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Satchu's Rich Wrap-Up
Tuesday 10th of October 2017

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Macro Thoughts

Home Thoughts

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Diani Beach Kenya @mfalme

Diani Beach is quite exquisite.

“I could hear my heart beating. I could hear everyone's heart. I could
hear the human noise we sat there making, not one of us moving, not
even when the room went dark.” ― Raymond Carver

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The dynamism of #RichardPrince's 1989 photograph 'Untitled (Cowboy)' whisks viewers across plains of stereotypical pageantry #SaatchiGallery

“there isn't enough of anything
as long as we live. But at intervals
a sweetness appears and, given a chance
― Raymond Carver, Ultramarine: Poems

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It's What Bob Corker Does Next That Counts @TheAtlantic
Law & Politics

Namely: that Donald Trump is irrational, ill-informed, impulsive,
unfit for command, and increasingly a danger to the country and the
world. The man who has ultimate authority over the world’s most
powerful military, including its nuclear weaponry, is recklessly
issuing threats to North Korea and others that set the nation “on the
path to World War III,” according to Corker—who, for the record, is
chairman of the Senate Foreign Relations Committee. “I know for a fact
that every single day at the White House, it’s a situation of trying
to contain him,” he told Jonathan Martin and Mark Landler of the

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05-DEC-2016 "We have a deviate, Tomahawk."
Law & Politics

“We copy.  There’s a voice.”
“We have gross oscillation here.”
“ There’s some interference. I have gone redundant but I’m not sure
it’s helping.”
“We are clearing an outframe to locate source.”
“Thank you, Colorado.”
“It is probably just selective noise. You are negative red on the
step-function quad.”
“It was a voice,” I told them.
“We have just received an affirm on selective noise... We will
correct, Tomahawk. In the meantime, advise you to stay redundant.”
The voice, in contrast to Colorado’s metallic pidgin, is a melange of
repartee, laughter, and song, with a “quality of purest, sweetest
“Somehow we are picking up signals from radio programmes of 40, 50, 60
years ago.”

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Disinformation goes hand in hand with election advertising @EUvsDisinfo
Law & Politics

Data now emerging from the ongoing American investigation into
possible Russian interference in and around the presidential elections
confirms that there was a Russian attempt to use Facebook advertising
in order to influence the election result. Some information about this
opinion forming operation has already been made available in articles
published by the Washington Post and CNN, among other media..
Ads targeted swing states
Fresh information published by CNN now provides additional details,
underlining that the Russian advertising had a geographical focus in
Michigan and Wisconsin, rather than targeting the United States more
broadly. In both these states, the contest between the two
presidential candidates ended up being very close, resulting in a less
than 1% victory for Donald Trump.
Focused on race, LGBT, religion, guns
Advertising is not news reporting, so calling the Facebook campaign in
question “fake news” would not be accurate. However, the messaging was
“promoting anti-Muslim messages” in addition to “touching on topics
from LGBT matters to race issues to immigration to gun rights”. As we
have seen before, hate-speech towards certain groups of people – be it
LGBT communities, Jews, migrants or Ukrainians – is a well-established
part of the toolkit in the pro-Kremlin influence methodology. Together
with the language of disinformation, these forms of aggressive
discourse are central to the way the pro-Kremlin campaign uses
information and media, including social media, when targeting public
opinion both inside and outside Russia.

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05-DEC-2016:: "We have a deviate, Tomahawk."
Law & Politics

I have no doubt that Putin ran a seriously 21st predominantly digital
programme of interference which amplified the Trump candidacy. POTUS
Trump was an ideal candidate for this kind of support.

Trump is a linguistic warfare specialist. Look at the names he gave
his opponents: Crooked Hillary, Lyin’ Ted, Little Marco, ‘Low-energy’
Jeb — were devastating and terminal.
The first thing is plausible deniability (and some folks here at home
need to remember those words).
The second thing is non-linearity, you have to learn how to navigate a
linear system (the new 21st digital ecosystem) in a non-linear way.
When you launch a social media campaign where a 100 bots repeat the
same thing verbatim, like Mombasa did last week, then your very
linearity is a monumental ‘’look its me’’ sign.
Beppe Grillo, the comic turned leader of the Five Star movement in
Italy said:  is is the deflagration of an epoch. It’s the apocalypse
of this information system, of the TVs, of the big newspapers, of the
intellectuals, of the journalists.”
He is right, traditional media has been disrupted and the insurgents
can broadcast live and over the top. From feeding the hot-house
conspiracy frenzy on line (‘’a constant state of destabilised
perception’’), timely and judicious doses of Wikileaks leaks which
drained Hillary’s bona fides and her turn-out and motivated Trump’s,
what we have witnessed is something remarkable and noteworthy.
Putin has proven himself an information master, and his adversaries
are his information victims.

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Limericking @Limericking Oct 8
Law & Politics

There is an old fellow named Pence
Whose hobby is taking offence.
He does it some days
In gimmicky ways
As well as at public expense.

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The House of Saud bows to the House of Putin Pepe Escobar
Law & Politics

What a difference a year – an eternity in geopolitics – makes. No one
could see this coming; the ideological matrix of all strands of
Salafi-jihadi terror – which Russia fights no holds barred, from
ISIS/Daesh to the Caucasus Emirate – beating a path to the Kremlin and
about to embrace Russia as a strategic ally.

The House of Saud was horrified by Russia’s successful campaign to
prevent regime change in Syria. Moscow was solidifying its alliance
with Tehran. Hawks in the Obama administration were imposing on Saudi
Arabia a strategy of keeping oil prices down to hurt the Russian

Now, losing all its battles from Syria to Yemen, losing regional
influence to both Iran and Turkey, indebted, vulnerable and paranoid,
the House of Saud has also to confront the ghost of a possible coup in
Riyadh against Crown Prince Mohammad bin Salman, a.k.a. MBS, as Asia
Times reported. Under so much pressure, who’re you gonna call?

Moscow will keep aligned with Iran across “Syraq”; that’s part of the
“4+1” (Russia-Syria-Iran-Iraq, plus Hezbollah) alliance in the
Levant/Mesopotamia, an incontrovertible (and winning) fact on the
ground. And that does not preclude Russia’s increasingly cozy
relationships across the Arab world – as with Egypt, Jordan, the UAE
and Libya.

What concerns Moscow, deeply, is Saudi (formal or informal) financing
of Salafi-jihadi outfits inside Russia. So a high-level line of
communication between Moscow and Riyadh works towards dissipating any
misunderstandings regarding, for instance, jihadism in Tatarstan and

It may be too early to identify the Saudi pivot to Russia as the shift
of the century. It is though a certified game-changer. Moscow is about
to become the new sheriff in town, in virtually any town across
Southwest Asia. And it’s getting there on its own terms, without
resorting to a Colt dialectic. MBS wants energy/defense cooperation?
He gets it. MBS wants less Russian cooperation with Iran? He doesn’t
get it. OPEC aims at higher oil prices? Done. And what about the
S-400s? Free – sort of – for all.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1782 The euro was up 0.25 percent at $1.1768. It had fallen to
$1.1669 on Friday, its lowest since Aug. 17.
Dollar Index 93.53 The index was last at 93.557, down 0.1 percent on
the day but still in reach of a 10-week high of 94.267 scaled on
Friday when surprisingly stronger U.S. September wages data enhanced
already high expectations that the Fed would hike rates for a third
time in 2017.
Japan Yen 112.52 The greenback was steady at 112.670 yen. It had
popped up to a near three-month high of 113.440 on Friday on robust
U.S. wages data
Swiss Franc 0.9783
Pound 1.3172 The pound nudged up 0.1 percent to $1.3157, having
bounced overnight from a one-month low of $1.3027 as news of rising
labor costs hardened expectations of higher interest rates
Aussie 0.7797
India Rupee 65.265
South Korea Won 1136.04
Brazil Real 3.1884
Egypt Pound 17.6190
South Africa Rand 13.7475

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Bloomberg Barclays EM USD Aggregate Index, has declined to a decade-low of 2.4 percentage points over Treasury yields
Emerging Markets

Bloomberg Barclays EM USD Aggregate Index, which takes into account
the impact of early redemption on cash flows, has declined to a
decade-low of 2.4 percentage points over Treasury yields. That’s more
than 100 basis points below the 10-year average.

Investors “know their geopolitical risks,” Russ Koesterich, who helps
manage the $78 billion BlackRock Global Allocation Fund from
Princeton, said in an interview with Bloomberg TV. “As long as the
global economy keeps expanding, and monetary policy remains
accommodative, then people will step in and buy these countries.”

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Mugabe appoints Chombo to key finance ministry in cabinet reshuffle The Source

Zimbabwe’s President Robert Mugabe has replaced Finance Minister
Patrick Chinamasa with Home Affairs Minister Ignatius Chombo in a
cabinet reshuffle, the government said in a statement late on Monday.

Happyton Bonyongwe was named Justice Minister, effectively ending his
reign as Director General of the Central Intelligence Organisation.

Bonyongwe replaces Vice President Emmerson Mnangagwa among several
other changes.

It is the surprise appointment of Chombo to the finance ministry to
replace the likeable Chinamasa who has led the country’s re-engagement
process with western lenders.

Chinamasa was moved to a newly created ministry of cyber security,
threat detection and mitigation.

In total, 10 cabinet ministers changed posts while two ministers were dropped.

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Dollar versus Rand 6 Month Chart INO 13.7475

At 1622 GMT, the rand was 0.67 percent weaker than Friday’s close at
13.8025 versus the dollar, after earlier falling as far as 13.8650
versus the greenback. The rand last traded at these levels on April

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09-OCT-2017 :: Politics Landing Blows on Economy @TheStarKenya
Kenyan Economy

You will recall that at the end of last month and coincident with the
Supreme Court decision, The Nairobi Securities Exchange had to
introduce circuit breakers after a precipitous 10% slide and on that
day the Nairobi All Share closed -3.69%. That Day we all got a chance
to take a look at what a ''cliff edge'' looks like and ''cliff edge
effects'' Since then the Equity markets has been on the slide and
Eurobond yields have ratcheted higher. The miraculous Shilling has
been the best behaved. The Shilling's resilience speaks to the
gilt-edged credibility that the Central Bank has achieved with Market
Participants. The Central Bank's FX operations are spectacularly
effective. However, what is clear is that Financial Indicators are
blinking amber. The Real Economy has been in the slow lane and there
is ample evidence of unexploded ordnance all over the place. The
Drought, the credit squeeze softened up the Economy but it is our
Politics which owns the ring now and has the potential to land a
Knock-out Blow a La the blow Mike Tyson landed on Trevor Berbick's
chin all those years ago.

On Friday @DaMina_Advisors' October 5th Report landed in my Inbox and I quote

''With effectively ‘no-adults-in-charge’ Kenya country is spinning
into a constitutional cul-de-sac......Without an election within the
constitutionally mandated 60-day window, Kenya will enter unmarked
treacherous constitutional political terrain.... President Uhuru
Kenyatta is determined to stay in office, whether an election happens
or not on October 26. Meanwhile the increasingly belligerent and
desperate opposition remains unwilling to recognize the legitimacy of
any government beyond October 26, and promises bloody mass action in
the streets to forcibly eject Kenyatta from power. The country’s
highest court, after delivering a historic verdict in late August to
annul the last presidential poll due to irregularities, has since
disappeared from the political arena''

Its clear now that the Opposition is taking an asymmetric approach.

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

What does it cost to put 500 People on the streets? I venture $10.00 a
head max. $5,000.00 versus an economic deterioration of at least 100x
is an outstanding example of the efficacy of this asymmetric strategy.
Go and compare the Street Protests in Togo and you will note our
Street Protests belong in the Theatre. The Opposition has resolved not
to participate in the election unless its “irreducible minimum”
demands are met. Two scheduled rallies at the Coast this weekend were
cancelled because the Mombasa Governor Ali Joho is out of the country
[probably could not get out fast enough].

What is clear is that the advantage of incumbency in fact accelerates
in this Round 2 of the Election. Therefore, I expect the Opposition to
boycott the Election entirely. And that the strategy of tension will
be maintained via degrading and denigrating the entire process. Market
Participants need to model this scenario because this is the direction
of travel.

''Essentially Kenya faces a very uncertain 21 days'' @DaMina_Advisors.

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Kenya is failing to create enough jobs for its young people
Kenyan Economy

Kenya’s rapidly expanding workforce isn’t finding jobs fast enough,
according to a new World Bank report. “Unemployment and
underemployment are rampant, especially among the youth,” the bank

Put simply, job growth isn’t keeping up with economic growth in
Kenya—if it was, East Africa’s largest economy would have created
150,000 more jobs than it did in the five years to 2013. Even so, this
would have covered only half of the gap between the growth in jobs and
the working-age population over that time.

Between now and 2030, Kenya’s working-age population will grow by
nearly 14 million people, to around 39 million. Without a stronger
labor market, the country’s already high youth unemployment rate could
get worse.

The government has pledged to create 570,000 new jobs in the formal
sector between 2015 and 2017, which implies a quadrupling of the pace
of job creation in 2013. To do this, policies need to promote faster
growth in the formal economy—which is highly productive but not very
big—as well as encourage workers in the large, less productive
informal economy to transition into more formal employment. Kenya’s
underground economy is vibrant, but establishments tend to stay small,
with owners avoiding “cumbersome registration procedures” and other
regulations that come from operating officially, the World Bank notes.

The two major problems, the bank says, are that too many workdays are
lost to labor disputes and the country’s minimum wage may be pushing
people into the informal sector. Kenya’s minimum wage, both in
absolute terms and relative to worker productivity, is much higher
than countries at a similar stage of development.

The World Bank has called Kenya’s aspirations of becoming an
upper-middle-income country—a group that includes Mexico, Turkey,
Thailand, and South Africa—by 2030 “farfetched.” Its underachieving
labor market is a major reason why.

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Why East Africa's retailers are struggling to stay in business @The_EastAfrican
Kenyan Economy

This optimism started being eroded in April this year, when the
Nielsen Africa Prospects Report on macro, business, consumer and
retail indicators showed that reduced spending, rising cost of living
and high interest rate regimes are making it difficult for retailers
to operate in the region.

“With predictions for growth lower than those experienced in the
previous 10 to 20 years, and the volatility experienced in 2016 set to
continue, businesses will require resilience, relentless adjustments
and adaptation to meet consumers’ altered needs,” said the Nielsen

Questions abound as to why the retailers are sagging under debt, yet
foot traffic has been growing. The Kenyan retail sector recorded $3.16
billion in revenues last year.

According to the Nielsen report, middle class spending has recorded a
marginal decline, as consumers in Uganda, Tanzania and Kenya have
become increasingly risk-averse.

A 2016 survey by Proctor & Gamble on Kenya’s retail sector indicated a
13 per cent expansion last year, compared with the previous year.
According to the survey, the expenditure in the sector amounted to
$17.6 billion across different channels.

Out of this, 18 per cent came from retail chains, which resulted in a
30 per cent market share for supermarkets, measured by expenditure.

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ARM Cement will get an additional $15 million (about Sh1.54 billion) cash injection from its key shareholders
Kenyan Economy

Managing director Pradeep Paunrama said part of the new money is aimed
at helping ease the cement maker’s tight cash position and will mainly
be channelled to its Tanzanian unit as capital expenditure.

“We are looking at injecting 15 million dollars. That’s for the
overall company but most of it is needed in Tanzania to get the unit
running back on its feet,” he said in an interview Monday.

“Now that Tanzania has started making profit again we need to rebuild
Tanzania, fund the working capital…that is where the money is

UK sovereign wealth fund CDC Group bought a 42 per cent stake last
year in the cement maker that saw it inject Sh14 billion.

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N.S.E Today

The International Markets are looking at the Catalonia situation closely.
McKinsey will repay fees it earned for six months’ work last year at
South African state utility Eskom if a high court finds the deal was
unlawful, the global consultancy said on Tuesday.
Eskom had given McKinsey and its local partner Trillian until Tuesday
to repay 1.6 billion rand ($117 million) in consultancy fees for a
contract that the state firm says was illegal.
Ethiopia devalued the Birr by 15% as of tomorrow.
Aliko Dangote was quite forthright at the FT Africa conference
yesterday. He said
Aliko Dangote says policies in Tanzania are scaring a lot of people.
Need to look at some of their new laws quickly. #FTAfrica Summit
Dangote on Tanzania's mineral reforms to increase gov equity: "They
are coming through the back door to seize your assets"
The Nairobi All Share shaved off -0.18 points to close at 160.85.
The Nairobi NSE20 eased -15.6 points to close at 3696.77
The Equity Market is like a Rabbit caught in the [political] headlights.
Equity Turnover was lacklustre at 212.997m

N.S.E Equities - Agricultural

Kapchorua Tea was high-ticked +8.108% to close at 80 on just 200
shares of business.

N.S.E Equities - Commercial & Services

Safaricom closed unchanged at 25.00 and traded 1.178m shares. The
Supply Side is being extinguished at this level now.

N.S.E Equities - Finance & Investment

Equity Bank rebounded +1.388% off a 4 month closing Low to close at
36.50 and on good volume action of 2.604m shares worth 95.169m.
COOP Bank closed unchanged at 16.50 and traded 2.308m shares.

Centum firmed +1.24% to close at 40.75 and traded 186,400 shares.

N.S.E Equities - Industrial & Allied

KenGen followed on yesterdays +2.87% gain to close +1.12% firmer at
9.05 and traded 289,000 shares with unserviced Buy Side Demand of over
1m shares. KenGen will release its FY Earnings October 18th.

ARM Cement announced it will get an additional $15 million cash
injection from its key shareholders.
Pradeep Paunrama said part of the new money is aimed at helping ease
the cement maker’s tight cash position and will mainly be channelled
to its Tanzanian unit as capital expenditure.
“We are looking at injecting 15 million dollars. That’s for the
overall company but most of it is needed in Tanzania to get the unit
running back on its feet,” he said in an interview with Business Daily
CDC Group bought a 42 per cent stake last year in the cement maker
that saw it inject Sh14 billion.
ARM which was -42.22% in 2017 through this morning rebounded +1.12% to
close at 13.25.

by Aly Khan Satchu (www.rich.co.ke)
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October 2017

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