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Satchu's Rich Wrap-Up
Wednesday 14th of July 2021

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"Last week marked the fourth consecutive week of increasing cases of Covid-19 globally," @DrTedros

"The Delta variant is ripping around the world at a scorching pace, driving a new spike in cases and deaths." 

"The current collective strategy reminds me of a firefighting team taking on a forest blaze," he said. 

"Hosing down part of it might reduce the flames in one area, but while it's smoldering anywhere, sparks will eventually travel and grow again into a rolling furnace." 

We emerged from the below captioned 4 weeks ago. 

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Global cases are gaining momentum. @video4me

R continues to edge up and the last 20 days have averaged over 1%/day increase in new cases.

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The viral loads in the Delta infections were ~1000 times higher than those in the earlier 19A/19B strain infections on the day when viruses were firstly detected

We deducted the intra-family transmission pairs from our time interval analysis. 

Our results showed the time interval from the exposure to first PCR positive in the quarantined population (n=29) was 6.00 (IQR 5.00-8.00) days in the 2020 epidemic (peak at 5.61 days) and was 4.00 (IQR 3.00-5.00) days in the 2021 (n=34) epidemic (peak at 3.71 days)
Compared to the 19A/19 B strains, the relative viral loads in the Delta variant infections (62 cases, Ct value 24.00 (IQR 19.00~29.00) for ORF1ab gene) were 1260 times higher than the 19A/19B strains infections (63 cases, Ct value 34.31 (IQR 31.00~36.00) for ORF1ab gene) on the day when viruses were first detected (Figure 1C).

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1795
Dollar Index 92.672
Japan Yen 110.52
Swiss Franc 0.9180
Pound 1.3849
Aussie 0.7460
India Rupee 74.59
South Korea Won 1149.24
Brazil Real 5.1637
Egypt Pound 15.6996
South Africa Rand 14.73391

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Turning to Africa

We are getting closer and closer to the Virilian Tipping Point

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South Africa struggles to contain worst unrest in decades @FT @jsphctrl

Security forces in South Africa are struggling to contain spreading unrest, with dozens dead after violent scenes that President Cyril Ramaphosa admitted have “rarely [been] seen before in the history of our democracy”.

The immediate trigger for the violence was the jailing last week of Jacob Zuma, the former president, for contempt of court for his refusal to attend an inquiry into corruption during his nine-year tenure.
Zuma, who still has strong support within the ruling African National Congress and in his home state of KwaZulu-Natal, has denied all wrongdoing and says the charges are politically motivated.
South Africa’s domestic spy agency is investigating whether its own former agents had orchestrated violence in KwaZulu-Natal out of loyalty to Zuma, said Ayanda Dlodlo, the state security minister, at a briefing on Tuesday. 

A leading business family related to Zuma denied this week that it was behind the unrest. The province is the former president’s power base and has a long history of political violence.
While analysts suggest the violence may have initially been fanned by Zuma’s supporters, high youth unemployment and economic disruption from the pandemic have also fuelled the looting and unrest. 

Riots that began in KwaZulu Natal have since spread to other areas including Gauteng, the economic hub that includes Johannesburg.
Sihle Zikalala, premier of KwaZulu-Natal, said on Tuesday that 26 people were confirmed dead so far in the province. 

Queues formed outside the few supermarkets remaining open after looting in Durban, the province’s biggest city. 

The main N3 motorway from Durban to Johannesburg, a major economic artery for South Africa and the region, was also largely shut on Tuesday. 

David Makhura, Gauteng’s premier, said that 19 people had died in the province, including 10 in a stampede in Soweto.
Hundreds of looters also ransacked industrial warehouses on the outskirts of Durban, which is one of Africa’s busiest shipping ports. A chemical plant in the region was also set on fire.
Ramaphosa ordered the deployment on Monday of up to 2,500 soldiers to support police and said that South Africans were “anxious and afraid” about societal breakdown. 

“This is not who we are as South Africans. This is not us,” he said in a televised address on Monday. 
But there was little sign on Tuesday of the promised military deployment on the streets, and the government is under heavy criticism in South Africa over a lethargic police response to the insecurity. 

“The situation was allowed to reach this point precisely because our law enforcement agencies failed to take control early on and do their jobs,” said John Steenhuisen, leader of the main opposition Democratic Alliance.
South Africa’s high joblessness and sharp post-apartheid economic divisions provide a tinderbox for violence, made worse by the pandemic pushing many even further below the poverty line. 

An already slow pace of vaccinations has ground to a halt as medical centres have been forced to shut their doors. Official unemployment was almost 33 per cent in the first three months of this year.
The rand slid by more than 1 per cent on Tuesday to 14.59 to the US dollar as traders bet that the unrest would undermine the country’s economic recovery. The currency, down 3 per cent so far this week, is at its weakest level since early April.
One South African television station broadcast live images of looters running away from a police van as officers looked on. 

“This moment has thrown into stark relief what we already knew: that the level of unemployment, poverty and inequality in our society is unsustainable,” said Ramaphosa. 

As he was speaking late on Monday, South African TV carried a split screen image of looters breaking into a blood bank.

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21 OCT 19 :: The New Economy of Anger

Nose-diving economic opportunity is creating tinder-dry conditions.

The Phenomenon is spreading like wildfire in large part because of the tinder dry conditions underfoot. 

Prolonged stand-offs eviscerate economies, reducing opportunities and accelerate the negative feed- back loop.

Paul Virilio pronounced in his book Speed and Politics, 

“The revolutionary contingent attains its ideal form not in the place of production, but in the street, where for a moment it stops being a cog in the technical machine and itself becomes a motor (machine of attack), in other words, a producer of speed.’’

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.@ethiotelecom reports 18.4% rise in full-year revenue -CEO @Reuters

ADDIS ABABA, July 13 (Reuters) - State-run Ethio Telecom, which has invited private investors to buy a stake in it, reported a 18.4% rise in full year revenue to end-June to 56.5 billion birr ($1.29 billion), CEO Frehiwot Tamiru said on Tuesday.

Ethiopia last month launched a tendering process for the proposed sell-off of a 40% stake in Ethio Telecom to private investors, part of the government's broader plan to open up the Horn of Africa country's telecoms sector.
On Tuesday, Frehiwot told reporters the company recorded a 22% jump in subscribers to 56.2 million.
She also said 6.58 million customers had signed up to use its mobile money service, known as Telebirr, which it launched in May.
The platform allows users to send and receive money, deposit or take out cash at appointed agents, pay bills to merchants and receive cash sent from abroad.
The CEO said the expansion of 4G services outside the capital Addis Ababa was one of the reasons behind the jump in revenue despite it being a challenging year.
"When we started the budget year the internet was shutdown and we lost billions because of this. And the crisis in the northern region [Tigray] was also something we didn't anticipate," Frehiwot said.
The telecoms business in Ethiopia, a country with a population of more than 100 million people, has attracted investors, although some have been put off by the slow pace of economic change and risks linked to ethnic unrest and a conflict in the Tigray region. read more
In May, regulators awarded an operating licence to a consortium led by Kenya's Safaricom (SCOM.NR), Vodafone (VOD.L), and Japan's Sumitomo (8053.T). The group paid $850 million for the licence.

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Kenya walks recovery tightrope before 2022 elections @AfricanBizMag @__TomCollins
Kenyan Economy

As Kenya looks to stage a recovery from the market disruption wrought by Covid-19, East Africa’s largest economy finds itself at an especially challenging moment as presidential elections loom in 2022.
With elections typically a period of government inaction and subdued growth, businesses have only a few months to recover from Covid-19 before they will be thrust into yet another downwards cycle.
To make matters worse, the rebound in well-vaccin­ated nations across the word is limited in African markets, where a third wave of Covid-19 is setting in amid limited vaccinations.
In fact, most African countries do not expect to adequately vaccinate their populations until 2022 at the earliest. 

Rapidly rising cases in neighbouring Uganda forced authorities to plunge citizens back into a strict lockdown in June, and Kenya could well follow suit. 

The pandemic has already taken a toll on key areas of Kenya’s economy including tourism, banking, manufacturing, aviation and hospitality. 

Analysts have also raised concerns about Kenya’s debt profile after the government borrowed $2.34bn from the IMF in April, with an additional $7.3bn in Eurobonds on the books over the next two years.

 Amid the possibility of further lockdowns, some observers believe that the IMF’s prediction of 7.6% growth in 2021 and 5.7% in 2022 paints an overly rosy picture. 

“I’m astonished with the IMF prediction, but frankly the IMF has been significantly off base in a lot of African countries recently,” says Aly-Khan Satchu, CEO of Nairobi-based investment advisory firm Rich Management.
“I’m hard pressed to see how this economy can rebound meaningfully this year. I think we are going to get a very anaemic rebound, probably half of what the IMF is predicting. A lot of people have lost their jobs, it’s been very tough.”
Government takes action
The government unveiled its latest budget in June, with plans to increase spending by 8.8% to $33.9bn to counter Covid-19. 

President Uhuru Kenyatta, who was dealt a blow in June as his plans to expand the executive were rejected by the courts, wants to seal his legacy by making infrastructure investments in highways, ports and railways near the end of his second term.
The ambitious plans have put the fiscal deficit at $8.8bn, equivalent to 7.7% of GDP, which the government plans to fill with aggressive external and domestic borrowing. 

The budget also maintained high taxes across the board, with an increase in fuel prices hitting the transport sector and commuters alike.
Though the government reduced VAT, PAYE and corporate tax rates in 2020 to cushion the economy from Covid-19, these measures were rolled back in January despite the fact that many businesses continue to struggle.
The result of a steady stream of IMF and World Bank loans over the Covid-19 period, and a significant amount collected from the tax base – which has been widened and broadened in recent years – is that Kenya’s government is not short of money. But its spending plans have raised eyebrows.

“Kenya doesn’t have a funding problem,” says George Bodo, CEO at Nairobi-based Callstreet Research and Analytics. “The problem is expenditure.”
Kenya’s government has been criticised for wasting money on vanity projects rather than productive areas of the economy, such as much-needed support for SMEs. 

Ineffective borrowing continues to weigh heavily: the government will spend two-thirds of its domestic budget on debt servicing this year compared to only a third on development projects.
And critics allege that much of the money from international lenders is whittled away by corruption. 

At time of writing, more than 236,000 Kenyans had signed a petition asking the IMF to cancel its $2.34bn loan as previous disbursements have been lost in corruption scandals, they claim.
Satchu says that the international community is keen to support Kenya as much as possible while the rest of the region is in turmoil.
“What the IMF and World Bank have done is given Kenya some breathing space and I think in part that is the geopolitical context for what is happening in Ethiopia and the Horn of Africa,” he says.
Growing the economy
Most analysts doubt that any serious economic policies or spending plans will be implemented between now and the elections next August.
The majority of sectors continue to operate at productivity levels well below pre-pandemic equivalents. 

Manufacturing – which accounts for around 10% of GDP and is made of up companies that produce goods including food, furniture, textiles, plastic goods, cement and flour – contracted by 3.2% in the third quarter of 2020.

“Manufacturers saw a fall in demand for their products and services, faced cashflow constraints, reduced output, and had difficulties in local sourcing or importation of raw materials,” Phyllis Wakiaga, CEO of the Kenya Association of Manufacturers (KAM) tells African Business. 

According to a KAM survey, only 25% of surveyed firms operated at near full capacity in Q1 this year

Nearly 30% operated at half capacity and 16% reported that they operated at lower than a quarter of installed capacity, continuing the trend from last year.
To help the sector grow, Wakiaga suggests the government should provide credit for SMEs, improve the ease of doing business and adopt a “do no harm” principle by creating a supportive regulatory environment.
Although Kenya, which is well known for its free-market credentials, has one of the more favourable regulatory environments in Africa, there are still many ways in which the government can help the private sector.
Seema Dhanani, head of office and coverage director for Kenya at CDC Group, the UK’s development finance institution, says that regulatory stability is key.
“We see constant changes around taxation and consistently changing regulation,” she says.
Critics argue that the government hurriedly implements new taxes when it has a funding shortfall without rigorously investigating the long-term effects of these policies. 

For example, the introduction of a minimum business income tax of 1% on 1 January stunned Kenya’s startup community as companies had to pay taxes even when they were not profitable.
Founders say that this could be extremely damaging for the emergence of long-term high-growth business plans on the Amazon model, which take years to reach profitability and require heavy investments in infrastructure and logistics.
“It’s short-sighted. With this anti-innovation policy in place, the authorities are likely to drive away revenue in the long term where they would otherwise be collecting if they didn’t have this policy in place,” says Daniel Yu, CEO and founder of the e-commerce startup Sokowatch. 

Negative outlook in banking sector

The banking sector is another area of the economy with a negative outlook as Kenyan lenders reported huge losses over the 2020 financial year. 

KCB, Kenya’s top lender by assets, reported a drop in net profit of 22% and Equity Bank, the second largest lender, reported a drop of 12%.
Loan books have deteriorated for most banks, especially those that are heavily exposed to sectors most impacted by Covid-19 including tourism, commerce, trade and hospitality. 

Banks were also impacted by the government directive to waive all fees on transactions.
“It was a cash cow for banks,” says Bodo. “KCB have said that they are now losing close to $2m in revenue a month.”

However, the fact that banks relied so heavily on transaction fees to turn a profit reflects the lack of innovation and sophistication of product-offerings by Kenyan lenders in the marketplace. 

Banks in more developed markets tend to offer zero-rated transaction fees to expose customers to other money-making parts of the business. 

Kenyan banks, on the other hand, have played it safe by maintaining the outdated revenue stream and mostly investing in government bonds.
The lenders remain risk-averse and liquid as they shy away from lending to the private sector, meaning they will be unable to meaningfully contribute to Kenya’s rebound. 

Bodo says that unless there is a risk guarantee from the government, there is unlikely to be much credit available for the private sector from banks in the local market.
Signs of recovery
Despite a generally negative outlook, there are signs that certain sectors are picking up steam.
The agricultural sector has been the backbone and saving grace of Kenya’s otherwise gutted economy throughout the pandemic. 

Thanks to lockdown exemptions implemented by the government, agri-producers and traders were able to continue to do business.
Although flower exports to Europe initially took a big hit, logistical challenges were overcome and demand gradually returned. 

Tea exports from the port of Mombasa actually grew by 21% in 2020 compared to the previous year, providing a valuable source of foreign exchange for the country.
The sector makes up around 34% of GDP, but reduced rainfall from March to May has led to predictions of a below-average harvest this year.

Another sector that looks to be staging a tentative rebound is tourism. 

Although Covid-19 uncertainty weighs on the overall outlook, tourists are beginning to return to Kenya’s famous safari destinations, says Muthuri Kinyamu, co-founder at Turnup.Travel. 

“Definitely it is much better now as vaccination continues and people have the confidence to travel further and to be more committed to holidays,” he says.
“Of course there is still a lot of apprehension regarding other measures like lockdowns but I’m looking at the last weekend and the Maasai Mara was busy again so that is a good sign. People are optimistic and ramping up their marketing efforts.”
Kinyamu expects around 750,000 international arrivals to visit Kenya this year, many of them having deferred their trips from the year before. 

Tour operators have pivoted from offering large group trips to smaller bespoke tours where families are relatively isolated.
Although vaccinations remain a distant reality in Kenya, the limited domestic rollout – only 0.4% of the population are fully vaccinated – may not affect tourists hailing from majority-vaccinated countries. 

But the slow rollout – plus the upheaval of next year’s elections – means that the economic situation facing Kenyatta’s successor is far from certain.

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by Aly Khan Satchu (www.rich.co.ke)
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July 2021

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