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Macro Thoughts

This downshifting has seen the US interest curve shift significantly
lower and this in turn has boosted Frontier and SSA Sovereign debt
prices and lowered yields. For example, Kenya’s 30 Year Eurobond
denominated in Dollars was close to 10% and has rallied about 100
basis points off those levels.

Home Thoughts

TIGER, tiger, burning bright    
In the forests of the night,    
What immortal hand or eye       
Could frame thy fearful symmetry?       

In what distant deeps or skies  
Burnt the fire of thine eyes?   
On what wings dare he aspire?   
What the hand dare seize the fire?      

And what shoulder and what art  
Could twist the sinews of thy heart?    
And when thy heart began to beat,       
What dread hand and what dread feet?    

What the hammer? what the chain?        
In what furnace was thy brain?  
What the anvil? What dread grasp        
Dare its deadly terrors clasp?  

When the stars threw down their spears, 
And water'd heaven with their tears,    
Did He smile His work to see?   
Did He who made the lamb make thee?

Tiger, tiger, burning bright    
In the forests of the night,    
What immortal hand or eye       
Dare frame thy fearful symmetry?

Political Reflections

Suffice to say, by queer coincidence, a terrible beauty is born on
February 17-18 on the South Asian chessboard. The resilience of the
Indian foreign policy and its diplomatic clout in isolating Pakistan
and compelling it to abandon the policy of sponsoring terrorist groups
in J&K is being put to test.
The announcement in Islamabad by the visiting Saudi Crown Prince of
his whopping $20 billion investment plans as “first phase” in a
profound programme to resuscitate the Pakistani economy — and that
too, coming on top of the $3 billion cash bailout and another $3
billion deferred payment facility for supply of Saudi oil — can only
be seen as an early warning to the Modi government to wake up from its
5-year old stupor confusing Indian strategy in a complicated world
with Modi’s self-image as a world statesman.
The point is, Iran is India’s lone natural ally in the region. The
Pulwama tragedy should  awaken us to this geopolitical reality. The
time has come to rapidly revive the verve of the India-Iran strategic
understanding, which has always been in our core interest as a factor
of regional security and stability.
The Saudi Crown Prince’s historic visit to Pakistan marks the
induction of Pakistan into the US-sponsored Middle East Security
Alliance. This geopolitical reality will haunt the Modi government’s
strident diplomatic campaign against Pakistan every inch of the way
and stymie all Indian attempts to isolate Pakistan.
On the other hand, Pakistan senses that it has come breathtakingly
close to taking revenge against India in Kashmir. The Pakistani
establishment thinks, rightly or wrongly, that India’s “East Pakistan
moment” has come and the payback time has come. And having embedded
itself within the MESA and made itself indispensable to an Afghan
settlement that will save face for the US and NATO, Islamabad is
brimming with confidence that no matter what Bolton might have
whispered to Doval, there is precious little that Washington can do —
or will do — to compel it to let go its agenda toward J&K and India.

Conclusions

MBS needs some mates and Imran needs the Moolah.

Sirloin steaks, Catena Zapata Nicolas Malbec [2014] Huawei
Technologies Co. and Wanzhou Meng

You will recall that Presidents Trump and Xi Jinping enjoyed a much
anticipated ''Truce'' Dinner at the G20 in Buenos Aires and quaffed a
Catena Zapata Nicolas Malbec [2014] wine with their sirloin steaks and
finished it all off with caramel rolled pancakes, crispy chocolate and
fresh cream, a dinner that ran over by 60 minutes and one where the
dinner Guests broke out into spontaneous applause thereafter.

Chinese stocks had their best day since early November – jumping more
than 3% – as investors held on to the belief that Beijing and
Washington will resolve a trade dispute that has hung over the
country’s economy

International Markets

Euro 1.2999
Dollar Index 96.88
Japan Yen 110.62
Swiss Franc 1.0051
Pound 1.2905
Aussie 0.7115
India Rupee 71.595
South Korea Won 1127.39
Brazil Real 3.7333
Egypt Pound 17.535
South Africa Rand 14.1468

Commodities

Emerging Markets

Frontier Markets

Sub Saharan Africa

Last week President Cyril Ramaphosa closed a speech quoting Ben Okri

We dream of a new politics
That will renew the world
Under their weary suspicious gaze.
There’s always a new way,
A better way that’s not been tried before.

This week Nigerians [84m people are registered to vote] were intending
to go to the Polls in the country’s sixth general election since
military rule ended in 1999. In fact, The Nigerian vote is ''the
largest democratic event in African history'' [@TheEconomist]  The
Elections were postponed at at 2.40am on election day. The Nigerian
electoral commission pronounced that the general elections were
postponed by a week. Charlie Robertson tweeted

''#Nigeriadecides but not yet. Postponement is typical.  2011
elections were pushed back twice, the 2nd time when the parliamentary
vote had already begun … In 2015 they were delayed by 6 weeks (roughly
a week ahead of time)''

Like Ben Okri's preferred literary genre of  ''magic realism''
Nigerian Politics has spun some surreal narratives of its own. Who can
forget the legendary Pleasure-Seeker General Sani Abacha, President
Umaru Yar'Adua who allegedly  was kept alive [or not] for a number of
days in an ambulance in the State House grounds. Even the austere
President Buhari went missing for a few months.

''The significance of the Nigerian elections for Africa is
tremendous,” said Professor Nic Cheeseman [Bloomberg]

“A flawed election and the political instability that this could
generate would not only undermine confidence in the feasibility of
democracy in one of Africa’s most important states, but also slow
economic growth in West Africa and the wider region.”

'In a system where candidates jump between political parties as if
they were changing buses, personality & money trump policy discussion'
tweeted David Pilling

Its a Nollywood Level drama but permit me to give you some context.
GDP growth has lagged Population growth, GDP grew by 1.93 percent last
year, up from 0.82 percent in 2017 and grew 2.4 percent in the fourth
quarter.Nigeria was the second biggest economy in Africa in 2018,
using the market exchange rate of NGN362/$ or the biggest economy
using the fixed rate [@RencapMan]. Unemployment has risen from 8.2% to
23.1% under President Buhari's watch which would be a plain untenable
position for any incumbent Politician seeking re-election in most
parts of the World. The President is a victim of low oil prices which
provide 70% of government revenue. ''Baba Go Slow'' has to be
contrasted with President Al-Sisi's Egypt. Al-Sisi [and I for one
disagree with him on many things particularly with his
''incarceration'' strategy] made bold moves when it came to the
Economy. Egypt devalued its currency early, took a brutal punch in the
solar plexus but is now reaping the dividend from its bolder economic
policy, Nigeria is still muddling along with its ''Voodoo'' level FX
economics. Since President Buhari came to power in May 2015, Nigeria's
stock market has fallen more than any other in the world, dropping 50%
in dollar terms. There is a Message in that performance. The Stock
Market has perked up over the last few sessions, however.

Atiku Abubakar, the main challenger to Mr Buhari, is also in his 70s.
It is an extraordinary Outcome that as the Continent becomes younger,
Our Leaders in many cases are getting older. This Elastic Band [the
difference between the average of leadership and the average of its
Citizens] is now stretched to breaking point and will snap.

Abubakar has struck a Bill Clinton circa 1992 when he kept chanting
"It's the economy, stupid"

Atiku Abubakar's mantra is  “Let’s Get Nigerians Working Again”.
Citing Margaret Thatcher, he says he wants to privatise state-owned
firms, which frankly is the optimal economic policy if its done fairly
and increases ownership in the Nigerian economy. I saw The Thatcher
Revolution up close and personal and it worked. From Ethiopia to
Nigeria to many other parts of Africa, Governments are running out of
headroom and they absolutely need to embrace Thatcherism. It is a
Silver Bullet.

We have seen a number of elections in Africa. Overturning Incumbents
is a thankless task but not too long ago we saw a number of Upsets in
West Africa. However, recently we witnessed a Nollywood level Plot
Twist in the DR Congo and its clear the Will of the People was not
expressed in the result.

Mr. Mbeki said “They are aware that the rest of the world is busy with
bigger issues, In Africa, things are most likely to get worse before
they get better.”

"We are tired of these same old leaders, We are laying the foundation
for a revolution in 2023." Until then, Nigeria will be stuck with
mediocrity pronounced the Economist.

Change is inevitable but not just yet.

He said anyone trying to intimidate voters or interfere with the
voting “will do it at the expense of his own life”.

Biti stands in the holding area at Rotten Row. Guard opens the gate
while Chamisa waits for him. They had taken Biti down after
sentencing. Fine had to be paid or they would have kept him inside.
Payment was not an admission of guilt but compliance with the order
pending appeal.

Martin Fayulu, leader of the Lamuka coalition and winner of the recent
presidential election in the Democratic Republic of the Congo (DRC) –
but who is not the new president – wrote to Africa’s leaders gathered
for last week’s African Union’s (AU) summit.
He proposed two options: setting up a special AU commission to verify
the ‘truth of the ballot’ in the DRC, or holding new elections in six
months. Fayulu’s letter had no impact, and his proposed options did
not come even close to being a subject of discussion at the summit.
Instead the AU and African heads of state welcomed with open arms the
man whose contested election victory had just a few weeks ago prompted
an AU ‘high-level consultative meeting’. The outcome was an
unprecedented request by the AU for the DRC to suspend the
announcement of the final results.
In his letter, Fayulu summed up nicely what all of this means for the
future of the DRC and more broadly, for democracy in Africa: ‘[If the
AU does not take action] the Congolese will no longer believe in
elections and this will be a defeat for democracy that will have
repercussions beyond the DRC.’
Most importantly, there was proof. Solid, objective proof, gathered by
a credible body, that the results announced by the Commission
Electorale Nationale Independante (CENI) were fraudulent. The
Conference Episcopale Nationale du Congo (CENCO) of the Catholic
Church, a trusted civil society actor, fielded 40 000 electoral
observers on the day of the polls.
This dwarfed the observer missions from the AU, with 80 observers, and
SADC, with 93 – the only international observers accredited by the
government. Both missions left shortly after the 30 December
elections.
In addition to having observers in more than half the polling
stations, the CENCO ran a parallel counting process using the results
that were posted outside polling stations, a requirement under
Congolese electoral law. Its extrapolated result gave Fayulu 62%,
Félix Tshisekedi 19% and Ramazani Shadary, the ruling party candidate,
18%.
The existence of this information distinguishes the recent
contestation in the DRC from numerous other contested elections, such
as Gabon and Zimbabwe. In neither of those instances was there
actionable proof of fraud like that provided by the CENCO in the DRC.
In many ways, the CENCO has set a new standard for such rigour and
objectivity.
The argument made by many is that they chose stability over war – an
exaggerated characterisation of what might have happened had pressure
been applied to let Fayulu take office. But the Congolese people chose
change over the status quo, and the regional, continental and
international response deprived them of that change.
What options then do the citizens of African countries have when
domestic institutions are captured by a small political elite? The
recent responses from the AU, SADC and the international community
would seem to indicate that they have very few.

In local elections in 2016 the ruling party, the African National
Congress (anc), slumped to 54% of the vote. Polls suggest that this
time it will win around 60%.
Mr Ramaphosa’s fans note his lifetime of outfoxing opponents. As head
of the National Union of Mineworkers he was a skilled negotiator.
Nelson Mandela put him in charge of talks to end apartheid when he was
only 39.
Later, Mr Ramaphosa used his nous—and his political connections—to
make a fortune in business. He is charming and ruthless. “He has the
patience of a vulture,” says a friend of many decades, adding,
admiringly: “He’s the most calculating person I know.”
To what end, though? Mr Ramaphosa has brought honesty and more
proficiency to the presidency. But it is unclear whether this ultimate
insider, who was deputy president under Mr Zuma, has the will to take
on the pillars of South African life—big government, politically
connected business, big labour—that have both made his career and
obstruct reform. “I am an enigma,” Mr Ramaphosa once told a
biographer. And so he remains.

Four years after the launch of construction, China has presented the
150 million Yuan (US$22 million) presidential palace it built for
Burundi as a gift to seal its diplomatic relations with the East
African country.

After taking office in 2015, Tanzania’s President John Magufuli
quickly launched a widely-praised anti-corruption campaign. He made a
show of plugging the holes in a very leaky government budget by, for
instance, purging “ghost workers” from the public payroll.
Three years on, however, not all is well with Tanzania’s public
finances. Moreover, efforts to ensure effective financial oversight
face mounting obstacles.
A recently completed special investigation by the Controller and
Auditor General (CAG) speaks to both of these trends.
In March 2018, Tanzania’s Controller and Auditor General, Mussa Assad,
presented his annual audit report for the 2016/2017 financial year. It
made for sobering reading. It showed that state entities had diverted
trillions of shillings into ghost ventures, while several budget lines
were not open to scrutiny.
What captured most attention, however, was the unexplained mismatch
between the collected revenue of TSh 25.3 trillion ($10.88 billion)
and the TSh 23.8 trillion ($10.24 billion) released by the treasury
for government expenditure. What happened to the “missing” TSh 1.5
trillion ($640 million)?
The government provided a range of explanations for the discrepancy as
the controversy spread from parliament to social media. Then, during a
function at State House, President Magufuli reportedly interrogated
the man behind the report. “The CAG is here,” he said, “can you stand
up and tell us if any money was stolen.” Assad responded: “No sir, no
money was stolen!”
Eventually, though, parliament compelled the CAG to investigate the
TSh 1.5 trillion inconsistency. This January, it completed and
submitted its report.
In the end, the audit debunks this figure. But in its place emerges a
much bigger one: TSh 2.4 trillion ($1.03 billion).
This is the figure accountant and opposition MP Ruge cited in
parliament and later detailed in an article. It is the sum of all the
anomalies and audit queries recorded in the CAG report, namely the
following:

TSh 976.96 billion of unauthorised reallocations (pp 19-23)
TSh 656.6 billion discrepancy between Exchequer Issues Warrants and
the Exchequer Release Report (p 29)
TSh 290.67 billion of unsupported overdraft (p 3)
TSh 234.12 billion of Exchequer Issues Warrants issued without proper
explanation (p 23-4)
TSh 189.99 billion unapproved withdrawals from the Consolidated Fund (p 19)
TSh 3.45 billion unjustified linked to cancellation of Exchequer Issue
Warrants (p 26)
TSh 3.26 billion incorrect Exchequer Issue Warrants (p 24)

“This makes them enticing propositions for the investors and therefore
more likely to yield handsome bids.”

With over 100 million people, Ethiopia has had one of the world’s
fastest-growing economies for years now. Yet the landlocked nation has
remained poor, with a per capita income below $800, according to the
World Bank. Its journey to become a lower-middle-income nation by 2025
has also been hampered, and currently ranks 167 out of 190 in the ease
of doing business.
These factors, coupled with foreign currency shortage, limited funding
options given escalating debt levels, a shallow domestic debt pool,
besides calls from global lenders to adjust its policies to strengthen
its economic competitiveness, has made privatization an inevitable and
attractive choice, says Signal Risk analyst Menzi Ndhlovu.

This month, authorities announced telecommunications company Ethio
Telecom will be the first of four state-owned firms to be
denationalized. Founded in 2010, the company is the sole voice and
data provider and caters to over 41 million customers. Abiy has said
the government plans to sell a 30 to 40% stake to top-rated industry
firms and will split the state-run company into two competing
businesses to spur competition.
One key test the privatization of Ethio Telecom will face is how much
control the government is willing to cede. The operator was used as a
critical tool in state surveillance and to silence dissenting voices,
according to Human Rights Watch.
Reports have also noted that if M-Pesa was rolled out, Safaricom would
host the servers in Nairobi—a move, Berhan Taye, an activist with
digital advocacy Access Now, says would raise questions over who will
have access to the personal and financial data of users.
“We don’t know who it’s being shared with. Once data crosses a border,
it’s a different conversation.”

On the same day he said, “we are in debt, we have to pay back but we
can’t. And secondarily, we aren’t able to finish projects we have
started” and announced his economic Pivot.
Of course, the downside risk of all this infrastructure is plain to
see and Sri Lanka and the tale of its Hambantota Port is now a cautio-
nary Tale. FX reserves were at less than a month’s worth of imports
and something needed to be done. Expectations are high.
The Prime Minister needs to execute real quick on the economic front
but if he levels the playing Field, a whole Troop of folks will be
looking to pile in. That Troop will include the Ethiopian Diaspora,
Foreign Investors and I am sure our very own Safaricom who must have
already presented the Prime minister with a copy of the MIT research
on M-Pesa which confirmed access to mobile-money services increased
daily per capita consumption levels of two percent of Kenyan
households, lifting them out of extreme poverty.

Kenya

The Finance Act, 2018 amended the Central Bank of Kenya Act (CBK Act)
to provide the legal framework for the licensing and regulation of the
mortgage refinance business and to bring the operations of Mortgage
Refinance Companies (MRCs) within the regulatory and supervisory
purview of the Central Bank of Kenya (CBK). MRCs will refinance
Primary Mortgage Lenders (PMLs) such as commercial banks, microfinance
banks and Saccos using funds from the capital markets so as to provide
affordable mortgages to eligible members of the public. In this
regard, and pursuant to Section 57(1) of CBK Act, the CBK has
formulated the draft Central Bank of Kenya (Mortgage Refinance
Companies) Regulations, 2019. The Regulations are intended to provide
a clear framework for licensing, capital adequacy, liquidity
management, corporate governance, risk management, and reporting
requirements of MRCs. CBK invites comments on the draft Regulations
through the email address fin@centralbank.go.ke