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Tuesday 19th of April 2016
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Morning Africa |
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Macro Thoughts |
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A quarter century after the Cold War, the Pentagon is worried about Russia's military prowess again. @politico Law & Politics |
“It is clear that while our Army was engaged in Afghanistan and Iraq,
Russia studied U.S. capabilities and vulnerabilities and embarked on
an ambitious and largely successful modernization effort,” McMaster
told the Senate Armed Services Committee last week. “In Ukraine, for
example, the combination of unmanned aerial systems and offensive
cyber and advanced electronic warfare capabilities depict a high
degree of technological sophistication.”
In Ukraine, a rapidly mobilized Russian-supplied rebel army with
surprisingly lethal tanks, artillery and anti-tank weapons has
unleashed swarms of unmanned aerial vehicles and cyberattacks that
shut down battlefield communications and even GPS.
McMaster added that “Russia possesses a variety of rocket, missile and
cannon artillery systems that outrange and are more lethal than U.S.
Army artillery systems and munitions.” Its tanks, meanwhile, are so
improved that they are “largely invulnerable to anti-tank missiles,”
says retired General Wesley Clark, who served as NATO commander from
1997 to 2000 and has been sounding the alarm about what the Ukraine
conflict means for the U.S. military.
Also on display in Ukraine to an alarming degree: Moscow’s widespread
political subversion of Ukrainian institutions, part of what experts
are now calling “hybrid warfare” that combines military power with
covert efforts to undermine an enemy government. Russia has since then
also intervened with ground forces and airstrikes in Syria—apparently
somewhat successfully—and flexed its muscles in other ways. This week,
two Russian fighter jets and a military helicopter repeatedly buzzed a
U.S. Navy warship in the Baltic Sea, despite radio warnings.
“Few in the West have paid much attention to Russia’s doctrinal pivot
to ‘New Generation War’ until its manifestation in Ukraine,” says
Karber. Another surprise, he adds, “is the relative lack of Western
attention, particularly given the unexpected scale and duration of the
conflict, as well as the unanticipated Russian aggressiveness in
sponsoring it.
Fast forward to 2016. After a decade and a half of counterinsurgency
operations in Iraq, Afghanistan and beyond—longer than even in
Vietnam—decades of assumptions about warfare are once again being
re-evaluated. McMaster and other top generals have concluded that
while the United States was bogged down in the Middle East, Moscow
focused its energies on rebuilding its own forces to potentially
counter America’s tactics.
Conclusions
Russia has made a Giant Leap in military capabilities and Syria was
the show-ground where Putin show-boated his ''Military'' Great Leap
Forward.
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Aiming at Iran, Saudi Arabia Mixes Oil Policy With Politics @javierblas2 Law & Politics |
After taking over defense and economic planning, Saudi Arabia’s Deputy
Crown Prince Mohammed bin Salman has now stamped his authority over
oil policy.
In so doing, the 30-year-old son of King Salman upended the Saudis’
decades-long approach of separating commercial from political
considerations. Over the weekend, Saudi officials quashed an agreement
among major oil producers in Doha to freeze output due to Iran’s
refusal to participate, a sign the regional rivalry is infecting the
market.
“Everything at Doha was about politics,” said Yasser Elguindi, an oil
analyst at Medley Global Advisors, a consultant that advises large
hedge funds.
“The fact that Saudi Arabia seems to have blocked the deal is an
indicator of how much its oil policy is being driven by the ongoing
geopolitical conflict with Iran,” said Jason Bordoff, director of the
Center on Global Energy Policy at Columbia University in New York and
a former White House oil official.
While the House of Saud has always kept control of oil policy,
ministers drawn from outside the royal family -- spanning from Sheikh
Yamani in the 1980s to Al-Naimi for the last two decades -- enjoyed
significant room for manoeuvre.
Al-Naimi -- and his number two, Prince Abdulaziz bin Salman, an older
half-brother of the deputy crown prince -- cooperated with Iran in the
past to cut production to boost prices. Oil policy was an unusual
oasis of stability in the convulsive politics of the Middle East.
In fact, the U-turn was telegraphed weeks before the gathering. Prince
Mohammed bin Salman, known in diplomatic circles as “MbS” and the
emerging force in economic policy within the kingdom, said in two
interviews with Bloomberg News that the participation of Iran was
necessary for any deal.
"We don’t care about oil prices,” Prince Mohammed told Bloomberg last
week. “$30 or $70, they are all the same to us. We have our own
programs that don’t need high oil prices."
The unanswered question is: Why did Saudi oil officials negotiate for
weeks on a draft accord for Doha, giving the impression that a deal
was possible even without Iran?
One suggestion is that Riyadh tried to use the Doha meeting to force
Russia, an ally of Iran, to choose between higher oil prices and
supporting Tehran. In that thesis, Al-Naimi played the role of good
cop, with Prince Mohammed acting as the bad cop. Another theory is
that Prince Mohammed made an eleventh-hour intervention, forcing his
team, led by Al-Naimi, into an U-turn, with the same objective: hurt
Iran.
"Ultimately, Saudi oil policy has become extremely politicized," said
Amrita Sen, chief oil analyst at Energy Aspects Ltd., a London-based
consultant.
Conclusions
KSA was always an Extreme Player but we are now in a kind of
''red-mist'' irrational territory.
All Recent Political Risk Atlas[es] have surged KSA Political Risk and
I cannot disagree.
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Africa's offshore wealth: feeding inequality @FT Africa |
During the boom years of the commodities supercycle, fast-growing
African economies produced a growing class of millionaires and
billionaires.
Now, with the revelations of the Panama Papers, the rich and famous
worldwide are squirming uncomfortably as their financial laundry gets
a public airing.
Some of the documents released so far uncover illegal or scandalous
conduct. But it may be revelations about the routine nature of
offshore finance that have the most lasting impact.
Africa has a particular problem with capital flight. Though difficult
to track because of its secretive nature, between 1970 and 2010 an
estimated $814bn flowed out of the continent, according to the
Political Economy Research Institute at the University of
Massachusetts. Much of this was moved by businesses, though private
wealth also plays a part.
Mounting evidence suggests that a preference among African elites to
shield their assets offshore means that inequality is greater than
generally realised.
“Most of the estimates we have for inequality leave out the fact that
the top 1 per cent, in addition to all the money in their domestic
accounts, have a lot of money offshore,” says James Henry, an expert
in offshore finance and former chief economist of McKinsey & Company.
In Nigeria, Africa’s largest economy and top oil producer, for
example, the number of individuals with assets over $1m surged by 44
per cent between 2005 and 2013, to 15,700.
Ethiopia, which has struggled with food insecurity and famine for
decades, is producing millionaires at a faster rate than anywhere else
on the continent. Between 2007 and 2014, the number more than doubled,
from 1,300 to 2,700, according to New World Wealth, a consultancy
based in the UK and South Africa.
According to a study by Capgemini and RBC Wealth Management, there
were nearly 150,000 “high net worth individuals” in Africa by 2014,
sharing wealth of $1.44tn.
The offshore industry has been growing since 2010 as stock markets in
the region have taken off. The gains tended to accrue to a small elite
and, thanks to the increasing ease with which money can be moved, the
rate at which it flows offshore has surged. Global Financial
Integrity, an NGO, estimates that illicit flows out of Africa are
increasing at a rate of 20 per cent a year.
“Most ordinary people do not have stocks, so it is simply a result of
the ownership of securities that has been a fact,” says Mr Henry at
McKinsey.
“What we tend to find is that once it is offshore, [money] stays
offshore and is reinvested … Basically people are looking at this as
their nest egg [for when] they get thrown out of power or need to
retire.”
Johannesburg-listed Standard Bank is among the firms that have
expanded their services to cater to Africa’s new class of wealthy
individuals. In 2009 it established a Wealth and Investment business
as an offshoot of its existing Private Clients division, catering to
individuals with $1m in investable assets or more.
Since then, its business in South Africa has trebled, while franchises
in Nigeria and Kenya have each grown by over 50 per cent. Offshore is
a key component of the services offered.
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Why African cities are full of street vendors and hawkers - and how we can create better jobs Mail and Guardian Africa |
Africa is urbanising rapidly, and in the next 35 years, Africa will
need to accommodate almost 900 million new urban dwellers, which is
equivalent to what Europe, USA and Japan combined have managed over
the last 265 years, data from the Mo Ibrahim Foundation shows.
In most continents, city growth is a by-product of two factors,
usually happening side-by-side: a “push” from an increase in
agricultural productivity growth, which means fewer workers are needed
on farms; and a “pull” from urban industries, whereby factories
requires an increasing amount of labour in cities.
Urban growth in Asia has largely unfolded along this trend – the
“Asian Tigers” typically went through both green and industrial
revolutions; cities grew as economies shifted away from agriculture
and towards export-driven industry.
But Africa’s case has been rather different, with only a weak
correlation between urbanisation and this kind of structural
transformation, lacking both a “push” from agriculture or a “pull”
from industry.
A new report from the World Bank outlines three reasons why Africa’s
urban growth has only given modest returns in GDP growth, and explains
why most of the jobs that African cities create are those in the
informal economy, vulnerable to extortionists like those revealed in
Kanjo Kingdom.
The report, Africa’s Pulse (pdf), reveals that African cities suffer
from three fatal flaws; the first is that cities are crowded, but not
necessarily economically dense. In other words, they are undergoing an
urbanisation of people, not of capital, which means that they lack
formal, affordable housing; residents are forced to live in unplanned
downtown settlements.
The second flaw is that cities are developing as a collection of
small, fragmented and disconnected neighborhoods, even as land near
the city centre ironically remains undeveloped. For example, in
Harare, Zimbabwe, and Maputo, Mozambique, more than 30% of land within
five kilometres of the central business district remains unbuilt.
The third flaw is that the crowding, yet disconnection, means that
living costs, especially transport, is very high in urban Africa.
Because of the fragmentation of neighbourhoods and nightmare traffic
jams, a resident of Nairobi, on average, can reach no more than 8% of
all jobs available in the city within 45 minutes. By contrast, in
greater London in 2013, this figure was 21.6%.
The research shows that firms in cities in Tanzania and Uganda, for
example, pay their workers 30-50% higher wages than in the rural
areas. But when adjusted for living costs, the urban wage premium
fades into statistical insignificance in the Tanzanian and Ugandan
cities studied.
In other words, higher wages in urban Africa are driven by higher
costs, not higher productivity. Urban workers in these countries gain
no purchasing power, on average, from living in a city.
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Tripling of South African bond buying signals new faith in rule of law @Reuters Africa |
JOHANNESBURG (Reuters) - A tripling of South African bond sales this
year on Monday added to signs that investors' faith in its
institutions has been somewhat restored following a court ruling
against President Jacob Zuma and the appointment of a former finance
minister.
Securities exchange figures showed foreign investors bought a net 30
billion rand ($2 billion) worth of South African debt in 2016,
compared with 10 billion in the same period last year.
The Treasury is flush with cash after a $1.25 billion 10-year bond
sale this month was two times oversubscribed, and bond yields have
recouped heavy losses in December after Zuma fired his finance
minister, raising fears of political interference.
Benchmark yields, which spiked to a record 10.38 percent after Zuma
briefly replaced Nhlanhla Nene with a virtually unknown politician,
have since recouped nearly 140 basis points, a third of which was
after the ruling against Zuma.
"Having Pravin Gordhan back in control, and having this noise around
Nkandla and Jacob Zuma, is showing the market that South African
institutions are still strong," Investec fixed income portfolio
manager Vivienne Taberer said.
"Government and state owned enterprises can get about their
constitutionally mandated activities, less encumbered by predatory
actions of (the) president and his allies," BNP Paribus Securities
South Africa analyst Nic Borain said.
"We expect markets - especially the bonds, currency and banks - to
track the ebbs and flows of Jacob Zuma's fortunes."
The litmus test for assets will be whether credit rating agencies
decide to downgrade debt. A cut from Moody's would mean a loss of its
investment grade status and possible ejection from the prestigious
World Government Bond Index (WGBI).
"Such an ejection would represent possibly the most dramatic outcome
of a ratings downgrade and should be South Africa’s biggest cause for
concern," Citadel chief strategist Adrian Saville said.
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@BritamEA reports FY 2015 Loss after Tax 1.009b Earnings here Kenyan Economy |
Par Value:
Closing Price: 11.55
Total Shares Issued: 1938415838.00
Market Capitalization: 22,388,702,929
EPS: -0.5
PE:
FY Gross earned premium 19.605675b vs. 14.045772b +39.584%
FY Net earned premium 16.373722b vs. 11.792162b +38.853%
FY Net realised gains on financial assets at fair value through
profits and loss [2.836211b] vs. 4.102165b -169.139%
FY Total revenue 20.130987b vs. 20.692335b -2.713%
FY Change in actuarial value of policyholder benefits [2.769604b] vs.
[3.051301b] -9.232%
FY Net insurance benefits and claims [10.614215b] vs. [8.023291b] +32.293%
FY Operating and other expenses [6.716741b] vs. [4.616406b] +45.497%
FY Total expenses [21.920789b] vs. [17.738960b] +23.577%
FY [Loss]/ profit before share of the profit of the associate
[1.789802b] vs. 2.953375b -160.602%
FY Share of profit of the associates accounted for using the equity
method 594.864m vs. 259.007m +129.671%
FY [Loss]/ profit before tax [1.194938b] vs. 3.212382b -137.198%
FY [Loss]/ profit for the year [1.009458b] vs. 2.497878b -140.413%
EPS [0.5] vs. 1.31 -138.168%
Dividend 0.30 vs. 0.30 –
Cash & cash equivalents at the end of the year 4.814061b vs. 6.841187b
-29.631%
Company Commentary
Core business Revenue increased +38%
Insurance business revenue +40%
Regional Units contribution to insurance business revenue was 4b +152.7%
AUM asset management business increased +66%
Loss on financial assets at Fair Value through profit or loss of -2.8b
versus a gain in 2014 of 4.1b
100% acquisition of Real Insurance Group
7 countries operating under BRITAM brand Uganda, Rwanda, Tanzania,
South Sudan, Mozambique and Malawi.
Dividend 30 cents a share
Earnings were mainly brought down by KES 2.8bn loss on financial
assets at fair value vs 2014’s gain of KES 4.1bn. The Company
attributed the decline in value of financial assets to poor
performance of the securities market. Gross earned premiums grew by
38% to KES 20.3bn but was offset by 32% increase in net claims and
benefits to KES 10.6bn. The Group's net loss ratio contracted by
200bps to stand at 62% vs 2014’s 64%, implying improved claims
management in the period. Investment income was up 31% to KES 4.55bn.
Loss after tax stood at KES 1.0bn vs 2014's PAT of KES 2.5bn, hence
loss per share stood at KES 0.50 down from an EPS of KES 1.31.
Conclusions
These Earnings were better than expected in fact.
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"This development shift into Nairobi's periphery is expected to accelerate as infrastructure is rolled out, preparing these towns to be the new frontier for land prices gains," she said. Kenyan Economy |
The value of land in Nairobi dropped in the first quarter of 2016, as
that of satellite towns increased, says a report.
Land prices in Eastleigh, Gigiri, Muthaiga, Parklands and Lang’ata,
dropped marginally by 0.2 per cent between January and March 2016,
attributed to shift by land investors to satellite towns, according to
the latest property index for the first quarter of this year.
“Athi River, Ruaka and Ruiru are some of the satellite places
beginning to attract large scale residential and retail development.
“This development shift into Nairobi’s periphery is expected to
accelerate as infrastructure is rolled out, preparing these towns to
be the new frontier for land prices gains,” she said.
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N.S.E Today |
The market was abuzz with Talk that Qatar National Bank was in the
lead to purchase Chase Bank.
QNB holds a meaningful chunk of EcoBank shares.
They have established their SSA bona fides severally but I would have
thought they would have to consider that Chase gives them mono-country
exposure compared to Ecobank.
I expect Big Cap Stocks to pop higher in a meaningful way as SSA
Investors recalibrate in favour of Nairobi when Lagos gets ejected
from the MSCI Frontier Index [because of the lack of convertibility in
the Naira]
The official closing Prices have not been received as I file this.
Safaricom set a fresh 2016 closing High and BRITAM EA reported a Full
Year Loss after Tax of 1.009b.
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N.S.E Equities - Commercial & Services |
Safaricom scored a Fresh 2016 Closing High to close +0.58% at 17.30 on
good volume action of 21.152m shares worth 366.261m. Buyers are set to
push the Price higher and are outpacing Sellers by a 2-1 margin.
Safaricom is +6.13% in 2016 considerably outperforming the Benchmark
Indices and that outperformance is set to stretch in the run up to the
Earnings Release. My Price Target for 2016 is 22.50.
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N.S.E Equities - Finance & Investment |
Britam reported a Full Year Loss after Tax of 1.009b versus a Profit
after tax of 2.497b FY 2014. Earnings were crimped by a KES 2.8bn loss
on financial assets at fair value vs 2014’s gain of KES 4.1bn. The
Company Gross earned premiums grew by 38% to KES 20.3bn but was offset
by 32% increase in net claims and benefits to KES 10.6bn. The Group's
net loss ratio contracted by 200bps. BRITAM reported a FY Earnings Per
share of -0.50cents a share and maintained the dividend at 30cents a
share. BRITAM EA spoke to the ''Regional Units contribution to
insurance business revenue was 4b +152.7%'' BRITAM has evidently
taken a big mark-down on its Listed Portfolio but should claw most of
this back through FY 2016. These results were in fact better than
consensus estimates. BRITAM of course endured a lot of drama in 2015
with its biggest Shareholder [at the start of 2015] the flamboyant Mr.
Dawood Rawaat being ousted from the shareholder register. BRITAM
firmed +1.3% to close at 11.70 and traded 1.449m shares. BRITAM EA is
-10.00% in 2016.
Re I&M Holdings ''CDC Group PLC has entered in a conditional agreement
with two existing shareholders DEG and Proparco for the sale and
purchase of shares comprising approximately 10.68% of the issued
shares'' I&M eased -0.93% to close at 106.00 and traded 56,700 shares.
Kenya Commercial Bank edged -0.58% off a 2016 closing High to close at
42.50 and traded 604,300 shares.
Standard Chartered firmed +0.4% to close at 252.00. Standard Chartered
has surged +29.23% in 2016 and is the Out Performer in the Tier 1
Banking Segment.
Equity Bank firmed +0.65% to close at 39.00 and traded 5.945m shares
worth 231.847m. Equity is -2.5% in 2016.
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N.S.E Equities - Industrial & Allied |
KenGen rallied +3.22% to close at 8.00 and traded shares as high as
8.30 +7.1% and an intra day high for 2016. KenGen is +12.67% in 2016
and has upside scope.
Bamburi Cement firmed +0.53% to close at 189.00 and traded 229,000
shares. Bamburi Cement has rallied +8.00% in 2016 and on some decent
volume.
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