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Macro Thoughts

Home Thoughts

I wake up around 5 and I could hear one of our Dogs barking at the
Gate and it was Sahara, without her collar and I surmise she had
escaped and come back home. We were all so happy. We are now waiting
on Bruno.

Bruno arrived in the course of the Morning.

“When a person is lucky enough to live inside a story, to live inside
an imaginary world, the pains of this world disappear. For as long as
the story goes on, reality no longer exists.” ― Paul Auster

“All men contain several men inside them, and most of us bounce from
one self to another without ever knowing who we are.” ― Paul Auster

“You can't put your feet on the ground until you've touched the sky.”
― Paul Auster

Rousseff, a one-time guerrilla fighter, now must step down and stand
trial in the Senate, a process that could wrap up by September,
according to the head of Brazil’s largest party, the PMDB. She will
maintain some presidential privileges such as an official residence, a
salary, a security detail and personal staff. Vice President Michel
Temer, 75, will take over as interim president. Many expect the switch
to be permanent.

Conclusions

This was like opportunistic hybrid warfare. I am of the view that
Intelligence discovered the Petrobras scandal, weaponised it and
voila.

The kingdom must end its deep dependence on oil revenue and build a
dynamic 21st century economy

This is a moment of high anxiety in Saudi Arabia. Oil prices are half
the level the Saudi government needs in order to balance its books,
and it is burning through cash reserves. Global oversupply ensures no
rebound for the foreseeable future. Rival Iran is on the rise.
Traditional Saudi allies, including the U.S., are keeping their
distance. Finally, the kingdom stands on the verge of a generational
change in leadership, and there’s a risk of a succession fight when
King Salman dies. There is nothing the Saudis need more than
comprehensive economic reform. The kingdom must end its deep
dependence on oil revenue and build a dynamic 21st century economy.
The current path can’t be sustained much longer.

That’s why the kingdom has launched Vision 2030. Led by the king’s
31-year-old son Deputy Crown Prince Mohammed bin Salman, the project
aims to lower the unemployment rate, bring more women into the
workforce and more than triple the share of nonoil exports. This is
the plan the Saudis need, acknowledging the kingdom’s true weaknesses
and challenges ahead. It deserves the support of Saudis and outsiders
alike. But it probably won’t work.

Euro 1.1343
Dollar Index 94.30
Japan Yen 108.61
Swiss Franc 0.9731
Pound 1.4406
Aussie 0.7286
India Rupee 66.745
South Korea Won 1173.01
Brazil Real 3.4678
Egypt Pound 8.8829
South Africa Rand 15.1076

Gold 6 month INO 1271.03 [consolidating ahead of a Leap over 1,300.00]
http://quotes.ino.com/charting/index.html?s=FOREX_XAUUSDO&t=c&a=50&w=1&v=d6

Crude Oil 3 Month Chart INO 46.31
http://quotes.ino.com/charting/index.html?s=NYMEX_CL.M16.E&v=d3&t=l&a=50&w=1

Frontier Markets

AT THE Palais de Justice in Lubumbashi, the Democratic Republic of
Congo’s second biggest city, an impressive piece of political theatre
is about to unfold. Hundreds of cops in navy-blue uniforms form a
cordon, clutching riot shields and smoke grenades. They are waiting
for the arrival of Moïse Katumbi Chapwe, a former governor of Katanga,
the region of which Lubumbashi is the capital, whom the government has
accused of hiring mercenaries and plotting a coup.

When Mr Katumbi arrives, he does so in a black minivan surrounded by a
huge crowd of people who fill the square, singing and waving signs
that read “Je Suis Moïse”. Dressed all in white, with a Congolese flag
around his neck, he clambers out and pushes through the crowd, ascends
the steps and goes inside. The moment the doors of the Belgian-built
1920s Art Deco building close, the cops rush the crowd, firing tear
gas and waving tasers. In less than a minute, the square is devoid of
anyone not wearing a blue uniform.

Mr Katumbi may be the biggest threat to Congo’s president, Joseph Kabila.

Under the constitution, adopted in 2006 at the end of a war that
killed anywhere between half a million and 5m people (nobody is sure),
Mr Kabila should stand down at the end of his second term in December.
But the former guerrilla, who took over as president when his father
was murdered in 2001, shows little sign of planning to do so. As a
result Congo, a country of perhaps 90m people four times the size of
France, which outside its fragile eastern regions has been relatively
stable for the past decade, may be plunged back into chaos.

More than anyone else, Mr Katumbi has the chance to build a coalition
able to force Mr Kabila to step down. In Katanga, where he was
born—the son of a Greek Jew and his Congolese wife—he is enormously
popular. Having made a fortune in servicing mining companies, in 1997
he bought TP Mazembe, Lubumbashi’s football team, and turned it into
Africa’s most successful. Katanga, by far Congo’s wealthiest region,
is also its most functional. Some of this is thanks to Mr Katumbi’s
work as governor, at a time when international mining companies moved
back to Katanga having all but abandoned it.

The president, by contrast, is deeply unpopular in most of the
country. He won elections in 2006 and 2011, but against a divided
opposition, and amid widespread irregularities. In both cases, he
relied heavily on support from Katanga, and in turn on Mr Katumbi, who
was one of his closest allies in government.

That support is now almost all gone. “We do not want another Mobutu,”
says a smartly dressed man who gives his name as Constantine, outside
a pharmacy in Lubumbashi (Mobutu was the dictator of the then Zaire
from 1965 to 1997). “I was not a supporter of Moïse Katumbi, but today
I am,” he says.

At the end of 2014 he sought to change the constitution. Some 40
protesters were shot by the police on the streets of Kinshasa. But the
gambit failed.

Since then, he has followed a strategy of glissement, or slippage. He
split Congo’s 11 regions into 26, in the process ejecting many of his
opponents from their positions. He has starved the election commission
of funds and has claimed an election is impossible to organise. That,
the Supreme Court has just ruled, would allow him to stay on past
December. Most recently, he has started a “national dialogue” to try
to convince opposition leaders to support a way for him to stay in
power.

But he has also embarked on a policy of repression. Whereas soldiers
fighting rebels in the east do so with ancient weapons, the police in
opposition strongholds such as Lubumbashi are smartly equipped with
brand new equipment, such as the tasers. Protests have been put down
by force. Hundreds of people—opposition politicians, activists and
journalists—have been arrested across the country.

The government is running through its reserves fast and, being unable
to borrow, is printing money.

What happens next is anyone’s guess; the government is plainly nervous
about the local reaction if it tries to cart Mr Katumbi off to
Kinshasa for trial. A day before he was taken to court, Mr Katumbi
explained his strategy at the tennis courts behind his house in
Lubumbashi, a mansion festooned with football memorabilia. “He can’t
bribe all of the population and he can’t kill all of the population.”
Mr Katumbi proposes to lead demonstrations against the government
until it gives up—and if he is arrested, or worse, killed, then to
become a martyr. “My fight is a pitiful fight. I have no gun. But if I
die, it will be for a cause,” he says, somewhat grandiloquently for a
man dressed in whites and clutching a racquet. He thinks that Mr
Kabila should step down gracefully.

Yet others are fearful of nastier consequences. Not everyone in Congo
will embrace a president from the south, like Mr Katumbi. In the east,
in particular, as many as 70 armed groups still run rackets and fight
localised wars with the government and each other. Many are hostile to
the entire Congolese state, not just to Mr Kabila. Even if he does not
step down, Mr Kabila may struggle to stay in control of much of the
country. And Congo’s history shows that when the president struggles,
bloodshed quickly follows.

Angola, whose leaders squandered billions of dollars during the go-go
years of sky-high oil prices, is the latest to take the IMF shilling.
Ghana signed an agreement with the fund last year after successive
governments went on election-driven spending sprees. Zambia, its
economy crippled by low copper prices, is negotiating a similar deal.

Zimbabwe is a slightly different case. After 15 years of isolation,
Robert Mugabe’s administration wants to mend ties with the west by
settling $1.8bn in arrears to the IMF, World Bank and African
Development Bank. Beijing proved less eager to bankroll Mr Mugabe than
he would have liked. If Harare settles its arrears, it will be
eligible for new lending, but the IMF’s country chief warned there
would be no free lunch. “Economic conditions are dramatic and economic
reforms need to take place now,” he said.

It is all so 1980s. Back then, as a condition of emergency lending,
the fund demanded a series of cookie-cutter free-market “reforms”
known collectively as the Washington Consensus. Its structural
adjustment programmes, or SAPs in the dreaded jargon, imposed deep
cuts on public services and insisted on privatisation as well as trade
and financial liberalisation. Many blamed such policies for destroying
already threadbare state provision of schools and hospitals, police
and security. Fela Kuti, the late, great and never mealy-mouthed
Nigerian musician, sang that SAP spelt “Suck African People” (“Suck
dem dry”). His version of what IMF stood for is not printable.

Now more difficult times have returned. Commodity prices have slumped.
Capital markets are in less generous mood. Drought has hit several
countries in southern Africa. In the good times, some African
governments returned to bad old ways. Mozambique recently revealed
that it had racked up $1.4bn in previously undisclosed borrowing.
Money raised for a tuna fleet had been lavished on the navy.

Mozambique is extreme, but not alone. According to the McKinsey Global
Institute, the continent (including north Africa) ran a weighted
average budget deficit of 6.9 per cent of gross domestic product in
2015, more than double the 3.3 per cent of 2010. In that year, Africa
was running a 0.4 per cent current account surplus. By 2015 it had
slipped to a 6.7 per cent deficit.

It is at such times that governments turn to the IMF. Fortunately,
things may not be so desperate this time. Imperfect though many
African governments remain, by and large their economies are better
managed. With a bit of luck, most will avoid outright default.
“There’s been a significant improvement in the macroeconomic policy
landscape in most cases,” says Abebe Aemro Selassie, deputy director
of the IMF’s African department.

Outside Nigeria, where President Muhammadu Buhari retains a visceral
hatred for the fund, there is also less stigma about turning to the
IMF. That is partly because it is no longer so hell-bent on pushing
neoliberal medicine down recipients’ throats and is more careful to
protect health, education and poverty alleviation programmes.

Razia Khan, economist for Africa at Standard Chartered Bank, says both
donor and recipients have moved cautiously towards the same page. When
someone shouts “Call for the IMF” it is not a sign that things are
going well. But it is no longer a death knell

Conclusions

Investors targeting Africa are looking east, as depressed commodity
prices and slowing growth in China put the brakes on a two-decade
growth surge in the world’s poorest continent.

Kenya, Tanzania and host Rwanda are the countries in vogue at the
World Economic Forum’s annual confab of Africa’s business and
political leaders that began Wednesday in Kigali. All three economies
should expand at least 6 percent this year, double the sub-Saharan
Africa average, according to the International Monetary Fund. Growth
in Ethiopia, the investors’ darling at last year’s WEF Africa summit,
is set to slow to 4.5 percent this year, from 10.2 percent in 2015, as
a drought curbs farm output.

“Looking at East Africa, anything below 6 percent growth is considered
a really poor performance,” Martyn Davies, the managing director of
emerging markets and Africa at Frontier Advisory Deloitte, said in an
interview at the WEF summit. “Low oil prices are a tailwind for growth
in this part of the world.”

Besides benefiting from lower energy costs, Kenya, Tanzania and Rwanda
are reaping the spoils of developing their tourism, agriculture,
services and manufacturing industries and improving their transport
links and energy supply. East Africa has also been leading economic
integration in Africa, helping promote regional trade.

“We have a much more diversified economy,” Kenyan President Uhuru
Kenyatta told the conference. “Africa needs to move away from being
commodity-dependent.”

Nigeria, which relied on crude for more than 90 percent of export
earnings in 2014, is a case in point. Its growth rate is expected to
slow to 2.3 percent this year, from a peak of 10 percent in 2009,
according to the IMF. Growth has also tanked in commodity-dependent
Angola, Ghana and Zambia.

Africa needs to adjust to lower commodity prices, maintain spending on
education and infrastructure, maintain flexible exchange-rate regimes
and foster domestic demand in the face of slowing global growth,
according to David Lipton, the IMF’s first managing director.

“Each country has to figure out how to adjust its stride,” Lipton told
the summit. “They can’t count on China the way they used to.”

The factors that underpinned Africa’s growth surge, including a young
and growing population, greater urbanization, improved governance and
greater macroeconomic stability, remain in place in many countries,
said Razia Khan, head of Africa economic research at Standard
Chartered Plc.

“Yes, it is a testing time,” she said in an interview in Kigali. “We
think it is still a matter of Africa rising. It was never going to be
a linear move up. I don’t think anyone should be thinking the outlook
is dramatically different to what we have seen in the past.”

Africa attracted $71.3 billion of foreign direct investment last year,
down from $88.5 billion the year before, accounting firm EY said in
its 2016 Africa Attractiveness report, released on Wednesday.

Despite the fact that South Africa’s economy is set to grow less than
1 percent this year, EY ranked it Africa’s most attractive investment
destination, partly because it is so much more developed than its
continental peers. Kenya was ranked fourth, after Morocco and Egypt,
while Rwanda was ninth and Tanzania 12th.

“From an investment perspective, the next few years may be
challenging,” EY said. “However, most African economies are in a
fundamentally better place today than they were 15 to 20 years ago.
Overall growth is likely to remain robust relative to most other
regions over the next decade.”

The investor bias toward East Africa is likely to continue while
commodity prices remain weak, according to Natznet Tesfay, head IHS
Africa Country Risk.

“It’s the only area that we get a lot of questions about,” she said in
an interview in Kigali. “It’s seen as being a safe haven in this
post-commodity super-cycle reality.”

Conclusions

For a while, I have been saying that Kenya and East Africa looks like
a bright star in what increasingly looks like a darkening sub-Saharan
sky. The shilling has been ‘Teflon’ since October and its performance
is a signal in the noise. With the exception of South Sudan [its going
to take decades for this leadership to get it] and Burundi [where the
African Union blinked], this region is shining bright. Kenya is
expected to post a six per cent GDP handle in 2016, Tanzania a seven
per cent, Uganda around five per cent, Ethiopia [even with a drought
that has scorched farmlands] probably eight per cent and the DR Congo
[where the more intrepid Kenyan corporates are stealing a March]
somewhere around nine per cent.

Meanwhile Nigeria, the biggest economy in SSA, will surely contract in
2016 and not least be- cause its president is determined not to
devalue the naira. The curve of history [from Soros skinning the Bank
of England in 1992, to the Mexican peso crisis in 1994, to the Thai
baht crisis in 1998 and many more too numerous to mention] confirm
that maintaining an artificial foreign exchange rate is a fool’s
errand and eventually carries the risk that the breakdown spirals out
of control and can become seriously disorderly. The official naira
rate is just below 200 to the dollar but no one is holding any store
by that price and that’s why absolutely no one is putting any more
money in Nigeria because they all know when the haircut is finally
imposed it’s going to be a big one. I find it just extraordinary that
such a brilliant president would risk it all on a bet on a single
number in a game of roulette. Those are the odds. South Africa which
is the second biggest economy in SSA will also contract or be at zero
per cent GDP this year. Here again, the David Van Rooyen interlude at
the Finance ministry was a step too far.

The venerable Financial Times headlined an article last week “Kenya a
rare bright spot in EM gloom”. “Looking for a winner from the oil
price slump? Kenya could well be a prime candidate, in the emerging
world at least’’ I have already mentioned the trend change in the
perennial current account deficit. “Between 2011 and 2015, Kenya’s
annual fossil fuel import bill was running at about Sh350bn ($3.4bn at
the current exchange rate). With oil at $30 a barrel, this could drop
to Sh115bn in 2016, according to calculations by Robertson, based on
central bank figures.

“The reason why Jacob Zuma will not go is because the ANC doesn’t want
to open a hand for him to go,” Machel said at a panel at the World
Economic Forum on Africa in Kigali, Rwanda on Thursday.
http://www.bloomberg.com/news/articles/2016-05-12/mandela-s-former-wife-says-zuma-will-only-go-if-anc-forces-him

 “For Zuma, if the ANC doesn’t take away his position he will not go.”

If people like ANC Secretary-General Gwede Mantashe, State Security
Minister David Mahlobo and Deputy Defence Minister Kebby Maphatsoe are
to be believed, South Africa’s misfortune is being plotted in faraway
capitals and being executed here by citizens who are highly paid
agents. It seems to be a preferable story to tell rather than to
accept that South Africa is caught in a vortex of really bad political
leadership that is continuously triggering social and economic
turbulence. But why tell the truth and let Hollywood have all the fun
producing make-believe political thrillers?

51,458.48 -671.86 -1.29%

Dollar versus Rand 6 Month Chart INO 15.0827
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt EGX30 Bloomberg +7.34% 2016
http://www.bloomberg.com/quote/CASE:IND

In my mtg w/ @MBuhari, focused on shared threat of terrorism &
impt efforts Nigeria expending to fight corruption. John Kerry


PHOTOS: Long queues in Abuja as new petrol price takes effect


Nigeria All Share Bloomberg -9.70% 2016
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg -10.29% 2016
http://www.bloomberg.com/quote/GGSECI:IND

As Mozambique's mountain of dubious debts tops US$2 billion, there are
growing calls for a forensic audit and an international police probe
into the officials and entities involved in this massive fraud. The
deals and loans arranged under President Armando Guebuza, and largely
kept secret under his successor Filipe Nyusi, mean that Mozambicans
now face the prospect of penury under the yoke of debt repayments on
an epic scale. The role of the banks involved in the deals, whose
terms were far above market rates, is also attracting regulatory
interest and criticism.

It is clear that the secret lending was undertaken by the country's
state security and intelligence services, and Africa Confidential here
reveals yet more detail of the astonishing malfeasance at the heart of
the state and who was responsible. The International Monetary Fund
leads an international financial community aghast at the enormity of
the deceptions of leaders of the governing Frente de Libertação de
Moçambique (Frelimo) and is still pondering its response. It is sure
to be severe and donors are already suspending budget support funds
and grants.

Debt-to-GDP levels will soon hit 100% and the metical stands at 55 to
the US dollar, and is still heading south. Foreign exchange reserves
are at a critical $1.8 bn., we can reveal, after $1.4 bn. was
haemorrhaged in the last year-and-a-half's effort to maintain the
value of the currency and pay off bad debts.

Sources close to Rosário Fernandes, ex-head of the revenue authority,
the Autoridade Tributária de Moçambique, have told us of systematic
diversions of taxes straight into the pockets of the Frelimo elite,
especially in the later years of President Guebuza's term of office,
when he exercised enormous patronage. Massively inflated contracts
were commonplace. The latest to emerge is the extravagant, nearly
complete, Bank of Mozambique building in Maputo, which boasts a
helicopter landing pad on the roof. Originally estimated to cost $90
mn., the final cost is reckoned at at least $300 mn., with kickbacks
and 'commissions' accounting for the cost inflation, say Frelimo
sources.

Guebuza engaged in an ultimately doomed attempt to extend his term of
office, which ended in October 2014, and this partly explains the
extraordinary scale of his liberality towards loyalists, sources
formerly close to him told us (AC Vol 53 No 18, The Putin option). The
schemes became increasingly brazen, and the creation in 2013 and 2014
of three companies – Empresa Moçambicana de Atum (Ematum), Proindicus
and Mozambique Asset Management (MAM) – was the culmination of this
programme. The companies, which received the totality of the $2 bn.
now owed by the state, were mainly in the field of maritime security,
even though it was the intelligence and security services that
provided the management. They bypassed parliament, illegally, and
defence procurement, effectively privatising, as one commentator put
it, national security while lining the pockets of the elite into the
bargain. Yet the ill-equipped companies could not cope and quickly
collapsed. Ematum, which originally claimed to be focused on tuna
fishing, is no longer operating its few licensed vessels because it
cannot pay salaries (AC Vol 56 No 24, Nyusi's nightmare).

The three companies also own VIPAS (VIP and asset management), which
was created in February this year to supply protection services to
embassies. It's unclear what the outlook is for the fledgling VIPAS,
but it is hard to imagine Maputo's diplomats being keen.

The only public face common to all the companies is their chief
executive, António Carlos do Rosário, a previously little-known
director of Serviço de Informação e Segurança do Estado (SISE,
Mozambique's intelligence service). Behind him stand senior Frelimo
politicians, and defence and security personnel. Do Rosário is the
shop window, but he answers to the current SISE Director, Grégorio
Leão José, who was appointed by Guebuza in 2005, our sources say.
Leão's wife, Ângela Diniz Buque Leão, is in business with Do Rosário,
a trusted Guebuza loyalist.

Many have often wondered how President Nyusi, who was Defence Minister
at the time, could have remained uninvolved – which was the public
impression as the Ematum scandal broke. However, the CEO of the
company supplying the patrol boats, Iskandar Safa, commented that the
parent company of his shipyard, Constructions mécaniques de Normandie
(CMN), had struck other deals with Mozambique. One of them was with
Proindicus, one of the previously secret massive debt-holders, which
is half-owned by the Defence Ministry-run company Monte Binga.
Commentators have remarked it would have been impossible for Nyusi not
to have been aware of deals of such magnitude. This could well explain
his reluctance to move against his predecessor over the Ematum bonds
and similar opaque debts (AC Vol 57 No 6, Nyusi's resolve in doubt).

 Some Frelimo members who are opposed to Guebuza nonetheless have
little sympathy for Nyusi. Veteran senior member Sérgio Castel Branco
da Silva Vieira said, 'I, and my children and grandchildren, are not
going to pay the debt of this robbery'. He added that Nyusi
'humiliated himself' during his recent visits to Germany and Brussels,
where he tried to cling to donor support.

German Chancellor Angela Merkel asked Nyusi when he met her in Berlin
on 19 April, 'Where is the money?' and also, 'Are you in charge?',
according to a source in Nyusi's delegation – which also included
elusive SISE head Leão. Germany supplied radar equipment for the
maritime security programme, as did France and Switzerland.

Merkel's questions go to the heart of the scandal, as the heaviness of
the external debt is obscuring the question of where the cash ended
up. There is widespread fear that, with its insistence on unity at all
costs and its long record running a one-party state, Frelimo is
constitutionally incapable of pursuing the generals, spies, and party
cadres who won the equivalent of lottery jackpots. The wealth of many
of them – in the form of lavish entertainments, luxury cars, and
stunning homes – is on conspicuous display in Mozambique's cities. For
now, Nyusi is taking the blame. Prime Minister Carlos Agostinho do
Rosário even spoke recently of the Nyusi administration as a
'transition government', in tacit acknowledgement of the long shadow
Guebuza casts.

In the absence of action by the government – although the
Attorney-General's office has announced an investigation into the
illegalities – the United States may take an interest, since it has de
facto jurisdiction given the US dollar denomination of the debt. It is
Mozambique's largest bilateral donor, at $400 mn. of aid per year,
which is now under what we hear will be 'very tough' review. The whiff
of a multi-billion dollar arms deal involving Russia could easily
pique American interest. Given the secretiveness to date, it would
hardly be surprising if more diversions, and more secret loans, turned
up.

Following talks with IMF in Washington, ending on 21 April, the Prime
Minister confirmed the additional loans: $622 mn. to Proindicus (which
was topped up to $900 mn., although the extra line of credit was not
activated) and $535 mn. to Mozambique Asset Management (MAM – see
table).

Of Proindicus' $622 mn., Africa Confidential has learned from senior
banking sources that only $311 mn. is shown to have gone to the
company. The other half may have been diverted to other projects and
possibly into private hands. The same suspicions apply to MAM, which
has not explained its procurement plans. The company is meant to
operate port facilities for Proindicus, including in Pemba – and to
compensate General Alberto Chipande for being cut out of the original
Pemba deal, we understand (AC Vol 55 No 16, Contracts galore in the
new order).

Finally, Mozambique confessed to the IFIs that it was holding other
state-backed loans to the Ministry of Interior. They have refused to
name the bilateral lender, or detail the purpose of the loans. They
total $221.4 mn. and were obtained between 2009 and 2014.

It is clear that the maritime security project previously claimed by
the authorities as being the military component of Ematum is actually
Proindicus, as Africa Confidential can see from the Credit Suisse
feasibility study document produced in February 2013. This means the
Ematum money allocated to the Defence budget was probably used for
other purposes. Indeed, the total value of Ematum's fishing assets
cannot be worth more than $100 mn. – probably far less – so the
unexplained sum may reach over $700 mn. (AC Vol 56 No 14). But since
the three companies effectively own each other, it is harder to trace
money and assets, which can be easily moved in an opaque manner.

et more debt may be in the pipeline. AC has learned that China is
believed to have made as yet undisclosed loans to SISE, which has
undergone significant expansion in recent years. SISE is part of the
Interior Ministry. Last Wednesday, Mozambican independent newspaper
CanalMoz reported that Chinese company ZTE provided the intelligence
service with an extensive telephone surveillance suite in a deal which
netted Guebuza's son Mussumbuluko an 8% commission, equivalent to $11
mn. Security sources also report two new training centres outside
Maputo, where Israelis are also assisting.

There is also talk of loans from Portugal to Mozambique, and senior
Frelimo figures tell us that in general, bilateral loans to specific
ministries are sometimes not properly declared to the Ministry of
Finance.

Possibly, the sheer level of abuse in the system caused the Ministry
of Finance to lose track of Mozambique's debts. It may still be unsure
itself whether it has disclosed everything. But three years is a long
time in which to conceal $2 bn. worth of debt, and the Prime Minister
beggars the belief of many in calling it an 'error'. 'Cover-up' is
widely thought a more accurate description.

There has been much speculation about what might have happened if the
IMF had taken a tougher stance on Ematum after December 2013 and
insisted on examining the books. Many donors supported the IMF's good
intentions in trusting its interlocutors in Maputo, but dissenters
such as Denmark – which always believed there were too many unanswered
questions (AC Vol 55 No 3, Donors up in arms) – have been vindicated
by the revelations about Proindicus. SISE even created MAM after the
Ematum scandal, in April 2014 – ironically, just before IMF's
ever-optimistic, international 'Africa Rising' conference in Maputo,
on 29-30 May that year.

The IMF's faith in the momentum around Mozambique as the rising star
of the region was not easily shaken, and it was with some naivety that
they then placed their hopes on the reputed integrity of Nyusi's new
Finance Minister, Adriano Maleiane.

Ultimately, Maleiane, like his predecessor Manuel Chang, had little
choice but to protect the party. Donor sources confirm that last
December Maleiane even signed a letter to a suspicious IMF that denied
the existence of MAM, Proindicus and the additional debt, despite
already being in talks with the banks over the loans.

The Central Bank was also complicit, even forcing local banks to lend
it dollars to hide inadequate levels of foreign reserves, say senior
banking sources in Maputo. In March, Mozambique repaid $25 mn. of
Proindicus debt from the reserves – a fact that Central Bank Governor
Ernesto Gove must have been aware of, despite his pleas of ignorance.
Now, Mozambique must find $134 mn. to pay the first tranche of MAM
debt in May. In addition, it owes about $80 mn. to investors in
Proindicus and MAM who did not waive their right to immediate
repayment when Mozambique was downgraded (AC Vol 57 No 9, IMF cut-off
follows secret debt shock). Some talk hopefully of money still sitting
in offshore accounts, or liquidating assets. But given its current
commitments, Mozambique is on course to lose at least another $400 mn.
from the reserves in debt repayments this year.

While a taciturn IMF bides its time, the markets remain jittery and
concerns of a looming default are growing. Annual debt servicing has
multiplied to more than $600mn, a totally unsustainable figure,
especially if, as it has been considering, we hear, the Fund cancels
its programme.

Credit Suisse and VTB may also need to answer tough questions from the
United Kingdom authorities because they used their London offices for
the deals. Senior Maputo government sources say the British
authorities have been alerted to the controversy surrounding the
loans.

Mozambique's plight has not gone unnoticed by China, which quickly
made overtures to Nyusi with $16 mn. in assistance and offers to
finance large investment in new projects.

Nyusi is to visit China from 15 to 17 May. While China's help comes at
its own price, and Nyusi has not been as enamoured of China as
Guebuza, it is hard for the government to ignore such offers at a time
of crisis. Some Frelimo sources fear that too great a reliance on
China could mean allowing the superpower to effectively 'buy the
country', but it gives them some options.

The IMF remains key. Investor confidence, already low, would be
further damaged by a vote of no confidence from the IMF, risking the
gas sector development on which the country has pinned all its hopes.
But Maputo is in need of more than a smile from IMF director Christine
Lagarde, we have learned. Just as its credit downgrade triggered a
clause in its loan agreements that meant investors had the right to
immediate repayment, so there is another clause that may now apply.

Conclusions

Uganda's decision to export oil through Tanzania undermines Kenya's
status as regional kingpin

The shape of East Africa's future as an oil producer became clearer on
23 April with the announcement that Uganda's crude oil pipeline would
go through Tanzania. The move alters the political balance of the
whole region and has left Kenya with some catching up to do. The
preferred route until the second half of last year, Kenya now has a
considerably less viable oil field and a damaged reputation as the
heartbeat of East African integration.

Kenya’s central bank wants bankers found guilty of any wrongdoing
jailed, after three lenders in East Africa’s biggest economy collapsed
in the past nine months.

“If people did the wrong things they should be held accountable,”
Governor Patrick Njoroge said Thursday in an interview at the World
Economic Forum in Kigali, the Rwandan capital. “We are going to take
them to a court of law. Put them behind bars.”

“It’s essential for people to understand that banking is not
shop-keeping,” Njoroge said. “It’s not like a fruit seller on a
corner. You get deposits from the population in trust. You have a
fiduciary responsibility to discharge.”

The problems that faced each of the three banks were unique, and
didn’t represent a systemic risk, Njoroge said. Their collapse has led
the central bank to intensify supervision of the banking industry,
such as ensuring that audits are done correctly, while enforcing
greater transparency and stronger governance.

“There was a reset in thinking of how the sector is organized and how
it delivers value,” he said. “Kenya has just gone through that reset.
It’s done, because we are now in the new normal.”

The stability of the banking sector is one of the key pillars the
government wants to build upon for the country to become an
international financial center, Njoroge said.

“Our aspiration is to become better than Dubai without the tower,” he
said, referring to the Burj Khalifa, the world’s tallest building. “We
are thinking Singapore, we are thinking any other financial center in
the world.”

Nairobi All Share Bloomberg +0.51% 2016
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg -2.90% 2016
http://j.mp/ajuMHJ

Every Listed Share can be interrogated here
https://rich.co.ke/rcdata/nsestocks.php

“We were not going as far as that; only two days’ journey in the
ox-cart to a bit of El Dorado my father had been fortunate enough to
buy in the bar of the Norfolk Hotel from a man wearing an Old Etonian
tie,” so says Elspeth Huxley’s The Flame Trees of Thika which is a
beautiful and lyrical book.

We were going to Thika, a name on a map where two rivers joined. Thika
in those days - the year was 1913 - was a favourite camp for big-game
hunters and beyond it there was only bush and plain. We were not going
as far as that, only two days' journey in the ox-cart to a bit of El
Dorado my father had been fortunate enough to buy in the bar of the
Norfolk hotel from a man wearing an Old Etonian tie.

Fortunes are being made already Out at Kiambu. You've only got to look
at the place to see how well everything grows. The trouble is to keep
the vegetation down. [all about Real Estate a 100 Years later]

Wonderfully healthy climate, splendid neighbours, magnificent sport,
thousands of years of untapped fertility locked up in the soil. I
congratulate you, my dear fellow, I really do. You've been lucky to
get this opportunity. Buck Ponsonby was bitterly disappointed. Best of
luck; and look us up when you come in for the races. Keep in touch,
old man.

Ruiru was just a few dukas kept by Indians and a river crossing, not
even a bridge: a causeway made by shovelling murram into the swampy
stream and putting up some white posts. In the rains it was awash or
under water and wagons often stuck, some times for days.

Conclusions

What I really enjoy about this Book, is overlaying todays Landscape
over the Landscape The Author is describing.

Central Bank of Kenya Governor Patrick Njoroge urged Barclays Plc and
its Johannesburg-based unit to engage with regulators in the countries
in which it operates as the British bank plans to exit the continent.

“It feels like we are being treated like flowergirls” who have no real
role to play in the transaction, he said in an interview at the World
Economic Forum’s annual Africa conference in Kigali, Rwanda on
Thursday, declining to say if he had met with the lenders. “There are
consequences of their actions in the 12-plus jurisdictions they
operate in. They need to talk to the regulators.”

The London-based lender is reducing its controlling stake in Barclays
Africa Group as part of a plan to raise cash, shrink globally and
lighten its capital burden. Barclays Africa, formerly known as Absa,
is South Africa’s third-largest bank and has operations in 12 nations
across the continent, including Tanzania, Zambia, Botswana, Mozambique
and Ghana, with more than 12 million customers. It owns 68 percent of
Nairobi-based Barclays Bank of Kenya.

Barclays last week sold 12.2 percent of its stake in Barclays Africa
through an accelerated share sale that raised about 13.1 billion rand
($874 million), leaving it with a holding of 50.1 percent. About 40
percent of the stock was sold to investors in South Africa and
international money managers took up the rest, including well-known
institutions and some hedge funds, two people familiar with the
transaction said. More than 125 investors were interested in buying
the securities, Barclays Africa said.

Par Value:                  2/-
Closing Price:           10.30
Total Shares Issued:          5431536000.00
Market Capitalization:        55,944,820,800
EPS:             1.55
PE:                 6.645

The Nairobi All Share firmed +0.27 points to close at 146.71 the
highest closing Level in May.
The Nairobi NSE20 firmed 4.27 points to close at 3927.69.
Equity Turnover had a Friday Feel and clocked 318.45m.
Brokers have been lamenting the recent fall off in volumes.

Safaricom closed the week at 17.30 +0.289% and less than 1% below its
2016 Closing High of 17.45. Safaricom served up some very tasty Full
Year Earnings earlier in the week. Safaricom is +6.13% in 2016 and has
plenty of room to the top side. Safaricom traded 746,600 shares which
is one of the lightest trading sessions in 2016 and informs us that
Sellers are not interested at these Levels and this is bullish for the
price.

TPS Serena was up-ticked +6.818% to close at 23.50 on light trading of
700 shares. TPS Serena will rebound from here but only once the
Tourism Recovery is plain and visible.

The Governor of the Central Bank Patrick Njoroge said the following in
a wide-ranging Interview with Bloomberg, yesterday.

“If people did the wrong things they should be held accountable,”
Governor Patrick Njoroge said Thursday in an interview at the World
Economic Forum in Kigali, the Rwandan capital. “We are going to take
them to a court of law. Put them behind bars.”

“It’s essential for people to understand that banking is not
shop-keeping,” Njoroge said. “It’s not like a fruit seller on a
corner. You get deposits from the population in trust. You have a
fiduciary responsibility to discharge.”

“There was a reset in thinking of how the sector is organized and how
it delivers value,” he said. “Kenya has just gone through that reset.
It’s done, because we are now in the new normal.”

“Our aspiration is to become better than Dubai without the tower,” he
said, referring to the Burj Khalifa, the world’s tallest building. “We
are thinking Singapore, we are thinking any other financial center in
the world.”

The Governor was also forthright regarding the  Barclays Bank PLC
divestment of its Africa Business and said

“It feels like we are being treated like flowergirls” who have no real
role to play in the transaction, he said in an interview at the World
Economic Forum’s annual Africa conference in Kigali, Rwanda

 “There are consequences of their actions in the 12-plus jurisdictions
they operate in. They need to talk to the regulators.”

Barclays Kenya firmed +0.485% to close at 10.35 and traded  703,000
shares. Barclays Kenya has retreated -23.89% through 2016 as Investors
fretted about the Barclays PLC divestment.

Kenya Commercial Bank was the most actively traded counter at the
Exchange and firmed +0.6% to close at 42.00 and just 1.75% below its
2016 High. KCB traded 3.6m shares worth 151.181m and 47.4% of the
total volume traded at the Bourse.
Equity Bank firmed +0.62% to close at 40.50 and traded 1.227m shares.
Equity Bank reported a dynamic set of Q1 2016 Earnings earlier this
week. Equity is +1.25% in 2016.

KenGen announced a 2 for 1 Rights Issue this week. Kenyan eased 1.37%
to close at 7.15 and has corrected 12.80% this week. The Correction is
near running its course. KenGen traded 229,900 shares.

EABL firmed +0.33% to close at 297.00 and traded 109,800 shares. EABL
is +8.79% in 2016 and is set to hurdle 300.00 in short order.