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Satchu's Rich Wrap-Up
Thursday 11th of October 2018

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Macro Thoughts

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Secret Wealth: The amount of money hidden in tax havens around the world as a percentage of national GDP @AFPgraphics

Secret Wealth: The amount of money hidden in tax havens around the
world as a percentage of national GDP according to a study by the
National Bureau of Economic Research in the US @AFPgraphics

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Trump takes swipe at #Fed as stocks tumble. Said that the Federal
Reserve has “gone crazy” on short-term interest rates. Calls stock
rout "a correction that we’ve been waiting for, for a long time. But I
really disagree with what the Fed is doing, OK?”

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Stock Rout Rolls Through Asia; Dollar Slides: Markets Wrap

The biggest stock sell-off since February rolled from the U.S. through
Asia on Thursday, with benchmarks from Tokyo to Hong Kong seeing
declines in excess of 3 percent.
The dollar weakened against all major peers while the yen pushed
higher and some emerging-market currencies came under pressure.
Treasuries, which helped trigger the stock decline when 10-year yields
hit the highest since 2011, extended gains posted Wednesday. C
hina’s Shanghai Composite gauge dropped more than 4 percent, while
Australian shares managed to keep losses to about 2.5 percent.
The MSCI Asia Pacific Index hit its lowest level since July 2017.
The plunge began in the U.S., where the Nasdaq 100 Index tumbled more
than 4 percent for its worst day in seven years. U.S. futures extended
Ten-year Treasury yields slipped to 3.15 percent, down from the
seven-year high of 3.26 percent reached on Tuesday. Yields have been
climbing under the influence of a shrinking Federal Reserve bond
portfolio and expectations for further interest-rate hikes.
President Donald Trump, who has claimed credit for record U.S. stock
levels, said after the U.S. stock market closed that the Fed is making
a “mistake” and “has gone crazy.”
Elsewhere, Wall Street’s “fear gauge,” as the Cboe Volatility Index,
or VIX, is known, soared the most since February. American crude fell
back below $73 a barrel as Hurricane Michael threatened to slash fuel
demand across the U.S. Southeast.
The yen gained 0.2 percent to 112.09 per dollar after gaining 0.6 percent.
The offshore yuan fell 0.2 percent to 6.9399 per dollar.
The euro bought $1.1563, up 0.4 percent.
The Bloomberg Dollar Spot Index dropped 0.2 percent.
The yield on 10-year Treasuries fell two basis point to 3.14 percent
West Texas Intermediate crude fell 1.8 percent to $71.88 a barrel.
Gold fell 0.1 percent to $1,193.10 an ounce.

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12-SEP-2016 :: Mirrors on the ceiling, The pink champagne on ice

If volatility spikes, positions are going to be reduced en masse. Or
to put it another way and to borrow the lyrics from the Eagles Hotel

Mirrors on the ceiling,
The pink champagne on ice
And she said “We are all just prisoners here, of our own device” Last
thing I remember, I was
Running for the door
I had to find the passage back
To the place I was before
“Relax,” said the night man,
“We are programmed to receive.
You can check-out any time you like,
But you can never leave! “
What is clear is that we are at the fag-end of this party.

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Law & Politics

The security establishment concluded that Mr. Khashoggi’s killing was
directed from the top because only the most senior Saudi leaders could
order an operation of such scale and complexity, the official said,
speaking on condition of anonymity to disclose confidential briefings.

All 15 left just a few hours later, and Turkey has now identified the
roles that most or all of them held in the Saudi government or
security services, the official said. One was an autopsy expert,
presumably there to help dismember the body, the official said.

Turkish intelligence had obtained a video of the killing, made by the
Saudis to prove that it had occurred.

A commentator close to Mr. Erdogan’s government said so publicly on Tuesday.

“There is a video of the moment of him being killed,” Kemal Ozturk

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Saudis are said to have lain in wait for Jamal Khashoggi @washingtonpost
Law & Politics

They had arrived from Riyadh, the Saudi capital, early that morning
and checked in at two inter national hotels in Istanbul before driving
to the consulate in the leafy Levent neighborhood, said two people
with knowledge of the investigation. One of them, the Mövenpick Hotel
Istanbul, is a few minutes from the consulate by car.

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13-NOV-2017 :: The existential paranoia in the head of 32-year-old wannabe King is evidenced
Law & Politics

 “How can I communicate with them while they prepare for the arrival
of al-Mahdi al-Montazar?”

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More destabilising for the Kingdom is the extent to which Saudi Arabia is now demonstrably operating beyond its real strength in the region
Law & Politics

More destabilising for the Kingdom is the extent to which Saudi Arabia
is now demonstrably operating beyond its real strength in the region
as its its more adventurous foreign policy over the last three years

The list of failures is impressive: Saudi-led bombing in Yemen since
2015 has not defeated the Houthis, but it has produced the greatest
manmade famine on earth; increased help for the Syrian armed
opposition the same year provoked Russian military intervention and
has brought President Bashar al-Assad close to victory; the quarrel
with Qatar has weakened all the Gulf monarchies; confrontation with
Iran is a conflict that can never be won.

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13-NOV-2017 :: The then 30-year-old crown prince of Saudi Arabia Mohamed bin Salman MBS arrived on the scene and immediately launched an unwinnable war in Yemen
Law & Politics

In all the history books I have read, its probably wisest to operate
on one front not two and certainly not three. The desperate impulse to
act is also up against a four- year deadline. The speed of decline in
FX reserves produces a 48 month shelf-life.

This week-end, the Baghdad Post is reporting the Kingdom has mobilised
its F-15 fighter jet fleet ito launch a military operation against
Hezbollah in Lebanon.

Geopolitical risk is biting back hard. I predict the spot crude oil
market re-price has further to run and will lift Brent crude over
$70.00 a barrel.

This is an unprecedented moment in the history of the Kingdom and the
most perilous moment for the House of Saud that I can recall. Taking
on Iran looks like will the straw that breaks the camel’s back.

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King of Saudi Arabia serves at the pleasure of the @Potus - That was agreed on February 1945, when Roosevelt met with King Abdulaziz of Saudi Arabia in person aboard the USS Quincy

This grand bargain between the US president and a Saudi king
established that oil would always be denominated in Dollars and Folks
from Saddam Hussein to Chavez of Venezuela and now the high re-
presentative of the European Union for foreign affairs Federica Maria
Mogherini have all sought to break the chokehold of the petro Dollar.

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Growth in the United States remains exceptionally robust for now, powered by a procyclical fiscal expansion that may, however, weigh on US and global growth later. @IMFNews #WEO
International Trade

The steady expansion under way since mid-2016 continues, with global
growth for 2018–19 projected to remain at its 2017 level. At the same
time, however, the expansion has become less balanced and may have
peaked in some major economies.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1557
Dollar Index 95.25
Japan Yen 112.11
Swiss Franc 0.9868
Pound 1.3222
Aussie 0.7070
India Rupee 74.395
South Korea Won 1144.75
Brazil Real 3.7565
Egypt Pound 17.9130
South Africa Rand 14.7529

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The IMF's Primary Commodities Price Index. rose 3.3 percent between February 2018 and August 2018 @IMFNews #WEO World Economic Outlook, October 2018

The IMF’s Primary Commodities Price Index. rose 3.3 percent between
February 2018 and August 2018—that is, between the reference periods
for the April 2018 and the current WEO—driven by higher energy prices
(Figure 1.2). As discussed in the Com- modities Special Feature, the
energy subindex rose 11.1 percent. Food prices were down 6.4 percent,
and the metals subindex declined 11.7 percent.

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Emerging Markets

He added that with advancing technology, it will be "hard for them to
move up the value chain the way that other countries have done in the
past." In addition to that, rising U.S. interest rates will continue
to put pressure on emerging market assets.

Economies with more significant fiscal deficits and less credible
monetary policies are going to come under renewed pressure, he said,
adding that this is the "first time" he's seeing "sustained pressure"
on emerging markets since 2002.

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17-SEP-2018 :: There are no more "Quaaludes" and policy makers will no longer be able to pop them
Emerging Markets

There are no more ‘’Quaaludes’’ and policy makers will no longer be
able to pop them. ‘’In prescribed doses, Quaaludes promotes
relaxation, sleepiness and sometimes a feeling of euphoria. It causes
a drop in blood pressure and slows the pulse rate. These properties
are the reason why it was initially thought to be a useful sedative
and anxiolytic It became a recreational drug due to its euphoric

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South Africa's government revenues at $109bn are 22% of the continent's total, Nigeria's at $34bn are 7% and Ghana's $9bn (2%). Worth considering Eurobond issue sizes vs these figs

Which country collects the most taxes and other government revenues in
Africa (in $bn) ? South Africa's government revenues at $109bn are 22%
of the continent's total, Nigeria's at $34bn are 7% and Ghana's $9bn
(2%). Worth considering Eurobond issue sizes vs these figs

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One Domino that has suddenly tipped over is Zimbabwe.

Reuters reported that People again formed long queues to fill up their
cars in the capital, with others panic-buying basic goods like cooking
oil and sugar.
There are $9.3 billion of Zollars in banks compared to $200 million in
reserves, official data showed, a mis- match that creates a premium
for the U.S. dollar and fans the black market.

It isn't the tax that's causing the turbulence. But, the mass
realization that what people thought were USD deposits are electronic
entries with questionable value. What is happening in #Zimbabwe is run
on a financial system in which people can't withdraw their deposits.


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Zimbabwe faces its worst economic crisis in a decade @AP

“You ask what the queue is for later. The important thing is to get in
the queue, there might be something there,” said Yvet Mlambo, a
resident of the capital, Harare.

Basic items such as bottled water are now being rationed, even as the
capital faces a cholera epidemic that has killed more than 40 people
and spread into the countryside.

Even beer is rationed, to some outrage.

“At least allow us to drink. How else can we drown our sorrows?” one
man shouted as he stared at a notice limiting customers to two beers
per purchase. Drinkers have formed WhatsApp groups to share tips on
where favorite brands can be found.

More worryingly, drugs are in short supply in a country where the
health system has long been on the brink of collapse.

Outside a pharmacy, Bridget Chikwimba shook her head. “I bought these
same allergy pills for a dollar last week, today they are $13,” she
told The Associated Press. “I waited five minutes while they
calculated the new price.”

The country’s Retail Pharmacists Association describes the shortages
of medicines as “severe.”

The road to a more secure future in Zimbabwe is “long, winding and at
times bumpy,” Mnangagwa replied in a statement posted on Twitter this
week. “But there is no other way.”

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Zambia faces battle to avoid default on foreign debt @FinancialTimes

Debt stress in Zambia is set to escalate next year as the burden of
hefty borrowings from China starts to weigh, throwing the
copper-exporting African nation into a struggle to avoid default on
its hard currency debt, analysts said.

Opinions diverge on whether default can be evaded, partly because
certain factors are subject to both market fluctuations and political
uncertainties. But stress is building as the kwacha, the national
currency, depreciates against the US dollar, making repayments of an
official $9.4bn in debt more expensive in local currency terms.

“My view is that Zambia will not default on its eurobonds, but the
country has a few very difficult years ahead,” said Gregory Smith,
analyst at Renaissance Capital, an investment bank. “The government
has presented next year’s budget, but we think it falls short of an
adequate survival plan,” he added.

John Ashbourne, Senior Emerging Markets Economist at Capital
Economics, a research firm, said Zambia’s debt problems are so severe
that it will probably have to seek emergency assistance from the IMF,
which imposes strict conditions in return for bailing out governments
hit by balance of payments crises.

“A combination of currency weakness and dwindling foreign exchange
reserves — which now cover less than two months of imports — will
probably force the government to seek emergency IMF assistance,” said
Mr Ashbourne.

Any IMF assistance — although intended to stabilise the country over
the longer term — could trigger some defaults because some of Zambia’s
loans are unlikely to meet the organisation’s sustainability
thresholds, Mr Ashbourne said.

The predicament that Zambia faces has been precipitated largely by a
recent borrowing binge from Chinese creditors which, in contrast to
the World Bank and the African Development Bank, appear to have lent
at commercial rather than concessional rates, analysts said.

In many cases, the Chinese creditors have not divulged the details of
their loans, but Mr Smith has used estimates derived from Zambian
sources to show the sharp pick-up in debt repayment costs the country
faces between now and 2022 (see chart).

China’s share of total debt amortisation — which includes payment of
interest and principal — appears set to rise from 35 per cent in 2019
to 50.4 per cent in 2021 as an increasing number of Chinese loans
finish their grace period and need to be repaid, according to Mr
Smith’s calculations.

Zambia has projected that it will need ZMW14.9bn in 2019 to honour its
external debts. Mr Smith estimates that at ZMW12.5 to the US dollar,
the government will have to find $1.2bn to meet such repayments, up
from the $680m Lusaka estimated in the 2018 budget.

Such an outlay would eat away a big chunk of the country’s foreign
exchange reserves, which stood at $1.82bn in June this year —
equivalent to about two months of imports.

The kwacha stood at ZMW11.9 to the US dollar in late afternoon trade
on October 9, down from ZMW10.2 on September 1st. Mr Smith says that
it would take a further depreciation to ZMW13-14 to the US dollar
before an IMF bail out would start to look likely.

Much ultimately rests on China. For one thing, the global price of
copper — which comprises about 60 per cent of Zambia’s exports — is
set primarily by Chinese demand. Dwindling investment numbers in
China, led by a fall in spending on infrastructure this year, have
dragged the price of copper lower this year — but there is still a
chance that Beijing’s determination to bolster economic growth in the
face of US trade tensions could yet resuscitate demand.

More directly, China may also offer at least a partial solution to the
debt concerns. If Beijing wants to keep an IMF bailout at bay, it may
choose to soften the terms of its loans to forestall a crisis. One
option would be to negotiate longer maturities on its loans, or
lengthen grace periods.

Both Ethiopia and Botswana received such leniency in recent months,
with Addis Ababa winning an extension of maturity on one of its
railway loans from 10 to 20 years and Gaborone getting a loan
extension and some debt write-offs.

In addition, the People’s Bank of China, China’s central bank, may
offer a backstop to the Zambian government in the form of foreign
exchange with which to honour its debt service charges, Mr Smith said.

“Zambia and China have had longstanding ties since the 1970s and we
think it is a strategic partnership that China will want to preserve,”
Mr Smith said. “Growing Chinese business in the country would also
suffer if Zambia could not meet its debt obligations.”

With all this in play, the prices of Zambia’s eurobonds — which have
been pummelled this year — are likely to fluctuate in response to
hopes over the potential for an accommodating stance from China, the
copper price, the kwacha’s value and Lusaka’s public communications on
what it is doing to head off default.

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Nene Rollercoaster Takes Nomura From Biggest Rand Bear to Bull

As the currency declined this week amid speculation that Nene would
resign as finance minister, Nomura International Plc recommended a
long-rand position versus the dollar, entering the trade at 14.85 and
targeting a move to the “lower 13s” over six months. That compares
with a median forecast of 15.14 in a Bloomberg survey of 24 analysts,
and would place Nomura among the four most bullish forecasters.

That’s quite a turnaround from January 2016, when Nomura predicted the
rand would slump to 19 per dollar, from around 16, after then
President Jacob Zuma had unexpectedly fired Nene as finance minister
the previous month. That compared with the 15.30 median call of 32
analysts in a Bloomberg survey at the time, and would have positioned
Nomura as the most bearish among them.

While Nomura described Nene’s axing in December 2015 as a “shock”
larger than the 2008 financial crisis, his ousting this time round
would have “minimal” effect on markets, and could even be positive as
a signal that the government won’t tolerate corruption, strategists
including Henrik Gullberg wrote in a note on Tuesday. In addition, a
sustained trade surplus and hawkish central bank would support the
rand, they said.

The rand declined 25 percent in 2015, reaching a record against the
dollar in December after Zuma fired Nene. This year, it’s down 17
percent, buffeted by headwinds including a stronger dollar, rising
U.S. rates and crises in Turkey and Argentina. But the worst is
probably over, according to Gullberg, provided Moody’s Investors
Service holds the country’s credit rating at investment level in an
assessment scheduled for Friday.

“I think that will provide a further boost to the rand, the external
environment permitting,” he said.

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Bank of America Merrill Lynch and Standard Chartered could be among the banks organising the 2019 London public listing of Dangote Cement, chairman and CEO Aliko Dangote said

Asked who the bankers could be for the IPO, Nigerian businessman
Dangote said “the usual ones...Bank of America Merrill Lynch, Standard

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China flexes its political muscles in Africa with media censorship, academic controls @globeandmail @geoffreyyork

When he announced another US$60-billion in financing for Africa last
month, Chinese President Xi Jinping promised that the money had “no
political strings attached.”

But a series of recent incidents, including cases of media censorship
and heavy-handed academic controls, have cast doubt on that promise.
China’s financial muscle is rapidly translating into political muscle
across the continent.

At a major South African newspaper chain where Chinese investors now
hold an equity stake, a columnist lost his job after he questioned
China’s treatment of its Muslim minority.

In Zambia, heavily dependent on Chinese loans, a prominent Kenyan
scholar was prevented from entering the country to deliver a speech
critical of China. In Namibia, a Chinese diplomat publicly advised the
Namibian President to use pro-China wording in a coming speech. And a
scholar at a South African university was told that he would not
receive a visa to enter China until his classroom lectures contain
more praise for Beijing.

African governments and businesses, eager for Chinese funds, are
increasingly willing to suppress or censor viewpoints that Beijing
does not like. Backed by dramatically rising investment and loans,
Chinese influence is sharply increasing in African media, academia,
politics and diplomacy.

One of the most obvious examples is the increasing isolation of
Taiwan. Three years ago, four African countries still gave diplomatic
recognition to Taiwan, to the displeasure of Beijing. Today, three of
those four countries have switched to Beijing’s side, lured by Chinese
aid. Only the tiny kingdom of eSwatini (formerly known as Swaziland)
still supports Taiwan.

Another sign of Beijing’s political power is the huge number of
African leaders who flock to the summit of China’s main African
organization: the Forum on China-Africa Cooperation (FOCAC). More than
50 African leaders attended the latest FOCAC summit in China last
month, where Mr. Xi announced his US$60-billion pledge. In fact, many
more African leaders attended the Beijing summit than the United
Nations General Assembly in New York, where less than 30 African
leaders were in attendance this year.

Political praise for China is widespread across Africa. The ruling
party in South Africa, the African National Congress, has lauded the
Chinese Communist Party as “a guiding lodestar” for the ANC.

In the academic sphere, China has rapidly expanded its influence by
promoting the establishment of Confucius Institutes, which teach
Chinese language and culture with a curriculum that is largely funded
and controlled by the Chinese government. There are now 54 Confucius
Institutes in Africa – more than the number of cultural centres of any
other government except France.

Even outside these institutes, Beijing seeks to influence the message
in African classrooms. Ross Anthony, director of the Centre for
Chinese Studies at Stellenbosch University in South Africa, has
described how he was denied an entry visa to China this year because
the Chinese authorities disliked his classroom lectures.

“I attended a meeting at the Chinese embassy in Pretoria where I was
informed that one of the reasons I was being denied entry was due to
the content of my classes,” Mr. Anthony wrote in an article for
University World News last month. “The main complaint was that I had
discussed issues such as Taiwan, Tibet, Xinjiang and the Cultural

China is increasingly insistent that Africans should represent China
“in a particular way – Beijing’s way,” Mr. Anthony wrote in a separate
article in a South African newspaper.

Chinese officials insist that their African counterparts must portray
the Chinese state and Chinese businesses as “pure as driven snow,” he
said. “The vast sums of money injected by Beijing entail a lot more
leverage from their side.”

Meanwhile, Beijing has expended an enormous amount of energy and money
on efforts to cultivate the African media. It has brought hundreds of
African journalists to China for all-expenses-paid “study tours” in
which the government’s views are propagated. It launched a program in
2015 to provide “training” for 1,000 African media professionals
annually. And it has begun to provide thousands of African villages
with a Chinese-owned satellite television service, featuring a range
of Chinese news and entertainment channels.

China has spent hundreds of millions of dollars to set up African
branches of China’s state-owned television channels and newspapers. It
imposes tight editing control on its African journalists – barring
them from covering the Pope’s visit to Kenya in 2015, for example.

China has also invested directly in African media companies. In 2013,
for example, Chinese state agencies purchased 20 per cent of
Independent Media, the biggest newspaper chain in South Africa.

Since then, the newspapers in this chain have increasingly adopted a
pro-Beijing slant in their opinion articles. And they have become less
tolerant of criticism of China.

Azad Essa, a regular columnist for Independent Media, knew that his
bosses might not be happy with his column criticizing China’s mass
indoctrination camps for its Uyghur minority. But the reaction was
swifter than he expected.

A few hours after his column was published in print editions last
month, he was told that it would not be posted online. A day later,
his column was permanently cancelled.

There is sometimes a backlash against the Chinese influence. Namibia’s
President, Hage Geingob, was irate when Chinese Ambassador Zhang
Yiming told him to “affirm political support” for China and “speak
highly on China-Africa economic relations” in his speech to the FOCAC
summit in Beijing. The ambassador said he “conveyed” this suggestion
to Mr. Geingob’s speechwriters, according to a report in a Namibian
newspaper last month. The President replied: “You should not tell us
what we should do. We are not puppets.”

But with Zambia increasingly dependent on billions of dollars in
Chinese loans, its government has made other gestures of political
loyalty to Beijing. When the respected Kenyan law professor Patrick
Loch Otieno Lumumba landed at Zambia’s main international airport on
Sept. 29 after being invited to give a talk on China’s rising
influence in Africa, he was refused entry and was immediately deported
back to Kenya. The government said he was deported because of
“security considerations.”

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03-SEP-2018 :: just about everyone has trooped off to China to make "win-win" music with Xi Jinping and his Forum on China-Africa Co-operation gig.

“China had a singular and positive influence on Africa. It rebalanced
the demand side for Africa’s commodi- ties and also bought those com-
modities on a long-term basis. It was this which triggered the African
recovery some two decades ago, However, since then a freewheeling
China has favourited elites, has facili- tated large-scale looting via
inflated infrastructure, some of which were white elephants 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,” referring to the Sri
Lankan port which has been leased to China for 99 years.

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Posta eyes @amazon deal in survival race @BD_Africa
Kenyan Economy

The Postal Corporation of Kenya is looking to clinch a deal with US
e-commerce giant Amazon, which will see it become their logistics
partner in Kenya.
Amazon officials will visit Kenya between October 17-19 to discuss the
impending working relationship, with the State firm hopeful that it
will ink a deal before the end of the year.
"Amazon is the biggest e-commerce company in the world and they need a
footprint in Kenya and in Africa. We want to be their logistics
partner in Africa," said Dan Kagwe, postmaster- general told the
Business Daily.

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

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