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Macro Thoughts

This is just wasting scarce FX reserves. The price of repeat Istanbul elections.

Home Thoughts

This time we all went deep into the forest on horse-back and
momentarily we all thought we were in a magical world.

A SMALL POUCH, made from three fox snouts neatly sewn together, may
contain the world’s earliest archaeological evidence for the
consumption of ayahuasca, a psychoactive plant preparation indigenous
to peoples of the Amazon basin that produces potent hallucinations.
The pouch likely belonged to a shaman in what is now southwestern
Bolivia around a thousand years ago, according to José Capriles, an
anthropologist at Penn State University and an author of a paper
published on the discovery today in the journal PNAS.
Capriles found the pouch—and evidence of its trip-inducing
contents—during a 2010 archaeological dig in Cueva del Chileno, a rock
shelter that shows signs of human activity going back 4,000 years.
The cave was once used as a tomb, and though later looters took the
bodies, they left behind what they considered to be garbage—beads,
braids of human hair, and what Capriles first thought was a leather
shoe.
That “shoe” turned out to be an archaeological treasure—actually a
leather ritual bag or bundle containing the fox-snout pouch, a
decorated headband, tiny spatulas made from llama bone, and a carved
tube and small wooden platforms for inhaling substances.
Radiocarbon dating of the leather bag surface indictaed it was used
sometime between around 900 to 1170 A.D.
While the bundle contained some dried plant remains, Capriles and his
international research team weren’t able to determine their identity
with certainty.
Still, wondering what other plants the shaman once stored in his bag,
the researchers tested the chemical signature from the inside of the
fox-snout pouch against those of a variety of plants.
It turns out the pouch once contained a number of psychoactive
substances. The analysis revealed traces of bufotenine,
benzoylecgonine (BZE) and cocaine (likely from coca leaf),
dimethyltryptamine (DMT), harmine, and possibly psilocin, a chemical
component of psychedelic mushrooms.
The pouch’s owner was either well-traveled or connected to a vast
trade network, as not all of the plants once present in the pouch are
native to southwestern Bolivia. Harmine is abundant in the yage plant,
which comes from tropical parts of northern South America, hundreds of
miles away.
And the team thinks the DMT may have been from chacruna, a plant from
the Amazonian lowlands. “This person was moving very large distances
or had access to people who were,” says Capriles.
The suspected shaman also had access to powerful psychedelic
experiences, likely thanks to a combination of harmine and DMT.
Harmine-containing yage is the primary ingredient in modern-day
ayahuasca, and is often combined with DMT-containing chacruna.
Together, the substances interact to cause powerful hallucinations
along with nausea and vomiting.
Though ayahuasca is touted today as an “ancient” preparation, the
actual age of the brew and ritual are contested.
Capriles’s find can be considered the world’s earliest archaeological
evidence of ayahuasca consumption, although there’s no way to prove
that the shaman at Cueva del Chileno actually brewed or administered
ayahuasca from the ingredients detected in the pouch.
Modern ayahuasca preparations “are idiosyncratic,” says Dennis
McKenna, an ethnopharmacologist who specializes in plant hallucinogens
and leads modern-day ayahuasca retreats.
“Every shaman practically has his own brew.” But he agrees that the
substances found in the Cueva del Chileno shaman’s pouch could have
been used to prepare ayahuasca.
“People have been arguing that [ayahuasca] was mostly a recent thing,”
says Scott Fitzpatrick, an archaeologist at the University of Oregon
who was not involved with the research. “The ayahuasca ritual has a
deep time perspective now.”
Today, ayahuasca is enjoying newfound popularity. Its psychedelic
effects—and its potential psychiatric benefits for people with mood
disorders and illnesses—fuel demand both in South America and the
United States, where shamans offer ayahuasca ceremonies for curious
practitioners.
Capriles concedes that the discovery could well be used to advertise
modern ayahuasca rituals aimed at tourists, but he emphasizes the
sacred nature of the shaman’s work. “These people were not just
tripping because of entertainment,” he says.
Nor was the ritual bundle left in the cave by accident. “We believe
that it was left intentionally,” he adds. “This is a typical behavior
that you see in ritually charged places.”
Modern users don’t necessarily try the drug for spiritual reasons,
says McKenna. “It’s used very differently these days—not necessarily
in a worse way, but a different way.”
But McKenna, who has spent years studying and sampling ayahuasca, sees
common ground between ancient healers and those seeking powerful
psychedelic experiences today.
“When I use these substances, I am usually astonished by what I
experience,” he says. “They must have been astonished, too.”

08-JAN-2018 :: The Crypto Avocado Millenial Economy.

The ‘’Zeitgeist’’ of a time is its defining spirit or its mood.
Capturing the ‘’zeitgeist’’ of the Now is not an easy thing because we
are living in a dizzyingly fluid moment. Whether its President Trump’s
rat-a-tat Tweets or a mind boggling 625% share price advance because
an erstwhile Tea Company [The Long Island Iced Tea Corp was a
little-known company making non- alcoholic lemonades and ice teas]
renamed itself the Long Blockchain Corp. We are living in
extraordinarily fast moving times. Paul Virilio has said ‘Wealth is
the hidden side of speed and speed the hidden side of wealth’ and he
is not wrong.

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.

Gravity’s Rainbow is a 1973 novel by Thomas Pynchon which is about the
design, production and dispatch of V-2 rockets by the German military.
In particular, it features the quest undertaken by several characters
to uncover the secret of a mysterious device named the “Schwarzgerät”
(black device), slated to be installed in a rocket with the serial
number “00000”.
As the world watches PyongYang, I cannot help wondering if Kim Jong-Un
has read Pynchon which speaks of “A screaming comes across the sky”
and North Korea.

“But it is a curve each of them feels, unmistakably. It is the
parabola.  They must have guessed, once or twice -guessed and refused
to believe -that everything, always, collectively, had been moving
toward that purified shape latent in the sky, that shape of no
surprise, no second chance, no return.’’

국정원 "北 미사일 신형무기체계 가능성…분석 늦어져"(1보) @yonhaptweet
https://twitter.com/yonhaptweet/status/1126749323797061633

If there can be a lethal game of Russian roulette in international
politics, this is it — what just began on May 8, the first anniversary
of the United States’ withdrawal from the Iran nuclear deal of July
2015.
Iran exercised “strategic patience” for one full year, as President
Hassan Rouhani noted, upon the request from the five remaining
signatories of the nuclear deal — Britain, France, Germany, Russia and
China. That period has run out.
Not only have the five powers failed to persuade the Trump
administration to retract from its decision, but Washington has gone
on a warpath of sanctions and deployment of a formidable strike group
to the Persian Gulf.
On the other hand, the five big powers couldn’t ensure that Iran got
the full benefits out of the nuclear deal as envisaged under the
nuclear deal, despite its full compliance with the terms of the deal,
which has been acknowledged repeatedly by the International Atomic
Energy Agency.
Only Russia and China observed the commitments given to Iran as
signatories, while the three European powers merely paid lip service.
Against this sombre backdrop, Rouhani announced on Wednesday that if
the remaining signatories fail to provide Iran with the merits stated
under the deal in the next 60 days, Tehran will stop complying with
its nuclear undertakings in consequent phases.
For a start, Iran will cease to observe the capping on the volume of
enriched uranium and heavy water reserves that it is permitted to
hold.
After 60 days, if Iran’s grievances are not still addressed, it will
no longer observe the restrictions on the 3.6 percent level of uranium
enrichment and will resume work on its heavy water reactor at Arak.
Iran has underlined that it is not withdrawing from the nuclear deal
but is only taking reciprocal measures as provided under articles 26
and 32 of the agreement regarding the eventuality of one or more of
the six powers failing to observe the treaty.
Rouhani has specified Iran’s concerns particularly in the oil industry
and the banking sector, which Washington has targeted with sanctions.
Rouhani said that after 120 days from now, even if Iran starts
enriching uranium beyond the 3.6 level and resumes work in Arak, it
will give yet another 60 days for negotiations before taking
additional unspecified  (which could be by the yearend).
Meanwhile, Iran will react strongly against any move by the western
powers to approach the UN Security Council for reimposition of the old
UN sanctions.
Russian roulette is a game of chance where players spin the cylinder
of a revolver with a single bullet in turns, put the muzzle against
their head and pull the trigger.
The player has 16.67% chances of firing a bullet into his head if
there is one bullet in the 6-chamber revolver.
Each player starts by spinning the cylinder, thus each player has an
equal chance of being killed by the bullet.
Quite obviously, it’s an insane game that US President Trump started
on May 8 last year.
With Iran’s response by way of reciprocal measures, round two is complete.
Russia and China are watching helplessly from the sidelines the insane
game being played out.
A big question can be put whether Trump himself wants another Middle
Eastern  war.
The danger lies in sleepwalking into a war. (See my earlier blog Iran
to even the nuclear score with US.) Iran’s reflexes will be guided by
certain key factors.
First and foremost, Tehran has no illusions that the Islamic
Revolution faces an existential challenge from the US and Israel.
Capitulation is a non-option.
The nuclear issue is an alibi to overthrow the 40-year old Islamic
regime in Iran, which the US had wanted to strangle in its infancy in
the cradle for the dangerous precedent it was setting in the region —
nationalist resistance to the western political, economic, military
and cultural hegemony of the Muslim Middle East.
On top of it, if in the heat of the battle, perchance an aircraft
carrier sinks or if the Straits of Hormuz gets closed or if oil prices
cascade, Trump alone will have to face the music.
The point is, Iran is a large country and its nuclear sites are vastly
dispersed. A massive bombing campaign is needed to destroy them, which
will inevitably trigger a full-scale regional war with catastrophic
consequences and in all probability sink Trump’s presidency.
Zarif talks about the famous ‘B Team’ that is pushing Trump into a war
with Iran — Bibi (Netanyahu), MBS (Saudi Crown Prince), MBZ (UAE Crown
Prince) and Bolton (US national security advisor.)
In common perception, the B Team is credited with having magical
powers over Trump. But is it really so?
Trump doesn’t convey such an impression, certainly. When the crunch
time comes, Trump indeed has a way of taking decisions that are in his
self-interests or can make or mar his presidential legacy.
North Korea is a telling example. Trump’s 90-minute phone call to
Vladimir Putin last week too shows his lone ranger approach.
Bolton threatened imminent US intervention in Venezuela and damned the
Russians for supporting Nicolas Maduro but Trump steps in to mollify
the Russians, hold out assurance that there is no US intervention and
actually seek Putin’s help.
Looking ahead, therefore, Zarif’s consultations with Lavrov on
Wednesday signal that Iran will coordinate closely with Russia its
future moves. Significantly, at the joint press conference with Zarif
in Moscow yesterday, Lavrov went out of the way to justify Iran’s role
in Syria.
The Kremlin spokesman Dmitry Peskov blamed Washington’s “ill-conceived
subjective decisions” subjecting Iran to “unjustified pressure” and
triggering the current face-off. He said the priority now is to
“maintain the (Iran nuclear) agreement’s viability” and to this end,
Moscow will plan its diplomatic moves.

President Trump seems to be relishing his financial warfare
strategies. He has Khamenei on the run, Maduro in Venezuela is being
attacked by remote-controlled drones, Xi suddenly looks ever so
fragile.

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.

Euro 1.1232
Dollar Index 97.325
Japan Yen 109.82
Swiss Franc 1.0139
Pound 1.3014
Aussie 0.6997
India Rupee 69.7665
South Korea Won 1176.67
Brazil Real 3.9470
Egypt Pound 17.123
South Africa Rand 14.2271

Underwriters have been granted a 30-day option to purchase up to an
additional 27,000,000 shares at the IPO price

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.
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.
“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.”
 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.
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.

In 18 years of publishing, Citron has never seen such an obvious fraud
as Jumia.  As the media in the US is naively anointing Jumia the
“Amazon of Africa”, the media in its home country of Nigeria has a
plethora of articles discussing the widespread fraud in this Nigerian
company.  Not even that elusive Nigerian prince can cover this one up.
Jumia is the worst abuse of the IPO system since the Chinese RTO fraud
boom almost a decade ago.  Worse than being “the most expensive” US
listed ecommerce company, Jumia reported financials show us a stagnant
business that has burned through $1 billion and has moved the suckers
game to the US Markets. In this report, Citron will expose the SMOKING
GUN and show why the equity is WORTHLESS.  We believe investors cannot
rely on reported numbers and a restatement of financials is on the
horizon.  The SEC must protect US Investors.

What do you do when you’re on the verge of bankruptcy, your largest
shareholders won’t fund you anymore, and your closest competitor just
got sold at a fire sale valuation? You fudge the numbers and hope that
you can dump stock onto US investors. At the end of 2018, Jumia had a
year’s worth of cash left and its two largest shareholders, MTN and
Rocket Internet, wanted an exit. Therefore, Jumia filed for an IPO in
March 2019, fudged its numbers, and began trading last month.

From 2015 to 2018, Jumia made little progress in its core business.
While mobile penetration has soared in the core markets, the Company’s
revenue declined from $145 million to $131 million while adjusted
EBITDA loss went from $161 million to $150 million. Jumia learned the
hard way that Nigeria, Jumia’s largest and most important market, is
not an easy place to do ecommerce for plenty of reasons including
logistics, poverty, and a culture of corruption.
Naspers, the smartest and largest tech investor in Africa, invested in
a Nigerian ecommerce company called Konga but sold the business to
Zinox Technologies in 2018 for a >90% loss on its investment. This was
not due to a lack of funds or a short-term investment horizon. Naspers
has $12 billion of cash on the balance sheet and its original
investment in Tencent (still owns >30%) dates back to 2001. Rather,
this decision was a reflection of Naspers’ bearish view on the
Nigerian ecommerce market vs. a bullish view on South African
ecommerce. Since its Konga exit, Naspers announced plans to invest
over $300 million in South African tech businesses.

Global import bill to drop 2.5% to $1.47 trillion in 2019: FAO
There’s ample supply of some foods; freight costs have fallen
Cheaper coffee, oilseeds and shipping costs mean the world’s food
import bill is expected to fall for the first time in four years.
The cost of buying food from abroad may drop 2.5 percent to $1.47
trillion this year, according to the the United Nations’ Food &
Agriculture Organization.
The FAO doesn’t forecast increases for any of the main food groups and
coffee, tea, cocoa and vegetable oil prices are expected to fare
worst.
Lower bills would be good news for consumers who’ve paid more for food
in recent years, helping to push up inflation.
Costs are now coming down as coffee to grains are pressured by
abundant supplies and trade tensions.
At the same time, commodity freight costs have fallen almost 50
percent from a July peak amid concerns about worsening prospects for
global economic growth.
“Lower unit costs of importing food are likely to offset an expansion
in global demand for many foodstuffs, implying that in 2019, more food
can be purchased nominally for the same or lower cost,” the FAO said
in a report Thursday.
The Bloomberg Grains Spot Subindex is near the lowest since 2016 amid
ample global supplies.
Coffee futures have reached the lowest in more than a decade in New
York as the market grapples with a global glut.
The Baltic Dry Index, a measure of commodity shipping costs, reached a
more than two-year low in February.
Still, it’s a mixed bag for some of the poorest nations, where import
bills will range from 3 percent declines to gains of 4 percent.
Those countries are likely to need to import more grains because of
poor production prospects.
The dependence on cereal imports could reach 35 percent of the total
food bill for least-developed countries and those in sub-Saharan
Africa, the FAO said.
The food import bill for last year was revised to $1.51 trillion, the
FAO said. Costs peaked at $1.52 trillion in 2014.

An MSCI basket of EM currencies fell the most since December at one
point this morning.

Frontier Markets

At the last election in 2014, the ANC won 62 percent of votes, the DA
22 percent and the EFF 6 percent.
By 0600 GMT, 75.6 percent of ballots in 22,925 voting districts had
been counted, showing the ANC to be in the lead with 57.21 percent,
while the main opposition Democratic Alliance (DA) was on 21.81
percent and the leftist Economic Freedom Fighters (EFF) had garnered
10 percent.

At the last election in 2014, the ANC won 62 percent of votes, the DA
22 percent and the EFF 6 percent.

Zambia, which the International Monetary Fund has warned is at high
risk of debt distress, contracted an additional $2.6 billion of new
external loans last year, according to the Finance Ministry. If the
funds are disbursed, they’ll increase the southern African nation’s
external debt to $12.7 billion, from $10.1 billion at the end of 2018.
The new loans suggest the government is too complacent about rapidly
increasing debt risks, Gregory Smith, fixed-income analyst at
Renaissance Capital in London, said by email Thursday.
“Last year, the government pledged it would be canceling loans and
slowing down the accumulation of debt,” he said. “Adding more new
loans is only going to aggravate what is already a dire situation.”
A spokesman for the Finance Ministry didn’t respond to an emailed
request for comment.
Zambia’s foreign-exchange reserves have plunged from a peak of almost
$4 billion in 2015 to $1.4 billion in February as foreign-debt
servicing costs soared.
Yields on the country’s $1 billion Eurobonds due in April 2024 jumped
69 basis points to 18.09 percent by 5:31 p.m. in Lusaka.
Africa’s second-biggest copper producer has boosted spending on
infrastructure including roads and airports in recent years, which it
has largely financed through external borrowing. The projects are an
investment for the future, according to Finance Minister Margaret
Mwanakatwe. Foreign debt has more than doubled since 2014, and the
cost of servicing it will increase by 90 percent this year, according
to Smith. While analysts including him are concerned about the
possibility of default in 2020 and in subsequent years, the government
has dismissed these worries, saying that the country has never
defaulted before.

“Avoiding default in our view will require canceling some loans, not
adding them, plus some combination of an IMF financed program, Chinese
debt re-profiling, and a People’s Bank of China credit line,” Smith
said. “Debt sustainability would require a u-turn on most of the loans
signed in 2018.”

The threat of a $190bn tax bill became a $300m payment. The Africa
Report looks into whether the Tanzanian government’s barnstorming
style will revolutionise the economy or scare away investors.
There was a certain optimism when John Magufuli became president in 2015.
Here was a man, as the early skirmishes on social media revealed, who
was not afraid to get his hands dirty to get things done: surprise
visits on hospitals and government offices to reveal who was slacking
off work; a push for discipline and austerity in public office; and an
anti-corruption drive known as ‘lance the boils’.
Even some of his most trenchant critics – like opposition politician
Zitto Kabwe – say that Magufuli is making progress. Kabwe tells The
Africa Report: Magufuli is doing the “right thing, but in the wrong
way”.
What is this “right thing”? At its core it concerns the role of
government, the mediator between the interests of capital, on the one
hand, and citizens, on the other.
“Let us stand as one. Tanzania belongs to us all and we should put the
interests of the country first,” Magufuli told parliament in 2015. It
is also a political fault line of the industrial era.
The US President Theodore Roosevelt at the dawn of the 20th century
fought against the price-gouging cartels in big business in finance,
energy and logistics, who ripped off Americans in the era of the
robber barons.
“When I say that I am for the square deal, I mean not merely that I
stand for fair play under the present rules of the game,” said
Roosevelt in a famous speech, “but that I stand for having those rules
changed so as to work for a more substantial equality of opportunity
and of reward for equally good service.”
Magufuli has certainly changed the rules of the game in Tanzania.
Passed in 2017, the Natural Wealth and Resources Contracts law allows
officials to trawl back through two decades’ worth of contracts to see
if any of the terms are unfavourable to the government.
Equinor, which has invested more than $2bn in developing Block 2 off
the coast, says that the production-sharing agreement it has with the
government is still valid, but has been unable to get any further in
negotiations over building a $30bn gas plant in Lindi.
Other legislation pushed the royalty rate on gold from 4% to 6%, gave
the government 16% of the stock of mining companies, and made it
illegal to export concentrates and unprocessed minerals.
This was accompanied by a major confrontation with the biggest mining
company, Acacia Mining – which had revenue of $751m in 2017, is owned
by Canada’s Barrick Gold and is listed on the London Stock Exchange.
In March 2017, the government halted the company’s cargoes at the
port. It claimed that Acacia had been understating the value of
exports to avoid tax since 2000 – something Acacia denied. The
Magufuli administration then slapped a tax bill of $190bn on the
company.
“The country has been short-changed and continues to be cheated out of
the much-needed revenue that would greatly boost our health sector,
infrastructure and others,” Magufuli declared. In what appears like a
victory for his tough stance,
Barrick Gold announced that a deal had been struck – whereby it handed
16% of the company to the government, promised to share profits 50:50
and agreed to pay a fine of some $300m.
The coal sector has seen intervention, too. A ban on importing coal to
stoke domestic mining raised howls across the private sector in 2016,
especially with Dangote Cement. Owned by the continent’s richest man,
the firm argued local coal was too expensive and poor quality.
But it is not just in mining. Late last year, Magufuli stepped in to
support a higher price for farmers. When private buyers baulked at the
price, he forced a government-controlled bank to step in:
“We will buy the entire crop, then we will look for buyers, and we
will eat anything that is not sold,” he said, ordering troops into the
fields to protect the crop from black-market operators.
Telecoms have not escaped his attention. In 2017, Magufuli claimed
that Indian company Bharti Airtel had swindled the government out of
its rightful share.
The presidency announced in January this year that it had upped its
stake in Bharti Airtel from 40% to 49%, and that the telecoms operator
would be paying the government more dividends.
So how has Magufuli executed his systemic rejig? It is a highly
centralised approach – heavy on loud rhetoric, light on parliamentary
or societal checks and balances.
“There is rampant looting in the mining sector,” says Magufuli one
day; “We are in an economic war […] billions in revenue have been
lost,” he will say the next.
And another: “Even the devil is laughing at us over our own
self-inflicted level of poverty amid natural wealth given to us by
God.”
Dismissals of what he sees as corrupt or inept officials, and a
rewiring of responsibility back to the presidency are also a feature.
“The wide discretionary powers of the Minister for Energy and Minerals
have been removed,” wrote Stein Sundstol Eriksen in a 2018 report for
the Norwegian Institute of International Affairs. The ministry of
energy and minerals has certainly been a locus of corruption.
But Magufuli has also changed the dynamic in the tax-collection wing
of government. Tax is the fuddy-duddy at the development party
But building a solid tax base remains a core job, the tough slog of
good governance. And in Tanzania, similar to African peers, the
tax-to-GDP ratio base is consistently in the low teens.
Magufuli has delivered here. “The tax-to-GDP ratio has increased by
about 1.5% of GDP since FY2014/15, supported by President Magufuli’s
drive against corruption and tax evasion,” reads the June 2017
International Monetary Fund report on Tanzania.
And at a contract-signing ceremony for the building of a new
hydropower dam in the middle of Selous game reserve in December 2018,
Magufuli hammered home his trademark ‘us against the world’ message.
“When we asked for financing for this project, the lenders refused to
give us money, but thanks to improved tax collection we are able to
finance this project using our own resources” Magufuli said.
East Africans with long memories will remember another politician who
said similar things: Meles Zenawi, a former Ethiopian premier.
Ethiopia is an interesting case for Tanzania because Addis Ababa
consciously tried to copy the Japanese and South Korean state-juiced
development model.
“The neoliberal economic reforms undertaken by Tanzania since the late
1980s in the mining and other economic sectors have largely created an
enclave economy in which a few wealthy individuals and multinational
corporations benefit at the detriment of majority poor people in rural
and urban areas,” says Japhace Poncian, a lecturer at Mkwawa
University in Tanzania, who says Magufuli is riding on the public
backlash against this – as well as Tanzania’s own socialist past under
Julius Nyerere – to promote his vision.
So it seems clear that Magufuli has chosen his side of the debate – he
will use ‘economic nationalism’ to ‘get the prices wrong’, be that for
cashews, gas or gold.
But will Magufuli make Tanzania rich? Or will it slide into
mismanaged, debt-burdened trouble?
First, a reckoning with capital.
The second is the ineffective bureaucratic tools with which he wants
to execute his great leap forward.
Third is a drift into authoritarianism that disconnects the executive
from the best available righting mechanism for development: the
public.
Then take, for example, the cashew confiscation: while Amsden vaunted
South Korea’s ability to ‘get the price wrong’, there was always a
final goal in mind, more often than not the upskilling of a particular
industrial subsector.
“There are a few examples involving the president himself and some of
his government officials taking initiatives to bring private operators
closer by convening meetings to learn of their challenges and issues,”
says Poncian. “The impact of these initiatives in terms of moving up
the value chains is yet to be seen.”
Here, the cashew price bump is good politics. But is it good
economics? Reports have emerged about a shadowy company called Indo
Power Solutions, which has entered into a $180m deal with the
government to buy 100,000tn of cashews, despite lacking any experience
in the commodity.
Certainly, the threat of $190bn tax bills and the prospect of the army
guarding cashews have made foreign investors circumspect about whether
or not to put money into the country.
“We believe that there is a question mark about future policies around
ownership of businesses,” says Konstantin Makarov of StratLink, a
boutique investment adviser for East Africa.
But Tanzanian officials are adamant they are not attempting to make a
hostile environment for foreign capital.
“It’s not the aim of the government to frustrate investors but we want
to have a win-win situation. We want to prove to stakeholders that
nobody is missing out,” Charles Sangweni, the acting director general
of the Petroleum Upstream Regulatory Authority tells The Africa
Report.
His institution is in charge of looking at contracts signed under
previous administrations. “We are doing the review for two purposes.
First is to clear the environment by proving that whatever was agreed
was good. But second, we are laying the baseline for establishing a
new production-sharing agreement for future investments,” he says.
The second key stumbling block is the tool Magufuli is wielding to
effect change: the bureaucracy. Japan had its legendary cadre of
technocrats in the ministry of trade and industry. But in Tanzania,
“there is total confusion,” says Kabwe.
This is partly because of the 180-degree turn in focus, from the more
free market- driven years of presidents Mwinyi, Mkapa and Kikwete to
the more state-driven economic turn of Magufuli.
But it is also due to a lack of investment and discipline that has
eroded the professionalism of the civil service. “We need a new
generation of bureaucrats now,” argues Kabwe.
It matters, partly because of the complexity of economic planning, but
also because of the dangers of ‘state capture’, as the South Africans
euphemistically call the purchasing of top government officials by
corporate interests.
“Yes, we may have a highly trained bureaucracy, but this is rarely
insulated from political and economic interference,” says Poncian.
“Magufuli has led a sharp authoritarian turn. This gives him freedom
to manage and perhaps curtail rent-seeking, but it will undermine the
institutional checks on it too,” according to Dan Paget of University
College London. “Worse still, it will leave an inheritance of
centralised power to his successor.”
And a mild economic nationalism balanced with investor interests is
not just a romantic notion, either. Jacob points to Chile as a “good
example where a mix of resource nationalism, a credible state-owned
company and respect for investors has proved successful”.

Among his guests was one of his prison wardens.

We can all remember the moment when Nelson Mandela came out of prison,
blinking in the sunlight and assumed leadership.

Dollar versus Rand 6 Month Chart INO 14.22
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Egypt Pound versus The Dollar 3 Month Chart INO 17.1183
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Egypt EGX30 Bloomberg
http://www.bloomberg.com/quote/CASE:IND

Nigeria All Share Bloomberg -8.06% 2019
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -6.01% 2019
http://www.bloomberg.com/quote/GGSECI:IND

Par Value:                  0.50/-
Closing Price:           40.50
Total Shares Issued:          3702777020.00
Market Capitalization:        149,962,469,310
EPS:             5.25
PE:                 7.714

Equity Group Holdings Q1 2019 results through 31st March 2019 vs. 31st
March 2018
Q1 Investment securities 169.650576b vs. 150.181142b +12.964%
Q1 Loans and advances to customers (net) 305.535628b vs. 271.075482b +12.712%
Q1 Total assets 605.667335b vs. 527.780738b +14.757%
Q1 Customer deposits 428.509100b vs. 382.422176b +12.051%
Q1 Total shareholders’ funds 95.436726b vs. 82.122852b +16.212%
Q1 Net interest income 10.435623b vs. 9.817591b +6.295%
Q1 Total operating income 17.617422b vs. 16.533236b +6.558%
Q1 Total operating expenses [8.781156b] vs. [8.206367b] +7.004%
Q1 Profit/ [Loss] before tax and exceptional items 8.836266b vs.
8.326868b +6.118%
Q1 Profit/ [Loss] after tax and exceptional items 6.195443b vs.
5.904736b +4.923%
Q1 Basic and diluted EPS 1.64 vs. 1.55 +5.806%
Q1 Net NPL 16.497233b vs. 9.314390b +77.116%

Customers of Equity Group’s   Tanzanian unit defaulted on nearly a
third of loans in the first quarter, a balance sheet deterioration
that seeped through to the parent company’s consolidated results.
The subsidiary’s stock of bad debt stood at 31.6 percent of the total
loan book of Sh14.8 billion by the end of March compared to 12.6
percent in its unit in South Sudan, 8.5 percent in Kenya, 8.1 percent
in DR Congo, 3.5 percent in Rwanda and 1.7 percent in Uganda.
Reporting as a combined entity, Equity Group’s non-performing loans
rose by Sh5.4 billion to Sh29.4 billion in the three months to March.
This translates to a non-performing loan ratio of nine percent.
The lender said the Tanzanian subsidiary has been hit by the ban on
raw cashew nut exports last year and the move to relocate core
government functions from the commercial capital Dar es Salaam to
Dodoma.
“The context of the issue in Tanzania is economic, which has
significantly affected the SME value chains, especially due to the
cashew nut ban and relocation of government to Dodoma from Dar es
Salaam,” said Equity chief executive James Mwangi on Thursday during
the release of quarter one 2019 financial results.

Nairobi All Share Bloomberg +10.65% 2019
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg -1.81% 2019
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