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Macro Thoughts

The United Nations General Assembly #UNGA is a set piece Event that I
always look forward to with a level of desire which always catches me
a little off guard. #UNGA is one of the few Platforms where William S.
Burroughs' edict
“Smash the control images. Smash the control machine.” applies and
just about everyone gets their Warholian moment
 "In the future, everyone will be world-famous for 15 minutes" said Andy Warhol.
Fortunately, this Year, we were able to skip Bibi Netanyahu's ''Dog
and Pony show'' because he had other things to focus on like trying to
cobble together a Government and I am sure the entire World breathed a
collective sigh of relief.
The 16 Year Old Environmental Activist Greta Thunberg who of course
set the tone with her powerful intervention
“You have stolen my dreams and my childhood with your empty words. And
yet I’m one of the lucky ones. People are suffering. People are dying.
Entire ecosystems are collapsing''
“We are in the beginning of a mass extinction. And all you can talk
about is money and fairytales of eternal economic growth. How dare
you!''
Of course the ''How dare you!'' resonated with me because it is as
Ryszard Kapuscinski wrote
''It is authority that provokes revolution''
President Bolsonaro pronounced  ''You shall know the Truth and the
Truth shall set you free'' and spoke of ''Trails of death and
destruction. Ideologically infected human souls and biologically
perverted children''  which I will just leave out there because his
intervention in fact left me speechless.
Boris Johnson spoke of ''Smart cities [which] will pullulate with
sensors, all joined together by the “internet of things”, bollards
communing invisibly with lamp posts.....[and asked] How do you plead
with an algorithm?''
President Rouhani skipped a handshake with President Trump and instead
delivered his message direct via Fox News, which was a very neat
touch.
President Trump evidently found it all a little overwhelming and had
his security detail block a 16 year old Girl and then did a J. Alfred
Prufrock and a ''Like a patient etherized upon a table'' impression.
Imran Khan delivered a speech which was as effective as the reverse
swing with which he used to bamboozle the World's best Batsman and
this time he bowled Prime Minister Modi all ends up.
TS Eliot wrote another poem captioned The Hollow Men which stars
Mistah Kurtz-he deadBetween the ideaAnd the reality
Between the motion
And the act
Falls the ShadowNow lets turn to the markets. Of course, Greta was
referencing the feedback loop and the risks of die back where we enter
a Phase of ''cascading system collapse'' precisely because of the
negative spillover effects of the Hydrocarbon Century. So let me turn
to the Houthis who two weekends ago struck deep inside the Kingdom
with a swarm of Drones and are now reporting that they attacked the
Saudi frontline and have  captured “thousands” of enemy troops,
including many officers and soldiers of the Saudi army, as well as
hundreds of armored vehicles.
“Operation ‘Victory from God’ is the largest military one since the
brutal aggression began. The enemy suffered heavy losses ... and wide
swathes of territory were liberated in only a few days,” Houthi
spokesman Mohammed Abdul-Salam tweeted. 3 Saudi brigades fell in hands
of Yemen’s Houthi fighters in Najran south of Saudi Arabia.
Saudi propaganda was effective in bringing the price of Oil right back
down after a 20% surge two weeks ago but a reprice higher is coming
and this time its not going to ebb. No number of Patriot missile
batteries can protect the House of Saud and its Salvatori Mundi now.
The Enemy is no longer at the border, its on the inside. BUY OIL.
The Dollar has been girding its loins all year and is set to explode.
BUY THE DOLLAR.
Safe Havens like GOLD and the new c21st Safe Haven BITCOIN, however,
are trading like everybody is long and are very crowded and look set
to deteriorate. BITCOIN could in fact fall as far as $1,000,00 where
it was in January 2017.
President Xi will have to let the renminbi go so SELL the RENMINBI.
They will hold it steady this week because the CCP is celebrating 70
years of the People's Republic but when the Party is over, it will be
an almighty hangover.
And You can also SELL STERLING because the United Kingdom is crashing
out of Europe. and the EURO as well where Parity is calling.

#UNGA

Let us go then, you and I,
When the evening is spread out against the sky
Like a patient etherized upon a table;
Let us go, through certain half-deserted streets,
The muttering retreats

Of restless nights in one-night cheap hotels
And sawdust restaurants with oyster-shells:
Streets that follow like a tedious argument
Of insidious intent
To lead you to an overwhelming question ...
Oh, do not ask, “What is it?”
Let us go and make our visit.

And indeed there will be time
To wonder, “Do I dare?” and, “Do I dare?”
Time to turn back and descend the stair,
With a bald spot in the middle of my hair —
(They will say: “How his hair is growing thin!”)
@realDonaldTrump J Alfred Prufrock

Till human voices wake us, and we drown.

Home Thoughts

This artwork combines two photographs - one taken in Borana, #Kenya
from above #PrideRock and the other taken 4,000 km south at Lion
Whisperer's famous #lion sanctuary where we created a massive replica
of Pride Rock.

Political Reflections

In China, however, There is only one Decider that Decider was
pronounced as much by Xinhua in a historical announcement in March
2018

The Central Committee of the Communist Party of China “proposed to
remove the expression that ‘the president and vice-president of the
People’s Republic of China shall serve no more than two consecutive
terms’ from the country’s constitution.”  In one fell swoop, President
Xi Jinping was President for Life. President Xi is on a Pedestal and
is faced with the Strong Man Conundrum. The Political Brand will not
permit a retreat let alone a Surrender.
Friedrich Wu, a professor at Nanyang Technological University in
Singapore sums up the feelings of many when he describes them as “a
list of surrender demands for China to acquiesce to”. [FT]

“If there is a decoupling between the two economies, so be it. The
Chinese people can endure more pain than the spoiled and hubristic
Americans.”

Xi speaks at start of 70th anniversary of military parade. Stresses
unity of all ethnicities here, China as one, projects confidence in
achievements. “No force can stop the Chinese people and the Chinese
nation forging ahead”, he says.

The Communist Party of China celebrates the 70th anniversary of its
rule today. The pomp and pageantry include a parade past Beijing’s
Tiananmen Square that will involve 15,000 soldiers and sailors, 160
planes, 580 tanks and other weaponry.
Chinese leader Xi Jinping obviously hopes to project national power
and confidence on a grand scale. For the great Chinese quest for
national wealth and power that began during its long “century of
humiliation” by Western powers has been substantially fulfilled.
By any conventional measure, the Chinese people have redeemed the
promise made by Mao Zedong on the founding of the People’s Republic of
China on October 1, 1949. They have “stood up.”
Just three decades ago, China with its near-destitute millions seemed
a hopelessly backward nation. Today, in the most startling national
transformation of the modern era, it is a global economic powerhouse
-- a fact evidenced by, among other things, President Donald Trump’s
obsessive and self-defeating efforts to penalize China.
China also poses a deeper challenge to the West. At a time when
liberal politics and economics are losing legitimacy, and voters are
expressing their frustration by electing demagogues, China
triumphantly upholds a model of technocratic authoritarianism.
But it is worth remembering during these celebrations of China’s
ascendancy that the country is still far from possessing the moral
prestige and political originality that its own greatest thinkers and
leaders desired for it.
Xi may impress some with a display of Chinese military hardware. But
the nationalism he seeks to turn into a civil religion is not only
felt to be oppressive by many people -- whether Muslims in Xinjiang,
Buddhists in Tibet or protesters in Hong Kong. It is also profoundly
derivative, without Chinese characteristics.
Sun Yat-Sen, who is venerated as father of the Chinese nation in both
the People’s Republic and Taiwan, was clear about this.
Towards the end of his life, he warned his compatriots against
adopting an idea of civilization developed in the West, which “when
applied to society, will mean the cult of force, with aeroplanes,
bombs, and cannons as its outstanding features.”
China’s earliest thinkers and leaders witnessed how the success of
some countries in the West was achieved through brutal imperialism and
slavery; how it involved ethnic cleansing and international conflict,
including many minor and two major wars.
They insisted that Chinese civilization with its long traditions of
statecraft and philosophy had devised better ways of organizing human
society and channeling individual passions.
Criticizing Western traditions of liberalism and democracy as
hypocritical and shallow, Liang Qichao emphasized China’s own
traditions of social harmony and political pluralism.
Yan Fu, the Chinese translator of John Stuart Mill and other Western
liberal thinkers, denounced “Western progress” as leading to
“selfishness, slaughter, corruption and shamelessness” and urged
attention to China’s philosophical and political traditions.
This was not just cultural vanity. After all, the Qing empire was able
to accommodate self-rule by minority groups arguably better than the
Western model of the nation-state, which, from Quebec to Kashmir and
Xinjiang, seeks aggressively to “integrate” ethnic, religious and
linguistic minorities (and mostly manages to alienate them).
As it happened, Chinese leaders such as Mao discovered that they could
only resist Western power while using the methods and techniques of
Western progress: revolution, nation-building and industrialization.
The project of rivaling Western progress through Western means became
more urgent after the calamitous failures of Maoism forced China to
reorient its economy to market principles.
As China’s reformist leader Deng Xiaoping put it, “development is the
only truth. If we do not develop, we will be bullied.”
But what comes after development is significantly advanced, and the
bullies lose their power to bully? Can China still offer something new
and redemptive, just as its first generation of leaders hoped?
The possibility is kept alive by some Chinese thinkers at least. In a
recent book, “Rethinking China’s Rise: A Liberal Critique,” Xu Jilin,
one of China’s major public intellectuals, laments that the national
pride sweeping the Chinese today is born out of beating the West at
its own game rather than devising the rules of a new, less destructive
game.
Refusing to be over-impressed by China’s material success, Xu delves
into its moral, intellectual and spiritual traditions. He offers a
vision of China as a tolerant society -- one that has recovered its
civilizational values of pluralism and practices them domestically as
well as internationally.
This might seem very utopian. But China’s own national icons wished
for nothing less, and a troubled world has reason to expect much more
from a formidable country on its 70th anniversary than a commonplace
military parade.

Former President Jiang Zemin also makes an appearance during the 70th
National Day military parade #國慶節 #国庆节 #China70years

Is this sane? "I want to meet my whistle blower accuser. I want to
PUNISH HIM BADLY. I think we should have a civil war, IF I'm
impeached. I didn't say what is clearly on the tapes. Gop who haven't
listened agree with my version!  Kids on the border deserve to be
tortured."

The Kremlin said Russia would have to give consent before transcripts
of presidential phone calls between Donald Trump and Vladimir Putin
could  be published, after Democrats indicated that they would seek
the records as part of an impeachment inquiry.
“It’s possible only by mutual agreement of the parties,” Putin’s
spokesman, Dmitry Peskov, told reporters on a conference call Monday.
“In general, diplomatic practice doesn’t provide for such
publications. If there are any signals from the Americans, then we’ll
discuss it.”
House Intelligence Committee Chairman Adam Schiff told NBC’s Meet the
Press on Sunday that Congress wants access to the records of calls
with Putin following controversy over the White House’s release of
details of Trump’s phone conversation with Ukrainian President
Volodymyr Zelenskiy that triggered an impeachment investigation.
The Kremlin said last week that it hoped the U.S. wouldn’t release
transcripts of Trump’s calls with Putin.

So much has happened in 2016, from the Brexit vote to President-elect
Trump, and it certainly feels like we have entered a new normal.
One common theme is a parabolic Putin rebound. At this moment,
President Putin has Fortress Europe surrounded. The intellectual
father of the new Zeitgeist that propelled Brexit, Le Pen, the Five
Star movement in Italy, Gert Wilders in the Netherlands, is Vladimir
Putin.
In the Middle East, it is Putin who is calling the shots in Aleppo,
and in a quite delicious irony it looks like he has pocketed Opec as
well.
However, my starting point is the election of President Donald Trump
because hindsight will surely show that Russia ran a seriously
sophisticated programme of interference, mostly digital. Don DeLillo,
who is a prophetic 21st writer, writes as follows in one of his short
stories:
The specialist is monitoring data on his mission console when a voice
breaks in, “a voice that carried with it a strange and unspecifiable
poignancy”.
He checks in with his flight-dynamics and conceptual- paradigm
officers at Colorado Command:
“We have a deviate, Tomahawk.”
“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
sadness”.
“Somehow we are picking up signals from radio programmes of 40, 50, 60
years ago.”
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: This 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.

This whole wretched saga is beginning to look less like ‘War in the
Middle East’ and more like ‘Carry On Up the Gulf’
The Saudis are taking a pasting. Video pictures from the Houthis of
Saudi soldiers and their allies killed or surrendering inside the
Saudi border town of Najran represent a devastating blow to a kingdom
which is constantly threatening war against Iran.
If it can’t protect its own armed forces inside Saudi territory, what
is the point of wasting time menacing Iran with military action over
the massive destruction of the oil facilities at Abqaiq and Khurais
almost two weeks ago?
This is the same Saudi Arabia which kidnapped Lebanon’s prime minister
Saad Hariri, bombed thousands of civilians in Yemen and tried to wipe
out Qatar’s independence.
Not to mention the little matter of chopping up Jamal Khashoggi almost
one year ago in the country’s Istanbul consulate and then secretly
burying bits of his body, for which Mohamed bin Salman – perhaps the
worst crown prince in Saudi history – now takes national (but not
personal) responsibility.
The news that King Salman’s personal bodyguard has now been murdered
in Jeddah – by a “friend”, we are told – only adds a hysterical note
to the chaos within the country.
Are the Americans now going to be asked to act as mercenaries for this
bizarre kingdom?
Clearly Saudi Arabia’s own armed forces, clotted with jet fighters,
missiles, American – and British – assistants, are as hopeless as they
always were. Remember how they couldn’t defend themselves from Saddam
after his invasion of Kuwait in 1990, which brought a pageant of
international armies to “protect” them?
The Iranians may have concluded that Donald Trump – in the immortal
words of American columnist Nicholas Kristof – is “the mother of all
bunny rabbits”, but it seems pretty clear that Trump’s decision to
tear up US commitments under the Iranian nuclear deal is a colossal
disaster.
He’s now supposed to defend a vicious monarchy that threatens war
against Iran for its (Houthi?) attacks on Saudi’s major oil
installations – but with what? Does he bomb Iran and then ask it not
to shoot back? At American ships? At US troops in Saudi Arabia?
In fact, this whole wretched saga is beginning to look less like “War
in the Middle East” and more like “Carry On Up the Gulf”.
We are supposed to take Iran seriously. But can this be done when it’s
principal opponent – a kingdom which spoke of “cutting off the head of
the snake” (Iran) – behaves like a buffoon?
It may be too soon to say that this is the ultimate crisis in US-Saudi
relations; we know how Saudi money can quieten the entire world’s
morality over the dissection of poor Jamal.
Since our very own Downing Street buffoon takes the Saudi side,
there’s no point in waiting for comment from the UK.
But pretty soon, the Americans or the EU are going to have to do what
Eisenhower did when he sent Dulles off to admonish Eden during the
1956 Suez War and say: “Whoa Boy!”
Meanwhile stand by for the next episode in the “Carry On” saga.
Another Saudi roar of defiance at the Islamic Republic? Another oil
tanker snaffled off to Bandar Abbas? More drones – coming 30 at a time
– deep inside Saudi territory? Or just more bombed wedding parties or
prisoners’ bodies in the dust of Yemen?
I’d bank on the latter. It will be another attempt to destroy one of
the poorest countries in the world by one of the world’s richest.

Crown Prince Mohammad bin Salman: "Absolutely not. This was a heinous
crime. But I take full responsibility as a leader in Saudi Arabia,
especially since it was committed by individuals working for the Saudi
government"

the overwhelming geopolitical question is around the longevity of the
House of Saud and its Crown Prince who is of course the Proud Owner of
Leonardo Da Vinci's Salvatori Mundi which means Saviour of the World
and according to Robert Baer has so. many enemies that he sleeps on
his $500m yacht the Serene off Jeddah. The much commented on Orb is of
no help now. If the Houthis have tapped into the Saudi Shia, the House
of Saud in my opinion is on its last legs. This is a Big Call and
needs to be understood for that. No amount of paid PR or kind words
from Trump can finesse this. Over the Weekend, so many of the Oil
Watchers I follow were saying we must wait for the Official Saudi
comment. Let me tell you this for free. Saudi comment is worthless,
irrelevant and paid for.

And by the way, my conclusion remains we are at a Peacock Throne
Moment for the House of Saud and that markets and folks tend to miss
inflection points and therefore I have a supreme conviction around the
Oil markets and am conducting my own operations and only on a need to
know basis. The Shah of Shahs ended up in Panama all on his lonesome
looking out to sea and there is another fellow not unlike the
fictional Dean Jocelin with a $500m Yacht called the Serene who will
most likely be looking out to Sea in the not too distant future.

International Markets

Euro 1.0884
Dollar Index 99.545
Japan Yen 108.36
Swiss Franc 0.9982
Pound 1.2294
Aussie 0.6702
India Rupee 70.663
South Korea Won 1199.30
Brazil Real 4.1625
Egypt Pound 16.2795
South Africa Rand 15.1538

So in a nutshell, this is what we know about this charade so far:

Its not a technology company in any way, shape or form. No income is
derived from the sale of a product or service delivered by a
technology. They owe $47 billion in lease commitments. Claiming WeWork
is a technology company is one of the many indicators that illustrate
how Adam & Miguel intentionally seek to mislead and defraud existing &
potential future retail investors. The product is the easiest to
replicate and there isn’t one barrier to entry.
When asked what inspired him to create a shared workspace company,
Adam said that when he was growing up in Israel he used to live in a
Kibbutz and was so mesmorised by the ‘sharing ideology’ that he
invented Co-Working. Mark Dixon founded Regus in the 1980’s. LEO,
Workspace Group, The Office Group, ServCorp, MWB, HQ and many others
were around way before Adam thought up of this ponzi.
WeWork post full year invoices for the year ahead this year to inflate
their revenues. They then heavily discount those invoices they’ve
already raised and treat them as expenses. They then pay whichever
broker secured that lead 100%, yes 100% of the contract value. Note
the industry standard commission is 10%. Neither the discounts nor the
100% in commission payments appear in their Financials as they are
‘community adjusted’. They also do the opposite, they turn expenses
into revenues so imagine a landlord agrees to discount their rent by
£250k to offset a portion of their build costs, standard practice,
WeWork treats that £250k as revenue. They also charge members even
after they’ve vacated, then credit them later. It’s not difficult to
boost revenues on a blank cheque. Revenues are not what you’ve
actually cleared through your bank, it’s the total tally of invoices
raised in a given period, a big difference.
The expenses as detailed in their accounts & S1 disclosure is not
accurate. To hide two crippling cost groups; fit-outs & marketing,
they invented a brand new accounting principle which they called
‘community-adjusted EBITA’S’. If they hadn’t they would have had to
post actual accumulated losses in the region of $6 billion instead of
the $4 billion reported. Why don’t we all do this. This is another
strong indicator, they are hiding actual losses to mislead, knowingly.
For somebody that can’t go a sentence without throwing in ‘community’
twice it’s interesting he’s never tweeted, his instagram features four
landscape google images and he’s non-existent on LinkedIn.
A brief search on any review site should show you the extent to which
they couldnt care less about what their customers think. Despite
rolling monthly contracts being sold with 3/6 month rent free periods
for peanuts, with all the promotional freebies they provide, the free
beer & festivals, 100% commission rates to brokers, billions in
instagram adverts, 3 PR articles a day, none of their buildings are
even near full and they are already experiencing falling occupancy
rates. They even sent teams to walk into their competitor’s Centres to
take photographs of tenant directory’s. That’s how desperate it’s
become. Regus is currently engaged in legal action accusing WeWork of
poaching customers and they are not the only ones who have accused
them of engaging in this.
Adam & Miguel have already collectively cashed out in excess of $1
billion in loans, royalties, salaries to extended family, private jets
and who knows what other instruments (e.g. selling the We trademark he
secretly purchased back to WeWork for a cool $6m), they’re chilling,
and reportedly less and less involved in the day to day running.
Miguel is more involved in a range of other businesses and has already
demoted himself from Co-Founder to Head of ‘Global Culture’, quietly
positioning himself for a quick exit post-IPO. Adam on the other hand
fancies himself as the next Masayoshi, he has his own ‘venture
capital’ firm investing in genuine entrepreneurs. Why would either of
them care what happens to their remaining holdings, they’ve already
cashed out enough to set up their grandchildren for life.
Adam & Miguel then used the funds extracted from WeWork and funnelled
it through privately controlled offshore investment vehicles and
almost overnight built an asset-rich portfolio of prime commercial
real estate (not an asset-light illusionary hustle). It doesn’t end
there. Adam & Miguel then lease those buildings they privately
acquired. back to their very own ‘spiritually’ valued WeWork at a
ridiculously high yield. Even the very founders are bleeding their own
ponzi scheme dry. Are these guys something or what. Further buildings
were then acquired with loans (from JP Morgan) totalling $500m hedged
against their already saddled collateralised. junk obligation WeWork.
It’s not enough that they’re making $230m in fees flogging this ponzi.
When they got caught, Adam tries justifying it by claiming he acquired
the buildings years ago as a way of proving the concept works. An
outright lie, and very insulting. If Adam can do and then conceal all
of these things, imagine what else we don’t know.
With pressure mounting, he arranges to appear alongside his actor
friend Ashton Kutcher in an ‘Exclusive’ interview on CNBC. Ja Rule,
sorry I mean Ashton Kutcher, in his trademark goofy-like character
plays his part to perfection…. ‘When I realised it was a technology
company I also realised that this company, through its technology, has
the greatest capacity than any other company in the entire world to
bring people together’. He’s using an actor to convince people his act
is for real.
The only reason it was valued at $47 billion is purely because one
individual in Japan bafflingly and solely invested a total of $12
billion, in 9 separate funding rounds, each at double the price (and
valuation) he (and he alone) paid less than 6/12 months prior. Since
Softbank first invested in 2012, nobody else has invested. The only
two people who claim WeWork is worth $47 billion are Masayoshi Son and
Adam Nuemann. As long as we’re debating, and continue doing so until
after the IPO Adam & Miguel are loving it.
Why would Masayoshi, an intelligent individual, invest so many
billions into this barefaced fraud, for the life of me I cant figure
it out. Maybe Adam & Miguel deceived him too. Or it could actually
really be as simple as it looks. It’s impossible for Adam, Miguel and
Masayoshi to sell their shares on the secondary market or post-IPO for
$100bn+ if Masayoshi didn’t allow Adam & Miguel to parade WeWork in
the press as being worth $47 billion, using purely Softbank’s 9 sole
investments & revaluations. Once they exchange, media outlets can run
headlines that project an aura that they are indeed worth what two
people have decided to value it at. Everybody in the loop benefits,
from the early investors that hope to offload their investments to
later stage mugs, to the media outlets and banks Goldman Sachs’ & JP
Morgans who earn hundreds of million in share sale commissions.
Everybody wins. No one is accountable.
Even Adam’s wife Rebekah, persuaded Masayoshi to sink $100m into her
very own pet-ponzi, WeGrow, ‘the future of education’. Cute no, his
and hers.
It was only until the Saudi’s threatened to pull their funds out of
the Vision Fund when Masayoshi reconsidered and decided to pull a
proposed further investment of a whopping $16bn (which would have
brought the total amount invested in/borrowed by WeWork to a laughable
$30 billion, 15x what Facebook raised). This is what may have alarmed
Adam to quickly initiate the IPO. He may now be afraid that if he
agreed to delay the IPO he wouldn’t be able to re-submit later without
providing a more scrupulously drafted breakdown of WeWork’s finances.
He may also be worried that if a permanent suspension of the IPO
happens, the company may not survive.
Adam & Miguel have consistently been way off any of their forecasts
made in their original pitch deck to investors (available online). He
forecasted profits of $14 million in 2014, $64 million in 2015, $237
million in 2016, $542 million in 2017 and $1 billion in 2018 (on
revenues of $3.6bn, a 36% profit margin). Their ‘community-adjusted’
accumulated losses amount to over $4bn, their actual losses are much
higher. WeWork sued a whistleblower who raised alarm bells in 2016
when she revealed how WeWork had slashed their profit forecasts by
76%. When Bloomberg revealed this, WeWork claimed that it had
‘over-estimated’ what landlords would be willing to front in build out
costs. But according to Adam ‘Because we have 40% margins, we can
choose when to become profitable’.
Two profitable serviced office groups, the largest IWG (Regus &
Spaces) and the most luxurious LEO, who collectively manage in excess
of 3500+ centre’s have been on the market for close to 2 and half
years now and they have not been approached by anybody willing to pay
a multiple of more than 1.25x revenues, which would make IWG valued at
between $3/4 billion. SoftBank could have acquired four Regus’s for
their $12 billion and still have enough change to sprinkle some fairy
dust on top. Instead they’re losing one Regus a year.
Facebook raised $2.2 billion pre-IPO. Google raised $130m pre-IPO,
Ebay $6.9 million. WeWork has raised $14 billion so far, 7x what
Facebook required pre-IPO, 140x what Google needed and they’re not
even a technology company. Where has that $14 billion gone? They
raised $14 billion, have less than $1.5bn cash and have nothing to
show other than $47 billion in lease commitments and a portfolio of
supersized Starbucks’s which are beginning to look outdated and in
need of urgent refits. Airbnb on the other hand is a technology
company, has raised $4 billion and posted profits of $93m last year on
$2.4 billion in revenues. No money has been swindled out of Airbnb,
they’re fiscally responsible and taking their time, waiting for the
right moment to IPO. No rush.
Serviced Offices as anybody in the industry will tell you generates
almost as much yield as your traditional commercial landlord,
typically 2/3%. Serviced Offices used to be very profitable when there
were few half decent ones around but today they’re everywhere and desk
prices have collapsed whilst conventional leasing rates have held
steady. It’s not just been around since the 1980’s but now everybody’s
getting into it, even developers British Land & Boston Properties are
beginning to include it as part of their offerings. Now its purely a
landlord play. Cafe’s and Hotels are jumping in too, even brokers are
building their own platforms where they act as operator, Knotel,
Instant Managed, CBRE to name a few. Even Google have a platform,
‘Campus’, very cool place. Adam though doesn’t think they’re come
close to being a threat, ‘Our biggest competitor is work itself’.
Serviced Offices is like the hotel industry only many times simpler,
its just desks, chairs, simple decor in common areas (plants & picture
frames), wifi, electricity, daily cleaning, plates and cutlery, and
maybe a plug in telephone handset. Or you can just hire one of the
many contractors WeWork use (John Robertson Architects, Oktra etc)
although most floors are just glass partitioned boxes (they don’t do
stud walls). LEO, Spaces and some of TOG’s centres have always been
more beautiful with a far higher build quality than any of WeWorks
offices. Now that’s it’s a landlord play, you have a avalanche of
landlords with far a deeper understanding of interior design and
office fit outs than WeWork will ever be able to outsource.
The Co-working side of the Serviced Office industry is not at all
profitable. Nobody makes money from co-working. Most operators provide
a little co-working alongside a largely 3/6 person partitioned
multi-office layout or around dead spaces. WeWork took out entire
floors and dedicated it to open-plan co-working.
How did this even begin? The earliest shareholders including a
gentleman called Mortimer Zuckerman were not just their landlords AND
seed investors. They also happened to own Fast Company and NY Post
which were instrumental in propping up WeWork in the press before
anybody knew who they were. The headlines they spun about WeWork’s
valuation and ‘meteoric’ rise was basically the shareholders
advertising their investments. Even Wikipedia’s page (throughout 2015
and 2016) introduced WeWork as the ‘most innovative company of 2015’,
citing a Fast Company article.
WeWork even thought about setting up WeCafe’s, they want to be the
first ever to disrupt the ‘working-in-a-coffee shop-as
a-service-space’. An internal report revealed people are working at
spacious, trendy hipster designed coffee shops where they get not just
a free table but also a chair (and free wifi) all for the price of a
cup of tea. If WeWork charged their members a fraction of the market
rate, half will vanish overnight. Or put another way, when they want
to start becoming profitable and all the freebies come to an end it
will feel like s rug has been pulled from under WeWork’s feet, by
which time Adam & Miguel will be long gone.
WeWork doesn’t pay the appropriate property taxes due on their UK
based centre’s. If you look at their Business Rates schedules of the
respective boroughs in which they operate in (available online) you’ll
notice that split their entire space into tiny cubicles. By doing so
WeWork avoids paying property taxes and earns tax rebates originally
intended for small businesses, $2.4 million to date. So they’re
effectively being financed by Her Majesty’s Government & the UK
taxpayer too.
If you are not already acutely aware that Adam Neumann and Miguel
McKelvey are fraudsters, count the number of times the word ‘Hustle’
is plastered in neon lights at every one of their tacky ikea-designed
offices (or just google the words: wework hustle and click on
images).When asked whether how they could come up with a $47 billion
dollar valuation, he replied ‘”No one is investing in a co-working
company worth $20 billion. That doesn’t exist. Our valuation and size
today are much more based on our energy and spirituality than it is on
a multiple of revenue.”. When Miguel was asked about their $20 billion
valuation (before it was almost tripled to $47bn), Miguel McKelvey
answered ‘Who gives a s***?’.
There are many people out there who give discreetly to charity, some
give generously but only with the fanfare, some ‘pledge’ to be
charitable largely for the PR impact but have no intention of giving,
this is something new. Adam, his wife Rebekah & Miguel have ‘pledged’
to give $1 billion they don’t have and yet to swindle out of WeWork
(not the last billion, the next billion) so they can acquire more land
to help mankind and support environmental causes ‘close to their
heart’. Is this the twilight zone? Where did the first billion go? Why
do they feel the need to use meaningless philanthropic pledges to make
themselves appear to be good wholesome folk, generous not greedy,
charitable and tax-free. WeWork’s cleaners have twice protested over
wages. Everything is fake.
WeWork will never ever, in its short history, generate a profit, let
alone the tens of billions in revenues necessary to generate anywhere
near the $3 billion in earnings required to (even then generously)
value the company at £47 billion.
A lot of people could have done what Adam Nuemann & Miguel McKelvey
did, they don’t because they’re not prepared to engage in a fraud.
They can play dumb all they like but when you fiddle with your
financials, invent accounting principles, secretly acquire IP and
double deal it for millions of dollars back to your own company,
market yourselves misleadingly as a ‘technology’ play, cash out close
to $1 billion and use that to acquire buildings to lease back to
WeWork, employ half your family etc, etc, etc…please for heavens sake
don’t try and convince me that they are unaware of what they are
doing. They know exactly what they’re doing. Adam and Miguel
purposefully choose to hide those costs under ‘Community-Adjusted
EBITA’s’. Why are they still parading WeWork as a technology company,
does anybody believe as cunningly intelligent as they are, that they
genuinely think WeWork is a ‘technology’ company? Why have they cashed
out, and not just a few million dollars as a deposit on a big mortgage
but hundreds of millions to buy buildings that they used to further
bleed their own ponzi scheme with?. They have cashed out $1 billion
whilst posting losses of $1.9 billion.
Since their S1 release, Adam & Miguel have slashed their proposed
post-IPO valuation by 86% in 4 re-valuations. The price started at $67
billion, then they quickly dropped it to $30/$40bn before again
looking down at their calculator and punching buttons quicker than you
can blink and coming back with $15/20bn. As you’re about to click, it
plunges 40% to $10bn. From $67 billion to $10 billion in 7 days. It’s
pathetic seeing this kind of desperation. I don’t want to be in the
room when he realises it’s not even close to being worth anywhere near
$1 billion. Within the last 10 days or so, his wife Rebekah has also
removed from her extraordinarily unnecessary position, they’ve hastily
elected their first female to their Board, halved Adam’s voting power,
lost a Chief Communications Officer, their bonds are crashing, two
landlords have begun legal proceedings, their principle investor
Masayoshi has publicly called for Adam to delay the IPO, even
Alexandria Ocasio-Cortez weighed in and warned vulnerable investors
Goldman Sachs & JP Morgan are now targeting… ‘you’re getting
fleeced!’. It’s not all bad news though, Adam agreed to return the $6m
he swindled when he secretly sold ‘We’ back to his company The ‘We’
Company. Btw, if you’re wondering why he settled on the name. ‘We’ he
pontificated recently ‘The ‘90s and early 2000s were the i decades.
iPhone, iPads, the iPod – everything was about me. Look where that got
us? In a terrible recession’.
The most discomforting element of this whole deception is that after
perpetuating this fraud for so long, media outlets are now inviting
these Hustlers to media-sponsored ‘leadership’ events where they’re
put on podiums to teach us how to become visionary’s whilst they have
now made it unnecessarily more difficult for genuine entrepreneurs &
technology companies to raise capital in future. The future is farther
because of them.
So to wrap up, if you were to contrast the key characteristics of what
defines a ponzi scheme with what we already know about WeWork, I think
we could safely assume that it could be somewhat judged beyond a
reasonable doubt that WeWork is a fraud, both Miguel McKelvey and Adam
Neumann seem to be knowing engaging in a fraudulent ponzi-like scheme
designed to mislead investors and appear to be nothing more than your
average, traditional run of the mill fraudsters, or in their own
words….Hustler’s. The magnitude of this fraud and the unprecedented
arrogance in which it’s being ruthlessly executed puts it in a league
of its own. Now they’re hoping to hustle the big boys on Wall Street,
and they will most likely get away with it.
The most disquieting element of this whole collaborative effort to
deceive is that after perpetuating this fraud for so long, media
outlets are now inviting these hustlers to media-sponsored
‘leadership’ events where they’re put on podiums to teach us how to
become visionary’s whilst they have now made it unnecessarily more
difficult for genuine entrepreneurs & technology companies to raise
capital in future. The future is farther because of them.

Commodities

Emerging Markets

Fitch Ratings has downgraded Saudi Arabia's Long-Term Foreign-Currency
Issuer Default Rating (IDR) to 'A' from 'A+'. The Outlook is Stable.
The downgrade reflects rising geopolitical and military tensions in
the Gulf region, Fitch's revised assessment of the vulnerability of
Saudi Arabia's economic infrastructure and continued deterioration in
Saudi Arabia's fiscal and external balance sheets.
Recent drone and missile attacks on Saudi Arabia's oil infrastructure
resulted in the temporary suspension of more than half of the
country's oil production.
Although oil production was restored fully by end-September, we
believe that there is a risk of further attacks on Saudi Arabia, which
could result in economic damage.
We have revised our assessment of the vulnerability of Saudi Arabia's
economic infrastructure to regional military threats as a result of
the most recent attack.
Fitch forecasts the government's balance sheet to deteriorate further
amid continued deficits. We forecast general government debt will be
26% of GDP in 2021 from 16% in 2018 and 14% in 2017, when we last
downgraded Saudi Arabia's ratings. Although this will still be well
below the 'A' category median (historically about 42% of GDP), we view
Saudi Arabia's debt tolerance as lower than that of most rating peers
due to weak structural features, including political risks, the
undiversified nature of the economy and shortcomings in governance.

the overwhelming geopolitical question is around the longevity of the
House of Saud and its Crown Prince who is of course the Proud Owner of
Leonardo Da Vinci's Salvatori Mundi which means Saviour of the World
and according to Robert Baer has so. many enemies that he sleeps on
his $500m yacht the Serene off Jeddah. The much commented on Orb is of
no help now. If the Houthis have tapped into the Saudi Shia, the House
of Saud in my opinion is on its last legs. This is a Big Call and
needs to be understood for that. No amount of paid PR or kind words
from Trump can finesse this. Over the Weekend, so many of the Oil
Watchers I follow were saying we must wait for the Official Saudi
comment. Let me tell you this for free. Saudi comment is worthless,
irrelevant and paid for.

Frontier Markets

Sub Saharan Africa

Zimbabwe’s central bank has clamped down on mobile money, banning the
purchase and sale of cash through the services, in the latest
directive aimed at gaining control of a monetary system that’s
spiraling out of control.
The directive, which the Reserve Bank of Zimbabwe said was necessary
because of commissions charged by agents, follows a Sept. 28
announcement enforcing the use of the Zimbabwe dollar and banning the
quoting of prices in foreign currency.
Ecocash, a mobile-money service operated by Econet Wireless Zimbabwe
Ltd., has 6.7 million active users in a nation of about 14 million
people. It’s the first time since its introduction in 2011 that its
users haven’t been able to use the so-called cash-back service.
Since the Zimbabwe dollar was reintroduced in June its value has
plunged to 15.19 to the U.S. dollar from an initial rate of 2.5.

“Money is accordingly a system of mutual trust, and not just any
system of mutual trust: money is the most universal and most efficient
system of mutual trust ever devised.”
“Cowry shells and dollars have value only in our common imagination.
Their worth is not inherent in the chemical structure of the shells
and paper, or their colour, or their shape. In other words, money
isn’t a material reality – it is a psychological construct. It works
by converting matter into mind.”
The Point I am seeking to make is that There is a correlation between
high Inflation and revolutionary conditions, Zimbabwe is a classic
example where there are $9.3 billion of Zollars in banks compared to
$200 million in reserves, official data showed.
The Mind Game that ZANU-PF played on its citizens has evaporated in a
puff of smoke.
‘’The choice of that moment is the greatest riddle of history’’ and
also said “If the crowd disperses, goes home, does not reassemble, we
say the revolution is over.”
What is clear to me is that Zimbabwe is at a Tipping Point moment.

Kenya

Kenya’s economy grew by 5.6% in the second quarter of this year, down
from expanding 6.4% in the same period a year earlier, the statistics
office said on Monday.
It attributed the deceleration in growth to a slowdown in the key
farming sector, which accounts for close to a third of output,
manufacturing and transportation.
“Agriculture’s performance as well as that of electricity and water
supply were mostly hampered by a delay in the onset of the long
rains,” the Kenya National Bureau of Statistics said in a report.
Farming, which includes forestry and fishing, grew by 4.1% during the
period, down from 6.5% a year earlier.
The governor of the central bank Patrick Njoroge last week maintained
a full year growth forecast of 6%, citing robust bookings in the
tourism sector.

With schools collapsing, health care struggling, business in the
doldrums, road carnage featuring in the news almost weekly and food
insecurity (hunger) reportedly now ravaging 24 (or half) of our 47
counties, one is often forced to wonder when, if ever, we shall see
any returns on President Uhuru Kenyatta’s “Big Four” agenda beyond
fancy speeches at international meetings.
None of this seems to bother us too much, with all focus remaining on
reforming a constitution we haven’t fully or properly implemented.
Look forward to the Council of Governors publishing details of its
Ugatuzi (Devolution) initiative to add to the independent Punguza
Mizigo (PM - reduce the burden), even as everyone waits for the
“handshake”, sorry, Building Bridges Initiative(BBI) Task Force
report.
I suspect that if these three initiatives were combined into one, we
would end up with a government so unwieldy and expensive that today’s
might look like a start-up.
We also seem resigned to the parlous state of our public finances, in
a national “Shauri ya Mungu” (Leave it to God) moment. I have been
surprised by the lack of commentary on the forthcoming 2020/21 budget
process (2020/21 to 2022/23) which was launched at the end of August
2019. This was followed by the Treasury’s advance (as in, pre-Cabinet)
publication of the 2019 Budget Review and Outlook Paper (BROP), to
which they invited public comments. There’s a first time for
everything.
The BROP, is supposed to be what it says - a review of the recent past
and a peek into the medium-term future. Some highlights from the
recent past (the 2018/19 fiscal year) include a Sh123 billion
shortfall in revenues. This included an ordinary revenue gap of Sh91
billion, mainly in income taxes and VAT. Erm, falling incomes and
reduced spending in the economy, anyone? Total expenditure side was
Sh149 billion short during the year. Again, since government doesn’t
have its own money, it surely can’t spend what it doesn’t have without
resorting to borrowing. No surprises there.
Looking forward, the headline number is that total public debt, which
was Sh1.9 trillion in 2012/13 (incurred over 50 years since
independence) will, ten years later, stand at Sh7.4 trillion by
2022/23. For the record, GDP in this ten year-period will have grown
from Sh4 trillion to a projected Sh15 trillion.
The fundamental concern today is that new debt is simply recycling
older debt and not building new assets. All of this despite a revenue
forecast of Sh2.7 trillion in 2022/23 against Sh1.6 trillion in
2018/19.
Which brings us to the elephant in the room — public expenditure. As
long as revenues are forever chasing spend, deficit reduction, let
alone fiscal consolidation, will remain pie in the sky. I see three
main troubles with our public spending.
First, I hark back to the constitution, whose whole point was to
reform (and modernise) our public spending framework, not to add fresh
new layers to it.
Think about national government administrations in counties that are
parallel to county governments, and regional development authorities
against regional economic blocs. Think about the typical triple county
payroll - staff hired directly by counties, staff transferred from
national government after devolution and former central government
staff who worked as district officers. Let’s not even get into the
half-hearted performance frameworks and incomplete re-engineering and
re-costing of functions between and across our two levels of
government. We haven’t addressed these fundamentals.
Instead, and second, we prefer to focus on non-structural stuff. In
its latest circular to ministries, departments and Agencies this week,
the Treasury identified cost-saving opportunities in training,
newspaper provision, foreign travel and air travel, communication and
airtime allowances, publicity and advertising, motor vehicle
acquisition, renting and partitioning of offices, purchase of
furniture, use of government transport outside office hours.
Apparently, this is the stuff that will “free space” for “Big Four”.
Let’s not even consider future headlines when spending ceilings are
honoured more in the breach. And we’re not yet talking about the waste
and misspending that the Auditor-General will then discern in the
fullness of time.
A third perspective should give us pause for reflection, especially
since it relates to the earlier two.
As the World Bank noted in its 2019 Public Expenditure Analysis for
Kenya “a growing share of recurrent spending is non-discretionary,
which could undermine government’s ability to re-allocate resources to
priority sectors”.
It further estimates that “approximately 68 percent of the central
government budget is on items of high to medium rigidity (items that
cannot easily be adjusted due to high judicial, political or social
costs e.g. counties, parastatals, Judiciary, Parliament, debt and
payroll).
Now that’s frightening. This isn’t just a debt trap that we’re looking at.
How did we get here? Food for thought.

Kenya bungled negotiations that would have led to an amicable solution
to the raging dispute over its maritime border with neighbouring
Somalia, the Daily Nation can reveal.
All indications point to the fact that authorities tasked with
handling the issue failed to take serious the initial talks initiated
by Somalia.
Now Somalia seeks to use Kenya’s own statutes — among them the
Territorial Waters Act 1972, the Maritime Zones Act 1989, and the
Interpretation and General Provisions Act — to advance its claim for
about 150,000  of maritime waters in the Indian Ocean.
According to multiple interviews and memorials filed at the
International Court of Justice (ICJ), the negotiation team led by
officials from the Attorney General (AG) and the Kenya International
Boundaries Office (Kibo) slept on the job.
And because of this, Kenya now risks losing a crucial chunk of land to
its neighbour, and even paying billions of shillings in compensation.
The officials didn’t just dilly-dally and delay; they even stalled the
bilateral talks between July to August 2014, and this forced Mogadishu
to seek ICJ’s arbitration.
“When the United Nations asked Kenya whether Somalia should go ahead
with the case, Kenya said “yes”, and this was a big mistake,” says a
source privy to the bilateral talks.
Thus, Kenya allowed Somalia to move to the ICJ headed by Abdulqawi
Ahmed Yusuf, a Somali. This appears to have put the nail on any move
to have the case settled outside the court.
According to highly-placed sources, Kenyan authorities failed to
deploy the requisite diplomatic tools to dissuade Somalia from moving
to the ICJ.
”I think we showed signs of naivety at the beginning. There are people
who felt it was time to make money rather than pursue the interest of
the country,” said the source.
During the negotiations in March 2014 through to July 2014, which
understandably gobbled up Sh3 billion, Kenyan delegations would
comprise 50 members against Somali’s two.
And because the AG didn’t do much to have the issue resolved amicably
and in time, the lethargic Kibo — known to have failed over the
Migingo Island issue — seized the opportunity only to later bungle up
the negotiations.
“They had a mentality that this was a small case, and that Somalia was
a failed State that couldn’t handle the issue,” according to the
source.
There must have been disconnect between Kibo and the AGs office then
headed by Prof Githu Muigai.
Instructively, Kenya failed to attend a crucial follow-up
negotiation’s meeting in Mogadishu.
The officers in charge of the negotiations didn’t even send an apology
for Kenya’s absence, and when Somalia requested for alternative dates,
Nairobi went mute.
The first meeting, on February 19, 2014, was between then-Somalia
Prime Minister Abdiweli Sheikh Ahmed and Deputy President William Ruto
in Nairobi, followed by a series of others in March and July that
year.
But Kenya was a no-show at the scheduled August 25-26, 2014 meeting in
Mogadishu.
“Somalia subsequently made repeated inquiries regarding the status of
the Second Joint Report, and sought confirmation that Kenya’s
delegation to the next round of negotiations in Mogadishu would arrive
as scheduled.
Kenya did not respond; it never signed the Second Joint Report, nor
did it send its delegation to Mogadishu for the scheduled talks”, says
the Somalia Memorial to the ICJ.
Somalia concluded that further negotiations would be pointless. It
therefore took the decision to seek resolution of the dispute in
accordance with international law.
Somalia appears to be placing the blame on Kibo Chief Juster Nkoroi,
who was the head of the Kenya delegation to the discussions.
Implicitly, were Kenya to lose the case, it won’t be because Somalia
will have put up a splendid show at The Hague; it will be because
Kenya undermined its own effort through greed, naivety, and sheer
incompetence.
Somehow, Nairobi’s approach to the case exposes despair, panic and
unpreparedness rather than firmness and confidence, as demonstrated by
the recent attempt by the government to have either the ICJ postpone
the hearings at The Hague for a year or the two parties embark on
fresh negotiations outside the judicial system.

Renamo has claimed last week’s vote was rigged and called for it to be
nullified. The preliminary results of two-thirds of the ballots
counted show President Filipe Nyusi leading with 75%, while Renamo
obtained 20% support -- much less than expected. Renamo, short for the
Mozambican National Resistance, fought a 16-year civil war against the
government until 1992.
Renamo’s political commission resolved at a meeting on Monday to “urge
all Mozambicans not to accept mega electoral fraud,” party President
Ossufo Momade told reporters in the capital, Maputo, after the
meeting. He listed of instances where he claimed his party had been
disadvantaged, including the alleged murder of its members and social
activists, voter register discrepancies and irregularities with the
counting process.
At stake is control over an economy that’s expected to become one of
the world’s biggest exporters of liquefied natural gas, as companies
including Exxon Mobil Corp. and Total SA plan projects of more than
$50 billion in the country’s northern region.
Russia welcomed Nyusi’s victory and said “no serious violations were
detected” in the elections, according to a statement.
“It’s very difficult to go back to war,” he said by phone. “They’re
not well-equipped anymore.”

Angola’s central bank stopped using a trading band that kept the
kwanza’s value within a fixed range, accelerating the currency’s
slump, according to two people familiar with the matter.
The kwanza began a sharp depreciation after the central bank started
holding daily auctions of $10 million each on Oct. 9, according to the
results of these auctions on the National Bank of Angola’s website. In
theory, the central bank had ended the trading band earlier this year,
but continued to impose the rule at its regular auctions to limit the
depreciation of the kwanza, one source said.
The monetary policy committee will hold an extraordinary meeting on
Wednesday to fine-tune “measures and instruments of monetary and
exchange rate policy,” it said on Oct. 20. The bank has cut its
benchmark rate by 250 basis points in the past 18 months to 15.5%.

Kenya

According to disclosures from the National Treasury statement of
actual revenues and net exchequer issues which are published on the
Kenyan gazette, tax income for government dropped by 32.4 percent
between July and September from Ksh.632.9 billion over a similar
period in 2018.
Month over month, new taxes fell at their sharpest in September as
collected revenues shrunk to Ksh.98.9 billion from Ksh.329.1 billion
in September 2018.
The declining tax base is largely attributable to the continued
deplorable macroeconomic environment whose incapacitation has locked
out key revenues for government.
A mark down in tax compliance coupled with reduced company investments
saw KRA miss out on its expected Ksh.1.77 trillion in revenue
collection in the past year by 11 percent in spite of notable spike in
collections to Ksh.1.58 trillion.
Further, the widening of employee tax bands had the opposite effect of
containing the Pay As You Earn (PAYE) taxes as the segment’s revenue
base shrunk by Ksh.6.1 billion.
Moreover, the de-coupling of the Kenyan economy towards lesser revenue
yielding segments such as agriculture continues to pose a significant
stranglehold on greater collections as automation in the more
discerning tax bases such as finance and manufacturing seals off
greater collections.
“Sectors where we traditionally get a lot of revenues are showing
weaknesses while on the vice versa, lesser yielding segments have
become dominant,” said KRA’s Deputy Commissioner for Innovation and
Risk Management Joseline Ogai in August.
The falling tax base has presented the largest doubt to Kenya’s fiscal
containment among multi-lateral lenders such as the World Bank as the
accumulation of public debt remains on forward footing.
The declining taxes for instance saw the International Monetary Fund
(IMF) raise Kenya’s debt distress profile from low to medium in
October 2018 on the back of years of persistent misses in revenue
mobilisation by government.
According to World Bank’s Chief Economist for Kenya Peter Chacha, the
shift in tax contributory segments remains the key ongoing concern to
the assessment of Kenya’s distress levels.
“There has been a disconnect in revenue mobilization with a decline in
the growth of tax to GDP. We have seen the decoupling of the structure
of the economy with a shift of growth towards lower contributory
segments such as agriculture,” Mr. Chacha said in an interview earlier
this month.
KRA however hopes to clap back on missed revenue targets going forward
through improved tax compliance to include greater surveillance of tax
payers.
The improved surveillance is anchored on innovation with the tax man
sinking to sync tax payers’ information with third party data bases
such as Kenya Power and mobile money services.
Additionally, KRA has stepped up its pursuit of tax cheats as mirrored
by the consistent indictments of tax evaders and their subsequent
prosecutions.
The tax man hopes to prosecute an estimated 600 individuals on tax
evasion by the end of June 2020 having indicted 222 persons in the
past year to see a 60 percent surge in tax recoveries to Ksh.8.5
billion.
KRA is expected to pull up its socks in the nine months to the end of
the current fiscal year with Treasury having pushed up the agency’s
revenue targets to Ksh.1.81 trillion.