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Macro Thoughts

Home Thoughts

This is magical picture. Count the #cubs with #tigress. I know for a
reason how few people will be elated after seeing this. Efforts are
helping in making this species bounce back from verge of extinction.
PC Siddharth Singh. Magical Terai.

My favourite Movie

Can’t think of anything lovelier than its hazy beauty to celebrate my
new telescope, which I just finished assembling. (A sprightly portable
Orion StarBlast II 4.5 equatorial reflector, for the curious.)

Political Reflections

China and the US will sign phase one trade deal. This deal can be seen
as a new start to explore each other's boundary of behavior and
tolerance. China-US ties can no longer go back to the past. But if the
two countries go to confrontation again, it will be idiocy of the
mankind.

Division of Specialization: If you are money-making (say Phoenicians)
then you don't need an army, you just pay whoever runs that business
for protection.

(i) w/o exacting protection money (Europe pays little even indirect),
(ii) w/defiant states.
Empires' model is to crush defiant states, plunder & parade
Vercingetorix, Zenobia,... Saddam.

Clarity of mind:
Trump figured out THAT business model
(i) REQUIRES direct punishment of Iranian Regime,
 or
(ii) change model

The three grand imperatives of imperial geostrategy are to prevent
collusion and maintain security dependence among the vassals, to keep
tributaries pliant and protected, and to keep the barbarians from
coming together Zbigniew Brzezinski

The difference between Saudi and Qatari thawb
Name 9 different Christian sects
Favourite type of Arak
Fill a government form in 5 minutes
Pronounce Iran correctly

Blofeld [read Trump]: Kronsteen, you are sure this plan is foolproof?
Kronsteen [read Pompeo]: Yes it is, because I have anticipated every
possible variation of counter-move.

Days after the assassination of General Qasem Soleimani, new and
important information is coming to light from a speech given by the
Iraqi prime minister.
The story behind Soleimani’s assassination seems to go much deeper
than what has thus far been reported, involving Saudi Arabia and China
as well the US dollar’s role as the global reserve currency.
The Iraqi prime minister, Adil Abdul-Mahdi, has revealed details of
his interactions with Trump in the weeks leading up to Soleimani’s
assassination in a speech to the Iraqi parliament.
He tried to explain several times on live television how Washington
had been browbeating him and other Iraqi members of parliament to toe
the American line, even threatening to engage in false-flag sniper
shootings of both protesters and security personnel in order to
inflame the situation, recalling similar modi operandi seen in Cairo
in 2009, Libya in 2011, and Maidan in 2014.
The purpose of such cynicism was to throw Iraq into chaos.
Here is the reconstruction of the story:
[Speaker of the Council of Representatives of Iraq] Halbousi attended
the parliamentary session while almost none of the Sunni members did.
This was because the Americans had learned that Abdul-Mehdi was
planning to reveal sensitive secrets in the session and sent Halbousi
to prevent this.
Halbousi cut Abdul-Mehdi off at the commencement of his speech and
then asked for the live airing of the session to be stopped.
After this, Halbousi together with other members, sat next to
Abdul-Mehdi, speaking openly with him but without it being recorded.
This is what was discussed in that session that was not broadcast:
Abdul-Mehdi spoke angrily about how the Americans had ruined the
country and now refused to complete infrastructure and electricity
grid projects unless they were promised 50% of oil revenues, which
Abdul-Mehdi refused.
The complete (translated) words of Abdul-Mahdi’s speech to parliament:
This is why I visited China and signed an important agreement with
them to undertake the construction instead.
Upon my return, Trump called me to ask me to reject this agreement.
When I refused, he threatened to unleash huge demonstrations against
me that would end my premiership.
Huge demonstrations against me duly materialized and Trump called
again to threaten that if I did not comply with his demands, then he
would have Marine snipers on tall buildings target protesters and
security personnel alike in order to pressure me.
I refused again and handed in my resignation. To this day the
Americans insist on us rescinding our deal with the Chinese.
After this, when our Minister of Defense publicly stated that a third
party was targeting both protestors and security personnel alike (just
as Trump had threatened he would do), I received a new call from Trump
threatening to kill both me and the Minister of Defense if we kept on
talking about this “third party”.
Nobody imagined that the threat was to be applied to General
Soleimani, but it was difficult for Prime Minister Adil Abdul-Mahdi to
reveal the weekslong backstory behind the terrorist attack.
I was supposed to meet him [Soleimani] later in the morning when he
was killed. He came to deliver a message from Iran in response to the
message we had delivered to the Iranians from the Saudis.
We can surmise, judging by Saudi Arabia’s reaction, that some kind of
negotiation was going on between Tehran and Riyadh:
The Kingdom’s statement regarding the events in Iraq stresses the
Kingdom’s view of the importance of de-escalation to save the
countries of the region and their people from the risks of any
escalation.
Above all, the Saudi Royal family wanted to let people know
immediately that they had not been informed of the US operation:
The kingdom of Saudi Arabia was not consulted regarding the US strike.
In light of the rapid developments, the Kingdom stresses the
importance of exercising restraint to guard against all acts that may
lead to escalation, with severe consequences.
And to emphasize his reluctance for war, Mohammad bin Salman sent a
delegation to the United States. Liz Sly, the Washington Post Beirut
bureau chief, tweated:
Saudi Arabia is sending a delegation to Washington to urge restraint
with Iran on behalf of [Persian] Gulf states. The message will be:
‘Please spare us the pain of going through another war’.
What clearly emerges is that the success of the operation against
Soleimani had nothing to do with the intelligence gathering of the US
or Israel.
It was known to all and sundry that Soleimani was heading to Baghdad
in a diplomatic capacity that acknowledged Iraq’s efforts to mediate a
solution to the regional crisis with Saudi Arabia.
It would seem that the Saudis, Iranians and Iraqis were well on the
way towards averting a regional conflict involving Syria, Iraq and
Yemen.
Riyadh’s reaction to the American strike evinced no public joy or
celebration. Qatar, while not seeing eye to eye with Riyadh on many
issues, also immediately expressed solidarity with Tehran, hosting a
meeting at a senior government level with Mohammad Zarif Jarif, the
Iranian foreign minister.
Even Turkey and Egypt, when commenting on the asassination, employed
moderating language.
This could reflect a fear of being on the receiving end of Iran’s
retaliation. Qatar, the country from which the drone that killed
Soleimani took off, is only a stone’s throw away from Iran, situated
on the other side of the Strait of Hormuz.
Riyadh and Tel Aviv, Tehran’s regional enemies, both know that a
military conflict with Iran would mean the end of the Saudi royal
family.
When the words of the Iraqi prime minister are linked back to the
geopolitical and energy agreements in the region, then the worrying
picture starts to emerge of a desperate US lashing out at a world
turning its back on a unipolar world order in favor of the emerging
multipolar about which I have long written.
The US, now considering itself a net energy exporter as a result of
the shale-oil revolution (on which the jury is still out), no longer
needs to import oil from the Middle East.
However, this does not mean that oil can now be traded in any other
currency other than the US dollar.
The petrodollar is what ensures that the US dollar retains its status
as the global reserve currency, granting the US a monopolistic
position from which it derives enormous benefits from playing the role
of regional hegemon.
This privileged position of holding the global reserve currency also
ensures that the US can easily fund its war machine by virtue of the
fact that much of the world is obliged to buy its treasury bonds that
it is simply able to conjure out of thin air.
To threaten this comfortable arrangement is to threaten Washington’s
global power.
Even so, the geopolitical and economic trend is inexorably towards a
multipolar world order, with China increasingly playing a leading
role, especially in the Middle East and South America.
Venezuela, Russia, Iran, Iraq, Qatar and Saudi Arabia together make up
the overwhelming majority of oil and gas reserves in the world.
The first three have an elevated relationship with Beijing and are
very much in the multipolar camp, something that China and Russia are
keen to further consolidate in order to ensure the future growth for
the Eurasian supercontinent without war and conflict.
Saudi Arabia, on the other hand, is pro-US but could gravitate towards
the Sino-Russian camp both militarily and in terms of energy. The same
process is going on with Iraq and Qatar thanks to Washington’s
numerous strategic errors in the region starting from Iraq in 2003,
Libya in 2011 and Syria and Yemen in recent years.
The agreement between Iraq and China is a prime example of how Beijing
intends to use the Iraq-Iran-Syria troika to revive the Middle East
and and link it to the Chinese Belt and Road Initiative.
While Doha and Riyadh would be the first to suffer economically from
such an agreement, Beijing’s economic power is such that, with its
win-win approach, there is room for everyone.
Saudi Arabia provides China with most of its oil and Qatar, together
with the Russian Federation, supply China with most of its LNG needs,
which lines up with Xi Jinping’s 2030 vision that aims to greatly
reduce polluting emissions.
The US is absent in this picture, with little ability to influence
events or offer any appealing economic alternatives.
Washington would like to prevent any Eurasian integration by
unleashing chaos and destruction in the region, and killing Soleimani
served this purpose.
The US cannot contemplate the idea of the dollar losing its status as
the global reserve currency. Trump is engaging in a desperate gamble
that could have disastrous consequences.
The region, in a worst-case scenario, could be engulfed in a
devastating war involving multiple countries. Oil refineries could be
destroyed all across the region, a quarter of the world’s oil transit
could be blocked, oil prices would skyrocket ($200-$300 a barrel) and
dozens of countries would be plunged into a global financial crisis.
The blame would be laid squarely at Trump’s feet, ending his chances
for re-election.
To try and keep everyone in line, Washington is left to resort to
terrorism, lies and unspecified threats of visiting destruction on
friends and enemies alike.
Trump has evidently been convinced by someone that the US can do
without the Middle East, that it can do without allies in the region,
and that nobody would ever dare to sell oil in any other currency than
the US dollar.
Soleimani’s death is the result of a convergence of US and Israeli
interests. With no other way of halting Eurasian integration,
Washington can only throw the region into chaos by targeting countries
like Iran, Iraq and Syria that are central to the Eurasian project.
While Israel has never had the ability or audacity to carry out such
an assassination itself, the importance of the Israel Lobby to Trump’s
electoral success would have influenced his decision, all the more so
in an election year .
Trump believed his drone attack could solve all his problems by
frightening his opponents, winning the support of his voters (by
equating Soleimani’s assassination to Osama bin Laden’s), and sending
a warning to Arab countries of the dangers of deepening their ties
with China.
The assassination of Soleimani is the US lashing out at its steady
loss of influence in the region. The Iraqi attempt to mediate a
lasting peace between Iran and Saudi Arabia has been scuppered by the
US and Israel’s determination to prevent peace in the region and
instead increase chaos and instability.
Washington has not achieved its hegemonic status through a preference
for diplomacy and calm dialogue, and Trump has no intention of
departing from this approach.
Washington’s friends and enemies alike must acknowledge this reality
and implement the countermeasures necessary to contain the madness.

The last five years on Earth have been hotter than at any time since
the industrial revolution kicked off almost two centuries ago.
That’s the conclusion of Europe’s Copernicus Climate Change Service,
which published data on Wednesday showing that global average
temperatures since 2015 were some 1.2 degrees Celsius (2.2 degrees
Fahrenheit) higher than when steam engines began powering industry.
Last year was the second warmest on record after 2016.
“These are unquestionably alarming signs,” Jean-Noel Thepaut, the head
of climate change monitoring at the European Centre for Medium-Range
Weather Forecasts, said in an email.
As wildfires continue to ravage Australia and pollution increasingly
chokes millions living in cities, the new data highlights the rapid
changes that the Earth’s ecosystem is undergoing as a result of
man-made carbon emissions.
After its invention in the 17th century, the steam engine was
developed to power the locomotives and factories that proliferated
during the industrial revolution.
The Copernicus Climate Change Service operates a network of satellites
for the European Union that collects weather, soil, air and water
data.
2019 was Europe’s warmest year, marginally higher than temperatures in
2014, 2015 and 2018
Global average temperatures in 2019 were 0.6 degrees Celsius warmer
than the 1981 to 2010 average
Atmospheric carbon dioxide concentration increased by about 2.3 parts
per million in 2019, to the second-highest level on record

''Entire ecosystems are collapsing’’
“We are in the beginning of a mass extinction''

International Markets

Global economic growth is forecast to edge up to 2.5% in 2020 as
investment and trade gradually recover from last year’s significant
weakness but downward risks persist, the World Bank says in its
January 2020 Global Economic Prospects.
Growth among advanced economies as a group is anticipated to slip to
1.4% in 2020 in part due to continued softness in manufacturing.
Growth in emerging market and developing economies is expected to
accelerate this year to 4.1%.
This rebound is not broad-based; instead, it assumes improved
performance of a small group of large economies, some of which are
emerging from a period of substantial weakness.
About a third of emerging market and developing economies are
projected to decelerate this year due to weaker-than-expected exports
and investment.
“With growth in emerging and developing economies likely to remain
slow, policymakers should seize the opportunity to undertake
structural reforms that boost broad-based growth, which is essential
to poverty reduction,” said World Bank Group Vice President for
Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu.
“Steps to improve the business climate, the rule of law, debt
management, and productivity can help achieve sustained growth.”
U.S. growth is forecast to slow to 1.8% this year, reflecting the
negative impact of earlier tariff increases and elevated uncertainty.
Euro Area growth is projected to slip to a downwardly revised 1% in
2020 amid weak industrial activity.
Downside risks to the global outlook predominate, and their
materialization could slow growth substantially. These risks include a
re-escalation of trade tensions and trade policy uncertainty, a
sharper-than expected downturn in major economies, and financial
turmoil in emerging market and developing economies.
Even if the recovery in emerging and developing economy growth takes
place as expected, per capita growth would remain well below long-term
averages and well below levels necessary to achieve poverty
alleviation goals.
 “Low global interest rates provide only a precarious protection
against financial crises,” said World Bank Prospects Group Director
Ayhan Kose.
“The history of past waves of debt accumulation shows that these waves
tend to have unhappy endings. In a fragile global environment, policy
improvements are critical to minimize the risks associated with the
current debt wave.”
Analytical sections in this edition of Global Economic Prospects
address key current topics:
The Fourth Wave: Recent Debt Buildup in Emerging and Developing
Economies: There have been four waves of debt accumulation in the last
50 years. The latest wave, which started in 2010, has seen the
largest, fastest, and most broad-based increase in debt among the
four.
While current low levels of interest rates mitigate some of the risks
associated with high debt, previous waves of broad-based debt
accumulation ended with widespread financial crises.
East Asia and Pacific: Growth in the region is projected to ease to
5.7% in 2020, reflecting a further moderate slowdown in China to 5.9%
this year amid continued domestic and external headwinds, including
the lingering impact of trade tensions.
Regional growth excluding China is projected to slightly recover to
4.9%, as domestic demand benefits from generally supportive financial
conditions amid low inflation and robust capital flows in some
countries (Cambodia, the Philippines, Thailand, and Vietnam), and as
large public infrastructure projects come onstream (the Philippines
and Thailand).
Regional growth will also benefit from the reduced global trade policy
uncertainty and a moderate, even if still subdued, recovery of global
trade.
Europe and Central Asia: Regional growth is expected to firm to 2.6%
in 2020, assuming stabilization of key commodity prices and Euro Area
growth and recovery in Turkey (to 3%) and Russia (to 1.6%).
Economies in Central Europe are anticipated to slow to 3.4% as fiscal
support wanes and as demographic pressures persist, while countries in
Central Asia are projected to grow at a robust pace on the back of
structural reform progress.
Growth is projected to firm in the Western Balkans to 3.6% -- although
the aftermath of devastating earthquakes could weigh on the outlook --
and decelerate in the South Caucasus to 3.1%.
Latin America and the Caribbean: Regional growth is expected to rise
to 1.8% in 2020, as growth in the largest economies strengthens and
domestic demand picks up at the regional level.
In Brazil, more robust investor confidence, together with a gradual
easing of lending and labor market conditions, is expected to support
an acceleration in growth to 2%.
Growth in Mexico is seen rising to 1.2% as less policy uncertainty
contributes to a pickup in investment, while Argentina is anticipated
to contract by a slower 1.3%.
In Colombia, progress on infrastructure projects is forecast to help
support a rise in growth to 3.6%.
Growth in Central America is projected to firm to 3% thanks to easing
credit conditions in Costa Rica and relief from setbacks to
construction projects in Panama.
Growth in the Caribbean is expected to accelerate to 5.6%,
predominantly due to offshore oil production developments in Guyana.
Middle East and North Africa: Regional growth is projected to
accelerate to a modest 2.4% in 2020, largely on higher investment and
stronger business climates.
Among oil exporters, growth is expected to pick up to 2%.
Infrastructure investment and business climate reforms are seen
advancing growth among the Gulf Cooperation Council economies to 2.2%.
Iran’s economy is expected to stabilize after a contractionary year as
the impact of US sanctions tapers and oil production and exports
stabilize, while Algeria’s growth is anticipated to rise to 1.9% as
policy uncertainty abates and investment picks up.
Growth in oil importers is expected to rise to 4.4%. Higher investment
and private consumption are expected to support a rise to 5.8% in
FY2020 growth in Egypt.
South Asia: Growth in the region is expected to rise to 5.5% in 2020,
assuming a modest rebound in domestic demand and as economic activity
benefits from policy accommodation in India and Sri Lanka and improved
business confidence and support from infrastructure investments in
Afghanistan, Bangladesh, and Pakistan.
In India, where weakness in credit from non-bank financial companies
is expected to linger, growth is projected to slow to 5% in FY
2019/20, which ends March 31 and recover to 5.8% the following fiscal
year.
In Pakistan’s growth is expected to rise to 3% in the next fiscal year
after bottoming out at 2.4% in FY2019/20, which ends June 30.
In Bangladesh, growth is expected to ease to 7.2% in FY2019/2020,
which ends June 30, and edge up to 7.3% the following fiscal year.
Growth in Sri Lanka is forecast to rise to 3.3%.
Sub-Saharan Africa: Regional growth is expected to pick up to 2.9% in
2020, assuming investor confidence improves in some large economies,
energy bottlenecks ease, a pickup in oil production contributes to
recovery in oil exporters and robust growth continues among
agricultural commodity exporters.
The forecast is weaker than previously expected reflecting softer
demand from key trading partners, lower commodity prices, and adverse
domestic developments in several countries.
In South Africa, growth is expected to pick up to 0.9%, assuming the
new administration’s reform agenda gathers pace, policy uncertainty
wanes, and investment gradually recovers.
Growth in Nigeria expected to edge up to 2.1% as the macroeconomic
framework is not conducive to confidence.
Growth in Angola is anticipated to accelerate to 1.5%, assuming that
ongoing reforms provide greater macroeconomic stability, improve the
business environment, and bolster private investment.
In the West African Economic and Monetary Union, growth is expected to
hold steady at 6.4%. In Kenya, growth is seen edging up to 6%. 

Unrest has the potential to disrupt activity and damage
infrastructure. It may also make fiscal consolidation efforts more
challenging for governments trying to ease tensions.

The global economy has experienced four waves of debt accumulation
over the past fifty years. The first three ended with financial crises
in many emerging market and developing economies. During the current
wave, which started in 2010, the increase in debt in these economies
has already been larger, faster, and more broad- based than in any of
the previous three waves. Current low interest rates —which markets
expect to be sustained into the medium term—appear to mitigate some of
the risks associated with high debt. However, emerging market and
developing economies are also confronted by weak growth prospects,
mounting vulnerabilities, and elevated global risks. A menu of policy
options is available to reduce the likelihood of the current debt wave
ending in crises and, if crises were to take place, to alleviate their
impact.
Total EMDE debt reached almost 170 percent of GDP in 2018 ($55
trillion), an increase of 54 percentage points of GDP since 2010.
Although China accounted for the bulk of this increase—in part due to
its sheer size—the debt-buildup was broad-based: In about 80 percent
of EMDEs total debt was higher in 2018 than in 2010. Following a steep
fall during 2000-10, debt has also risen in low-income countries
(LICs), reaching 67 percent of GDP (around $270 billion) in 2018, up
from 48 percent of GDP (around $140 billion) in 2010. In contrast, in
advanced economies, total (public and private) debt has remained
steady near the record levels reached in the early aftermath of the
global financial crisis, at 264 percent of GDP in 2018 ($130
trillion). While government debt has risen to a high of 104 percent of
GDP ($50 trillion), private sector debt has fallen slightly amid
deleveraging in some sectors.

Euro 1.1109
Dollar Index 97.406
Japan Yen 109.60
Swiss Franc 0.9730
Pound 1.3081
Aussie 0.6879
India Rupee 71.0698
South Korea Won 1159.61
Brazil Real 4.0938
Egypt Pound 15.9952
South Africa Rand 14.2123

Commodities

Emerging Markets

Frontier Markets

Sub Saharan Africa

Fresh from signal victories in Khartoum and Algiers, youthful mass
movements are demanding jobs, opportunities and accountability as
financial uncertainty grows
Two developments in the past year will be of seismic importance in
2020: the revolutionary movements in Algeria and Sudan and the start
of the African Continental Free Trade Agreement (ACFTA).
The tension between the aspirations of Africa's overwhelmingly young
1.2 billion people and the continent's sluggish economic progress is
palpable throughout the continent's 30 million square kilometres.
In several countries, especially in the bigger economies such as
Algeria, Nigeria and South Africa where hopes are highest, the
political temperature is close to boiling point.
It will take quantities of political will not seen so far to respond
to such pressures with a credible plan.
That explains the attention given to the free trade deal, which all
the members of the African Union bar Eritrea have signed, and is due
to start operating in July. It is the most ambitious trade zone
project in the world.
No other region has tried to weld 54 countries into a single market
and eventually a full customs union. It also flies in the face of the
waves of nationalism, protectionism and populism surging around the
world.
Africa isn't immune to those pressures, as shown by the xenophobic
attacks in South Africa and Nigeria's closure of its land borders.
It will take many years to change Africa's economic game, to reach its
first target of a single market with a gross domestic product of over
US$3 trillion, bigger than India's economy today. But the trade treaty
is the essential first step.
It is the biggest of several regional initiatives, such as a new
regional currency in West Africa, attempts to rationalise the range of
overlapping trading blocs, and ending visa requirements for all
African visitors as a first step on the road to free movement across
the continent.
All face political opposition from vested business interests and
hard-pressed workers fearful of more competition for local jobs.
Outsiders, governments and multinational companies are re-focusing
attention on Africa this year – mainly for natural resources, markets,
votes at the UN General Assembly and occasionally as a location for
high-return investment.
Britain starts off with an Africa investment summit in London on 20
January; Turkey says 2020 is its year for Africa and follows with an
investment conference in April; France hosts its event in Bordeaux in
June and will also launch a six-month festival of Africa in May to be
run by Senegalese architect and public intellectual N'Goné Fall.
And China's Foreign Minister Wang Yi started this year with his
customary African tour, this year to Egypt, Djibouti, Eritrea, Burundi
and Zimbabwe.
It's significant that the last three countries on Wang's itinerary are
all under some Western sanctions.
Certainly, the battle for African hearts and minds is heating up.
Expect to hear more claims from the United States, which is due to
announce its own new initiatives in Africa, about how China's prolific
lending based on resource deals threatens a new debt crisis for
Africa.
The reality is that China is now unassailably Africa's leading trading
partner, in spite of infrastructure projects of often doubtful utility
and massive expense. Western business feels left out and wants to
catch up.
Fresh from what is sees as the triumph of its Africa summit in Sochi,
Russia will ramp up its trade with the continent, although it's still
trailing the major players such as China, India, the European Union
and the US.
Moscow hopes for more natural resource deals backed by diplomacy and
security assistance. Several massive deals are in the pipeline.
As a guide to the year ahead, Africa Confidential is dedicating this
and the next edition to the coming political, economic and security
developments in Africa.
Apart from the biggest countries, such as Egypt, Nigeria and South
Africa, we will cover the many elections throughout the continent this
year, together with regional and national economic and financial
trends.
We will also focus on the growing security crisis across the Sahel,
the Horn of Africa and in the Great Lakes region, as well as the
escalating war in Libya which is sucking in more outside powers.

Growth is projected to firm to 2.9 percent in 2020 and strengthen to
3.2 percent in 2021-22—notably weaker than previous projections.
Downside risks to the outlook include a sharper- than-expected
deceleration in major trading partners; increased investor risk
aversion and capital outflows triggered by elevated debt burdens; and
growing insecurity.
The feeble economic recovery in Sub-Saharan Africa has lost momentum,
with growth in 2019 estimated to have edged down to 2.4 percent, from
2.6 percent in 2018.
In Angola, Nigeria, and South Africa—the three largest economies in
the region—growth was subdued in 2019, remaining well below historical
averages and contracting for a fifth consecutive year on a per capita
basis.
Activity in Nigeria was lackluster, as both macroeconomic policy and
the business environment remain unconducive to strong domestic demand.
Growth in 2019 is estimated to have remained broadly unchanged at 2
percent
In South Africa, growth remained anemic in 2019 as it fell to an
estimated 0.4 percent. Weak growth momentum has reflected an array of
overlapping constraints.
These include persistent policy uncertainty, constrained fiscal space,
subdued business confidence, infrastructure bottlenecks— especially in
electricity supply—and weakening external demand, particularly from
the Euro Area and China.
In addition, financial stresses at the public energy utility have
worsened the government budget balance and raised debt sustainability
concerns, weighing further on sentiment
Activity in Angola is estimated to have contracted by 0.7 percent in
2019, as oil output declined for the fourth consecutive year due to
lower yields from aging fields and postponed investment in new
capacity.
In Sudan, the fourth largest economy in the region, political
instability, alongside an ongoing currency crisis, has caused activity
to contract sharply.
However, the formation of a three-year interim government to oversee
the country’s transition to democracy helped improve stability in the
second half of last year.
Beyond the large economies, growth deteriorated in several industrial
commodity exporters in 2019 as weaker prices and softer demand
dampened activity in extractives sectors (Democratic Republic of
Congo, Liberia, Namibia; Figure 2.6.1.C).
In contrast, growth accelerated in some countries as investments in
new oil and mining capacity boosted activity (Ghana, Guinea,
Mauritania).
Among exporters of agricultural commodities, growth rates have been
more robust, notwithstanding some mild slowdowns. Estimates for 2019
indicate that growth averaged in excess of 5 percent, as sustained
public investment in infrastructure continued to support activity
(Togo, Uganda).
Yet, growth softened in some other countries as decelerating external
demand and lower commodity prices constrained export revenues
(Madagascar, Rwanda).
In others, agricultural production suffered from severe drought
(Senegal, Zimbabwe), or late rains (Kenya).
Zimbabwe also suffered a sharp rise in inflation that continued to
squeeze real incomes, resulting in a large contraction in economic
activity, estimated at 7.5 percent. Activity has been further
constrained by persistent shortages of food, fuel, electricity, and
foreign exchange.
However, per capita incomes contract among some of the largest
economies that account for one-third of the region’s poor (Angola,
Nigeria, Sudan).
Projected per capita growth for the region is insufficient to yield
significant progress in poverty alleviation.
In South Africa, growth is expected to firm to 0.9 percent in 2020,
before strengthening to an average of 1.4 percent in 2021-22.
Growth in Angola is projected to rise to 1.5 percent in 2020 and to
average 2.7 percent in 2021-22.
In the West African Economic and Monetary Union (WAEMU), growth is
expected to average 6.7 percent.
In Kenya, growth is expected to remain solid, but soften somewhat as
accommodative monetary policy does not fully offset the impact of a
fiscal tightening.
Activity in Ghana—the region’s fifth largest economy—is expected to
soften from the 7 percent growth of 2019 partly due to slowing oil
production as much-needed maintenance on various oil fields is carried
out to ensure their long-term viability.
The balance of risks for Sub-Saharan Africa is firmly to the downside.
China, in particular, accounts for one-half of global metals demand
and one-quarter of global oil demand (World Bank 2018o).
A faster-than- expected slowdown in China would cause a sharp fall in
commodity prices and, given Sub-Saharan Africa’s heavy reliance on
extractive sectors for export and fiscal revenues, weigh heavily on
regional activity.
Government debt in the region is expected to reach 62 percent of GDP,
on average, in 2020, up from its trough of 39 percent of GDP in 2011.
This broad-based rise in government debt has led to sharp increases in
interest burdens, crowding out non-interest expenditure and raising
concerns about debt sustainability.
Countries with elevated debt burdens are susceptible to sudden
increases in investor risk aversion (Angola, Ghana, Mozambique,
Namibia, South Africa, Zambia; Figure 2.6.2.D).
This can lead to sizable currency depreciations, capital outflows, and
increases in borrowing costs as risk premia rise sharply.
Where debt is largely denominated in foreign currency, sharp currency
depreciations would make servicing debt more challenging.
Insecurity, conflicts, and insurgencies— particularly in the
Sahel—would weigh on economic activity and food security in several
economies (Burkina Faso, Chad, Ethiopia, Mali, Niger, Nigeria), if
they were to intensify further or spread geographically (Figure
2.6.2.E; FAO 2019; UNHCR 2019).
Moreover, the large populations that are forcibly displaced by these
conflicts cluster in areas that often become a source of further
instability, with poverty rates being worse than in their places of
origin (Beegle and Christiaensen 2019).
Extreme weather events are becoming more frequent as the climate
changes, posing a significant downside risk to activity due to the
disproportionate role played by agriculture in many economies in the
region (Figure 2.6.2.F).
The devastation caused by the tropical cyclones that hit low-income
countries in East and Southern Africa in 2019 bear testimony to this,
as do persistent drought conditions, particularly in the Sahel and
Southern Africa.
As droughts continue to suppress agricultural output, they increase
food insecurity, raise food price inflation, exacerbate poverty
levels, and often contribute to forced displacement of populations
(IPCC 2019).

“Growth is expected to slow due to tighter fiscal and monetary policy
stances aimed at containing inflation,” the World Bank said in a
report released Wednesday in Washington.
The annual inflation rate in the Horn of Africa nation was 19.5% in December.
The lender reduced its fiscal 2020 growth forecast for Ethiopia by 1.9
percentage points from the prior estimate in June.
Growth could increase slightly to 6.4% in fiscal 2021 and 7.1% in
2022, according to the World Bank.

Since 1990, per capita income in the world has increased by about 50
percent. For the median SSA country, this increase was 45 percent.
In the case of Ethiopia, it was over 200 percent!
Of course, there are countries that have done better still—China (960
percent increase) and India (280 percent increase).
In terms of the industrial sector’s value added in GDP, this has
increased sharply in recent years in Ethiopia getting closer to the
other comparator groups.
But this has been driven predominantly by the construction sector.
Similar to other observers, my conclusion is that it is too soon to
say if the recent industrialization push will have an enduring effect.
Much of the “hardware” necessary for rapid
industrialization—industrial parks, road and electricity
infrastructure, etc.—have been put in place.
But the economic transformation risks being stifled because the
“software” that is as important for effective industrialization is
missing—things like access to credit and sufficient foreign exchange
for the private sector.
Growth in Ethiopia, on average, has been 8.1 percent in 2000-10 and
9.5 percent in 2010-18, this compares with 5.6 and 5.9 percent
respectively in other fast-growing countries in sub- Saharan Africa.
For one, the level of public debt has increased from some 40 percent
of GDP in 2008 to 60 percent of GDP last year. Note that we are
normalizing by GDP which has been increasing furiously over this
period.
The fact that the debt to GDP ratio has increased markedly in this
context shows just how pro-cyclical fiscal policy has been.
The rate of increase in public debt relative to GDP is comparable to
the other country groupings. But the scale of borrowing in Ethiopia
has been an order of magnitude different.
This has pushed up debt vulnerability ratios, placing Ethiopia at high
risk of debt distress according to the IMF/World Bank debt
sustainability analysis.
Over the last two decades the share of credit to the public sector has
been about 60 percent of total credit to the economy, while in
sub-Saharan African comparator countries is has been just 30 percent
of total credit.
The effect of this has been to engender the very high levels of public
investment that we have seen—indeed, higher than even some of the
fastest growing countries globally at the time of their take-off.
That financial conditions have been looser is evident from the higher
level of inflation in Ethiopia.
But one consequence of this has been weak export performance. Most
other sustained growth cases saw exports as a share of GDP increase
substantially during the transition, but this has not been the case in
Ethiopia.
Exports as a share of GDP remains well below that of comparators, even
as imports have risen sharply. Exports as a share of GDP has actually
declined in recent years, which is highly unusual.
there is a strong need to boost export growth by creating room for
higher levels of domestic and foreign private investment.

Textile exports virtually non-existent. Remittances are huge

We walked to Kakinzi after we had been attacked, we had lost many
things. We had no blankets so we tried warming up with fire. You warm
your back, and the front gets cold. I later got a very filthy blanket
from Kyakabale (Anthony), very smelly, but the 'sweetest' thing.
#M7Trek.

Civil and political rights will remain constrained as Magufuli seeks a
landslide in the general election to endorse his statist vision
The prospect of the October general election will dominate 2020. Last
year, pre-poll government interference in the local elections saw up
to 90% of opposition candidates being disqualified, a subsequent
opposition boycott, and over 99% of seats going to the ruling party,
Chama Cha Mapinduzi. The CCM aims to repeat the exercise in October,
when landslide victories for the CCM can be expected at presidential,
parliamentary, and council levels. The challenge this year will be
carry it off and still maintain some legitimacy.
Landslide victories for the CCM can be expected at presidential,
parliamentary, and council levels. The challenge this year will be
carry it off and still maintain some legitimacy. @Africa_Conf

South African business confidence slumped to the lowest in 34 years in
2019 as the country faced power cuts, delays in policy implementation,
deteriorating public finances and the risk of losing its only
remaining investment-grade credit rating.
A sentiment index compiled by the South African Chamber of Commerce
and Industry showed business confidence declined to an average of 92.6
from a two-year high of 95.5 in 2018, according to an emailed
statement Thursday.
That’s the lowest annual number since 1985.
Sentiment surged in 2018 after Cyril Ramaphosa won the leadership of
the ruling African National Congress and took over as president of the
country, but has since slumped as reforms stalled.
Business confidence remains fragile and “could tilt either way” in the
coming months depending on the fiscal and economic outlooks presented
by Ramaphosa and Finance Minister Tito Mboweni in their
state-of-the-nation and budget speeches in February, the chamber said.
Assessments by credit-ratings companies, which are expected after the
budget, will also affect sentiment, it said.
The economy unexpectedly contracted in the third quarter and is stuck
in the longest downward cycle since 1945.
While the government expects gross domestic product growth of 1.2%
this year, the World Bank this week became the first key institution
to lower its forecast below 1% due to power-supply constraints vexing
the country.
Eskom Holdings SOC Ltd., which generates about 95% of the South
Africa’s electricity, resumed rolling blackouts over the weekend to
prevent a total collapse of the national grid.
“The economy’s potential is wavering and requires positive corrective
steps to direct the economy in an appropriate direction,” Sacci said.
Weak economic growth could lead to a further deterioration in public
finances and heighten the risk of South Africa losing its last
investment-grade credit rating with Moody’s Investors Service.
The company cut the outlook of the nation’s Baa3 assessment to
negative in November, effectively giving lawmakers just over three
months to preserve the assessment and avert a forced selloff of
billions of rands of its debt.

A meme flying round on social media is that There is a New sex
position called the “Ramaphosa” Get on top and do nothing
[@danielmarven].
You will agree that the overall picture is not very pretty.

Isabel dos santos lives modestly these days. Or so the billionaire
daughter of a former Angolan president, José Eduardo dos Santos, says.
She arrived on foot to meet your correspondent at a smart hotel in
London; and at the end of the interview she disappeared off towards a
Tube station.
It is a step down for a woman who once flew the rapper Nicki Minaj to
Luanda, Angola’s capital, at a cost of millions. But these days
Africa’s most prominent businesswoman has good reason to play it cool.
But Ms dos Santos, who has not set foot in Angola since 2018, insists
that she is popular. Lots of Angolans “see me as a role model”, she
says.

Kenya

Tourists visiting Kenya’s lovely Lamu archipelago are normally stirred
from their slumber by pleasant sounds, such as gently lapping waves or
the call to prayer drifting across the water.
But on January 5th some were woken by the less melodious rattle and
crump of distant battle. Across Manda Bay, on the mainland, fighters
from al-Shabab, a Somali jihadist group, were engaged in an unusually
daring assault on American forces stationed at a Kenyan airbase.
The attack, which lasted several hours, was startlingly effective. The
lightly armed jihadists—probably no more than 15 of them—managed to
kill three Americans (one soldier and two security contractors) and
wreck six aircraft, some used by America’s armed forces for snooping
missions across the Somali border. Never before had al-Shabab targeted
a facility housing American troops outside Somalia.

Kenya began 2020 with erratic and intractable factional politics as
the top two candidates for the next presidential election – William
Ruto and Raila Odinga – counter each other's attempts to cobble
together alliances from their bases in their respective ethnic
homelands.
As money changes hands on an epic scale, parliamentarians and county
leaders are switching parties and alignments at a bewildering pace.

it certainly feels like a decade of “semiotic arousal” when
everything, it seemed, was a sign, a harbinger of some future radical
disjuncture or cataclysmic upheaval.

Revelation 6:12-13: When he opened the sixth seal, I looked, and
behold, there was a great earth- quake, and the sun became black as
sackcloth, the full moon became like blood, and the stars of the sky
fell to the earth as the fig tree sheds its winter fruit when shaken
by a gale.

“Employee contracts have been terminated after due consultation. All
staff have been provided with the necessary support aligned with the
labour laws.”
The 171-room hotel has faced increased competition over the past
decade as the hospitality industry has witnessed the entry of new
players and expansion by established brands.