leader Felix Tshisekedi and the ruling coalition
candidate Emmanuel Ramazani Shadary are trailing with around 20% each,
we hear (AC Vol 59 No 25, The Twelve Fixes of Christmas). All these
figures, and the detailed calculations underlying them, were provided
by CENCO to diplomats in Kinshasa on 2 January
Widespread intimidation, suspension of polling in certain areas, and
use of government facilities by the ruling party were reported as
Kabila’s allies attempted to fix the result in Shadary’s favour. But
the fix was not thorough enough, sources in Shadary’s Front commun
pour le Congo (FCC) told Africa Confidential. They said control of the
poll was lost because they did not pay off enough election officials.

read more



Africa


Election officials say they can’t publish #CongoElection results on
Sunday as planned…to avoid political unrest…result will be revealed
"next week".

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This could unfold in many ways. I find it v hard to believe that Kabila/Shadary will accept defeat and step down @jasonkstearns
Africa


I also don't think they will be able to rig elections and move on, as
we now know that the Catholic Church, opposition and civil society,
will put up a fight

read more



From his look with fancy glasses, bright blue suit etc, it seems DRC President Joseph Kabila is planning a move into music or the movies when/if he leaves in Jan - @cobbo3
Africa


From his look with fancy glasses, bright blue suit etc, it seems DRC
President Joseph Kabila is planning a move into music or the movies
when/if he leaves in Jan – as he waits to return to power in 2025 or
2030 as he hinted?

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"What is happening in Sudan is a revolution," said Amjed Farid, a spokesman for Sudan Change Now @FT's @thomas_m_wilson H/T @davidpilling
Africa


“The Sudanese people are in the streets because they have nothing to lose.”
Mr Bashir, who seized power in a military coup in 1989, has overseen
the gradual decay of the Sudanese economy. Accused by the US of
sponsoring terrorism in the 1990s, Sudan spent two decades as an
international pariah prevented from trading with the west.
The economy has been starved of foreign currency since South Sudan
gained independence, taking with it three-quarters of the country’s
oil production. US sanctions were lifted in 2017 but attempts to
rebuild commercial relationships with the west have done little to
bridge a gaping trade deficit.
The value of the Sudanese pound plummeted by 85 per cent against the
dollar last year and inflation is running at almost 70 per cent,
rendering normal life virtually impossible for many of Sudan’s 40m
people.
This week, Mr Bashir said he would address economic hardship by
increasing the salaries of public sector workers and promised that
remaining subsidies on wheat, fuel or electricity would remain in
place — but his words had little effect.
Although at least 37 protesters were shot dead by security forces in
the first five days of protests, according to Amnesty International,
each day demonstrators are back out on the streets.
“Bashir has faced down protests before, but what’s clear is that the
economy has reached a tipping point and the masses, including many
within areas previously regarded as regime strongholds, have been
pushed to the edge,” said Murithi Mutiga, who covers the Horn of
Africa at the International Crisis Group.
As a result, the protests include Sudanese professionals and the urban
poor, in a similar pattern to the uprisings that toppled Sudan’s last
military autocrat, Gaafar Nimeiry, in 1985, Mr Mutiga said.
The collapse of the country’s economy means patients are dying in its
hospitals deprived of life-saving drugs, and its doctors — earning as
little as $30 a month — are unable to withdraw their paltry salary
because of banking restrictions, he said.
“Those who are taking to the streets are facing the hardship of life
without any possibility of survival,” he said. “A whole country in the
21st century has been taken hostage by one man and one party.” The
Sudanese government could not be reached for comment.
Mr Bashir used military force to quell public protests in 2013 and
January last year — and as long as he retains control of the military
and intelligence services, observers are reluctant to predict his
demise. However, they say his options are running out.
“The [regime] desperately needs a bailout, they need debt forgiveness,
they need real structural reforms to the economy, but it is very
difficult for that to happen with Bashir at the helm,” said Mr Mutiga.
“Bashir will be asking Saudi Arabia for money, and the Saudis will be
wanting to squeeze him for some concessions,” said Alex de Waal, a
former adviser to the African Union on Sudan.

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Uganda's public debt rises by 22%, hits Shs 41.5 trillion @observerug
Africa


Uganda's public debt has increased by 22 per cent, rising from Shs
33.99 trillion as at June 30, 2017, to Shs 41.51 trillion as at June
30, 2018, according to the 2018 auditor general's report released
today.
Handing over the report to the speaker of parliament Rebecca Kadaga,
the auditor general John Muwanga said that payment for loans worth Shs
3.9 trillion which are 50 per cent of those he has studied, expires in
2020.
Muwanga said that if the government is to service the loans as
projected in the next financial year 2019/2020, it would require more
than 65 per cent of the total revenue collections which is over and
above the sustainability levels of 40 per cent.
”The revenue to GDP is actually standing at 55% which is the highest
in the region. We did a special audit on public debt and we expect you
to look at it in detail and see the issues that we’re raising. We have
concerns about the sustainability of debt, it is currently still
sustainable, but if we go at the rate at which we’re going, we need to
be careful. And there issues there that really need addressing. We’re
taking in more commercial loans, we’re taking in more loans whose
conditionalities are probably not very conducive for us as a
development country." she said.

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Don't Call Bribes 'Chickens' @bopinion
Africa


Mozambique

If you are bribing government officials to give your firm lucrative
construction contracts, an important question is: When do you pay the
bribes? I am not an expert on bribes, but I had vaguely thought that
the answer would be “before you are awarded the contracts.” It just
seems like the government officials have more leverage than you do:
They can award very large contracts, while you can only pay them
somewhat smaller bribes; lots of people are competing to bribe them
for the contracts, while there are relatively few corruptible
governments that will give out lucrative contracts in exchange for
bribes. Also of course this is, in different form, the normal approach
in the gift economy of investment banking and big business generally:
If you are a service provider trying to get a lucrative mandate from a
company, you curry favor with the company by doing free work, taking
executives out to dinner, etc., before they give you the mandate.
Companies don’t hire investment bankers to do big deals in the hopes
that the bankers will buy them steak dinners afterwards; the bankers
buy the steak dinners in the hopes that the companies will hire them
to do big deals.

But the problem with bribes is that, if you pay a corrupt government
official a large bribe before he awards you a lucrative contract, he
can always not award you the contract. (Or he can hold out for more
bribes.) It is hard to rely on his honesty and integrity, you know?
And if he stiffs you it is not like you can sue. Plus, you might not
have the money: You might need to get the contract payment first, so
you can use some of it to pay the bribes. So here is an email that
Jean Boustani, a salesman for Abu Dhabi-based shipbuilding company
Privinvest Group, allegedly sent to an unnamed official of the
government of Mozambique about the timing of alleged bribes (uh,
“success fees”) connected to a contract that Mozambique awarded
Privinvest to help build a “coastal monitoring system” to fight
pirates:

A very important issue which needs to be clear: we had various
negative experiences in Africa. Especially related to the ‘success
fees’ payments. Therefore, we have a strict policy in the Group
consisting of not disbursing any ‘success fee’ before the signature of
the Project Contract.

Very fair! But look at it from the government official’s perspective.
If he awards you the contract first, and then he doesn’t get his
bribe, he still has leverage: He can cancel the contract or seize your
assets in the country or whatever. But after the contract award he
might be more constrained by institutions or publicity. Plus, in this
particular case, the contract fee was paid at signing, so you’ve
already got the money. Also, what if he loses an election? Here is how
the Mozambican official allegedly responded to Boustani’s email:

Fabulous, I agree with you in principle. Let us agree and look at
project in two distinct moments. One moment is to massage the system
and get the political will to go ahead with the project. The second
moment is the project implementation/execution. I agree with you that
any monies can only be paid after the project signing. This has to be
treated separately from the project implementation … Because for the
project implementation there will be other players whose interest will
have to be looked after e.g. ministry of defense, ministry of
interior, air force, etc. … in democratic governments like ours people
come and go, and everyone involved will want to have his/her share of
the deal while in office, because once out of the office it will be
difficult. So, it is important that the contract signing success fee
be agreed and paid in once-off, upon the signing of the contract.

So the equilibrium is apparently that you pay the bribe at the same
time the contract is signed. (Actually Privinvest allegedly wired its
co-conspirators $10.2 million of bribes five days after signing, which
is also when Mozambique wired Privinvest its $317 million fee under
the contract.) Makes sense. Why would either party trust the other?

Those emails are from this indictment that U.S. federal prosecutors in
Brooklyn brought yesterday against Boustani, as well as Mozambique’s
former Minister of Finance and three former Credit Suisse Group AG
bankers who helped arrange the financing for the projects that
Mozambique awarded to Privinvest. The indictment is full of
instructive bribe-negotiation emails. For instance Boustani allegedly
emailed the Mozambican official “requesting a bribe and kickback
figure,” and the official replied:

Fine brother. I have consulted and please put 50 million chickens.
Whatever numbers you have on your poultry I will add 50 million of my
breed.

Look, again, I am not an expert on bribes, and nothing in this column
is ever legal advice. But it does seem to me that, if you are looking
for a code word for “bribes,” “success fees” is almost infinitely
superior to “chickens.” Like if someone finds these emails and asks
you “isn’t ‘success fee’ just a euphemism for ‘bribe,’” you can just
tough it out and be like “oh no those are success fees, very standard,
in every contract, you gotta pay a fee for success. Consulting! Local
expertise!” But if someone finds these emails and asks you “isn’t ‘50
million chickens’ just a euphemism for ‘$50 million of bribes,’” what,
are you going to be like “no no no we had a legitimate need for 50
million chickens for this coastal monitoring project, the chickens
will be stationed on the seashore to look out for pirates”? Come on.
If you are using “chickens” as a euphemism for “bribes,” you are not
doing it to be sneaky; you are doing it to show off how ridiculously
brazen you are.

The charges against the three Credit Suisse bankers are in some ways
stranger. A big part of them is: Credit Suisse originally demanded
some stringent conditions for the loan, and in the course of
negotiations the deal team replaced some of those conditions with less
stringent but still perfectly reasonable conditions. For instance,
Mozambique was receiving financing from the International Monetary
Fund, which imposed limits on Mozambique’s borrowing from private
sources, and Credit Suisse originally required Mozambique to inform
the International Monetary Fund of the loan. This condition was
replaced “with the less stringent requirement that Mozambique
represent to investors ‘that they [were] in compliance with their IMF
and World Bank obligations.’” That strikes me as a reasonable
compromise: If the IMF required notice, then the compliance rep means
that Mozambique would give the IMF notice; if the IMF didn’t require
notice, then there’s no reason for Credit Suisse to. (Either way, the
representation wasn’t true, but that’s a separate issue.)

It is an unsettling read. Business deals are complicated, and there is
a give and take in negotiating legal protections; a bank wants the
strongest possible guarantee that its client is not doing anything
legally risky, while the client wants as much flexibility as possible
to run its affairs. The bank will generally start out by asking for a
lot — copious representations and certifications and sign-offs and
legal opinions and control rights for the bank — and the client will
push back, and they will agree on a compromise. If it turns out that
the client was doing enormously illegal stuff, then in hindsight that
compromise will look suspicious: Why didn’t the bankers insist on
ironclad guarantees? But that is just not generally how it works, even
when there’s no bribery going on.

Or there were some people involved in the deal — proposed deal
partners and proposed directors of the entity formed by Privinvest and
Mozambique — who were flagged by Credit Suisse executives or by an
outside due diligence firm as bad actors. “A master of kickbacks,” is
the phrase that a due diligence report used about one of them. The
deal team “failed to relay” these concerns to Credit Suisse’s
compliance department, alleges the indictment. But what they did
instead was get rid of those people! “We need to structure him out of
the picture,” the lead banker said about the kickback-master guy, and
as far as I can tell they did. After seeing red flags about the
proposed directors, the bankers got a different group of directors
appointed, and then got compliance approval based on those directors
“without revealing that two separate groups of directors had been
researched.” I don’t know! That seems okay, no? Like, they considered
doing a non-compliant transaction, and they researched it and decided
that it would be non-compliant, so they decided to do a compliant one
instead, and they took that one to the compliance department.

In my former life as an investment banker, I tried to only go to
compliance for approval of transactions that I thought were legal.
Asking compliance to approve illegal transactions would have wasted
their time and mine, and damaged my credibility. Occasionally people
came to me — innocently enough, usually; the law is complicated —
asking me to do transactions that were illegal, and I would say “no,
that’s illegal, why don’t we do a legal transaction instead?” If they
agreed, then I’d go get compliance approval for the legal one, not the
other one. 1   The job of the deal banker is to structure a deal that
works, that will get through compliance and committee approvals. Most
deals start by not working, and the banker has to massage them to get
them to work; you take the final one to compliance for approvals, not
the bad rough draft.

So I was sympathetic to the bankers up until I got to the part of the
indictment alleging that “throughout 2013 and 2014, using loan
proceeds, Privinvest made numerous kickback payments” to the Credit
Suisse bankers! Specifically the lead banker allegedly got $45 million
wired to a bank account that he set up in Abu Dhabi, characterized as
“partial pymt on consultancy agreement” or “dividends payment,” some
of which he allegedly shared with the other two bankers. These are
much better euphemisms than “chickens,” but still, if you work at a
bank you can’t have your banking client pay you millions of dollars
personally for “consultancy”! Come on. 2

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China and Kenya have denied reports that a key port in Mombasa was at risk of being seized by Beijing over unpaid debts @CNNAfrica
Kenyan Economy


China and Kenya have denied reports that a key port in Mombasa was at
risk of being seized by Beijing over unpaid debts. This has not doused
fears in developing countries that their government may have left
themselves vulnerable to the Asian giant
Kenya is the latest country where China is frantically defusing a
public relations storm over President Xi Jinping's signature Belt and
Road megaproject.
In a statement Friday, China's Ministry of Foreign Affairs dismissed
as "not true" numerous reports that a key port in Mombasa was at risk
of being seized by Beijing over unpaid debts.
Speaking to journalists last week, Kenyan President Uhuru Kenyatta
also pushed back, dismissing as "pure propaganda" reports based on a
leaked letter from the country's Auditor General warning that assets
belonging to the Kenya Port Authority -- including Mombasa's massive
Kilindini Harbor, the largest port in East Africa -- were listed as
collateral for a multi-billion-dollar loan to fund a railway project.
"The Chinese government themselves say this (it) is nonsense,"
Kenyatta said, while the AG's office denied publishing any such
letter, copies of which circulated widely online.
Despite Beijing and Nairobi's vehement denials, concerns over the
loans speak to a growing fear in many developing countries that their
governments, in rushing to cash in on China's Belt and Road Initiative
(BRI), have left themselves overextended, with Chinese state-owned
companies ready to snap up ports, railways and other key
infrastructure across the globe should debtors default.
For critics of the BRI, Sri Lanka's Hambantota port is the perfect
example of the risks developing countries are taking on with their
Chinese loans.
In December 2017, Beijing acquired a 99-year lease to the port --
located in a key strategic position on the Indian Ocean -- in return
for forgiving some of the billions of dollars the South Asian country
owed China.
The move sparked fears China would use similar defaults in other
countries to acquire a host of new infrastructure, with both potential
economic and military benefits -- leapfrogging rivals in the region
such as India and the US.
Part of the problem stems from Beijing's "ad hoc approach" to settling
debt issues, according to a report by the Center for Global
Development (CDG), which pointed to a lack of consistency in dealing
with defaulting nations.
In the past, China has been willing to write off or restructure debts
and extend further lines of credit, while at other times it has
demanded assets to service the loans.
"Without a guiding multilateral or other framework to define China's
approach to debt sustainability problems, we only have anecdotal
evidence of ad hoc actions taken by China as the basis for
characterizing the country's policy approach," the CDG report said.
n January 2018, former Maldives President Mohamed Nasheed accused
Beijing of staging a "land grab" in his country. After his Maldivian
Democratic Party took power this November, it pledged to end "China's
colonialism" and renegotiate loans agreed by former strongman Abdulla
Yameen with Beijing.
In August, recently elected Malaysian Prime Minister Mahathir Mohamad
shelved two Chinese-funded projects over fears they could "bankrupt"
the country.
But as the country enters 2019, the plan is looking shakier than in
ever -- and appears in need of a rethink. Failure to do so, according
to Bloomberg analyst Nisid Hajari, risks that "this plan to project
Chinese power, influence and trade across much of the world could
undermine all three."

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In an interview with @RFI_English, @BD_Africa columnist @jaindikisero says the national consensus in #Kenya about Chinese loans being a necessary evil to build badly-needed infrastructure is crumbling.
Kenyan Economy


The publication claims that the burden of Kenya’s credit obligations
is set to grow as a five-year period of grace comes to an end. The
Nation recalls that Beijing agreed in May 2014 to push back the
servicing of a 2.8 billion euro loan contracted from China’s Exim Bank
to build the 385km Mombasa and Nairobi Standard Gauge Railway line.
According to the newspaper, China now accounts for up to 72 per cent
of a whopping €2.36 billion is expected to pay in 2019 as repayments
of loans contracted from bilateral lenders.
Jaindi Kisero is former Managing Editor of the Nation Media Group in
charge of Business and Economic Affairs, and now a columnist at Daily
Nation and Business Daily.
He says the national consensus qualifying Chinese loans as being a
necessary evil is crumbling.
“China is bringing corruption in the country through the funding of
small projects which are very poorly drafted and the contracts
opaquely procured holds Kisero.
He also denounces “a small clique of ruling elite” who he believes are
feeding fat on such contracts. According to Kisera, China is now in a
position to influence Kenyan politics.

Debt default

The respected columnist says there is a strong case for Kenyans to be
worried about the Standard Gauge Railway line running from Mombasa to
Nairobi and from Mombasa to Naivasha, with an extension to Malaba in
the eastern region of Uganda.

“They brought in the Ports authority to sign a take or pay, meaning
that they had to give SGR enough freight so that they can service the
Chinese loan. If not they will just take the port”, Kisera noted.

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These are the world's 20 most dynamic cities @wef H/T @sidchat1
Kenyan Economy


At the time when the World Economic Forum is examining globalization
4.0, JLL’s City Momentum Index, now in its sixth iteration, focuses on
momentum for the world’s most commercially active cities.
Tracking a range of socioeconomic and commercial real-estate
indicators to identify attributes for success over the short term, the
City Momentum Index ranked 131 major established and emerging business
hubs across the globe to identify the urban economies and real-estate
markets that are currently undergoing the most rapid expansion.
This year’s rankings find the fastest urban growth continuing to shift
away from the West to the East. Asia Pacific is home to 19 of the top
20 cities in this year’s index, and overall, Indian and Chinese cities
dominate the rankings, accounting for three-quarters of the top 20.
Only one city outside of Asia Pacific, Nairobi, ranks in the top 20
most dynamic cities in the globe – and even in Nairobi there is a
strong Asian influence, with significant amounts of investment from
China, particularly focused on infrastructure projects.
Nairobi (ranked 6th in the index) is projected to have one of the
fastest-growing populations in the world over the next five years. The
authorities there are turning to smart technologies to help cope with
overcrowding, traffic congestion and inefficiency in transportation
around the city.

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by Aly Khan Satchu (www.rich.co.ke)
 
 
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January 2019
 
 
 
 
 
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