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Macro Thoughts

This is one of the most unclear Fed meetings since 2015 and markets
are set for a major move.
Rate cut is currently favored, but it’s close. This meeting sets the
tone for the rest of 2019

Specifically, with respect to the United States, stoking up the Fire
with rate cuts is a very dangerous situation because according to my
calculations, the FED will need to be raising rates into the Election,
something that will turn Trump apoplectic I am sure.

Home Thoughts

We do not know when, or even if, such a momentous event will occur.
But it behoves us to be prepared. That is why Oxford university polled
the public recently on what humanity should do if aliens make contact.
The answers, unveiled last week at the British Science Festival in
Coventry, amounted to a boost for scientists and a boo to politicians.
Thirty-nine per cent of respondents believed that scientists should
decide what to do next, outnumbering the 15 per cent keen for
politicians to shoulder this historic duty.
Only 11 per cent thought a planet-wide referendum should shape the
future of cosmic diplomacy. Startlingly, a majority would support
replying.
This is madness on a galactic scale. An alien lifeform extending the
tentacle of friendship is likely to be reaching out from a position of
technological, if not intellectual, superiority.
The history of explorers pinpointing distant lands is one of plunder
and conquest. Parading our presence could unleash interplanetary
pandemonium.
The survey is not frivolous. Our species has been never been more
invested in the scientific hunt for life elsewhere in the universe.
The Seti Institute in California, whose name stands for the Search for
Extra-Terrestrial Intelligence and which is backed by Nasa, has been
scanning the heavens for alien radio signals since the 1980s.
Billionaire tech investor Yuri Milner is a prominent backer of the
$100m Breakthrough Listen project, a decade-long rummage through radio
and visible light emissions from distant stars.
The Kepler Space Telescope, meanwhile, was launched in 2009 to search
for exoplanets — those beyond our own solar system. It found more than
2,600.
Last week, one exoplanet that fell under Kepler’s gaze was revealed to
have water in its atmosphere. By analysing the starlight filtering
through the atmosphere of K2-18b, lying 110 light years away,
scientists at University College London deduced the presence of water
vapour and hydrogen.
“This planet satisfies more requirements for habitability than any
other we know about now,” one said. Life elsewhere might be cut from a
different molecular jib; if not, liquid water is a prerequisite.
There is more data to come: the James Webb space telescope, Hubble’s
successor, should begin operating in 2021; the European Space Agency
will launch Ariel, a planet-hunting mission, in 2028.
If a mysterious signal was picked up, the detecting observatory would
ask others to confirm the signal is real, not an artefact, and from
space rather than Earth.
Next, scientists would need to judge whether it is a
“technosignature”, a sign of technologically advanced activity rather
than a natural phenomenon.
It is unclear what would follow, although current recommendations
suggest the discoverer notifies the UN and International Astronomical
Union, as well as the public.
While 56 per cent of those surveyed supported a reply (men were keener
than women), there is little scientific appetite for messaging back.
“Intentionally signalling other civilisations in the Milky Way Galaxy
raises concerns from all the people of Earth, about . . . the
consequences of contact,” runs a 2015 statement signed by, among
others, Elon Musk.
It is not impossible that a single nation could steal the initiative.
A new space race is unfolding between India and China. This year,
China’s Chang’e-4 landed on the far side of the moon, while India
deployed its own Vikram lander (though contact was lost).
President Donald Trump’s resurrection of US Space Command hints at a
foreign policy calculation that dominance in the final frontier can
rebalance a lack of diplomacy on terra firma.
The same muscular reckoning may lead to a darker gamble: what more
dramatic way for a strongman to show he is king of this world than by
controlling first contact with another?

“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
sadness”.
“Somehow we are picking up signals from radio programmes of 40, 50, 60
years ago.”

It is just as the main course arrives that Wole Soyinka — playwright,
poet, novelist, essayist and part-time agitator — reaches into his
pocket and brings out a plump green chilli.
“Actually, when I travel I always carry a special paste, which I have
made for me — paste which I put in my pocket,” he offers by way of
explanation in his plummy baritone.
“This one,” he says, proceeding to dissect the dapple-green pepper, “I
got when I arrived in London. Because I forgot my paste in the fridge
in Sochi.”
There’s something in the casualness of the gesture that sums up the
larger-than-life 83-year-old. Soyinka, one of the great postcolonial
literary figures — he won Africa’s first Nobel Prize for literature in
1986 — and a fearless denouncer of dictators is a peripatetic
adventurer, seemingly at total ease in his own skin.
In the chilli incident is a dash of eccentricity, a deft nod to
travels in Russia, and the confidence of a man happy to produce his
own fiery condiment in a London fish restaurant.
There’s the set-in-his-ways gentleman doing things just so and the
Bohemian man of letters who doesn’t give a damn. His bristly white
beard and snow-white Afro, which conjures up a lavish bubble bath,
complete the picture.
I am leaned in rather close because Soyinka, though mentally as sharp
as razor wire, is struggling to hear me over the 1970s soul and hubbub
of Friday afternoon diners.
We had asked to have the music turned down at the start of the meal
because Soyinka’s hearing aid magnifies ambient sounds. The waitress
had come back unbudgeable, apologising but citing “company rules”.
I’ve been rather tickled ever since by the notion that, as a result,
Soyinka has not been responding to my questions, but rather answering
inquiries from diners at other tables. His anecdotes flow in a
riverine gush unhindered by my efforts to change their course.
Soyinka chose Pescatori in Fitzrovia, an upscale part of London within
eyeshot of the spindly BT Tower, because it has been a Nigerian
hangout for decades.
He hasn’t been for years and there’s no sign of recognition from the
staff. The moment he sits down, the waitress offers to pour him water,
which he rejects as though she were insisting he start with a plate of
spinach.
“I’ll have a glass of wine,” he says, as if this were self-evident. We
opt for a bottle, but when I ask the waitress for a recommendation,
Soyinka intervenes.
“Since you’re not choosing,” he says, shooting me a slightly
contemptuous glance, “do they have Arneis de Roero?”
“I won’t let the waiter choose, on principle,” he says, as she pours
us each a generous glass of the Arneis, a white grape variety from
Piedmont.
It is the sort of firmly held conviction, about matters great and
small, that has so often landed Soyinka into what he calls “hot
water”.
Hot water, it transpires, can range from causing a “hell of a
kerfuffle” for diving, under the influence of malarial fever, into the
pool of an Atlanta hotel —
“It was the first time any black person had ever immersed his body in
that swimming pool” — to spending two years rotting in a Nigerian
prison.
Though he writes in English, Soyinka presents an African view of the
world and his prose is steeped in Yoruba mythology. Yet he rarely goes
easy on African despots — from Omar al-Bashir of Sudan to Zimbabwe’s
Robert Mugabe.
After urging his countrymen to stop paying taxes during the mid-1990s
military dictatorship of Sani Abacha and escaping from Nigeria by
motorbike, he was sentenced to death in absentia in 1997 and was only
able to return when civilian rule was restored in 1999.
Soyinka’s adventures, scrapes and brushes with the law — some of which
have no doubt improved in the telling — have formed the material for
several memoirs, from The Man Died: Prison Notes (1971) to You Must
Set Forth at Dawn (2006).
Together with 30 plays, two novels, several collections of poetry and
countless thunderous essays, they form a voluminous body of work that
makes Soyinka a sort of Samuel Johnson of his age.
He has never been tired of Lagos or London, much less of life. Back in
1965, as factional and ethnic politics began to grip post-independence
Nigeria, he was arrested for holding up a radio station at gunpoint.
The idea was to stop a minister from taking to the airwaves. When I
inquire about the incident, he mishears me. “Did you say mimic gun?”
he asks. (I didn’t.)
“One of the myths, and I have many myths surrounding me, is that I
went in with a toy gun, which I find very funny. Let’s just say I have
never held a toy gun in my life.”
At this point, a different waiter appears with our starters, a plump
pinkish octopus tentacle (like a severed arm) for Soyinka and what was
supposed to be a prawn and crayfish cocktail for me.
I look at the two slices of rolled-up ham and protest that it is not
what I ordered. The waiter scowls and thrusts it at me anyway.
A moment later the manager appears, whipping both plates away to the
evident mystification of Soyinka, who is left with his knife and fork
poised above the tablecloth.
A few minutes later, our rightful starters restored, we are discussing
Soyinka’s childhood in Abeokuta, a city in the fertile wooded savannah
of south-west Nigeria.
Born in 1934, the second of six children, his mother was a shopkeeper
and political activist and his father an Anglican minister and
headmaster of St Peter’s Primary School.
“I grew up with street theatre of one form or another. The masquerades
that many people think are purely sacred have a performance aspect. It
was an unbelievable pageant. It awoke my theatrical instincts.”
After attending Abeokuta Grammar School, where he won several writing
prizes, Soyinka went on to University College Ibadan to study English
literature, Greek and western history, and from there, in 1954, to
Leeds University.
Already prolific, after he graduated he wrote plays including The Lion
and the Jewel, which attracted the attention of London’s Royal Court
Theatre.
His first work to appear there was a one-act play about apartheid
South Africa called The Invention.
It was preceded by a poetry recital to which Soyinka invited his
cousin, a young musician called Fela Kuti, to accompany him on stage.
That was a big break for Fela, who went on to become the legendary
father of Afrobeat.
The two shared a flat in Bayswater. “We were impecunious. We shared
everything,” he says, polishing off the last sliver of octopus and
mopping a dab of sauce from his prodigious beard. “Everything. I won’t
say more than that. It was a wild apartment.”
Soyinka returned to Nigeria in 1959 and, when independence arrived in
1960, wrote a play, A Dance of the Forests, for the celebrations.
Nigeria’s new elite did not like it. Soyinka refused to gloss over
Africa’s past, including the participation of Africans in the slave
trade.
The play warned of the dangers of a new corrupt class emerging to
occupy the space vacated by the British. Soyinka has been at war with
African despots ever since.
The waitress returns with our main course, spaghetti vongole for him
and a grilled Dover sole for me. More wine is poured. I’ve ordered
Jersey Royal potatoes, but Soyinka is not tempted to share them.
“I’ve been ruined by the African yam. I lost all taste for potatoes
since I was a student, thanks to mashed potatoes,” he says.
“Excuse me, I am going to bring something out with which I always
travel.” It is at this point that he produces the chilli.
Soyinka spent the next several years writing and teaching in Nigeria.
In 1967, he met the leader of breakaway Biafra, then embroiled in a
ruinous civil war, an encounter that landed him two years in solitary
confinement.
In his cell, he scratched out protest poetry on toilet paper and
cigarette packages.
Despite such hard experiences, I suggest, there is something
picaresque about his escapades.
“Fortunately, I have a saving sense of self-deflation. Still, there
are certain issues about which I feel very strongly and for which I am
prepared to go any lengths,” he says, clattering a clamshell into a
side bowl.
Even prison? “That’s an occupational risk. You don’t really set out to
go to jail. It just happens, and you have to accept it as a penalty of
taking certain risks. I just like to be at peace with myself,” he
says, adding that some things he cannot let lie.
“One is one’s own ultimate judge. The view of the rest of the world is trivial.”
Out of jail, Soyinka stepped up his political activity, turning his
pen against misrule across the continent. “With any society coming out
of one phase of suppression there’s always a contest for the
repossession of the space of power,” he says. “It could be a focused,
very purposeful elite or just a demagogue rising from the slums.”
Few leaders — politicians, generals or the religious zealots behind
Boko Haram — have escaped his contempt.
Of the latter, he says: “For the first time, I began to accept the
existence of the theological concept called ‘evil’. Of course the foot
soldiers in any cause are usually obtained from the disenfranchised.
But the real initiators of this kind of violence are not. They believe
in power.”
When I ask how optimistic he is about Africa, where coups are rarer
and governments come and go with more regularity, he is cautious.
No sooner is there some positive development in one corner of the
continent, he says, than something else — like Boko Haram — sets
things back. I ask him to name a good Nigerian leader, but he
struggles for an answer.
Soyinka has spent much time in the US, where he has taught at a number
of universities.
“My life has been involved with the diaspora on a very personal and
visceral level,” he says of his interaction with prominent
African-Americans.
Donald Trump’s election marked an end to his US sojourn. In what has
become known among Nigerians as “Wolexit”, he cut up his Green Card.
“To have some redneck ride into power on the steed of racism was for
me too much.” Later this month, when he delivers a regular Harvard
lecture, “I’ll go in as an alien, an alien from outer space. I love
that designation.”
The bottle of Arneis is drained and Soyinka looks mournfully at his
empty glass. I suggest another. He brightens, opting for “a robust
Italian red. Montepulciano. Two glasses.”
I ask about the state of writing on the African continent. Nigeria in
particular, hardly a stranger to brilliant fiction from the likes of
Soyinka, Chinua Achebe and Ben Okri, has recently seen an astonishing
flourishing of literary talent.
Chimamanda Ngozi Adichie, author of Half of a Yellow Sun — which
Soyinka describes as “marvellous” — is but the best known. There are
dozens of others from all parts of the country and the diaspora,
including Elnathan John, Leye Adenle and Teju Cole, writing in a
dazzling range of styles.
Many of the brightest talents, including Sarah Ladipo Manyika and
Ayobami Adebayo, are women.
“We have a crop of young female writers coming out of Africa these
days. It’s really very impressive. There is a general unleashing of
female energy.” He is reluctant to name names for fear of it being
“taken as some kind of Wole Soyinka endorsement”.
(He takes no part even in the literary prize that bears his name.)
Many of the writers, he says, reflect a broader female stirring on the
continent, from business to politics and even religion — what he calls
a “Here I am, deal with that” attitude.
He wonders whether the literary outpouring is some kind of reaction to
religious fundamentalism. “Could it be a kind of subconscious response
to the misogynist agenda of extremist religious strains?”
The waitress takes away my Dover sole to be re-grilled. I have been so
engrossed in conversation it is only half-eaten.
I ask about his own work’s reputation for difficulty. One reviewer
accused him of never writing “house” when he could write “habitation”.
Short words are so boring, he says, adding that he thinks in Yoruba,
whose vocabulary has very precise meaning.
“If it is too difficult, too self-consciously mannered and stylistic,
for heaven’s sake just throw it in the garbage and read something
else.”
Soyinka spends much of his time these days in Abeokuta, where he lives
with his much-younger third wife, though he keeps a “pied-à-terre” in
Lagos.
“I am a closet glutton for tranquility,” he says, despite what he
admits are outward appearances to the contrary. But people and events
“keep dragging me back”.
How many children does he have? “In Yoruba tradition, we say it is
unfortunate to count your children. The gods have been unusually
generous in my own circumstances, unsolicitedly generous,” he says,
emphasising each syllable.
“I am quite content. I told my children and grandchildren recently
that I am changing my title to the Grand Patriarch. That’s how I am
referred to now by my entire clan.”
How long do you intend to live for, I ask, surprised at my own
question. “By all logic I should not be alive right now because of my
lifestyle,” he replies, unfazed.
“I flout everything they teach at medical school, including the fact
that I don’t drink water.” He looks at his untouched glass. “I eat
only when I want to. I don’t obey the rules of cholesterol.”
What about smoking? “I used to smoke hard cigarettes. Gitanes,
Gauloises, cigars and cheroots especially. But I lost interest several
years ago,” he says, draining the Montepulciano.
We’ve been talking for nearly three hours, but he can’t resist one
last story. “I had an argument with Fidel Castro about it,” he says,
as if this might be a common occurrence.
“By that time Castro had got religion about the perils of smoking and
he rounded on a guerrillero, saying, ‘This is bad for you. I have
medical evidence.’ He started bullying him.
I said, ‘Wait a minute. Leave the man alone. Let him find his own
time.’ ” Soyinka says this triggered a two-hour discussion. “Castro
loved to argue. But I think that day he met his match.”
The two called it an evening and Soyinka retired to bed. “The
following morning a box of cigars — Cohiba — arrived at my hotel.
It just said, ‘With compliments of the Cuban government.’ Who did it?
To this day, I’ve no idea. But I still have some of them in Abeokuta.”
He pauses. “That’s the story of my smoking career.”

PESCATORI57 Charlotte St, Fitzrovia, London W1
Polpo alla griglia £11.50
Prawn cocktail £10.50
Jersey Royals £3.75
Spaghetti vongole £18.50
Dover sole £39
San Pellegrino £4
Espresso £2.40
Double espresso £2.80
Bottle Arneis Langhe £45
Glass Montepulciano x 2 £13.90
Total (inc service) £170.27

To think how many Africans suffer in oblivion. That makes me sad…
Despite my sadness, I create joyful rhythms… I am an artist… I want
people to be happy and I can do it by playing happy music. And through
happy music I tell them about the sadness of others… So really I am
using my music as a weapon.

Political Reflections

The Saudis know that they are no match for Iran one-on-one. They
absolutely need the cooperation of the US – Israel would be a big help
too.
The Iranians know perfectly well they cannot directly attack Israel.
Israeli submarines equipped with nuclear-tipped missiles are
permanently deployed in or near the Gulf and with that option, Israel
could attack and cripple Iranian nuclear and other infrastructure with
non-nuclear equipment from the air, as almost happened in 2012 before
the attack was called off because of opposition from the Obama
Administration in Washington.
Immobilizing half of the Saudi oil production is not a minor event.
Retaliation will probably be equally serious, if not more so.
The preliminaries are over. The main event, it would appear, is about to begin.
Unless, of course, the Trump Administration does nothing of
significance in retaliation. That would be a mistake of cosmic
significance, much more serious than the erasure of Obama’s “redline”
following the Syrian use of poison gas, which led to a significant
reduction in US influence in the Middle East.

Why the fuzzy language here? B/c saying Iran bombed Aramco means you
have to retaliate

~ 3 strikes and you’re out seems about the limit cc  @hervegogo

Yemen's Iran-backed Huthi rebels on Wednesday threatened to attack
dozens of targets in the United Arab Emirates, including in the cities
of Dubai and Abu Dhabi.
"We announce... that we have dozens of targets in the UAE, among them
Abu Dhabi and Dubai, and that they can be targeted at any moment,"
Huthi military spokesman Brigadier Yahya Saree said.
The UAE is part of the Saudi-led coalition fighting the Huthis in
Yemen in an intractable five-year conflict that has devastated the
country.
"If you want peace and security for your facilities, and towers made
of glass that cannot withstand one drone, then leave Yemen alone," the
rebel spokesman said.
The Huthis have made threats against the UAE in the past, and claimed
strikes that were never confirmed by the Emirati authorities.
This week, the militia claimed it carried out devastating attacks on
Saudi oil infrastructure that took out half the kingdom's production
-- although Washington and Riyadh reject that, saying the assault was
beyond their capabilities.
"To the Emirati regime, we say that just one operation will cost you a
lot," Saree said.
"You will regret it if your leadership decides to issue instructions
to its armed forces to launch any response in the coming days or
weeks," Saree said.

Gro Harlem Brundtland, a former WHO head who co-chaired the board,
added that current approaches to disease and health emergencies are
“characterized by a cycle of panic and neglect.”
The report cited the 1918 “Spanish flu” pandemic, which killed an
estimated 50 million people. With vast numbers of people crossing the
world on planes every day, an equivalent air-borne outbreak now could
spread globally in less than 36 hours and kill an estimated 50 million
to 80 million people, wiping out nearly 5% of the global economy, it
said.

International Markets

Back in Britain, Boris Johnson is still prime minister and the country
is still due to leave the European Union on Oct. 31, deal or no deal.
Yet the pound has recovered all the losses since the start of his
hectic premiership. At $1.25, it is stronger than when he took office.
What’s going on? It’s customary to view the Brexit saga as some kind
of Shakespearean tragedy of betrayal, from the playing fields of Eton
to the dreaming spires of Oxford and thence to the corridors of power
in Westminster.
The better analogy might be “A Comedy of Errors.” Egregious mistakes
have been made by players on both sides. They range from Johnson’s
strategy to force through a no-deal exit by closing parliament, which
cost him his majority, to opponents of Brexit leaving him in power.
The market judges these errors make it much less likely that Britain
will exit with no deal. That may be the biggest error of all.
Sterling has strengthened too far and too fast.

The yuan was the eighth most traded currency this year, being on one
side of just 4.3% of foreign exchange trades by turnover world-wide,
according to data published Monday by the Bank for International
Settlements.
That ranking was unchanged from the previous survey three years ago as
the BIS said the value of yuan trading has only grown “in line” with
other emerging-market currencies, although China now hosts more forex
dealing.
As President Xi Jinping has toured the globe in recent years, China’s
government-run banks have lent billions of dollars in yuan to other
countries and welcomed the development of markets trading yuan bonds.
Beijing has cheered Hungary for raising money in yuan, and Russia’s
central bank for saying it would hold more foreign-exchange reserves
in yuan.
Yet the Switzerland-based BIS’s long-running study showed that 88% of
the $6.6 trillion in daily foreign-exchange turnover this April still
included the U.S. dollar.
A major obstacle in China’s ambitions: Beijing’s tight control, with a
system it calls “managed convertibility” to keep the currency stable
and the financial system safe.
Events starting in mid-2015 also undermined market trust, including a
botched currency devaluation after a stock crash. Yuan selling helped
cut the central bank’s reserves by about $1 trillion in a little over
two years.
“As the renminbi weakened after mid-2015, so too did the market’s
willingness to own it and use it,” David Lubin, head of emerging
markets economics at Citigroup Inc., said in a March report, using
another name for the yuan. “That’s hardly the mark of a global reserve
currency.”
When enthusiasm about an internationalized yuan peaked, about the time
of the IMF endorsement, almost 30% of Chinese trade was settled in
yuan, Hong Kong banks held deposits of 1 trillion yuan and issuance of
yuan-denominated “dim sum” bonds totaled nearly $10 billion a month,
the Citigroup research showed.
More recently, it says, the trade figure has halved, deposits are down
40% and bond issuance has slipped to a 10th of its highs.
The BIS data underscore the disconnect between China’s huge economy
and limited activity in its currency. Use of the Hong Kong dollar has
risen much faster—indicating sustained global interest in doing
business in China, just not with its currency.
Under the weight of a fast-decelerating Chinese economy, the yuan has
been slipping. In August, the central bank let it fall below 7 to the
dollar for the first time since 2008, prompting the Trump
administration to label Beijing a currency manipulator.
China has grown as a center for foreign exchange trading, with an 86%
increase in trading turnover from 2016, far outpacing a 27% global
rise, the BIS survey said. Still, this represents just 1.6% of the
global total this year, and only a fifth of Hong Kong’s turnover.

Euro 1.1047
Dollar Index 98.454
Japan Yen 108.083
Swiss Franc 0.9966
Pound 1.2482
Aussie 0.6786
India Rupee 71.1775
South Korea Won 1194.93
Brazil Real 4.1109
Egypt Pound 16.348
South Africa Rand 14.6929

With his flowing locks and gnomic pronouncement that the “energy of we
[is] greater than any one of us, but inside each of us”, Adam Neumann
has the air of a prophet.
Max Weber, the sociologist, called charisma the “quality that makes an
individual seem extraordinary . . . by virtue of which supernatural,
superhuman or at least exceptional powers” are attributed to him
But charisma in business is not god-given, like the charisms (gifts of
grace) described by the apostle St Paul, such as speaking in tongues
or performing miracles. It relies on other people trusting in the
charismatic leader; as soon as they stop believing, it evaporates.
Even if he had been pure as a prophet, he would have faced resistance.
The broader difficulty is that venture capital investors such as Mr
Son — something of a shaman himself — have been quick to put huge
valuations on technology companies with fluent founders, confident
that stock markets will follow.

Commodities

Sustainability-minded millennials increasingly want to know where
their cup of Americano or Espresso Macchiato comes from, and some of
the world’s top coffee companies are turning to technology for help.
Roasters including J.M. Smucker Co. and Jacob Douwe Egberts are
joining a blockchain initiative by Farmer Connect, a startup backed by
Swiss coffee trader Sucafina and developed in partnership with
International Business Machines Corp.
The technology will help firms trace the origin of the beans they buy
and sell as well as their pricing along the supply chain.

Emerging Markets


Frontier Markets

Sub Saharan Africa

August was an interesting month with hugely diverging performances.
Egypt skipped into overdrive on the back of 1) funds from the Veon/GTH
buyout being recycled back into the market 2) the Fawry IPO and 3) a
150bps rate cut by the CBE.
Trade deficit with Africa stood at KES 156m, marking the first time
Kenya has run a deficit with other African countries since the Central
Bank of Kenya (CBK) started to publicly keep trade records in 1999.
We asked everyone about the removal of the old KES 1,000 note (total
stock estimate of USD 200m) by 1 October. It may lead to some parallel
market premiums ahead but impact expected to be muted.
Rate cap silver linings - it pushed the move to digital loans. There
are now 63 mobile money players from telco, fintech and banks, with
approximately KES 10bn (USD 100m) credit and growing fast. Safaricom
and its bank partners are roughly 60% of this market.

Digital enterprises in Africa are often heralded as the future of the
continent’s development, particularly when it comes to “leapfrogging”
the numerous barriers to becoming profitable businesses able to take
advantage of internet technologies to scale rapidly.
A report this month on the global digital economy from UNCTAD worries
“wealth creation in the digital economy is highly concentrated in the
United States and China, with the rest of the world, especially
countries in Africa and Latin America, trailing considerably far
behind.”
UN agency also worries the dominance of global digital “super
platforms” (Facebook, Microsoft, Apple, Amazon, Google, Tencent and
Alibaba), their control of data, as well as their capacity to create
and capture the ensuing value, will only accentuate the concentration
and consolidation of their dominance rather than reducing inequalities
between and within countries.
Ultimately, there’s the risk developing countries will just become
providers of raw data, “while having to pay for the digital
intelligence generated using their data.”
The report puts the opportunities and challenges for young African
businesses in their rightful context against a backdrop of tough
international competition, weak physical and digital infrastructure
and the limited access to both capital and talent.
The authors frame their analysis of African digital enterprises as
three strategic approaches.
The first, described as customer-relationship scaling for local niche
markets, is used by business-to-business digital enterprises in areas
including customized software development for local firms and supply
chain management systems.
This strategy works because the digital enterprises often don’t
require huge capital resources before acquiring customers and can also
adapt and learn as they go along.
These companies could face international competition from large
companies like a SAP or Microsoft but more often than not they’re
better placed to customize for the peculiarities and limitations of
the local market (such as poor bandwidth) than their much larger
rivals.
The second strategy noted by UNCTAD for African digital enterprises is
to be a “last-mile platform” providing a service through a
digital-analog relationship. The example given here are platforms like
M-Pesa (East Africa) or Paga (Nigeria) which use thousands of agents
to help reach customers.
This strategy works because African digital businesses operate in
digital markets of low trust and capacity limitations along with other
infrastructure weaknesses such as poor bandwidth.
A third strategy is for African digital businesses to “exploit the
distance-bridging potential of digital technologies” by targeting
customers in developed countries with a localized offering. The idea
is to turn the startups’ physical presence in Africa into an asset.
The most obvious example of this is Andela (started in Nigeria) and
Gebeya (Ethiopia). Both “take advantage of the incessant demand for
software developers in developed countries and the low cost of labour
in Africa.”
Even though the internet offers African digital companies an
opportunity to reach the world with just a few clicks, the report
argues localization and adapting to their market challenges is key to
ensuring a competitive advantage on the global stage.
However, even as these individual businesses grow there’s a concern
not enough is being done to build African digital infrastructure
across markets—”the enterprises seldom, if ever, create digital
building blocks for innovators elsewhere in Africa or beyond.”
It was a point made during Quartz’s Africa Innovators panel at the
World Economic Forum Africa last week.
“We can’t allow our continent to become a dumping ground for crap from
other countries,” argued Bright Simons, founder of Ghana’s mPedigree.
“To do that, we need to build supply chain systems, regulatory
systems, and defend them. And we need to have the technology and the
systems to defend them.”

The strategy, like big tech’s, is to be the platform, said Bob
Collymore to Africa Report, “whether it was for the banking industry,
the healthcare industry, the agricultural industry.’’
Uber filed an initial offering amount of $1 billion, typically a
placeholder amount. The company applied to list on the New York Stock
Exchange. In the IPO Pros- pectus, the word ‘platform’ appears more
than 700 times.
Gladwellian level move. “The tipping point is that magic moment when
an idea, trend, or social behaviour crosses a threshold, tips, and
spreads like wildfire”- Malcolm Gladwell.
The new high tech, millenial, crypto, avocado economy exhibits viral,
wildfire and exponential and even non-linear characteristics not
unlike Ebola.

The digital economy continues to evolve at breakneck speed, driven by
the ability to collect, use and analyse massive amounts of
machine-readable information (digital data) about practically
everything.
Global Internet Protocol (IP) traffic, a proxy for data flows, grew
from about 100 gigabytes (GB)per day in 1992 to more than 45,000 GB
per secondin 2017.
And yet the world is only in the early days of The data-driven
economy; by 2022 global IP traffic isprojected to reach 150,700 GB per
second, fuelled bymore and more people coming online for the first
timeand by the expansion of the Internet of Things (IoT).
Value creation arises once the data are transformed into digital
intelligence and monetized through commercial use.

Platformization is the second driver. In the past decade, a plethora
of digital platforms have emerged around the world using data-driven
business models, and disrupting existing industries in their wake.
The power of platforms is reflected in the fact that seven of the
world’s top eight companies by market capitalization use
platform-based business models.

Transaction platforms are two/ multi-sided markets with an online
infrastructure that supports exchanges between a number of different
parties.
They have become a core business model for major digital corporations
(such as Amazon, Alibaba, Facebook and eBay), as well as for those
that are supporting digitally enabled sectors (such as Uber, Didi
Chuxing or Airbnb).
Innovation platforms create environments for code and content
producers to develop applications and software in the form of, for
example, operating systems (e.g. Android or Linux) or technology
standards (e.g. MPEG video).

The economic geography of the digital economy does not display a
traditional North-South divide. It is consistently being led by one
developed and one developing country: the United States and China. For
example, these two countries account for 75 per cent of all patents
related to blockchain technologies, 50 per cent of global spending on
IoT, and more than 75 per cent of the world market for public cloud
computing. And, perhaps most strikingly, they account for 90 per cent
of the market capitalization value of the world’s 70 largest digital
platforms. Europe’s share is 4 per cent and Africa and Latin America’s
together is only 1 per cent. Seven “super platforms” – Microsoft,
followed by Apple, Amazon, Google, Facebook, Tencent and Alibaba −
account for two thirds of the total market value.

Depending on the definition, estimates of the size of the digital
economy range from 4.5 to 15.5 per cent of world GDP. Regarding value
added in the information and communications technology (ICT) sector,
the United States and China together account for almost 40 per cent of
the world total. As a share of GDP, however, the sector is the largest
in Taiwan Province of China, Ireland and Malaysia. Global employment
in the ICT sector increased from 34 million in 2010 to 39 million in
2015, with computer services accounting for the largest share (38 per
cent). The share of the ICT sector in total employment rose over the
same period, from 1.8 per cent to 2 per cent.

In 2018, digitally deliverable service exports amounted to $2.9
trillion, or 50 per cent of global services exports. In LDCs, such
services accounted for an estimated 16 per cent of total services
exports, and they more than tripled from 2005 to 2018.

The combined value of the platform companies with a market
capitalization of more than $100 million was estimated at more than $7
trillion in 2017 – 67 per cent higher than in 2015. Some global
digital platforms have achieved very strong market positions in
certain areas. For example, Google has some 90 per cent of the market
for Internet searches. Facebook accounts for two thirds of the global
social media market, and is the top social media platform in more than
90 per cent of the world’s economies. Amazon boasts an almost 40 per
cent share of the world’s online retail activity, and its Amazon Web
Services accounts for a similar share of the global cloud
infrastructure services market. In China, WeChat (owned by Tencent)
has more than one billion active users and, together with Alipay
(Alibaba), its payment solution has captured virtually the entire
Chinese market for mobile payments. Meanwhile, Alibaba has been
estimated to have close to 60 per cent of the Chinese e-commerce
market.

As with network effects, more users mean more data, and more data mean
a stronger ability to outcompete potential rivals and capitalize on
first-mover advantages.

In virtually every value chain, the ability to collect, store, analyse
and transform data brings added power and competitive advantages.
Digital data are core to all fast-emerging digital technologies, such
as data analytics, AI, blockchain, IoT, cloud computing and all
Internet-based services.

Indeed, in the global “data value chain”, many countries may find
themselves in subordinate positions, with value and data being
concentrated in a few global platforms and other lead MNEs. Countries
at all levels of development risk becoming mere providers of raw data
to those digital platforms while having to pay for the digital
intelligence produced with those data by the platform owners. Breaking
this vicious circle will require out-of-the-box thinking aimed at
finding an alternative configuration of the digital economy that leads
to more balanced results and a fairer distribution of the gains from
data and digital intelligence.

If left unaddressed, the yawning gap between the under-connected and
the hyper-digitalized countries will widen further and existing
inequalities will be exacerbated

The global value of e-commerce is estimated by UNCTAD to have reached
$29 trillion in 2017, which is equivalent to 36 per cent of GDP (table
I.2). This corresponds to a 13 per cent growth from the previous year.

Digital platforms offer these mechanisms online, and can be both
intermediaries and infrastructures. They are intermediaries in that
they connect different groups of people (the different “sides” of
multi-sided markets).22 For example, Facebook connects
users,advertisers, developers, companies and others, and Uber connects
riders and drivers. Many platforms also serve as infrastructures that
different sides canbuild upon. For example, users can develop profile
pages on Facebook, and software developers can build apps for Apple’s
App Store. In fact, any specific firm may itself be only partly a
platform business. Inthe case of Apple, the vast majority of its
activities focus on selling high-end consumer goods – a rather
traditional business.

Kenya

Par Value:                  20/-
Closing Price:           3.50
Total Shares Issued:          1951467045.00
Market Capitalization:        6,830,134,658
EPS:             0.98
PE:                 3.571