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Friday 15th of January 2016
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Macro Thoughts |
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11-JAN-2016 2016 Starts With A Bang @TheStarKenya Africa |
Home Thoughts
“You have wakened not out of sleep, but into a prior dream, and that
dream lies within another, and so on, to infinity, which is the number
of grains of sand. The path that you are to take is endless, and you
will die before you have truly awakened.” ― Jorge Luis Borges
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“All men who repeat a line from Shakespeare are William Shakespeare” ― Jorge Luis Borges, Labyrinths Africa |
“They seek neither truth nor likelihood; they seek astonishment. They
think metaphysics is a branch of the literature of fantasy” ― Jorge
Luis Borges, Labyrinths
“There is no need to build a labyrinth when the entire universe is
one.” ― Jorge Luis Borges
“Time is the substance I am made of. Time is a river which sweeps me
along, but I am the river; it is a tiger which destroys me, but I am
the tiger; it is a fire which consumes me, but I am the fire.” ― Jorge
Luis Borges, Labyrinths: Selected Stories and Other Writings
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The leader of al-Qaeda has called for attacks on Saudi Arabia, following the mass execution of 47 people in the Kingdom Law & Politics |
The leader of al-Qaeda has called for attacks on Saudi Arabia,
following the mass execution of 47 people in the Kingdom – many of
whom were tied to the extremist group.
Al-Zawahiri, the group's leader, announced the threats in a
seven-minute audio recording earlier this week, which was reported by
a US terror monitor, the SITE Intelligence Group said on Thursday.
In the recording the Egyptian militant leader urged his followers to
launch new attacks against the kingdom’s ruling Al Saud family, which
he called a “rotten regime that corrupted your religion”.
Al-Zawahiri dismissed the killing of al-Nimr as part of the
“Saudi-Iranian competition for power in the region”.
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Zimbabwe presidency dismisses Mugabe heart attack rumour Africa |
A rumor than Zimbabwean President Robert Mugabe has suffered a heart
attack is a "grim lie", his spokesman George Charamba said on
Thursday.
"This is the way the website seeks to improve its hits in order to get
dirty money from Google. There is a financial incentive to the grim
lie," Charamba told Zimbabwe's state-run newspaper The Herald.
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Ethiopia confronts its worst ethnic violence in years Africa |
The violence has also earned Ethiopia a rare rebuke from the U.S.
government, which considers it a key ally in the fight against
terrorism.
“We were protesting peacefully and marching around the town when we
heard about the deaths in the other villages, and so we became angry
and attacked the farm,” said 27-year-old Drabuma Terrafa, standing
near the charred remnants of a Solagrow potato warehouse.
Ethiopia’s federal police and army counterterrorism units have poured
into the state. In more than a dozen interviews, people described
arbitrary arrests, beatings and killings by security forces.
“I think the strategy is to terrorize people by shooting them point
blank,” said Merera Gudina, the chairman of the opposition Oromo
Federalist Congress party.
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Barclays's Africa Choice to Depend on Capital, Ex-Director Says via @business Africa |
Barclays Plc must decide whether its capital is best deployed in
Africa amid slowing growth in the continent’s biggest economy and a
need to further shrink its balance sheet, according to Michael Rake,
the bank’s former deputy chairman.
"Barclays has historically been in a very good position there, but is
suffering in South Africa economically,” Rake, who stepped down from
the British bank’s board at the end of 2015, said in an interview on
Bloomberg Television Thursday. "The question becomes around priorities
and capital. It’s a good business and the board, I’m sure, will
continue to keep under review its African position and how to handle
it."
Britain’s second-largest lender will give a strategic update alongside
its full-year earnings on March 1. Candice Macdonald, a spokeswoman
for Barclays in London, declined to comment on the bank’s plans for
Africa.
Barclays shares tracked a slide by world equity markets, falling 3.9
percent to 193.9 pence at 10:55 a.m. in London and extending their
decline to 11 percent this year. McFarlane pledged in July to double
the share price over the next three to four years. Barclays Africa,
which trades in Johannesburg and has a market value of about $6.6
billion, fell 1.6 percent to 130 rand and is down 9.6 percent this
year.
In Africa, where Barclays has operated for almost a century, pretax
profit slipped 7.7 percent in the third quarter, compared with
increases at the credit-card and personal and corporate-banking
divisions. The region reported a return on equity of 9.7 percent in
the third quarter, above the 9.3 percent level for 2014, but below the
bank’s target of at least 11 percent.
In the region, the bank had 52.2 billion pounds ($75 billion) of
assets, about 14 percent of its total, as of Sept. 30 and employed
44,700 people in Africa and the Middle East at the end of 2014,
according to its annual report.
"It’s for the Barclays board to judge the future of Africa," Rake
said. "If you take a long-term view, Africa could be very important,
as it has five of the fastest-growing economies."
Political and economic turmoil has made Barclays’s job more difficult.
President Jacob Zuma has taken South Africa to the brink of a junk
credit rating and caused the rand to plummet against the dollar last
year after he fired his finance minister and replaced him with an
unknown lawmaker.
Staley and McFarlane have frozen hiring indefinitely and are planning
to cut 20 percent of staff at the investment bank. Rake, who was
deputy chairman for more than three years, said Barclays will
prioritize advisory and execution businesses, such as mergers and
acquisitions and debt capital markets, and cut back in the "so-called
casino banking area."
“I think the focus would be at the moment on London, New York, perhaps
with Tokyo, Hong Kong and Shanghai, but really being able to serve
global clients,” Rake said of his “personal view” for the best
geographic distribution for the investment bank.
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Acrimonious Exit of Nene Hits Africa's Economy, @TheStarKenya Africa |
The markets are not interested in Zuma’s explanations, they are seeing
a South African president who has gone rogue.
The signal emitted by Nene’s unceremonious sacking, has criss-crossed
the world and imperiled the South African Economy. The economy which
was barely growing is going to contract. The cost of living and the
cost of borrowing is going to spike big.
The first- and second-round effects are going to shudder South Africa Inc.
And the scariest part for South Africans is this: The president just
doesn’t get it.
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Water politics Sharing the Nile Economist Africa |
The Renaissance Dam is merely the latest test of countries’
willingness to share water. There may soon be more difficulties.
Ethiopia plans to build other dams on the river, which could further
affect downstream supply. Sudan has promised foreign investors an
abundance of water for irrigation. If Egypt is made to feel at the
mercy of its neighbours, it may not have finished rattling its sabre.
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Nigeria stocks hit 3-1/2-year low as funds sell on naira woes Reuters Africa |
The naira has dived 34 percent on the black market compared with its
official level of 197 after the central bank stopped dollar sales to
retail currency outlets. The move has intensified speculation that
Africa's top oil producer will have to formally devalue its currency
soon.
"With crude oil prices down, accretion to FX reserves is out of the
question ... putting investors on red alert. The central bank may not
be able to meet all the demand for FX even if it were to devalue,"
said Ayodeji Ebo, head of research at Afrinvest.
the share index, which has the second-biggest weighting after Kuwait
on the MSCI frontier market index, has fallen for five straight days,
sliding below the psychologically important 25,000 point line not seen
since September 2012.
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SABMiller Shuts South Sudan Unit on Foreign Currency Deficit Africa |
SABMiller Plc will close its brewing operations in South Sudan, the
only beer factory in the world’s youngest country, by mid-February as
a foreign-currency shortage curtails its ability to import raw
materials.
The company will cut as many as 176 jobs by the end of March, said
Carlos Gomes, the managing director of South Sudan Beverages Ltd. The
brewer has failed to make a profit in the war-torn country since
setting up the nation’s first brewery in 2009, he said in an interview
in October.
South Sudan devalued its currency by 84 percent last month in favor of
a floating regime when it adopted the parallel market’s rate of 18.5
pounds per dollar from a previous fixed rate of 2.96.
“We have for many months not had access to any significant amount of
forex,” Gomes said in response to e-mailed questions. “We had large
South Sudan pound deposits in the bank at the time the devaluation was
announced. The end result is that we incurred a loss of tens of
millions of dollars, placing SSBL in an even worse position than it
was.”
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Kenya tests international appetite for new debt sale @FT Kenyan Economy |
Kenya is gauging international appetite for new sovereign bonds as
investors warn that weakening emerging markets will push the country’s
borrowing rate above 10 per cent. Henry Rotich, Kenya’s finance
minister, said the country was planning an international roadshow for
new long-dated bonds, while also exploring alternative means of
raising external budget support.
These could include a soft loan from the China Development Bank,
Islamic financing, export credit arrangements and the sale of debt
denominated in Japanese yen, known as samurai bonds.
“We just want to expand our menu,” Mr Rotich told the Financial Times
in an interview. “Which one to pick depends on how quick we can pick
one.”
Kenya’s announcement follows news that Nigeria and Mongolia are also
planning to issue debt despite dwindling investor appetite for bonds
sold by developing countries. Falling bond prices mean countries that
paid 5 or 6 per cent to borrow on markets two years ago now face rates
of 10 per cent.
“Kenya is lucky that it can still issue,” said Kevin Daly at Aberdeen
Asset Management. “Ghana and Zambia have been shut out of markets by
prohibitively high yields. For Kenya, issuance will be challenging but
the last bond sale did well and there is likely still appetite.”
Prices for the country’s five- and 10-year bonds have dropped sharply
since last year, pushing the yield on Kenya’s 2024 bond from 5.97 per
cent in April to 9.45 per cent.
Kenya hopes to boost its standing with international investors by
securing an extension of standby facilities from the International
Monetary Fund before holding a bond roadshow in February or March.
The roadshow “is basically to meet investors and gauge appetite for
our longer-term bonds”, said Mr Rotich. “If we were to issue another
eurobond, could we look at 15 years, 20 years, I’ve seen countries
that have done 30 years.”
As a net oil importer, Kenya has benefited from the slump in oil
prices and the government expects growth to reach 5.8 per cent for
2015, and 6.1 per cent in 2016.
However the country’s debt burden has grown to equal 56 per cent of
GDP, a high level for EMs and the budget deficit target for 2015-16 is
8.7 per cent. To limit the pressures, Kenya plans to diversify its
sources of credit.
Mr Rotich said he was in discussions with the China Development Bank
for a budget support loan of $600m at a rate of about 3.65 per cent
above the London interbank offered rate (Libor).
Kenya is also scheduled to host an Islamic financing conference next
month, although Mr Rotich said it would take up to two years to issue
any sukuk (Islamic bond) because the country’s banking law would first
have to be amended.
East Africa’s largest economy was one of the most successful
participants in the recent EM credit boom, breaking records in 2014
for the biggest sovereign bond debut by an African country.
About $600m of the $2bn money raised was used to pay off a syndicated
loan while the remainder was mostly spent on development
infrastructure projects such as roads, rural electrification and
health projects.
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11-JAN-2016 Which brings me back to East Africa and Kenya. There is a massive trend- change occurring Kenyan Economy |
Which brings me back to East Africa and Kenya. There is a massive
trend- change occurring in front of our eyes in what was a previously
intractable problem, the perennial current ac- count deficits. This is
an important point to note. Our import bills [fuel and associated
product are the single biggest expense item] have cratered. At current
prices, I estimate Kenya is on-side by $150 million a month. This is
big and this is why the shilling has turned ‘teflon’. In fact, whilst
Kenya still runs behind Tanzania and of course Ethiopia on a GDP
basis, this part of Africa is now outperforming the rest of
sub-Saharan Africa and the outperformance is accelerating and we might
just find ourselves in a sweet spot.
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21-DEC-2015 The Teflon Shilling and Other Matters @TheStarKenya Kenyan Economy |
What’s going on you might well ask?
Oil accounts for about a quarter of Kenya’s annual import bill.
According to latest data, Kenya imported Sh177.2 billion worth of fuel
and lubricants between January and September, a 34.66 per cent drop
from the Sh271.2 billion it took in during the same period last year.
That’s a Sh94 billion swing and nearly a $1 billion. That’s $1 billion
of dollar demand that has evaporated. Since September, the price of
fuel has tanked more than 20 per cent further accelerating this trend.
Ear- lier in the year, I spoke of how this $1 billion boost would
underpin our economy by providing a powerful grassroots stimulus.
However, what has happened is that the govern- ment has creamed off a
great deal of this by raising taxes on the price of fuel and thereby
improving its fiscal position and this has blunted the price move at
the pump.
Other factors that are supporting the shilling are the bona fides of
the Central Banker. The regime change at the apex bank has been
extremely well received by the markets.
The political hullabaloo around the Eurobond is now being discounted
because no one in fact believes that there was a Sh140 billion heist.
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Kenya aims to cut external, fiscal deficits - fin min Kenyan Economy |
Kenya's economy is expected to grow 6.1 percent in 2016 and the
government wants to trim ballooning budget and current account
deficits to steady the economy, its finance minister said on Thursday.
Kenya, East Africa's biggest economy, set a budget deficit target of
8.7 percent for the 2015/2016 fiscal year starting July, unnerving
some investors who were also uneasy about Kenya's current account
deficit, which stood at above 8 percent.
The current account deficit was fuelled by a growth of imports like
oil and consumer goods which was not matched by growth in exports. The
budget deficit swelled due to increased spending on infrastructure
projects and local government units created in 2013.
Officials and investors say the government has to deal with the
deficits to boost investor confidence and stave off instability in the
currency and borrowing rates. The shilling lost 11 percent against the
dollar in 2015, but faired better than most African currencies.
Finance Minister Henry Rotich said the global slump in the price of
crude oil had helped the country's current account deficit to improve
due to a lower import bill.
"With the measures we are taking to cut the fiscal deficit, the twin
deficits will obviously go down," he told Reuters by phone.
"We are aiming at around 6.5 percent (current account deficit) and
also getting our fiscal deficit, including grants, coming down to
about 4.5 percent."
He said Kenya was reviewing all government ministries' expenditure
plans for this fiscal year with a view to cutting unnecessary items
and reducing borrowing.
"By the end of this month we will have known what savings we are
likely to achieve from the exercise," he said, adding the measures
will be contained in a supplementary budget to be taken to parliament
for approval.
Growth was expected to be 6.1 percent this year, slightly up from last
year's projection of about 5.8 percent. Rotich said growth will be
driven by public investments in infrastructure, a recovery in tourism
and farming.
"We are still seeing infrastructure supporting the growth.
Construction remains strong. We see recovery of tourism boosting that.
With the favourable weather, we see agriculture will also be strong,"
he said.
The government is investing in a Chinese-built 327 billion shilling
($3.2 billion) modern railway, tarmac roads and power plants. Tourists
have started to return to the country's beaches and game reserves
after key Western markets like Britain lifted travel warnings.
Rotich said the main risks to Kenya's growth outlook were global
developments including any slowdown in the Chinese economy, the
direction of the oil price and U.S. interest rates.
"The risks continue to be external developments. It has become
difficult to get a full feel of forecasts for global economic
developments," he said, adding the main risk at home was any adverse
weather like poor rainfall.
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Barclays Africa to shut down Nairobi office over redundancy Kenyan Economy |
Barclays Africa Group will close its regional management office based
in Nairobi shifting all support role to its South Africa premises.
The office will be closed in March.
The move is expected to see redeployment of over 30 staff based here
but will not affect Barclays Bank Kenya employees.
Barclays Africa Group, which in 2013 revealed plans to raise its
revenues from the continent and make it account for 20-25 per cent of
its returns by 2016, said the move was meant to streamline its
operations on the continent.
“Barclays Africa Group Limited (BAGL) can confirm that it will close
down its regional operations and technology management office in
Nairobi, Kenya by 31 March this year. Our Africa operations will
continue to be supported by the pan-African regional centre based in
South Africa,” a statement from Barclays Africa Group read.
National Bank Says Kenyan Government Stalls Its Expansion
http://www.bloomberg.com/news/articles/2016-01-14/national-bank-says-kenyan-government-stalls-its-expansion-plans
National Bank of Kenya Ltd. pushed back targets to strengthen its
balance sheet after the government failed to approve proposals by the
state-controlled lender to raise capital, Chief Executive Officer
Munir Sheikh Ahmed said.
National Bank, which has total assets of 118 billion shillings ($1.2
billion), requires 7 billion shillings in fresh capital to enable it
to compete with lenders including Barclays Bank of Kenya Ltd., Ahmed
said in an interview Wednesday in the capital, Nairobi. Barclays is
Kenya’s fifth-biggest bank by assets, while National Bank currently
ranks 10th, according to data compiled by Bloomberg.
“The bank needs capital to grow at a rapid pace, but this has been
delayed,” Ahmed said. “We are relying on profit generated
month-on-month to grow the balance sheet. Trading profit becomes part
of capital. It’s pure organic growth and that’s a slower pace.”
Kenyan Treasury Secretary Henry Rotich said in October the government
is considering merging National Bank with Consolidated Bank of Kenya
Ltd., Development Bank of Kenya Ltd. and other state-owned lenders as
part of a plan to sell government assets to private investors. Rotich
also proposed in his annual budget in June that minimum capital
requirements be raised to promote consolidation in the banking
industry, though that plan was rejected by lawmakers after opposition
from the central bank.
The proposed merger of the state-owned banks “doesn’t take away our
strategy to grow to top-tier status,” Ahmed said.
National Bank shares climbed 1.2 percent to 16.85 shillings on
Wednesday, bringing it’s gain to 6.3 percent this year. The lender’s
price-to-earnings ratio stands at 2.64, compared with 6.29 at Kenya
Commercial Bank Ltd., the nation’s biggest lender by assets.
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The Teflon Shilling and Other Matters @TheStarKenya 21-DEC-2015 Kenyan Economy |
What’s going on you might well ask?
Oil accounts for about a quarter of Kenya’s annual import bill.
According to latest data, Kenya imported Sh177.2 billion worth of fuel
and lubricants between January and September, a 34.66 per cent drop
from the Sh271.2 billion it took in during the same period last year.
That’s a Sh94 billion swing and nearly a $1 billion. That’s $1 billion
of dollar demand that has evaporated. Since September, the price of
fuel has tanked more than 20 per cent further accelerating this trend.
Ear- lier in the year, I spoke of how this $1 billion boost would
underpin our economy by providing a powerful grassroots stimulus.
However, what has happened is that the govern- ment has creamed off a
great deal of this by raising taxes on the price of fuel and thereby
improving its fiscal position and this has blunted the price move at
the pump.
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