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Macro Thoughts

Home Thoughts

The Messier 87 galaxy, April 10 It might look like just a lopsided
ring of light. But look closer and you’ll see a one-way portal to
eternity: the first ever image of a black hole. Event Horizon
Telescope Collaboration, via National Science Foundation

If you spend enough time on the Thames, you will eventually come
across human remains. It is a river of lost souls, filled with
suicides, battles, burials, murders and accidents, with people so poor
their families couldn’t afford to bury them, or so destitute they were
never missed.
Their bones wash up on the foreshore in the drifts of smooth,
honey-brown animal bones, the remains of 2,000 years of dining and
feasting.
i know this because I am a mudlark and I’ve found my fair share of
lost and forgotten Londoners. Mudlarking is best described as a hobby
for the archaeologically curious. Twice a day, the tidal Thames falls
low enough to search the riverbed for the city’s lost and discarded
objects.
I let the river dictate what I find; I don’t dig or use a metal
detector, I merely take what is left for me on the surface of the mud
and caught among the shingle. It is a giant lucky dip, with each tide
delivering new treasures and random objects.
In the 15 years I’ve been chasing the tides, I’ve found countless
coins and buttons, Roman hairpins, a complete Iron Age pot, medieval
buckles, Tudor shoes, Georgian wine bottles and modern wedding rings,
but the most sobering are the human finds.
A handful of teeth, eaten away by rot, and a dirty creamy-yellow cup,
a section of human skull with faint grooves and ridges on the inside
where someone’s brain once pressed against it.
Pink rubber gloves, old coats packed with sand, and bedraggled wigs
have all stopped me in my tracks over the years, but the grey plastic
brick I once found seemed innocent enough, until I picked it up.
It was heavier than I expected and when I shook it, it sounded like
gravel mixed with sand. I turned it over and saw just enough of a
soggy white label to read: ‘Remains of the Late…’ I had found
someone’s ashes.
What should I do? After much thought, I dropped them back into the
river to continue their journey east, even if it meant they would
eventually end up permanently marooned further downstream.
People are drawn to the river as a means to an end. I have found two
souls that were claimed by its fast-running water and every year the
river police recover around 35 bodies, 90 per cent of which are
attributed to suicide.
If they are not retrieved, tides and currents sweep bodies away
quickly, carrying them many miles from where they first entered the
water. Some are never found; they are sucked down into the mud or
washed out to sea.
Those that are recovered are brought back in zipped bags to a
riverside mortuary on a floating pontoon in front of Wapping police
station. Such is the state of many river corpses that until recently
police officers were given a special allowance to search drowned
bodies for clues to their identity.
It is unlikely that the bones I and a fellow mudlark found this summer
will ever be identified. We were close to the estuary and had just
dropped off the shoreline to begin our trudge across miles of sticky
grey mud when my friend saw the skull resting upside down in a shallow
dip.
Winkles had set up home in its crevices and sinuses and a sprig of
bladderwrack was growing out of it. A rough skin of barnacles over the
rich brown bone showed it had been there some time, and close by we
found a single long femur and the two lower bones of an arm. All the
rest had been washed away.
There are rules and regulations regarding mudlarking. Anyone searching
the foreshore must have a permit from the Port of London Authority
(pla.co.uk). Finds of historic note should be recorded on the Portable
Antiquities Scheme database (finds.org.uk); anything qualifying as
treasure has to be reported by law; and the police must be informed of
human remains.
We took a GPS reading and called it into the police. The next day the
bones were retrieved and delivered to the coroner.
A week or so later a policeman was on my doorstep with a DNA kit. They
needed to rule me out of the investigation and assured me that
anything they took would be destroyed when it was over, so I submitted
to the swab.
Meanwhile, my social media pages were buzzing. Through Facebook a
specialist in barnacle colonisation of human remains from Murdoch
University in Perth, Australia, contacted me. If the bones proved to
be as old as I thought, she was keen to get her hands on them for
further study.
The bones travelled north to a lab in Scotland where tests confirmed
that they are at least 200 years old. It is possible, therefore, that
they are those of an inmate from a prison hulk — decommissioned
warships that were turned into floating jails to hold Napoleonic
prisoners of war and those awaiting transportation.
Conditions on board the hulks were horrific — food was scarce and
disease was rife. Those who died were treated with little more respect
than in life. Their bodies were rowed to nearby marshland and buried
in shallow graves next to the river, and it’s not uncommon to find
their bones today. Water levels are rising by about a foot every 100
years, eroding their meagre graves.
But it may be possible to give this individual some of the recognition
he (or she) was denied in life. I have just heard that the police have
agreed to release the bones to Murdoch University, where it hopes to
find out as much as possible about the person they belonged to.
If there’s a facial reconstruction, I may finally get to look into the
face of one of the river’s lost souls.

Political Reflections

These places run on a 0 sum game and thus, no reason to cooperate

The predator doesn't need to engage with nature, a necessary complex
dialogue that any  productive work requires.

However, the Predator can only be effective if he possesses certain qualities :
- Awareness to spot a prey
- Speed to beat competition

The wellbeing of the nation resides in its ability to create wealth
from knowledge. Hence the obligation for cooperation

The Events that took place on Friday at the truce village of Panmunjom
and during the Inter-Korean Summit were breathtaking for the Hollywood
Optics. The Opening Shot of Kim Jong Un surrounded by a Phalanx of
North Korean Officials [later replayed as Chairman Kim sat in his
Presidential Vehicle surrounded by his Ninja bodyguards] was almost as
good as the opening Sequence in PT Anderson's Boogie Nights [Steadicam
operator Andy Shuttleworth]. This was Cinema of the highest level
which is no surprise when You consider that Kim Jong-Il the Father was
obsessed with Cinema and amassed arguably the world’s largest personal
film collection: over 20,000 bootlegged 35mm screening copies. Kim
Jong-Il also had a penchant for Hennessy Paradis cognac and for two
years in the mid-1990s, he was the world's largest buyer of Hennessy
Paradis cognac, importing up to $800,000 of the stuff a year.  Kim
Jong-Il began his career as the head of the state’s propaganda and
agitation department and its clear that Kim Jong-Un's sister Kim Yo
Jong who holds the same role and evidently handles all the optics, is
a chip off the old Block. Friday was tip-top Geopolitical Optics. Mike
Pompeo, the newly minted US Secretary of State [His predecessor was
fired via Twitter] had visited Pyongyang the previous week and
pronounced; that the young North Korean leader was "a smart guy who's
doing his homework"

While the U.S. Navy launches a handful of AEGIS destroyers each year,
the single image below of a Shanghai shipyard shows nine newly
constructed Chinese warships.
China’s Navy, known as the PLAN (People’s Liberation Army Navy), is
modernizing at an impressive rate. And on a vast scale.
A key ingredient is the construction of a fleet of large destroyers,
amphibious warships and aircraft carriers. The below photo, snapped
from an airplane window on December 13, and shared on social media,
captures the vast scale of this construction.
Other developments are not visible in the photo. It is the same
shipyard where China’s mysterious sailless submarine has been
constructed.
Although that submarine is not clearly apparent in the photograph, it
may be present in the basin.
This image paints an interesting picture of Chinese naval
modernization. Yet the biggest takeaway is that this shipyard is not
alone.
There are many yards across China which are similarly impressive. The
Chinese Navy of today, and the future, is changed beyond all
recognition from the Chinese Navy of the past. The world naval balance
is shifting.

''Longing on a large scale makes history.” wrote Don DeLillo

Skirmishes erupted after foreign aid trucks were blocked by armed
loyalists of President Nicolás Maduro. Meridith Kohut for The New York
Times

Venezuela where GDP is down from $350bn in 2012 to an estimated $60bn
in 2019. People have been pushed to the edge and are taking to the
streets.
Paul Virilio pronounced in his book Speed and Politics,
“The revolutionary contingent attains its ideal form not in the place
of production, but in the street, where for a moment  it stops being a
cog in the technical machine and itself becomes a motor (machine of
attack), in other words, a producer of speed.’’

The Phenomenon is spreading like wildfire in large part because of the
tinder dry conditions underfoot. Prolonged stand-offs eviscerate
economies, reducing opportunities and accelerate the negative feed-
back loop.

International Markets

Euro 1.1144
Dollar Index 97.106
Japan Yen 109.55
Swiss Franc 0.9830
Pound 1.3273
Aussie 0.6864
India Rupee 70.9728
South Korea Won 1166.06
Brazil Real 4.0635
Egypt Pound 16.0508
South Africa Rand 14.3859

Bernstein: "most people think you can’t grow subs without spending a
lot more on programs & films. If you look at the second chart below
you can see that we disagree. At $20bn annual spend, they can release
a new complete series every day. Even taking into account foreign
language material and a percentage of duds, this feels like enough"

My Mind kept to an Article I read in 2012 ‘’Annals of Technology
Streaming Dreams’’ by John Seabrook January 16, 2012.
“This world of online video is the future, and for an artist you want
to be first in, to be a pioneer. With YouTube, I will have a very
small crew, and we are trying to keep focused on a single voice. There
aren’t any rules. There’s just the artist, the content, and the
audience.”
“People went from broad to narrow,” he said, “and we think they will
continue to go that way—spend more and more time in the niches—
because now the distribution lands- cape allows for more narrowness’’.
And this brought me to Netflix. Netflix spearheaded a streaming
revolution that changed the way we watch TV and films. As cable TV
lost subscribers, Netflix gained them, putting it in a category with
Facebook, Amazon, and Google as one of the adored US tech stocks that
led a historic bull market [FT].
Netflix faces an onslaught of competition in the market it invented.
After years of false starts, Apple is planning to launch a streaming
service in November, as is Disney — with AT&T’s WarnerMedia and Com-
cast’s NBCUniversal to follow early next year.
Netflix has corrected brutally and lots of folks are bailing big time
especially after Netflix lost US subscribers in the last quarter.
Even after the loss of subscribers in the second quarter, Ben
Swinburne, head of media research at Morgan Stanley, says Netflix is
still on course for a record year of subscriber additions.
Optimists point to the group’s global reach. It is betting its future
on expansion outside the US, where it has already attracted 60m
subscribers. And this is an inflection point just like the one I am
signaling in the Oil markets.
Netflix is not a US business, it is a global business. The Majority of
Analysts are in the US and in my opinion, these same Analysts have an
international ‘’blind spot’’
Once Investors appreciate that the Story is an international one and
not a US one anymore, we will see the price ramp to fresh all-time
highs.

Commodities

Aramco raised $25.6bn in the biggest-ever IPO, selling shares at 32
riyals each and valuing the company at $1.7tn, overtaking Microsoft
and Apple as the most valuable listed company in the World. At the
latest valuation of $1.96 trillion, Aramco is a whisker shy of Crown
Prince Mohammed bin Salman's Target of $2 trillion set some four years
ago.  At $2tn, it is worth more than technology giants Apple [which is
2nd and worth $1.19 trillion] and Microsoft, and bigger even than the
top five oil companies — ExxonMobil, Total, Royal Dutch Shell, Chevron
and BP — combined. The Saudi Stock Exchange Tadawul has elevated to
the seventh largest exchange in the world after the successful listing
and the Post IPO Pop in the price. “It’s a great day for Saudi Arabia
and the leadership of Saudi Arabia and for the people of Saudi Arabia.
It’s a D-Day for Aramco, it’s a day of reckoning and vindication,”
Energy Minister Prince Abdulaziz bin Salman told Reuters in
Madrid.Prince Abdulaziz predicted investors who didn’t buy into the
offering would be “chewing their thumbs” after missing out.“I know he
is proud,” his half-brother and oil minister, Prince Abdulaziz bin
Salman, said in a TV interview after the shares were successfully
allocated last week. “He made us all proud because he took good
decisions. These decisions, you have seen it now, have brought us a
4.6 times over-subscription.”@Amena__Bakr tweeted [The] General mood
in Saudi Arabia with regards to the Aramco IPO from people I spoke to
can be summarized in 3 words: vindicated, triumphant, relieved.
Notwithstanding some churlish International commentary
''At every turn, the crown prince and his advisers have sought to
determine the price of the offering rather than leave it to the
market: wealthy Saudi families have been pressured to buy shares;
banks have had to issue loans to retail investors; funds in the
kingdom and regional allies, including Abu Dhabi, were asked to
bolster the sale after plans to market the listing globally were
abandoned. The size of the original stake had to be scaled back to 1.5
per cent'' [Financial Times].The comments by the Financial Times
counterintuitively speak to the sharp and smart moves by the Saudi
Authorities.
This is a singular triumph for the Kingdom, The Crown Prince and his
Team. It was precisely correct to limit the supply of shares [1.5%] in
order to maintain a structure where Demand outstripped Supply. This is
Lesson 101 in the business of IPOs. It was precisely correct to sell
shares into strong Hands. Your own Nationals and Sovereign Wealth
Funds from the Neighbourhood represent Strong Hands. Affording
leverage versus a security with a proposed $ dividend of 3.75% is a
risk adjusted No-Brainer for the Banks. It would have been plain
irresponsible to have done anything differently. Why on Earth would
you sell more shares than the market could absorb into International
Markets where Short Sellers would have a ''Boondoggle'' That would
have been a little insane. The Saudi Authorities have captured the
bulk of the value addition from the listing.  Limiting transaction
Fees to below $70m was also clever business and I am sure has been a
Catalyst for some of the churlish commentary by those who were
salivating at the prospect of hundreds of millions dollars of fees.
This was optimal stewardship of the public Purse, plain and simple.
Furthermore, selling shares in your home market and catapaulting the
Tadawul to the seventh largest Exchange in the World is also optimal.
No Country in the World is truly sovereign unless it has ownership of
its own capital markets. The Kingdom has parlayed itself into the
bulge-bracket via the Aramco listing. That is a significant
achievement and a crystallising of a One-Off opportunity.
@DaniloOnorino was  quoted as follows  “This is the Ferrari of the oil
companies” and if you want to buy this Ferrari, You need to go to
Riyadh and that's the final overarching point.

there’s a panic” in the coffee futures market. “There’s concern that a
lot of the farmers who sold their coffee through futures are not going
to be able to deliver on the underlying products.”

Emerging Markets

Only one outlier to the rally, Turkish Lira, whose under-performance
is more noticeable every day.

Brazil, Sept. 8 A fire reached the Amazon rainforest near the city of
Porto Velho. The destruction of the Amazon in Brazil has rapidly
increased under a new president. Victor Moriyama for The New York
Times

Subramanian said the Indian economy is now experiencing a “second
wave” of the Twin Balance Sheet crisis, which is behind what he terms
a “Great Slowdown.”
He described the crisis as debts accumulated by private corporates
becoming the non-performing assets of banks.
According to Subramanian, the first wave of this crisis happened when
bank loans extended to steel, power and infrastructure sector
companies during the investment boom of 2004-11 turned bad.
The second crisis is largely a post-demonetization phenomenon
involving non-banking financial companies, or shadow banks and real
estate firms.
After high-value currency notes were banned, considerable amounts of
cash made their way to banks, who lent a major part of that to shadow
banks. They channeled this money to the real estate sector.
By 2017-18, the shadow banks were accounting for roughly half the
estimated 5,000 billion rupees (US$70.6 billion) of outstanding real
estate loans.
Subramanian said the collapse of the country’s largest shadow bank,
IL&FS, in September 2018 was a “seismic event” which was responsible
for “prompting markets to wake up and reassess the entire NBFC
(non-bank financial company) sector.”
What the markets discovered was profoundly disturbing. A lot of NBFC
lending in the recent period was concentrated in one particular
industry – real estate – which itself was in a precarious situation.
At the end of June 2019, the total number of unsold houses and flats
in the top eight cities was almost one million, valued at 8 trillion
rupees ($113 billion), or the equivalent to about four years of sales.
Once the extent of their exposure to real estate became known after
IL&FS went belly-up, banks, as well as mutual funds, virtually stopped
lending to NBFCs.
“In some ways, this may have been India’s version of the US housing
bubble,” Subramanian and Felman argue.
Worse, it has created a new wave of stress for banks, some of whose
credit to shadow banks amount to 10-14% of their loan books.
With banks turning cautious – on top of fund-starved NBFCs that had
emerged as a key source of lending for small businesses and consumer
durable purchases in the post-demonetization period – the flow of
commercial credit has collapsed from a peak of 20 trillion rupees in
2018-19 to “virtually nothing” in the first six months of this fiscal
year.
Subramanian and Felman say India is now facing a situation of an
unresolved legacy balance sheet problem along with a fresh crisis,
both of which have pushed the economy into a downward spiral.
The paper says high rates and little credit are causing the economy to
slow, thereby intensifying the stress on the corporate sector and on
the financial system itself. This has made the financial sector
exercise greater caution while lending.
The current slowdown, they note, is worrisome, not only because gross
domestic product growth has slowed to 4.5% in the second quarter of
2019-20. Even more distressing is the disaggregated data.
“The growth of consumer goods production has virtually ground to a
halt, production of investment goods is falling. Indicators of
exports, imports and government revenues are all close to negative
territory.
These indicators suggest the economy’s illness is severe … [this]
slowdown seems closer to the 1991 balance of payments crisis,” they
stated.
Second quarter growth of 4.5% was propped up by a 15.64% increase in
government expenditure. If that component is left out from gross
domestic product, the economy actually grew 3.05%.
This non-government part – private consumption expenditure, investment
and net exports – forms 87-92% of the economy.
The crisis in 1991 mentioned by Subramanian is considered the worst in
independent India’s economic history.
The country ran large deficits, accumulated over a long period of
time, and as a result faced the balance of payment.
India had to pledge gold reserves, take loans from the IMF and carry
other structural adjustments to its economy, sponsored by the IMF and
World Bank.
The country also changed its economic policies with a greater emphasis
on private sector participation and did away with many controls.
Various tax reforms were carried out with a view to promoting
investment.
Former prime minister Manmohan Singh, the finance minister during that
period, was instrumental in framing the new economic policies, which
helped the country come out of the crisis as a stronger and more
resilient economic power.

The GDP figure is the weakest recorded under Prime Minister Narendra
Modi, who first swept to power five years ago promising to take
India’s economy to new heights and create millions of jobs every year.

Prime Minister Narendra Modi revoked  Article 370, which protected
Kashmir’s demography by restricting residency to Kashmiris alone and,
under a sub-section known as Article 35A, forbade the sale of property
to non-Kashmiris.
Essentially, Modi is seeking to flood the zone. The Periphery is a
Tinderbox in many parts of the World.

Frontier Markets

Sub Saharan Africa

The Pentagon has accused Russian troops of targeting one of its
surveillance drones close to the Libyan capital of Tripoli last month.
The drone was watching on as a battle for control over the city began
to unfold.
The US Pentagon’s Africa Command has issued a statement saying an
unarmed US surveillance drone was shot down near Libya’s capital on
November 21 by Russian weapons.
Now, it wants the highly sensitive wreckage back.
US Army General Stephen Townsend says Russian troops are refusing to return it.
“They say they don’t know where it is, but I am not buying it,”
General Townsend told Reuters at the weekend.
The circumstances of the incident are confused.
But both General Townsend and his spokesman Colonel Christopher Karns
have attempted to excuse it as accidental.
Townsend said the Russians “didn’t know it was a US remotely piloted
aircraft when they fired on it”. Colonel Karns stated the air-defence
gunners opened fire after “mistaking it for an opposition aircraft”.
This is possible.
Libya has become a hive of combat drones in the past year.
Cheap Turkish and Chinese-made devices are now swarming over the battlefields.
Above them loiter larger, more powerful, machines controlled by US and
French forces.
Now, advanced Russian drones have joined the fray.
It’s created a scenario where General Townsend is not just worried
about his drones. He’s concerned at the impact fresh Russian forces
are having on the civil war.
“This highlights the malign influence of Russian mercenaries acting to
influence the outcome of the civil war in Libya, and who are directly
responsible for the recent and sharp increase in fighting, casualties
and destruction around Tripoli,” he said.
In recent months, Russia has surged state-backed mercenaries into
Libya to assist the Libyan National Army. This Libyan faction is under
the control of Field Marshal Haftar, who is also backed by the United
Arab Emirates, Saudi Arabia, Egypt and France.

Seychelles 16,433.9
Mauritius 11,238.7
Equatorial Guinea 10,174.0
Botswana 8,258.6
Gabon 8,029.8
South Africa 6,374.0
Namibia 5,931.5
Eswatini 4,140.0
Cabo Verde 3,654.0
Angola 3,432.4
Source: World Bank

Clashes in October 2019 in Oromia, Ethiopia’s most populous region,
left scores of people dead. They mark the latest explosion of ethnic
strife that has killed hundreds and displaced millions across the
country over the past year and half.
Why did it happen? Prime Minister Abiy Ahmed has taken important steps
to move the country toward more open politics.
But his efforts to dismantle the old order have weakened the Ethiopian
state and given new energy to ethno-nationalism.
Hostility among the leaders of Ethiopia’s most powerful regions has soared.
Four fault lines are especially perilous. The first cuts across
Oromia, Abiy’s home state, where his rivals – and even some former
allies – believe the premier should do more to advance the region’s
interests.
The second pits Oromo leaders against those of Amhara, Ethiopia’s
second most populous state: they are at loggerheads over Oromia’s bid
for greater influence, including over the capital Addis Ababa, which
is multi-ethnic but surrounded by Oromia.
The third relates to a bitter dispute between Amhara politicians and
the formerly dominant Tigray minority that centres on two territories
that the Amhara claim Tigray annexed in the early 1990s.
The fourth involves Tigray leaders and Abiy’s government, with the
former resenting the prime minister for what they perceive as his
dismantling of a political system they constructed, and then
dominated, and what they see as his lopsided targeting of Tigrayan
leaders for past abuses.
An uptick of attacks on churches and mosques across parts of the
country suggests that rising interfaith tensions could add another
layer of complexity.
Ethiopia’s transition may not yet hang from a precipice; indeed, it is
still a source of hope for many in Ethiopia and abroad. But signs are
troubling enough to worry top and former officials.
Among the most alarmist suggestions made by some observers is that the
multinational federation could break apart as Yugoslavia did in the
1990s.
This worry may be overstated, but Abiy nonetheless should err on the
side of caution as he walks a tightrope of pushing through reforms
while keeping powerful constituencies on board.

The bond maturing in 2024 gained as much as 1.1 cents to 106.34 cents
in the dollar, according to Tradeweb data.
The birr currency extended its slide to 31.5088 to the dollar, having
depreciated sharply in the past four weeks.
The fund and the government reached a $2.9 billion preliminary
agreement on Wednesday for a three-year financing package to support
Ethiopia’s economic reforms.
In its statement, the IMF outlined five pillars to its program with a
“transition to a more flexible exchange rate regime” topping the list.
Other items were more oversight of state enterprises, domestic revenue
mobilization, financial sector and monetary policy reform, and
improving supervision.
It last devalued the currency by 15% in October 2017.
The IMF agreement marked a big shift for Ethiopia, said Charles
Robertson at Renaissance Capital, who calculates the currency is
over-valued by 20-25%.
On the black market, the birr traded at 39 to the dollar.
“We assumed an IMF deal was off the agenda,” Robertson wrote to
clients, adding any currency adjustment would also aid government
privatization plans in the telecom and airline sectors and help
attract investors nervous about being able to repatriate funds.
“This immediately matters to bidders for telecom licenses in Ethiopia,
holders of the illiquid single sovereign Eurobond ... and private
equity groups who’ve already invested in the continent’s second
largest country by population, attracted by two decades of very high
growth.”

The executive board of the International Monetary Fund agreed Monday
to a $368.4 million credit facility to boost Democratic Republic
Congo’s falling reserves.
The Washington-based lender will also send staff to the central
African nation through the end of May to help prepare Congo for its
first formal IMF loan program since 2012, the IMF said in an emailed
statement.
“The recent fall in commodity prices, new spending initiatives, and
looser spending oversight during the political transition period have
led to a weaker fiscal position mostly financed by the central bank,”
the IMF said.
Because of this, Congo’s international reserves “have fallen to
critically low levels creating urgent balance of payment needs.”
Congo is Africa’s largest producer of copper and the world’s largest
source of cobalt. Its last IMF loan program was halted in 2012 amid
concerns about corruption in the mining industry.

In a little clearing in a Ghanaian forest, not far from where
grapefruit-sized cocoa pods hang heavily from the trees, 67-year-old
Yaa Asantewaa breaks into song.
Dressed in a threadbare skirt and purple T-shirt, she dances to her
uplifting lyrics: “If you want to buy fine cloth — it is cocoa. If you
want a meaningful life — it is cocoa.”
Farmers have been singing variations of this song — about how planting
cocoa will make you rich — for decades in Ghana, the world’s largest
producer after neighbouring Ivory Coast.
In the first decades of the 20th century, smallholders in west Africa
rushed into cocoa farming as if it were the new gold.
Today, between them, Ghana and Ivory Coast produce nearly two-thirds
of the global supply of cocoa, the main ingredient in a chocolate
industry worth more than $100bn a year in sales.
On Christmas Eve, nearly all the chocolate treats hidden inside
stockings by the tree will almost certainly contain cocoa from one of
those countries.
But Ms Asantewaa knows only too well that the words to her song are
fanciful. Cocoa has not made her rich.
Like most of the 2m cocoa farmers in west Africa, she is a smallholder
— and extremely poor. She owns a tiny forest plot from which she
harvests just four bags of cocoa beans a year.
For that, at last year’s prices, she would have earned about £300. The
mud houses in her village of Wawase in southern Ghana have no
electricity or running water.
The penury of many farmers at the bottom of the chocolate industry’s
multibillion-dollar pyramid reflects a much broader issue: why is it
so difficult for poor countries to break out of poverty by extracting
higher prices for their raw materials and by climbing up the
value-added ladder?
Ghana supplies about one-fifth of all cocoa beans, for which it earns
about $2bn a year, less than one-fiftieth of the value of the
chocolate that is manufactured, branded and sold.
Nana Akufo-Addo, Ghana’s president, says his country is locked in a
colonial-style relationship with the world’s chocolate manufacturers
in which it provides raw materials only to import finished goods.
“Chocolate is a $100bn industry and we who produce 65 per cent of the
raw material make less than $6bn from the sweat and toil of our
farmers,” he says, referring to the combined sales of Ghana and Ivory
Coast.
What prevented these two countries, he asks, from earning more by
turning beans into cocoa liquor and cocoa butter or even manufacturing
finished chocolate bars?
In practice, both Ghana and Ivory coast, which have high electricity
costs and where little chocolate is eaten, have found it hard to
wrestle a greater share of profits from an industry that keeps most of
the added value near the western consumer markets it serves.
The chocolate industry has been accused of more than keeping its adult
farmers in poverty. As long ago as 2001, chocolate makers, including
Mars, Nestlé and Hershey, signed an agreement to eliminate child
labour from their supply chains in Ghana and Ivory Coast where the
problem is most acute.
Yet in 2015, the US labour department found that the number of
children working on cocoa farms — some carrying out dangerous tasks
such as spraying pesticide, lugging heavy sacks or wielding machetes —
had actually gone up to 2.1m.
The industry has since signed up to a less ambitious target of
reducing child labour by 70 per cent by next year. Most observers
think it will fail.
As if that were not enough, cocoa farming has also been linked to
rampant deforestation, particularly in Ivory Coast.
Its cocoa production has nearly doubled to 2m tonnes over the past
decade as farmers clear new forest land.
After years of talk, African governments have decided to act to
improve their leverage in the chocolate industry.
In July, Ghana and Ivory Coast unilaterally announced a fixed premium
of $400 a tonne over the benchmark futures price from October 2020.
“If you look at Opec, they are only controlling about 30 to 40 per
cent of the global oil supply and they control prices,” says Mahamudu
Bawumia, Ghana’s vice-president, referring to the oil cartel. “If they
have Opec, we can have Copec.”
The determination of producer countries to squeeze more value from
chocolate might appear to be putting them on a collision course with
industry.
Business logic suggests that manufacturers, such as Nestlé and
Ferrero, and trading houses, including Cargill and Olam, are not keen
to pay more for ingredients. Yet, in many ways, the rhetoric coming
from Africa chimes with that of the chocolate industry itself.
“We are a food business, so it is absolutely critical that our supply
chains are sustainable,” says Victoria Mars, a fourth-generation
member of the family and former chairwoman of Mars. “If we don’t have
the raw materials, we can’t make our products.”
A combination of self-interest and reputational risk is forcing
manufacturers to clean up supply chains that are linked to grinding
poverty, child labour and environmental degradation.
Some, including Barry Callebaut, a Switzerland-based chocolate maker
that is the world’s biggest cocoa buyer, have cautiously welcomed the
$400 premium.
Consumers are increasingly interested in the sourcing of their
products and under what conditions they are produced.
Non-governmental organisations have ratcheted up the pressure on
manufacturers by exposing the darker side of chocolate and most of the
big chocolate makers have responded with bold-sounding initiatives.
Mars has committed to spending $1bn over 10 years on its “Cocoa for
Generations” programme that, it says, will fundamentally overhaul a
supply chain it admits is broken.
Barry Callebaut has launched a “Forever Chocolate” initiative, which
aims to hit four audited targets by 2025: lift 500,000 farmers out of
poverty, reduce child labour to zero, become carbon- and
forest-positive, and have fully sustainable ingredients.
Companies say these efforts represent a step-change in their thinking.
“It’s getting away from old-fashioned corporate social responsibility
and creating real impact,” says Nicko Debenham, Barry Callebaut’s head
of sustainability, who criticises what he regards as the piecemeal
certification programmes such as Fairtrade and Rainforest Alliance.
“We can’t just hit replay on what we’ve done and what other people
have done. To create impact, we’ve got to do this at scale.”
As well as protecting their reputations, chocolate makers worry that
their supply of cocoa could dry up if farmers are destitute.
“If our farmers are not able to thrive, if they are not able to make a
decent living, if they are not able to educate their children, then
they are not going to stay farmers,” says Ms Mars. “We all have to
work this out together.”
With industry and producer countries now purportedly on the same side,
surely something can be done to improve cocoa-farming conditions that
some compare to modern slavery?
Mr Debenham has been banging his head against the problem for years.
Since 2016, he has been overseeing Barry Callebaut’s “Forever
Chocolate” initiative.
He describes it as the industry’s best effort yet to tackle structural
problems that, he says, can only be solved by co-operation between
governments in producer and consumer countries as well as NGOs and the
industry.
“Everybody has to play their role, not just by telling industry we’re
going to ban you, we’re going to punish you, we’re going to beat you,”
he says.
Barry Callebaut, he says, is rolling out a combination of initiatives
that can be carried out at scale.
In Ghana, it has bought a licensed buying company, Nyonkopa, to get
around a ban on foreign firms purchasing cocoa directly from farmers,
allowing it to distribute seedlings, shade trees and yield-enhancing
advice to smallholders.
After decades in which inherited plots have been split between
children, farm sizes are simply too small, says Mr Debenham. “It’s not
an acceptable living. It’s below the poverty line,” he says, adding
that, in the long run, the answer is bigger farms and fewer farmers.
If the overarching goal is alleviating poverty, defined by the World
Bank as living on less than $1.90 a day adjusted for prices, Mr
Debenham has concluded the key is diversification away from chocolate.
Raising yields, say experts, is not the whole solution since, if too
many farmers are successful, aggregate output will rise and prices
inevitably fall. In 2017, cocoa prices tumbled by nearly 40 per cent,
a disaster for farmers blamed partly on surging production in Ivory
Coast.
Instead, Barry Callebaut has collected data from 230,000 cocoa farmers
and is offering tailor-made business plans to help them increase
income by growing vegetables, making soap, selling honey or keeping
livestock.
One option is to raise hens whose eggs provide both protein and cash.
Eggs sell for half a cedi each, or around $2.65 for a crate of 30.
John Afful, a 43-year-old cocoa farmer in Ghana’s southern Ashanti
region, says. “Before I had poultry, things were tough. It was even
hard to send my kids to school.”
Asked what ambitions he has for his five children, Mr Afful replies
definitively: “I don’t want them to be cocoa farmers.”
Barry Callebaut has also signed up to so-called Scope 3 carbon targets
which means not only being carbon neutral in its energy and
supply-chain footprint, but also accounting for historical land use
changes.
By 2025, it has pledged that none of its cocoa will come from farms
that were converted from forest after 2005, a claim backed up through
laborious farm-boundary surveys and satellite imagery.
It has organised child protection committees to report violations on
about one-quarter of its cocoa farms.
According to PwC, which audits the programme, these actions are having
some impact. Barry Callebaut has nudged 185,000 farmers above the
$1.90 poverty threshold since 2016 and achieved a 6.7 per cent
reduction in emissions in the year to the end of August.
There were 3,867 cases of reported child labour in the period, though
2,200 are being dealt with.
Many are sceptical about how effective industry programmes can be in
tackling what campaigners consider a structural imbalance in power
between huge multinationals and the poor farmers who supply them. “I
think it’s bullshit quite frankly,” says Victoria Crandall, who is a
Lagos-based former commodities analyst for five years in Ivory Coast.
Paul Shoenmakers, head of impact at Tony’s Chocolonely, a niche Dutch
chocolate manufacturer that aims to act as a catalyst for change in
the industry, says: “It is like killing a forest fire with a glass of
water.”
Michiel Hendriksz, a former cocoa executive at commodities trader
Archer Daniels Midland, says the attempt by Ghana and Ivory Coast to
impose the $400 premium will fail.
The premium, known as the “living income differential” or LID, is
intended to increase farm-gate prices to levels high enough that
farmers can send their children to school, eat healthily and pay
medical bills.
But campaigners doubt the ability of African governments to influence
prices that are determined by traders buying and selling derivative
contracts worth some 40 times physical supplies.
Unlike oil wells, cocoa trees cannot simply be turned off to reduce
supply. Even if prices go up, say traders, that will encourage farmers
to grow more, sending prices back down again.
“LID is a bad poker game by people who cannot play poker,” says Mr
Hendriksz, who argues that the whole cash-crop model is a recipe for
continued poverty.
He has more radical advice for producers: “If they abandon cocoa,
prices would go through the roof. Grow more food, produce less cocoa
and push up the price.”
As well as seeking to raise cocoa prices, Ghana wants to incentivise
chocolate manufacturers to grind cocoa beans domestically. But highly
mechanised factories employ few people and, thanks to generous tax
breaks, contribute little to the treasury.
Some entrepreneurs have tried to make chocolate in Ghana. But most
have hit problems. Ghana has no sizeable dairy industry, forcing them
to import milk.
Electricity prices are high. So are temperatures, obliging them to
spend heavily on refrigeration.
“It’s hard to manufacture at origin,” says Ms Crandall. “Your
production costs are always going to be more than in Europe or the
US.” Manufacturers, she says, stay close to their consumers, which
means the westerners who can afford chocolate.
Like many, Ms Crandall sees no easy solutions. “There has to be a
radical transformation of the whole industry,” she says. “If consumers
want an ethical chocolate bar and they want farmers to be flourishing,
they have to cut out the trading houses and they have to cut out big
chocolate.”

Namibia's economy is shrinking, inflation is at its lowest in 14 yrs,
but because Namibia pegged its currency to the South African Rand, if
they cut interest rates, investors could shift funds to SA to earn
higher returns making it difficult for Namibia to retain reserves

Kenya

He will continue in that role as well as leading KQ “until a
substantive CEO for Kenya Airways has been recruited

“Our projections are less optimistic than that (those) of the
government, which sees debt stabilising in 2020 and falling to 54 per
cent by 2024. General government debt reached 61.3 per cent of GDP at
end-2019,” Fitch said in a rating update on December 10.
In November 2019, the Parliament approved a change to the existing
debt limit, moving it to a nominal limit of Sh9 trillion from 50 per
cent of GDP in net present value terms.
The rating firm warned that Kenya spent twice as much as its peers in
paying for loans with the government’s interest costs at 22.1 per
cent.

The report on the county’s expenditure in the first quarter of the
current fiscal year that ends in June 2020 shows that City Hall used
Sh3.2 billion in staff compensation compared to the Sh1.5 billion
raised in own sources.