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Macro Thoughts

Home Thoughts

“The silence of an African jungle on a dark night needs to be
experienced to be realised; it is most impressive, especially when one
is absolutely alone and isolated from one's fellow creatures, as I was
then.” ― John Henry Patterson, The Man-Eaters of Tsavo

In Tsavo, man has not interfered with natural processes, but stood by
and observed and learned from the long-term vegetational cycles and
patterns that are Nature's hallmark. During the tenureship of my late
husband, who was Warden of Tsavo East for almost thirty years, we
accepted the constant fluctuation of different species triggered by
these cycles as natural events, understanding that we still had a lot
to learn, mindful of the fact that most life forms in that arid
environment are dependent upon the activities of Elephants.

Finally I would like to quote the words of Sir Crispin Tickell whose
credentials would be as long as this lecture - for example:

... "as long as Nature is seen as something outside ourselves;
frontiered and foreign, separate, it is lost both to us and in us. It
follows that to achieve a society in harmony with Nature, we must be
guided by respect for it. We should direct and integrate our lives
consistently with it rather than try to subjugate and control it. This
requires deeper understanding and acceptance of Natural processes, and
an ability to cope with their inherent uncertainties. Thus in the area
of conservation, we should move from the static idea of conservation
of places and things to the conservation of process, to allow natural
processes to function, and to create conditions in which they can do
so."

Gravity’s Rainbow is a 1973 novel by Thomas Pynchon which is about the
design, production and dispatch of V-2 rockets by the German military.
In particular, it features the quest undertaken by several characters
to uncover the secret of a mysterious device named the “Schwarzgerät”
(black device), slated to be installed in a rocket with the serial
number “00000”. As the world watches PyongYang, I cannot help
wondering if Kim Jong-Un has read Pynchon which speaks of “A screaming
comes across the sky” and North Korea.

“But it is a curve each of them feels, unmistakably. It is the
parabola. They must have guessed, once or twice -guessed and refused
to believe -that everything, always, collectively, had been moving
toward that purified shape latent in the sky, that shape of no
surprise, no second chance, no return.’’

Kim Jong-Un has been precise and calibrated in his response to President Trump

“Our final goal is to establish the equilibrium of real force with the
U.S. and make the U.S rulers dare not talk about military option,”
North Korean leader Kim Jong Un was quoted as saying by the state news
agency, KCNA. One of the strategies of the pre-regime change moment
has been to demonise the other leader. And front and centre in Kim’s
mind must be the image
of Saddam Hussein being hung by his neck and of Muammar Gaddafi
meeting his death after having been sodomised with a bottle. When you
view things from Kim the rocket man’s perspective, you might
appreciate that far from being illogical, he is in fact being
ruthlessly logical and he is speaking the language his adversaries
understand lucidly. 10 m folks in Seoul just 60 kms from the border,
28,500 US soldiers are all in the line of fire.

Euro 1.1647
Dollar Index 94.80
Japan Yen 114.06
Swiss Franc 0.9998
Pound 1.3052
Aussie 0.7679
India Rupee 64.605
South Korea Won 1114.75
Brazil Real 3.2680
Egypt Pound 17.6475
South Africa Rand 14.0546

Stocks, bonds and currencies of developing nations have soared over
the past 21 months, despite tremors on the global landscape from
Brexit to Donald Trump’s U.S. presidency, not to mention coups and
impeachments in their own backyards. Emerging assets are trading at or
near record highs relative to a gauge of their political risk,
according to data compiled by Bloomberg. There’s a similar trend for
inflows into exchange-traded funds.

Frontier Markets

The hunt for yield is taking investors such as M&G Investment to the
world’s least developed region -- sub-Saharan Africa.

Countries that 10 years ago didn’t exist in the international bond
market are now reaching out to global investors. South Africa became
the region’s first dollar bond issuer in the 1990s, and in the past
decade they have been joined by other sovereigns including Rwanda,
Ghana and Cameroon. Most recently, Ivory Coast sold $1.25 billion of
16-year notes alongside a €625 million ($729 million) 8-year bond.

African bonds yield 12 percent on average, according to the AFMI
Bloomberg African Bond Index -- much higher than the Bloomberg USD
Emerging Market Sovereign Bond Index’s 4.4 percent.

The area is "on the brink of a deadly disaster", warned the Norwegian
Refugee Council on Wednesday.

Four years of clashes between militias representing the Luba ethnic
group and Twa pygmies in Tanganyika province have killed hundreds of
people and forced thousands to flee into neighbouring Zambia.

The conflict, which has intensified in recent months, is part of a
worsening humanitarian crisis in the DRC.

Militia violence has spiked this year, fuelled in part by President
Joseph Kabila's refusal to step down when his constitutional mandate
expired last December.

"Tanganyika is on the brink of a deadly disaster," said Ulrika Blom,
NRC's Congo country director. "It's a catastrophic cocktail about to
blow up."

Democratic Republic of Congo opposition leader Moise Katumbi has
warned President Joseph Kabila against stretching the people’s
goodwill.

Katumbi says President Kabila must cede power in December when his
extended mandate expires or risk facing an uprising.

I flicked the channels and came across a report from the Congo, where
opposition presidential hopeful Moise Katumbi had been leading the
street against a third term for Kabila. ‘’Birthday-Boy’’ President
Joseph Kabila is constitutionally barred from running for a third
term, and Katumbi has set out his stall now and is a formidable
adversary. In fact, the numbers were building and Katumbi must have
been thinking this might just turn into a Tsunami. President Kabila,
however, out- witted Katumbi by removing him from the street and the
Congo entirely.  is might well prove a cleverly administered technical
knock-out.

Democratic Republic of Congo’s central bank said on Thursday that it
expects year-end inflation to stand at 49.8 percent, down from an
earlier estimate of over 52 percent.

Dollar versus Rand 6 Month Chart INO 14.0534
http://quotes.ino.com/charting/index.html?s=FOREX_USDZAR&v=d6&t=c&a=50&w=1

Egypt Pound versus The Dollar 3 Month Chart INO 17.6475
http://quotes.ino.com/charting/index.html?s=FOREX_USDEGP&v=d3&t=c&a=50&w=1

#Nigeria does not see devaluation risk in midterm: finance
minister @ReutersAfrica


Nigeria All Share Bloomberg +37.22% 2017
http://www.bloomberg.com/quote/NGSEINDX:IND

Ghana is having a hard time selling $820 million of local-currency
debt. They aren’t sovereign notes, which is part of the problem.

The second-biggest economy in West Africa attracted just a quarter of
the 3.6 billion cedis of 10-year bonds up for sale last week at about
19.5 percent. Investors were willing to take on 2.4 billion cedis of
seven-year notes paying just half a percentage point lower. The
government has extended the offer period to the end of this week, at
the same terms.

“The vast majority of offshore investors that can buy cedi bonds have
only got a mandate for sovereign risk,” the government said in a
statement. “Over time, and as the structure performs, we expect more
offshore buying.”

To be sure, Ghana’s eurobonds are holding up just fine. They returned
18 percent this year, more than double the gains in the Bloomberg
Barclays Emerging Markets Hard Currency Aggregate Index.

Is the yield attractive enough?

The nation is offering its energy bonds at about 200 basis points
higher than the yield on local-currency government debt due in 2026,
and 50 basis points more than the average yield on a 10-year auction
in April.

A MONEY-CHANGER deftly flicks through a brick of bills, her
fingernails a sparkly purple that matches her eye-shadow. She keeps
the stack of “bond notes” (Zimbabwe’s ersatz money) bundled inside a
sock in a plastic carrier bag. Real American dollars are hidden in her
bra. Although bond notes are officially worth the same as American
dollars, here on a pavement in Harare, the capital, greenbacks trade
at a premium of 20-30% to the bills printed by Mr Mugabe’s government.
Those wanting to buy dollar bills with mobile money, which is also
supposedly denominated in the American currency, must pay a further
premium of 30%.

The queues that once snaked around the block outside banks have
disappeared, but only because there is hardly any cash to be had.
Nearly everyone pays with swipe cards linked to Zimbabwean bank
accounts, or EcoCash, a popular form of mobile money. But the lack of
foreign exchange means that imports may become scarce. In late
September a shiver of panic over shortages of food and fuel rippled
through the capital, sparking a round of panic-buying. And prices are
rising.

John Robertson, an economist, reckons that the money supply expanded
by 36% in the 12 months to August, six times more than the rate a few
years earlier. “What’s behind that money? Nothing,” says Rob Davies,
another economist in Harare. “It’s a Ponzi scheme.”

In October Mr Mugabe replaced his pragmatic finance minister, Patrick
Chinamasa, with a loyalist. Mr Chinamasa lost his job while attending
the annual meetings of the World Bank and International Monetary Fund
where he was pleading for debt relief and new loans to restart the
economy. Zimbabwe is unlikely to get either as long as Mr Mugabe is in
charge.

Acacia Mining said on Thursday its chief executive and chief financial
officers had resigned and appointed temporary replacements in the
midst of negotiations to end a long running dispute with the Tanzanian
government.

Africa is the largest untapped source for growth for our industry, and
a lot of the minerals of the future will come from the continent,"
Baatar said. "Our future with the East lies in Africa, and together we
can participate in its transformation journey."

The track record of success for the world’s biggest mining companies
in Africa over the last decade has been poor. Firms, including Rio,
spent billions expanding into new African assets as metal prices
soared during the commodities super-cycle of the late 2000s, only to
see much of the value lost as prices collapsed in later years.

Rio spent $3.7 billion in 2011 on a coal project in Mozambique and
years developing the $20 billion Simandou iron ore project in Guinea.
It later abandoned both projects. Rio’s former chief executive officer
and ex-chief financial officer were charged with fraud by U.S.
authorities who alleged they inflated the value of the Mozambique coal
assets.

For future projects to succeed, partnerships with African states,
financiers and customers must "change beyond the traditional models
and include different types of joint ventures and different
project-financing models," Bataar said.

The Markit Stanbic Bank Kenya Purchasing Managers’ Index (PMI) for
manufacturing and services slumped to 34.4 from 40.9 in September, its
lowest since the series began in January 2014.

“The heated political temperature has resulted in a challenging couple
of months for Kenya’s private sector,” said Jibran Qureishi, economist
for East Africa at Stanbic Bank.

Output has contracted for six straight months, according to the PMI,
and Qureishi said last month’s drop was the sharpest since the series
began, as output, new orders and employment contracted.

Par Value:                  0.05/-
Closing Price:           25.25
Total Shares Issued:          40065428000.00
Market Capitalization:        1,011,652,057,000
EPS:             1.21
PE:                 20.868

H1 Service revenue 109.73b vs. 98.01b +12.0%
H1 Handsets and other revenue 4.49b vs. 4.01b +11.9%
H1 Construction revenue 0.20b vs. 0.08b +150.0%
H1 Voice revenue 45.70b vs. 47.35b +3.6%
H1 SMS revenue 8.92b vs. 8.63b +3.4%
H1 Mobile data revenue 17.55b vs. 13.40b +31.0%
H1 Fixed service revenue 3.23b vs. 2.40b +34.7%
H1 Mpesa revenue 30.05b vs. 25.87b +16.2%
H1 Total revenue 114.43b vs. 102.10b +12.1%
H1 Other income 0.32b vs. 2.28b -86.0%
H1 Direct costs [35.43b] vs. [32.50b] +9.0%
H1 Construction costs [0.20b] vs. [0.08b] +150.0%
H1 Other expenses [24.84b] vs. [20.99b] +18.3%
H1 EBITDA 54.27b vs. 50.81b +6.8%
H1 Depreciation and amortization [16.74b] vs. [16.35b] +2.4%
H1 EBIT 37.53b vs. 34.46b +8.9%
H1 Finance income 0.91b vs. 0.83b +10.2%
H1 Finance costs [0.63b] vs. [0.81b] -21.9%
H1 PBT 37.82b vs. 34.49b +9.6%
H1 Net income 26.20b vs. 23.93b +9.5%
H1 Basic and diluted EPS 0.65 vs. 0.60 +9.0%
Shareholders’ funds 94.82b vs. 107.49b -11.8%
Cash and cash equivalents at the end of the half year 28.07b vs. 43.03b -34.8%

Company Commentary

Customer numbers +10.8% 2.5m at at 30th September 2017
Mobile Data Customers 16.9m +13.5%
M-Pesa Customers 19.3m +9.5%
Service Revenue +12.00% to 109.73b
Voice service Revenue 47.35b +3.6%
Messaging SMS Revenue 8.92b +3.4%
Mobile Data Revenue 17.55b +31%
M-PESA revenue 30.05b +16.2%
Non Voice service Revenue increased to 56.8% of total service revenues
EBITDA +6.8% to 54.27b
EBIT +8.9% to 37.53b
Net Income +9.5% to 26.2b excluding one-off adjustment in H1 17 Growth was 21.4%

Conclusions

Against a soft macro backdrop, Safaricom have served up another
compelling set of Earnings.
Voice still alive and kicking, Data +31% and M-PESA +16.2% lead the charge
They are looking at geographical expansion.
M-Soko takes them into E-Commerce.
Strong and safely earnings

Nairobi All Share Bloomberg +22.60% 2017
http://www.BLOOMBERG.COM/quote/NSEASI:IND

Nairobi ^NSE20 Bloomberg +18.54% 2017
http://j.mp/ajuMHJ

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