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Satchu's Rich Wrap-Up
Monday 23rd of January 2017

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Macro Thoughts

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China clamps down on banks moving currency overseas @ft

Chinese regulators are stamping out moves by banks to shift renminbi
out of the country as they attack one of the few loopholes remaining
in the country’s strict new capital controls regime.

The tightening is another setback for the Chinese government’s larger
strategy of internationalising its currency — a goal that has taken a
back seat to stabilising capital outflows and the renminbi’s
depreciation against the dollar.

According to several people briefed on rules introduced this month,
banks in Shanghai must “import” Rmb100 for every Rmb100 they allow a
client to remit overseas, ensuring no net outflows of the Chinese
currency. Shanghai-based banks had been allowed to remit Rmb160
overseas for every Rmb100 they brought back into China.

The clampdown goes even further in Beijing where banks must import
Rmb100 for every Rmb80 they remit overseas on behalf of clients,
ensuring a net inflow into the capital. The People’s Bank of China
declined to comment.

Bankers have also complained that the central bank and Safe are only
communicating regulatory “window guidance” over the phone or during
face-to-face meetings, rather than in writing.

They added that Safe has instructed banks not to inform clients why
their overseas remittances are being rejected and is checking their
net renminbi flows on a weekly basis, compared with every month

“It’s up to us to tell clients sorry, we can’t let you do the
transfer,” the banker added. “But obviously the clients know what is
going on. This is not a secret.”

Home Thoughts

Been reading some Shiva Naipaul who was of course over-shadowed by his
elder brother V.S.Naipaul

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Rereading: Fireflies and The Chip-Chip Gatherers by Shiva Naipaul

This "material", though it risked coming to him secondhand, was also
Shiva's own. When approaching it, as he did in his first novel,
Fireflies, he had to, among other things, pretend his brother's
acclaimed 1961 novel, A House for Mr Biswas, didn't exist, and
produce, out of the same, richly visited terrain, his own masterpiece.
The story covers the same ground that Biswas did: a young woman, Baby,
from an all-powerful Hindu family, the Khojas, is married off to an
outsider, Ram Lutchman, a bus driver of no particular social status.
Lutchman, a little man, is a sort of prototype of and antithesis to
Biswas, to modernism's "little man".

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Law & Politics

Historical hinge points are not always discernible in real time, but
America’s dizzying leap from Obama to Trump—from the first black
president to the leader of the movement that questioned his
citizenship, from a globalist who pushed an opening with Asia to a
populist who echoes the angry rhetoric of ethno-nationalists in
Europe—is an obvious one.

Trump did mouth a few of the traditional pieties expected of new
presidents, thanking Obama for his “magnificent” assistance during the
transition, calling his oath of office “an oath of allegiance to all
Americans.” But he went on to describe America as a hellscape where
the Washington establishment has declared war on the public, creating
a land of lost jobs, struggling families, “mothers and children
trapped in poverty in our inner cities,” “rusted-out factories
scattered like tombstones across the landscape of our nation,” “an
education system that is flush with cash but leaves our young and
beautiful students deprived of all knowledge.”

“And the crime!” he continued. “And the gangs! And the drugs that have
stolen too many lives and robbed our country of so much unrealized
potential. This American carnage stops right here and stops right

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Huge story. The current National Security Advisor is under counterintelligence investigation for ties to Russia. ‏@Susan_Hennessey
Law & Politics

Counterintelligence agents have investigated communications by
President Trump’s national security adviser, including phone calls to
Russian ambassador in late December

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Three years ago. One of the most incredible pictures of #Euromaidan, taken on 20.01.2014 by Den Didenko in Kyiv ‏@EuromaidanPress
Law & Politics

“Martyrs are needed to create incidents. Incidents are needed to
create revolutions. Revolutions are needed to create progress.”
Chester Himes

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Donald Trump Preaches Angry Nationalism, While Practicing Goldman Sachs Capitalism The Intercept
Law & Politics

nationalistic, a considerable departure from the traditional
Republican Party embrace of the free market and an activist foreign
policy. Trump talked of an “America First” policy and vowed that
“January 20th 2017, will be remembered as the day the people became
the rulers of this nation again.”

But Trump’s words on the steps of the Capitol bore little resemblance
to the reality of the administration he is building.

It’s hard to argue with Trump’s assessment that “the establishment
protected itself, but not the citizens of our country. Their victories
have not been your victories; their triumphs have not been your

But that establishment will be in full force in the Trump
administration. The megabank Goldman Sachs, famously close to Trump’s
opponents in the Democratic Party, has six alumni posed for key posts
in his administration, including his treasury secretary nominee Steve

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.0737
Dollar Index 100.81
Japan Yen 113.69
Swiss Franc 0.9988
Pound 1.2413
Aussie 0.7565
India Rupee 68.045
South Korea Won 1167.70
Brazil Real 3.1695
Egypt Pound 18.7675
South Africa Rand 13.4999

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President Jammeh of Gambia is also in the departure Lounge

''Africa is not a Country'' has become a popular meme on social media,
but it makes an important about the non-linearity of the Continent.
However, that non-linearity should not obscure what looks like a
significant political Trend-Change and the LSE for business in their
report ''The commodity price rout and Africa's unusual electoral
cycle,'' said this:

''It would seem elections in the region are at a tipping point, the
traditional incumbent re-election bias is at a historic low and the
ground is fast shifting beneath the feet of the political
establishment. What has triggered the turn of the tide?''

The African ''Demographic Dividend'' has metasized into a
''Demographic Terminator'' across many parts of Sub-Saharan-Africa.
The first Signal was emitted from Ouagadougou with the termination of
''Beautiful'' Blaise Compaore in 2014. Since then, President GoodLuck
in Nigeria and now President Mahama in Ghana have exited stage left.
President Jammeh of Gambia is also in the departure Lounge. Africa
being non-linear, we have seen events unfold at the opposite end of
the spectrum, for example in Kinshasa where President Kabila has
managed to fend off the pressure from the streets and string things
along. Ethiopia, which is very much the SSA economic Poster-Child, has
had to impose a State of Emergency. One senses that we have now
entered a period when the demographic Bulge is arriving at voting Age
and this moment of enfranchisement is a revolutionary one. This is a
moment of significant political friction and ground level intelligence
is going to be at a premium. Counter-intuitively, South Africa [with
its entrenched institutions] looks significantly less politically
risky than many other SSA countries.

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South African asset prices have of course been battling a ''Zuma'' haircut

South African asset prices have of course been battling a ''Zuma''
haircut which began to ebb into year end 2016 [The Rand closed the
Year +11% versus the Dollar] as Investors started to factor in Pravin
Gordhan's fight-back against rogue policy-making.

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South Africa All Share Bloomberg +3.71% 2017

Dollar versus Rand 6 Month Chart INO 13.49 [I am bullish the ZAR]


Egypt Pound versus The Dollar 3 Month Chart INO 18.7675


The fundamental paradox at the heart of President Buhari's government
is the Naira. Investors are sidelined waiting for President Buhari's
moment of Epiphany.


Nigeria All Share Bloomberg -2.42% 2017


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The new President of Ghana Nana Akufo-Addo is saying all the right things

Ghana looks primed to move from a policy-making haircut to a
policy-making premium

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Ghana Stock Exchange Composite Index Bloomberg +4.15% 2017

@IgnazioMagnani  Earth from Space 🇹🇿Tanzania, Mount Kilimanjaro

@ggkenya #Aerial #Engaruka Basin #Tanzania's north Rift:
#climatechange #desertification @EvClimateChange @getthecanon


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Mozambique's Eurobond Strategy May Damage Restructure Prospects

The southern African nation missed a near-$60 million coupon payment
on Jan. 18 for its $727 million Eurobonds issued in March, prompting
S&P Global Ratings to cut its assessment of Mozambique to “selective
default.” The government has a 15-day grace period to pay the
interest, but S&P doesn’t believe this will happen, it said. The
default could be part of government’s strategy to try compel
bondholders to negotiate a restructuring, which they’ve so far

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Political risk seems to be hounding bond investors wherever they go.
In Ivory Coast, the world’s largest producer of cocoa, a mutiny in the
army has destabilized the government, sending its debt to the world’s
worst performance. President Alassane Ouattara’s grip on the
40,000-member armed forces appeared to be slipping, with many soldiers
who helped to bring him to power in 2011 saying he has failed to
deliver the promised pay bonuses or improve their living conditions.

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Sasini Tea and Coffee reports FY16 EPS 3.39 -20.609% Earnings here
Kenyan Economy

Par Value:                  1/-
Closing Price:           17.70
Total Shares Issued:          228055504.00
Market Capitalization:        4,036,582,421
EPS:             3.39
PE:               5.22

One of Kenya's lead tea and coffee producers.

FY Revenue 3.507629b vs. 2.786126b +28.157%
FY Gain/ [Losses] arising from changes in fair value of biological
assets less cost to sell 133.566m vs. 18.290m +630.268%
FY Results from operating activities 917.501m vs. 964.524m -4.906%
FY Finance income 116.869m vs. 93.864m +24.509%
FY Profit before tax 1.020758b vs. 1.039222b -1.777%
FY Taxation [charge]/ credit [258.908m] vs. 61.990m -517.661%
FY Profit for the year 761.850m vs. 1.101212b -30.817%
FY Total comprehensive income 522.311m vs. 1.743357b -70.040%
FY Gains/ [Losses] arising from changes in fair value of biological
assets after tax 93.496m vs. 21.113m +342.836%
EPS on operating activities 2.98 vs. 4.18 -28.708%
EPS on biological assets 0.41 vs. 0.09 +355.556%
EPS 3.39 vs. 4.27 -20.609%
Dividend per share 1.50 vs. 1.25 +20.000%
Total equity 13.960232b vs. 13.558505b +2.963%
Cash and cash equivalents at the end of the year 1.954551b vs.
1.200514b +62.810%

Company Commentary

11,108 tonnes of made Tea compared to 8,578 tons in the previous year.
average price realised $1.89 per KG versus 1.87
Coffee 944 tons average $4.57 per KG


Big surge in Tea Production.
Cheap share on a PE of 5.22

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Kenyan Economy

The price of the beverage at the Mombasa auction hit a high of Sh286
per kilogramme last Tuesday, up from Sh268 the previous week.

Edward Mudibo, the managing director of East African Tea Traders
Association (EATTA), said the price is expected to maintain the trend
in coming weeks.

“This week’s price represents a two-year high and we expect to witness
better prices at the auction in subsequent sales,” said Mr Mudibo.

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29-AUG-2016 I called this a "Schumpeter moment" for banking a little while ago.
Kenyan Economy

I called this a “Schumpeter moment” for banking a little while ago.
According to Schumpeter, the “gale of creative destruction” describes
the “process of industrial mutation that incessantly revolutionises
the economic structure from within, incessantly destroying the old
one, incessantly creating a new one”.

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Base Titanium @BaseTitanium Base Resources @TheStarKenya
Kenyan Economy

Base Titanium released its quarterly activities report – December 2016
last week in Nairobi. Base Resources' share price closed at a 26 month
high of 25 Australia dollar cents and has rallied an extraordinary
+640.09% over a 12 month period. The highest price was clocked in
March 2013 (when the commodity markets were in full swing ) at
53cents. Base Titanium mines mineral sands at Kwale. Mineral sands
produce the following

''Finely ground titanium dioxide is used as white pigment in paints,
plastics, paper, and even edibles - constituting the single greatest
use of titanium worldwide. Zircon's primary use is in the production
of ceramic tiles, but also in more exotic applications such as foundry
casings, nuclear fuel rods, or water purification systems to name just
a few. The main uses for rutile are the manufacture of refractory
ceramic, as a pigment, and for the production of titanium metal''
(Seeking Alpha).

Mineral sands are an esoteric corner of the commodities markets and
transactions are typically bilateral.

I was introduced to Tim Carstens, the CEO of Base Resources by the
then Australian High Commissioner Geoff Tooth and have watched Tim up
close and personal and can say at this time, Mr Carstens has proven he
has the wherewithal to navigate through multiple complex (and even
asymmetric) environments simultaneously. During this period, Base
Resources has had to navigate a boom and a bust in the commodities
markets, a nascent mining environment here in Kenya (and I have to
give credit to Tim and the CS Dan Kazungu who both never lost sight of
the national interest) and simultaneously keep the whole show financed
at an international level.

Rutile is responsible for 50% of revenue but only 15% of volume and
therefore bulk Rutile sales have a significant impact on revenues.
Ilmenite prices rallied an eye-popping +40% in Q4 2016 and prices for
Base Resources’ ilmenite have increased by over 100% between May and
December 2016. Base ramped up production with Ore mined (tonnes)
clocking 3,049,333 in December 2016 versus 2,101,295 in December 2015.
Average revenue per tonne clocked $250 per tonne (versus $200 last
quarter). Base is surfing the price rebound and extracting more value
by optimising production. Interestingly, Kenya exported $16million of
Titanium to the US ten months through 2016 just a little behind Tea
($18m for the same dates). That is called a diversification of our
exports basket right there. The rising tide of production and prices
helped base reduce its net debt by $18.1million to $129.5million.

This remarkable performance will lead to higher royalty payments for
the government of Kenya but its important to look at base not through
a royalty prism alone. Base reminds me of a moon landing, its planted
the mining flag in the Kenyan soil. Kenya did not have a mining sector
before Base Titanium. And in the future, Base's modus operandi will be
a calling card for its expansion across the continent. They are
looking at a property just south of Tanga in Tanzania. Given how
aggressive President Magafuli can be, I would be surprised if he has
not pounced on Tim, yet. Base has an outstanding safety record; Kwale
operations’ lost time injury frequency rate (“LTIFR”) remains at zero.
Base Resources’ employees and contractors have now worked 8.2 million
man-hours LTI free, with the last LTI recorded in the March quarter of
2014. It is Base which is seeking to revitalise the cotton value chain
as its contribution towards creating a sustainable economy after the
mine's life has expired. At every step, Base has been ahead of the
curve, I am certain that the ROI for the local community is off the

Base Resources is listed in Australia and I expect the share price to
scale all time highs over the next 18 months.

Base is living proof that the Kenya mining sector is now open for
business and we should always remember the pioneers who opened it up.

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Kenya Shilling versus The Dollar Live ForexPros 103.03
Kenyan Economy

Nairobi All Share Bloomberg -6.97% 2017


124.04 -0.17 -0.14%

Nairobi ^NSE20 Bloomberg -8.55% 2017 [Fresh 2008 closing Low]


2,913.84 -11.06 -0.38%

Every Listed Share can be interrogated here


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by Aly Khan Satchu (www.rich.co.ke)
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January 2017

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