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Monday 11th of April 2016 |
Afternoon 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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Inside Story - What will Djibouti's elections mean for stability? @AJEnglish @AJENews Video Africa |
Published on Apr 8, 2016 It's a country with fewer than a million people and very limited natural resources, yet Djibouti is courted by world powers. That's because of its strategic location at the entrance to the Red Sea and south of Suez. Relatively stable, it has drawn the attention of military planners in Japan, China, France and the US, who have all set up military bases there. Incumbent president Ismail Omar Guelleh has been in power for 17 years but the opposition accuses him of not doing enough to deal with the country's high unemployment. According to the World Bank, 20 percent of the population lives in poverty. Not everyone has been enthusiastic about the vote, some opposition parties boycotted it. Voters in the tiny east African nation of Djibouti cast their ballots to pick a president. After claims of repression and unfair constitutional change, the election is not without controversy. What will it mean for stability? What are the global implications from a strategically important part of the world?
Presenter: Sami Zeidan
Guests:
Hamidou Wone - Specialist in conflict management who served as a diplomat in the Horn of Africa
Aly Khan Satchu - Emerging economy specialist in Nairobi
Thomas-John Guinard - Legal officer in charge of Djibouti at the human rights organisation, Alkarama
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Beijing risks 'ERM-style' currency crisis as deflation persists Africa |
A top adviser to the Chinese government has warned that Beijing risks a currency blow-up akin to Britain's traumatic ordeal in 1992, if it continues trying to defend its exchange rate peg amid a deepening deflation crisis.
Yu Hongding, a director of the Chinese Academy of Social Sciences, said China is caught in two concurrent "deflationary spirals" that are feeding on the other. A major devaluation and a blast of well-targeted fiscal stimulus will be needed to break out of the trap.
"They must stop intervening on the exchange market. China needs to devalue by 15pc. They are creating conditions for speculators," he told the Daily Telegraph, speaking at the Ambrosetti forum of global policymakers on Lake Como.
Prof Yu, a former rate-setter for the central bank (PBOC) and currently a member of the national planning committee, said the government is making a serious mistake in trying to defend the yuan by burning through foreign exchange reserves, already down to $3.2 trillion from $4 trillion in mid-2014.
He warned that the slowdown in capital outlows in March may prove fleeting. "Reserves will continue to fall until we devalue. Once we get towards $2 trillion the markets will start to panic. They won't believe that the government can control it any longer," he said.
Home Thoughts
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The world looks away as blood flows in Burundi Africa |
More than a quarter of a million people have fled in terror as opposition militias plot their return. Without international assistance a humanitarian disaster looms
“Blood flows everywhere in Burundi, that’s how things are,” said the young farmer, rolling up his trouser legs and a shirt sleeve to show cuts and bruises almost as raw as his anguish
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After 25 years in power, Chadian President Idriss Deby is seeking a fifth term in office at elections on Sunday (10.04.2016). Africa |
In the foreign policy arena, Deby can claim to have had some success. He is regarded as an important player in the struggle to defeat the Nigerian Islamist militant group Boko Haram, the French military in Mali value him highly, he was welcomed to the White House by US President Barack Obama, and he is also the chair of the African Union.
However, Sunday's elections in Chad will differ from those at which Deby triumphed five years ago. This time they will not be boycotted by the opposition. There are 13 candidates running against Deby, who also faces protest from the street.
Conclusions
Another Election whose chronicle was foretold.
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The Panama Papers' growing impact on Africa Africa |
The twin sister of DRC's leader Joseph Kabila twin sister, the nephew of South Africa's President Jacob Zuma and business people allegedly linked to Zimbabwe's President Robert Mugabe are all named in the Panama Papers. The Mossack Fonseca leak – the biggest data leak ever - have revealed the names and alleged financial affairs of top officials from at least 15 different sub-Saharan African countries or people linked to them have been named.
While the practice of keeping money abroad is not illegal, the revelations by the International Consortium of Investigative Journalists' (ICIJ) team of about 400 journalists have made global headlines. African Union chairwoman Nkosazana Dlamini-Zuma said the African money kept in foreign banks should be repatriated to the continent.
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Africa |
Even so, as his popularity with voters withers, his grip over the party is slipping.
The Constitutional Court verdict was a reminder that even presidents are supposed to obey the law. The ANC, by sticking with a leader who appears not to believe this, is making a mockery of the democracy that it and others fought so hard to establish.
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https://next.ft.com/content/fd59fb30-fe50-11e5-99cb-83242733f755 Africa |
“The opportunity now, with the renminbi being a reserve currency, we are looking obviously at the lowest cost of funds to fund our budget deficit. Initially we were looking simply at the eurobond but then we began to explore opportunities in the renminbi market so there is a possibility of issuing a panda bond,” Kemi Adeosun told the Financial Times and Reuters in an interview. Panda bonds are renminbi-denominated debt sold by foreigners into China’s bond markets.
The priority, Ms Adeosun said, is to borrow “the cheapest possible money” — a total of 1.8tn naira ($9bn) from international and Nigerian markets. She said it seemed that a renminbi-denominated bond would be cheaper than issuing a eurobond. She also said that, given Japan’s negative interest rates, “there’s the possibility of doing a Samurai [yen-denominated bond] which is also an option we’ll look at. We’re simply shopping around for the best deals.”
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Africa's great opportunity for reform Kevin Watkins ODI Africa |
First the bad news. After fifteen years in the global economic growth fast lane, sub-Saharan Africa is reeling from the effects of falling commodity prices, depressed Chinese demand, and deteriorating financial conditions. The IMF has revised growth forecasts down to 3.5% for 2016, from an annual average rate in excess of 5% since 2000.
Now for the good news. Africa’s economic slowdown is a wake-up call and an opportunity to rethink an economic model that is failing. The impressive growth record of the past 15 years has roughly doubled output, but with limited results for poverty reduction, job creation and productivity. Already extreme inequality is rising in many countries.
Manufacturing has stagnated.
The challenge for policy-makers is to set a course for recovery that supports more inclusive growth, while preparing the ground for an economic transformation.
Meeting that challenge in the midst of an economic downturn will not be easy. Having ridden the wave of the commodity super-cycle, Africa has been hit hard by the slump in oil and metal prices. Dependent on oil for 70% of government revenue, Nigeria has been forced to turn to the World Bank and the African Development Bank for an emergency loan to plug an expanding budget deficit. Weak commodity prices are magnifying already unsustainable fiscal deficits in Ghana and Zambia.
Eurobond markets that two years ago looked like a source of ‘cheap money’ are delivering their own verdict. The combination of currency devaluation, shrinking foreign exchange buffers and slower growth has pushed typical yields on African bonds from 3-4% two years ago to 8-9% today.
Real as the immediate costs of adjustment are, they should not deflect attention from the deeper failures. While economic output has doubled over the past fifteen years, poverty incidence has fallen modestly – from 57 to 42% – and the number of poor has risen with population growth.
To make matters worse, the region’s competitive position has deteriorated relative to emerging markets like Vietnam and Bangladesh. Adjusted for productivity real wages are higher, especially for skilled labour. The costs of transport are prohibitive: exporting a container from sub-Saharan Africa typically costs $2,200 (£1557) compared with $610 for Vietnam. Africa’s energy grid produces less electricity than Argentina, forcing firms to install high-cost, low efficiency diesel generators.
To make matters worse the quality of education is abysmal. In Vietnam, sustained growth has been underpinned by the development of an education system that is producing learning outcomes to rival those in the UK. Tanzania is seeking to achieve universal secondary schooling. But after five years of schooling, fewer than half of the country’s children can pass a grade 2 numeracy test – and the case is not untypical.
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Read the full press release @CbkKenya Kenyan Economy |
CENTRAL BANK OF KENYA INTRODUCES LIQUIDITY SUPPORT FRAMEWORK FOR COMMERCIAL AND MICROFINANCE BANKS
The Central Bank of Kenya (CBK) is concerned about the anxiety that continued in the financial sector at the end of last week. This follows the placement of Chase Bank Limited under receivership on April 7, 2016, due to its inability to meet its financial obligations. This followed inaccurate social media reports and the stepping aside of two of its directors. Although the CBK is confident about the strength of the banking sector, we wish to reinforce our support to the sector.
Consequently, from tomorrow Monday, April 11, 2016, we will avail a facility to any commercial or microfinance bank that comes under liquidity pressures arising from no fault of its own. We will avail this facility for as long as is necessary to return stability and confidence to the Kenyan financial sector.
We have confidence in the rigor and strength of our banking sector and will continue to monitor and oversee full compliance to our laws and regulations. As has also been indicated, firm action will be taken against those who have abused their fiduciary positions of management of our financial institutions.
CENTRAL BANK OF KENYA April 10, 2016
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Kenya steps up support for banks @FT Kenyan Economy |
Kenya’s central bank offered to extend emergency support on Sunday to any institution that faces liquidity problems through no fault of its own amid rising depositor anxiety about the health of the financial services sector in east Africa’s largest economy.
The offer comes days after the Central Bank of Kenya placed the medium-sized Chase Bank into receivership after a run on its reserves following the removal of two senior executives and widespread social media rumours about the state of the lender.
Chase is the third bank to be placed into receivership since Patrick Njoroge became central bank governor last June and introduced a much tighter supervisory regime. The police issued arrest warrants on Friday for two Chase executives and six from a fourth bank, the National Bank of Kenya, further raising concern.
Mr Njoroge told a hastily called press conference on Sunday evening that, while he was confident about banking sector stability, he recognised the “fear, anxiety out there”.
“From Monday, we will avail a facility to any bank or microfinance institution that comes under liquidity pressures for no fault of their own,” he said. “We will avail this facility for as long as is necessary to return stability to the Kenyan financial sector.
“I am sure depositors, once they know, that this support can be provided to their institutions, they will be calm, and calm will be restored.”
He said no upper limit would apply to the facility.
Over the past few months a flight to quality has been noticeable as depositors move their funds away from the smaller of Kenya’s 42 banks. The largest seven institutions control some 80 per cent of the market.
On Friday, Mr Njoroge called on banks to consider merging or taking on strategic investors. He warned that some institutions “might feel some heat” from his tightening regulatory regime.
The governor, who has taken a much tougher approach to banking supervision than his predecessors, issued a thinly veiled warning that banks should consider 2016 as a “transitional year”.
“The idea is that banks will strengthen their business models to be more resilient and so they will be more stable,” he told a press conference. “No one is an island and so some of the banks might feel some heat from this [tighter supervision].
“This will inevitably require some consolidation. That means some banks need to look for strategic investors.”
Habil Olaka, chief executive of the Kenyan Bankers Association, said the immediate “pressure is starting to subside” but agreed that “things are becoming much tougher. That is apparent”.
Mr Njoroge said the circumstances at Chase, National Bank and the two other banks placed in receivership — Dubai Bank of Kenya and Imperial Bank — were all “isolated”.
But analysts believe Kenya’s banks will have little choice but to heed the governor’s advice as the effects of his stricter supervisory regime are felt.
Adesoji Solanke, of Renaissance Capital, said the sector was “very lopsided”.
“Of course they need some consolidation, there are just too many banks,” he said. “There’s a lot of cleaning up going on and I think there will be more, but it should result in a stronger banking sector eventually.”
Aly-Khan Satchu, a Nairobi-based independent analyst, said he thought Mr Njoroge and Mr Rotich were trying to “make consolidation an orderly process”. However, he warned that they might not be able to control the situation should depositors panic if more banks became mired in improper conduct.
“Trying to hold back market forces is like standing in the way of a freight train,” he said, adding that up to 10 banks were at risk of being taken over in the short-to-medium term.
Bob Collymore, chief executive of Safaricom, Kenya’s dominant telecoms company and a vocal proponent of fighting private sector corruption, welcomed the authorities’ moves against alleged rogue bankers.
“It’s about bloody time,” he said. “We have so much opacity in this economy that the poor guy who is trying to run a small business hasn’t had a hope in hell’s chance.”
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[This is what I wrote] 11-APR-2016 ::Core Banking System is Sound Kenyan Economy |
On Thursday [the decision was made at 4 am in the morning], the Central Bank placed Chase Bank into receivership. Chase Bank on Wednesday published results in the Standard newspaper showing that its earnings dropped from a profit of Sh2.3 billion in 2014 to a loss of Sh742 million in 2015. Loans to employees and directors in 2016 amounted to 13.6 billion shillings versus the 3.24 billion shillings reported the previous time. That 13.6b figure was about 50% more than the core capital of the Bank. Chase Bank's non performing loans jumped from Sh3 billion in 2014 to Sh11 billion in 2015. Evidently, it is impossible to get a 360 degree perspective because the situation remains really fluid. Deloitte Kenya qualified the Accounts, this qualification was miniaturised in the Standard Newspaper Earnings Restatement and Release. A Qualification of the Accounts is no small thing and the act of miniaturising that Qualification is hardly helpful either. The Chairman Zafarullah Khan and his side-kick Duncan Kabui are wanted [as are the 5 National Bank Officials who also recently were sent on leave].
Chase Bank is the third Bank the Central Bank of Kenya has taken over since Patrick Njoroge became governor last July. A fourth bank National Bank has sent its chief executive and five senior managers on leave while its accounts are investigated. The First overarching Point to note is that we have now entered a new more ''rules-based'' system of regulation. What is also clear is that we were previously in a more permissive environment. Tier 3 Banks are finding themselves at the Bleeding Edge of this move to a more ''rules-based'' System. Years of resisting increased Capital requirements, has meant that these Tier 3 Banks are pirouetting their businesses on ''wafer-thin'' capital. Recent Events [Dubai Bank, Imperial Bank, National Bank and Chase Bank] now means Investors and Depositors are placing considerably less credence on the accounts as presented. Then in a ''Double-Whammy'', Depositors have embarked on a Deposit Flight to Quality further undercutting them. Without Shareholders now stumping up bucketloads of Capital, these Banks are in effect now ''Zombie'' Banks. The Process of Consolidation is now market-led. I appreciate the Authorities are keen to keep this orderly and not allow it to turn disorderly. The important Point for the Authorities is not to provide a blanket ''Put'' Option and to erect a Firewall in the right place. The Central Bank Governor has a fiendishly difficult Brief.
Social Media is not responsible for these Banks being placed into receivership. When You filter out the Noise, Social Media has proven a pre-eminent Signal and Early Warning System. In fact, I would argue that recent events confirm the need for real-time surveillance. I recall many years ago the totemic Hans Joerg Ruedloff [who was then Chairman of Credit Suisse First Boston] telling me ''CSFB does not takes [credit] losses'' meaning you get caught on the wrong side of a Chase Bank type event and You're fired. I would have thought recent events make a Prima Facie Case for Real Time Surveillance both at the level of the Regulator and at the level of various Credit Committees. The Cutting Edge of the Financial Markets has already moved in this direction. Smart Money flew the day after Imperial Bank, I am afraid to say.
There was an interesting story in the Sunday Nation, implying that the Events as played out were a part of an elaborate Bear Raid by International Investors, who were looking to upscale their shareholding in Chase Bank. Let me take you back to 2008, when Lehman crashed and Bob Diamond [then CEO of Barclays PLC] paid just about any price [to the State of Qatar and this arrangement became the subject of some controversy] to keep Barclays out of the clutches of a State Rescue. The Point I am making is that the Game is lost the moment you are placed in receivership. Thats what Bob Diamond understood.
Kenya has 42 banks or one Bank per million. This is sub-optimal. The more optimal Outcome is Fewer but bigger Banks. It is clear now that market Forces have the bit between their Teeth and that we are now embarked on a market-led consolidation process.
Across the Economy, we are witnessing a Flight to Quality. The Stock Market is placing a Premium on Companies they feel are properly governed [EABL, Safaricom, KCB and so forth], where they know they will not be caught out by an announcement that overnight the entire Capital and more has been lent out to Insiders. The Market is now placing an enormous discount on those Companies where they feel Governance is challenged. This Trend has a lot further to run.
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Every Listed Share can be interrogated here Kenyan Economy |
Kenya to receive USD 600m loan from China Kenya is in the process of finalizing an agreement with China for a USD 600m loan to be channeled towards bridging the budget deficit for the current fiscal year, which is anticipated to decline to KES 522.3bn from KES 569.2bn according to the draft budget policy statement released by the National Treasury in February. The National Treasury is targeting a budget deficit of 6.9% of GDP in the 2016/17 fiscal year compared to a revised 8.1% in the current fiscal year. The National Treasury has in the recent past announced plans to reduce expenditure by about 1% alongside reduction of net domestic borrowing for the 2015/2016 fiscal year by about 25%.
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N.S.E Today |
The Central Bank held a Press Conference on Sunday Evening where the Governor Patrick Njoroge announced ''Consequently, from tomorrow Monday, April 11, 2016, we will avail a facility to any commercial or microfinance bank that comes under liquidity pressures arising from no fault of its own. We will avail this facility for as long as is necessary to return stability and confidence to the Kenyan financial sector.'' The Proviso ''from no fault of its own'' is an important one. On Friday, Mr Njoroge called on banks to consider merging or taking on strategic investors. He warned that some institutions “might feel some heat” from his tightening regulatory regime. [Financial Times] The governor, who has taken a much tougher approach to banking supervision than his predecessors, issued a thinly veiled warning that banks should consider 2016 as a “transitional year”. “This will inevitably require some consolidation. That means some banks need to look for strategic investors.” Habil Olaka, chief executive of the Kenyan Bankers Association, said the immediate “pressure is starting to subside” but agreed that “things are becoming much tougher. That is apparent”. Aly-Khan Satchu, said he thought Mr Njoroge and Mr Rotich were trying to “make consolidation an orderly process”. In my opinion, we have now embarked on a Process of consolidation in the Banking sector and what we can predict is that we are headed to a place with less than 42 Banks. The central bank offered banks Sh10 billion ($99 million) in 28-days reverse repos, moving away from its usual seven-day reverse repos. The Kenya Shilling struck an 8 month High against the Dollar and was last trading at 101.09. The Nairobi All Share closed 0.83 points lower at 145.67 The NSE20 retreated 40.77 points to close at 3958.57. Equity Turnover clocked 328.119m
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N.S.E Equities - Agricultural |
Kakuzi traded 96,600 shares [0.49% of its shares] worth 30.429m all at 315.00 -4.26%. Kakuzi reported a +229.498% Surge in FY15 EPS and confirmed in that Earnings Release that ''Avocado was dominant in returns but Tea and forestry made useful contribution to profits'
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N.S.E Equities - Commercial & Services |
Safaricom eased -0.3% to close at 16.70 and traded 1.693m shares.
Kenya Airways improved +1.14% to close at 4.45 ahead of the CEO Mbuvi Ngunze holding an Analyst Briefing tomorrow.
Nation Media ticked +1.72% firmer to close at 177.00 on light trading.
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N.S.E Equities - Finance & Investment |
Business Daily carried a report this morning that said ''The Joshua Oigara-led KCB was Sunday night said to be in pole position to buy the troubled lender whose most valuable asset is its control of the small and medium-sized enterprises (SMEs) market where growth has been strong and returns big'' And that The list of suitors included Equity Bank, Commercial Bank of Africa, I & M Bank and investment firm Centum, which is said to be keen on merging Chase Bank operations with its SME-focused associate Sidian Bank (formerly K-Rep).
Kenya Commercial Bank closed unchanged at 42.00 and was trading at 42.50 +1.19% at the Finish Line. KCB traded 3.488m shares worth 147.348m. The current Environment [Flight to Quality and also a Pipe-line of M&A Opportunities] is surely one that favours KCB and I would venture Standard Chartered. KCB sits 1.17% beneath a 2016 Closing High. Standard Chartered closed at 249.00 +0.4% and remains an eye-popping +27.69% in 2016. Equity closed unchanged at 40.25 and traded 1.096m shares.
National Bank rebounded 5% to close at 10.50 and traded 98,200 shares. The Treasury spoke to a possible 3 way merger between National Bank, Consolidated Bank and Development Bank and this might have encourage Bottom-Fishers. NBK remains -21.93% in 2016.
Pan Africa Insurance rebounded +7.38% to close at 40.00 and traded 1,400 shares but remains -33.33% in 2016.
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