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I visited Doha for the first time on the eve of the second (Iraq) Gulf
War in 2003. I was convinced then that Qatar was set to explode onto
the scene because of its gas reserves, and I wanted to see things up
close and personal. Doha in 2003 was still a little sleepy.
Subsequently, I visited Doha with al Jazeera in 2011 and by that time
the State of Qatar had the wind (gas) in their sails for a number of
years and the growth and transformation of Qatar had turned
exponential. The ubiquity of al Jazeera (after a period when it was
caught in Donald Rumsfeld’s cross-hairs) gave the state outsize soft
power across the Middle East and beyond. Today, Qatar is a big player
in the region punching far beyond its absolute size (estimates are
that there are fewer than 300,000 Qatari citizens) both in terms of
hard and soft power. In a geopolitical context, Qatar played a big
role in toppling Muammar Gaddafi in Libya and its influence can be
seen similarly in the move to remove President Bashar al-Assad in
Syria. In foreign policy terms, Qatar has packed a big punch beyond
merely hosting the US military at al Udeid air base. It was the state
of Qatar which bailed out Barclays Plc during the financial crisis. In
Kenya, Qatar National Bank was spoken of as a possible buyer of Chase
Bank but notwithstanding that QNB was a rank outsider in that
transaction (they tend to operate on a wider canvas and not a narrow
one which Chase Bank was). The fact that it was referenced speaks to
the state’s power on the global stage.

I am therefore grateful to the Qatar ambassador to Kenya Ibrahim
Mohammed Abdulrahman Alabdullah for the invitation to attend the 16th
Doha forum, from where I am writing this article from. This is the
16th iteration of the forum which is being held under the title
“Stability and Prosperity for All”. I attended the opening ceremony on
Saturday night and on my way in I spotted Afghanistan President Ashraf
Ghani who was clutching his Tasbi. Big- ticket attendees were the
Yemeni President Abdrabnuh Mansur Hadi and the President of Niger
Mahamadou Issoufou who said “terrorism has deleted borders between
countries”

in his opening address. President of Mauritius Dr Ameenah Gurib said
“equity and equality of opportunity are essential”. The UN secretary
general Ban Ki-moon said “we urgently need to start discussions on the
transition in Syria”. The former president of Mozambique Armando
Guebeza was also in attendance.

One of my takeaways is: The new and youthful Emir HH Sheikh Tamim bin
Hamad Al Thani has reset the look and feel, and we will have to watch
to see whether the direction has been reset as well.

Macro Thoughts

Home Thoughts

The age of oil rents is over. A political and geopolitical revolution
is on its way.

About twenty countries around the world are dependent on a single
number: the price of oil. Some, primarily Persian Gulf states, live
entirely off their oil and gas wealth. They rely on crude oil, natural
gas and petroleum products for 50 percent of their Gross Domestic
Product and for 70-plus percent of their budget revenue. Some 15
countries generate more than 50 percent of their export earnings from
oil, gas and petroleum product sales.

Oil-producing countries have been living a dream. In recent decades,
most oil-producing countries saw their per-capita GDP not only expand
but show a rate of growth above the global average. In other words,
they were getting rich faster than the rest of the world. In terms of
dollar-denominated GDP per capita, as crude prices peaked in 2011
Russia and Kazakhstan outstripped Malaysia and Turkey; Saudi Arabia
and Equatorial Guinea nearly overtook South Korea; Kuwait shot ahead
of Great Britain, while Qatar rose to rank as one of the three richest
nations. The new generation of the petrostates' political elite has
come to look on oil rent as a means to achieve all its goals. And yet,
many experts will call the oil windfall a curse, not a blessing. A
prosperity that is due to the sheer accident of owning large mineral
resources rather than to technological prowess, investment and hard
work has its downsides, including the degradation of political
systems, the throttling of competition and the proliferation of
populist fiscal policies.

The weakening in oil demand has more to do with technological progress
than with the slowdown in China’s economy, which has been the main
growth driver for the world economy and oil consumption in the recent
decades.

Indeed, economic growth and oil consumption have become more and more
disconnected. Over the last fifteen years, average
oil-consumption-to-GDP elasticity has been about 0.7 for China and
even less for developed countries. A striking example is the U.S.
where from 1980-2014 real GDP grew by 150 percent and oil consumption
edged up only 11 percent. This is because modern economic growth is
increasingly driven by more energy-efficient sectors. Even lower
prices fail to boost oil's appeal to consumers who stand to gain more
from improving energy efficiency than from saving on oil costs.

The vast majority of oil-producing states have paid for their
windfalls with the entrenchment of authoritarian or populist left-wing
regimes, repression of civil society and infringement of women's
rights.

Only a third of oil-producing nations enjoy GDP per capita in excess
of $10,000, while five (Angola, Iraq, Nigeria, Venezuela and Algeria)
have failed to reach the $5,000 mark. In other words, although the
petrostates as a group have outperformed the rest of the world in
recent years, some of them have missed out on their chance.

Theoretically, a government can make up for lower oil revenue by
deploying the reserves accumulated in a sovereign wealth fund or by
raising debt. About half of the oil-producing countries have built
substantial reserves. Moreover, Norway (which learned the lesson of
the 1986 oil slump and the subsequent banking crisis in the aftermath
of which its reserve fund was set up), Kuwait and the UAE have all put
aside enough money to tide them over a fairly long period of low oil
prices or even nonexistent oil revenue. On the other hand, countries
like Angola, Nigeria, Iraq, Venezuela, Mexico and Ecuador have too
tiny a piggy-bank to compensate for revenue shortfalls in even the
near term, while Russia and Algeria are vulnerable over the medium
term. The least wealthy nations (by GDP per capita) have the smallest
reserves, a result of the imprudent economic policies of their
governments.

 The only way out of the squeeze is to cut spending, starting with
capital expenditures. However, phasing out infrastructure and other
mammoth projects that governments use to create jobs could cause mass
unemployment and social unrest. Shrinking capital spending may also
trigger infighting among the corrupt elite, as its major source of
illicit enrichment dwindles.

The threats to social peace from a reduction in current spending are
too obvious to merit discussion.

The deficit is biggest in Venezuela (24.4 percent of GDP in 2015),
Algeria (13.7 percent), Azerbaijan (7.6 percent), Russia (5.7 percent)
and Ecuador (5.1 percent), all of which are already feeling the pinch.
But even the affluent Persian Gulf states, particularly Saudi Arabia
where government spending exceeded 50 percent of GDP and the budget
deficit hit 21.6 percent of GDP in 2015, will have to radically revise
their fiscal policies in the coming years. This revision will have
far-reaching consequences not only for their own peoples but for the
whole world.

By autumn 1991 the Soviet Union was going bankrupt, with no
international reserves to speak of, no means to avert default and no
money to buy vital imports, let alone support “friendly” regimes. The
living standards of a population that depended on government aid
plummeted. The end of 1991 marked the end of the USSR.

First, the populist regimes in Venezuela, Ecuador and Algeria, which
are the most financially vulnerable today, are going to be hit hard.
Indeed, Latin America as a whole is certain to veer to the right. The
rulers in Ecuador and Venezuela, as well as in Venezuela-sponsored
Cuba, have already been scared by the triumph of right-wing forces in
Argentina. While liberal reforms will hardly bring about an immediate
improvement in people's lives, left-wing populism is certain to start
losing its grip on the continent.

Now is the time for petrostates to awaken from their long oil dream
and choose between the first and the third worlds.

Conclusions

Oil based economies are going to contract, currencies which have
already collapsed are going to be routed and Greek- style austerity
will be the order of the day. The melt-down is coming.

The following essay on Oil always struck me as particularly insightful:

Oil kindles extraordinary emotions and hopes, since oil is above all a
great temptation. It is the temptation of ease, wealth, strength,
fortune, power. It is a filthy, foul-smelling liquid that squirts
obligingly up into the air and falls back to earth as a rustling
shower of money. To discover and possess the source of oil is to feel
as if, after wandering long underground, you have suddenly stumbled
upon royal treasure. Not only do you become rich, but you are also
visited by the mystical conviction that some higher power has looked
upon you with the eye of grace and magnanimously elevated you above
others, electing you its favorite.

Many photographs preserve the moment when the first oil spurts from
the well: people jumping for joy, falling into each other’s arms,
weeping.

Oil creates the illusion of a completely changed life, life without
work, life for free. Oil is a resource that anesthetizes thought,
blurs vision, corrupts. People from poor countries go around thinking:
God, if only we had oil! The concept of oil expresses perfectly the
eternal human dream of wealth achieved through lucky accident, through
a kiss of fortune and not by sweat, anguish, hard work. In this sense
oil is a fairy tale, and like every fairy tale, a bit of a lie. Oil
fills us with such arrogance that we begin believing we can easily
overcome such unyielding obstacles as time. With oil, the last Shah
used to say, I will create a second America in a generation! He never
created it.

Oil, though powerful, has its defects. It does not replace thinking or wisdom.

For rulers, one of its most alluring qualities is that it strengthens
authority. Oil produces great profits without putting a lot of people
to work. Oil causes few social problems because it creates neither a
numerous proletariat nor a sizable bourgeoisie. Thus the government,
freed from the need of splitting the profits with anyone, can dispose
of them according to its own ideas and desires.

Look at the ministers from oil countries, how high they hold their
heads, what a sense of power they have, they, the lords of energy, who
decide whether we will be driving cars tomorrow or walking.

And oil’s relation to the mosque? What vigor, glory, and significance
this new wealth has given to its religion, Islam, which is enjoying a
period of accelerated expansion and attracting new crowds of the
faithful.

Turkey’s ruling party prepared on Sunday to install an ally of Turkish
President Recep Tayyip Erdogan as the next prime minister, to legalize
the de facto shift of the country’s power to Erdogan’s hands from
parliament’s.

Binali Yildirim, the only candidate to lead the AK Party, will take
over from current chairman and Prime Minister Ahmet Davutoglu, who
announced his resignation this month after failing to assert his
authority against Erdogan. According to most readings of Turkey’s
constitution, the prime minister is the head of the executive, with
the president traditionally taking a more ceremonial role.

That is, until Erdogan became president in 2014.

"What we need to do is to legalize the de facto situation, to bring to
an end this confusion,’’ Yildirim said in his speech during the
convention, referring to Erdogan’s push to concentrate powers with the
presidency. "The way to do this is with a new constitution, and a
presidential system in the new constitution.’’

The presumptive Republican presidential nominee leads by just 2
points, 46 percent to 44 percent, over the Democratic front-runner
among registered voters — essentially a dead heat, well within the
poll’s 3.5 percentage-point margin of error.

What effect would electing Donald Trump have? It’s hard to say because
we don’t really know what he thinks. And I’m not sure he knows what he
thinks. He’s perfectly capable of saying contradictory things at the
same time. But there are some pretty stable elements of his ideology,
if you can even grant him that concept.

By making the southern border of Turkey the new barrier against
migration and terrorism, EU leaders are deluding themselves by
including part of the Middle East battle zone within their outer
defences and pretending that there is no war in SE Turkey and the
Turkish border is impermeable. Dearlove is right to say that the EU's
ill-judged response to the twin crises over migrants and Isis is set
to fail and the political beneficiaries will be the proto-fascist
right across Europe.

The dollar’s three-week rally is just the beginning, according to
Deutsche Bank AG.

A slump by the greenback earlier this year has “likely run its
course,” analysts at the world’s second-largest currency trader wrote
in a note Friday. The bank favors buying the U.S. currency versus
emerging markets -- such as China, Mexico and South Korea -- following
a shakeout in speculative bets on the dollar, George Saravelos,
co-head of global foreign-exchange research in London, wrote.

“The dollar still has some legs,” said Sebastien Galy, a strategist at
Deutsche Bank in New York. “The global dollar trend is probably far
less appealing than it used to be, but there’s still some opportunity
there."

The Bloomberg Dollar Spot Index, which tracks the dollar versus 10
peers, added 0.8 percent this week. The greenback rose 0.8 percent to
$1.1224 per euro and gained 1.4 percent to 110.15 yen.
Market Swings

The dollar slumped 12 percent versus the yen, 7 percent versus the
euro, and 7 percent against 10 peers this year before turning higher
this month.

“The dollar cycle isn’t old enough to die of old age,” Saravelos
wrote. “Recent weakness has likely run its course.”

Markets are pricing just a 30 percent likelihood of a hike next month
and a 73 percent by the end of the year.

“The dollar does go up against risky assets,” Lee Ferridge, the
Boston-based head of macro strategy for North America at State Street
Global Markets, said in an interview at Bloomberg’s New York
headquarters. “But for euro and yen, it’s much more subtle now because
that’s about policy divergence.”

Euro 1.1230
Dollar Index 95.196
Japan Yen 109.76
Swiss Franc 0.9895
Pound 1.4524
Aussie 0.7248
India Rupee 67.32
South Korea Won 67.32
Brazil Real 3.53875
Egypt Pound 8.88
South Africa Rand 15.6194

Gold 6 month INO 1250.695 [SELL]

Inventories of crude oil and refined products have soared, but seem to
be having little impact on prices.Measured in terms of the number of
days of demand that could be met by the stored oil,
OECD commercial inventories have risen from 57 days at the end of 2013
to 67 days at the end of March this year. They exceed by 5 days the
volume of oil in storage at the depth of the financial crisis, after
global oil demand had collapsed.

Surging oil inventories are normally associated with falling oil
prices, because they're seen as a signal that there's too much oil
about. Until early this year, this time was no different. The 76
percent drop in crude oil prices that accompanied the rise in
inventories is well known.But the recent surge in prices, which have
jumped by more than 75 percent from their mid-January low, has not
been accompanied by a drop in the volume of oil in storage. Quite the
opposite.

Much of the reported spare capacity is the result of disruptions to
supply that can't be restored without improvement in some underlying
political problem -- whether the unrest in the Niger River delta, or
the chaos engulfing Libya.

KRISTINA, Kosovo — Every Friday, just yards from a statue of Bill
Clinton with arm aloft in a cheery wave, hundreds of young bearded men
make a show of kneeling to pray on the sidewalk outside an improvised
mosque in a former furniture store.

The mosque is one of scores built here with Saudi government money and
blamed for spreading Wahhabism — the conservative ideology dominant in
Saudi Arabia — in the 17 years since an American-led intervention
wrested tiny Kosovo from Serbian oppression.

Since then — much of that time under the watch of American officials —
Saudi money and influence have transformed this once-tolerant Muslim
society at the hem of Europe into a font of Islamic extremism and a
pipeline for jihadists.

Kosovo now finds itself, like the rest of Europe, fending off the
threat of radical Islam. Over the last two years, the police have
identified 314 Kosovars — including two suicide bombers, 44 women and
28 children — who have gone abroad to join the Islamic State, the
highest number per capita in Europe.

They were radicalized and recruited, Kosovo investigators say, by a
corps of extremist clerics and secretive associations funded by Saudi
Arabia and other conservative Arab gulf states using an obscure,
labyrinthine network of donations from charities, private individuals
and government ministries.

“They promoted political Islam,” said Fatos Makolli, the director of
Kosovo’s counterterrorism police. “They spent a lot of money to
promote it through different programs mainly with young, vulnerable
people, and they brought in a lot of Wahhabi and Salafi literature.
They brought these people closer to radical political Islam, which
resulted in their radicalisation.”

But where the Americans saw a chance to create a new democracy, the
Saudis saw a new land to spread Wahhabism.

Frontier Markets

Some of Katumbi's supporters fear that authorities will block the
multi-millionaire former mining mogul from returning to the country,
but Kapiamba rejected that possibility.

"They can't force him into exile," Kapiamba said, adding that Katumbi
was headed to Johannesburg. "He is going to return."

Political tensions are running high in Congo ahead of the scheduled
election. The country's highest court ruled last week that Kabila
could stay in power if it did not take place before the end of his
mandate.

Opposition parties labeled that a "constitutional coup d'etat" and
called for marches across the country on May 26 to demand that Kabila
step down this year.

On Friday, a court also sentenced three activists, arrested hours
before a general strike in February to demand that Kabila leave power
when his mandate expires this year, to one year in prison, the United
Nations said.

The director of the U.N. human rights office in Congo, Jose Maria
Aranaz, denounced the decision as evidence of "the instrumentalization
of the judiciary and the continued criminalization of civil society."

Ben Shepherd, an analyst at Chatham House, said the moves against
Katumbi were part of a struggle by the rival politicians to win the
confidence of members of Congo’s “interlocking, self-interested
elite”.

“There is a sense that the presidency is weak. Kabila hasn’t managed
to get a third term rubber-stamped and a new deal is possible.
Currently no one wants to commit to either side so momentum is
extremely important. If one candidate could attract support it could
snowball,” Shepherd said.

Seychelles holds the distinction of being the first sub-Saharan
African country to issue a sovereign bond – it issued a US$30 million
bond in 2006. This was followed by the Democratic Republic of Congo
(DRC) issuing $454 million, Gabon $1 billion and Ghana $750 million in
2007.

Between 2010 and 2015 at least a dozen other sub-Saharan African
countries, including Côte d’Ivoire, Senegal, Angola, Nigeria,
Tanzania, Namibia, Rwanda, Kenya, Ethiopia and Zambia issued sovereign
bonds. They raised commercial debt in excess of $19.5 billion.

Many of these Eurobonds will mature between 2021 and 2025. It will
require these sub-Saharan African countries to repay an average of
just under $4 billion annually in that period. But they are already
currently bleeding a rising total of just over $1.5 billion in annual
coupon payments on these Eurobonds. This represents a total of an
additional $15 billion across the term of the Eurobonds. The total
accumulated bonds are in excess of $24 billion. The principle amount
of this is $35 billion.

The $750 million Ghana bond, with a ten-year maturity, was issued in
October 2007 and was four times oversubscribed. The principle
repayment, which kicks in in 2017, will signal the direction of the
continent’s economic dynamics in the years to follow. The writing is
already on the wall. Ghana has already buckled, requiring an
International Monetary Fund (IMF) financial restructuring package.

Prior to these countries issuing the bonds, they carried foreign debt
in the form of bilateral and multilateral concessional loans. These
loans carried an average interest rate of 1.6% and a maturity of 28.7
years. The financing from sovereign bonds comes at an average floating
coupon rate price of 6.2% with an 11.2-year maturity period.

This means that these countries will continue to bear rising
inflation, debt repayment crisis, reduction of GDP growth and
challenges with managing their fiscal deficits.

Déjà vu, Africa. We are set for troubled times.

Dollar versus Rand 6 Month Chart INO 15.62
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt EGX30 Bloomberg +6.98% 2016
http://www.bloomberg.com/quote/CASE:IND

"This is probably the economy's worst performance since the
mid-1990s," said John Ashbourne, Africa analyst at Capital Economics,
in a note on the GDP figures.

The central bank has imposed currency restrictions but maintained the
naira's peg against the dollar. Investment has fallen, as foreign
firms expect an eventual devaluation because of the slump in oil
revenues.

President Muhammadu Buhari has rejected calls by the International
Monetary Fund for a more flexible exchange rate.

"The biggest falls in growth came in the manufacturing sector, which
is being squeezed by a complex and inflexible FX system," said
Ashbourne. "It is now clear that these policies have – as we'd long
argued – made a bad situation worse."

Meanwhile Nigeria, the biggest economy in SSA, will surely contract in
2016 and not least because 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.

Ghana Stock Exchange Composite Index Bloomberg -10.92% [37 month Lows]
http://www.bloomberg.com/quote/GGSECI:IND

Mr Thakrar confesses that he did not see this coup coming.

“Of course I was caught by surprise. But this is a people business and
these kinds of things happen all over the world,” he told The
EastAfrican.

The entrant now promises a fierce fight for the Ksh86 billion ($860
million) advertising market in Kenya, which will reverberate across
East Africa least because Oxygène has swooped not just key personnel
from Scangroup, but also some of its key accounts.

Nairobi All Share Bloomberg +0.71% 2016
http://www.BLOOMBERG.COM/quote/NSEASI:IND

146.74 +0.41 +0.28%

Nairobi ^NSE20 Bloomberg -3.71% 2016
http://j.mp/ajuMHJ

3,890.85 +10.04 +0.26%

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