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Monday 06th of August 2018

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Macro Thoughts

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06-AUG-2018 ::The Indian Ocean Economy and a Port Race. @TheStarKenya

Good Morning from Durban, South Africa. Durban is the southern-most
and largest Port on the Indian Ocean in Africa [in 2017 the port
catered for 9,821 vessels and processed 22,785,7619 metric tons of
cargo] and has the largest population of Indians outside India. The
Indians in Durban and all along the Indian Ocean coast-line from
Mombasa to Beira to Durban were brought to Africa by the monsoon

Professor Felipe Fernández-Armesto explains ''The precocity of the
Indian Ocean as a zone of long-range navigation and cultural exchange
is one of the glaring facts of history'', made possible by the
''reversible escalator'' of the monsoons. The Indian Ocean Economy
preceded the Atlantic Ocean Economy, where the Europeans only learnt
how to ''crack the code'' of the Atlantic winds [and a new 'Western'
culture arose on both sides of the ocean] long after the Indian Ocean.

As we scan the Blue Economy it is worth appreciating that Maritime
shipping is the lifeblood of Africa, with over 90% of the continent’s
imports and exports transported by sea. Today from Massawa, Eritrea
[admittedly on the Red Sea] to Djibouti, from Berbera to Mogadishu,
from Lamu to Mombasa to Tanga to Bagamoyo to Dar Es Salaam, through
Beira and Maputo all the way to Durban and all points in between we
are witnessing a Port race of sorts as everyone seeks to get a piece
of the Indian Ocean Port action. China [The BRI initiative], the Gulf
Countries [who now appear to see the Horn of Africa as their
hinterland], Japan and India [to a lesser degree] are all jostling for
optimal ''geo-economic'' positioning.

Overlay the Geopolitics and its worth noting that the Geopolitics has
become much more fluid. Fluidity has been engendered by the
spectacular arrival of Prime Minister Abiy in Ethiopia [which is
land-locked, of course but a key Future Taker of Port facilities] who
has made peace with President Afawerki's Eritrea and is surely set to
undercut Djibouti and even LAPPSET, both Projects which seem to me to
have been predicated to some degree on a permanent Freeze between
Ethiopia and Eritrea. Investments in Ports have a long lead time and I
am not certain that those same investments are able to re-calibrate at
the speed with which the Geopolitics is moving. The Big Risk is that
some these Port investments will be ''Hambanota''-ed.

Bloomberg reported that Hambantota Port has 'become a cautionary tale
for Xi’s Belt and Road aspirations. The idea was to take an
inconsequential harbor visited by fewer than one ship a month on
average and turn it into a modern, bustling seaport adorning a
southern Belt and Road maritime route. It hasn’t turned out so well.
Hambantota (population at the time 11,200) got a new port. The port at
Hambantota, was partly funded during the Rajapaksa administration by a
loan from the Export-Import Bank of China. By the time Rajapaksa was
voted out of office in 2015, more than 90 percent of Sri Lanka’s
government revenue was going toward servicing debt. Last year, with
Xi’s Belt and Road plan in full flow, a new Sri Lankan government
moved to ease the debt. In return for $1.1 billion, it basically
handed the seaport over to China.

 “All these huge projects are a waste,” says Sisira Kumara
Wahalathanthri, a local politician who opposes the current Sri Lanka
government. “No ships are coming to the port. No flights are coming to
the airport.”

I am bullish on the Blue Economy and in particular the Indian Ocean
Economy which is set to relive its glory days. Unlike the marvellous
song ''Everyones a Winner'' by Hot Chocolate, but There will be
Winners and Losers. Everyone is drinking the Indian Ocean ''Kool-Aid''
right now.

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Whoever fights monsters should see to it that in the process he does not become a monster. And if you gaze long enough into an abyss, the abyss will gaze back into you.
Law & Politics

Whoever fights monsters should see to it that in the process he does
not become a monster. And if you gaze long enough into an abyss, the
abyss will gaze back into you. - Friedrich Nietzsche

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Law & Politics

Mr Mandaza said Mr Mnangagwa’s government was actually a military
junta in disguise. “Mnangagwa is not in charge, Chiwenga is in
charge,” he said. “In hindsight, it was naive to think that after a
coup and a military government one could have expected a free, fair
and credible election.”

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Democracy loses another round in Zimbabwe. @Bershidsky on elections as an authoritarian tool via @bopinion
Law & Politics

The questionable Zimbabwe election is fresh proof that in the modern
world, elections have less and less to do with democracy. The
incumbent leader, Emmerson Mnangagwa, was declared winner on Friday
and his party, ZANU-PF, gained a constitutional majority in
parliament. The manipulated outcome was the global norm rather than an

But any expectation of democratization should have died long before
Mnangagwa was declared victorious. Despite fashionable gimmicks such
as biometric voter registration, this was a typical authoritarian
election campaign with international observers noting  voter coercion,
the use of government resources to buy votes, ruling-party control of
the media and a lack of transparency on the part of the election
commission. As the votes were counted, some polling stations made the
results public and others didn’t. Chamisa, who prematurely declared
victory before any official counting was done, maintains that the
election was stolen from him. Mnangagwa unleashed the army on
Chamisa's supporters to put to rest any illusion that the outcome
could be contested. Several people were killed.

Mnangagwa ended up with 50.8 percent of the official tally, while
Chamisa was credited with 44.3 percent, but, as in all such elections,
the numbers don’t really matter. In this case, they’re supposed to
show that the election was closely fought and fairly won, so
international financial institutions might have fewer doubts about
Mnangagwa’s legitimacy. It may or may not work depending on the
economic policy signals Mnangagwa sends out. Not being as reckless as
Mugabe is probably the threshold of sufficiency for some investment
and financial aid; democratization would be too much to ask.

The data on the decline in election fairness come from a 2014 study by
Oxford University’s Sylvia Bishop and Anke Hoeffler, which pointed out
that only 14 countries in the world didn’t hold elections in the
previous decade, but that only about half of all elections held could
be deemed free and fair. Authoritarian regimes, Bishop and Hoeffler
wrote, hold elections to win propaganda points for supposed
legitimacy, to gather information on allies, voters and adversaries,
to project power, and to “coup-proof” themselves in the eyes of the
military. Signaling for the sake of investors and donors, something
especially important to Mnangagwa, is also a widespread motive: That’s
why authoritarian regimes often don’t mind the presence of
international observers, who tend to criticize some aspects of what
they see but almost always praise some others.

Christopher Dielmann, senior economist at Exotix Capital, a
London-based investment bank specializing in emerging markets,

With the election behind us, the question on investors' minds will be
whether or not Zimbabwe can now focus on rebuilding the economy,
engaging with the international community, and eventually finding a
way to achieve debt relief. The opposition concerns – especially the
very narrow margin of victory that prevents a future runoff – and the
violence of the past days will be weighed against an overall reduction
in violence throughout the campaigning and election, and a greater
degree of transparency than we’ve seen in the past. By many accounts,
this imperfect election nevertheless delivered sufficient
transparency, especially in relation to past results in the country,
that should allow reengagement to occur relatively smoothly.

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Divided nation, broken economy face Zimbabwe's new president
Law & Politics

Emmerson Mnangagwa’s tenure as Zimbabwe’s newly elected president got
off to a rocky start.

He narrowly secured a five-year term in an election marred by
opposition allegations of rigging and the deaths of six people when
soldiers fired live rounds at protesters in the capital, Harare.
Details of election flaws were outlined by observers from Western
nations, whose support is needed to rebuild an economy beset by mass
unemployment, dire cash shortages and crumbling infrastructure after
two decades of misrule under Robert Mugabe.

“Mnangagwa has to start from scratch and prove he is not another
demagogue like Mugabe,” Rashweat Mukundu, a political analyst at the
Zimbabwe Democracy Institute, said by phone. “His legitimacy will
continue to be questioned in some circles, and investors may have
watched the election with skepticism, especially the violence.”

A former spy chief and deputy president, the 75-year-old Mnangagwa
first took office in November after the military seized control of the
country and the ruling party forced Mugabe to step down. He pledged to
hold credible elections, declared the country open for business and
assured investors that land grabs that started in 2000 and triggered
the southern African nation’s economic collapse were a thing of the

The new administration’s targets include an annual economic growth
rate of at least 6 percent over the next five years, attracting $5
billion in foreign direct investment and $10 billion in domestic
investment a year.

That’s going to be easier said than done. The International Monetary
Fund sees the $17.5 billion economy growing an average of 4.2 percent
a year through 2022, and the nation secured just $289 million of
foreign direct investment last year, according to the United Nations
Conference on Trade and Development.

Cash shortages are a major constraint on growth and deterrent to
investment. More than 98 percent of transactions are conducted via
electronic transfers, and banks limit withdrawals, making it difficult
for business to pay wages on time.

Zimbabwe has relied mainly on the U.S. dollar since scrapping its own
currency in 2009 to halt hyperinflation that saw prices double every
day. The government’s introduction of bond notes, a dollar-backed
quasi-currency, to ease the liquidity crisis has helped little.

The state’s finances are also in a mess. It spends almost the entire
national budget on wages for its 350,000 employees and owns about 100
cash-strapped and largely dysfunctional companies, while a broke
Treasury battles to collect tax revenue.

Zimbabwe is also saddled with $1.7 billion of arrears owed to the
African Development Bank and World Bank that it needs to clear before
it can tap new loans from multilateral lenders.

“Ultimately, they will need to try and secure donor financing through
grants or concessional loans, or even a commercial bridge loan, that
will allow them to clear outstanding arrears to multilateral
institutions, which will pave the way forward to achieving debt
relief,” Christopher Dielmann, an economist at Exotix Capital, said in
emailed comments.

Robert Besseling, executive director of political risk advisory firm
EXX Africa, expects the fallout over the disputed elections will
probably subside, enabling the government to begin repairing its
reputation and court investments and debt relief. Significant inflows
from the European Union and U.S. may depend on a commitment by
Mnangagwa’s administration to a debt-repayment plan and possibly
reaching out to the opposition, he said.

“Further outbreaks of violent unrest in Harare are less likely due to
the heavy-handed security crackdown in the capital and other cities,”
Besseling said. “While the opposition will seek to remain relevant by
staging demonstrations, attendance will be smaller than in previous

“The most immediate challenge for the winner is uniting the nation so
that there is cohesion and common purpose to tackle the larger task of
rebuilding our ruined economy,” he said.

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On Wednesday I had a soldier raise his AK at me and threaten to shoot, on Friday a riot policeman move to shove me with his shield FT @jsphctrl
Law & Politics

On Wednesday I had a soldier raise his AK at me and threaten to shoot,
on Friday a riot policeman move to shove me with his shield. In sum
I’m sensing you’d be absolutely fucking crazy to come and invest here.
It’s just a hunch.

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20 November 2017 Main actors in Zimbabwe's 'coup' are the problem, not the solution @TimesLIVE
Law & Politics

A country of false dawns and dashed hopes since 1980

It is tempting to jump for joy and ululate with the oppressed people
of Zimbabwe. For decades they have been brutalised by the regime of
Robert Mugabe. On Saturday, as millions of jubilant Zimbabweans
flooded the streets of Harare and other centres, hugging soldiers and
thanking them for finally acting, tears rushed to one's eyes.

As the images of the masses flooding into Harare were beamed across
the world it was tempting to say that finally a new uhuru (freedom)
had arrived in Zimbabwe.

It would be foolish to do so. Zimbabwe has been a country of false
dawns and dashed hopes since Mugabe took power in 1980. Nearly four
decades after it gained its freedom and inspired us here in South
Africa to soldier on, it remains a country for and of old men. It is
in the grip of these old men. It cannot shake them off.

That is why events of the past two weeks in Zimbabwe need to be viewed
with caution and scepticism, but not a loss of hope. Freedom is coming
to Zimbabwe, yes. But it will not be brought by the fired and
soon-to-be-reinstated vice-president Emmerson Mnangagwa. It will not
be brought by General Constantino Chiwenga, the man who led the army
in its actions last week.

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.@Airbnb Is the New @NATO The nation state is trumpeted. The nation state is redundant @nytimes
Law & Politics

I was chatting earlier this year with Brian Chesky, the co-founder and
chief executive of Airbnb. He told me about trying to raise $150,000
in 2008 for his idea of a peer-to-peer home and room rental company.
Everyone called him crazy. They scoffed at the notion that people
would trust one another enough to allow strangers into their homes.
They derided the idea that those strangers would be nice enough, or
honest enough, to respect properties.

“Airbnb, without fundamental human goodness, would not work,” Chesky
said. A decade later, Airbnb is in more than 190 countries. It has had
more than 300 million guest arrivals. It is valued in the tens of
billions of dollars.

From all the data the company has accumulated, no major country
anomalies, in terms of patterns of behavior, have emerged. People from
Japan, Brazil, Nigeria, Russia, the United States, Mexico and France
are equally respectful and honest. There are no national outliers,
Chesky said, on the goodness or trustworthiness scale. There are no

That is interesting. I wonder if we are looking in the wrong places to
assess the state of the world. The twilight of an era, as in Vienna a
little over a century ago, is always murky. With nationalism and
xenophobia resurgent, examples of humanity’s basest instincts abound.
They grab the headlines. At the same time, community and sharing,
often across national borders, through digital platforms like Airbnb,
BlaBlaCar and Facebook, expand. This is the world’s undercurrent. It
shifts the perceptions of billions.

The nation state is trumpeted. The nation state is redundant. Perhaps
the trumpeting is linked to the redundancy. The natural state of
politics becomes theater. Its most compelling actors, however
buffoonish, prosper. They strut the stage mouthing fantasies. They
babble and veer.

The digital undercurrent, meanwhile, is steady. It leads people to
make daily leaps of trust, like getting into a stranger’s car. It
prizes efficient use of resources. It opens the world.

“These platforms are an integral part of the geopolitical landscape,
because in some ways and for a different set of reasons their power is
approaching the power historically held by nation states,” Arun
Sundararajan, a professor at New York University’s Stern School of
Business and author of “The Sharing Economy,” said. “We look to
Facebook for identity.” He continued: “More and more people actually
have a sense of understanding of others’ cultures and the feeling
someone I don’t know can be trusted.”

Perhaps Airbnb is the new NATO. I started thinking about this in
Hungary earlier this year. Viktor Orban, the prime minister, promotes
an illiberal model based on xenophobic nationalism. He is prospering.
Yet just about every Hungarian I met was renting out apartments or
rooms to strangers through Airbnb or other platforms. A woman I got to
know had just rented her place to a Kazakh. Connected to each other,
individuals organize the self-defense that is cross-border community.
It is closed systems that kill.

The networking undercurrent may be stronger than the surface of
things. How else to explain that the world has not gone over a cliff
these past 19 months?

As Peter Drucker, the management consultant and author, put it, “The
greatest danger in turbulent times is not the turbulence, but to act
with yesterday’s logic.”

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Trump's NEC director China's economy is weakening 'almost across the board' and that money is leaving the country because it's a 'lousy investment'
Law & Politics

Trump's NEC director just told @FerroTV on @BloombergTV that China's
economy is weakening 'almost across the board' and that money is
leaving the country because it's a 'lousy investment'.. extraordinary

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Law & Politics

Continue to think the market underestimates the longevity & costs of
this attrition

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President Donald Trump playing hardball on trade is "my thing."
Law & Politics

President Donald Trump defended his use of tariffs that have inflamed
tensions with China and Europe, telling an audience of diehard
supporters on Saturday that playing hardball on trade is “my thing.”

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China's Minsky moment beckons @asiatimesonline
Law & Politics

A  scandal involving faulty vaccines wouldn’t seem a threat to China’s
most powerful reform push in decades. Nothing could be further from
the truth, though, as President Xi Jinping’s 2018 darkens by the day.

Recent days demonstrated why. China’s president doesn’t tweet or
engage in public displays of emotion. Yet stress levels in Beijing are
surging as growth slows, a trade war escalates, the yuan slides and
Sinologists buzz about waning enthusiasm for upending an imbalanced
economic system.

The yuan’s accelerating drop over the last six weeks reflects investor
doubts that Xi can keep dueling bubbles in credit, debt and property
from imploding. This so-called Minsky moment arrives in every giant,
industrializing economy and it will someday hit China. The question is
whether Trump’s trade assault will deliver that Minsky reckoning.

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Chinese Foreign Minister Wang Yi trolling the Trump administration via @ZackCooper
Law & Politics

“when I first heard this figure of $113 million I thought I heard
wrong. At least it should be 10 times higher, for a superpower with
$16 trillion of GDP.”

SINGAPORE - United States Secretary of State Mike Pompeo on Saturday
(Aug 4) announced US$300 million (S$409 million) in funding for
security cooperation in the Indo-Pacific region, on the back of
America's US$113 million economic initiatives unveiled earlier in the

Mr Pompeo, who is in Singapore for Asean-related meetings this week,
said: "As part of our commitment to advancing regional security in the
Indo-Pacific, the US is excited to announce US$300 million in new
funding to reinforce security cooperation throughout the entire

This new security assistance will advance shared priorities, he said,
particularly in maritime security, humanitarian assistance and
peacekeeping capabilities, and countering transnational threats.

Let the games begin...

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26 Jul 2018 Actually I think @POTUS has taken Xi down a few notches.
Law & Politics

Actually I think @POTUS has taken Xi down a few notches. @ianbremmer
and in what is a game of Chicken has open Xi's eyes to the downside
risk which looks precipitous and of a Fat Tail nature

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An unintended consequence of Xi's consolidation of power is that he is accountable for the scandal, at least in the eyes of the Chinese public.
Law & Politics

But the backlash against Xi began even before the vaccine revelations.
Concerns were rising over the gradual creation of a personality cult.

Nonetheless, the road ahead for Xi remains treacherous. If he stays
his current course, so will China, with each stumble reinforcing
negative perceptions of his leadership. Yet changing course could also
hurt Xi’s reputation, as it would amount to an admission of flawed
judgment – a problem for any leader, but especially for a strongman
like Xi. And some of the new policies Xi would have to adopt conflict
with his instincts and values.

The risks are real. But Xi probably doesn’t have much choice but to
face them. As China’s summer of discontent clearly suggests, he needs
a new game plan.

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Dubai to Hong Kong, follow the money (laundering)
Law & Politics

To the believers, the glittering towers and man-made islands that
characterise the Dubai real estate market are proof of an economic

A reminder of how a small fishing port on the edge of the desert took
just decades to transform itself into a global investment hub. Yet for
all the admirers, there are many doubters. Those who see its
shimmering skyline as a facade, its reputation for secrecy an
invitation for money laundering and who question whether an emirate
once synonymous with gold smuggling has ever truly shaken its appeal
to those with something to hide.

Those doubts gained traction with the recent publication of a report
by the Washington-based Centre for Advanced Defence Studies, which
found that the emirate’s real estate sector had been used by terror
financiers, drug lords and war profiteers to launder money.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1567
Dollar Index 95.16
Japan Yen 111.26
Swiss Franc 0.9946
Pound 1.3002
Aussie 0.7397
India Rupee 68.515
South Korea Won 1123.34
Brazil Real 3.7074
Egypt Pound 17.8775
South Africa Rand 13.3252

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Crude Oil 6 Month Chart INO 68.41

Emerging Markets

Frontier Markets

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Congo opposition leader Katumbi refused entry at border

Congolese opposition leader Moise Katumbi was refused entry into Congo
via the country’s land border with Zambia on Friday, he said in a

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South Africa All Share Bloomberg -4.01% 2018

Dollar versus Rand 6 Month Chart INO 13.34

Nigeria All Share Bloomberg -4.56% 2018

Ghana Stock Exchange Composite Index Bloomberg +10.83% 2018

#Ebola is back again in #DRC 13.ew cases confirmed in #beni: 3 dead

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UPDATE 1-IMF makes significant progress in talks with Kenya @ReutersAfrica
Kenyan Economy

International Monetary Fund’s mission to assess the Kenyan economy
achieved “significant progress” and talks with the government will
continue in the coming weeks, the IMF said on Friday after a two week
visit to Nairobi.

Kenya secured a six-month extension for its stand-by credit
arrangement of $989.8 million from the fund in March, and is seeking
another extension when it expires in mid-September.

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The Kenya Shilling appreciated by 0.6% against the US Dollar during the month of July to Kshs 100.4 @CytonnInvest #Cytonnreport
Kenyan Economy

The Kenya Shilling appreciated by 0.6% against the US Dollar during
the month of July to Kshs 100.4, from Kshs 101.1 at the end of June,
supported by inflows from diaspora remittances. During the week, the
Kenya Shilling appreciated by 0.1% against the US Dollar to close at
Kshs 100.3 from Kshs 100.5, the previous week, supported by inflows
from diaspora remittances. On a YTD basis, the shilling has gained
2.7% against the USD. In our view, the shilling should remain
relatively stable against the dollar in the short term, supported by:

The narrowing of the current account deficit to 5.8% in June from 6.3%
in March, and is expected to narrow to 5.4% of GDP in 2018 driven by
growth of agricultural exports, continued of diaspora remittances as
well as tourism receipts, Stronger inflows from principal exports,
which include coffee, tea and horticulture, which increased by 9.3%
during the month of April to Kshs 21.9 bn from Kshs 20.0 bn in a
similar period the previous year, with the exports from coffee, and
horticulture increasing by 6.7%, and 25.0% y/y, respectively, while
tea exports have declined marginally by 1.6% y/y, Improving diaspora
remittances, which increased by 16.9% to USD 253.7 mn in May 2018,
from USD 217.1 mn in April 2018, with the bulk contribution coming
from North America at USD 122.8 mn attributed to (a) recovery of the
global economy, (b) increased uptake of financial products by the
diaspora due to financial services firms, particularly banks,
targeting the diaspora, and (c) new partnerships between international
money remittance providers and local commercial banks making the
process more convenient, and, Sufficient forex reserves, currently at
USD 8.8 bn (equivalent to 5.8 months of import cover) and the USD 1.5
bn stand-by credit and precautionary facility by the IMF, still
available until September 2018.

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Equities turnover declined by 29.8% during the month to USD 96.7 mn from USD 137.7 mn in June @CytonnInvest #Cytonnreport
Kenyan Economy

Equities turnover declined by 29.8% during the month to USD 96.7 mn
from USD 137.7 mn in June, taking the YTD turnover to USD 1.2 bn.
Foreign investors remained net sellers during the month

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Nairobi All Share Bloomberg -0.02% 2018
Kenyan Economy

Nairobi ^NSE20 Bloomberg -10.82% 2018

Every Listed Share can be interrogated here

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

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