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Macro Thoughts

Home Thoughts

In the sun-drenched waters of the Indian Ocean, a small coral island
sits at the mouth of Mossuril Bay, where the waves melt seamlessly
into the sky.

Ilha de Moçambique, or the Island of Mozambique, was used as a harbor
and trading center by Arab merchants between the 10th and 15th
centuries before Portuguese explorer Vasco da Gama landed on the
island in 1498 and claimed it for Portugal.

For nearly 400 years, it was the colonial capital of Portuguese East
Africa, positioned on the maritime trade routes for gold, spices, and
slaves. By 1907, shortly after the collapse of the slave trade, the
capital moved to Lourenço Marques and the island’s population rapidly
dwindled. This mass exodus protected it from the ravages of modern
development during the 20th century—effectively freezing the island in
time.

German Chancellor Angela Merkel declared failure in her bid to form a
new government, throwing the future of Europe’s longest-serving leader
into doubt and potentially pointing the world’s fourth-biggest economy
toward new elections. The euro fell.

A month of exploratory coalition talks ended in a dramatic collapse
just before midnight Sunday in Berlin when the pro-market Free
Democratic Party, one of the prospective partners, walked out on a
deal that Merkel said had been within reach.

Conclusions

Instability at the beating Heart of the EU Project

Conclusions via @Hervegogo

@Claire_Phipps Mugabe’s speech is the reflection of the kind of legal
& complex questions he put on the table during the negotiations and
that his audience could not answer to. Engaging in discussions with
Bob was a very risky enterprise for plotters. Cc:@alykhansatchu

As Zimbabweans poured on to the streets of Harare to celebrate the
expected departure of the man who has ruled over them for nearly 40
years, Robert Mugabe sat with a friend, munching corn and reminiscing
about old times.

“He was talking about his school days in the 1930s and anthropology
and how it impacted on the colonial perception of Africans and their
intellect,” said George Charamba, who has been the president’s
spokesman and one of his closest advisers for 17 years.

Mr Charamba, who said he spent five hours with Mr Mugabe on Saturday
and left him just 20 minutes before talking to the Financial Times,
said the 93-year-old liberation hero remained on form in spite of the
storms raging around him.

“In the midst of such a highly charged intellectual conversation, we
were munching corn,” he said. “Oh my God, he was very upbeat and
chatty.”

Unless Mr Mugabe can muster his legendary cunning to wriggle out of
what appears a desperate situation, it also supports the view of those
who say Mr Mugabe, surrounded by sycophants and increasingly frail, is
in denial about what is happening to him.

Mr Charamba insisted that these were “derivative actions” and
“fireworks” for the masses. “The principle action, the Hamlet of this
drama, is the president and the soldiers,” he said.

It is authority that provokes revolution....This occurs when a feeling
of impunity takes root among the elite: We are allowed anything, we
can do anything. This is a delusion, but it rests on a certain
rational foundation. For a while it does indeed look as if they can do
whatever they want. Scandal after scandal and illegality after
illegality go unpunished. The people remain silent...They are afraid
and do not yet feel their own strength. At the same time, they keep a
detailed account of the wrongs, which at one particular moment are to
be added up. The choice of that moment is the greatest riddle of
history. Ryszard Kapuściński Shah of Shahs, P. 106

You will recall that only last year, In a speech before the African
Union in 2016, indeed, Mugabe said would remain at the helm “until God
says: Come.” What is clear is that an Old Man's mind and political
antennae were properly scrambled by an ambitious wife [Gucci Grace], a
wife who was always untenable and whose political longevity was
entirely correlated to the presence of her Husband.

The fast moving events in Harare will culminate in the dismissal of
President Robert Gabriel Mugabe and the re-instatement of the Vice
President he fired, Emmerson Mnangagwa. Mr. Mnangagwa aka The
Crocodile [“A crocodile patiently waits for his target, pretending to
be a rock, At times you think he doesn’t react, or doesn’t have any
solution to what is happening. He doesn’t show irritation until the
optimal moment and then he strikes. And when he does, he doesn’t miss
his target”].  My Friend Herve Gogo  rebutted Reuters saying

''The analogy to Ceausescu is misplaced. This isn’t a revolution but
just an aggiornamento inside ZANU-PF. & everyone is currently
negotiating with Mugabe''

The pictures from Harare on Saturday spoke to a ''People Power'' which
is a genie which will be difficult if not impossible to put back in
its Bottle.

“It’s like Christmas,” said one marcher, Fred Mubay to Reuters.

He had a warning for whoever takes over Zimbabwe: “If the next leader
does the same, we are going to come out again.”

I agree with U.S. Assistant Secretary of State for African Affairs
Yamamoto who said “It’s a transition to a new era for Zimbabwe, that’s
really what we’re hoping for.”

The Military which launched this decapitation are certainly set to
shape the Outcome but now have a Tiger by the Tail. Interestingly, the
Military have been walking on linguistic egg shells and side-stepping
the word ''coup'' with finesse.

Zimbabwe’s economy has fallen to the 20th biggest in sub-Saharan
Africa from 10th when President Robert Mugabe came into power almost
four decades ago [Bloomberg]. The Economy has halved in size since
2000.  As of October, the country owed lenders including the IMF,
World Bank and African Development Bank about $9 billion, according to
the finance ministry. Hyperinflation peaked at about 500 billion
percent at the end of 2008, according to the International Monetary
Fund, leading to the nation abandoning its own currency in favor of a
basket of foreign exchange including the South African rand, the
dollar, the euro and the pound, as well as so-called bond notes
printed by the government. After 2 1/2 years of deflation, consumer
prices started rising again in February, driven by a shortage of cash
and higher food costs and its difficult to see how another bout of
hyper-inflation is avoided.

The dislocation in the Economy is evidenced in the price of BITCOIN
which jumped as high as $13,499, almost double the rate at which it
trades in international markets, according to prices cited on Golix’s
website.  Further evidence of economic disequilibrium is seen in the
performance of the Stock Market. Before a correction at the end of the
week. the Zimbabwe Industrial Index had jumped +390% Year to date and
the MSCI Zimbabwe Index +420%. The country's shares are trading at a
475 percent premium to cash, according to an Exotix analysis of Old
Mutual data. That difference has to collapse for there to be any
chance of Zimbabwe normalising. This difference started to collapse on
Friday with the Zimbabwe Stock Exchange dropping $1,5 billion in value
and the industrial index shedding 11.32%.

What is clear is that Zimbabwe is entering a New Normal and that in
the medium term Zimbabwe has the potential to be one of the fastest
growing economies in Africa. The People want to grab that opportunity
with both hands. If Zanu-PF want to be part of that new more
optimistic Future they need to invite the Opposition into Government,
look for a big cash Boost from the international Community in order to
stabilise the ''Now''

Zimbabweans have only known one Leader and that Leader is now gone.

Giddy with joy and finally free to speak out, vast throngs of
demonstrators turned Zimbabwe’s capital into a carnival ground on
Saturday in a peaceful outpouring of disdain for President Robert
Mugabe and calls for him to quit immediately. Still clinging to his
now-powerless post, the longtime leader was scheduled on Sunday to
discuss his expected exit with the military command that put him under
house arrest.

It was a historic day when the old Zimbabwe, a once-promising African
nation with a disintegrating economy and a mood of fear about the
consequences of challenging Mugabe, became something new, with a
population united, at least temporarily, in its fervor for change and
a joyful openness that would have seemed fanciful even a few days ago.

The euphoria, however, will eventually subside, and much depends on
the behind-the-scenes maneuvering to get Mugabe to officially resign,
jumpstart a new leadership that could seek to be inclusive and reduce
perceptions that the military staged a coup against Mugabe. The
president was to meet military commanders on Sunday in a second round
of talks, state broadcaster ZBC reported.

“The common enemy is Robert Mugabe. That’s for starters,” said
37-year-old Talent Mudzamiri, an opposition supporter who was born
soon after Zimbabwe’s independence.

He had a warning for whoever takes over Zimbabwe: “If the next leader
does the same, we are going to come out again.”

"Hubristic arrogance," he told The Globe and Mail. "He was in power so
long. He became so comfortable, complacent and over-confident. He's
stubborn, and he forgot the nature of the state around him. This is a
military state, a state of securocrats. He forgot that he was just a
representative of a securocratic state, and it will always dump you if
you don't serve it. So they fired him."

Mr. Mugabe's own blunders led to his fall, Mr. Gwede says. "When
someone is in power for 37 years, there is the myth of invincibility.
And Mugabe himself believed it. He forgot that his rule was based on
the security agencies, not the popular will. He showed arrogance, and
the military decided that enough was enough. He was aware that
something was afoot, but he couldn't stop it."

One of his biggest blunders was to allow his politically inexperienced
wife to share his power. "She has an inflated sense of superiority,
but she lacks the emotional intelligence to know that you shouldn't
insult people in public," Mr. Gwede says. "She seems to revel in the
limelight."

Euro 1.1733 GERMAN COALITION TALKS COLLAPSE -- OFFICIAL: DOW JONES
Dollar Index 93.67
Japan Yen 112.01
Swiss Franc 0.9885
Pound 1.3201
Aussie 0.7554
India Rupee 65.010
South Korea Won 1100.56
Brazil Real 3.2574
Egypt Pound 17.7280
South Africa Rand 14.0327

Oil, stock correlation turns negative by most since 2014

In an era of lashings of surplus oil, the crude oil markets had priced
‘’geopolitical’’ risk at close to zero. Since late June, the markets
have been re-pricing ‘’geopolitical’’ risk, and, in particular, events
in the Kingdom of Saudi Arabia [still the largest single supplier of
crude oil to global markets] have led the re-price.

Saudi Arabia and its allies UAE, Bahrain, Kuwait are caught in an ever
tightening Shia pincer. The paranoia in the palaces in Saudi Arabia is
real and existential. And what is also clear is that Bibi Netanyahu,
MBS [the crown prince of Abu Dhabi], Jared Kushner and a Trump carte
blanche have all leveraged this existential paranoia to effect not a
state capture but
a kingdom capture.  The Guptas were a precursor for this particular capture.

Frontier Markets

My image of the day 🇿🇼@ResurrectZim
https://twitter.com/ResurrectZim/status/931941076457357314

While there may not be any direct connection between these two events,
they suggest some intriguing comparisons. In both countries ruling
families seem to have failed to secure themselves in power.

When Mugabe, as leader of the Zimbabwean African National
Union-Patriotic Front (Zanu-PF), became ruler of Zimbabwe at
independence in April 1980, José Eduardo dos Santos was already
President of Angola. He had succeeded to that position after the death
of Agostinho Neto in September 1979.

Dos Santos had to deal with external intervention and over two decades
of civil war , during which he ruled dictatorially. Mugabe, despite a
facade of constitutionalism and regular elections, also became
increasingly dictatorial. He abandoned adherence to the rule of law
and his country’s economy collapsed. Angola became notorious for the
scale of the corruption linked especially to its oil riches. Zimbabwe
went from bread-basket to basket-case. With the great majority of the
people of both countries living in dire poverty, Dos Santos flew to
Europe when he needed medical attention, while Mugabe went to
Singapore.

Though Dos Santos was probably as reluctant as Mugabe to give up
power, he decided to quit as president of the country and try to
retain influence through the ruling party and members of his family.
Mugabe tried to impose his wife on his party as his chosen successor
and then to cling on to his positions even when the army took
effective control of his country.

Given recent developments in Luanda and Harare, it would seem that
neither of these two old men have succeeded in securing their family
dynasties.

By 2016, suffering health problems that took him to Spain for
treatment, Dos Santos announced that he would step down as president
of Angola and he approved his Minister of Defence, João Manuel
Gonçalves Lourenço as his successor.

Following the victory of the ruling Popular Movement for the
Liberation of Angola (MPLA) in the general election held in August
this year, Lourenço took over as president in September. But Dos
Santos remained president of the MPLA, and clearly expected Lourenço
to look after his interests and that of his family, who had become
enormously wealthy.

From the action Lourenço has now taken against Dos Santos’ billionaire
daughter Isabel, it would seem that he’s becoming his own man. It
appears he wishes to distance himself from the Dos Santos family,
which for many Angolans is associated with corruption on a vast scale.

The London-educated Isabel has proved herself to be a very capable
businesswoman, and though the Angolan economy has been suffering
because of low oil-prices, on top of massive corruption, it’s unlikely
she was sacked to bring in a better chief executive to run the
country’s most important state owned company. There is talk in Luanda
that Isabel’s brother, José Filomeno dos Santos, will be relieved of
his position as head of the country’s large Sovereign Wealth Fund and
that his father, the former president of the country, will be replaced
as president of the ruling party, though that may have to wait until a
party congress is held.

Dollar versus Rand 6 Month Chart INO 14.0318
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Nigeria All Share Bloomberg +36.57% 2017
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana Stock Exchange Composite Index Bloomberg +49.24% 2017
http://www.bloomberg.com/quote/GGSECI:IND

Annual growth in credit to the private sector, often used to
assess private sector expansion, has plummeted from 25 percent in
November 2015, the month Magufuli took office, to 1 percent in July
2017.
http://presidential-power.com/?p=7222

The governments of major sub-Saharan African nations are more indebted
than at any point since 2005, when the IMF and World Bank were writing
off tens of billions of US dollars of debt under their heavily
indebted poor countries initiative.

Worse still, the cost of servicing this debt has risen to an average
of 12.2 per cent of government revenues, up from a low of 5.4 per cent
in 2011 and the highest figure since 2001, before the wave of debt
forgiveness.

“The long-term forces that are driving up debt are not really under
control,” said Jan Friederich, a senior director in the sovereigns and
supranationals group at Fitch Ratings. “One of the fundamental issues
is relatively weak public financial management in most sovereigns in
the region.”

William Jackson, senior emerging market economist at Capital
Economics, a consultancy, added: “Generally finances in the emerging
world have been improving over the last 15-20 years but sub-Saharan
Africa is one region where debt levels have deteriorated. We have
warned about the rise in debt across [the region].”

The figures come just weeks after Patrick Njoroge, governor of the
central bank of Kenya, warned that a “secular increase” in African
public debt has pushed several governments towards a debt-servicing
threshold beyond which they should not borrow.

Until recently the IMF had played down such concerns, but in October
it said that “a continuation of the elevated pace of debt accumulation
seen in 2014-16 would increase public debt to unsustainable levels,”
not just among African oil exporters, which have seen their public
sector debt double to an average of 45 per cent of gross domestic
product since 2010-13, but even in non-resources economies where the
rise has been more modest, from 46 per cent of GDP to 59 per cent.

As the country simmers after its election re-run, churchmen take to
diplomacy – and politicians to the street and social media

In an eloquent address to a full auditorium at the Center for
Strategic and International Studies (CSIS) in Washington, DC on the
morning of 9 November, Raila Odinga, leader of Kenya's opposition
National Super Alliance (Nasa), explained for the first time in detail
what he had in mind for resolving Kenya's deepening political crisis.
He wanted President Uhuru Kenyatta to step down immediately, 'since
his tenure legally expired on 1 November' (the date by which the
Supreme Court wanted a repeat election held), and demanded that his
government be replaced by 'an interim government of shared power
between Nasa and Uhuru's Jubilee administration'. This, he said, is
because 'Kenya is hurtling towards outright dictatorship… under a
reign of terror targeting the electoral commission and the judiciary.'

Nairobi All Share Bloomberg +22.34% 2017
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg +17.07% 2017
http://j.mp/ajuMHJ

Exhibit 019 : Nairobi City. @mwarv
http://bit.ly/2j5j3sh

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

News out of the beating heart of the EU Project [Germany] where Madam
Merkel is unable to cobble together a Coalition saw the Euro sell off
hard in the early hours before staging a snap back.
African debt servicing costs have hit a 16-year high. The cost of
servicing this debt has risen to an average of 12.2 per cent of
government revenues, up from a low of 5.4 per cent in 2011 and the
highest figure since 2001, before the wave of debt forgiveness.
The figures come just weeks after Patrick Njoroge, governor of the
central bank of Kenya, warned that a “secular increase” in African
public debt has pushed several governments towards a debt-servicing
threshold beyond which they should not borrow.
The Supreme Court wielded a [political] Guillotine and President
Kenyatta will be sworn in as president Tuesday, Nov. 28.
A Further 90 day delay and Election and the attendant uncertainty
would have been unconcionable for the markets.
I am expecting a ''monster'' Bull run into Year End.
Raila Odinga left Kenya on the eve of today's Supreme Court ruling. He
is now in Zanzibar according to the New York Times.
Ryan Cummings said ''Seems NASA are going to go through with plans to
inaugurate Odinga as Kenyan president in a parallel ceremony. Cant see
what it will achieve outside of legitimising a state crackdown on
actions it could define as treasonous''
The Opposition's asymmetric strategy of tension has run out of road
and there needs to be some serious introspection and navel gazing.
The Shilling popped momentarily over 104.00 ahead of the Court
decision but then predictably rallied to trade firmer at 103.65.
The Nairobi All Share surged +1.035% to close at 164.82.
The Nairobi NSE20 ramped +49.01 points higher to close at 3779.16
Volume clocked 555.5m with Buyers outpacing Sellers by a wide margin
in most counters.

Sasini Tea and Coffee rallied +7.00% to close at 26.75.

Safaricom firmed +0.98% to close at 25.75 and within 3.73% of an all
time high. The NASA Boycott strategy was predictably a damp squib and
I expect Fresh Life time Highs before Year End. Safaricom traded
3.958m shares and Buyers outpaced Sellers by a Factor of 4 to 1.

TPS Serena Hotels [which is a pure play Beneficiary of todays SCOK
decision] improved +0.9% to close at 28.00 on strong volume action of
502,200 shares.

Equity Bank rallied +3.067% to close at an 11 week high of 42.00 and
traded 3.138m shares worth 131.898m. Equity Bank had 3 Buyers for
every Seller.
KCB Group rallied +3.048% to close at a 7 week high of 42.25 and
traded 1.136m shares. Buyers outpaced Sellers by a Factor of 5.5 to 1.
Standard Chartered ticked +0.92% firmer to close at 220.00 and traded
105,600 shares. Notwithstanding the recently issued Profits Warning, I
expect a meaningful move to 240+

CIC Insurance rallied +8.11% to close at an 11 week high of 6.00 and
traded 532,900 shares.

EABL closed unchanged at 237.00 and traded 548,300 shares worth
130.483m. EABL was the only share at the Securities Exchange that had
more Sellers than Buyers.

KenGen popped +1.744% higher to close at 8.75 and traded 243,900 shares.

Total Kenya rallied +4.123% to close at 25.25 and was trading 26.00
+7.22% at the closing Bell. Total Kenya has served up a mouth-watering
+54.76% return in 2017.