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The real risks of the falling oil price Nick Butler's blog @FT
In any discussion of the oil market it is all too easy to ignore the
real world consequences of the price fall that has occurred over the
last three years. We might appreciate a small cut in the price of
petrol or gasoline at the pump, even though its effect is dampened by
high levels of taxation. But we do not give much thought to the impact
of price changes on the supplying countries. That is short-sighted
because the structural shift that has taken place is profoundly
destabilising and potentially very dangerous.
A new note from the Energy Information Administration in the US
published last month sets out the impact of the fall in prices in
recent years. It is worth summarising the data, which are expressed in
real 2016 dollars.
These are big numbers for all the countries involved. Very few have
diverse economies that can adjust quickly to the fall in the price of
a crucial export commodity. Most have large dependent populations,
especially of children and young people. Nigeria, for instance, has
some 115m people, amounting to 61 per cent of its population, under
the age of 25; Angola 13m — 63 per cent of its population.
Of course, the absence of properly diversified economies or of
sensible measures of population control is the fault of the
governments concerned. Many are corrupt, and most simply lack the
experience and competence to manage their national economies. Many
have wasted too much money over the years on defence spending or on
the luxury toys enjoyed by the wealthy, such as the $450m yacht bought
last year by the Saudi deputy crown prince Mohammed bin Salman. A few,
like the United Arab Emirates, have developed serious strategies of
diversification and some have even managed to establish sovereign
wealth funds and investment vehicles to put oil revenue to good use.
But simply looking down on the failings of the oil producers is not an
The price fall has reduced the revenue of the Opec states by some
$750m from the 2012 level — a fall of over 60 per cent. None have
fully adapted to that loss of income. Most have assumed that the price
change would be temporary and some have even borrowed to cover the
shortfall of revenue against current spending — thereby storing up
even more problems for the future.
The real pain of enforced austerity is only just beginning and will
deepen as governments realise that the price fall is more structural
than cyclical. The latest attempt to manage the market by extending
the production quota for another nine months has had no positive
effect. Prices for Brent crude on Friday were down to about $48 per
The pain will be profoundly destabilising. At least five Opec states
are at risk of very serious political and economic destabilisation,
including major economies such as Venezuela and Nigeria. Civil unrest
is already evident in Libya and latent in Algeria. Across the whole of
the cartel there is a substantial and growing group of restless,
unemployed youths aged between 15 and 30. Many of Opec states, again
including Nigeria and Venezuela, already have their own political or
tribal conflicts. To all that can be added the simmering disputes
between the strands of the Islamic religion, and most of the Opec
member states are Islamic.
I wrote last week that Opec was failing — with the ability to control
prices lost because of the changes working through the global oil
industry. I believe that is true but it would be naïve and complacent
to interpret that simply in economic terms as the inevitable collapse
of a temporary cartel.
In reality, the structural fall in the oil price is the most
destabilising economic event to have hit the world since the financial
crash of 2008. In this case, the impact is being felt in slow motion
but it is building and feeding on existing conflicts and tensions. And
just as the collapse of the subprime housing market in the US shook
the global economic system, so the problems of the cartel cannot be
contained within the countries themselves. When problems are rapidly
globalised through migration, terrorism and even health risks if key
public services collapse, the deteriorating situation within Opec is
all too likely to become our problem too.
THE OLDEST HUMAN FOSSILS EVER DISCOVERED HAVE STORIES TO TELL
The first fossil skeleton of a human ever discovered was found, in
1823, in southern Wales, ceremonially buried under six inches of soil
in a limestone cave facing the sea. William Buckland, the Oxford
geologist who unearthed it, didn’t know what he had come upon.
Buckland had been busy exploring caves in England and Germany, noting
the loamy soils and the animal bones they contained as indications of
“the last great convulsion that has affected our planet’’—the Biblical
flood, he meant. In Goat’s Hole Cave, in Wales, he found the bones of
a hyena, a bear, a rhinoceros, an elephant (actually a mastodon),
deer, rats, and birds, and roughly half of a human skeleton, which had
been stained with red ochre and laid to rest with periwinkle shells
and an assortment of ivory rods and broken armlets. At first, Buckland
thought it was a man—perhaps a taxman killed by smugglers—but then he
decided that it was a woman, maybe a fortune-teller, or a witch, or a
prostitute from the days of the Roman occupation. He called her the
Red Lady of Paviland. Whoever she’d been, Buckland wrote, she was
“clearly postdiluvian,” a relatively recent deposit.
Only much later was the Lady revealed to be a man after all, and, in
2009, after decades of effort, scientists determined that the skeleton
is thirty-three thousand years old—the oldest human remains ever found
in Britain. By now, of course, we know that the history of our species
is far more ancient, although the evolutionary tree keeps changing
shape and sprouting limbs. For a while, it was thought that modern
humans, who were present in Europe by at least forty thousand years
ago, descended from Neanderthals, which have been known and recognized
as separate creatures since the nineteenth century. In fact, though,
Neanderthals were our cousins; we shared a common ancestor, and our
populations overlapped until about forty thousand years ago, when,
probably, we drove them extinct. Starting in the nineteen-sixties, a
series of spectacular fossil discoveries made it clear that Homo
sapiens arose in Africa. We didn’t shuffle off the continent until a
hundred and twenty thousand years ago or less, but it turns out that
earlier hominins, Homo erectus, had been spilling out of there for
ages already, making stone tools and, eventually, fires.
The further back we place ourselves in the Paleolithic, the busier the
place seems to get—and the less unique we appear to have been. Today,
the story got even richer. In a paper in the journal Nature, an
international team of researchers announced that they have pushed back
the date of the earliest human remains to three hundred thousand years
ago. And the specimens in question were found not in East Africa,
which has become synonymous with a sort of paleoanthropological Garden
of Eden, but clear on the other side of the continent—and the
Sahara—in Morocco. “We’re not claiming that Morocco is the cradle of
modern humankind,” the lead author, Jean-Jacques Hublin, of the Max
Planck Institute for Evolutionary Anthropology, said at a press
conference yesterday. Rather, he added, our emergence as a species was
pan-African. “There is no Garden of Eden in Africa—or if there is,
it’s Africa,” Hublin said. “The Garden of Eden is the size of Africa.”
Such episodes would have connected previously isolated regions of
Africa, enabling early humans to occasionally disperse across the
continent, perhaps in pursuit of migratory game. There would have been
relations, a regular exchange of genes, a diversifying, pan-African
people. The Paleolithic era starts to sound almost multicultural.
Hublin noted that a green-Sahara period occurred around three hundred
thousand years ago, just prior to the date of the Irhoud site. The
researchers speculate that Irhoud may have been a hunting camp, a pit
stop on a longer journey; it’s clear that the flint in the tools found
there came from miles away. It’s also clear that paleoanthropologists
will need to expand their search beyond East Africa, which, it now
seems, may be considered the cradle of humankind mostly because it’s
so rich in specimens. “There’s a lot of rocks of the right age and a
lot of bones to find,” Fleagle told me. Have we been looking for our
keys under the street lamp, because that’s where the light is?
Hublin emphasized that identifying the oldest known human remains
doesn’t mean they were the first—far from it. Phylogenetic studies
indicate that Homo sapiens and Neanderthals last shared a common
ancestor, Homo heidelbergensis, about six hundred and fifty thousand
years ago, so our species won’t turn out to be older than that. Still,
he said, “what happened in Africa between six hundred thousand and
four hundred thousand years ago is basically unknown.”
@BMZ_Bund "Tapping Africas fast potential needs improvement of
framework conditions" @PaoloGentiloni for #G7 at #G20Germany #wAfrica
They came to praise President Donald Trump, not focus on the controversies engulfing him.
Law & Politics
One by one, Trump's Cabinet members assembled around the table spoke
effusively about the president as he sat beaming, soaking it all in at
the first formal gathering of his most senior officials at the White
House on Monday.
The lavishing of praise and adulation contrasted with the storm
enveloping the president as he struggles with myriad crises, including
an investigation into possible ties between his election campaign and
Russian meddling in the race.
For him, the meeting was a welcome rendering of what he feels are
major accomplishments ignored by his detractors, even though major
legislative achievements have eluded him thus far.
There was no one more gushing than White House chief of staff Reince
Priebus, who is frequently the target of criticism from long-time
Trump advisers and is often see as just one misstep away from being
ousted, even though rumors of his departure have all proved to be
"On behalf of the entire senior staff around you, Mr. President, we
thank you for the honor and the blessing that you’ve given us to serve
your agenda and the American people and we’re continuing to work very
hard every day to accomplish those goals," Priebus said.
Bank of Canada Rate Hike Signal Sends Loonie Higher
The Bank of Canada offered its strongest signal yet that it’s ready to
raise interest rates as the economy gathers steam, in surprise
comments that sent the Canadian dollar and bond yields soaring.
In a speech Monday, Senior Deputy Governor Carolyn Wilkins highlighted
how the nation’s recovery is broadening across regions and sectors,
giving policy makers “reason to be encouraged.” She downplayed worries
about Toronto’s housing market and said policy makers need to keep
their eye on the future evolution of growth, not only current economic
“As growth continues and, ideally, broadens further, Governing Council
will be assessing whether all of the considerable monetary policy
stimulus presently in place is still required,” Wilkins said in
Winnipeg, Manitoba. “At present, there is significant monetary policy
stimulus in the system.”
Wilkins said policy makers will be focusing on the data and talking to
“many people” ahead of the next interest-rate decision on July 12.
The remarks are an indication policy makers anticipate the next rate
move will be higher as momentum has shifted after two years of pain
from a slump in oil prices. It’s also effectively a rebuke of
pessimists betting on a disorderly unwinding of Toronto’s housing
bubble that has left the Canadian dollar one of the worst performing
currencies this year.
The Canadian dollar extended gains after Wilkins’s comments,
appreciating 0.9 percent to C$1.3350 per U.S. dollar at 2:04 p.m. in
Toronto, the steepest increase since March and the biggest advance
among Group-of-10 peers on Monday. The gain helped turn the loonie’s
year-to-date loss against the greenback into a gain.
Carolyn Wilkins, Senior Deputy Governor of the Bank of Canada
signalled that Canadian interest rates have bottomed and the next
policy shift will likely be higher came like a bolt from the blue. Her
guidance caught more than a few traders off guard as the Loonie
rallied hard and fast from 1.3470 to 1.3310 during the NY session.
Cost of 'Black Swan' bet on falling markets hits pre-crisis low FT
Hedge funds could make 25 times their money if S&P 500 falls 7 per
cent in a month
The cost for hedge funds of taking out “Black Swan” insurance against
a sharp fall for US equities has fallen to the lowest level since
before the financial crisis as stock markets continue to touch
Months of low market volatility has forced down the price of options
allowing hedge funds to place bets that would make them 25 times on
their money if the S&P 500 index fell by 7 per cent over the next
“The price of constructing hedges against a fall in equity markets are
at their lowest levels ever, while equity markets are trading at
all-time highs,” said Deepak Gulati, chief investment officer of
Argentiere Capital and former head of equity proprietary trading at
“Historically low levels of volatility in options markets are
providing the opportunity to construct long volatility positions with
completely asymmetric pay-offs.”
Options using the so-called one month 97-93 per cent put spread on the
S&P 500, which requires the index to fall by between 3 and 7 per cent
in a month to be profitable, currently allows a maximum profit of $4
for contracts that cost $0.16, or a 25 times return, according to
Tanzanian Government Accuses Acacia of Mining Gold Illegally
Tanzania’s government accused Acacia Mining Plc of operating illegally
in the East African country and said mining companies have been
evading taxes. Acacia’s shares slumped.
An audit ordered by President John Magufuli in March found that Acacia
had been conducting business in Tanzania “contrary to the law,”
Nehemiah Osoro, chairman of a committee of academics, lawyers and
economists that conducted the probe, said at a briefing Tuesday in the
commercial capital, Dar es Salaam. The audit covered mineral exports
over the past 19 years.
“We should summon them and demand that they pay us back our money,”
Magufuli said after receiving the committee’s report. “If they accept
that they stole from us and seek forgiveness in front of God and the
angels and all Tanzanians and enter into negotiations, we are ready to
Acacia’s shares dropped as much as 15 percent and were 10 percent
lower at 269.8 pence by 3:08 p.m. in London. The company, which is
majority owned by Barrick Gold Corp., said in a statement that it
strongly refutes the committee’s findings.
“We have always conducted our business to the highest standards and
operated in full compliance with Tanzanian law,” Acacia said. “We have
declared everything of commercial value that we have produced since we
started operating in Tanzania and have paid all appropriate royalties
and taxes on all of the payable minerals that we produce.”
“These people are ruthless,” a visibly agitated Magufuli said in a
live broadcast. “They have taken all this gold and other minerals, but
revenues, taxes, they didn’t pay.”
The president said he agreed with all 20 recommendations in the
report. Proposals include maintaining the mineral-export ban until all
back-taxes are paid, having companies receive their revenue in
Tanzanian bank accounts and renegotiating mining agreements to allow
the state to buy shares in the companies. The report also recommended
that any arbitration be handled by Tanzanian courts and that the
government rectify mining and tax laws to make the industry more
beneficial to the nation.
Companies have mined diamonds, for example, in Tanzania since 1949.
The government’s stake in those companies has fallen to 35 percent
from 50 percent, but the state has yet to receive any dividends,
“This is inhuman and it’s a big sin,” Magufuli said. “What curse have
we been burdened with?”
@Centum_Inv reports FY Earnings EPS -6.979% here
Par Value: 0.50/-
Closing Price: 40.00
Total Shares Issued: 665441775.00
Market Capitalization: 26,617,671,000
FY Trading sales 9.401660b vs. 8.140574b +15.491%
FY Trading business direct and other operating costs [8.204607b] vs.
FY Trading profit 1.197053b vs. 678.915m +76.319%
FY Income from financial services 4.074964b vs. 4.072050b +0.072%
FY Financial services funding and other costs [3.884669b] vs.
FY Operating profit from financial services 190.295m vs. 584.490m -67.443%
FY Investment and other income 7.345806b vs. 6.533056b +12.441%
FY Realised gains on disposal of investments 1.033362b vs. 5.419394b -80.932%
FY Operating and administrative costs [1.121877b] vs. [1.435310b] -21.837%
FY Finance costs [1.048371b] vs. [1.981966b] -47.104%
FY Share of associates profits 1.346935b vs. 1.074114b +25.400%
FY Profit before tax 8.943203b vs. 10.872693b -17.746%
FY Profit after tax 8.310291b vs. 9.947630b -16.460%
Basic EPS 10.93 vs. 11.75 -6.979%
Total Assets 88.385b vs. 78.054b +13.236%
Total Equity 49.473b vs. 43.258b +14.367%
NAV per share 67.34 vs. 59.08 +13.981%
Closing cash and cash equivalents 5.639b vs. 10.197b -44.699%
Dividend 1.20 vs. 1.00 +20.000%
Dividend 1.20 per share
FY Group Portfolio investments 65.464b versus 57.021b
FY Group Total Assets 88.385b versus 78.054b
FY Company NAV 67.34 versus 59.08
Company recorded a 14% growth in the book value of shareholder funds
versus a 22% decline in the NSE
Consolidated profit after tax declined by 16% on account of lower
gains on disposal compared to the previous period.
Adjusted for the gains on disposal, the group profit after tax
increased by 66% year on year
Beverage business +37% in trading profit
Operating Profit of the financial services business dropped by 67%
primarily as a result of Sidian Bank's performance. 168m loss over 12
month period ended March 2017
Centum completed an exit of 26.43% stake in Kenya Wine agencies
limited KWAL realising a gain of 1.1b
Our focus in the real estate sector is master development.
Strong Earnings cheap share very nimble and risk adjusted up-risking
and de-risking strategy.
Tea prices hit a three-month high at the latest Mombasa weekly auction
A market report by East African Tea Traders Association (EATTA)
indicates on average, a kilogramme of tea fetched Sh300 compared with
Sh286 in the previous sale.
This is the second time the price has crossed Sh300 mark since the
beginning of the year.
“Out of 137,700 packages (8,900,000 kilos) available for sale, 124,120
packages (7,778,632 kilos) were sold with nine per cent remaining
unsold,” says EATTA managing director Edward Mudibo.
During the auction, Pakistan Packers were dominant and presented
strong competition. Afghanistan showed strong interest with sustained
activity from Russia and Sudan. Yemen and other Middle Eastern
countries were very active but offered lower rates for the commodity.
Tea production for 2017 is expected to drop by 11 per cent due to the
effects of drought in production that has cut volumes coming in from
Agriculture and Food Authority (AFA) says production of green leaf
will drop from 473 million kilos in 2016 to about 420 million kilos
In the meanwhile, Reuters reports India’s tea exports in April fell
9.2 per cent from a year ago to 12.21 million kg, according the
state-run Tea Board.
The country’s tea exports in the first four months of 2017 rose 5.7
percent to 72.77 million kg, it said.
India, the world’s second-biggest tea producer, exports CTC
(crush-tear-curl) grade mainly to Egypt, Pakistan and the UK, and the
orthodox variety to Iraq, Iran and Russia.