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Macro Thoughts

Home Thoughts

“We succeeded in taking that picture, &, if you look at it, you see a
dot. That’s here That’s home That’s us On it, everyone you ever heard
of, every human being who ever lived, lived out their lives'' “The
Pale Blue Dot” Carl Sagan

Political Reflections

State television blamed “takfiri elements”, a reference to Sunni
Muslim militants, for the attack. Ahvaz is in the center of Khuzestan
province, where there have been sporadic protests by the Arab minority
in mainly Shi’ite Iran.
Foreign Minister Mohammed Javad Zarif blamed the bloodshed on
“regional terror sponsors”, language that usually refers to Iran’s
enemies Saudi Arabia and Israel, and “their U.S. masters”, and vowed
that Tehran would respond decisively.
A video on state television’s website showed confused soldiers at the
scene of the attack. Standing in from of the stand, one asked: “Where
did they come from?” Another responded: “From behind us.”

Conclusions

Pompeo and his team of MBS and MBZ are baring their fangs

“The #Israeli jets saw the IL-20, used it as a shield against
anti-aircraft #missiles. The actions of the Israeli pilots, which led
to the loss of life of 15 #Russian servicemen, either lacked
#professionalism or were an act of #criminal #negligence.” — Russian
MoD

#BREAKING Russia has just announced that when they complete their
"military live-fire exercises" in the waters off the Syria Coast, they
are CLOSING THE AIRSPACE Over Syrian Territorial waters along the
entire coastline.

Conclusions

Putin needs to shut out Netanyahu over Syrian Air-Space or shut up.

It was the look on Donald Tusk’s face that told Theresa May she was in
trouble. When the president of the European Council — the shop steward
for the other 27 EU member states — greeted the prime minister shortly
after lunch on Thursday “he looked ashen-faced”. Tusk had just sat
through a leaders’ lunch at which the French president Emmanuel Macron
had torn up Tusk’s plans for a special summit in mid-November to
thrash out a final Brexit deal. Tusk ushered May onto a balcony for a
private chat to break the news.

Tusk’s message sabotaged what May’s aides had believed was a carefully
choreographed diplomatic dance that would see EU leaders welcoming her
Chequers proposal as having advanced discussions — while not backing
its substance — and keeping it alive before the Tory party conference
next weekend.

Macron, irritated that Britain was refusing to devise a new version of
the “backstop” to prevent a hard border between Northern Ireland and
the republic in time for October’s EU summit, demanded that May be put
on the spot. “The UK must make choices,” he said. “We have to go
faster.”

At first Downing Street aides saw Tusk as a fellow victim of Macron’s
intervention. “Whatever happened in that room had been difficult for
him too,” one British source said.

An hour later Tusk was the villain of the piece. At his press
conference he pronounced that May’s Chequers proposal “will not work”
in its desire to achieve access to the European market for goods and
maintain frictionless borders.

Later he turned injury into insult, publishing an Instagram picture of
May with some cakes and the slogan “sorry, no cherries”, a sly
reference to the widespread EU belief that Britain is seeking to
“cherry-pick” the benefits of EU membership while dodging the costs.
Macron went further, calling Brexiteers “liars”.

A minister said: “We had expected something between warm and lukewarm
and what we got was stone cold.”

May’s team were quickly in crisis mode and the prime minister held her
own press conference shaking with rage and fear. Backstage,
“frustrations were boiling over,” a source said. The meeting had
turned into abject humiliation.

Eurosceptic MPs said Chequers was “dead as a dodo” and May would have
no chance of getting the Commons to vote for her plan. Ministers
called each other to discuss whether they should urge her to “pivot”
to a looser free-trade deal with Brussels.

As her team — which included chief of staff Gavin Barwell — fled
Salzburg, they quickly began working up plans for a speech to the
nation on Friday.

Back in Downing Street, more radical thoughts were being considered.
At least two of May’s senior political aides concluded that the only
way to break the deadlock with Brussels, her party and parliament
would be to call a general election. They began to war-game how the
prime minister could position herself to win.

“It’s my personal view, but the thought of it has crossed a lot of
minds,” one of them said.

Another aide spoke to a Tory strategist outside government and said:
“What are you doing in November, because I think we are going to need
an election.”

An election was not discussed on the conference calls with advisers
and speechwriters as May raced home. When it emerged the next morning
that she was to make a statement, ministers were quick to express
their horror that she might already be taking the step.

Yet if May is to survive and force a deal through the Commons, radical
measures might be required. The premise of those backing an election
would be for May to switch to a more Eurosceptic-friendly vision of
Brexit — a free-trade deal like that signed by Canada with the EU —
and then a direct appeal to the public.

“The idea is that she pivots, strikes a looser deal with Brussels and
if she can’t get that deal through the Commons, she calls an election
and runs as a Eurosceptic,” one Tory said.

“You say to the public, ‘I told you last time that I needed your help
to deliver Brexit, you didn’t believe me, but now it really is
critical.’ If you get a decent majority, the Eurosceptics can outvote
the remainers in the Commons.”

The fringe benefit for May is that a snap election would stop a coup
to oust her.

The drawback of this approach is that when May last asked for support
to bolster her Brexit negotiating hand, at the 2017 general election,
the public removed her majority instead.

Last week’s events and the disaster that unfolded have strengthened
the hand of those who want a change of approach, however.

The genesis of the disaster appears to have been a profound
miscalculation about the willingness of the Europeans to help a prime
minister in peril.

EU diplomats say May overplayed her hand, planting an article in the
German newspaper Die Welt before the meeting arguing that she has
compromised and now the EU must too, a message she repeated over
dinner with her fellow leaders on Wednesday night.

EU diplomats accused her of reading out the article. The defence, that
she did not read it out but simply made the same arguments from her
notes, hardly absolves May of blame.

Andrew Bridgen, the back-bench dean of dissent, said: “The prime
minister is stuck between a rock and a hard place. The tragedy is that
she put herself in the hard place and rolled the rock over her own
head.”

One ERG source said: “A cabinet minister was due to resign this
weekend but now there’s no point. Yet again the prime minister has
been able to shoot herself in the foot without our assistance. It’s
political S&M. It’s like every disaster gives her a grisly shudder of
pleasure.”

“The prime minister’s got 10 days to come up with a new plan and reset
Brexit and her leadership, or men in grey suits will be dispatched to
tell her to go,” one Brexiteer said. “It’s now shit or bust.”

James Dean was an iconic American actor, who tapped into the universal
yearning and angst of nearly every adolescent human being with a raw
connection that has surely not been surpassed since. In one of his
most consequential films, Rebel without a Cause, two players (read,
teenage boys) decide to settle a dispute (read, teenage girl) by way
of near-death experiences. Each speeds an automobile towards a cliff.
A simple rule governs the challenge: the first to jump out of his
automo- bile is the chicken and, by universally accepted social
convention, concedes the object in dispute. The second to jump is
victorious, and, depending on context, becomes gang leader, prom king,
etc.

“The trade war is negative for EM. My best case is that, as we get
closer to US mid-term elections, we’ll see @realDonaldTrump declare a
victory over China, tariffs will come off and EM will rally for a few
good months.” ~ @RencapMan

NEAR MISCHIEF REEF, South China Sea — As the United States Navy
reconnaissance plane banked low near Mischief Reef in the South China
Sea early this month, a Chinese warning crackled on the radio.
“U.S. military aircraft,” came the challenge, delivered in English in
a harsh staccato. “You have violated our China sovereignty and
infringed on our security and our rights. You need to leave
immediately and keep far out.”
Aboard the P-8A Poseidon maritime patrol aircraft, flying in what is
widely considered to be international airspace, Lt. Dyanna Coughlin
scanned a live camera feed showing the dramatic evolution of Mischief
Reef.
Five years ago, this was mostly an arc of underwater atoll populated
by tropical fish and turtles. Now Mischief Reef, which is off the
Philippine coast but controlled by China, has been filled out and
turned into a Chinese military base, complete with radar domes,
shelters for surface-to-air missiles and a runway long enough for
fighter jets. Six other nearby shoals have been similarly transformed
by Chinese dredging.
“I mean, this is insane,” Lieutenant Coughlin said. “Look at all that
crazy construction.”
A rare visit on board a United States Navy surveillance flight over
the South China Sea pointed out how profoundly China has reshaped the
security landscape across the region.
“In short, China is now capable of controlling the South China Sea in
all scenarios short of war with the United States,” Admiral Davidson
said, an assessment that caused some consternation in the Pentagon.
In a June meeting with Defense Secretary Jim Mattis, Mr. Xi vowed that
China “cannot lose even one inch of the territory” in the South China
Sea, even though an international tribunal has dismissed Beijing’s
expansive claims to the waterway.
The reality is that governments with overlapping territorial claims —
representing Vietnam, the Philippines, Taiwan, Malaysia and Brunei —
lack the firepower to challenge China. The United States has long
fashioned itself as a keeper of peace in the Western Pacific. But it’s
a risky proposition to provoke conflict over a scattering of rocks in
the South China Sea, analysts say.
On the scratchy radio channel, the Chinese challenges kept on coming.
Eight separate times during the mission this month, Chinese
dispatchers queried the P-8A Poseidon. Twice, the Chinese accused the
American military aircraft not just of veering close to what Beijing
considered its airspace but also of violating its sovereignty.
“Leave immediately!” the Chinese warned over and over.
“China’s militarization of the South China Sea has been a gradual
process, with several phases where alternative actions by the U.S., as
well as other countries, could have changed the course of history,”
said Alexander Vuving, a professor at the Daniel K. Inouye
Asia-Pacific Center for Security Studies in Honolulu.
Chief among these moments, Mr. Vuving said, was China’s takeover of
Scarborough Shoal. The United States declined to back up the
Philippines, a defense treaty ally, by sending Coast Guard vessels or
warships to an area that international law has designated as within
the Philippines’ exclusive economic zone.
“Seeing U.S. commitment to its ally, Beijing might not have been as
confident as it was with its island-building program,” Mr. Vuving
said. “The U.S. failure to support its ally in the Scarborough
standoff also demonstrated to people like Duterte that he had no other
option than to kowtow to China.”

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

A nondescript office in Riga’s communist-era Institute of Mathematics
and Computer Science may be Latvia’s last line of defense against
threats to next month’s general election.

There, the nation’s 29-strong CERT cyber-security group is bracing for
its biggest test to date: repelling attempts by Russia to sway the
voting process. Having studied meddling in the U.S. and fellow
European Union members like Germany, the team is schooling state
employees on suspicious emails and website links that could be
phishing attempts, all the while receiving “threat feeds” from NATO
and allied countries.

“The awareness that something could happen is clearly much higher”
than during the last election, Varis Teivans, CERT’s deputy head, said
in an interview in a secure room containing some basic furniture but
no computers. “It’s clear our big neighbor, Russia, has carried out
offensive cyber operations against the Baltic states.”

Estonia suffered what’s widely believed to be the first large-scale
Russian cyber assault in 2007 amid a row over relocating a Soviet-era
monument in its capital, Tallinn. A massive denial-of-service attack
ensued, crippling government, banking and media websites.

The interference didn’t stop there. Estonian prosecutors recently
unearthed a scheme in which Russia secretly bankrolled three
supposedly independent news websites, dictating stories containing
Kremlin talking points, Buzzfeed News reported in August. One was
allegedly instructed to play up tensions in the U.S. or the EU, as
well as the Ukraine conflict.

“Our adversary is reactive and opportunistic,” Liisa Past, a former
chief research officer at Estonia’s Information Security Authority,
said by phone. “Its goal isn’t so much tampering with the result of
elections as de-legitimizing the process, raising questions and
doubts, much like we saw with the U.S. presidential elections.”

International Markets

Euro 1.1733
Dollar Index 94.25
Japan Yen 112.60
Swiss Franc 0.9598
Pound 1.3073
Aussie 0.7262
India Rupee 72.455
South Korea Won 1119.82
Brazil Real 4.0512
Egypt Pound 17.9430
South Africa Rand 14.3934

Commodities

Emerging Markets

Frontier Markets

Sub Saharan Africa

The US is preparing to create an agency that can invest up to $60bn in
the developing world in an effort to counter what some in Washington
describe as China’s use of debt to wage “economic warfare”.
In what observers say is the biggest shake-up of US commercial lending
to developing countries in 50 years, the Overseas Private Investment
Corporation will be folded into the new agency and allowed to invest
in equity. At present Opic can invest only in debt, putting it at a
disadvantage to European development finance institutions (DFIs).
Ray Washburne, president and chief executive of Opic, told the FT that
China – by using what he called “loan-to-own programmes” – was
“creating countries that have the shackles of debt around them”. That
amounted to “economic warfare”, he said.
By more than doubling Opic’s lending ceiling to $60bn and allowing it
to invest in equity, he said, it would be put on “an equal footing
with other DFIs”.
Riva Levinson, president of KRL, a Washington-based emerging markets
consultancy, said she hoped legislation could be passed by the Senate
before midterm elections in November. “This is the first real attempt
to recognise that the US needs to support its companies in the
commercial battlefield in the developing world,” she said. “Because
China is taking it all.”
The Better Utilization of Investments Leading to Development act
(Build Act), which passed the House in August, has bipartisan support,
including from close allies of President Donald Trump such as Wilbur
Ross, secretary of commerce.
Opic will be folded into the new agency, called the International
Development Finance Corporation. The arrangement has been sold to the
president, as spearheading private-sector investment and countering
China’s so-called debt diplomacy, while making a profit for the US
taxpayer, according to those involved in talks.
“Opic started out being viewed as corporate welfare and within a year
the office of management and budget was giving it an extra $30bn,”
said Ms Levinson. “It’s a blueprint of how to get things done in
Trump’s Washington.”
In August, 16 senators wrote to Steven Mnuchin, US Treasury secretary,
complaining that the International Monetary Fund was bailing out
countries that had got into trouble because of what they called
“predatory Chinese infrastructure financing”.
The letter expressed concern that Chinese lending to Djibouti in the
Horn of Africa could enable Beijing to take control of the country’s
container port. Last year, Beijing opened its first overseas military
base in Djibouti on the Red Sea.
“The Chinese are all state-owned enterprises and it’s part of their
foreign policy to go in and control things for the benefit of the
Chinese state,” said Mr Washburne.
Some recipient countries have also begun to question Chinese lending
practices. In June, Malaysia suspended $22bn of China-backed projects
while it reviewed financing terms.
In Africa, some citizens’ groups have said Chinese deals favour
corrupt officials more than the state.
“The Chinese have an edge with the African political elites, but not
so much with the people,” said Kwasi Prempeh, executive director of
the Center for Democratic Development in Ghana. “African elites are
doing business with them because there’s not a lot of transparency.
But at the popular level, the Chinese cannot muster the soft power of
the west.”

JOHN MAGUFULI, the president of Tanzania, has strong views about birth
control. He does not see the point. In 2016 he announced that state
schools would be free, and, as a result, women could throw away their
contraceptives. On September 9th this year he told a rally that birth
control was a sign of parental laziness. Tanzania must not follow
Europe, he went on, where one “side effect” of widespread
contraception is a shrinking labour force.

There seems little danger of that. Tanzania’s fertility rate is
estimated to be 4.9, implying that the average woman will have that
many children. Europe’s rate is 1.6. Tanzania is helping drive a
continental baby boom. In 1950 sub-Saharan Africa had just 180m
people—a third of Europe’s population. By 2050 it will have
2.2bn—three times as many as Europe. If UN forecasts are right,
sub-Saharan Africa will have 4bn people in 2100 (see chart 1).

That is worrying, although not for the old reasons. In “An Essay on
the Principle of Population”, published in 1798, Thomas Malthus
claimed that the human population was bound to increase faster than
the supply of food, leading to catastrophe. Although Malthus is still
admired by some, the green revolution rubbished his hypothesis. The
fear now is not that countries will run out of food but that a surfeit
of babies will retard their development.

Mr Magufuli is right to suggest that Europe has many old people and
could do with more workers to support them. But Tanzania’s many
children weigh on its economy, too. Sub-Saharan Africa’s dependency
ratio (the population younger than 20 and older than 64 versus the
population between those ages) is 129:100, compared with 65:100 in
Europe. Sub-Saharan Africa is expected to have a worse dependency
ratio than Europe even in 2050.

High fertility can also be seen as a global problem, says Bill Gates,
whose foundation (jointly run with his wife, Melinda) will hold a
conference next week about the state of the world. Overall, humanity
is becoming wealthier. But because birth rates are so high in the
poorest parts of the world’s poorest countries, poverty and sickness
are that much harder to eradicate. “Kids are being born exactly in the
places” where it is hardest to get schooling, health and other
services to them, he explains.

There is nothing inherently African about large families. Botswana’s
fertility rate is 2.6, down from 6.6 in 1960. South Africa’s rate is
2.4. And although the UN has a good record of predicting global
population growth, it has got fertility projections badly wrong in
individual countries. Sudden baby busts in countries like Brazil, Iran
and Thailand caught almost everyone out. Could Africa also spring a
surprise?

The UN’s demographers project that fertility will fall in every single
mainland African country over the next few decades. They just expect a
much slower pace of change than Asia or Latin America managed when
their families were the same size. It took Asia 20 years, from 1972 to
1992, to go from a fertility rate above five to below three.
Sub-Saharan Africa is expected to complete the same journey in 41
years, ending in 2054. Its fertility rate is not expected to fall
below two this century. Because many Africans marry young (see next
article) the generations turn over quickly, leading to fast growth.

The reason the UN expects change to be slow in future is that it has
been slow until now. After stagnating economically in the 1990s,
countries like Nigeria and Tanzania grew wealthier in the 2000s. But
their fertility rates hardly fell (see chart 2). Nor has urbanisation
transformed family life as much as you might expect. West Africa is
much more urban than east Africa, but has a higher fertility rate.

Three things could drastically change the picture, however. First,
more African governments could promote family planning. Ethiopia,
Malawi and Rwanda have done so, and their birth rates are dropping
faster than average. Perhaps the starkest change is in Kenya. Alex
Ezeh of the Centre for Global Development, a think-tank in Washington,
remembers showing Kenyan politicians evidence that wealthy people both
desired and had small families, whereas the poor wanted large families
and ended up with even larger ones. The government invested in clinics
and propaganda, to some effect. Household surveys show that 53% of
married Kenyan women used effective contraception in 2014, up from 32%
in 2003. Kenya’s neighbour, Tanzania, is at least a decade behind.

The second cause for optimism is education. Broadly, the more girls go
to school in a country, the lower that country’s birth rate. This
seems to be more than just a correlation: several studies, in Africa
and elsewhere, have found that schooling actually depresses fertility.
To attend school—even a lousy school where you barely learn to read—is
to gain a little independence and learn about opportunities that your
parents had not envisaged for you.

Researchers at the International Institute for Applied Systems
Analysis in Austria suggest that Africa’s schools are about to drive a
large change. They point out that education spending weakened in some
African countries in the 1980s as governments scrambled to cut budget
deficits. Girls’ schooling, which had been increasing, flattened. It
is probably not a coincidence that African fertility rates fell little
in the 2000s, when that thinly educated cohort reached womanhood. But
school enrolments have risen since then. If education really makes for
smaller families, that will soon be apparent.

The third profound change would be stability in the Sahel. The
semi-arid belt that stretches through Burkina Faso, Chad, Mali, Niger,
northern Nigeria and Sudan is lawless in parts and universally poor.
Child death rates are still shockingly high in places. Partly as a
result, and also because women’s power in the Sahel is undermined by
widespread polygamy, people still desire many children. The most
recent household survey of Niger, in 2012, found that the average
woman thought nine the ideal number.

Progress on all three counts depends mostly on African politicians. It
falls to them to create more and better schools, provide security for
their people and invest in family planning. They, not foreign
observers, need to conclude that their countries would be wealthier if
they had rather fewer children. Like so much in Africa, almost
everything depends on the quality of government. And that, sadly, is
hard to decree.

The Maldives' presidential election has been dubbed a "referendum on
freedom." As China gains more political influence across the
archepelago, India wants an electoral setback for "pro-Beijing"
President Yameen.
The Maldives will hold its third multiparty presidential election on
September 23 amid grave concerns over rights abuses in the country.
President Yameen Abdul Gayoom (Abdulla Yameen) has consolidated his
power since winning the 2013 presidential election by a narrow margin
of 6,000 votes.
President Yameen has jailed two former presidents, including his
half-brother, Maumoon Abdul Gayoom, his former vice president, two
Supreme Court judges, two former defense ministers and scores of other
government critics.
Rights groups criticize the trial of former president Mohamed Nasheed,
who in 2015 was sentenced to 13 years in prison. The vice president,
Ahmed Adeeb, was arrested in 2015 after what the government called a
failed assassination attempt on Yameen. Adeeb is currently serving a
33-year prison sentence on terrorism and corruption charges.
In February of this year, the Maldives government ordered law
enforcement agencies to disregard any move by the country's Supreme
Court to arrest or impeach President Yameen for not obeying its ruling
to release jailed opposition leaders.
Aiman Rasheed, a spokesman for Transparency Maldives, said that
Sunday's vote is "a referendum on authoritarianism versus freedom."
Opposition parties – many of them Yameen's former political partners –
formed an alliance in exile with the aim of ousting the ruling
Progressive Party of Maldives (PPM) from power.
Despite differences, opposition forces managed to field a single
candidate – Ibrahim Mohamed Solih – to challenge Yameen in the Sunday
vote.
Despite indications that Solih, who has the backing of exiled former
president Nasheed, could defeat Yameen, the outcome of the election is
still hard to predict.
But the economic growth during Yameen's tenure is partly due to aid
and investment from China, which, under Yameen, has managed to oust
India as the Maldives' main backer.
Beijing considers the Maldives an important route in its "Belt and
Road" initiative that, apart from its other projects, also aims to
connect the Indian Ocean to Central Asia.
"We believe that the Chinese government has an interest in maintaining
the authoritarian rule of President Yameen," he said Friday at a news
conference in Colombo, Sri Lanka, where he's living in exile.
"Beijing is encouraging dictatorship in the Maldives and secretly
promoting unsolicited contracts. These contracts are not transparent
at all; there is no bidding process, no tenders. There is no
democratic oversight," he said.
Nasheed, who cannot participate in the September 23 polls due to his
conviction, believes India needs to step up its role to counter
Chinese influence on the Maldives.
"India is responsible for providing security in the Indian Ocean and
also to the Maldives. We are in a very precarious situation at the
moment. What is happening is that China is giving out high-interest
loans to our country. By 2020, we have to pay off almost 40 percent of
the government revenue to pay back the debt. If we are unable to do
so, China would ask for equity and in the process we will have to give
up our country's sovereignty. So we are falling into a death trap,"
Nasheed told DW, adding that India, being the historical provider of
safety and security to the Maldives, has a reason to be concerned
about the situation.
Until Yameen came to power, the Maldives had remained in the Indian
sphere of influence ever since both countries gained independence from
British rule in 1947.
The recent inauguration of the China-funded Sinamale Friendship Bridge
has become the latest cause of friction between Beijing and New Delhi.
The $200 million (€170 million) bridge will link capital Male to an
airport-island.
Yameen said the bridge marks the "dawn of a new era for the Maldives."
 Despite China's increasing clout, India still enjoys a considerable
influence on the Maldives. Unlike India, China does not have a
military presence in the Maldives. Indians are the second-largest
expatriate community in the Maldives. Also, India has a geographical
proximity with the Maldives, which is located just 400 kilometers
southwest of India's Malabar coast.
"The Sunday election is crucial for both Yameen and India," Harsh
Pant, head of the strategies studies program at the Observer Research
Foundation, told DW, adding that the India-Maldives ties have taken a
hit because of Yameen's policies.
"At the moment, the space for India in the Maldives is limited. But
New Delhi can still emphasize the fact that that the Indian Ocean is
an area where India plays a much bigger operational and logistical
role than China. So, there are certain red lines that President Yameen
must not cross," said Pant.
Dhruva Jaishankar, a foreign policy expert at the Brookings Institute
India, believes the election is likely to "raise more questions about
Yameen's legitimacy" as Maldives ruler.
"President Yameen is overseeing an authoritarian government. For many
years, he has financial support from China and Saudi Arabia, and has
also tied up with organized criminal groups," Jaishankar told DW,
adding that India's carrot and stick policy with Yameen has not
yielded the desired results.

From kerosene to toothpaste, toilet paper, toothbrushes, sweets,
chocolates, books, mattresses and even Internet access, governments
are imposing taxes, measures that are hurting the poor further.

In June, as finance ministers presented their annual budgets, East
Africa’s three top three economies announced plans to borrow more than
$12 billion to finance their budget deficits, even as their public
debts rose amid concerns over sustainability.

Kenya had the highest borrowing plans of $5.58 billion, followed by
Tanzania at $4.6 billion and Uganda at $2.4 billion, with a huge chunk
of this being sourced from external financiers. However, this seems to
have slowed down, as the reality that they needed to cut down their
spending sank in.

“My preference is a fiscal shock, but there is a what you call the
political collar or the politics of policy making which then slows you
down. My preference would be more of a big bang approach because every
day counts in terms of cost,” Ncube, a former banker, said in a
briefing with journalists on the sidelines of an investor conference
in New York on Friday.

The new government’s focus on getting the economy back on track
requires paying off the roughly $2 billion in arrears to international
financial institutions such as the World Bank, African Development
Bank (ADB), European Investment Bank (EIB) and the $4 billion it owes
the Paris Club of sovereign nations.

John Mangudya, who is both governor of the Reserve Bank of Zimbabwe
and chairman of the government’s arrears clearance committee, said the
strategy is to clear the debts to the World Bank and ADB first before
approaching the Paris Club.

“We are looking at many options,” Mangudya said. He expects to
announce the plan within six months, noting the need for debt
sustainability.

“One year from now, our wish and our hope and prayer is that we would
have cleared our arrears,” he said.

Going to the International Monetary Fund cannot happen until the
arrears are cleared, however. In the meantime, Mangudya would like to
engage in a six-month IMF staff monitoring program through June 2019
as part of the nation’s re-engagement with the global economy.

The new infection is almost 200 km (125 miles) away from the nearest
other known case in Congo’s current Ebola outbreak, which is believed
to have killed 97 people since July and infected another 46 in North
Kivu and Ituri provinces.
Ituri province’s Vice Governor Keta Upar said in a statement that the
latest Ebola case had been reported in Tchomia on the shores of Lake
Albert. It is the closest the disease has come to Uganda, Congo’s
eastern neighbor.

Provisional liquidators have granted exclusivity to @ActisLLP for
@abraajgroup Africa funds, citing emerging market investor’s “level of
on the ground diligence undertaken, flexibility in their approach and
immediate working capital support,” email

Kenya

Better 2018 economic performance is balanced against concerns whether
public spending can be calmed & revenue improved.

The average interbank rate declined to 3.6%, from 4.2% the previous
week, while the average volumes traded in the interbank market
declined by 22.2% to Kshs 14.3 bn

The listed banks recorded a 19.0% average increase in core Earnings
Per Share (EPS), compared to a decline of 14.4% in H1’2017. Only NIC
Group and Housing Finance Group recorded declines in core EPS,
registering declines of 2.1% and 95.7%, respectively. CFC Stanbic
recorded the highest growth at 104.5% y/y, aided by 21.9% increase in
total operating income, coupled with a 14.0% decrease in total
operating expenses. HF Group recorded the biggest decline at 95.7%, on
the back of a 13.9% decline in Net Interest Income (NII), and a high
cost to income ratio of 99.3%

"THE markets are never wrong," President Kagame said in an interview
in Washington in 2014 at the USAfricaSummit and this statement is in
fact a timeless one. There have been occasions too many to mention
where Folks will rail against the market and the Point is this, always
take the side of the market against the Demagogue. Always.

The term "bear market" is named for the manner in which a bear tends
to attack. A bear will usually swipe its paws in a downward motion
upon its prey, and for this reason, markets laden with falling stock
prices are called bear markets.

A bear market is a condition in which securities prices fall and
widespread pessimism causes the stock market's downward spiral to be
self-sustaining. Although figures vary, a downturn of 20 percent or
more from a peak is the widely accepted definition of a bear market.

The Nairobi Securities Exchange has 3 Indices, The Nairobi All Share
[market Capitalisation Index], the NSE 20 and the NSE 25 [which are
equal weighting indices where each of the 20 or 25 stocks that
comprise the Index carry an equal weight]. The NSE 20 is -23.697% in
2018, its at a 19 month low and entered a bear market at the end of
August. The Nairobi All Share is -15.02% in 2018, at a 16 month low
and entered a bear market on September 19th. Last week a whole series
of share prices hit all time lows. This List which is not exhaustive
includes the venerable Nation Media Group [-34.913% in 2018 on a Total
Return Basis], Kenya Power [-48.9%] Deacons [-84.5% in 2018], Uchumi
[-76.08%], Mumias Sugar [-50.00%]. The Question you need to ask
yourself is which of these are ''zombies''

Economists have worried about “zombie companies” for decades. Timothy
Taylor, editor of the Journal of Economic Perspectives, has followed a
trail of references back to 1989, noting sightings of these zombies in
Japan from the 1990s, and more recently in China. The fundamental
concern is that there are companies which should be dead, yet continue
to lumber on, ruining things for everyone [FT]

The Big Cap stocks have also rolled over. Safaricom entered a bear
market Friday having fallen 20% over the last 4 weeks. The Banks are
getting slammed too. KCB has slumped into a bear market and is down
20% over the last four weeks.

The stock Market is largely seen as a Leading Indicator.

If this were the price performance in New York [which by the way
closed at all time highs last week], there would be a Revolution and
immediate remedial action.

One of my first Bosses was the aptly named Mark Dearlove who said to
me, ''You only get smelly fingers picking bottoms, Aly-Khan''

The market has further to fall.

Closing Price: 24.00
Market Capitalization: 961,570,272,000
EPS:1.38 PE: 17.391

This was the highest growth rate since December 2016

Rising to just over 17,000 feet (3,800 meters), Mt Kenya is the
continent's second highest peak. But the summit trails are far less
crowded than its snowy counterpart (Kilimanjaro) across the border in
Tanzania.

Team Pompeo and his Lieutenants MBS and MBZ evidently bared their
Fangs in Iran where 11 Revolutionary Guards were killed in an attack
on an Iranian military parade.
This coupled with some coercive Iranian sanction warfare sent Crude
Oil spinning higher and to a 2014 high. This Surge higher will prove
problematic for a number of Pure-Play Oil importers.
Vladimir Putin needs to shut out Netanyahu over Syrian Air-Space or
shut up and today we learnt via Russian Minsiter of Defense Shoigu
that "[Syria] will be supplied with S-300 air defense missile system
within two weeks" and that "Russia will jam sat navigation, on-board
radars and comms systems of combat aircraft which attack target
Syria."
The Escalator in Chief continues to ratchet his Trade and Tariff War higher.
The US announced it is to to set up a $60bn agency to counter China in
developing world @FT
Ray Washburne, president and chief executive of Opic, told the FT that
China – by using what he called “loan-to-own programmes” – was
“creating countries that have the shackles of debt around them”. That
amounted to “economic warfare”, he said.
By more than doubling Opic’s lending ceiling to $60bn and allowing it
to invest in equity, he said, it would be put on “an equal footing
with other DFIs”.
Provisional liquidators have granted exclusivity to @ActisLLP for
@abraajgroup Africa funds, citing emerging market investor’s “level of
on the ground diligence undertaken, flexibility in their approach and
immediate working capital support,” email
Kenya’s credit rating has been kept on hold by S&P with a stable outlook.
last week, @NSE_PLC equities market was on a downward trend with the
NASI, NSE 20 and NSE 25 declining by 8.0%, 5.4% and 8.4%, respectively
@CytonnInvest
The NSE 20 is -23.697% in 2018, its at a 19 month low and entered a
bear market at the end of August. The Nairobi All Share is -15.02% in
2018, at a 16 month low and entered a bear market on September 19th.
Last week a whole series of share prices hit all time lows.
The Equity Market steadied after last weeks precipitous spiral lower.
The Nairobi All Share which was -15.02% in 2018 and at a 16 month low
rebounded +3.86 points to close at 149.35.
The Nairobi NSE20 which was -23.697% in 2018 and at a 19 month low
rebounded +40.23 points.

Safaricom which had retreated -20.00% over the last 4 weeks and
therefore into a bear market, rebounded +4.17% to close at 25.00 and
on heavy volume action of 23.473m shares worth 584.367m. Safaricom has
been in a multi-year bull run and has severally bounced after a 20%
correction. The Bulls will appreciate todays violent rebound as
confirming that bull Trend remains in tact. Medium Term Investors
should be loading the boat right around here.

Nation Media rebounded +2.94% off a record low to close at 70.00 and
traded 3,600 shares.

Equity Group rebounded +3.87% to close at 40.25 and traded 8.396m
shares worth 339.192m. Equity is +6.28% in 2018 on a Total Return
Basis and outperforming the Indices.
KCB Group rebounded +4.61% to close at 39.75 and traded 3.285m shares
worth 131.085m. KCB Group is at scratch in 2018 on a Total Return
basis. KCB was recognised by Cytonn as the most attractive bank,
according to their H1'2018 Banking Report supported by a strong
franchise value & intrinsic value score.

KenGen firmed +0.77% to close at 6.55 and traded 172,900 shares.
KenGen has been exhibiting price resilience as the market tanked.
KPLC closed unchanged at 4.65 an all time low [-48.9% in 2018] and
traded 3.219m shares. You would hope that at some time in the not too
distant future KPLC will speak to the share price and how they are
seeking to address its precipitous fall which surely imperils a number
of loan agreements.

KenolKobil surged +6.734% to close at 15.85 and traded 134,300 shares.

EABL improved +0.56% off a 2018 closing low to close at 181.00 and
traded 226,000 shares.

Mumias Sugar closed unchanged at a record low of 0.55 and -50.00% in 2018.