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Tuesday 31st of July 2018 |
Morning Africa |
Register and its all Free. If you are tracking the NSE Do it via RICHLIVE and use Mozilla Firefox as your Browser. 0930-1500 KENYA TIME Normal Board - The Whole shebang Prompt Board Next day settlement Expert Board All you need re an Individual stock. The Latest Daily PodCast can be found here on the Front Page of the site http://www.rich.co.ke Macro Thoughts |
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'Unlawful interference' potential cause for MH370 disappearance @FastFT Law & Politics |
Malaysia’s safety investigation team said the disappearance of Malaysia Airlines flight MH370 may have been caused by “unlawful interference”, according to findings the team presented on Monday, more than four years after the aircraft went missing. Kok Soo Chon, head of the safety investigation team, said this conclusion was based on findings that show the flight’s pilot and first officer had no history of mental illness or anxiety, and that the aircraft, which unexpectedly was rerouted back toward Malaysia, was flown manually and not on auto-pilot. Mr Kok underscored this possibility is not certain however, partly because nobody has claimed responsibility for the flight’s disappearance. The MH370, a passenger flight with a total of 239 passengers and crew on board, went missing en route from Kuala Lumpur to Beijing on March 8 2014. The latest attempt at finding the aircraft, which was carried out until the end of May in the southern Indian Ocean by Ocean Infinity, a Texas-based surveying company, reached no conclusion. But Mr Kok said this does not mean the issue is resolved. “The wreckage has not been found. The passengers have not been found. How can we call our report a final report? There must be some form of closure.”
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25-AUG-2014 The signal announcing this new arrhythmic normal was the disappearance of #MH370 Law & Politics |
‘’For years he’d been studying the phenomenon of chaos, of which an arrhythmic heartbeat was a perfect example’’ His excellency Johan Borgstam told me the signal announcing this new arrhythmic normal was the disappearance of the MH370. Since then planes have been falling out of the sky like flies. And the uncertainty around MH370 and MH17 which is sharpened by the way the story is seemingly turned on and off took me back to Don Delillo ‘’”We are not witnessing the flow of information so much as pure spectacle, or information made sacred, ritually unreadable. The small monitors of the office, home and car become a kind of idolatry here, where crowds might gather in astonishment.’’
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The story behind the spectacular collapse of Dubai's star financier @business Emerging Markets |
Days before rubbing elbows with global business titans in Davos in January, Arif Naqvi set out to charm another circle of friends—Gulf Arab tycoons—in a last-ditch attempt to save his Dubai private equity firm. But things were already on the cusp of spiraling out of control. Dogged by allegations Abraaj had mismanaged investors’ money, Dubai’s star financier soon couldn’t pay the rent. After Naqvi, 58, surrendered control of Abraaj in June, it was revealed that for years, its main revenues didn’t cover operating costs. Abraaj borrowed to fill the gaps and now owes creditors over $1 billion. Once lenders turned off the taps, the firm collapsed, leaving losses, lawsuits and shattered reputations in its wake. Abraaj’s reliance on multiple levels of leverage created a “highly unstable” business model that’s unusual for the private-equity industry, the court-appointed liquidators that are dismantling the firm said in a report dated July 11 and seen by Bloomberg. After analyzing the documents they could get their hands on—since some went missing—investigators at PricewaterhouseCoopers said Abraaj’s use of loans to cover operating expenses left it “sensitive to volatility and potential liquidity crises.” They are now selling Abraaj assets to pay creditors and investigating allegations of “mismanagement, comingling of funds and misappropriation of assets.” Abraaj assets for sale include stakes in 12 funds and holdings in a Pakistani utility and a discount voucher business Naqvi declined to comment, while the firm defended its use of leverage. Borrowing was a necessity because most of its clients, especially early on, were family businesses that weren’t always timely in making payments, according to an e-mailed statement from Abraaj. “In hindsight, the pace of growth should have been more measured,” the statement said. “The back office was not keeping pace in terms of sophistication or best practice.” Back-office operations encompass things like record maintenance, accounting and regulatory compliance. Abraaj’s spectacular demise has dealt a severe blow to Dubai’s reputation as a global financial center. It rattled the trust of investors who included Bill Gates, the International Finance Corp. and U.S. and U.K. government agencies, triggered defaults on loans from at least 10 sources and set off lawsuits in the United Arab Emirates and Turkey. Abraaj’s Biggest Creditors Dubai private equity firm is defaulting on at least $1.1 billion of debt Source: PricewaterhouseCoopers liquidation report dated July 11, 2018 * Air Arabia separately disclosed $336 million exposure to Abraaj, without specifying details The chronology of the collapse, drawn from conversations with about a dozen people with direct knowledge of the company, lays out how rapidly things fell apart for Naqvi, the suave Pakistani entrepreneur who built Abraaj from the ground up in the past 16 years only to see it crumble in under 10 months. A fixture at the annual World Economic Forum in Davos, Naqvi had crafted Abraaj’s image as the face of Middle East private equity. Starting with $3 million of capital in 2002, it grew by leaps and bounds, at one point managing almost $14 billion of assets for investors like the Bill & Melinda Gates Foundation and the retirement fund for teachers in the state of Texas. Abraaj oversaw funds from 18 offices in emerging markets spanning Latin America, Africa and Asia—a network that several U.S. investors have since tried to buy at fire-sale prices. Former employees said Naqvi did everything he could to portray Abraaj as a powerhouse. He lavished staff with big salaries, had generous budgets for travel and leased a private corporate jet. He sponsored events like Abraaj Week, an annual business conference that featured gala dinners at Dubai’s luxury Armani hotel in the world’s tallest tower, the Burj Khalifa. An avid art collector, Abraaj even financed a coveted annual art prize that furnished the winner with a $100,000 grant. But the firm’s foundation was shaky: fees earned from managing investments between 2014 and 2017 at some points barely covered half of costs, according to numbers released in the liquidators’ report. While it’s true that the world’s private equity firms thrive by borrowing money to fund acquisitions, they don’t typically use debt to pay for basic expenses, according to Ludovic Phalippou, associate professor of finance at Oxford University’s Said Business School. “It is unusual for any PE firm to finance operations with a loan,” said Phalippou, author of Private Equity Laid Bare. “We could see this as Abraaj applying what they preach to themselves. In contrast, several major PE firms are actually publicly listed and have no leverage, the exact opposite of what they preach.” Naqvi’s house of cards began teetering last September when investors in a $1 billion health care fund raised in 2016—including the Gates Foundation—asked questions about what happened to their money, according to four of the people. In the course of monitoring investments, they grew suspicious that not all proceeds were deployed and wanted to know why because a clause in the fund stipulated that any extra cash would be returned to them, one person said. A spokesperson for the Seattle-based charity declined to comment. Starting about a year earlier, Abraaj did in fact begin pulling tens of millions of dollars from at least one flagship fund—the Abraaj Private Equity Fund IV—to prop up its finances, three people said. By the early months of 2017, it was moving money out of the health care fund, too, they said. Abraaj then deposited borrowed cash into both funds’ accounts just before the auditors, KPMG, compiled subsequent quarterly earnings statements, they said. Earlier this year, Abraaj hired KPMG’s local office to verify transactions made by the health fund and said the auditor found no misuse of money. KPMG International said it’s now investigating the 2018 review with its legal advisers, Linklaters. It said KPMG wasn’t hired to do an official audit or verify how the funds were used. The cash crunch only got worse. Abraaj had planned to sell a stake in Pakistani utility K-Electric to Shanghai Electric in March 2017, which would have raised several hundred million dollars, but the transaction was delayed due to regulatory hurdles. By the fall, Abraaj was trying to reassure the health-fund investors that everything was fine. But in November, four of them accused it of withdrawing cash without their consent. They hired forensic accountants to examine what happened. The unused funds were later returned, which only deepened the liquidity crunch. With pressure mounting, Naqvi’s inner circle started to unravel. In the final two months of 2017, key executives quit, among them Mustafa Abdel Wadood, who resigned but agreed not to leave immediately, according to several people. Waqar Siddique, Naqvi’s brother-in-law, served as Abraaj’s managing partner and head of risk and compliance Naqvi wasn’t about to give up. Before going to Davos—where he sat on a panel with Bill Gates—he tried to convince numerous members of the Gulf business elite to give Abraaj tens of millions of dollars in short-term loans, three people said. One was Sharjah-based businessman Hamid Jafar, who offered a short-term loan of $300 million – including $100 million for Naqvi himself. Jafar later sued Naqvi and one of his directors, claiming personal checks they’d issued as security on the loan bounced. In the U.A.E., a seven-sheikhdom federation including Sharjah, that’s a criminal offense that can get you thrown in jail. A spokesman for the family declined to comment. According to three people, Naqvi also got about $75 million from Air Arabia, a discount airline that still lists him as one of its board members on its website. Up until a few months ago, Abraaj owned a stake in Air Arabia that a separate person with direct knowledge said was pledged as collateral with banks. They sold the shares when Abraaj defaulted. By June, the carrier disclosed a $336 million exposure to Abraaj, equal to about a quarter of its current market cap. A spokesman said the carrier had nothing new to say. Other business leaders declined to give Naqvi money, two people said. One was Damac Properties Chairman Hussain Sajwani, the billionaire who’s partnered with Donald Trump on Dubai projects, they said. Niall McLoughlin, Damac’s senior vice-president for marketing and corporate communications, said the assertion that Sajwani was approached for a loan “is not true.” After Naqvi ceded control of the fund management business in February, things deteriorated fast. By the spring, more executives quit and job cuts ensued. Yet even in May, Abraaj was trying to reassure its creditors they’d be paid. Just weeks later, one debtor, a Kuwaiti pension fund with $200 million of exposure, sealed its fate by refusing to agree to a standstill on debt payments. Instead, it put pressure on Abraaj to wind down operations. Naqvi capitulated not long after that, filing on June 14 for a court-appointed restructuring in the Cayman Islands, where the holding company and investment-management arm are based. The liquidators’ report valued Abraaj’s known assets at $1.1 billion, including stakes in 12 funds and investments like the K-Electric holding. That’s a full $1.4 billion less than Abraaj’s total assets as of March, according to financial statements disclosed in the report. The liquidators suggested that either Abraaj’s solvency position had “declined markedly” or had been “overstated.” Over the years, Abraaj invested in a wide range of industries and regions, as these nine companies from its portfolio show Some former employees said the speed of the demise didn’t surprise them. They described Naqvi as “aggressive” and “competitive” and said he ran Abraaj like he was a king; little could happen without his approval and attempts to question his actions often drew furor. Abraaj disputed the idea that Naqvi was that influential. In its statement, it said the firm “has always been run as a partnership” and that “dialogue and engagement has always been encouraged, both internally and externally.” PwC said key financial statements were either missing or non-existent. In particular, the company produced only consolidated financials, not separate ones for the asset management and holding companies, making it difficult to analyze how money moved between the two. While the Dubai Financial Services Authority hasn’t said what investigations—if any—it’s conducting, Abraaj’s legal troubles have already started. Aside from the case over the bounced check, which Naqvi’s lawyer has said was provisionally settled out of court, the firm is being sued by a founder of the Turkish dairy maker it bought with the European Bank for Reconstruction and Development in 2014. Abraaj wouldn’t respond to those accusations. Frontier Markets
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Zambia commits to paying Eurobond debt 'on time and in full,' finance minister says Africa |
Zambia is committed to meeting repayment obligations on its Eurobonds “on time and in full,” and comments by the president that it’s seeking help to refinance the securities are not “a signal of failure” to repay the debt, Finance Minister Margaret Mwanakatwe said. Zambia, which Moody’s Investors Service cut further into junk last week, wants assistance to refinance its first Eurobond that matures in 2022, President Edgar Lungu said during a meeting with his Turkish counterpart Recep Tayyip Erdogan. The southern African country has three dollar-denominated bonds totaling $3 billion outstanding.
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Phone monopoly is big prize in Ethiopia sell-off @Reutersafrica Africa |
“Everyone is here. MTN is here, Safaricom. I mean everyone is coming,” the new head of the Ethiopian Investment Commission (EIC) said of the stiff competition to enter the previously off-limits telecoms sector. “A lot of them. Including U.S., by the way,” Belachew, an affable lawyer who is the first port of call for foreign investors, said with a smile following an evening meeting with an executive from Kenyan mobile operator Safaricom. Of the industries facing privatization - the government will also open up Ethiopian Airlines [ETHA.UL], the state logistics firm and the power monopoly to private investment - Ethiopia’s state telecommunications monopoly is the prize because of its huge protected market. But the form liberalization takes and the speed with which it is carried out will hinge on competition between the government’s two top priorities: raising foreign exchange and creating jobs. Since coming to power in April, Prime Minister Abiy Ahmed, 41, has turned Ethiopia on its head with a dizzying drive towards openness. On the diplomatic front, he has made peace with neighboring Eritrea and is pushing for reconciliation with exiles. Turning to the economy, Abiy aims to loosen the government’s tight grip on strategic sectors after decades of socialist central planning and authoritarian rule. The impact of the reform push in sub-Saharan Africa’s second most populous nation could be huge for multinationals, which are currently restricted to a handful of sectors. International telecommunications firms in particular are excited at the prospect of entering one of the few African telecoms sectors - one that serves a population of 100 million - still protected by a state monopoly. “Technology companies and telecoms companies want to get in as quickly as possible. It’s a rare thing,” Andrew Kitson, head of telecommunications research with BMI Research, told Reuters. Reuters reported this month that Safaricom, whose parent companies are South Africa’s Vodacom and Britain’s Vodafone, is in advanced talks to introduce its popular M-Pesa mobile money service there. MTN, which operates in 24 countries in Africa and the Middle East, last month said the Ethiopian market “would be a natural fit”. France’s Orange, whose subsidiary Sofrecom won a two-year contract to manage state-owned Ethio Telecom in 2011, is also interested. “If the state opens a process to privatize or seek a partner for Ethio Telecom, we would be in the running. That’s certain,” a source close to the matter said. Vietnam’s state-owned Viettel, which operates or holds licenses in Mozambique, Burundi, Cameroon and Tanzania, is looking at opportunities in Ethiopia, a company official said. Other potential suitors include Etisalat and Zain from the Middle East, Kitson said. A Zain spokesperson was not immediately available. Etisalat did not respond to a request for comment. Though the competition has already begun, no one yet knows what the ultimate prize will be. The government is yet to chose consultancy firms to advise on the overall shape of privatization, which will include valuation of Ethio Telecom. Selling a piece of Ethio Telecom, which boasts over 60 million mobile subscribers, could provide much-needed foreign exchange, especially if the deal comes with a pledge to maintain the monopoly. It’s a model Ethiopia has used before. In two transactions in 2016 and 2017, Japan Tobacco International (JTI) bought more than 70 percent of Ethiopia’s National Tobacco Enterprise Share Company. Though the company only had annual earnings of around $15 million, the government included a 10-year monopoly, according to a rival bidder. JTI paid almost $1 billion for the stake. Investor interest in Ethio Telecom could be dampened, however, once it is forced to open its books to bidders. “We’ve got no idea how big this company is, what its liabilities are, what its weaknesses are. All we know is how many subscribers,” Kitson said. The government has also made clear the state will maintain a majority stake and control of the board, which could discourage investors. If the main goal of privatization is to foster competition to improve services as a boost to the economy, the government may want to take another tack. “You cannot grow the manufacturing sector without efficient telecoms and less costly telecoms services,” the EIC’s Belachew said. Though it wouldn’t generate the same amount of foreign exchange, licensing other operators could boost government revenues through spectrum license fees and taxes on mobile services and SIM card sales. With one of the lowest mobile penetration rates in Africa - around 60 phones per 100 inhabitants - there is plenty of scope for growth. The government may balk, however, over fears Ethio Telecom, currently Addis’ main cash cow, would struggle to keep pace with international competition on prices and service. A middle way would be to stagger liberalization, starting with the sale of a minority stake in Ethio Telecom and, once the partnership has matured, opening the market to new players. For all the enthusiasm, both from Ethiopian authorities and interested companies, little has been decided. The government must still establish the bodies that will oversee its privatization scheme. It then must hire financial advisors and carry out a valuation of assets before placing them on the auction block. It could be two years or more before new investors enter the sector, analysts say. But the current momentum is encouraging, observers say. And officials like Minister of Public Enterprises Teshome Toga are quick to play up the government’s determination to follow through on its announcements. “In the last 20 years we have divested fully or partially privatised 377 enterprises,” Teshome told Reuters. “The only difference now is we are venturing into big enterprises.”
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Norwegians buy Uganda's Bujagali hydropower dam Africa |
Norway’s SN Power has acquired a majority stake in the 250MW Bujagali Hydropower dam on the River Nile from an American private equity fund. SN Power paid approximately $277 million for the two-thirds stake in the project previously held by SG Bujagali Holdings, a Sithe Global company owned by the New York-based private equity fund, Blackstone, which has more than $430 billion in assets under management. The dam will continue to be operated by Bujagali Energy Limited, whose other shareholders include the Aga Khan Fund for Economic Development as well as the Government of Uganda. Earlier this year lenders, led by the International Finance Corporation and the African Development Bank, completed a refinancing package that extended the tenor of their loans in the project in order to reduce the cost of electricity from Bujagali.
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