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Thursday 09th of May 2019 |
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Macro Thoughts |
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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 California Africa |
A lot of risk calculations are based on Value at Risk (VAR). Essentially, you overlay a volatility measure over the portfolio, and you calculate how much money is on the line. Central banks have suppressed volatility therefore in real terms; investors are now holding bigger positions at these current artificially suppressed levels. 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 California:
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! “
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@Aiww What's in a Name? @aiww @aiweiwei_art Africa |
A name is the first and final marker of individual rights, one fixed part of the ever-changing human world. A name is the most basic characteristic of our human rights: No matter how poor or how rich, all living people have a name, and it is endowed with good wishes, the expectant blessings of kindness and virtue.
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Arrogance, fanaticism and the prospect of a US-Iranian war @AJENews @marwanbishara Law & Politics |
Tensions between the United States and Iran have flared up since the Trump administration withdrew from the nuclear deal with Iran last year and began ratcheting up sanctions on the Islamic Republic. Earlier this month, tensions turned into threats, as Washington refused to extend sanctions waivers for buyers of Iranian oil, designated Iran's elite Revolutionary Guards (IRGC) a terrorist organisation, and began military preparations to deter Iran. These measures are pushing the Iranian economy to the brink. Oil exports, which have already dwindled from 2.5 million to less than 1.3 million barrels a day since last year, could drop even further, crippling the state budget. Ordinary Iranians, who are already suffering from the raging inflation (currently at 40 percent) and skyrocketing prices of goods, will likely bear the brunt of Washington's push to bring Iranian oil exports to zero. And this is only the beginning. The Iranian leadership has been defiant. Supreme Leader Ayatollah Ali Khamenei has said this "hostile measure" will not be left "without a response", while President Hassan Rouhani has threatened to disrupt oil shipments from Gulf countries. Foreign Minister Mohammad Javad Zarif has cautioned that Iran could walk away from the nuclear deal and warned against a potential escalation to war. If the past three Gulf wars of the 1980s (Iraq-Iran), 1991 (US/UN-Iraq) and 2003 (US/UK-Iraq) are anything to go by, a confrontation between the US and Iran would prove far more devastating. So why are Washington and Tehran ignoring the lessons of war, and marching eyes wide shut towards another armed conflict? And can anyone stop them? Even before he was elected president, Donald Trump famously branded the Joint Comprehensive Plan of Action (JCPOA) negotiated by the Obama administration "the worst deal ever" and once he took office, he embarked on dismantling it. In May last year, his administration withdrew from the JCPOA and issued 12 demands to Iran. It was one of those impossible lists, designed to provoke and humiliate. The US wants Iran to end all its nuclear and missile programmes, withdraw its forces from Syria, stop its "destabilising" policies in Iraq, Afghanistan and the Gulf, and cease its support for armed groups like Hezbollah, Hamas, and the Houthis in exchange for negotiating a new nuclear deal. No one would have been more surprised than the US itself if Iran had said yes to any of it. These demands basically constitute total Iranian surrender, not only to the US but also to Israel and Saudi Arabia, Trump's key regional partners and principle drivers behind the new Iran policy. National Security Advisor of the United States John Bolton made this crystal clear on the sidelines of the UN General Assembly session last September, when he said: "If you cross us, our allies, or our partners; if you harm our citizens; if you continue to lie, cheat, and deceive, yes, there will indeed be hell to pay." The message was certainly heard loud and clear in Tehran, which has accused the so-called B-team (Bolton, Israel's Benjamin Netanyahu, Saudi Arabia's Mohammed Bin Salman and the UAE's Mohammed Bin Zayed) of pushing Trump to seek regime or war with Iran. But it is not only the US and Iran who have engaged in religious fanaticism. Israel and Saudi Arabia have done so as well, and so have various non-state actors such as the Islamic State of Iraq and the Levant (ISIL). They have all assumed their own versions of "manifest destiny", claiming they were divinely ordained to conquer and occupy and willing to use God's name in vain in order to advance their narrow political interests. I am not convinced that either Trump or Rouhani wishes for a war. There doesn't seem to be a decision or a plan to go to war, yet - not today, not tomorrow. But what about next year? Trump's 12 demands have left Tehran with no option for an honourable exit and set it on the path towards an economic disaster. Feeling anxious about an implosion from within, it will have to devise a plan to respond. Meanwhile, the US will continue to strangle it economically, destabilise it politically and undermine it regionally. It will pursue various containment strategies like "offshore balancing", but if those fail, military intervention will be a viable option. Washington's aggressive approach will likely weaken Iranian pragmatists like Rouhani, and empower hardliners. This will cause Iran to abandon diplomatic efforts to contain the crisis and seek to quit the nuclear deal and perhaps even the Nuclear Non-Proliferation Treaty altogether, rile up its Gulf neighbours, and undermine the US presence in Iraq and Afghanistan. This would inevitably evoke a sharp reaction from Washington, which may lead to war or wars by proxy throughout much of the region. Foreseeing such developments, the Trump administration is already preparing the public for possible escalation. Like the Bush administration, it is repeating the same false claims that paved the way for the invasion of Iraq - that there are weapons of mass destruction (WMD) threat and support for terrorism. Clearly, some in Washington have forgotten the Iraq debacle, and continue to believe in limited wars and regime change.
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Exclusive: China backtracked on nearly all aspects of U.S. trade deal - sources @Reuters Law & Politics |
The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters. In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation. U.S. President Donald Trump responded in a tweet on Sunday vowing to raise tariffs on $200 billion worth of Chinese goods from 10 to 25 percent on Friday – timed to land in the middle of a scheduled visit by China’s Vice Premier Liu He to Washington to continue trade talks. The stripping of binding legal language from the draft struck directly at the highest priority of U.S. Trade Representative Robert Lighthizer - who views changes to Chinese laws as essential to verifying compliance after years of what U.S. officials have called empty reform promises. Lighthizer has pushed hard for an enforcement regime more like those used for punitive economic sanctions – such as those imposed on North Korea or Iran – than a typical trade deal. “This undermines the core architecture of the deal,” said a Washington-based source with knowledge of the talks. Spokespeople for the White House, the U.S. Trade Representative and the U.S. Treasury Department did not immediately respond to requests for comment. Chinese Foreign Ministry spokesman Geng Shuang told a briefing on Wednesday that working out disagreements over trade was a “process of negotiation” and that China was not “avoiding problems”. Geng referred specific questions on the trade talks to the Commerce Ministry, which did not respond immediately to faxed questions from Reuters. Lighthizer and U.S. Treasury Secretary Steven Mnuchin were taken aback at the extent of the changes in the draft. The two cabinet officials on Monday told reporters that Chinese backtracking had prompted Trump’s tariff order but did not provide details on the depth and breadth of the revisions. Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfil its pledges through administrative and regulatory changes, two of the sources said. Both Mnuchin and Lighthizer considered that unacceptable, given China’s history of failing to fulfil reform pledges. One private-sector source briefed on the talks said the last round of negotiations had gone very poorly because “China got greedy”. “China reneged on a dozen things, if not more ... The talks were so bad that the real surprise is that it took Trump until Sunday to blow up,” the source said. “After 20 years of having their way with the U.S., China still appears to be miscalculating with this administration.” The rapid deterioration of negotiations rattled global stock markets, bonds and commodities this week. Until Sunday, markets had priced in the expectation that officials from the two countries were close to striking a deal. Investors and analysts questioned whether Trump’s tweet was a negotiating ploy to wring more concessions from China. The sources told Reuters the extent of the setbacks in the revised text were serious and that Trump’s response was not merely a negotiating strategy. Chinese negotiators said they couldn’t touch the laws, said one of the government sources, calling the changes “major.” Changing any law in China requires a unique set of processes that can’t be navigated quickly, said a Chinese official familiar with the talks. The official disputed the assertion that China was backtracking on its promises, adding that U.S. demands were becoming more “harsh” and the path to a deal more “narrow” as the negotiations drag on. Liu is set to arrive in Washington on Thursday for two days of talks that just last week were widely seen as pivotal – a possible last round before a historic trade deal. Now, U.S. officials have little hope that Liu will come bearing any offer that can get talks back on track, said two of the sources. To avert escalation, some of the sources said, Liu would have to scrap China’s proposed text changes and agree to make new laws. China would also have to move further towards the U.S. position on other sticking points, such as demands for curbs on Chinese industrial subsidies and a streamlined approval process for genetically engineered U.S. crops. The administration said the latest tariff escalation would take effect at 12:01 a.m. Friday, hiking levees on Chinese products such as internet modems and routers, printed circuit boards, vacuum cleaners and furniture. The Chinese reversal may give China hawks in the Trump administration, including Lighthizer, an opening to take a harder stance. Mnuchin - who has been more open to a deal with improved market access, and at times clashed with Lighthizer – appeared in sync with Lighthizer in describing the changes to reporters on Monday, while still leaving open the possibility that new tariffs could be averted with a deal. Trump’s tweets left no room for backing down, and Lighthizer made it clear that, despite continuing talks, “come Friday, there will be tariffs in place.”
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09-JUL-2018 :: a "Chickie Run." Both race stolen cars towards the edge of a cliff. The first to eject out of his car is branded a "chickie.". Law & Politics |
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 automobile 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. Buzz, the leader of a local gang, agrees to a “Chickie Run.” Both race stolen cars towards the edge of a cliff. The first to eject out of his car is branded a “chickie.” Seconds into the race, Buzz discovers that his jacket is stuck on the door handle, making jumping out of the car so- mewhat difficult. Jimmie jumps out an instant before the cars reach the edge of the cliff. Buzz, still unable to free his jacket from the door handle, fails to escape. While he won’t be branded a “chickie,” he suffers a worse fate.
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@Uber's Long Road to an IPO Is Ending at a Less-Than-Ideal Moment @business World Currencies |
When you’ve waited a decade to go public, it’s natural to want the best possible conditions to make an entrance. In that regard, 2019 hasn’t been kind to Uber. After 10 tumultuous years as a private company, the most highly valued startup in the U.S. is finally ready to make its market debut. Ride-hailing giant Uber Technologies Inc. is due to price shares in its long-awaited initial public offering after the market closes Thursday. While the listing is still expected to be the largest in the biggest year for technology IPOs since 2014, it’s unlikely to hit the highs that were first expected. Uber last raised money from Toyota Motor Corp. in August, at a valuation of about $76 billion. The San Francisco-based company is now considering pricing shares at the midpoint of the marketed range or slightly below, according to a person familiar with the matter. That could see the company debut with a market value just above that of its most recent funding round, at about $79 billion. Last year, bankers jockeying to lead the offering told Uber it could be valued at as much as $120 billion in an IPO. This year, widely expected to be the busiest for mega U.S. tech listings this century, started with a partial government shutdown that shuttered the agency that approves IPO documents for 35 days, all but killing activity in the first quarter. After submitting its confidential filing in December, Uber -- along with rival Lyft Inc. and a host of other hopefuls -- was left sitting on the sidelines while U.S. stocks enjoyed the best start to a year in at least a decade. Today, the picture looks very different. Companies have been rushing to market, with Lyft, Pinterest Inc. and Tradeweb Markets Inc. all raising more than $1 billion each since late March. Markets, meanwhile, aren’t looking so hot. U.S. stocks fell for a third day Wednesday as trade tensions escalated between the U.S. and China, extending the 2% loss that started the week. “They’re looking at the market as well as what’s happened to Lyft,’’ Wedbush Securities analyst Dan Ives said. Shares of Uber’s biggest competitor tumbled to a record low on Wednesday after it disclosed a steep loss in its first quarterly earnings report as a public company. The stock closed 26% below the IPO price of $72, valuing Lyft at just $15.1 billion -- exactly the valuation it garnered in its last private funding round in 2018. However, because Lyft is focused on the domestic ride-sharing market, Ives said the company is a “one-trick pony” compared to Uber, a “three-headed value monster.” That’s certainly how the company’s executives and their advisers have been pitching Uber to potential investors in cities including New York, London and San Francisco. On the roadshow, Uber touted its plans to expand in logistics and other transportation businesses, including scooters, autonomous driving and mass transit, a person familiar with the matter has said. The company aims to become a one-stop shop for customers who would only need to use one platform for multiple services. Arun Sundararajan, a professor at New York University’s business school, said that while going public will give Uber money to capture more of the transportation market, it could also push it to put quarterly targets ahead of its broader ambitions. “The trillion dollar valuation will come if they can spend the next five to 10 years getting to that place where more is spent on Uber than on any other form of transportation,” Sundararajan said. “The trouble is that’s going to require keeping investors at bay who are putting pressure on Uber to deliver earnings.” “The freedom to play the long game gets significantly reduced when you go public even when the resources to do so are increased,” he said. Like many of the IPO class of 2019, Uber is deeply unprofitable. It lost $3.04 billion last year on an operating basis on revenue of $11.3 billion, bringing total operating losses over the past three years to more than $10 billion, according to filings. Uber has been working with Morgan Stanley to lead its IPO plans, alongside Goldman Sachs Group Inc. -- once the company’s go-to bank -- and Bank of America Corp. Its shares are set to trade on the New York Stock Exchange under the ticker UBER. Uber has long been Silicon Valley’s wunderkind, with a cavalcade of elite venture investors betting on the ride-hailing business from the start. Blue-chip investors First Round Capital and then Benchmark led the earliest rounds, cutting checks to the startup that could soon prove to be extremely lucrative investments. Over multiple funding rounds its valuation soared: from $60 million, to $3.7 billion, to $42.8 billion, to -- in 2016 -- $62.5 billion when Saudi Arabia’s Public Investment Fund wrote the company a $3.5 billion check, sent in a single wire transfer. But while Uber was coming of age as a Silicon Valley success story, behind the scenes it was struggling to grow up. Co-founder Travis Kalanick resigned in 2017 when early investors pushed for his ouster, after a series of controversies including allegations of sexual harassment inside his company and the use of software to bypass regulators. Kalanick had long refused to hire an experienced chief financial officer or chief operating officer, both seen as key steps to moving the company toward the public markets. Neither Kalanick nor his co-founder Garrett Camp will be invited to Friday’s bell ringing ceremony at the New York Stock Exchange, a person familiar with the matter said, though both are set to be multi-billionaires after the offering. Instead, standing center stage will be Chief Executive Officer Dara Khosrowshahi, who joined Uber from Expedia Group Inc. with the express mandate to take the company public. His compensation post-IPO will reward him handsomely if he brings Uber’s public valuation to $120 billion over a 90-day span. Uber’s offering is set to be among the 10 largest U.S. IPOs of all time and the biggest on a U.S. exchange since Alibaba Group Holding Ltd.’s $25 billion global record holder in 2014, according to data compiled by Bloomberg. Other high-profile startups with plans to go public, or considering it, include Slack Technologies Inc., Postmates Inc., Peloton Interactive Inc. and Airbnb Inc. With large institutional investors, plenty of debt and a history of releasing quarterly financials, Uber already has some of the characteristics of a public company. Soon, it will also experience the changing whims of Wall Street -- with the eyes of the next crop of IPO hopefuls firmly fixed on how it fares.
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Africa's current population:1,314,952,231 as of Wed, May 8, 2019, based on UN estimates. @jmollel Africa |
Africa #population is 16.64% of total #world population and density is 45 per Km2; median age is 19.4 years.
total land area: 29,648,481 Km2 41 % is urban (541,028,160 people in 2019)
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.@BarrickGold Could 'Force' Resolution to @AcaciaMining's Troubles, CEO Says @markets Africa |
Barrick Gold Corp.’s Mark Bristow said the company may have to “force” an end to stalled talks with Tanzania over the fate of its subsidiary Acacia Mining Plc -- but not yet. Shares of the unit pared gains. Acacia has been at odds with Tanzania’s government since July 2017, when the state handed the London-listed gold producer a $190 billion tax bill, saying it falsely declared bullion exports. Bristow became Barrick chief executive officer in January, and the following month the Toronto-based miner said it had reached a settlement proposal with the government. Yet so far, no final deal with the government has been signed. “We would definitely at a point intervene and force the process, but right now it’s not a constructive way to try to solve this problem,” Bristow said in an interview in Toronto Wednesday. Acacia said on Thursday that it was seeking clarification from Barrick on Bristow’s comments that weren’t consistent with its own understanding. The company said it has not yet received the proposed settlement “It’s a tragedy; what we’re dealing with is a complete breakdown of relationships,” Bristow said Wednesday, noting that the Tanzanian government refuses to deal with Acacia. Bristow declined to provide more details on what an intervention would look like. “There’s a way where we could get involved in wrapping up the business going forward and then deal with the assets ourselves,” Bristow said. “Or there’s a way where we could cooperate with the Acacia board and we could look at strategic options and realize the assets in a different way. Those are the options that we have.” Later on Wednesday Bristow, who is known for speaking plainly, revisited his frustration during the first-quarter earnings call. “At this stage, almost any solution is better than none,” he told analysts, noting that the protracted dispute “has already destroyed a great deal of value.”
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@CyrilRamaphosa Faces Moment of Truth as South Africa Counts Votes Africa |
While opinion polls all point to a sixth outright national election win for the African National Congress, the margin of victory will be crucial for Ramaphosa after he scraped through a party leadership vote in December 2017. With about 14% of ballots counted by 7:52 a.m. in Pretoria on Thursday, the ANC had secured 54.8%. The final outcome is expected by Saturday. The 66-year-old lawyer and former labor-union leader is looking for a decisive win to quell opposition in the faction-riven ANC to give him the clout to push through reforms needed to spur growth in Africa’s most-industrialized economy. A narrow victory could embolden his critics and may force the party into coalitions to retain control of some provinces, limiting his policy options. “Ramaphosa is weak and vulnerable inside the ANC, but strong in the government and protected by society,” said Xolani Dube, an analyst at the Xubera Institute for Research and Development in the eastern city of Durban. “He needs to navigate how to serve the interests of two masters -- the ANC constituency that reluctantly placed him into power and society at large, which holds the key to keeping him safe from the wolves of his own party.” The ANC share of the vote has declined from a peak of more than 69% in 2004, when the economy was expanding at about 5% a year and the government was cutting taxes. Its support plummeted to 54.5% in 2016 municipal elections when its supporters shunned the ballot amid weak economic growth and allegations of graft and misrule during Jacob Zuma’s presidency. The ANC forced Zuma to resign in February last year, but after initial euphoria when Ramaphosa took over, confidence has slumped and is now at multi-year lows. The rand is more than 20% weaker against the dollar over that period. The currency gained for a second day on Wednesday as the vote proceeded peacefully. The equity and bond markets were closed for the election-day holiday. Investors are expecting Ramaphosa to use a strong mandate to implement structural reforms to lure investment and spark an economy that has expanded by less than 1.5% for the past four years. He would still face an unemployment rate of more than 27%, persistently high inequality and ballooning debt. The government has failed to close a yawning fiscal gap despite tax hikes over the past five years. The election will allocate seats in the 400-member National Assembly and nine provincial legislatures to parties based on the proportion of the vote they win. A first meeting of the new parliament has been provisionally set for May 22, where the president is due to be officially elected. Also at stake in this election is the ANC’s majority in the province of Gauteng, which includes the capital, Pretoria, and the economic hub of Johannesburg. The ruling party lost both cities in the 2016 municipal election, with the Democratic Alliance taking control with support from smaller parties. The ANC’s main challengers among 48 parties contesting the national vote are Mmusi Maimane’s center-right DA and the populist Economic Freedom Fighters, led by former ANC youth-wing leader Julius Malema.
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Angolan president sacks chair of state energy firm Sonangol @ReutersAfrica Africa |
Angola’s President João Lourenço on Wednesday sacked Carlos Saturnino as chair of state energy firm Sonangol in the midst of one of the worst fuel shortages to hit Africa’s second-largest crude producer in years. Sebastiao Gaspar Martins will replace Saturnino as chair of the oil producer, a statement from the president’s office said. The statement did not give a reason for the change, but it comes a day after Lourenço promised a rapid resolution to the shortage of fuel that is plaguing the capital of Luanda and cities across the southern African country. Angola, despite producing around 1.5 million barrels of oil per day, relies on imports for 80 percent of its demand for refined products such as petrol and diesel.
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@IMFNews Warns Uganda Debt Metrics Are Weakening @business Africa |
Uganda’s public debt may expand to 50.7 percent of its gross domestic product as the nation borrows for infrastructure investment ahead of planned oil production and in a bid to become a middle-income economy by 2040, the International Monetary Fund said. The debt may rise to that level by the end of June 2022 from a projected 42.2 percent of GDP in this financial year, the Washington-based lender said in an Article IV report on Uganda’s economy. Obligations to external lenders may account for more than a third of GDP from 27.7 percent this year, the report said. “While Uganda’s debt level remains at low risk of debt distress, directors cautioned that debt metrics had weakened, some investment projects may not generate the envisaged return, and interest payments are rising,” the IMF said. Uganda’s debt climbed 22 percent to 44.7 trillion shillings ($11.9 billion) in the fiscal year to end-June 2018 as the country borrowed to build roads and hydroelectric dams. Interest payments are projected to take as much as 20 percent of revenue in 2019-20, a level typically only associated with countries at high risk, or in debt distress, the IMF said. Tax cuts and exemptions would hamper revenue collection, the lender said. “Uganda’s external position is weaker than the level implied by fundamentals and desirable policies,” the IMF said. East Africa’s third-biggest economy, whose government projects oil production will begin in 2022, may expand by 6.3 percent in the 12 months through June 2019 and 6.6 percent in 2023-24, IMF said.
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Kenya to upgrade old rail track to deliver Uganda link @Reutersafrica Kenyan Economy |
The development of Kenya’s railways has been part of China’s “One Belt, One Road” initiative, a multi-billion dollar series of infrastructure projects upgrading land and maritime trade routes between China and Europe, Asia and Africa. Kenya opened a modern railway linking the port of Mombasa with the capital Nairobi in 2017 at a cost of $3.2 billion. This was then linked with another new line, costing $1.5 billion and also funded by Chinese loans, to Naivasha in the Rift Valley. The Nairobi-Naivasha standard gauge rail (SGR) line, will be opened in August but does not yet extend to Uganda. “We need to make sure that when we commission the SGR in August, we have connectivity to Uganda from the SGR so we have to rehabilitate that line to make sure it is properly functional,” Kenyan transport minister James Macharia told Reuters, adding that the work will take a year to complete. Macharia said that spending $150 million to rehabilitate a decades-old line from Malaba on the border with Uganda and using the rest to build another short track connecting the SGR at Naivasha would be a quicker option than building another SGR. A Chinese loan worth $3.7 billion for the extension of the SGR from Naivasha to Malaba, which was last month reported by Kenyan media to be imminent, did not materialise, with neither government offering any explanation. “It is much faster to rehabilitate because the (Naivasha-Malaba) SGR would take three to four years,” Macharia said, without commenting on the potential loan that fell through. “Eventually we will do the SGR anyway but for the time being it is good to have something which is working,” the minister said, adding that the funding will come from a private firm which will recoup its investments by operating the line. “We have got a private sector partner who will do this work. And then for the recovery we have a PPP (Public Private Partnership) arrangement with them,” he said. Critics say Kenya is saddling future generations with debt from China, while the government says borrowing to build the infrastructure will spur economic development.
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06-NOV-2018 :: The Shilling. @TheStarKenya Kenyan Economy |
Today, if you scan Sub-Saharan Africa you will note many dual currency regimes all of which are interfering with the free markets. Here in Kenya, you can exchange your money at a 50 cents bid offer spread. Sure, the Central Bank [and I rank their foreign exchange operations as an ‘’Outlier’’ when you compare it to any other Central Bank on the continent] probably smooths lumpiness but that is prudent and sensible. If you are aware of a lumpy trade, it certainly makes sense to spread it out because after all Participants have access to enormous amounts of Leverage in the FX markets and Kenya does not fold infinite FX reserves. I have always enjoyed parsing the linguistics and in this respect the characterisation of “other managed arrangement” is wrong on the facts as I see them.
The finding that the Shilling is 17.5% overvalued is also alarmist and not borne out by facts. Such a devaluation would ‘’cry havoc’’ with our debt-to-GDP ratios. The International Monetary Fund raised its assessment of the chance of Kenya’s external debt distress to moderate from low due to increasing refinancing risks and narrower safety margins in East Africa’s biggest economy. The Washing- ton-based lender estimates Kenya’s total public debt will peak at 63.2 per cent of gross domestic product this year and gradually decline over the medium term. This compa- res with 58 percent in 2017 and 53.2 per cent in 2016, when the nation ramped up infrastructure projects. There is an argument that we need to be tapping Euro denominated Eurobond borrowing and not just dollar denominated debt.
The Central Bank is sitting on the highest hard currency reserves in its history. Remittances have surged by 71.9% year on year to $266.2M in June 2018 from $54.9M in June 2017. Remittances are the most important source of forex bar none.
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