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Satchu's Rich Wrap-Up
Thursday 30th of August 2018

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The Latest Daily PodCast can be found here on the Front Page of the site

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"It's a mercy that time runs in one direction only, that we see the past but darkly and the future not at all."

“The past only comes back when the present runs so smoothly that it is
like the sliding surface of a deep river,” Virginia Woolf wrote some
years before she filled her coat-pockets with stones, waded into the
River Ouse
Rivers may be among our richest existential metaphors — “Time is a
river which sweeps me along, but I am the river,” Borges proclaimed in
his timeless meditation on time
A river passing through a landscape catches the world and gives it
back redoubled: a shifting, glinting world more mysterious than the
one we customarily inhabit. Rivers run through our civilisations like
strings through beads, and there’s hardly an age I can think of that’s
not associated with its own great waterway. The lands of the Middle
East have dried to tinder now, but once they were fertile, fed by the
fruitful Euphrates and the Tigris, from which rose flowering Sumer and
Babylonia. The riches of Ancient Egypt stemmed from the Nile, which
was believed to mark the causeway between life and death, and which
was twinned in the heavens by the spill of stars we now call the Milky
Way. The Indus Valley, the Yellow River: these are the places where
civilisations began, fed by sweet waters that in their flooding
enriched the land. The art of writing was independently born in these
four regions and I do not think it a coincidence that the advent of
the written word was nourished by river water.

Political Reflections

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With Ships and Missiles, China Is Ready to Challenge U.S. Navy in Pacific @nytimes
Law & Politics

In April, on the 69th anniversary of the founding of China’s Navy, the
country’s first domestically built aircraft carrier stirred from its
berth in the port city of Dalian on the Bohai Sea, tethered to
tugboats for a test of its seaworthiness.
“China’s first homegrown aircraft carrier just moved a bit, and the
United States, Japan and India squirmed,” a military news website
crowed, referring to the three nations China views as its main rivals.
Not long ago, such boasts would have been dismissed as the bravado of
a second-string military. No longer.
A modernization program focused on naval and missile forces has
shifted the balance of power in the Pacific in ways the United States
and its allies are only beginning to digest.
While China lags in projecting firepower on a global scale, it can now
challenge American military supremacy in the places that matter most
to it: the waters around Taiwan and in the disputed South China Sea.
That means a growing section of the Pacific Ocean — where the United
States has operated unchallenged since the naval battles of World War
II — is once again contested territory, with Chinese warships and
aircraft regularly bumping up against those of the United States and
its allies.
To prevail in these waters, according to officials and analysts who
scrutinize Chinese military developments, China does not need a
military that can defeat the United States outright but merely one
that can make intervention in the region too costly for Washington to
contemplate. Many analysts say Beijing has already achieved that goal.
To do so, it has developed “anti-access” capabilities that use radar,
satellites and missiles to neutralize the decisive edge that America’s
powerful aircraft carrier strike groups have enjoyed. It is also
rapidly expanding its naval forces with the goal of deploying a “blue
water” navy that would allow it to defend its growing interests beyond
its coastal waters.
“China is now capable of controlling the South China Sea in all
scenarios short of war with the United States,” the new commander of
the United States Indo-Pacific Command, Adm. Philip S. Davidson,
acknowledged in written remarks submitted during his Senate
confirmation process in March.
He described China as a “peer competitor” gaining on the United States
not by matching its forces weapon by weapon but by building critical
“asymmetrical capabilities,” including with anti-ship missiles and in
submarine warfare. “There is no guarantee that the United States would
win a future conflict with China,” he concluded.
“The task of building a powerful navy has never been as urgent as it
is today,” President Xi Jinping declared in April as he presided over
a naval procession off the southern Chinese island of Hainan that
opened exercises involving 48 ships and submarines. The Ministry of
National Defense said they were the largest since the People’s
Republic of China was founded in 1949.
Even as the United States wages a trade war against China, Chinese
warships and aircraft have picked up the pace of operations in the
waters off Japan, Taiwan, and the islands, shoals and reefs it has
claimed in the South China Sea over the objections of Vietnam and the
When two American warships — the Higgins, a destroyer, and the
Antietam, a cruiser — sailed within a few miles of disputed islands in
the Paracels in May, Chinese vessels rushed to challenge what Beijing
later denounced as “a provocative act.” China did the same to three
Australian ships passing through the South China Sea in April.
When Defense Secretary Jim Mattis visited Beijing in June, Mr. Xi
bluntly warned him that China would not yield “even one inch” of
territory it claims as its own.
China’s naval expansion began in 2000 but accelerated sharply after
Mr. Xi took command in 2013. He has drastically shifted the military’s
focus to naval as well as air and strategic rocket forces, while
purging commanders accused of corruption and cutting the traditional
land forces.
While every branch of China’s armed forces lags behind the United
States’ in firepower and experience, China has made significant gains
in asymmetrical weaponry to blunt America’s advantages. One focus has
been in what American military planners call A2/AD, for
“anti-access/area denial,” or what the Chinese call
A centerpiece of this strategy is an arsenal of high-speed ballistic
missiles designed to strike moving ships. The latest versions, the
DF-21D and, since 2016, the DF-26, are popularly known as “carrier
killers,” since they can threaten the most powerful vessels in the
American fleet long before they get close to China.
The DF-26, which made its debut in a military parade in Beijing in
2015 and was tested in the Bohai Sea last year, has a range that would
allow it to menace ships and bases as far away as Guam, according to
the latest Pentagon report on the Chinese military, released this
month. These missiles are almost impossible to detect and intercept,
and are directed at moving targets by an increasingly sophisticated
Chinese network of radar and satellites.
Such missiles pose a particular challenge to American commanders
because neutralizing them might require an attack deep inside Chinese
territory, which would be a major escalation.
The American Navy has never faced such a threat before, the
Congressional Research Office warned in a report in May, adding that
some analysts consider the missiles “game changing.”
The “carrier killers” have been supplemented by the deployment this
year of missiles in the South China Sea. The weaponry includes the new
YJ-12B anti-ship cruise missile, which puts most of the waters between
the Philippines and Vietnam in range.
While all-out war between China and the United States seems
unthinkable, the Chinese military is preparing for “a limited military
conflict from the sea,” according to a 2013 paper in a journal called
The Science of Military Strategy.
Lyle Morris, an analyst with the RAND Corporation, said that China’s
deployment of missiles in the disputed Paracel and Spratly Islands
“will dramatically change how the U.S. military operates” across Asia
and the Pacific.
Last year, China counted 317 warships and submarines in active
service, compared with 283 in the United States Navy, which has been
essentially unrivaled in the open seas since the collapse of the
Soviet Union in 1991.
The roots of China’s focus on sea power and “area denial” can be
traced to what many Chinese viewed as humiliation in 1995 and 1996.
When Taiwan moved to hold its first democratic elections, China fired
missiles near the island, prompting President Bill Clinton to dispatch
two aircraft carriers to the region.
“We avoided the sea, took it as a moat and a joyful little pond to the
Middle Kingdom,” a naval analyst, Chen Guoqiang, wrote recently in the
official Navy newspaper. “So not only did we lose all the advantages
of the sea but also our territories became the prey of the imperialist
The Liaoning’s battle group now routinely circles Taiwan. So do
Chinese fighter jets and bombers.
China’s new J-20 stealth fighter conducted its first training mission
at sea in May, while its strategic bomber, the H-6, landed for the
first time on Woody Island in the Paracels. From the airfield there or
from those in the Spratly Islands, the bombers could strike all of
Southeast Asia.
The recent Pentagon report noted that H-6 flights in the Pacific were
intended to demonstrate the ability to strike American bases in Japan
and South Korea, and as far away as Guam.
“Competition is the American way of seeing it,” said Li Jie, an
analyst with the Chinese Naval Research Institute in Beijing. “China
is simply protecting its rights and its interests in the Pacific.”

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28-AUG-2017 Apart from a few half-hearted and timid FONOPs [freedom of navigation operations], China has established control over the South China Sea.
Law & Politics

It has created artificial Islands and then militarised those
artificial islands across the South China Sea. It is a mind-boggling
geopolitical advance any which way you care to cut it.


The Trade War's Target is China and Mr. Trump to date has been
rattling Xi Jinping's Pedestal or is it a Golden Cage.

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Law & Politics

President Donald J. Trump feels strongly that North Korea is under
tremendous pressure from China because of our major trade disputes
with the Chinese Government.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1691
Dollar Index 94.59
Japan Yen 111.655
Swiss Franc 0.9709
Pound 1.3022
Aussie 0.7279
India Rupee 70.675
South Korea Won 1109.15
Brazil Real 4.1066
Egypt Pound 17.8955
South Africa Rand 14.4056

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Emerging-market carry traders have had their worst August on record over the trade war and currency crises from Turkey to Argentina
Emerging Markets

August has historically been a cruel month for emerging markets. By
one measure, this year’s has been the worst on record.

A Bloomberg currency index that tracks carry-trade returns from eight
emerging markets, funded by short positions in the dollar, has slumped
more than 5 percent since end-July, set for its biggest August drop
since Bloomberg started compiling the data in 1999.

While a hawkish Federal Reserve boosted the dollar to a 14-month high
this month, currency crises from Turkey to Argentina and China’s trade
war with the U.S. dented demand for riskier assets. Turkey’s lira,
Argentina’s peso, Brazil’s real and Russia’s ruble were the hardest
hit developing-nation units, cutting returns for speculators who
borrow in a currency they expect to depreciate or remain little
changed to secure the lowest borrowing costs, and using the proceeds
to buy assets with higher yields.

The cost of insuring against a default by developing nations for five
years had its biggest August spike since at least 2012, according to
the Markit CDX Emerging Markets Index.

“No one wants to be a hero during August,” Manulife Asset’s Segal said.

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[The End of] Halcyon Days @TheStarKenya
Emerging Markets

From Latin Alcyone, daughter of Aeolus and wife of Ceyx. When her
husband died in a shipwreck, Alcyone threw herself into the sea
whereupon the gods transformed them both into halcyon birds
(kingfishers). When Alcyone made her nest on the beach, waves
threatened to destroy it. Aeolus restrained his winds and kept them
calm during seven days in each year, so she could lay her eggs. These
became known as the “halcyon days,” when storms do not occur. Today,
the term is used to denote a past period that is being remembered for
being happy and/or successful.

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20-AUG-2018 President Trump has apparently embraced a strong Dollar and of course coercive financial warfare and tweeted this on 16 August.
Emerging Markets

Our economy is doing better than ever. Money is pouring into our
cherished Dollar like rarely before, companies earnings are higher
than ever, infla- tion is low & business optimism is higher than it
has ever been. For the first time in many decades, we are protecting
our workers!

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.@theresa_may's Pledge to Become G7's Biggest Investor in Africa 'Big Ask' - Economist: @SputnikInt

Theresa May has announced plans to boost Britain's investment in
Africa after Brexit, during her first trip to the continent as prime
minister. Sputnik spoke to Sub-Saharan African political and economic
analyst, Aly-Khan Satchu, about overseas investment in the continent.
On Tuesday, August 28, in a speech in Cape Town, Mrs. May pledged £4
billion (US$5.1 billion) in support for African economies and said she
wanted to create jobs for young people and make Britain the G7's
biggest overseas investor in Africa, ahead of the US.
The British prime minister, who is due to visit Nigeria on Wednesday,
August 29, pledged to prioritize investment in Africa as she sought to
drum up trade deals with Brexit looming in March 2019.
"By 2022, I want the UK to be the G7's number one investor in Africa,
with Britain's private sector companies taking the lead," Mrs. May
told business leaders in Cape Town.
"I want to create a new partnership between the UK and our friends in
Africa built around shared prosperity," she added.
Sub-Saharan African political and economic analyst, Aly-Khan Satchu,
said Britain had a "lot of leverage" in Africa because of the historic
links from its empire and commonwealth.
"Because of its history Britain has a lot of leverage and indeed
ground-level knowledge of the continent so in a post-Brexit world it
makes sense to sweat its African equity," Mr. Satchu told Sputnik.
He said he suspected the £4 billion was not new money but had come
from other budgets but now had a "sharper focus on the youth dynamic".
"Britain preceded China and the US and is seeking to play to that
advantage. This is largely a ‘born free' generation and the UK is wise
to play to that theme for multiple and overlapping reasons," Mr.
Satchu told Sputnik.
He said her pledge to become the G7's biggest investor in Africa was a
"big ask".
France Is Targeting Anglophone Africa
"Macron's France has come into Theresa May's patch aggressively
targeting anglophone Africa. The US is seeking to roll back China and
will certainly put more money to work. If you look at North American
remittances into Africa and at portfolio flow capital then the US
looks likely to stay ahead," Mr. Satchu told Sputnik.
China remains the biggest overseas investor in Africa, but is not in the G7.
"China had a singular and positive influence on Africa. It rebalanced
the demand side for Africa's commodities and also bought those
commodities on a long-term basis. It was this which triggered the
African recovery some two decades ago," Mr. Satchu told Sputnik.
"However, since then a freewheeling China Inc has favorited elites,
has facilitated large-scale looting via inflated infrastructure, some
of which were white elephants on Day One, and has lumped the African
citizen with the tab. How this plays out is now the key to
Sino-African relations going forward. A Hambantota scenario would be
problematic," Mr. Satchu said, referring to the Sri Lankan port which
has been leased to China for 99 years because the government in
Colombo was unable to pay for it.
On Thursday, August 30, Mrs. May will meet Kenyan President Uhuru
Kenyatta, who has just returned from seeing US President Donald Trump
in Washington.
Mr. Satchu said Kenya was one of a number of economies which were
performing well in Africa — others include Senegal, Ethiopia, Ghana
and the Ivory Coast.
"But it's been very lopsided growth, trickle down has been anemic. The
secret is to unleash human capital and connect it to the 21st century.
Look at internet speeds. Ethiopia's model, while good, has run out of
cash," Mr. Satchu told Sputnik.

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Africa's fastest growing Economies via @Zemedeneh

#Africa’s growing contribution to the world economy:  it’ll be home to
some of the world’s fastest-growing economies in the coming years.
Ethiopia to record the fastest growth in real GDP terms, well above
the global average. Source: @Euromonitor

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Brussels is not the reason behind Britain’s weak trade links with
Africa. France, Germany and Italy — all EU members — export more than
double the value of goods to the continent than the UK, according to
the International Trade Centre. Even Spain, which has an economy half
the size of the UK’s, exports more than Britain.

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The UK's trade presence in Africa was not always this small: until the late-1990s Britain accounted for nearly 7 per cent of the continent's imports. Now that share has dropped to just over 2 per cent. FT

“As the prime minister announced during her speech in South Africa,
the UK’s ambition is to be the G7’s number one investor in Africa by
2022,” said George Hollingbery, international trade minister.

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Chinese goods exports to Africa are eight times larger than those of the UK and even bigger than the top three exporters - Germany, France and the US - combined.via FT

Mrs May is visiting South Africa and Nigeria, the two African
countries receiving the largest value of UK exports of goods and
services. Yet their combined value is just £7.3bn a year — only around
one-sixth of the £39bn worth of goods UK exports to the Netherlands
annually. Later this week the prime minister will also go to Kenya, a
smaller UK trading partner but a fast growing economy.

Imports from Africa form just 2 per cent of total UK imports,
partially as a consequence of falling commodity prices. Fuel, precious
stones and fresh fruit dominate the trade, according to the
International Trade Centre. By comparison, trade with the EU is
dominated by machinery and vehicles, either as finished goods or as
parts and components.

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In #Uganda, a singer, a president and a generational fight for Africa, by @davidpilling via @FinancialTimes

They call him the Ghetto President. The Ugandan singer and activist
Bobi Wine, born in a Kampala slum and now a member of parliament, is
facing charges of treason.
The accusation stems from an incident in which protesters allegedly
threw stones at the motorcade of the actual president, Yoweri
Museveni. But Mr Wine’s real crime is more simple: at 36 and in touch
with Uganda’s youthful population, he is half the age and twice as
popular as his 74-year-old nemesis.
There are Bobi Wines all over Africa. Rapid urbanisation and the
spread of social media have enabled a generation of young people to
express their frustrations and cross-fertilise ideas.
Whether they are bloggers or rappers or human rights activists, their
concerns are similar. Young people are complaining about lack of jobs,
about government corruption and about out-of-touch leaders.
Mr Wine, whose legal name is Robert Kyagulanyi, has been a growing
irritant to the Ugandan president. First it was his scathing lyrics
and then, since his election to parliament last year, his legislative
In song, he dared to spoof Mr Museveni, a former bush-war hero who
toppled a dictator 32 years ago, only to become one himself. In
parliament, Mr Wine fought against a clampdown on social media and an
amendment to the constitution to lift a 75-year-old age limit on
presidential candidates. The amendment, which was eventually passed,
effectively installs Mr Museveni as president for life.
Mr Wine has paid dearly for his popularity. After being arrested
nearly two weeks ago, he was tortured so badly by Mr Museveni’s
security forces — including beatings with a metal rod — he was unable
to walk. He has now been released on bail.
The case has received international attention. Last week, 88 African
and international celebrities, including Nigerian Nobel Prize-winning
playwright Wole Soyinka and the British singer Peter Gabriel and music
producer Brian Eno, signed a petition.
Across the continent, Mr Wine’s spreading fame has put leaders on
notice that they face a youthful rebellion. Africa has the youngest
population in the world, with a median age of 19.5. Uganda’s is just
16. But the continent has the world’s oldest leaders, with an average
age of 62. Incumbents are clinging on well past their sell-by date.
Take Paul Biya. Please. The 85-year-old president of Cameroon has been
in power for 35 years. Although he spends much of his time in a
five-star hotel in Geneva and presides over a country spiralling into
near civil war, like Mr Museveni he harbours delusions of his own
popularity. In elections in October, he will be seeking yet another
term. Given the powers of incumbency, you would not bet against him.
In 1986, Mr Museveni was celebrated as a new kind of leader. “The
government should not be the master, but the servant of the people,”
he said in his inaugural speech. His idea of a servant, it turns out,
is someone who hangs around for life.
Those who know Mr Museveni say he genuinely believes he alone can lead
the country. Like the general in his labyrinth, surrounded with
hangers-on and flatterers, he is convinced he is loved. That is why Mr
Wine is so dangerous. With the mockery of a well-honed lyric, he
pierces the armoury of presidential vanity. “What used to be democracy
has now become hypocrisy,” he sings.
Mr Wine has kept his recording studio in the slum where he grew up. He
is more in touch with the average Ugandan than Mr Museveni can ever
be. Though his leadership skills are untested, his ability to voice
the frustrations of a dispossessed generation are not. A typical post
online beneath one of his songs reads: “We are . . . the grandchildren
of the independence generation and the grandparents of the future
generation. We must within ourselves find solutions.”
The picture is slowly shifting. Particularly in west Africa, two-term
limits are now the norm. Ageing, unpopular leaders, from South
Africa’s Jacob Zuma to Zimbabwe’s Robert Mugabe, have been shoved
aside. In Liberia, the electorate has gambled on George Weah, a
51-year-old former football star, as their president.
Most exciting of all is Ethiopia, where Abiy Ahmed, just 42, was
elected prime minister in April. He is turning things upside down.
These are early days, but so far he has concluded a peace deal with
Eritrea, released thousands of political prisoners and shaken up parts
of the economy that needed it.
Africa is a vast and varied continent. As is said of India, whatever
is true of Africa, the opposite is also true. Just as the wind of
youthful change is real, so too is the recalcitrance of age and power.
Youth will not always be right. But it will have its day.

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NOV 14 ::Ouagadougou's Signal to Sub-Sahara Africa

What’s clear is that a very young, very informed and very connected
African youth demographic [many characterise this as a ‘demographic
dividend’] – which for Beautiful Blaise turned into a demographic
terminator – is set to alter the existing equilibrium between the
rulers and the subjects, and a re-balancing has begun.

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Why South Africa SHOULD BE afraid of the economic "big bad wolf" @RonakGopaldas

JOHANNESBURG — Earlier this month, South Africans had a taste of
emerging market turmoil when the Turkish lira plunged, knocking the
highly liquid rand. The rand did pull back, but it also put South
Africa under the radar of traders who feel that South Africa’s
economic fundamentals are shaky. And as Ronak Gopaldas explains in
this article, South Africa better start getting its financial house in
order or risk being totally blown away in a future financial crisis. –
Gareth van Zyl

What to make of financial markets? As we currently sit in the throes
of a Turkey initiated emerging market sell-off, anxious investors are
wearily contemplating their next moves. The rand has sold off
dramatically, the Indian rupee has reached historical lows, the
Turkish lira moved by 14% in a single day. Meanwhile, the MSCI
emerging market bond index plunged to its lowest level in a year,
while stock markets across Asia, Latin America and Africa turned deep

There’s a sense of déjà vu akin to the 2013 taper tantrum and fragile
five fallout. The incidental cause of this current contagion? Turkey.
As financial times correspondent Joseph Cotterill succinctly tweeted
in reference to Turkey’s economy – “Imagine if a country had also done
Nenegate… but had then just kept going”. Now, fears of a Turkey
hard-landing have placed the economic and political problems of other
countries firmly in the spotlight. Positive sentiment has been eroded,
a wave of capital flight and contagion has been triggered and
retreating investors have flocked to safe haven assets amid the
prevailing uncertainty.

It goes without saying that South Africa is vulnerable in this
context. Despite the tendency to frame South Africa’s issues as
domestically driven, the reality is that our economy does not operate
in a vacuum. What happens in the rest of the world has a profound
influence on SA – meaning that when emerging market contagion takes
root, a small open economy reliant on portfolio flows, like ours, will
be under stress. As the most liquid tradeable EM currency and a proxy
for EM sentiment, the effects of such a reversal are especially
pronounced in a risk-off environment.

But here’s the really worrying thing – Turkey is not even the most
important risk to consider. Even before the most recent bout of
volatility there had been a feeling among financial markets that we
were approaching an inflection point. After a “goldilocks” period, low
interest rates facilitated by low inflation, the tide is finally
starting to shift. And with that, all will change.

Indeed, the normalisation of the rate cycle poses significant risks.
But, noteworthy, inflation and interest rates don’t necessarily need
to get out of hand to effect changes. Markets, driven by human
emotions, only need conditions to be slightly worse than what they are
accustomed to for reactions to occur. If this happens, it will present
a serious headache for emerging market policy makers to contemplate.

This policy dilemma is best explained by using a fable, namely the
story of the three little pigs and the big bad wolf. For those
unfamiliar – The Three Little Pigs is a fable about three pigs who
build three houses of different materials. The two pigs building
houses of straw and sticks scoff at their brother, building the brick
house. But when the wolf comes around and blows their houses down,
they run to their brother’s house. And throughout, they sing the
classic song, “Who’s Afraid of the Big Bad Wolf?”

Thus, taken both metaphorically and literally, those economies that
have built their houses on poor foundations stand to be blown away by
the big bad wolf – in this case, higher global interest rates, driven
by hikes from the US Federal Reserve. Where South Africa features in
this EM universe is the key question – will it suffer the same fate as
Argentina or Turkey or can it still shape a different path?

As the fable goes, the big bad wolf starts with the straw house.

Let’s call this the house of ‘bad economics”. Typically, these are
countries that spend too much, borrow too much and save too little.
The hallmarks of such economies are twin deficits, a lack of policy
credibility, fiscal laxity, and a huge reliance on external funding.

Such characteristics have been firmly displayed in Argentina, which
again finds itself knee deep in a balance of payments crisis.
Argentina is especially vulnerable to the vagaries of global financial
flows because it is so dependent on foreign borrowing. Another
vulnerable candidate is commodity dependent Zambia, which faces the
challenges of ballooning debt, balance of payment stresses and poor
investor sentiment. The country is seen by bond investors and analysts
alike as the most likely African sovereign to renege on its debt
obligations in the event of a sustained risk-off environment.

Countries that exhibit these features are going to be in trouble in a
less favourable monetary backdrop. In short, when the big bad wolf
comes the economic fragility of their straw houses will be exposed.

Next, the big bad wolf went for the stick house – let’s call this the
house of bad politics.

Such houses are characterised by democratic regression, corruption,
nepotism and a lack of independent policymaking. In Turkey, the
confluence of all of these factors has been evident. Following the
recent election, President Recep Tayyip Erdogan duly installed his son
in-law as finance minister in a move that spooked markets.
Interference in monetary policy has compromised the independence and
credibility of the central bank – another red flag for investors.
Rising authoritarianism and a diplomatic spat with the US has further
exacerbated the negative view towards the country, and investors
pulled their cash as the yield on their debt was not viewed as
sufficient to accept such heightened risk. Taken together and fanned
by erratic and haphazard policy decisions, Turkey’s political own
goals have turned a bad situation into a full-blown crisis.

But they’re not the only ones. With a packed election calendar for
2019 including Brazilian, Indian, South African, Nigerian and
Indonesian elections – political developments will be front and centre
of investors’ thinking. Any indications of escalating political risk
along with signs of imprudent economic management will be severely
punished. South Africa saw a glimpse of the devastating effect of this
in 2015 and should be cautious of the pitfalls of building a stick

Finally, the house that survives is the one built on a sturdy
foundation. This is a house built from bricks – it takes longer than
the others and requires more hard work. But despite the unpopularity
at the time, it is a wise decision, as it withstands the threat from
the big bad wolf.

So, what features do countries with brick houses exhibit? Policy
certainty and coherence, and strong fiscal discipline are
non-negotiable traits. Sound governance and the political will to
execute a reform agenda are essential. Typically, measures to improve
the business environment and enhance competitiveness are prioritised.
Mostly importantly, these are houses where short-term political
expediency is sacrificed for longer term economic sustainability.

As it stands, South Africa’s foundation is precarious. The country is
in a low growth bind, faces uncertainty around key policy issues such
land reform and the mining charter, and despite an initial wave of
Ramaphoria, the investment cycle failed to take off. What is clear is
that given the country’s twin deficits, governance challenges, and
weak balance sheet, it is going to be in the firing line, unless
drastic action is taken.

But what will actually happen when the big bad wolf arrives?

EM countries have constrained policy war chests. Countries with the
combination of dysfunctional politics, and growing populism should be
concerned about the arrival of the big bad wolf, who may well blow
down the entire house.

For with higher interest rates comes, naturally, a higher cost of debt
funding. And with this comes trade-offs and hard choices. In the wake
of quantitative easing, with money too cheap to mention, politicians
globally have often managed to avoid having to choose between
competing spending priorities, jostling recipients of state patronage
(whether official or not) and protesting tax bases.

However, the steady upward march by US rates will see these issues
emerge at the forefront of market narratives as funding becomes harder
and harder. It is highly plausible that when faced with questions on
what spending to cut or what tax to raise, politicians will answer
with a third question: how much more borrowing will the market let us
get away with? On the former, the self-reinforcing feedback loop of
higher yields, higher financing stress, higher credit risk and then
back to higher yields is one with plenty historical precedent.

Markets will also be highly reactive due to the potential for sudden
deteriorations: as Hemingway said, when describing the process by
which he personally went bankrupt: these things happen gradually, then

The message to emerging markets and SA is therefore clear – fortify
your houses to sure up the economic and political fundamentals or risk
being blown away by the big bad wolf.

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27-AUG-2018 :: The ZAR gets caught up in the CrossFire. @TheStarKenya

President Trump the linguistic and financial warfare specialist has
the Machine-Gun and the ZAR is in its line of Fire.

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South Africa All Share Bloomberg +1.11% 2018

Dollar versus Rand 6 Month Chart INO 14.4067


Egypt Pound versus The Dollar 3 Month Chart INO 17.8945


Nigeria All Share Bloomberg -7.54% 2018


Ghana Stock Exchange Composite Index Bloomberg +8.73% 2018


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The International Centre for Settlement of Investment Disputes ordered the Tanzania Electric Supply Co. to pay Standard Chartered Plc $148.4 million after breaching a power contract, the arbitrator said.

The case that began in 2001 concerns a purchase agreement in May 1995
between Tanesco and Independent Power Tanzania Ltd., whose rights were
later taken over by Standard Chartered in 2014.
The agreement required IPTL to supply Tanesco with 100 megawatts
before the company was placed under the custody of a liquidator in
December 2008 following ownership disputes between shareholders
Mechmar Corp. and VIP Engineering and Marketing Ltd.
Tanesco maintained it paid IPTL for power, while Standard Chartered
argued that it should have been paid.
Tanesco is required to pay Standard Chartered interest at three-month
London interbank offered rate plus 4 percent from Sept. 30, 2015 until
the date of the award, the Washington-based arbitrator said in a
ruling on its website. Calls to Tanesco Managing Director Esau
Mwinuka’s mobile phone weren’t answered.

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Ebola outbreak in North Kivu, Democratic Republic of Congo (DRC) could be worst ever in East Africa @theIRC

With a total of 112 confirmed and probable cases and 75 deaths, the
outbreak’s toll is already high
The recent spread of Ebola to Oicha, an area surrounded by multiple
armed groups, poses significant logistical and security management
The IRC is distressed about a potential repeat of the 2014 Ebola
outbreak if immediate and sufficient international response is not
In some areas, local communities have resisted follow up of contacts
as well as safe burials - critical for outbreak control

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Kenyan Lawmakers Propose Keeping Rate Cap, Jeopardizing IMF Loan

Kenya’s parliament defied a bid by the Treasury to remove a cap on
commercial interest rates that’s crimped bank lending.
Draft legislation agreed by lawmakers on Wednesday undermines the
government’s ability to raise a new standby loan from the
International Monetary Fund, which has insisted the limit be scrapped
in return for new funding. It may also further slow the growth in
lending to the private sector, which dropped to 2.4 percent last year
from 9.3 percent in 2016.
Lawmakers also voted to repeal a so-called floor on deposits that
requires banks to pay savers a minimum of 70 percent of the central
bank rate. Lending rates remain capped at 400 basis points above the
benchmark rate, currently 9 percent.
“Banks have still been making colossal profits they were making before
the cap,” lawmaker Antony Kimani Ichung’wa said during a debate in
parliament Wednesday in the capital, Nairobi. “With the 4 percent
spread, banks have made profits. We are widening the spread by
removing the floor, so that banks have flexibility.”
Kenya’s government imposed the cap in August 2016 to fulfill an
election-campaign pledge by President Uhuru Kenyatta to improve
lending terms for consumers, against the advice of the central bank.
The measure exacerbated a slowdown in credit growth, with banks
including KCB Group citing their inability to compensate for riskier
customers by charging higher interest rates for the slump.
Treasury Secretary Henry Rotich called for the repeal of the
legislation in his budget speech in June. Central bank Governor
Patrick Njoroge has complained the cap complicates monetary policy by
making credit demand hard to predict.
The IMF granted Kenya a six-month extension to a $1.5 billion standby
loan in March to complete delayed reviews of the facility, before the
government embarks on talks about a new potential program. The funding
is available to shield the economy from exogenous shocks.
“The odds of a new facility are quite slim and the market may pay more
attention to this,” Jibran Qureishi, regional economist for Stanbic
Holdings Ltd. in Nairobi, said in an emailed research note. “Whereas
Kenya doesn’t face a balance of payments crisis at present, the
credibility that is attached to an IMF approval or acknowledgment
should not be discounted.”
The six-month extension to the IMF facility expires on Sept. 14. The
draft law must now be submitted to Kenyatta for his assent.


I agree with Jibran.

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@SanlamKenya reports H1 2018 EPS [10.5] Earnings here
Kenyan Economy

Par Value:                  5/-
Closing Price:           22.75
Total Shares Issued:          144000000.00
Market Capitalization:        3,276,000,000
EPS:             0.21
PE:                 108.333

Sanlam Kenya PLC H1 2018 results through 30th June 2018 vs. 30th June 2017
H1 Gross written premium income 3.340848b vs. 3.308030b +0.992%
H1 Net earned premium 2.494578b vs. 2.724794b -8.449%
H1 Investment and other income 1.193699b vs. 1.571115b -24.022%
H1 Total income 3.688277b vs. 4.295909b -14.144%
H1 Net claims and policyholder benefits [2.447956b] vs. [2.751422b] -11.029%
H1 Operating and other expenses [1.781524b] vs. [1.391963b] +27.986%
H1 Impairment of financial assets [1.152329b] vs. –
H1 Finance costs [77.311m] vs. –
H1 Total expenditure [5.459120b] vs. [4.143385b] +31.755%
H1 [Loss]/ Profit before tax [1.770843b] vs. 152.524m -1,261.026%
H1 [Loss]/ Profit after tax [1.531415b] vs. 90.528m -1,791.648%
H1 EPS (Basic & diluted) [10.5] vs. 0.62 -1,793.548%
Total equity 2.399737b
Total assets 28.161780b
Cash resources at the end of the year 1.864942b


The Question is whether they have taken the whole hit
H1 Impairment of financial assets [1.152329b]

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by Aly Khan Satchu (www.rich.co.ke)
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August 2018

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