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Published on Apr 8, 2016
It's a country with fewer than a million people and very limited
natural resources, yet Djibouti is courted by world powers. That's
because of its strategic location at the entrance to the Red Sea and
south of Suez.
Relatively stable, it has drawn the attention of military planners in
Japan, China, France and the US, who have all set up military bases
there.
Incumbent president Ismail Omar Guelleh has been in power for 17 years
but the opposition accuses him of not doing enough to deal with the
country's high unemployment.
According to the World Bank, 20 percent of the population lives in
poverty. Not everyone has been enthusiastic about the vote, some
opposition parties boycotted it.
Voters in the tiny east African nation of Djibouti cast their ballots
to pick a president.
After claims of repression and unfair constitutional change, the
election is not without controversy.
What will it mean for stability? What are the global implications from
a strategically important part of the world?

Presenter: Sami Zeidan

Guests:

Hamidou Wone - Specialist in conflict management who served as a
diplomat in the Horn of Africa

Aly Khan Satchu - Emerging economy specialist in Nairobi

Thomas-John Guinard - Legal officer in charge of Djibouti at the human
rights organisation, Alkarama

Macro Thoughts

A top adviser to the Chinese government has warned that Beijing risks
a currency blow-up akin to Britain's traumatic ordeal in 1992, if it
continues trying to defend its exchange rate peg amid a deepening
deflation crisis.

 Yu Hongding, a director of the Chinese Academy of Social Sciences,
said China is caught in two concurrent "deflationary spirals" that are
feeding on the other. A major devaluation and a blast of well-targeted
fiscal stimulus will be needed to break out of the trap.

"They must stop intervening on the exchange market. China needs to
devalue by 15pc. They are creating conditions for speculators," he
told the Daily Telegraph, speaking at the Ambrosetti forum of global
policymakers on Lake Como.

Prof Yu, a former rate-setter for the central bank (PBOC) and
currently a member of the national planning committee, said the
government is making a serious mistake in trying to defend the yuan by
burning through foreign exchange reserves,  already down to $3.2
trillion from $4 trillion in mid-2014.

He warned that the slowdown in capital outlows in March may prove
fleeting.   "Reserves will continue to fall until we devalue. Once we
get towards $2 trillion the markets will start to panic. They won't
believe that the government can control it any longer," he said.

Home Thoughts

“you find magic wherever you look. sit back and relax. all you need is
a book” ― Dr. Seuss, The Cat in the Hat

“And this mess is so big
And so deep and so tall,
We cannot pick it up.
There is no way at all!”
― Dr. Seuss, The Cat in the Hat

After shepherding two suicide bombers toward the check-in counters,
the so-called “man in the hat” planted a bomb that failed to detonate
immediately and left the scene, according to prosecutors. Surveillance
cameras spotted him on a 10-kilometer (6.2 mile) stroll toward central
Brussels before the trail went dark near European Union headquarters.

Abrini dumped his light-colored jacket in a garbage bin and later sold
the hat, according to the prosecutor’s statement.

Conclusions

The Absence of any US Individuals denudes the #Panamapapers Bona Fides.

Euro 1.1416
Dollar Index 94.11
Japan Yen 107.73
Swiss Franc 0.9523
Pound 1.4133
Aussie 0.7566
India Rupee 66.345
South Korea Won 1146.23
Brazil Real 3.5898
Egypt Pound 8.8666
South Africa Rand 14.9299

Dollar Yen 1 Year Chart INO 107.80 [105.00 then 95.00]
http://quotes.ino.com/charting/index.html?s=FOREX_USDJPY&v=d12&t=f&a=50&w=1

Euro versus the Dollar 1 Year Chart 1.1416 [set to test 1.1450 again?]
http://quotes.ino.com/charting/index.html?s=FOREX_EURUSD&v=d12&t=f&a=50&w=1

Gold 1 Year Chart INO 1251.25 [At the Pivot]
http://quotes.ino.com/charting/index.html?s=FOREX_XAUUSDO&v=d12&t=f&a=50&w=1

Emerging Markets

Frontier Markets

More than a quarter of a million people have fled in terror as
opposition militias plot their return. Without international
assistance a humanitarian disaster looms

“Blood flows everywhere in Burundi, that’s how things are,” said the
young farmer, rolling up his trouser legs and a shirt sleeve to show
cuts and bruises almost as raw as his anguish

In the foreign policy arena, Deby can claim to have had some success.
He is regarded as an important player in the struggle to defeat the
Nigerian Islamist militant group Boko Haram, the French military in
Mali value him highly, he was welcomed to the White House by US
President Barack Obama, and he is also the chair of the African Union.

However, Sunday's elections in Chad will differ from those at which
Deby triumphed five years ago. This time they will not be boycotted by
the opposition. There are 13 candidates running against Deby, who also
faces protest from the street.

Conclusions

Another Election whose chronicle was foretold.

The twin sister of DRC's leader Joseph Kabila twin sister, the nephew
of South Africa's President Jacob Zuma and business people allegedly
linked to Zimbabwe's President Robert Mugabe are all named in the
Panama Papers. The Mossack Fonseca leak – the biggest data leak ever -
have revealed the names and alleged financial affairs of top officials
from at least 15 different sub-Saharan African countries or people
linked to them have been named.

While the practice of keeping money abroad is not illegal, the
revelations by the International Consortium of Investigative
Journalists' (ICIJ) team of about 400 journalists have made global
headlines. African Union chairwoman Nkosazana Dlamini-Zuma said the
African money kept in foreign banks should be repatriated to the
continent.

AT 2pm in the tiny African state of Djibouti everything stops. As the
sun burns high in the sky people retreat to their homes, save for a
few men lying in the shade of colonial-era walkways, chewing qat
leaves that bring on a hazy high.

Even so, as his popularity with voters withers, his grip over the
party is slipping.

The Constitutional Court verdict was a reminder that even presidents
are supposed to obey the law. The ANC, by sticking with a leader who
appears not to believe this, is making a mockery of the democracy that
it and others fought so hard to establish.

South Africa All Share Bloomberg +1.44% 2016
http://www.bloomberg.com/quote/JALSH:IND

51,424.48 +277.66 +0.54%

Dollar versus Rand 1 Year Chart INO 14.96
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d12&t=f&a=50&w=1

Custodian of the THM The @KingSalman Honors a banquet held by
@AlsisiOfficial, at Abdeen Palace. #SaudiArabia #Egypt


Egypt EGX30 Bloomberg +5.68% 2016
http://www.bloomberg.com/quote/CASE:IND

Buhari to confer with Xi Jinping on support for development of
Nigeria’s infrastructure

“The opportunity now, with the renminbi being a reserve currency, we
are looking obviously at the lowest cost of funds to fund our budget
deficit. Initially we were looking simply at the eurobond but then we
began to explore opportunities in the renminbi market so there is a
possibility of issuing a panda bond,” Kemi Adeosun told the Financial
Times and Reuters in an interview. Panda bonds are
renminbi-denominated debt sold by foreigners into China’s bond
markets.

The priority, Ms Adeosun said, is to borrow “the cheapest possible
money” — a total of 1.8tn naira ($9bn) from international and Nigerian
markets. She said it seemed that a renminbi-denominated bond would be
cheaper than issuing a eurobond. She also said that, given Japan’s
negative interest rates, “there’s the possibility of doing a Samurai
[yen-denominated bond] which is also an option we’ll look at. We’re
simply shopping around for the best deals.”

Nigeria All Share Bloomberg -11.57% 2016
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -4.46% 2016
http://www.bloomberg.com/quote/GGSECI:IND

1,905.93 -2.05 -0.11%

First the bad news. After fifteen years in the global economic growth
fast lane, sub-Saharan Africa is reeling from the effects of falling
commodity prices, depressed Chinese demand, and deteriorating
financial conditions. The IMF has revised growth forecasts down to
3.5% for 2016, from an annual average rate in excess of 5% since 2000.

Now for the good news. Africa’s economic slowdown is a wake-up call
and an opportunity to rethink an economic model that is failing. The
impressive growth record of the past 15 years has roughly doubled
output, but with limited results for poverty reduction, job creation
and productivity. Already extreme inequality is rising in many
countries.

Manufacturing has stagnated.

The challenge for policy-makers is to set a course for recovery that
supports more inclusive growth, while preparing the ground for an
economic transformation.

Meeting that challenge in the midst of an economic downturn will not
be easy. Having ridden the wave of the commodity super-cycle, Africa
has been hit hard by the slump in oil and metal prices. Dependent on
oil for 70% of government revenue, Nigeria has been forced to turn to
the World Bank and the African Development Bank for an emergency loan
to plug an expanding budget deficit. Weak commodity prices are
magnifying already unsustainable fiscal deficits in Ghana and Zambia.

Eurobond markets that two years ago looked like a source of ‘cheap
money’ are delivering their own verdict. The combination of currency
devaluation, shrinking foreign exchange buffers and slower growth has
pushed typical yields on African bonds from 3-4% two years ago to 8-9%
today.

Real as the immediate costs of adjustment are, they should not deflect
attention from the deeper failures. While economic output has doubled
over the past fifteen years, poverty incidence has fallen modestly –
from 57 to 42% – and the number of poor has risen with population
growth.

To make matters worse, the region’s competitive position has
deteriorated relative to emerging markets like Vietnam and Bangladesh.
Adjusted for productivity real wages are higher, especially for
skilled labour. The costs of transport are prohibitive: exporting a
container from sub-Saharan Africa typically costs $2,200 (£1557)
compared with $610 for Vietnam. Africa’s energy grid produces less
electricity than Argentina, forcing firms to install high-cost, low
efficiency diesel generators.

To make matters worse the quality of education is abysmal. In Vietnam,
sustained growth has been underpinned by the development of an
education system that is producing learning outcomes to rival those in
the UK. Tanzania is seeking to achieve universal secondary schooling.
But after five years of schooling, fewer than half of the country’s
children can pass a grade 2 numeracy test – and the case is not
untypical.

The Central Bank of Kenya (CBK) is concerned about the anxiety that
continued in the financial sector at the end of last week. This
follows the placement of Chase Bank Limited under receivership on
April 7, 2016, due to its inability to meet its financial obligations.

CENTRAL BANK OF KENYA INTRODUCES LIQUIDITY SUPPORT FRAMEWORK FOR
COMMERCIAL AND MICROFINANCE BANKS

The Central Bank of Kenya (CBK) is concerned about the anxiety that
continued in the financial sector at the end of last week. This
follows the placement of Chase Bank Limited under receivership on
April 7, 2016, due to its inability to meet its financial obligations.
This followed inaccurate social media reports and the stepping aside
of two of its directors.
Although the CBK is confident about the strength of the banking
sector, we wish to reinforce our support to the sector.

Consequently, from tomorrow Monday, April 11, 2016, we will avail a
facility to any commercial or microfinance bank that comes under
liquidity pressures arising from no fault of its own. We will avail
this facility for as long as is necessary to return stability and
confidence to the Kenyan financial sector.

We have confidence in the rigor and strength of our banking sector and
will continue to monitor and oversee full compliance to our laws and
regulations. As has also been indicated, firm action will be taken
against those who have abused their fiduciary positions of management
of our financial institutions.

CENTRAL BANK OF KENYA
April 10, 2016

Kenya’s central bank offered to extend emergency support on Sunday to
any institution that faces liquidity problems through no fault of its
own amid rising depositor anxiety about the health of the financial
services sector in east Africa’s largest economy.

The offer comes days after the Central Bank of Kenya placed the
medium-sized Chase Bank into receivership after a run on its reserves
following the removal of two senior executives and widespread social
media rumours about the state of the lender.

Chase is the third bank to be placed into receivership since Patrick
Njoroge became central bank governor last June and introduced a much
tighter supervisory regime. The police issued arrest warrants on
Friday for two Chase executives and six from a fourth bank, the
National Bank of Kenya, further raising concern.

Mr Njoroge told a hastily called press conference on Sunday evening
that, while he was confident about banking sector stability, he
recognised the “fear, anxiety out there”.

“From Monday, we will avail a facility to any bank or microfinance
institution that comes under liquidity pressures for no fault of their
own,” he said. “We will avail this facility for as long as is
necessary to return stability to the Kenyan financial sector.

“I am sure depositors, once they know, that this support can be
provided to their institutions, they will be calm, and calm will be
restored.”

He said no upper limit would apply to the facility.

Over the past few months a flight to quality has been noticeable as
depositors move their funds away from the smaller of Kenya’s 42 banks.
The largest seven institutions control some 80 per cent of the market.

On Friday, Mr Njoroge called on banks to consider merging or taking on
strategic investors. He warned that some institutions “might feel some
heat” from his tightening regulatory regime.

The governor, who has taken a much tougher approach to banking
supervision than his predecessors, issued a thinly veiled warning that
banks should consider 2016 as a “transitional year”.

“The idea is that banks will strengthen their business models to be
more resilient and so they will be more stable,” he told a press
conference. “No one is an island and so some of the banks might feel
some heat from this [tighter supervision].

“This will inevitably require some consolidation. That means some
banks need to look for strategic investors.”

Habil Olaka, chief executive of the Kenyan Bankers Association, said
the immediate “pressure is starting to subside” but agreed that
“things are becoming much tougher. That is apparent”.

Mr Njoroge said the circumstances at Chase, National Bank and the two
other banks placed in receivership — Dubai Bank of Kenya and Imperial
Bank — were all “isolated”.

But analysts believe Kenya’s banks will have little choice but to heed
the governor’s advice as the effects of his stricter supervisory
regime are felt.

Adesoji Solanke, of Renaissance Capital, said the sector was “very lopsided”.

“Of course they need some consolidation, there are just too many
banks,” he said. “There’s a lot of cleaning up going on and I think
there will be more, but it should result in a stronger banking sector
eventually.”

Aly-Khan Satchu, a Nairobi-based independent analyst, said he thought
Mr Njoroge and Mr Rotich were trying to “make consolidation an orderly
process”. However, he warned that they might not be able to control
the situation should depositors panic if more banks became mired in
improper conduct.

“Trying to hold back market forces is like standing in the way of a
freight train,” he said, adding that up to 10 banks were at risk of
being taken over in the short-to-medium term.

Bob Collymore, chief executive of Safaricom, Kenya’s dominant telecoms
company and a vocal proponent of fighting private sector corruption,
welcomed the authorities’ moves against alleged rogue bankers.

“It’s about bloody time,” he said. “We have so much opacity in this
economy that the poor guy who is trying to run a small business hasn’t
had a hope in hell’s chance.”

On Thursday [the decision was made at 4 am in the morning], the
Central Bank placed Chase Bank into receivership. Chase Bank on
Wednesday published results in the Standard newspaper showing that its
earnings dropped from a profit of Sh2.3 billion in 2014 to a loss of
Sh742 million in 2015. Loans to employees and directors in 2016
amounted to 13.6 billion shillings versus the 3.24 billion shillings
reported the previous time. That 13.6b figure was about 50% more than
the core capital of the Bank. Chase Bank's non performing loans jumped
from Sh3 billion in 2014 to Sh11 billion in 2015. Evidently, it is
impossible to get a 360 degree perspective because the situation
remains really fluid. Deloitte Kenya qualified the Accounts, this
qualification was miniaturised in the Standard Newspaper Earnings
Restatement and Release. A Qualification of the Accounts is no small
thing and the act of miniaturising that Qualification is hardly
helpful either. The Chairman Zafarullah Khan and his side-kick Duncan
Kabui are wanted [as are the 5 National Bank Officials who also
recently were sent on leave].

Chase Bank is the third Bank the Central Bank of Kenya has taken over
since Patrick Njoroge became governor last July. A fourth bank
National Bank has sent its chief executive and five senior managers on
leave while its accounts are investigated. The First overarching Point
to note is that we have now entered a new more ''rules-based'' system
of regulation. What is also clear is that we were previously in a more
permissive environment. Tier 3 Banks are finding themselves at the
Bleeding Edge of this move to a more ''rules-based'' System. Years of
resisting increased Capital requirements, has meant that these Tier 3
Banks are pirouetting their businesses on ''wafer-thin'' capital.
Recent Events [Dubai Bank, Imperial Bank, National Bank and Chase
Bank] now means Investors and Depositors are placing considerably less
credence on the accounts as presented. Then in a ''Double-Whammy'',
Depositors have embarked on a Deposit Flight to Quality further
undercutting them. Without Shareholders now stumping up bucketloads of
Capital, these Banks are in effect now ''Zombie'' Banks. The Process
of Consolidation is now market-led. I appreciate the Authorities are
keen to keep this orderly and not allow it to turn disorderly. The
important Point for the Authorities is not to provide a blanket
''Put'' Option and to erect a Firewall in the right place. The Central
Bank Governor has a fiendishly difficult Brief.

Social Media is not responsible for these Banks being placed into
receivership. When You filter out the Noise, Social Media has proven a
pre-eminent Signal and Early Warning System. In fact, I would argue
that recent events confirm the need for real-time surveillance. I
recall many years ago the totemic Hans Joerg Ruedloff [who was then
Chairman of Credit Suisse First Boston] telling me ''CSFB does not
takes [credit] losses'' meaning you get caught on the wrong side of a
Chase Bank type event and You're fired. I would have thought recent
events make a Prima Facie Case for Real Time Surveillance both at the
level of the Regulator and at the level of various Credit Committees.
The Cutting Edge of the Financial Markets has already moved in this
direction. Smart Money flew the day after Imperial Bank, I am afraid
to say.

There was an interesting story in the Sunday Nation, implying that the
Events as played out were a part of an elaborate Bear Raid by
International Investors, who were looking to upscale their
shareholding in Chase Bank. Let me take you back to 2008, when Lehman
crashed and Bob Diamond [then CEO of Barclays PLC] paid just about any
price [to the State of Qatar and this arrangement became the subject
of some controversy] to keep Barclays out of the clutches of a State
Rescue. The Point I am making is that the Game is lost the moment you
are placed in receivership. Thats what Bob Diamond understood.

Kenya has 42 banks or one Bank per million. This is sub-optimal. The
more optimal Outcome is Fewer but bigger Banks. It is clear now that
market Forces have the bit between their Teeth and that we are now
embarked on a market-led consolidation process.

Across the Economy, we are witnessing a Flight to Quality. The Stock
Market is placing a Premium on Companies they feel are properly
governed [EABL, Safaricom, KCB and so forth], where they know they
will not be caught out by an announcement that overnight the entire
Capital and more has been lent out to Insiders. The Market is now
placing an enormous discount on those Companies where they feel
Governance is challenged. This Trend has a lot further to run.

Nairobi All Share Bloomberg +0.55% 2016
http://www.BLOOMBERG.COM/quote/NSEASI:IND

146.50 -0.94 -0.64%

Nairobi ^NSE20 Bloomberg -1.03% 2016 [back below 4,000.00]
http://j.mp/ajuMHJ

3,999.33 -54.96 -1.36%

Kenya to receive USD 600m loan from China
Kenya is in the process of finalizing an agreement with China for a
USD 600m loan to be channeled towards bridging the budget deficit for
the current fiscal year, which is anticipated to decline to KES
522.3bn from KES 569.2bn according to the draft budget policy
statement released by the National Treasury in February. The National
Treasury is targeting a budget deficit of 6.9% of GDP in the 2016/17
fiscal year compared to a revised 8.1% in the current fiscal year. The
National Treasury has in the recent past announced plans to reduce
expenditure by about 1% alongside reduction of net domestic borrowing
for the 2015/2016 fiscal year by about 25%.

The Central Bank held a Press Conference on Sunday Evening where the
Governor Patrick Njoroge announced
''Consequently, from tomorrow Monday, April 11, 2016, we will avail a
facility to any commercial or microfinance bank that comes under
liquidity pressures arising from no fault of its own. We will avail
this facility for as long as is necessary to return stability and
confidence to the Kenyan financial sector.''
The Proviso ''from no fault of its own'' is an important one.
On Friday, Mr Njoroge called on banks to consider merging or taking on
strategic investors. He warned that some institutions “might feel some
heat” from his tightening regulatory regime. [Financial Times]
The governor, who has taken a much tougher approach to banking
supervision than his predecessors, issued a thinly veiled warning that
banks should consider 2016 as a “transitional year”.
“This will inevitably require some consolidation. That means some
banks need to look for strategic investors.”
Habil Olaka, chief executive of the Kenyan Bankers Association, said
the immediate “pressure is starting to subside” but agreed that
“things are becoming much tougher. That is apparent”.
Aly-Khan Satchu, said he thought Mr Njoroge and Mr Rotich were trying
to “make consolidation an orderly process”.
In my opinion, we have now embarked on a Process of consolidation in
the Banking sector and what we can predict is that we are headed to a
place with less than 42 Banks.
The central bank offered banks Sh10 billion ($99 million) in 28-days
reverse repos, moving away from its usual seven-day reverse repos.
The Kenya Shilling struck an 8 month High against the Dollar and was
last trading at 101.09.
The Nairobi All Share closed 0.83 points lower at 145.67
The NSE20 retreated 40.77 points to close at 3958.57.
Equity Turnover clocked 328.119m

Kakuzi traded 96,600 shares [0.49% of its shares] worth 30.429m all at
315.00 -4.26%. Kakuzi reported a +229.498% Surge in FY15 EPS and
confirmed in that Earnings Release that  ''Avocado was dominant in
returns but Tea and forestry made useful contribution to profits'

Safaricom eased -0.3% to close at 16.70 and traded 1.693m shares.

Kenya Airways improved +1.14% to close at 4.45 ahead of the CEO Mbuvi
Ngunze holding an Analyst Briefing tomorrow.

Nation Media ticked +1.72% firmer to close at 177.00 on light trading.

Business Daily carried a report this morning that said ''The Joshua
Oigara-led KCB was Sunday night said to be in pole position to buy the
troubled lender whose most valuable asset is its control of the small
and medium-sized enterprises (SMEs) market where growth has been
strong and returns big'' And that The list of suitors included  Equity
Bank, Commercial Bank of Africa, I & M Bank and investment firm
Centum, which is said to be keen on merging Chase Bank operations with
its SME-focused associate Sidian Bank (formerly K-Rep).

Kenya Commercial Bank closed unchanged at 42.00 and was trading at
42.50 +1.19% at the Finish Line. KCB traded 3.488m shares worth
147.348m. The current Environment [Flight to Quality and also a
Pipe-line of M&A Opportunities] is surely one that favours KCB and I
would venture Standard Chartered. KCB sits 1.17% beneath a 2016
Closing High.
Standard Chartered closed at 249.00 +0.4% and remains an eye-popping
+27.69% in 2016.
Equity closed unchanged at 40.25 and traded 1.096m shares.

National Bank rebounded 5% to close at 10.50 and traded 98,200 shares.
The Treasury spoke to a possible 3 way merger between National Bank,
Consolidated Bank and Development Bank and this might have encourage
Bottom-Fishers. NBK remains -21.93% in 2016.

Pan Africa Insurance rebounded +7.38% to close at 40.00 and traded
1,400 shares but remains -33.33% in 2016.