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Satchu's Rich Wrap-Up
Friday 15th of April 2016

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Macro Thoughts

Home Thoughts

I thank the British High Commissioner for the Invitation yesterday to
the #EatTweet4 Meet-Up.

read more

@tunajibu it's a privelege to be at the @HCNicHailey #EatTweet4

I thank the @Kenya_Chamber's Chairman Kiprono Kittony for the Invite
yesterday and of course I am rooting for Kip.

read more

The Serena The Star

MY memories of the Serena start in Mombasa years back when the
managing director Mahmoud Jan Mohamed was the manager. I was then a
teenager and remember losing my heart to a girl, who would beat me at
table tennis, in a bikini. That table tennis Table is still there. The
Serena brand has always been sprinkled with a fairy dust and reminds
me of happy; joyful; carefree: halcyon days of youth.

I want to be somewhere like this, with my Wife feeding me Fresh Crab
in a Bikini. How about that?

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New 125-foot infinity pool and adjoining Ocean Grill, serving fresh seafood and other snacks.

“The fault, dear Brutus, is not in our stars, but in ourselves.” ―
William Shakespeare, Julius Caesar

read more

Hannah Fine Dining The Polana Maputo

"The future enters into us, in order to transform itself in us, long
before it happens." -- Rainer Maria Rilke

"A billion stars go spinning through the night, / glittering above
your head, / But in you is the presence that will be / when all the
stars are dead." -- Rainer Maria Rilke

read more

Erdogan Sees Evil in `Lord of the Rings' Where Others See Good
Law & Politics

Turkish President Recep Tayyip Erdogan’s lawyers are about to come
face to face with “The Lord of the Rings.”

Six months ago, family doctor Bilgin Ciftci lost his job for posting
photographs online that appeared to liken Erdogan to Gollum, one of
the most infamous creatures from J.R.R. Tolkien’s epic fantasy novel.
The doctor was charged with insulting the president. Now, his freedom
hinges on a Turkish court’s reading of an existential question about
good and evil: Was Gollum "bad?" Or was he simply corrupted by power?

The affair might seem like a quirky one-off, except it’s one of
thousands of cases that Erdogan’s lawyers are pursuing against alleged
insults to the president, a crime punishable by more than five years
in jail. Like many of them, this one concerns what a private
individual can -- and cannot -- say on social media. And with the case
drawing more and more publicity, it’s becoming emblematic of a broader

"It’s only the absurd tip of a very large iceberg. There are thousands
of insult cases like this being opened up at the moment in Turkey, and
often on very shaky ground," said Aykan Erdemir, a senior fellow at
the Foundation for Defense of Democracies in Washington and formerly
an opposition member of Turkey’s parliament. "This is not a trivial


Erdogan is evidently a trivial Fellow who does not forgive easily and
has a Big Ego.

“It's a dangerous business, Frodo, going out your door. You step onto
the road, and if you don't keep your feet, there's no knowing where
you might be swept off to.” ― J.R.R. Tolkien, The Lord of the Rings

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The Peninsula #panamapapers are 'provocation': #Putin
Law & Politics

This speaks to my point about the absence of any North american Names
which is such a statistical outlier it undermines the credibility of
the leak.

read more

2016 Terrorism & Political Violence Risk Map AON Risk Solutions
Law & Politics

Terrorism and civil disquiet loom large, but the most
business-threatening risks are war and sudden changes in government.
These are less manageable and less foreseeable. The risks from
geopolitical rebalancing we flagged last year remain. And a generation
of aging autocrats in Africa and other regions suggest a tide of
change is imminent.

Kenya country risk rating reduced reflecting an improved security environment

Increased TPV score for 2016
Bosnia and Herzegovina
South Africa

High-level political changes and geopolitics

The risk of high-level political change through coups, insurrection or
war has been attached to 12 more countries this year, bringing the
total number of countries at risk to this type of business critical
peril to 68. This year, the majority of these additions are due to the
risk of coups or other forms of extra-constitutional power seizure.
Driving this trend are uncertainties around succession in undemocratic
or illiberal states due to aging leaders and the presence of
factionalised elites.

Sudden and potentially violent political change at the top as well as
war are arguably more business-critical risks than either terrorism or
civil unrest as they can have much wider political

risk ramifications. We have added specific risk markers arising from
increased risks of coup and insurrection on the map to Angola,
Equatorial Guinea, Guinea, Guyana, Kazakhstan, Liberia, Maldives,
Moldova, Saudi Arabia, Uzbekistan, Zambia and Zimbabwe.

Sub-Saharan Africa saw the most increases in political violence risks,
with six countries having their rating raised – these being Angola,
Burundi, Ghana, South Africa, Zambia and Zimbabwe. This was primarily
due to the risks of political instability and the potential for coups
and civil unrest. Sub- Saharan Africa remains the region with the
largest concentration of high to severe risk rated countries (six at
severe, and 10 at high).

read more

Saudi Arabia placed at risk of coup or insurrection in global study
Law & Politics

Saudi Arabia was one of 12 countries placed at risk of coup d’état and
insurrection in a 2016 terrorism and political violence map.

The Aon study, produced in partnership with The Risk Advisory Group,
gave countries a score based on criteria including the risk of
sabotage, commotion and rebellion.

It showed a rise in the number of countries with business-related
perils due to coups, insurrection or war.

This year, the risk rating of countries including Angola, Saudi
Arabia, Kazakhstan, Zimbabwe and Angola were increased due to concerns
over coups or other forms of power seizure from uncertainties
surrounding succession.

In the GCC, Bahrain was also ranked at high risk, the second highest
ranking below severe. Kuwait, Qatar, Oman and the UAE were ranked at
the second lowest level in the five score index, low.

Sub-Saharan Africa was found to have the highest number of countries
with high to severe risk, following an increase in the risk rating of
Angola, Burundi, Ghana, South Africa, Zambia and Zimbabwe.

Elsewhere, the Middle East had the largest number of terrorist attacks
in the last year at 1,114, largely due to the activities of ISIL in
Iraq and Syria, according to the study.

This compared to 799 attacks in South Asia, 491 in North Africa and
331 in Sub-Saharan Africa.

“This year’s Aon Terrorism and Political Violence Map shows a rise in
political violence and terrorism risks for the first time since 2013.
The threat of terrorism is critical, but sudden political change at
the top as well as war can arguably be more catastrophic for
business,” said The Risk Advisory Group head of intelligence and
analysis Henry Wilkinson.

“These risks are less manageable and less foreseeable and have the
potential for cascading political risk ramifications across a region.”

read more

Greenland sees early ice sheet melt
Law & Politics

Greenland's massive ice sheet has experienced such an early and
extensive melt that scientists this week thought their models were
broken when they saw the data.

Summer-like warm temperatures and rain resulted in about 12 percent of
the ice sheet surface area - 1.7 million square kilometres - showing
signs of melting ice on Monday, scientists at the Danish
Meteorological Institute (DMI) said.

"We had to check that our models were still working properly," climate
scientist Peter Langen told DMI's Polar Portal website.

Such a melt is normal for late May, but not mid-April.

Before now, the top three dates for reaching that milestone were
previously: May 5, 2010; May 8, 1990; and May 8, 2006.

"Something like this wipes out all kinds of records, you can't help
but go, 'This could be a sign of things we're going to see more often
in the future,'" Langen said.


read more

23-NOV-2015 I cannot help feeling we are like frogs in boiling water.
Law & Politics

I cannot help feeling we are like frogs in boiling water. We have
created massive interference in the ‘’cosmic tuning’’ phenomenon.

read more

"General Soleimani traveled to Moscow last night to discuss issues including the delivery of S300s and further military cooperation," one senior Iranian security official told Reuters
Law & Politics

Iranian Revolutionary Guard Commander Qassem Soleimani (L) stands
at the frontline during offensive operations against Islamic State
militants in the town of Tal Ksaiba in Salahuddin province March 8,
2015. Picture taken March 8, 2015.


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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1261
Dollar Index 94.92
Japan Yen 109.31
Swiss Franc 0.9679
Pound 1.4158
Aussie 0.7721
India Rupee 66.613
South Korea Won 1146.56
Brazil Real 3.4718
Egypt Pound 8.8787
South Africa Rand 14.4962

Bank of Japan Gov. Haruhiko Kuroda said Thursday that the yen’s
recent rise has been “excessive,” using his strongest language yet


Dollar Yen 3m chart INO 109.31 [headed back to 105.00 after this


read more

Commodity Markets at a Glance WSJ

Gold 6 month INO 1230.05 [1,250.00 is resisting the advance]


#Oil producers head for Doha counting $315bn cost of slump.


#Oil prices nearly unch ahead of oil producers' meeting. Iran to
modestly boost oil supply. reut.rs/1V3QTwF


Crude Oil 1 Year Chart 42.05 [Lets see where we are this time next week]


Emerging Markets

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Jamaica Weighs Replacing Queen Elizabeth and Legalizing Pot @business
Frontier Markets

Jamaican lawmakers will debate a constitutional amendment that would
replace Britain’s Queen Elizabeth II as head of state and make the
island a republic.

The proposal is a “major action item” on the new government’s
2016-2017 legislative agenda, and would replace the Queen with a
Non-Executive President, Governor General Sir Patrick Allen said
Thursday in a speech to parliament posted on the government’s website.

Jamaican Labour Party leader Andrew Holness scraped a narrow win in
general elections in February as voters opted for promises of tax cuts
and a higher minimum wage over the previous government’s austerity
program. The legislative agenda also includes a proposal to set fixed
election dates and term limits for the Prime Minister, as well as a
proposal to fully legalize marijuana for “specified purposes.”

read more

Whither the 'Democratic' Congo's democracy? Peter Pham

The constitution of the Democratic Republic of the Congo (DRC) could
not be clearer: "The President of the Republic is elected by direct
universal suffrage for a mandate of five years renewable a single
time" (Article 70) and "the number and the duration of the mandates of
the President ... cannot be made the object of any constitutional
revision" (Article 220). Hence, the country's current ruler, Joseph
Kabila — who took power after the assassination of his father in 2001
and was subsequently proclaimed the "winner" of elections held in 2006
and 2011 — should be preparing to vacate Kinshasa's Palais de la
Nation to make way for a successor who should be installed there by
Dec. 20. Except there seems to be no such movement. In fact, if
anything, there are plenty of worrying signs that the 44-year-old
Kabila fils and some of those around him may be planning quite the
opposite, with potentially devastating consequences not only for
Congolese democracy, but the peace and security of Central Africa as a

read more

Fast forward to 2016. The number of Africans online, 29%, is still low compared with the global average of 46%. But Africa is going digital, and fast

South Africa All Share Bloomberg +4.01% 2016


Dollar versus Rand 6 Month Chart INO 14.5075 [Bulls squeezing the
ZAR shorts]


Egypt EGX30 Bloomberg +6.52% 2016


NIGERIAN FX controls are undermining political reforms by President
Muhammadu Buhari and making the country “uninvestable” for buyers who
measure returns in dollars, Exotix Partners LLP


Nigeria All Share Bloomberg -13.60% 2016


Ghana Stock Exchange Composite Index Bloomberg -4.93% 2016


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Exotix Sees Kenyan Equity Valuations Buoyed by Low Oil, Politics @business
Kenyan Economy

Kenya equity valuations that declined over the past year are now among
the most attractive in sub-Saharan African frontier markets, supported
by the lowest political risk in a decade and favorable global
conditions, analysts from Exotix Partners LLP said.

Lower oil prices, which benefit net crude importers like Kenya, and
the prospect that the timing of U.S. interest-rate increases have been
pushed out are expected to foster a “relatively benign environment for
capital inflows into Kenya,” Hasnain Malik, head of frontier markets
strategy, said in an interview Tuesday in the capital, Nairobi. Kenya
also continues to attract “refugee capital” from investors in
neighboring countries facing civil unrest, such as Somalia and South
Sudan, that are seeking a safe haven, he said.

The Nairobi Securities Exchange’s All Share Index fell 11 percent in
2015 amid a sell-off in developing-nation stocks on concern that a
slowdown in China, the world’s second-biggest economy, and a collapse
in commodity prices would stem growth. The index is down almost 1
percent so far this year.

“Over the past three to four years, we’ve been looking at a Kenyan
market that has perpetually hit new highs in terms of its valuation
multiple,” he said. “Over the past year, we’ve seen quite a
significant derating.”

Exotix favors “all of the big stocks” in the Kenyan index, including
East African Breweries Ltd., the region’s biggest brewer, Safaricom
Ltd., the country’s largest mobile-phone company, and lenders
including Equity Group and KCB Group, Head of Equities Ali Khalpey
said. It’s avoiding companies in distress, such as Kenya Airways Ltd.,
which last year reported the country’s biggest-ever loss, and retailer
Uchumi Ltd., he said.

Kenyan banking stocks remain enticing to investors even after the
closure by the central bank of three small lenders including Chase
Bank Kenya Ltd. and Imperial Bank Ltd. because of governance concerns.
On April 10, the central bank announced it would provide liquidity
support to banks facing constraints because of “anxiety” about the
banking system.

Kenyan police on April 8 ordered the arrest of Chase Bank Chairman
Zafrullah Khan and Group Managing Director Duncan Kabui. It’s also
asked for the detention of six other directors from state-owned
National Bank Ltd. who were placed on forced leave last month pending
an internal audit.

“It’s cases of rot at the top and abuse of privilege,” Kato Mukuru,
head of equity research at Exotix. “It’s not a crisis, it’s a
governance issue.”

Exotix’s positive outlook for Kenya is buttressed by what it sees as
relative political stability in an election year, Malik said. The
country is scheduled to hold a presidential vote in August 2017.

The ruling Jubilee coalition appears to be more united than at any
time since it came to power in March 2013, helped by the failure of
war-crimes cases against President Uhuru Kenyatta and Deputy President
William Ruto at the International Criminal Court, Malik said. Kenyatta
and Ruto faced charges of instigating violence after a disputed 2007
election that left at least 1,100 people dead. The two, who were in
rival parties in 2007, joined forces to win the 2013 vote.

With the political opposition looking “incoherent, divided, fragmented
and disorganized,” conditions for investors are “a lot lower risk,”
Malik said. “Political risk is in Kenya’s favor at the moment.”

read more

A no-deal roadshow in London met huge investor interest @HKRotich told reporters @KenyaTreasury @business
Kenyan Economy

In 2014, Kenya borrowed $2.82 billion in its first Eurobond. Yields on
that dollar-bond due June 2024 stood at 7.6 percent on Thursday.

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Bank Failures Seen Spurring Kenyan Takeovers in Flight to Safety @business
Kenyan Economy

A series of bank failures is set to trigger a wave of mergers and
acquisitions among Kenyan lenders as depositors seek safety in the
biggest financial institutions.

Consolidation is inevitable in the $61 billion economy, where 42 banks
serve 44 million people, compared with 22 banks in Nigeria, which has
a population of 180 million and gross domestic product that is nine
times bigger, according to Cytonn Investments Management Ltd., a
Nairobi-based money manager.

The nation’s regulators were forced to step in with emergency support
to stem depositor panic after the collapse last week of Chase Bank
Kenya Ltd., the third lender to be placed under statutory management
since August.

“We are on the cusp of a market-led consolidation,” said Aly-Khan
Satchu, chief executive officer of Rich Management, a Nairobi-based
adviser to companies and wealthy individuals. “The issue for the
central bank is to keep it orderly and avoid a disorderly Darwinian

The nation’s largest banks -- from KCB Group and Equity Group Holdings
Ltd. to the local units of Standard Bank Group Ltd., Barclays Plc and
Standard Chartered Plc -- will benefit as customers move cash from
smaller, mostly family-owned lenders which don’t trade their shares
publicly, according to Exotix Partners LLP. That won’t help smaller
lenders starved of liquidity, with 80 percent of the system’s cash
locked in the seven biggest banks.

“There should be a flight to quality,” Ali Khalpey, head of equities
for London-based Exotix, said in an interview in Nairobi. “If people
start losing their deposit base, that’s consolidation for you

KCB, the owner of Kenya’s largest lender by assets, is emerging as a
potential play maker in buyouts. “We are looking at whether it
presents an opportunity that matches KCB strategy,” Chief Financial
Officer Lawrence Kimathi said in a conference call Wednesday.

The Nairobi-based unit of London-based Barclays, which is planning to
trim its investments in Africa, will focus on expanding existing
operations rather than making acquisitions, Chief Executive Officer
Jeremy Awori told reporters on Wednesday.

M&A deals have already started happening. I&M Holdings Ltd., Kenya’s
No. 6 lender by assets, offered to buy Giro Commercial Bank Ltd. for
an undisclosed amount to add seven branches and bolster its short-term
lending business. Mwalimu National Sacco Ltd., the country’s largest
savings and credit co-operative, acquired 51 percent of Equatorial
Commercial Bank Ltd. in October.

Since taking office in June, Central Bank of Kenya Governor Patrick
Njoroge has improved oversight by demanding better corporate
governance standards, restricting new banking licenses and increasing
capital reserve requirements.

“The collapse and consolidation of some of Kenya’s small and
medium-sized banks might even create a stronger banking sector
replacing small, weak banks, with larger, more stable ones,” John
Ashbourne, an Africa economist at London-based Capital Economics Ltd.,
said in an April 12 note. “All three of the recent bank runs were
prompted by unprofessional or unethical activity at relatively small
banks, which are unlikely to be repeated in larger, more systemically
important firms.”

A run on Chase Bank, which was Kenya’s 11th largest at the time it was
placed into receivership on April 7, gathered pace as the lender’s
chairman and group managing director resigned shortly after announcing
restated earnings with a qualified audit opinion. Imperial Bank Ltd.
was seized by regulators in October amid claims of fraud that company
executives deny. In August, Dubai Bank Kenya Ltd. collapsed after it
breached daily cash-reserve-ratio requirements.

“A few more banks may well suffer similar internal problems,”
Ashbourne said. “We do not believe that a wide spread crisis is

read more

Relief for motorists as petrol price drops to six-year low
Kenyan Economy

The price of petrol has dropped to a six-year low of Sh80.71 per litre
in Nairobi, offering a big relief to motorists.
Petrol will retail at Sh4.87 per litre less for the next one month,
the Energy Regulatory Commission (ERC) announced yesterday.
This is the sixth drop in a row in the ERC’s monthly reviews and the
lowest pump price since December 2010 when the energy regulator
started controlling the cost of fuel.

read more

by Aly Khan Satchu (www.rich.co.ke)
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April 2016

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