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Satchu's Rich Wrap-Up
Friday 27th of November 2020

Negative rates are the next major gold discovery. And if you are sitting there befuddled. Buy eurodollar futures. Buy lots of them. Assuming you already own gold. @hendry_hugh
World Of Finance

The absurdity of it all brought us Trump and Brexit. Let's learn the lesson second time around. Negative rates are the next major gold discovery. And if you are sitting there befuddled. Buy eurodollar futures. Buy lots of them. Assuming you already own gold.

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Asif Kapadia's Maradona documentary slices through the myth to show us the man @guardian

Diego Armando Maradona’s life is a cliché, a rags to riches tragedy. He started as a poor boy with no filter, one whose ruthless drive and innate skill took him to greatness, before a sudden fall. 

Had he been watching, Andy Warhol would have been enthralled.

Asif Kapadia, who won an Oscar for Amy, another documentary about a scintillating talent who came crashing to earth, is the man behind a new film about Maradona. 

In the film, titled Maradona, Kapadia slices through the persisting myth of D10S, attempting to free Diego the man from Maradona the legend. 

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To this day, the natural reservoir of Marburg is unknown. Marburg lives somewhere in the shadow of Mt. Elgon. Crisis in the Hot Zone Lessons from an outbreak of Ebola. Richard Preston

In 1980, a French engineer who was employed by the Nzoia Sugar Company at a factory in Kenya within sight of Mt. Elgon developed Marburg and died. He was an amateur naturalist who spent time camping and hiking around Mt. Elgon, and he had recently visited a cavern on the Kenyan side of the mountain which was known as Kitum Cave. It wasn’t clear where the Frenchman had picked up the virus, whether at the sugar factory or outdoors. Then, in the late summer of 1987, a Danish boy whose name will be given here as Peter Cardinal visited the Kenyan side of Mt. Elgon with his parents—the Cardinals were tourists—and the boy broke with Marburg and died. Epidemiologists at usamriid became interested in the cases, and they traced the movements of the French engineer and the Danish boy in the days before their illnesses and deaths. The result was weird. The paths of the French engineer and the Danish boy had crossed only once—in Kitum Cave. Peter Cardinal had gone inside Kitum Cave. As for the Ugandan trappers who had collected the original Marburg monkeys, they might have poached them from the Kenyan side of Mt. Elgon. Those monkeys might have lived near Kitum Cave, and might even have occasionally visited the cave. Mt. Elgon is a huge, eroded volcanic massif, fifty miles across—one of the largest volcanoes in East Africa. Kitum Cave is one of a number of caverns that penetrate Mt. Elgon at an altitude of around eight thousand feet and open their mouths in a deep forest of podo trees, African junipers, African olives, and camphors. Kitum Cave descends into tight passages and underground pools that extend an unknown distance back into Mt. Elgon. The volcanic rock within Kitum Cave is permeated with mineral salts. Elephants go inside the cave to root out chunks of salty rock with their tusks and chew on them. Water buffalo also visit the cave to lick the rocks, and they may be followed into the cave by leopards. Fruit bats and insect-eating bats roost in the cave, filling the air with a sour smell. The animals drop their dung in the cave—an enclosed airspace—and they attract biting flies and carry ticks and mites. The volcanic rock contains petrified logs, the remains of trees that were enveloped in lava, and the logs are filled with sharp crystals. Peter Cardinal may have handled crystals inside the cave and scratched his hands. Possibly the crystals were tainted with animal urine or the remains of an insect. The Army keeps some of Peter Cardinal’s tissues frozen in cryovials, and the Cardinal strain is viciously hot. It kills guinea pigs like flies. In February, 1988, a few months after Peter Cardinal died, the Army sent a team of epidemiologists to Kitum Cave. The team wore Racal suits inside the cave. A Racal is a lightweight pressurized suit with a filtered air supply, used for hot operations in the field. There is no vaccine for Marburg, and the Army people had come to believe that the virus could be spread through the air. Near and inside the cave they set out, in cages, guinea pigs and primates—baboons, green monkeys, and Sykes’ monkeys—and they surrounded the cages with electrified wire to discourage predators. The guinea pigs and monkeys were sentinel animals, like canaries in a coal mine: they were placed there in the theory or the hope that some of them would develop Marburg. With the help of Kenyan naturalists, the Army team trapped as many different kinds of wild mammals as they could find, including rodents, rock hyraxes, and bats, and drew blood from them. They collected insects. Some local people, the il-Kony, had lived in some of the caves. A Kenyan doctor from the Kenya Medical Research Institute, in Nairobi, drew blood from these people and took their medical histories. At the far end of Kitum Cave, where it disappears in pools of water, the Army team found a population of sand flies. They mashed some flies and tested them for Marburg. The expedition was a dry hole. The sentinel animals remained healthy, and the blood and tissue samples from the mammals, insects, arthropods, and local people showed no obvious signs of Marburg. To this day, the natural reservoir of Marburg is unknown. Marburg lives somewhere in the shadow of Mt. Elgon.

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They fancied themselves free, wrote Camus, ―and no one will ever be free so long as there are pestilences.

―In this respect, our townsfolk were like everybody else, wrapped up in themselves; in other words, they were humanists: they disbelieved in pestilences.

A pestilence isn't a thing made to man's measure; therefore we tell ourselves that pestilence is a mere bogy of the mind, a bad dream that will pass away.

But it doesn't always pass away and, from one bad dream to another, it is men who pass away, and the humanists first of all, because they have taken no precautions.

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China sends a message with Australian crackdown @FT @LowyInstitute
Law & Politics

The author is a senior fellow with the Lowy Institute

For a glimpse of the future in a world dominated by China, a good starting point is Australia.

Beijing’s embassy in Canberra last week handed the local media a short document detailing 14 grievances that China says are the cause of its rapidly deteriorating relations with Australia.

The document contains many familiar complaints: Beijing says Canberra has been interfering in its sovereignty through critical statements on Taiwan, Hong Kong, the South China Sea and Xinjiang, and has unfairly excluded Chinese companies like Huawei from Australia’s 5G telecommunications network.

The truly illuminating detail, however, lay in the other multiple grievances, about hostile local media coverage, foreign investment restrictions, critical think-tank reports and MPs speaking out on human rights.

As Rush Doshi of the Brookings Institution in Washington notes, the list is revealing in its hypocrisy. 

After all, Beijing routinely directs attacks at its critics through its state-controlled media, regulates local think-tank output, screens foreign investment proposals and regulates the speech of Chinese officials.

China’s most prominent Oceania scholar followed the document’s release by calling Australian foreign policy “bizarre”, “immature”, “stubborn”, “belligerent”, “mindless” and “juvenile”, among a litany of other pejoratives. And that was in just one article. 

The list of grievances also complains that Australia is forcing the state government of Victoria to ditch its participation in the Belt and Road Initiative, because it conflicts with Canberra’s refusal to sign on to Beijing’s flagship infrastructure programme.

Needless to say, if a Chinese provincial party secretary signed an agreement with Australia which Beijing had not sanctioned, he or she would be sacked forthwith.

It is little wonder that Australia has become the canary in the coal mine of an emerging illiberal Chinese world order. 

Australia is a close US ally, and a core member of the Anglosphere’s Five Eyes intelligence partnership.

The Australia-China relationship has been deteriorating for some years, but the downward spiral has accelerated in recent months. 

Two tipping points stand out this year — the Australian call for an independent inquiry into the Covid-19 outbreak, and police raids on Chinese-Australians and Chinese media in Australia over allegations of covert interference in domestic politics.

China’s response has been ferocious, slapping trade restrictions on multiple Australian exports, such as wine, beef, timber, barley and coal.

The trade barriers initially carried a pretence of legality, as they were ostensibly based on anti-dumping claims and health concerns. 

In recent weeks, the Ministry of Commerce in Beijing hasn’t bothered with that, issuing informal instructions to customs to block Australian goods on arrival.

Australian leaders used to say the country didn’t have to choose between its security ally (the US) and its economic partner (China). Such sinuous spin no longer passes muster.

It is true that Australia has at times been diplomatically clumsy in its handling of Beijing, notably in the way it unilaterally called for the Covid-19 inquiry and in its management of proposals to limit Chinese investment in the country.

Prominent Australians have also been critical of Canberra’s hardening line, saying that the intelligence community has taken over policy at the expense of diplomacy and commercial interests.

They also complain that Australian leaders’ efforts to keep on the right side of Donald Trump has ended up making them look like they were trailing dutifully behind him. 

Some in the business community are demanding that Canberra finds ways to work with China to rescue the relationship. 

However, other democracies should take note of Beijing’s behaviour, as they could be the next target.

The message is clear. If your media is overly critical, if your think-tanks produce negative reports, if your MPs persist in criticism, if you probe Communist party influence in your community and politics and if you don’t allow Chinese state and private companies into your market, and so on, you will be vulnerable to Beijing’s retribution as well.

As documents go, Beijing’s “14 Grievances” doesn’t quite match the “Long Telegram”, the dispatch from George Kennan in 1946 that laid the foundation for US policy of containment towards the Soviet Union in the cold war.

But it provides an illuminating road map for a future in which a powerful China demands that its political system be respected and its human rights record stays beyond foreign scrutiny.

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07-OCT-2019 :: China turns 70

They have “stood up.” Xi’s model is one of technocratic authoritarianism and a recent addition to his book shelf include The Master Algorithm by Pedro Domingos. Xi is building an Algorithmic Society.

The pomp and pageantry included a parade that involved 15,000 soldiers and sailors, 160 planes, 580 tanks and other weaponry including what Hu Xijin [President Xi’s trusted mouth-piece] described as 

‘’This is the legendary DF41 ICBM. But it is not a tale. Today it is displayed at Tiananmen Square I touched one about four years ago in the production plant. No need to fear it. Just respect it and respect China that owns it’’.

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“No matter how the official narrative of this turns out"
Law & Politics

"these are the places we should be looking, not in newspapers or television but at the margins, graffiti, uncontrolled utterances, bad dreamers who sleep in public and scream in their sleep.”

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Currency Markets at a Glance WSJ
World Currencies


Dollar Index 91.958

Japan Yen 104.0835

Swiss Franc 0.9065200

Pound 1.336875

Aussie 0.73723

India Rupee 73.93875

South Korea Won 1104.530

Brazil Real 5.336800

Egypt Pound 15.638700

South Africa Rand 15.22430

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Thoughts from a Renaissance man After the bleak mid-winter @rencapman
Emerging Markets

Humming the first line to the rather beautiful In the bleak mid-winter felt very appropriate as lockdown announcements swept Europe. 

But we’re confident the virus will pass in 2021, either through its natural expiry, or via vaccination, or because countries choose to ‘live with the virus’.

 Meanwhile, most of EM has either suppressed the virus or is not at risk of lockdown because they have chosen to accept the virus and let it run. 

Many in Asia and Africa will have seen their economies outperform DM in 2020, with a relatively low loss of life.

Also important for EM and FM investors looking at 2021 and beyond is Joe Biden’s victory in the US presidential election, which we think will result in large portfolio inflows to the asset class.

Our key conclusion for investors is to buy anything and everything EM and FM – and while that may sound like the sort of thing we always say, in fact, it’s not.

Debt investors might want to consider overweighting African eurobonds – e.g. a basket of Egypt, Kenya, Ghana/Nigeria and Angola. 

This provides high single-digit yields in dollars, while providing a mix of energy importing and exporting countries, and countries with IMF deals and those without.

We think equity markets in FM including Georgia and Kazakhstan, and small EM markets such as Pakistan, are worth attention. 

Investors might favour the East Asian giants in EM and Vietnam in FM, and there are trades to be done when the virus peak is past in Central Europe too. 

We think SA will be a beneficiary of US sanction risk on Russia or Turkey, but also because its domestic yield curve could see a lot of compression at the long end given a rand rally and assuming inflation stays low. 

We expect LatAm and SA to benefit from some recovery in commodity prices and currency.

it was enough in 2018 and 2019 to mean that average daily inflows to the US were over $1bn each working day. This contributed to US dollar strength which is usually unhelpful for EM.

But from 2022 onwards, we think Europeans, Japanese and others will once again feel comfortable investing in EM rather than the US, and US companies too will not be feeling the same pressure to re-shore production.

We assume UST yields will trade within a 0-2% range until 2030 (and then fall), also kept down by core Eurozone yields around 0% or less.

High single-digit yields in local currency debt – and relatively high in real terms too – are still available in EEMEA and LatAm. 

We think global disinflationary trends mean these might be one of the last big bond trades available to fixed income investors – as we outlined in Thoughts from a Renaissance Man: When yields disappear: 0% EM interest

If inflation and interest rates remain low in EM, the third-interesting target for investors is evidently equities. 

If rand 10-year bond yields can drop from around 9% to say 6-7%, we think the improved risk-free rate would justify a big rise in equity valuations.

So for the first time in years, probably since the taper tantrum in 2013 and the commodity crash of 2014, we think there are good reasons for a sustained bull run in EM.

We expect CIOs at large pension and mutual funds will reallocate to EM in the wake of the US presidential election. We think low yields in DM will encourage portfolio flows to EM in 2021. 

We assume net FDI flows to the US economy will cease in 2021 and reverse in 2022, with flows from DM heading to EM instead. 

We think this will contribute to EM FX strength, helping suppress inflation and interest rates and encourage more bank lending and investment. 

Faster growth will result, attracting more money to EM. Dollar GDP will rise faster than real GDP, improving debt ratios and probably credit ratings. 

After a difficult decade, we believe better times lie ahead.

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Thoughts from a Renaissance man After the bleak mid-winter @rencapman [continued]
Emerging Markets

The lighter touch on lockdown in much of Africa is understandable when YtD deaths in Nigeria are estimated at 1,163 people vs the normal loss of over 2.3mn.

Globally deaths of 1.3mn are equivalent to a week of normal annual deaths (57mn), and compares to about 10mn lives lost to cancer. 

LatAm has fared particularly poorly, followed by Europe and a number of Gulf states. 

But for a country such as India, which has recorded the second-highest number of cases in the world (8.9mn) and the third-highest number of deaths at 131k, that figure is still only 1% of normal annual deaths (about three days’ worth). 

Even if it doubled to Maldives’ levels, it is only about a week of normal deaths. 

27 countries are expected to grow in 2020. Most important is obviously 2% growth from China, pushing its GDP up to $14.9trn or 18% of global GDP. 

China, Taiwan and Egypt are the only EMs expected to grow in 2020. 

FMs such as Bangladesh (up 3.8%) and Vietnam (up 1.6%) and 13 countries out of Africa including Ivory Coast, Kenya and Ghana are all expected to grow. 

This FM outperformance is ironic given how unloved the asset class has become. FM GDP also fared relatively well in the global financial crisis.

To be fair, we have a starting point assumption that the G20 and World Bank might not share. 

We think borrowing costs for EM and FM, in dollars, will be the lowest they have ever been in the coming decade. 

EM dollar borrowing costs have already fallen by two- thirds over the past 20 years. This justifies a big increase in debt loads, not a fall – as we explained in our global presentation at Renaissance Capital’s 25th anniversary EM & FM conference held over 9-13 November.

While some debt-forgiveness campaigners argue that international investors demand too high an interest rate from low income countries, what we find more interesting is why debt managers are prepared to accept so little yield from low-rated credits. 

FM and African borrowers have been getting a remarkably good deal.

A big variable here is of course currency direction. If all the debt is foreign, and your currency weakens, those lower dollar interest rates are then easily offset by currency weakness (Turkish banks could explain this rather well in October 2020). 

But we expect EM currencies to appreciate against the dollar so debt servicing costs will fall as a percentage of GDP, which is helpful for credit ratings. 

Credit ratings can also improve if more borrowing drives faster growth. The ideal scenario is more borrowing, at lower rates, improving growth while not worsening debt service costs.

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Crypto Crashes Overnight As Whales Move Bitcoin To Exchanges @zerohedge
World Currencies

CoinTelegraph's William Suberg notes that the sudden price drop came in tandem with large-volume investors depositing BTC to exchanges - presumably with the aim of taking profit near Bitcoin’s $20,000 all-time highs.

“All Exchanges Inflow Mean increased a few hours ago. It indicates that whales, relatively speaking, deposited $BTC to exchanges,” Ki Young Ju, creator of on-chain analytics resource CryptoQuant, summarized to Twitter followers.

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Upcoming suspension of cryptocurrencies
World Currencies

In response to the FCA's policy statement on cryptocurrencies: "PS20/10: Prohibiting the sale to retail clients of investment products that reference cryptoassets", on Friday the 27th of November, 2020, 01:00 GMT, we will suspend trading of all cryptocurrencies & liquidate all existing positions at the last available trade price. 

Learn more about the FCA rules here:


The future section on prohibition COBS 22.6.

Complying early with FCA policy statement was an internal business decision as it is becoming increasingly difficult, and almost impossible to hedge cryptocurrency exposure.

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27 NOV 17 :: Bitcoin "Wow! What a Ride!"
World Currencies

Let me leave you with Hunter S. Thompson, “Life should not be a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside in a cloud of smoke, thoroughly used up, totally worn out, and loudly proclaiming “Wow! What a Ride!”

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

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.

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Turning to Africa The Spinning Top

So far Africa has dodged the Virus from a medical perspective though it remains in my view a slow burning Fuse and we all know by now ''viruses exhibit non-linear and exponential characteristics'

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Whatever happened to Madagascar’s ‘herbal cure for COVID-19’?

The hard lockdown was a harrowing ordeal that none of us should ever have to relive ever again. 

However, there was one utterly bonkers sub-plot developing across the Indian Ocean. 

Back in April, Madagascar’s Government declared it had created a ‘herbal cure’ for COVID-19, and began distributing the remedy immediately.

Their claims were met with both derision and optimism. Most of the western world dismissed the alleged ‘healing powers’ of the drink, but several African nations – including Senegal – signed up to purchase stocks. 

The concoction was made up of indigenous plants and traditional herbs that were mixed and bottled accordingly on the island – but did it actually work?

More than a quarter of Madagascar’s 26 million inhabitants have so far taken the drink, according to government figures, and there are still nine million bottles in stock. 

But the Indian Ocean island nation has still recorded more than 17 341 coronavirus cases and at least 251 deaths, although the spread of infection has slowed in recent weeks.

Two months ago, the WHO endorsed a protocol for testing African herbal alternatives as potential treatments for the coronavirus and other epidemics. 

Prosper Tumusiime, a regional WHO director, said that the efficacy of traditional medicine would also be looked into – but this hasn’t served as a green-light for distribution.

“If a traditional medicine product is found to be safe, efficacious, and quality-assured, WHO will recommend (it) for a fast-tracked, large-scale local manufacturing. The onset of COVID-19. has highlighted the need for strengthened health systems and accelerated research and development programmes, including on traditional medicines.”

It’s crucial to note that the infusion’s effects have not yet been scientifically tested – and the WHO has issued several warnings against its use for the time being. 

However, Rinah Rakotomanga, a communications official for the Madagascar Government, told the BBC that the country still encourages the use of the herbal ‘potion’:

“The majority of people who used the product and don’t have a chronic illness recovered completely, we are proud to have this remedy against the disease. It’s in our culture as Malagasy people to use decoctions like this… as long as it’s working, we don’t need clinical trials.”

It was a different story during winter, when cases were quadrupling and hitting a domestic high of 400 a day. Health Minister Ahmad Ahmad sounded the alarm in July – but at a political cost to himself. 

He sent out a letter to international aid donors, saying the trend was now “very critical… with notable flare-ups in certain regions, particularly in Antananarivo.”

Urgent needs included 337 ventilators, 2.3 million face masks, 697 000 pairs of gloves, 533 200 medical blouses, and multiple oxygen bottles. 

The government reacted sharply, describing the appeal as ‘a personal initiative taken without consulting’ President Rajoelina. Indeed, criticism of the regime’s COVID-19 reaction is a dangerous game.

On 13 July, two youths put up a banner on a busy road in the capital Antananarivo seeking the release of the leader of their student group who had been detained in June for criticising the potion on Facebook. They were arrested and questioned.


So, to answer the question posed earlier…

It is yet to be approved for usage by the WHO – but the government of Madagascar is still touting its own remedy.

Although tests are ongoing to decide if the drink works or not, it seems vaccine treatments will be prioritised now.

Cases remain relatively low on the island – but the so-called ‘cure’ failed to prevent hundreds of death and a nasty peak.

One in four Madagascans have taken the treatment, yet hospitals were – at one point – ‘overwhelmed’ with new cases.

Internal dissent regarding the ‘potion’ has not been welcomed: Ministers have been sacked, and protesters arrested.

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@PMEthiopia has launched an unwinnable War on Tigray Province.

Ethiopia which was once the Poster child of the African Renaissance now has a Nobel Prize Winner whom I am reliably informed

PM Abiy His inner war cabinet includes Evangelicals who are counseling him he is "doing Christ's work"; that his faith is being "tested". @RAbdiAnalyst

@PMEthiopia has launched an unwinnable War on Tigray Province.

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Ghana Stock Exchange Composite Index Bloomberg

Thoughts from a Renaissance man After the bleak mid-winter @rencapman [continued]

For a start, we continue to advise investors to be wary about those countries where fertility rates will remain high until at least 2040 if those countries also run C/A deficits. 

As we wrote last year, “Where fertility rates are likely to stay high and dependency ratios remain low for a few decades to come, interest rates should also remain high, unless governments are running a C/A surplus and a fairly tight fiscal policy''

Such countries will be at most risk of taking on too much debt, as we saw in LatAm in the 1970s and 1980s and more recently in Zambia. 

''Investors should be most attentive to Nigeria, Angola and DR Congo, among others, over the next 20 years.”

Unfortunately, Zambia has continued to run C/A deficits and its situation has deteriorated despite copper prices rising to around five-year highs. 

Nigeria too continues to run a C/A deficit, although it has managed to suppress domestic interest rates (at the short end). 

More positively, Angola has allowed its currency to become the cheapest in Africa based on our REER model and this should improve its C/A (unfortunately its methodology is difficult to compare with others).

To take one example, Nigeria’s debt is relatively low as a percentage of GDP, and its interest payments are just 2% of GDP. 

But its revenue base is so low that the interest burden is pretty high for the government even if debt does not look burdensome for the economy as a whole. A significant chunk of GDP is the non-tax paying informal economy.

In mid-November, our REER models showed us that the currency of Ethiopia is 25% overvalued, Bangladesh is 39% overvalued, China is 27% overvalued, Kenya is 19%, Vietnam is 31% overvalued etc. 

So at first glance, this is telling us that the dollar per capita increase these countries have seen is NOT justified.

Should Brazil’s dollar per capita GDP really have fallen by a half since 2011? It has only just outperformed Zimbabwe.

Ethiopia could be interesting if IMF estimates are right that the ETB will depreciate by 25% to an average ETB44/$ in 2020 and another 17% to ETB51/$ in 2022. 

Such moves would probably help Ethiopia get better bids from foreign investors interested in stakes in Ethio Telecom and potentially Ethiopian Airlines.

The picture in Africa is worse. Of all those shown below, the average rating was 2.7 (i.e. around Ba3/BB-) in 2014 just as commodity prices began to fall, it was 1.6 three years later in 2017 (i.e. between B and B+) and is now 1.1 (around B2/B).

All three agencies have negative outlooks for Ethiopia, and downgrades also look likely for Kenya, Namibia, Rwanda and SA among others. Given this, the average 1.1 rating for all African credits we follow may fall further.

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Senegal Cautions Against Private-Debt Relief for African Nations @economics

Stronger African economies don’t need debt relief from bondholders, whose money will be crucial to help finance the recovery of the continent, according to Senegal Economy and Planning Minister Amadou Hott.

Senegal is one of 46 low-income nations that got a waiver on bilateral debt payments until the first half of 2021 under a plan by the Group of 20 major economies to ease the blow of the coronavirus pandemic. 

The G-20 has chided private creditors for not joining the relief drive, which has deferred $5.7 billion in interests and principal so far.

However, only a limited number of heavily indebted African countries require a moratorium from commercial creditors, Hott said in a written response to questions.

For Senegal and other economies with strong fundamentals “there is no need to force any participation from private creditors,” Hott said

“Our priority is to maintain our relationship with private investors that are key long-term partners to bridge our financing gap.”

Zambia Default

Although the continent has so far escaped widespread coronavirus transmission, the pandemic’s economic fallout has emptied fiscal coffers and threatens to sink millions back into poverty

Earlier this month, Zambia became the first country in Africa to default since the onset of the pandemic, raising fears that others may follow in the world’s poorest continent.

Rich nations should focus on bolstering concessional financing by at least $100 billion annually as well as ramping up International Monetary Fund resources to ease the fiscal strains of the region, Hott said. 

Saudi Arabia, which holds the presidency of the G-20 this year, expects the group to agree soon on a new issuance of IMF reserve assets, known as special drawing rights.

Despite growing pressure, money managers in New York and London have said fiduciary duties to clients prevents blanket relief to poor countries struggling with dwindling revenues amid the global downturn. 

About a third of the countries eligible for the moratorium declined to ask for it out of fear it could tarnish their reputation in debt markets.

“If you try to drag the private sector into this debt-relief initiative, you will have a potentially extended period of time were these countries could have lost access to private market capital,” Kevin Daly, investment director at Aberdeen Standard Investments, said at the Bloomberg Invest Africa virtual conference Tuesday. 

“The criticism that we have not been involved in this initiative has been overplayed.”

African countries will likely return to international debt markets in force early next year with yields falling back to pre-pandemic levels and investors showing interest, Hott said.

Ivory Coast this week became the first sub-Saharan African sovereign to tap international debt markets since the onset of the pandemic. 

The world’s top cocoa producer sold 1 billion euros ($1.2 billion) of 12-year bonds at a yield of 5%.

“The Ivory Coast issuance opens the door for other sub-Saharan African countries to come to the market again and move away from all the noise created by the Zambia default,” said Simon Quijano-Evans, chief economist at Gemcorp Capital LLP in London.

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96% of surveyed hotels now open, from 89% in Sept. Avrg. bed occupancy 23% @MihrThakar
Kenyan Economy

Exports of goods +2.8% in the 10 mnths to Oct 2020

Gross NPLs 13.6% in Oct 2020, same as Aug

47% of banking sector loan book restructured

Private sector credit growth +7.7% in the 12 months to Oct 2020

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The queue of lorries snakes down the narrow tarmac road, stretching back as far as the eye can see on both sides of a sign that reads: “Welcome to Busia, the gateway to east and central Africa”. @ReutersAfrica

Before COVID-19, Kenyan driver Joseph Kimani used to reckon with a five-hour wait to cross from there into Uganda with his cargo of diesel.

Now the queue on the Kenyan side, which he and other drivers say extends for upwards of 60 km (37 miles), take five days to clear and, for them, life on the road has become literally that.

“The queues have been growing longer and longer,” Kimani said, blaming the delays mainly on coronavirus-related health checks.

To cross over, drivers need to show a negative COVID test taken in the previous 14 days. Failing that, they must submit to testing at the border and wait two days for the result.

“I don’t even get time to see my family. I eat what I get on the road. I live in this vehicle,” he said.

Busia is part of a transport corridor that extends from Kenya’s port of Mombasa into landlocked nations in East and Central Africa, including Rwanda, South Sudan and Democratic Republic of Congo.

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.@CentumPLC reports Half Year Earnings here
N.S.E Equities - Finance & Investment

Par Value:                  0.50/-

Closing Price:           17.80

Total Shares Issued:          665441775.00

Market Capitalization:        11,844,863,595

EPS:             7.41

PE:                 2.402

Results for 6 months ended 30th September 2020

HY Sales 294.869m versus 4.775213b

HY Trading [Loss] Profit [403.945m] versus 254.424m

HY Income from Financial Services 1.871656b versus 1.904039b

HY Funding and other Costs [1.833909b] versus [1.895577b]

HY Operating Profit from Financial Services 37.747m versus 8.462m

HY Investment and other income 433.464m versus 12.402305b

HY Operating and Admin Costs [502.888m] versus [574.665m]

HY Finance Costs [1.331233b] versus [2.037422b]

HY [Loss] Profit [2.048919b] versus 10.003123b

HY [Loss] Proft before Tax [2.048919b] versus 7.716233b

HY [Loss] Profit after Tax [1.981725b] versus 6.790544b

HY EPS [2.09] versus 10.70

Portfolio Investments 20.425b versus 18.202b

Cash and Cash Equivalents 8.850b versus 8.182b

Inventory Residential Units 4.257b versus 3.016b

Other Assets 74.944b versus 72.461b

A. Background

The 6-month period to 30 September 2020 was an extremely challenging one against a backdrop of Covid 19 and the economic uncertainty and disruption to business that it occasioned. 

Fortunately, the core focus of our Centum 4.0 strategy that began in 2019/2020 was to build business resilience by strengthening the balance sheet through a process of:

a) reducing debt;

b) enhancing liquidity;

c) switching to more cash flow generative assets that are less susceptible to market movements; and

d) Value preservation.

Debt Reduction: During the six months period, we reduced net debt by Kshs 4.1 Bn by retiring our 5 year bond fully. 

In the prior period ended 30 September 2019, the company had made an early repayment of its USD denominated facility of USD 75 million. 

These actions of deleveraging the balance sheet have resulted in a significant reduction in finance costs from KES 1.2 billion to KES 335 million.

Liquidity Enhancement: In June 2020, Centum Real Estate Limited, our wholly owned Real Estate subsidiary, repaid shareholder loans worth KES 3.75 billion to Centum. 

This repayment is the first significant cash contribution from our Real Estate subsidiary. Since this was a repayment of a shareholder loan, the transaction was not recognized in the income statement. 

We are upbeat about the strong pipeline of land sales within Centum RE and we expect further contribution in the second half of the year.

Switching to more cash flow generative assets: To preserve value, we closed the period with cash and marketable securities portfolio of KES 8.3 billion, the bulk of which is invested in cash flow generating fixed income securities.

The switch to fixed income securities significantly enhanced our interest income, further cushioning statement from the decline in dividend income as portfolio companies cut dividend to preserve cash.

In the current period, no gain on disposal or impairment provision on assets has been recorded. 


Real Estate

Centum Investment Company Plc has reorganized its Real Estate business unit into two distinct businesses units: Centum Real Estate Limited, which is a wholly owned subsidiary and the holding company for all wholly owned real estate business; and Two Rivers Development Limited, of which the company holds a 58% stake. 

Centum Real Estate Limited is pursuing a sales-led development model and is currently constructing 1,482 residential units across three sites, namely Two Rivers Development in Nairobi, Vipingo Development in Kilifi and Pearl Marina Development in Uganda.

 Of the 1,482 units under construction, 1,086 units, with a revenue potential of KES 9.2 billion had been sold as at 30 September 2020, representing a pre-sale level of 73%. 

The business has collected over KES 2.6 billion in cash deposits for these presold units and has a collectible KES 6.6 billion.

IFRS 15: Revenue from Contracts with Customers requires that the seller recognizes revenue once the performance obligations under the contract are satisfied. 

Collections from presold units are treated as a deferred revenue on the balance sheet and will reflect on the income statement when the units are completed and transferred to buyers.

Private Equity

The Private Equity business recorded a KES 1.2 billion consolidated after-tax loss for the period ended 30 September 2020 compared to an after-tax profit of KES 8.4 billion recorded for a similar period in 2019. 

During the six-month period ended 30 September 2019, the Group completed the disposal of its stakes in three beverages companies, realising a net gain of KES 12 billion.

The Group has not received any dividends from portfolio companies where the Group holds minority stakes in the six-month period ending 30 September 2020 as these portfolio companies have elected to build resilience in their balance sheets by preserving cash. 


Marketable Securities

The Group held KES 6.5 billion in marketable securities and KES 1.7 billion in cash at 30 September 2020

Company Performance

The Company after-tax profit improved from a loss of KES 1.6 billion to a profit of KES 95 million. The Company also booked revaluation losses of KES 1.4 Billion which contributed to a total loss of KES 1.3 billion. 

In the period ended 30 September 2020, the company did not dispose any of its assets. In the corresponding period in the prior year, the company recorded a gain on disposal of KES 2.2 billion.


There is evidently a sticker shock with the reported Loss of 1.981725b.

It is a conservatively reported HY set of numbers and the bias has been to take the Hit up front as it were.

However, they have a lot of Real Estate Sales which are yet to be booked.

Looks interesting on any further reverses. 

read more

by Aly Khan Satchu (www.rich.co.ke)
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November 2020

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