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Macro Thoughts

Home Thoughts

The bronze sculpture depicts a lone man in mid-stride with his arms
hanging at his side.[6] The piece is described as "both a humble image
of an ordinary man, and a potent symbol of humanity".[7] Giacometti is
said to have viewed "the natural equilibrium of the stride" as a
symbol of "man's own life force".[8]

Citing a source, the SCMP reported that Xi’s price for holding the
meeting in Osaka was that Trump delay additional tariffs, which of
course is a risk: "The reality, though, is President Trump could
always have a change of heart,” the source said. “But the truce cake
seems to have been baked."
A senior Trump administration official told POLITICO earlier this week
that it is possible that tariffs could be delayed but cautioned that
“nothing is certain. Absolutely nothing.”
A Washington-based source familiar with the talks said that there were
“ongoing attempts to coordinate press messaging”, but added that there
was no specificity yet regarding decisions on tariffs or timing within
that messaging.
But while the original SCMP report helped boost risk sentiment
overnight, sending futures to session highs, a subsequent report by
the WSJ in turn slammed sentiment, after it detailed that the
ceasefire is not unconditional but instead Chinese President Xi
Jinping will present Trump with a set of terms the U.S. should meet
before Beijing is ready to settle a market-rattling trade
confrontation, raising fresh questions whether a ceasefire will even
be implemented and the two leaders will agree to relaunch talks. Among
the preconditions noted by the WSJ, Beijing is insisting that the U.S.
remove its ban on the sale of U.S. technology to Chinese
telecommunications giant Huawei Technologies Co. Beijing also wants
the U.S. to lift all punitive tariffs and drop efforts to get China to
buy even more U.S. exports than Beijing said it would when the two
leaders last met in December.
In short, simply to agree to a ceasefire, Beijing demands that Trump
concede to many of the currently implemented steps in the ongoing
trade war in return for, well, nothing.
How or why Trump will agree to any of this is unclear and is why
futures stumbled immediately after the WSJ report hit...
As the WSJ further adds, despite his preconditions, "Xi isn’t expected
to take a confrontational tone with Mr. Trump, according to the
Chinese officials."
Of course, if the WSJ is right and Beijing has such high-threshold
conditions to even agree to a truce, it may well be that absolutely
nothing is announced after the meeting between the two presidents
concludes, and the market is starting to price it in.

I would cautiously say the situation has not changed for the better,
but I remain optimistic to a certain extent. But, to put it bluntly,
the situation has definitely become more dramatic and explosive.
LB: Do you believe that the world now has become more fragmented?
VP: Of course, because during the Cold War, the bad thing was the Cold
War. It is true. But there were at least some rules that all
participants in international communication more or less adhered to or
tried to follow.
Now, it seems that there are no rules at all. In this sense, the world
has become more fragmented and less predictable, which is the most
important and regrettable thing.
so I would like all the G20 members to reaffirm their intention — at
least an intention — to work out some general rules that everyone
would follow, and show their commitment and dedication to
strengthening international financial and trade institutions.
Everything else is details that complement the main topics one way or
another. We certainly support Japan’s presidency. As for the
development of modern technology, the information world, the
information economy, as well as our Japanese colleagues’ attention to
matters such as longevity and the environment — all this is extremely
important, and we will certainly support it and will take part in all
these discussions.
LB: Mr President, you have observed four American presidents at close
quarters and maybe five, you have had direct experience. So, how is Mr
Trump different?
VP: We are all different. No two people are the same, just like there
are no identical sets of fingerprints. Anyone has his or her own
advantages, and let the voters judge their shortcomings. On the whole,
I maintained sufficiently good-natured and stable relations with all
the leaders of the US. I had an opportunity to communicate more
actively with some of them.
The first US president I came into contact with was Bill Clinton.
Generally, I viewed this as a positive experience. We established
sufficiently stable and business-like ties for a short period of time
because his tenure was already coming to an end. I was only a very
young president then who had just started working. I continue to
recall how he established partner-like relations with me. I remain
very grateful to him for this.
VP: It would be better to ask what would be to America’s advantage in
this case. Mr Trump is not a career politician. He has a distinct
world outlook and vision of US national interests. I do not accept
many of his methods when it comes to addressing problems. But do you
know what I think? I think that he is a talented person. He knows very
well what his voters expect from him.
Russia has been accused, and, strange as it may seem, it is still
being accused, despite the Mueller report [on the investigation into
allegations of Russian meddling in the 2016 presidential campaign], of
mythical interference in the US election. What happened in reality? Mr
Trump looked into his opponents’ attitude to him and saw changes in
American society, and he took advantage of this.
LB: Mr President, you have had many meetings with President Xi, and
Russia and China have definitely come closer. Are you putting too many
eggs in the China basket? Because Russian foreign policy, including
under your leadership, has always made a virtue of talking to
everybody.
VP: First of all, we have enough eggs, but there are not that many
baskets where these eggs can be placed. This is the first point.
Secondly, we always assess risks.
Over the past 25 years or so (25, I believe), the share of G7
countries in the global GDP has declined from 58 per cent to 40 per
cent.
We are self-sufficient, and we are confident. Russia is the largest
continental power.
We should think about guarantees, which we should use as the basis for
talks with North Korea.
VP: It did not increase or decrease. Risk must always be
well-justified. But this is not the case when one can use the popular
Russian phrase: “He who doesn’t take risks, never drinks champagne.”
Primarily, this concerns Syria, we have managed to preserve Syrian
statehood, no matter what, and we have prevented Libya-style chaos
there. And a worst-case scenario would spell out negative consequences
for Russia.
When we discussed this matter only recently with the previous US
administration, we said, suppose Assad steps down today, what will
happen tomorrow?
Your colleague did well to laugh, because the answer we got was very
amusing. You cannot even imagine how funny it was. They said, “We
don’t know.” But when you do not know what happens tomorrow, why shoot
from the hip today? This may sound primitive, but this is how it is.
But when a person enters a square, raises his eyes to the sky and
proclaims himself president? Let us do the same in Japan, the US or
Germany. What will happen? Do you understand that this will cause
chaos all over the world?
This spy story, as we say, it is not worth five kopecks. Or even five
pounds, for that matter. And the issues concerning interstate
relations, they are measured in billions and the fate of millions of
people. How can we compare one with the other? Secondly, the average
person listens and says, “Who are these Skripals?” And it turns out
that [Sergei] Skripal was engaged in espionage against us [Russia]. So
this person asks the next question, “Why did you spy on us using
Skripal? Maybe you should not have done that?” You know, these
questions are infinite. We need to just leave it alone and let
security agencies deal with it.
VP: As a matter of fact, treason is the gravest crime possible and
traitors must be punished. I am not saying that the Salisbury incident
is the way to do it. Not at all. But traitors must be punished.
As concerns treason, of course, it must be punishable. It is the most
despicable crime that one can imagine.
LB: You have seen many world leaders. Who do you most admire?
VP: Peter the Great.
LB: But he is dead.
VP: He will live as long as his cause is alive just as the cause of
each of us. (Laughter). We will live until our cause is alive.

Euro 1,1376
Dollar Index 96.189
Japan Yen 107.69
Swiss Franc 0.9758
Pound 1.2672
Aussie 0.7014
India Rupee 68.99
South Korea Won 1155.73
Brazil Real 3.8195
Egypt Pound 16.695
South Africa Rand 14.172

Benchmark futures in Malaysia are down 7.1% this quarter as the
world’s most-consumed edible oil grapples with persistently high
stockpiles in top growers amid lackluster demand. Its performance is
in stark contrast to the Bloomberg agricultural spot price index,
which is on course for the best quarterly gain in three years thanks
to weather-related grain-supply disruption. Another quarterly loss for
palm would cap a seventh straight drop -- the worst run since futures
started in 1995. The oil, used in everything from candy to biofuel,
fell for a seventh straight day in Kuala Lumpur on Friday, touching
1,951 ringgit a ton ($471), the lowest intraday level in seven months.

A reorganization of the cocaine supply chain and the players involved
is visible at the middle and retail level, with the emergence of
fragmented, looser and more horizontal organizational structures.
Smaller groups have been able to enter the market by using a range of
information technology like encryption, darknet marketplaces, social
media for dealing and cryptocurrencies. Entrepreneurship in the
competitive cocaine market is evident from innovative distribution
strategies, such as cocaine-exclusive call-centres. These new methods
appear to reflect to some extent the type of disruption seen in other
areas facilitated by the common use of smartphones — a potential
‘Uberization’ of the cocaine trade — a competitive market in which
sellers compete by offering additional services such as fast and
flexible delivery options.

Emerging Markets

Frontier Markets

For ten days in May Uhuru Kenyatta, Kenya’s president, vanished from
view. Kenyans feigned concern on Twitter, using the hashtag
#FindPresidentUhuru. A missing-person poster appealed for information
on the whereabouts of a five-foot-eight African male last seen in
Beijing. A government spokeswoman sought to reassure the public: Mr
Kenyatta had been in his office “meditating”. But others speculate
that the president was in a funk after his trip to China failed to
yield a new loan for the next phase of Kenya’s ambitious $10bn
railway. Mr Kenyatta could be forgiven for feeling piqued. Beijing’s
largesse to Africa has sometimes seemed limitless (see chart). In
September China promised another $60bn in aid and loans to the
continent. Xi Jinping, its president, promised the money would come
with “no political strings attached”. John Magufuli, Tanzania’s
strongman president, was delighted. The West, he griped, made its
money dependent on “strange conditions”, such as insisting that
Tanzania should not lock up gay men. “China is a true friend,” he
enthused. Its assistance comes “free of charge”. Being chummy with
China has served Tanzania well. It has received more than $2bn in
loans since 2010, reckons the China-Africa Research Initiative at
Johns Hopkins University. In 2013 China agreed to finance and build a
$10bn port in Bagamoyo, once a big slave- and ivory-trading entrepôt
but now a sleepy fishing village. Kenya has done even better. It was
an early African member of the Belt and Road Initiative, China’s
global infrastructure project. It scooped up at least $9.8bn between
2006 and 2017, making it Africa’s third-largest recipient of Chinese
loans. Mr Kenyatta must have reckoned that his railway project, on
which he has staked much political capital, was due another cut of Mr
Xi’s cash. Not only has it been one of China’s highest-profile
projects in Africa, but Beijing has already doled out $4.7bn to
finance its first two sections. An almost 500km stretch between the
port of Mombasa and the capital, Nairobi, is up and running. The
second is nearly completed. Kenya had assumed that China would fork
out the $3.5bn needed for the penultimate section, to Kisumu on Lake
Victoria. If China’s ultimate vision was a railway network connecting
resource-rich inland states to Indian Ocean ports, why stop funding
the project halfway through Some Africans suspect that China
deliberately lends countries more than they can repay in order to
seize strategic assets when they default. They point to the
Chinese-financed port at Hambantota in Sri Lanka. After the project
flopped commercially, a Chinese state-owned firm took control.
Hambantota would be a handy place to park Chinese naval vessels
seeking to patrol the Indian Ocean. “The situation that Sri Lanka got
itself into may not turn out to be unusual,” says Mutula Kilonzo, a
prominent Kenyan senator. “It is going to happen to African countries,
too. The conditions of many loans are...a debt trap.” Deborah
Brautigam at Johns Hopkins argues that Hambantota is an exception. She
looked at more than 3,000 projects overseas financed by China, and
found that it was the only example of such an asset being seized to
cover a debt. Nonetheless, African leaders are spooked. Dialogue with
the Chinese is becoming edgier. On June 7th Mr Magufuli indefinitely
suspended construction at Bagamoyo, balking at demands from the
project’s Chinese partner for a 99-year lease and a ban on port
development elsewhere in Tanzania. Moving smoothly from cheerleader to
critic, he accused the firm of setting “tough conditions that can only
be accepted by mad people”. Last year Sierra Leone scrapped a
Chinese-funded project to build a new international airport for fear
that it would involve too much debt. The perception of a plot to turn
the Indian Ocean into a Chinese lake endangers the political capital
China has amassed in Africa. Since Mr Kenyatta came to power in 2013,
public debt has nearly tripled. Last year the imf raised the country’s
risk of debt distress from low to moderate. If Kenya defaults, China
risks being blamed. China’s hesitation also reflects the uneven
performance of past projects. A railway between Djibouti and Addis
Ababa, completed in 2017, cost China’s state-owned insurer Sinosure
$1bn in losses, its chief economist said last year. Corruption and
mismanagement drive up costs. Sometimes plans smack of unreasonable
optimism. Bagamoyo’s port was expected to handle more containers than
Rotterdam, Europe’s biggest freight terminal. Kenya’s railway has had
its critics from the outset. Corruption made it a ludicrously
expensive venture, costing twice the international average per
kilometre of track. The railway’s freight-carrying capacity was
miscalculated and has proved to be only 40% of what was predicted. It
was meant to be cheaper to ship goods up the line than send them by
road. Even though the opposite has proved true, Mr Kenyatta’s
government has forced all containers coming out of the port onto the
railway. Hapless traders in Mombasa have to pay for goods arriving by
sea to be sent to Nairobi and back again as a result. China seems to
have belatedly realised that throwing good money after bad would be an
error. So it is embracing caution instead. When Mr Kenyatta and his
delegation arrived in Beijing in May, they were treated to an
unfamiliar experience, according to a presidential adviser. The
Kenyans were questioned not only about their sums, but about
corruption. Mr Kenyatta was asked how he would afford a census and a
referendum on constitutional change. The Chinese even wanted to know
if he planned to stand for office again (he is obliged to stand down
in 2022). “It was like talking to the World Bank,” grumbled another
aide. Mr Kenyatta did not return from Beijing empty-handed. He agreed
to export avocados to China and won funds for a data centre and a road
connecting Nairobi’s suburbs to its airport. Such laudably modest
deals should be celebrated. Mr Xi might not be about to champion human
rights, but China’s shift closer to Western lending standards is a
step in the right direction. ◼

*Issuer default rating cut to CCC, reflecting govt’s high external
financing requirements, continued fall in FX reserves, limited access
to financing & a further rise in govt debt against the backdrop of its
ambitious CapEx program.

On june 23rd 2018 Abiy Ahmed, Ethiopia’s newly inaugurated prime
minister, took to the podium wearing a bright green t-shirt. Smiling
and waving, he offered hope of democratic change to tens of thousands
of supporters at a rally in the capital, Addis Ababa.
A year later, almost to the day, he again addressed the nation, this
time in army uniform, to declare, stony-faced, that his government had
thwarted a coup. It was a sharp reminder of the fragility of his
democratic revolution.
There are many unanswered questions, including whether and how events
in Bahir Dar were connected to the killing of the army chief. If the
incidents were indeed linked, as the government claims, that would
point to a wider conspiracy and suggest that Abiy faces a threat from
elements of the national army.
The ramifications for a country that seemed on the path to reform are
gloomy. Scores of journalists, politicians and activists linked to
Amhara nationalists have already been arrested.
Repression may, in turn, stoke further resentment in Amhara, a region
in which many young people are beginning to feel discriminated against
by Abiy and his Oromo faction.
The euphoria that greeted Abiy’s rise to power just over a year ago
seems a distant memory. ◼

Conclusions

The near term events will surely alert Investors to risks which had
been previously overwhelmed by Prime Minister Abiy's sheer force of
personality and his velocity. Having announced his economic Pivot 90
days into his term, recent developments particularly around the
Telecom Sector indicated he was ready to go much further much faster
than even the boldest Commentator had imagined. The cross cutting
political undercurrents are multi-sided and the seriousness is
reflected in the number of IDPs. To Date Investors have given the
Prime Minister the benefit of the doubt. This might be a popping over
the Radar moment for political risk. The Final worry is around
bandwidth in the PM's Office and whether the Office can risk manage
the Politics and simultaneously fast track the much needed economic
reform program.

Tanger Med, the biggest port in Africa with an annual volume of 3.5
million 20-foot equivalent units (TEU) in 2018, will add six million
in capacity after its extension worth 1.3 billion euros, port director
Rachid Houari said in an interview.
Morocco hopes the port, which offers a platform for exports by local
production plants of French car makers such as Renault SA and Peugeot
SA, will reach volumes of 4.5 million TEU by this year’s end like
Algeciras in southern Spain.
Authorities at the port on the western tip of the Mediterranean, just
across from the Spanish coast, hope it can build on its role as a
calling point for container shipping firms, especially between Asia,
Africa and Europe.
“I hope we will add one million TEU of containers every year,” said
Houari. He declined to estimate future volumes, saying only the
original terminal had reached 3.5 million TEU in just six
years.“Fingers crossed we will fill it up in six years,” he said.
Some 90% of container volumes passing through the ports are transiting
to other destinations, he said.
The biggest market, with a 40% share, is West Africa, where Moroccan
firms have heavily expanded to in recent years. Some 20% will go to
Europe and 10% to the Americas.
Morocco invested 1 billion euros in the first terminal which has
created some 6,000 jobs at the port and 70,000 others in a trade zone
in the area, he said.
The port is about 50 kilometers west of Tangier, the main city in
northern Morocco, allowing space for expansion.
Tangier also has a ferry terminal carrying some 40,000 people per day
in the summer peak season as Moroccans living in Europe cross the
Mediterranean.
The terminals are operated by APM Terminal, and owned by Denmark’s
Maersk, Germany’s Eurogate and a local firm.

Dollar versus Rand 6 Month Chart INO 14.1688
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt Pound versus The Dollar 3 Month Chart INO 16.694
http://quotes.ino.com/charting/index.html?s=FOREX_USDEGP&v=d3&t=c&a=50&w=1

Egypt EGX30 Bloomberg +8.17% 2019
http://www.bloomberg.com/quote/CASE:IND

Nigeria All Share Bloomberg -5.35% 2019
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -5.05% 2019
http://www.bloomberg.com/quote/GGSECI:IND

Zimbabwe has up to 10 companies producing cannabis, and South Africa
has three. Kenya, Rwanda and Uganda are reviewing their drug laws to
allow this

Global ride-hailing firm Uber Technologies Inc is in talks with
regulators over plans to expand into two West African countries and
provide a boat service in Nigerian megacity Lagos, a company executive
said on Thursday.
In much of sub-Saharan Africa there are low levels of personal car
ownership, rapidly expanding populations and a lack of efficient mass
transport systems in fast-growing cities.
Uber, which said it has 36,000 active drivers in sub-Saharan Africa,
operates in a number of countries in East and South Africa but is
largely absent from West Africa, aside from Nigeria and Ghana.
The firm has identified the region as a target for potential
expansion, Chief Business Officer Brooks Entwistle told Reuters. He
said the company was in talks with regulators in Ivory Coast and
Senegal regarding the possible launch of services.
“Both Abidjan and Dakar are logical opportunities for us,” said
Entwistle, adding that discussions were at an early stage. He did not
disclose further details.
“We have talked about West Africa today as being a big growth priority
for us and launch priority for us moving forward,” said Entwistle.
Ivory Coast and Senegal have two of the world’s fastest growing
economies, according to the International Monetary Fund. Nigeria,
Africa’s largest economy, is also the continent’s most populous
nation.
A number of motorcycle ride-hailing firms have also targeted West
Africa as an area for expansion in the last few months.
Nigeria’s commercial capital Lagos, a megacity of around 20 million
inhabitants built on a lagoon where Uber began operating in July 2014,
is beset by heavy congestion.
Entwistle, who spoke to Reuters during an interview in Lagos, said the
company was in talks with state regulators about providing a transport
system on the city’s waterways as a way of bypassing its choked roads.
“We are looking at the waterways here, which are very interesting to
us as it relates to a potential service,” said Entwistle.
The company has launched a boat service in the Indian city of Mumbai
in the last few months.
“We did launch Uber Boat in Mumbai and we have watched the product
develop. It’s in its early stages and we think there is high relevance
here,” he said, referring to Lagos.
The Uber executive, who described Lagos as “one of the great growth
opportunity cities in the world”, said the company has also held
discussions with a bus firm and regulators in the city.
He said the talks were in line with a global push by the company to
develop products that can work alongside public transit systems.
Entwistle said the combination of population growth and congestion
made Lagos, and other cities in the region, attractive.
The United Nations predicts that Nigeria’s population will more than
double to 400 million by 2050, which would make it the third most
populous country in the world after China and India.
Uber faces stiff competition in African cities from Estonian
ride-hailing firm Bolt, which until early 2019 was called Taxify.
Bolt has grabbed business largely by taking a smaller cut from drivers
using its app.
We did launch Uber Boat in Mumbai and we have watched the product
develop. It’s in its early stages and we think there is high relevance
here,” he said, referring to Lagos.
The Uber executive, who described Lagos as “one of the great growth
opportunity cities in the world”

Uber is seriously ubiquitous and  I recall how it arrived in Nairobi
and made its Gladwellian level move. “The tipping point is that magic
moment when an idea, trend, or social behaviour crosses a threshold,
tips, and spreads like wildfire”
Uber argues its platform positions it to become all-things
transportation, encompassing everything from scooters and bicycles to
freight delivery, driverless vehicles and even flying cars

The price at the Mombasa Auction, which had rebounded at the beginning
of this month after a streak of poor performances, slid back to below
two dollars in the last two sales of June.
The prices have been so bad that last week the auction witnessed some
teas selling for as low as $0.36 cents (Sh36) per kilogramme, leading
to concern from stakeholders.
“A kilogramme of made tea comes from four kilos of green leaf meaning
it will be Sh9 per kg of green leaf. If you subtract the
manufacturing, transport and warehousing costs, one wonders what the
farmer will take home,” said Peter Kimanga, chiarman of the East
African Tea Traders Association (EATTA).
Mr Kimanga says increasing production and lack of expansion in the
export markets is finally taking a toll on earnings, worsened further
by the declining quality of Kenya teas.
“Kenya’s overreliance on a few bulk export markets will continue to
distress the sector and urgent interventions need to be employed in
order to broaden our market base as well as arrest the declining
quality,” he said.
He said the government as a major beneficiary of the industry’s forex
earnings should step in to reverse the trend.

The NSE All Share is +5.63% in 2019 trading at a PE of 11.64
https://twitter.com/RichFrontiers/status/1144493788686983168

Nairobi All Share Bloomberg +5.63% 2019
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg -6.47% 2019
http://j.mp/ajuMHJ

Every Listed Share can be interrogated here
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