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Macro Thoughts

Home Thoughts

“I had learnt the satisfaction which comes from hardship and the
pleasure which derives from abstinence; the contentment of a full
belly; the richness of meat; the taste of clean water; the ecstasy of
surrender when the craving of sleep becomes a torment; the warmth of a
fire in the chill of dawn.”  ― Wilfred Thesiger

“So, so many wings they have,” she said. “Metropolitan Museum wing
named after them, Louvre wing also, London Royal Academy wing also. A
bird with so, so many wings can fly so, so high.”
“But we are not birds. We have no need of wings.”
“At the Tate Modern, they have a staircase with their name. At the
Jewish Museum in Berlin, they have an escalator. They have a rose
also, pink, bearing their name. They have an asteroid in the sky. So,
so many things they have.”
“Why must I care about asteroids and escalators?”
She knew what to say. “Branding,” she cried. “You buy naming rights,
your name becomes loved. It will be so, so loved. And love is good for
business, no? So, so good.”
He loved his wife. “O.K.,” he said. “Smile wing, Smile extension,
Smile gallery, Smile balcony, Smile ward, Smile elevator, Smile
toilet, Smile star in the sky.”
She broke into song. “When you’re smiling,” she sang. It was their
song. “When you’re smiling.”
“The whole world smiles with you,” he said.

The People’s Liberation Army Air Force posted a photo on its social
media account this week showing the fifth-generation fighter tagged
with the number 62001, designating the aircraft as part of a frontline
unit.
Chinese media reported that the stealth fighter had entered the
Eastern Theatre Command, which encompasses Taiwan.
Collin Koh, a research fellow at the S Rajaratnam School of
International Studies at Nanyang Technological University in
Singapore, said the aircraft appeared to have two missions.
“The unit turning operational in Eastern Theatre Command is precisely
aimed at Taiwan,” Koh said.
“And to challenge US military activities in Taiwan Strait, besides
posing a threat to the median line that Taiwan’s air force patrols
along.”

Boris Johnson has set up a “war cabinet” to deliver Brexit “by any
means necessary” by October 31 as a senior cabinet minister warned
that there was “now a very real prospect” of no deal.
In a dramatic shift Michael Gove, the minister responsible for no-deal
preparations, said the government was “working on the assumption” that
Brussels would not strike a fresh agreement.
In a Whitehall revolution, Johnson will make every decision on Brexit
policy with a team of just six senior ministers — all of them
Brexiteers who support no deal.
Starting tomorrow, the war cabinet — Gove; the chancellor, Sajid
Javid; the foreign secretary, Dominic Raab; the Brexit secretary,
Steve Barclay; and Geoffrey Cox, the attorney-general — will plot the
nation’s course.
Putting the country on a war footing, Johnson has ordered Gove to
chair meetings of civil servants and political advisers every day —
including Sundays — until the 2016 referendum result is delivered.

Euro 1.1119
Dollar Index 98.037
Japan Yen 108.63
Swiss Franc 0.9931
Pound 1.2339
Aussie 0.6907
India Rupee 68.87
South Korea Won 1183.81
Brazil Real 3.7777
Egypt Pound 16.5955
South Africa Rand 14.28

North Korea’s economy shrank in 2018 for a second straight year, and
by the most in 21 years, hit by international sanctions to stop its
nuclear programme and by severe drought, South Korea’s central bank
said on Friday (Jul 26).
North Korea’s gross domestic product (GDP) contracted by 4.1 per cent
last year in real terms, the worst since 1997 and the second
consecutive year of decline after a 3.5 per cent fall in 2017, the
South’s Bank of Korea estimated.
North Korea does not disclose any statistics on its economy. The South
Korean central bank has been publishing its estimates since 1991,
based on information from various sources including the South’s
foreign trading agencies.
North Korea’s international trade fell 48.4 per cent in value in 2018
as tougher international sanctions in late 2016 and 2017 cut exports
by nearly 90 per cent, the Bank of Korea said.
Output in the mining sector shrank 17.8 per cent because of sanctions
on exports of coal and minerals, while the agriculture, forestry and
fisheries sector contracted by 1.8 per cent because of drought, it
said.
North Korea’s population was estimated at 25.13 million and annual
income per head at S$1,298, the South Korean central bank said.

The Events that took place on Friday at the truce village of Panmunjom
and during the Inter-Korean Summit were breathtaking for the Hollywood
Optics. The Opening Shot of Kim Jong Un surrounded by a Phalanx of
North Korean Officials [later replayed as Chairman Kim sat in his
Presidential Vehicle surrounded by his Ninja bodyguards] was almost as
good as the opening Sequence in PT Anderson's Boogie Nights [Steadicam
operator Andy Shuttleworth]. This was Cinema of the highest level
which is no surprise when You consider that Kim Jong-Il the Father was
obsessed with Cinema and amassed arguably the world’s largest personal
film collection: over 20,000 bootlegged 35mm screening copies. Kim
Jong-Il also had a penchant for Hennessy Paradis cognac and for two
years in the mid-1990s, he was the world's largest buyer of Hennessy
Paradis cognac, importing up to $800,000 of the stuff a year.  Kim
Jong-Il began his career as the head of the state’s propaganda and
agitation department and its clear that Kim Jong-Un's sister Kim Yo
Jong who holds the same role and evidently handles all the optics, is
a chip off the old Block. Friday was tip-top Geopolitical Optics. Mike
Pompeo, the newly minted US Secretary of State [His predecessor was
fired via Twitter] had visited Pyongyang the previous week and
pronounced; that the young North Korean leader was "a smart guy who's
doing his homework"

They all have had tiny little hands like the Elves in the Elves and
the Shoemaker. And this country has nuclear weapons and on its border
with its neighbour South Korea sit 25,000 American soldiers.
I believe North Korea is the perfect instrument for China

“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.’’

South Korea is set to be peeled off and going by his puppy dog smiles
President Moonriver will be in PyongYang before you can pronounce Kim
Yo Jong correctly. Russia always had their back. China was never
interested in bringing him to heel. After all, he is the buffer state
between China and more than 30,000 US soldiers parked on their
doorstep in South Korea.

Frontier Markets

The IMF released their iconic World Economic Outlook last week and
said the following about Sub Saharan Africa

In sub-Saharan Africa, growth is expected at 3.4 percent in 2019 and
3.6 percent in 2020, 0.1 percentage point lower for both years than in
the April WEO, as strong growth in many non-resource-intensive
countries partially offsets the lackluster performance of the region’s
largest economies. Higher, albeit volatile, oil prices have supported
the outlook for Angola, Nigeria, and other oil-exporting countries in
the region. But growth in South Africa is expected at a more subdued
pace in 2019 than projected in the April WEO following a very weak
first quarter, reflecting a larger-than-anticipated impact of strike
activity and energy supply issues in mining and weak agricultural
production. So after downshifting SSA growth 0.1% for 2019 and 2020
they have pegged Nigeria at 2.3% and 2.6% and South Africa at + 0.71%
and +1.1%. Nigeria and South Africa constitute 50% of SSA GDP. I think
Nigeria will post lower numbers than projected by the IMF and worthy
of note is that Both Economies are in fact in reverse because of
Population growth which is exceeding GDP.

This single Paragraph does not tell the Story because this year in
2019 so much has gone on. Let start with the Geopolitical and
Political dimension. There has been a significant advance and
intrusion by Middle Powers [KSA, UAE, Egypt was always there] into the
Horn of Africa. The ''Oudh'' Spring in Khartoum met a ''red in tooth
and claw'' Counter-Revolution and Sudan feels like an African
Fault-line. Its somewhat counterintuitive but it is the Al-Sisi Model
which is delivering economic growth of 6% but I for one think its
impossible to replicate because the cry for Political Freedom is
relentless and at fever pitch. Sudan is surely a collision which is
set to repeated elsewhere in what could morph into a Gladwell level
move not unlike Ebola which is exponential at its heart.

America feels detached, China certainly more cautious around its BRI
Loan Book. Russia has reasserted itself with its unique bag of Tricks
[Elections,, Weapons and Cash particularly where there are resources
available for swapping]. The United Kingdom will surely seek a bigger
engagement post Brexit and France and the Future of the French
speaking World is also in Africa. Quite a sophistical Policy Tool-Kit
is required.India is a Player too.

At a more granular level, Zimbabwe is a Laboratory Experiment with
Inflation last clocking 176%. There is a straw and camels back moment
but predicting that moment is always a Fools Errand. Centrifugal
forces are working against the mercurial Prime Minister Abiy's agenda
in Ethiopia. The French speaking countries like Cote D'Ivoire and
Senegal are in a sweet spot in large part precisely because of the
stability of the Euro Anchor and at which very moment they are
considering dumping the connection and launching their own ECO.
President Tshishikedi in the DR Congo continues to build momentum from
a low base. East Africa's Infrastructure model [predominantly rail] is
finding that the Main Creditor is not being persuaded to pony up more
cash. The actual Signal was emitted at FOCAC 2018 but Policy Makers'
Antennae were scrambled then and the message did not get through. The
Message got through at the third time of asking, in fact. The Proof of
Magafulinomics will be in the eating and surely we will know whether
the cake it is baking is a growing one or a shrinking one.

The overarching and interestingly at a time when the Rest of the World
seems to be embarked on a process of Fragmentation and Globalisation
coming apart at the seams, Africa is proudly moving counter-trend with
the African Continental Free Trade Area (AfCTA). Of course, the Devil
is in the Details of the execution and such things can simply fall
apart in a deluge of Non-Tariff Barriers but it is a Silver Bullet
particularly if we allow the free circulation of our People who are
natural Entrepreneurs. Just look outside, there are markets just about
everywhere.

From an economic Perspective, balance sheets are fully loaded and the
exposure to Foreign markets quite high [The SSA Eurobond market is in
excess of $104b, for example]. Just on Friday Fitch Ratings revised
its Outlook on South Africa to Negative; Affirms at 'BB+'. This is
surely a Precursor for what has to be a deteriorating Ratings trend
line. For now, with the Developed World embarked on their own version
of ''Voodoo economics'' with interest rates deep in negative
territory, this has created a benign backdrop for SSA Sovereign Paper
because of the Optics of handsomely positive interest rates in a world
of negative interest rates. However, the Ratings Trendline versus
Yield compression means at some point the elastic band will snap.
Zambia of course snapped earlier in the year.

The best performing stock market has been South Africa where the Gold
Price move higher popped Gold and Miners shares.

While Cape Town is South Africa’s top tourist attraction, few of its
1.7 million annual foreign visitors venture beyond the iconic areas
around Table Mountain to the Cape Flats, a mishmash of sandy,
windswept neighborhoods filled with low-rise apartment blocks and
shacks designed by the apartheid regime to keep the city’s black and
mixed-race residents out of view. Police estimated in 2013 that there
are 100,000 gang members in the city of 4 million people. Just 12
miles from Cape Town’s beaches, five-star hotels, and internationally
lauded restaurants, gangs fight for turf in the area’s rapidly
expanding drug trade. The conflict has led to 900 murders in 2019,
more than the annual total for 2018, in a country that already has one
of the world’s highest murder rates.
Ramaphosa was quick to emphasize that the deployment—which took place
on July 18—was a “defense force of democratic South Africa.” But for
many South Africans, the presence of troops in the Cape Flats evoked
memories of the last years of apartheid, when townships were patrolled
by government forces and protests were put down with a heavy hand.
Since 1994, the army has only been deployed twice in major
cities—Johannesburg, Durban, and Cape Town—to end bouts of xenophobic
violence.
A study conducted by the government of Western Cape province in 2017
and 2018 found that 95% of people in the Cape Flats felt unsafe on the
street at night. Daylight wasn’t safe, either: Children out playing
have been the victims of stray bullets from shootouts.
Cape Town is a conduit city for heroin trafficking—the country is one
of three major routes for the drug out of Afghanistan. The trade in
South Africa is worth at least $260 million, according to a
conservative estimate by Simone Haysom, a senior analyst at the Global
Initiative Against Transnational Organized Crime. Cape Town is the
epicenter of gang activity, which also feeds off protection rackets
and trade in other drugs including crystal meth. “I am a thug. What I
do, selling drugs and other illegal things, is not good, but what am I
supposed to do?” says Pretty Boy, a 46-year-old gangster in the
Bonteheuwel neighborhood. He wore sweatpants and a beanie with a
pompom as he stood in the street surrounded by younger gang members.
“We read in the newspapers that government is spending 23 million rand
($1.7 million) for the army to come here. Why don’t they use that
money to improve people’s lives instead?”

The Outlook revision reflects a marked widening in the budget deficit
as a result of lower GDP growth and increased spending, including
state-owned enterprise (SOE) support, increasing our projections for
government debt/GDP and heightening the difficulty of stabilising
debt/GDP over the medium term. Renewed downward revisions to GDP
growth in 2019 also raise new questions about South Africa's GDP
growth potential. The social context of exceptionally high inequality
will constrain the government's policy response to these
challenges.Fiscal metrics have deteriorated significantly due to
under-performance of revenue, which is expected to worsen in the
current fiscal year as growth has turned out to be weaker than
expected. Low trend GDP growth means that economic recovery is not
expected to drive a major fiscal improvement in later years, while we
also forecast expenditure to increase by approximately 2pp of GDP in
FY19/20-FY21/22.  Fitch forecasts GG debt to increase further to 68%
of GDP in FY21/22, and debt may continue rising after that. GG debt
was 57.3% in FY18/19 (including central government gross loan debt of
55.6% of GDP and 1.6% of GDP of local government debt), compared with
a current 'BB' category median of 44.6%. The debt structure helps to
reduce refinancing and foreign-exchange risks, with a particularly
long average maturity of central government debt of 13.2 years and
foreign-currency debt accounting for just 8.2% of GG debt.

Dollar versus Rand 6 Month Chart INO 14.2794
https://quotes.ino.com/charting/?s=FOREX_USDZAR

Egypt Pound versus The Dollar Chart INO 16.5940
https://quotes.ino.com/charting/?s=FOREX_USDEGP

Egypt EGX30 Bloomberg +3.25% 2019
http://www.bloomberg.com/quote/CASE:IND

Nigeria All Share Bloomberg -11.17% 2019
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -6.57% 2019
http://www.bloomberg.com/quote/GGSECI:IND

A leaked report from the International Monetary Fund said earlier this
year that Tanzania’s economy has not been expanding as fast as
official figures suggest. It said lower growth was partly due to
President John Magufuli’s “unpredictable and interventionist”
policies.
In the first quarter, construction, the biggest driver of GDP, grew
13.2%, compared with 15.6% a year ago, the state-run National Bureau
of Statistics (NBS).
However, growth in the mining sector, which has been the target of
repeated government interventions, rebounded to 10.0% from a 5.7%
decline during the same period in 2018. Tanzania is Africa’s
fourth-largest gold producer.
“The growth (of the mining sector) was mainly due to an increase in
production of gold, coal and diamonds,” said NBS.

Par Value:
Closing Price:           3.56
Total Shares Issued:          2615538528.00
Market Capitalization:        9,311,317,160
EPS:             0.24
PE:                 14.833

CIC Insurance Group Limited HY 2019 Results through 30th June 2019 vs.
30th June 2019
HY Gross written premiums 9.594819b vs. 8.980946b +6.835%
HY Net earned premiums 7.111682b vs. 7.082902b +0.406%
HY Investment and other income 1.623551b vs. 1.640640b -1.042%
HY Total income 8.735233b vs. 8.723542b +0.134%
HY Claims and policyholders’ benefits expense [5.040992b] vs.
[4.669916b] +7.946%
HY Operating and other expenses [3.214160b] vs. [3.075124b] +4.521%
HY Total expenses [8.255152b] vs. [7.745040b] +6.586%
HY PBT 146.839m vs. 643.694m -77.188%
HY Tax charge [125.939m] vs. [106.639m] +18.098%
HY Profit for the period 20.900m vs. 537.055m -96.108%
EPS 0.01 vs. 0.21 -95.238%
These unaudited condensed financial statements are extracts from the
books of accounts of the group. They were approved by the board of
directors on 26th July 2019.
FINANCIAL HIGHLIGHTS
• Gross written premiums increased by 7% from KShs.9B in 2018 to
KShs.9.5B in 2019. Regional countries contributed Kshs.1B
• Claims incurred increased from Kshs.4.7B to Kshs.5B driven mainly by
adverse group life claims in Q1 that are not expected to recur.
Subdued investment environment and yield curve deterioration has also
resulted in high actuarial reserves.
• Operating expenses remain under control and only rose by 5% to Kshs.3.2B.
• Profit before tax declined from Kshs.644M to Kshs.147M mainly
because of the loss in our life business occasioned by the adverse
group life claims that are not expected to repeat.
General business and CIC Asset Management had a profit before tax of
Kshs.326M and Kshs.104M respectively, while the regional countries
contributed a profit before tax of Kshs.50M.
• Total assets increased by 9% to KShs.36B
• We project a significantly improved performance for our life
business in the second half of the year.

Kenya Shilling depreciated by 0.7% against the US Dollar to close at
Kshs 103.8, from Kshs 103.1 the previous week, with the shilling
hitting a 3 year low of Kshs 104.0, partly driven by uncertainty
caused by Monday's announcement that the Treasury Cabinet Secretary
would be charged with financial misconduct, coupled with a relatively
liquid money market. The Kenya Shilling has depreciated by 1.9% year
to date, in comparison to the 1.3% appreciation in 2018

Improving diaspora remittances, which have increased cumulatively by
13.6% in the 12 months to June 2019 to USD 2.8 bn, from USD 2.4 bn
recorded in a similar period of review in 2018.

The average volumes traded in the interbank market declined by 20.8%
to Kshs 8.2 bn, from Kshs 10.4 bn the previous week.

The market is currently trading at a price to earnings ratio (P/E) of 11.6