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Satchu's Rich Wrap-Up
Monday 12th of April 2021

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World Of Finance

Over the last week – Russia’s Foreign Ministry has said that Ukraine’s accession to NATO would lead to a “large-scale escalation” of the war in Donbas & “irreversible consequences for Ukrainian statehood.” 

The Kremlin said – “the new situation in east Ukraine raises the possibility of full-scale military intervention.”

The fundamental problem with aggressive accommodation from central banks comes down to a market foundation built on moral hazard. 

Each day, week, and month the Federal Reserve provides more juice, the leverage piles up in pockets all over the planet. 

Of course, central bankers often don’t see the toxic leverage until it’s far too late. Here lies the conundrum. While providing excessive accommodation (the Fed is making $120B of asset purchases monthly), when traditional shocks arrive – as they always have – the market is ill-prepared. 

Far far less so than under normal conditions historically. Take Covid-19 for example. Many people forget the Fed embarked on additional quantitative easing in 2019. 

By Q1 2020, relative value hedge funds were running 20-1 leverage – yes, stepping in front of the steamroller to pick up $100 bills. 

One of the primary reasons why the Fed’s March 2020 bazooka was 5x larger than the weaponry used in the post-Lehman failure era (2008) – comes down to the enormous leverage in the fixed income market. 

The Fed literally had to put out a fire, 10x the size of Long Term Capital Management

In March 2020, at least ten hedge funds were on the brink of failure.

*A relative value fixed income hedge fund will go long vs. short either on the run (liquid) vs. off the run (illiquid) bonds or long cash government bonds vs. futures contracts. After all, a 1% annual return levered 20x magically becomes 20%, just insert the steamroller. These funds will PRINT fabulous returns year after year and then give it all back in a week – they NEVER learn.

The Coming Shocks

After President Obama was elected, there was the classic test from the bully that is Vladimir Putin, some say he disdained him. Russia’s move? He took Crimea and put Eastern Ukraine, converting the region into a permanent low-grade conflict. 

Putin realizes the best border that he can most easily exploit while giving Russia a geographic buffer against the West is a long-lasting, low-grade conflict in quasi-failed states within his sphere of influence

Hence Georgia. Hence Transnistria Romania. Hence Syria (love that Mediterranean port!). Today, adding insult to injury – he is militarizing the Arctic Circle. 

As our clients are pointing out in our live institutional chat on the Bloomberg terminal – before every invasion, the invader tries to first establish the moral justification for an invasion.  

Russia has already started to build a “humanitarian” justification for direct action – a strong indicator of possible action. This is exactly what is going on now.

The Ukraine – Taiwan Risk Connectivity 

China did not make a move during Obama’s reign, nor Trump’s, and Xi may think that represents a missed opportunity. But the Chinese military really wasn’t up to snuff back then. 

On April 21, 2016, Xi became Commander-in-Chief of China’s Joint Operations Command Center of the People’s Liberation Army

To quote Ni Lexiong (lecturer at Shanghai University of Political Science and Law), Xi “not only controls the military, but does so in an absolute manner, and that in wartime, he is ready to command personally.” 

At some point, you have to walk the walk, not just talk the talk. China’s military has been built up, primed, and readied. 

Numerous senior officials in Biden’s DoD (Dept of Defense) are ringing alarm bells about potential Chinese aggression i.e. —  against Taiwan. 

As Niall Ferguson reminds us all, since the Communists’ triumph in the Chinese civil war in 1949, the island of Taiwan had been the last outpost of the nationalist Kuomintang. 

And since the Korean War, the U.S. had defended its autonomy. Taiwan is still treasured land for Xi and China.

Meanwhile, our own military brass has been complaining for decades about how it would be very difficult for the U.S. to fight three wars simultaneously. Think – Ukraine, Taiwan, and some sort of the Middle East/Central Asia/Iran mix.

Trump Biden – Putin Xi

Again, neither Putin nor Xi made a move during the Trump administration. Why? Why did they treat each meeting with Trump officials respectfully? Why did Chinese diplomats dump all over Biden’s team in Alaska, in over the top, disgracefully so fashion? 

Well, Putin, Xi, and Trump are all bullies, and above all unpredictable. Think back to a playground in grade school. Bullies don’t pick on bullies. Bullies pick on snowflakes. 

In Biden – Putin and Xi see a weak old man in decline, a figurehead for an Obama third term of a country that itself is in decline, laden with debt, riven by internal strife, and sick of war. 

Realistically, what would the U.S. do if Russia made a military move on Eastern Ukraine? Nothing. And if China saw that, Taiwan would be at serious risk.

The Life of a Super-Power in Decline

During the reign of Marcus Aurelius, emperor of Rome from 161 AD to 180 AD, the omnipotent stoic philosopher spent much of his time on military expeditions along the Danube, containing German incursions. 

In 387 AD the first German hordes crossed, never to leave. In 410 AD the city of Rome was sacked. In 487 AD the Western Roman Empire fell. Europe wouldn’t achieve its earlier economic prosperity for 1000 years. 

There are literally over 200 reasons listed by scholars for Rome’s fall, but certainly among the most important is that Rome had debased its currency to pay debts, and stretched its military too long beyond its limits

Meanwhile, farmers were cutting off their thumbs to evade the military draft. No thumbs: no spear throwing, no sword-wielding. Sure, the Roman West scrounged up a strong emperor from time to time (Aurelian, ruled 270 AD to 275 AD), but then a string of weak ones would follow hard thereupon. 

Meanwhile, the Germans were mastering Roman military tactics, and gaining wealth from trade with Rome. And always testing Rome for any military weakness. 

Finally, when Rome was at its weakest, the Germans faced incursions into their own eastern flank and poured into Western Europe. And now, here we are.

At the Bear Traps Report, we are always looking for clues – across asset classes – to validate or invalidate the constant and often obnoxious stream of news in the daily – weekly cycle. 

Credit risk is all-important, but a glance in the direction of currency volatility – the price someone is willing to pay for a bet in one direction or another – is a key measuring stick to monitor. 

Notice above how much weaker the ruble has traded recently relative to the broad, Bloomberg Dollar Index.

Testing and Probing

Today, Russia and China are continually testing and probing the U.S. for weakness, just like the Germans did Rome. 

Occasionally, we vote in a bully. But half of our population finds that unbearable. So we vote in a doddering weakling in the name of normalcy and decency. And that’s fair. But Putin will push. For sure. Then Xi will push. For sure.

America will fail that double test, most likely. If America passes the two tests, there will be more tests. For sure. That’s just the nature of the game. The risk-reward is never perfect but looks pretty good right now from Putin’s and Xi’s points of view.

Some of our best relationships were in Kiev for the Orange Revolution. There was vast protesting on Independence Square in Kiev when Kiev’s Chief of Police walked on to the platform and proclaimed to the crowd that the Kiev Police Department had joined the revolution. 

He shouted, “We are with you!” The moment was electric. Everyone knew the tide had turned in favor of the Revolution. Cheers of joy waved through the crowd. An unbelievable moment of exhilaration.

The Dnieper River is Ukraine’s longest and Europe’s fourth, rising in Russia and spilling into the Black Sea. It is well known since ancient times: Herodotus describes it in his Histories. And it cuts Ukraine down the middle, effectively resulting in three Ukraine’s: the Crimean peninsula, Western Ukraine and Eastern Ukraine. 

It is well known that years before his annexation of Crimea, Putin approached Poland with the following proposal: you take Western Ukraine and I’ll take Eastern Ukraine. 

The Polish government was shocked, but this has given a lasting impression of Putin’s strategic goals in the region.

Eastern Ukraine is much more Russian. Western Ukraine is much more Ukrainian, far more European. It was Western Ukraine that drove the Orange Revolution. 

When the government wanted to strengthen its hold, our friends witnessed busloads of Eastern Ukrainian thugs, heads shaved and donning long black leather jackets everyone, dumped around the perimeter of Independence Square. 

They were scarier than the tanks that were already there. But in the event, they were bought off with vodka and weren’t much of a factor. 

The Eastern Ukrainians were skeptical and indifferent. The Western Ukrainians were enthusiastic, and Kiev, passionate. The Orange Revolution prevailed.

But then the new government became corrupt as many had predicted. And that did anger Western Ukrainians because they were left out of the action. 

So the new government fell to the old government. But that was unacceptable to the US. So the old government fell again leaving the current mess: Crimea gone, the East in low-grade conflict, and the West sullen and demoralized.

It is a pleasant coincidence for Putin and Xi that Hunter Biden has business “experience” in Ukraine and China.

In sum, Putin believes Eastern Ukraine is ripe for the plucking, but that Western Ukraine is closed to him. When should he take the East? Now or wait for the US to elect another bully, perhaps reelect Trump himself? Now is the time. Strike while the iron is hot.

Meanwhile, Xi views it as his manifest destiny to take Taiwan. Unlike Vietnam, which does have a minority Chinese population, Taiwan is really and truly Chinese

And it is hard to square a visionary goal of China being the single greatest dominant power on earth if it can’t even “take back” Taiwan. 

So if Xi sees Putin consolidate Eastern Ukraine, the pressure on Xi to consolidate Taiwan will prove irresistible.

Niall Ferguson and the Taiwan Relations Act

Ferguson’s depth and work on this subject is second to none. To Niall’s point, the act states that the U.S. will consider “any effort to determine the future of Taiwan by other than peaceful means, including by boycotts or embargoes, a threat to the peace and security of the Western Pacific area and of grave concern to the United States.” 

It also commits the U.S. government to “make available to Taiwan such defense articles and … services in such quantity as may be necessary to enable Taiwan to maintain a sufficient self-defense capacity,” as well as to “maintain the capacity of the United States to resist any resort to force or other forms of coercion that would jeopardize the security, or the social or economic system, of the people on Taiwan.”

And perhaps none of this would matter much to markets, a couple of 10% shakeouts, if we weren’t at highly levered all-time valuation highs, with call options being bought hand over fist as a result of forever money from the Fed.

And we notice cracks here and there in the market action even at fresh new highs: Nasdaq Biotech IBB ETF acts like death (nearly 16% off the Feb highs), ARKK Innovation ETF has $25B of new inflows now WAY underwater and the S&P 600 small-cap indices look very weak. 

These weak spots smell too high heaven, fewer and fewer stocks are holding up the market. The TRIN index remains cautious. The Archegos affair causing the margin to be reigned in. 

It’s an odd new high. Perhaps it will get better. Perhaps it will gain strength and come to look like a normal bull run. It happens.

But we have real geopolitical military risks right now that we haven’t seen since the eve of WWII. Ignore that risk at your peril. We won’t.

There is only one way to pay for war without conquest: inflation. And there is only one price to pay for running away from war: loss of power. Either scenario is bad for stock markets and good for gold.

Buy war insurance now.

We believe in the Fourth Turning. We believe our slate is about to be wiped clean. We believe in creative destruction. We believe the old order of today will fall to the new consensus of tomorrow.

But between now and then there is a crash or sequence of crashes so only one word matters: risk. And that risk is not currently being discounted by the markets.

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Ukraine, Impact on Risk Assets @Convertbond
World Of Finance

So far there is some evidence of additional risk being priced into risk assets. The cost of credit default protection on Russian sovereign debt is underperforming vs. South Africa and other emerging market counties, but not Brazil. 

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Federico García Lorca

“My head is full of fire

and grief and my tongue

runs wild, pierced

with shards of glass.” 

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My unusual week with Myanmar’s violent, paranoid military junta @SEA_GLOBE
Law & Politics

“Why don’t you come see for yourself?” Ari Ben-Menashe, the foreign lobbyist hired by Myanmar’s new military junta regime, asked bluntly.  

It was with this one question that I became involved in the now-infamous military PR tour in Myanmar. 

“Hi Allegra, it’s Ari Ben-Menashe. I just wanted to let you know that we have submitted your request and it is now with the highest levels of people. I mean the highest of levels,” seemingly referencing authorities within Myanmar’s junta regime.

While still suspicious, I was beginning to think that this Canadian-Israeli PR man, who had worked with some of the world’s most brutal figures, including Zimbabwe strongman Robert Mugabe and Libyan general Khalifa Haftar, was in fact going to keep his word. 

I flew into Yangon on March 30 on a relief flight from South Korea. 

I had been expecting an empty aircraft with a handful of aid workers. Instead the plane was nearly full, occupied by Myanmar passengers – some repatriating to reunite with family, others to stand in solidarity with the protest movement.

We stayed at a military guest house, gated and armed by soldiers bearing rifles. At least two uniformed men were on guard at all times, sitting outside their watch box next to the gate. 

That changed only on the final day, when they were replaced by men in civilian clothing. 

On our first day, following an early breakfast, we were ushered into an idling mini van parked outside. 

Our liaison, along with several other staff, mainly Ministry of Defense (MoD) personnel and translators, piled in with us. 

We were then escorted around Yangon by a six-vehicle military convoy, each with 10-15 armed and uniformed soldiers. 

They even tried following us into bathrooms at times. Our military liaison told me this was for “our own safety,” to protect us against the “violators”, the term used by the military to refer to the anti-coup protesters. 

In several instances, the language employed, especially the use of the phrase “human rights violations”, seemed specifically crafted to appeal to our sensibilities as foreign reporters. 

However, despite the ambiguity and performative undertones, these conversations made the military’s agenda and platform very clear. 

To the generals in Naypyidaw, their actions were warranted by one simple calculation: four deaths, purportedly the result of the anti-coup demonstrations in Yangon, justified the over 600 murders of protestors by security forces.

Major General Zaw Min Tun avoided the question when I asked about this during my interview with him later in Naypyidaw, probing how he could justify this staggering disproportionality.

As I began walking through the market, a rumble of noise grew. Within seconds, the previously muted street was filled with the sound of banging pots and pans, an act of anti-military disobedience that had become widespread across Myanmar since the coup. 

I looked around as the noise mounted and saw that nearly everyone in sight was holding up the three-finger salute, a symbol that has become synonymous with the anti-coup Civil Disobedience Movement in Myanmar. 

A brave act of defiance given that we were accompanied by military personnel.

A man ran by me, shaking me out of my stunned silence, beckoning for more vendors to join in with the noise-making. He stopped in front of me to explain what he was doing.

“We beat the drums against the military coup, this is our symbol. All Myanmar people don’t like the military coup, they want an elected government – the government of Aung San Suu Kyi,” said the man, a 60-year-old retired seaman, referring to the ousted civilian leader. 

As he spoke, a stream of police officers began marching down the streets. The man pulled me back as they passed.

“You see what I mean?” he asked, referencing the growing security presence in front of us, deployed to quiet the protesters. 

“The police come to this market everyday. Every night at 8pm they come to quiet us. They are everywhere, they oppress all people.”

“The military is shooting everyone without reason. If we bang our pots and pans, they shoot us. Please help us, we really need it. They are covering up the truth. The military wants to show fake news to the world,” said the woman.

And yet, despite their best efforts, the regime’s ill-fated propaganda schemes did little to flip the narrative.

 If anything, what remains most poignant from this trip are the brave voices of the people who spoke out against the regime – in person, from balconies, in cars, and online. 

One woman cried out to us as we left the market in Yangon.

“Please report back our real stories.”

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Taiwan to stage live-fire drills as fears of possible PLA attack grow @SCMPNews
Law & Politics

Exercises will take place on Dongsha Islands in South China Sea on April 25 and May 5, Taiwan’s coastguard says

Announcement comes after People’s Liberation Army reported to have used drones to gather intelligence about Dongshas

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“Unity is iron and steel; unity is a source of strength,”
Law & Politics

“Complete reunification of the motherland is an inevitable trend..no one and no force can ever stop it!” 

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The territory had been annexed by imperial China in the eighteenth century, but on two occasions it broke away, before Mao retook it, in the nineteen-forties. In Beijing, it was called New Frontier, or Xinjiang: an untamed borderland. @NewYorker
Law & Politics

Growing up in this remote part of Asia, a child like Sabit, an ethnic Kazakh, could find the legacy of conquest all around her. Xinjiang is the size of Alaska, its borders spanning eight countries. 

Its population was originally dominated by Uyghurs, Kazakhs, and other indigenous Turkic peoples. 

But, by the time Sabit was born, Kuytun, like other parts of Xinjiang’s north, had dramatically changed. 

For decades, the Xinjiang Production and Construction Corps—a state-run paramilitary development organization, known as the bingtuan—had helped usher in millions of Han Chinese migrants, many of them former revolutionary soldiers, to work on enormous farms. 

In southern Xinjiang, indigenous peoples were still prevalent, but in Kuytun they had become a vestigial presence.

In 2009, a fight broke out in a toy factory in the southern province of Guangdong. Amid the melee, two Uyghur employees were killed by a Han mob. 

The next month, hundreds of Uyghurs took to the streets of Xinjiang’s capital city, Ürümqi, waving Chinese flags and chanting “Uyghur”—a call to be seen by the country’s leadership. 

The police cracked down, and riots erupted. Hundreds of people were injured or killed, and hundreds were arrested. More than forty Uyghurs were presumed disappeared. Dozens were later sentenced to death.

That summer, Sabit and her mother returned to Kuytun, to settle her father’s affairs. Friends had warned her not to go: rumors had been circulating of an escalating crackdown on the indigenous peoples of Xinjiang—of Kazakh traders being disappeared at the border. 

But Sabit had made an uneventful trip there less than a month earlier, and she wanted to be by her mother’s side. 

For two weeks, they met with family and visited ancestors’ graves. The trip, she later recalled, “was full of tears and sadness.”

On July 15th, Sabit and her mother drove to Ürümqi Diwopu International Airport, for a flight back to Kazakhstan. 

They arrived in the middle of the night, and the building was nearly empty. 

At customs, an officer inspected her mother’s passport and cleared her to go. 

But when Sabit handed over her documents he stopped, looked at her, and then took her passport into a back office.

“Don’t worry,” Sabit assured her mother, explaining that the delay was most likely another bureaucratic annoyance. 

Minutes later, the officer returned with an Uyghur official, who told Sabit to sit on a bench. 

“You cannot leave,” he said. “You can discuss between yourselves whether your mother will go or stay.”

Once she was gone, the official turned to Sabit and coldly explained that she had been assigned a “border control”—a red flag, marking her for suspicion. 

“Your mother was here, so I didn’t mention it,” he said. “You should know what Xinjiang is like now. You’d best coöperate.”

The authorities came to regard Uyghur identity as “mistaken”: Uyghurs were Chinese.

With near-paranoid intensity, the government pursued any perceived sign of “splitism.” The Party secretary of Kashgar, Zhu Hailun, was among the most aggressive. 

Abduweli Ayup, who worked for Zhu as a translator and an aide, recalled that, in March, 1998, cotton farmers protested a ruling that barred them from planting vegetable patches. 

Zhu railed at them for being separatists, adding, “You’re using your mosques as forts!” 

On another occasion, he derided the Quran, telling an Uyghur audience, “Your God is shit.” 

As the 2008 Olympics approached, Chinese authorities became obsessed with the concept of weiwen, or “stability maintenance”—intensifying repression with a ferocity that the Chinese sociologist Sun Liping compared to North Korea’s.

Nowhere did this seem more apt than in Xinjiang, where China’s leaders continually appeared to mistake popular discontent for a growing insurgency. 

The 2009 protests in Ürümqi—following similar ones in Tibet—caused Party theorists to call for engineering a monocultural society, a single “state-race,” to help pave the way for “a new type of superpower.” 

One influential domestic-security official noted, “Stability is about liberating man, standardizing man, developing man.”

Several months later, in Yunnan Province, a small group of assailants dressed in black stormed a train station and, wielding knives, brutally killed twenty-nine bystanders and injured more than a hundred and forty others. 

Although no organization claimed responsibility for the incident, an insurgent group based overseas celebrated the attack. 

The authorities declared that the assailants were Uyghur separatists, and in Beijing the incident was called “China’s 9/11.” 

Xi was enraged. “We should unite the people to build a copper and iron wall against terrorism,” he told the Politburo. “Make terrorists like rats scurrying across the street, with everybody shouting, ‘Beat them!’ ”

Soon afterward, the Party leadership in Xinjiang announced a “People’s War.” The focus was on separatism, terrorism, and extremism—the “Three Evil Forces.” 

The region’s top official took up the campaign, but Xi grew dissatisfied with him, and two years later appointed a replacement: Chen Quanguo, then the Party secretary of the Tibet Autonomous Region—a tough-minded apparatchik whose loyalty was beyond question.

The vast majority of self-immolations were occurring to the east of the autonomous region, so Chen tightened the borders of his jurisdiction, restricting entry for Tibetans from outside it. 

In Lhasa, he made it impossible to buy gas without an I.D. He built hundreds of urban police depots, called “convenience stations,” which were arranged in close formation—an overwhelming display of force. 

He dispatched more than twenty thousand Communist Party cadres into villages and rural monasteries, to propagandize and to surveil. 

Some locals reported that members of volunteer groups called the Red Armband Patrols upended homes to confiscate photos of the Dalai Lama, whom the Chinese authorities blamed for the unrest. 

Detentions appeared to rise. In 2012, when a large number of Tibetans travelled to India to receive a blessing from the Dalai Lama, Chen had them consigned to makeshift reëducation facilities.

The self-immolations continued in neighboring territories, but Chen’s jurisdiction recorded only one in the next four years. 

“We have followed the law in striking out, and relentlessly pounding at illegal organizations and key figures,” he declared. 

He had a flair for cultivating his superiors. In March, 2016, just before his appointment to Xinjiang, delegates from his region arrived at the National People’s Congress, in Beijing, wearing pins with Xi’s image on them—“a spontaneous act to show gratitude,” state media noted. The Party deemed Chen’s tactics a success.

In Xinjiang, Chen wore his thin, jet-black hair in a precise coiffure, and travelled with a security detail brought with him from Tibet. 

Rather than move into the Party secretary’s residence, he set himself up in a hotel that was controlled by the government and secured by the People’s Liberation Army. 

The building was in close proximity to facilities that housed police organizations, and Chen had a high-speed data line run from his residence into the region’s digital-security infrastructure.

Xi had once compared reform to a meal, noting that after the meat is eaten what’s left is hard to chew. Chen made it clear that he came to “gnaw bones.” 

He titled one of his speeches “To Unswervingly Implement the Xinjiang Strategy of the Party Central Committee, with Comrade Xi Jinping at the Core.”

His predecessor had borrowed from his Tibet strategy, deploying two hundred thousand Party cadres in Xinjiang. Chen increased their numbers to a million, and urged them to go from house to house, and grow “close to the masses, emotionally.” 

Under a program called Becoming a Family, local Party officials introduced them to indigenous households, declaring, “These are your new relatives.” Cadres imposed themselves, stopping by for meals; sometimes they were required to stay overnight. 

Assisted by Zhu Hailun, who by then had become the deputy Party leader of Xinjiang, Chen recruited tens of thousands of “assistant police officers,” for a force that could implement mass arrests and also quell any unrest that they provoked. 

He began constructing thousands of “convenience stations,” seeking to impose an “iron grid” on urban life. 

He set out to divide the population into three categories—trusted, average, untrustworthy—and to detain anyone who could not be proved sufficiently loyal.

Chen went to Beijing to meet with Xi. Then, days later, he held a grandiose rally in Ürümqi, with ten thousand helmeted troops in sharp rows, automatic weapons at the ready. 

As helicopters hovered overhead and a phalanx of armored vehicles paraded by, Chen announced a “smashing, obliterating offensive,” and vowed to “bury the corpses of terrorists and terror gangs in the vast sea of the People’s War.”

Even as the number of detentions surged, the authorities pushed for more. One police chief recalled a Party member explaining, “You can’t uproot all the weeds hidden among the crops one by one—you need to spray chemicals to kill them all.” 

In June, Zhu drafted a communiqué. “Stick to rounding up everyone who should be rounded up,” it reminded. “If they’re there, round them up.”

At Ürümqi Diwopu International Airport, an official handed Anar Sabit a detention certificate, an administrative document noting orders for her apprehension. 

It was dated June 20th. Sabit was led to a small interrogation room. Her phone and documents were confiscated, and the airport official told her to prepare for a “video investigation.”

She was positioned before a computer; through a video link, another official began to question her in Uyghur, a language that she did not understand. 

(Many of the people Chen had recruited to administer the crackdown were from the ethnic groups that he was targeting.)

Her name is on the list,” he said. “Nobody can save her.”

Project Skynet. After Xi Jinping came to power, China rolled out an enhanced version, Sharp Eyes, envisioned as a system of half a billion cameras that were “omnipresent, fully networked, always on and fully controllable.” 

In Beijing, virtually no corner went unobserved. The cameras were eventually paired with facial-recognition software, giving the authorities a staggering level of intrusiveness.

Xinjiang itself has become a laboratory for digital surveillance. By 2013, officials in Ürümqi had begun to affix QR codes to the exterior of homes, which security personnel could scan to obtain details about residents. 

On Chen Quanguo’s arrival, all cars were fitted with state-issued G.P.S. trackers. 

Every new cell-phone number had to be registered, and phones were routinely checked; authorities could harvest everything from photos to location data. 

Wi-Fi “sniffers” were installed to extract identifying data from computers and other devices. 

Chen also launched a program called Physicals for All, gathering biometric data—blood types, fingerprints, voiceprints, iris patterns—under the guise of medical care. 

Every Xinjiang resident between the ages of twelve and sixty-five was required to provide the state with a DNA sample.

In 2015, the Chinese state-security apparatus began building the Integrated Joint Operations Platform, or ijop, where the streams of information could converge. 

“Problematic people and clues identified by the integrated platform are major risks to stability,” a memo that he circulated said. “Persons or clues that are difficult to check are risks within risks—hazards within hazards.”

Tens of thousands of security officers were given the ijop app and prodded to upload information to it.

 A forensic analysis of the software, commissioned by Human Rights Watch, revealed thirty-six “person types” that could trigger a problematic assessment. 

They included people who did not use a mobile phone, who used the back door instead of the front, or who consumed an “unusual” amount of electricity. Even an “abnormal” beard might be cause for concern. 

Socializing too little was suspicious, and so was maintaining relationships that were deemed “complex.” 

The platform treated untrustworthiness like a contagion: if a person seemed insufficiently loyal, her family was also likely infected.

While they were squeezed together, the woman explained that she was a student who had been arrested for using a file-sharing program called Zapya to download music. 

Officials using ijop were expected to log any “suspicious” apps—there were dozens, but many residents did not know what they were. 

The next day, Sabit was shuttled to a hospital for a medical exam. Her blood was drawn, and a urine sample was taken; she was also given an electrocardiogram, an ultrasound, and a chest X-ray. Back at the station, officers took photographs and fingerprints, and sampled her DNA. 

She was given an iris scan, and compelled to speak into a microphone, so that her voiceprint could be taken: more data to be uploaded to ijop.

About twenty-five million people live in Xinjiang—less than two per cent of China’s population—but, according to an assessment based on government data, by the end of 2017 the region was responsible for a fifth of all arrests in the country.

The Chinese have an expression, gui da qiang, that describes “ghost walls”—invisible labyrinths, erected by phantoms, that confuse and entrap travellers. In Sabit’s case, the phantom was the state, and she was determined to find her way through its obstacles.

Chen Quanguo’s crackdown was aimed at a single goal: moving a large percentage of Xinjiang’s population into an archipelago of fortified camps for political reëducation. Shortly after he arrived, he had begun building hundreds of prison-like facilities—what an official later described as trusted destinations for the untrusted.

“Although a certain number of people who have been indoctrinated with extremist ideology have not committed any crimes, they are already infected,” one noted. 

“They must be admitted to a reëducation hospital in time to treat and cleanse the virus from their brain.”

The classes, of course, had nothing really to do with language. As a government document made clear, reëducation was intended to sever people from their native cultures: 

“Break their lineage, break their roots, break their connections, and break their origins.”

Yarkand County is about eight hundred miles from Kuytun, in southwestern Xinjiang, on the rim of the Taklamakan Desert. 

When Marco Polo visited, in the late thirteenth century, he noted that Muslims and Christians lived alongside one another there, and that the region, with its temperate climate and rich soil, had been “amply stocked with the means of life.”

Later, evidence emerged to suggest that the internment system was turning hair into a commodity. (Last year, the United States interdicted a thirteen-ton shipment of hair, which White House officials feared had been partly harvested at the camps.)

While on duty, Sabit often gazed through the small caged window and took in the nighttime view: a garden, a poplar tree, and then Kuytun’s urban panorama—the city’s glowing lights, the cars tracing lines on a highway, reminding her of her old life. 

Later, she captured these reveries in a poem, written in Mandarin, which ends:

Night watch

I turn toward the darkness and

Its wanton torment

Of the feeble poplar.

By the summer, it appeared that roughly ten per cent of Xinjiang’s Uyghur population was under confinement. 

Adrian Zenz, an independent academic who has unearthed troves of government documents on Chen’s crackdown, estimated that there were as many as a million people in the camps—a statistic echoed by the United Nations and others. 

Not since the Holocaust had a country’s minority population been so systematically detained.

Experts estimate that, since 2017, some sixteen thousand mosques have been razed or damaged, with minarets pulled down and decorative features scrubbed away or painted over. 

An official in Kashgar told Radio Free Asia, “We demolished nearly seventy per cent of the mosques in the city, because there were more than enough.” 

In some cases, officials pursued an odd tactic: miniaturization. In 2018, the grand gatehouse of a mosque in the town of Kargilik was covered with a banner proclaiming, “Love the Party, love the country.” 

Then the structure was dismantled and rebuilt as an ersatz version of itself, at a quarter the size.

Kuytun had become an open-air prison. The city was ringed with checkpoints, where Uyghurs and Kazakhs were forced through scanners, even as Han residents passed freely. 

“We will implement comprehensive, round-the-clock, three-dimensional prevention and control,” Chen Quanguo had proclaimed while Sabit was in captivity. 

“We will resolutely achieve no blind spots, no gaps, no blank spots.” The technology was deployed to create a digital-age apartheid.

 “I cried a lot that day,” she recalled. “I was like a virus.”

In December, the International Criminal Court declined to rule on the People’s War in Xinjiang, because the actions taken there appear to have been committed “solely by nationals of China within the territory of China,” and China is not a party to the court. 

For years, most of the world’s nations officially ignored what was happening. 

Only recently did the United States declare that China is committing genocide. Last year, Washington imposed sanctions on Chen Quanguo, Zhu Hailun, and the bingtuan, and barred imports of cotton and tomatoes from Xinjiang. 

The European Union, the U.K., and Canada took similar measures a few weeks ago.

Fear permeates the émigré community. As a recent Freedom House report notes, “China conducts the most sophisticated, global, and comprehensive campaign of transnational repression in the world.” 

Its tactics have ranged from digital intimidation and threats of lawsuits to unlawful deportation.

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Growing up in this remote part of Asia, a child like Sabit, an ethnic Kazakh, could find the legacy of conquest all around her. Xinjiang is the size of Alaska, its borders spanning eight countries. Its population was originally dominated by Uyghurs, Kaza
Law & Politics

Dissent is measured and snuffed out very quickly in China. 

China has unveiled a Digital Panopticon in Xinjiang where a combination of data from video surveillance, face and license plate recognition, mobile device locations, and official records to identify targets for detention. 

Xinjiang is surely a precursor for how the CCCP will manage dissent. 

The actions in Xinjiang are part of the regional authorities’ ongoing “strike-hard” campaign, and of Xi’s “stability maintenance” and “enduring peace” drive in the region. 

Authorities say the campaign targets “terrorist elements,” but it is in practice far broader, and encompasses anyone suspected of political disloyalty.

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07-OCT-2019 :: Xi’s model is one of technocratic authoritarianism The Master Algorithm by Pedro Domingos. Xi is building an Algorithmic Society.
Law & Politics

Xi’s model is one of technocratic authoritarianism and a recent addition to his book shelf include The Master Algorithm by Pedro Domingos. Xi is building an Algorithmic Society.

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28-MAR-2021 :: We are once again entering an exponential escape velocity Phase #COVID19
Law & Politics

The Virus remains an exogenous uncertainty that is still not resolved though all the virologists who have metastasized into vaccinologists will have you believe its all sunlit uplands from here. 

Glorious sunrise at the Borana conservancy @nickdimbleby @JamboMagazine

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Data from #Covid19 worldwide on April 08: + 707,260 cases in 24 hours @CovidTracker_fr

Data from #Covid19 worldwide on April 08: + 707,260 cases in 24 hours, i.e. 133,811,627 in total + 13,827 deaths in 24 hours, or 2,901,987 in total

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08-MAR-2021 My concern is that Brazil which was the epicenter of the Virus in May 2020 is once again a Precursor and a Harbinger

The P.1 variant shares mutations such as E484K, K417T, and N501Y and a deletion in the orf1b protein (del11288-11296 (3675-3677 SGF)) with other VOCs previously detected in the United Kingdom and South Africa (B.1.1.7 and the B.1.351, respectively).

Prevalence of P.1 increased sharply from 0% in November 2020 to 73% in January 2021 and in less than 2 months replaced previous lineages (4).

The estimated relative transmissibility of P.1 is 2.5 (95% CI: 2.3-2.8) times higher than the infection rate of the wild variant, while the reinfection probability due to the new variant is 6.4% (95

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28-MAR-2021 :: We have Ph-B.1.1.28 in the Phillipines

Whole genome sequencing revealed that the 33 samples with the Ph-B.1.1.28 emergent variant merit further investigation as they all contain the E484K, N501Y, and P681H Spike mutations previously found in other variants of concern such as the South African B.1.351, the Brazil P.1 and the UK B.1.1.7 variants.

This is the first known report of these mutations co-occurring in the same virus.

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Persons who received only one dose of Pfizer or Moderna vaccine had lower and in some cases undetectable neutralization of the B.1.1.7, P1 & other variants of concern @celinegounder

Persons who received only one dose of Pfizer or Moderna vaccine had lower and in some cases undetectable neutralization of the B.1.1.7, P1 & other variants of concern even though they had activity against the original strains of SARS-CoV-2.

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Currency Markets at a Glance WSJ
World Currencies

Euro 1.1887

Dollar Index 92.271

Japan Yen 109.528

Swiss Franc 0.9262

Pound 1.3681

Aussie 0.7604

India Rupee 75.1275

South Korea Won 1126.025

Brazil Real 5.6791

Egypt Pound 15.7215

South Africa Rand 14.6186

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Alibaba Chart via @sunchartist
World Of Finance

There is frequently a "coming to Jesus" meeting in Beijing where any number of things can happen

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There is frequently a "coming to Jesus" meeting in Beijing where any number of things can happen

Alibaba’s Jack Ma is still young, healthy, and his company is firing on all cylinders.  Yet, he recently stepped down as chairman at a handsome ceremony – posing as a rock star and singing a few tunes.  

The musical theme was appropriate.  He has been whistling past the graveyard for many years – as is the lot of prominent businessmen in the People’s Republic of China.

And there is frequently a “coming to Jesus” meeting in Beijing where any number of things can happen to a trustee – from forcing him to sell off non-policy debt-inducing assets, to accepting “retirement” to charges of corruption and a life sentence in prison….and no more access to the CCP’s official black hair dye #6.  

Indeed, CCTV showing court proceeding clips where the former celebrity tycoon now has white hair is the greatest indignity that can be levied on a person in political China.  The citizenry knows justice (such as it is) has been served.  


'You're nothing but a cloud’ Xi's message to Jack Ma

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Key questions for EM at the IMF/WB spring meetings @RobinBrooksIIF
Emerging Markets

1. Will a killer COVID-19 mutation derail global recovery?

2. Is US fiscal stimulus - via higher US yields - bad for EM?

3. Why were so many EMs not growing before COVID-19?

4. How much worse will EM "secular stagnation" be now?

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“President Ismail Omar Guelleh obtained 167,535 votes, which is 98.58 percent,” Interior Minister Moumin Ahmed Cheick told public broadcaster RTD

“My vote is of no use, nor are the votes of 80 percent of the Djiboutian people,” the opposition candidate told AFP news agency in a text message.

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"We've seen dead bodies in hallways. Almost every one of these buildings has been trashed." @SkyNews

Dozens were killed when Islamic State insurgents overran the town of Palma in Mozambique.

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How Mozambique’s corrupt elite caused tragedy in the north @TheAfricaReport @NickNorbrook

It suits President Filipe Nyusi’s government that the Islamic State (IS) rebel group claims it organised the attack on Palma –– it helps distract from the crime and corruption at the heart of the problem.

The century turned out differently for Mozambique; after a gruelling civil war in the 1990s, the award-winning president Joaquim Chissano and his team of young technocrats like prime minister Luisa Diogo worked to turn the country around. 

IMF resident representative Felix Fischer told this author in 2009 that Mozambique’s post-conflict bounce-back was “Vietnam-like” in its trajectory.

There were new mining and energy projects, a smelter that had brought back international capital, a useful balance of Chinese infrastructure and European budget support. Tourists flooded over the border from South Africa. The economy was creating jobs.

With the arrival of President Armando Guebuza – an authoritarian Frente de Libertação de Moçambique (Frelimo) party general – in 2004, the technocratic faction of the party shrank, and those linked to the military grew.

‘Mr Gue-Business’, as he was nicknamed, heralded an uptick in elite self-enrichment and also the beginning of a more confrontational attitude towards northern Mozambique.

Drug trafficking was already a huge problem in Mozambique – a country which, according to César Guedes of the UN Office on Drugs and Crime (UNODC), can barely manage its own maritime security, “let alone prevent international crime syndicates operate across its 3,600km of coastline”.

A leaked US diplomatic cable in 2010 explained: “Despite anti-corruption rhetoric, the ruling Frelimo party has not shown much serious political will to combat narcotrafficking.”

“Mohamed Bashir Suleman (‘the other MBS’), described as the largest narcotrafficker in Mozambique, has direct ties to President Guebuza and former president Chissano

Other traffickers bribe both high and low level officials. Chief of customs Domingos Tivane is a significant recipient of these narcotrafficking-related bribes. 

Police officials told Embassy officers that they are unwilling to go after “big fish” narcotraffickers because of their ties to senior officials.”

Guebuza’s protegé Celso Correira (now minister for land and rural development, and campaign manager for President Nyusi) took over management of the Nacala Port, identified as a key channel for much of the illicit cargo that comes in and out of Mozambique. 

Then the biggest narcotrafficker, MBS was the number-one financier of the ruling party, according to US diplomats.

The amounts trafficked are eye watering. In 2018, London-based academic and former international correspondent in Mozambique Joseph Hanlon published a paper called ‘The Uberization of Mozambique’s heroin trade’. 

In it, he estimated some $600m-800m of heroin transited through Mozambique annually, with $100m used to bribe members of Frelimo.

“Mozambique is part of a complex chain which forms the East African heroin network. Heroin goes from Afghanistan to the Makran coast of Pakistan, and is taken by dhow to northern Mozambique. There, the Mozambican traffickers take it off the dhows and move it more than 3,000km by road to Johannesburg, and from there others ship it to Europe,” wrote Hanlon.

It is not just drugs. In the dog days of the Guebuza administration, when he was trying to change the constitution to allow a third term, the politically connected elite pulled off an even greater heist.

This time it was robbing the treasury in Maputo. In 2014, a secret $850m loan for Ematum, a tuna fishing company owned – curiously – by Mozambique’s intelligence services. 

Other secret loans came to light, including a $525m loan to the state-owned Mozambique Asset Management company. 

The loans were a front for bribery and kickbacks, and have been the subject of many legal investigations. 

The $2bn in total loans contributed to an economic downturn and the government to default on its debt repayments.

Stephen Bailey-Smith, a senior economist at Global Evolution, which eventually bought the loans when they were repackaged, says the debt repackaging finally demystified the tuna bonds: 

“Investors assumed this was effectively sovereign debt. I don’t think anyone in their right mind thought they were taking a risk solely linked to a tuna fishing company. Remember, at the time, people were jumping up and down about how Mozambique would be the next big thing, one of the largest gas producers in world, and people wanted to get in early. With limited other opportunities, the bonds provided a way in.”

Not everyone was doing well in Mozambique. While on a tour of the country, Brazil’s President Luiz Inácio ‘Lula’ da Silva remarked: “No Mozambican can feel proud to open their car door and see a hungry person looking for something to eat in the rubbish.”

Welcome to Cabo Delgado

While foreign investors were piling into Mozambique’s energy sector, and local elites were grabbing what they could from narcotics, a small insurgency was gathering pace in the historically neglected north.

In 2012, the radical Kenyan Islamic cleric Aboud Rogo Mohammed was assassinated. Aboud Rogo funnelled cash and recruits to Al-Shabaab in Somalia and was linked to Al Qaeda in East Africa. 

He had cult leader status for his youthful supporters from the Ansar Muslim Youth Council, who were slowly pushed south.

Radical imams in Tanzania welcomed them. But the ‘Kibiti Killing’s of police officers in southern Tanzania triggered a crackdown from President Magufuli’s government in 2017, with bodies reported washing up on the beach in Dar es Salaam. 

“Some of the survivors, already radicalised, are believed to have moved into Mozambique”, says Dino Mahtani, International Crisis Group Deputy Director for Africa.

They were joined by artisanal miners kicked out of the Monte Puez ruby mine in Northern Mozambique. 

“Locals say the region has been turned into a ‘militarized zone’ where state forces and a South African-owned security company have allegedly beaten villagers and killed illegal miners”, reports Estacio Valoi and Gesbeen Mohammad.

Gemfields, which owns the mine and makes Fabergé Eggs, said in a statement: “Local and religious leaders inform us with great concern for how artisanal miners and traders have changed the social fabric of their communities, through marrying under-age girls, and bringing alcohol and drugs into the community.”


In early 2017, an insurgency known locally as Al-Shabaab, inspired by but unrelated to the Somali insurgents, briefly seized the smuggling port town of Mocambique de Praia, in Mozambique’s poorest province Cabo Delgado. It was the first time they would do so, but not the last.

This slow Islamic-inflected insurgent migration south co-incided with a tightening of maritime security efforts in Kenya and Tanzania, says the UNODC’s Guedes, which itself squeezed the drag traffickers south down the Swahili coast. 

“Mozambique, even through it was further south, still made sense to the syndicates”.

As with all successful trading, it is useful to have goods travelling in both directions; the grim trade of heroin met with Asian demand for Mozambican illicit produce.

Then the drugs syndicates were joined by gem and timber smugglers, wildlife traffickers, and human traffickers – including human body parts. 

“Some of the decapitated bodies in the streets seen after the Palma attack had also had their fronts opened up”, says Mozambican researcher Tomás Queface from the University of Sussex.

To what extent to insurgents and syndicates overlap? Guedes points to a boat seized off the Mozambique coast coming from Asia with both drugs to be smuggled and arms for the militants.

“Now that Al-Shabaab controls large segments of the Cabo Delgado coast line, there are fears that they are already beginning to take a slice of illicit coastal smuggling, including taxing drugs cargos that transit through waters and land they control”, says Mahtani, who thinks the links are more opportunistic. 

“They wont be involved in making the international trade of narcotics happen, but if drugs are still flowing into Cabo Delgado, then it stands to reason they might take a cut of the trade, either by transit fees or taxes, or from facilitating transport and landing of cargoes.”

For certain, criminals have the run of the province, and pay off the authorities, or attack them if they get in the way. Collusion goes to the highest levels of military intelligence, suspect some analysts. 

One diplomatic source tells The Africa Report, “The military are all neck-deep in drugs, and they don’t want people to see that”.

Mozambican researcher Queface says there are fears that the insurgents have penetrated the military: “The militants always seem to know where they army is going to attack.” President Nyusi appointed a more capable general to the region in January but he contracted Covid-19 soon after and died.

Some analysts believe the government doesn’t want international forces in Cabo Delgado because “then all eyes will fall on the scale of illicit trafficking that goes on in the province, and a lot of other things could come to light”, says Louw-Vaudran.

There were also question marks over the length of time – several months – that the insurgency were able to take and hold Mocambique de Praia. 

“We don’t know what they are hiding”, says Queface. Even former president Guebuza has told journalists that the government was not sending the best soldiers and commanders to the north. 

Journalists, academics and aid workers are mostly barred from the area. A UK journalist, Tom Bowker, was deported for reporting on the insurgency

Some people are being driven off the land, “and then when the land has been evacuated, people approach concession holders saying ‘do you want to sell’, with interested buyers coming to the table to flip properties into their own hands, and put the squeeze on those who don’t have the protection”, says the diplomatic source.


As all eyes are on the heroin traffic to the north, in the south, concerns are growing that Brazil’s fearsome cocaine cartels are getting a foot in the door.

The PCC is Brazil’s most-powerful and internationally-connected syndicate. The arrest of PCC operative Gilberto Aparecido Dos Santos, alias “Fuminho,” in Maputo in April 2020 raises flags for the UNODC’s Guedes

Brazilian media report him as having already made several smuggling deals across multiple African countries.

Despite the arrest, cocaine busts continue. In January 2021, five men were arrested by police on cocaine smuggling charges. 

“The group was caught while “threatening” the alleged receiver of the drugs, a Nigerian who allegedly received eight kilograms of cocaine from Brazil, worth an estimated 18 million meticais, and destined for South Africa”, reports Omardine Omar.

“It is not what Mozambique needs right now”, says Guedes, who suspects it was an attempt to look for new cocaine routes into Asia.

 “When you look at other countries who have both heroin and cocaine smuggled through them [such as Guinea Bissau] … it is total destabilisation of the state”.

A former top official in Zimbabwe told us the Maputo meeting was torn between President Emmerson Mnangagwa’s pushing for his country to lead a intervention force to Mozambique and Ramaphosa’s plan which has won the day, for now. 

Nyusi was between the two options but still preferring to use forces from outside the region, such as Portuguese and United States’ trainers.


Depending how you add it all up, the gas export project, with a price tag ranging from $20bn to $120bn, is Africa’s biggest industrial project today.

It is a huge investment for the energy companies and banks involved. They’re unlikely to it shut down – even if the window for fossil fuels is closing as rich countries invest in the green energy transition.

There is also a rush to sow up the remaining large LNG contracts – the China-Iran deal, for example, shrinks global gas appetite.

And as Liesl Louw-Vaudran of the Institute for Security Studies points out, “South Africa is on the hook”. 

The state investment company IDC is invested in Mozambique Gas, South Africa’s largest bank Standard Bank has sunk $485m into the project.

The planned industrial hub will likely not happen. “I saw powerpoint presentations from Standard Bank saying 5,000 expats would be permanently based in Palma, they would need all the services, creating opportunities for SMEs to go – and they did go, and these were the guys that were targeted”, says Louw-Vaudran.

The Palma attack is turning point for the insurgency; not just in their methods of attack, but in their victory, says security analyst Jasmine Opperman. Between 40 – 80 vehicles were stolen during the raid, bank vaults busted, telecoms equipment taken. 

They have money, wheels and communications. And perhaps now greater ambition. Queface expects larger towns like Nangade to be hit.

“There are 19 cells, and at minimum 2,500 fighters”, says Opperman, who says their ranks have swollen massively in the last year.


Beyond the region, the international community needs to get involved. For Mahtani, this should start with “the stamping out of the drug trade in the Indian Ocean”, which would de-escalate the corrupting flow of narcotic cash into the political economies of East and Southern Africa.

Guedes thinks that Europe needs to wake up to its role here: “Not many people realise that Shengen starts just a few hundred kilometers from Palma; Mayotte is France”. 

Given the French islands that dominate the Mozambique channel, and Operation Atalanta, the EU’s naval force that protects Somalia, Europe is well placed to extend naval forces in the area. Similarly, the US Joint Task Force in Bahrain cold play an interdicting role.

Beyond that, there are fears that other kinds of international interventions could lead to calamity. There is French military base in Mayotte. 

“The worst case would be if the French sent in the Légion Étrangère”, says Louw-Vaudran.

For Mahtani, there is a security stalemate in the north which requires intervention, but not at the risk of squashing Mozambique sovereign statehood.

Does Nyussi have a plan to keep Palma safe? Can he retake Mocambique de Praia – that would be a start, but does the Mozambican government have the resources to do it on its own? That is where Mozambique could perhaps give some ground, suggests Mahtani.

“Don’t rush into a heavy scorched earth counter-insurgency across the province. Start by recapturing the ports, and have a politically-driven plan to peel off some of the local insurgents urging them to surrender, giving promises of development to appeal to sons of the soil who have joined the insurgency”, says Mahtani, who sees military solution track like that pursued in Afghanistan as something to avoid.

Although conditions have been deteriorating fast, over the past six months, according to regional analysts, most say that a decisive response now could stop that trend.

“It’s not too late to act”, says Guedes.

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4 JUN 12 :: 'Maputo, Boom Town'

GREETINGS from the Serena Polana, Maputo. I can confirm that Maputo is the land of wonderful and flavoursome tiger prawns.

The Architecture is also deliciously retro. By the way, the Polana was built in 1922 and the flavour is fabulously Riviera and very swanky. 

It is less than 4 hours by plane from Nairobi and surely set to be the most of in things and places to visit.

Of course, Mozambique has popped large onto the global radar because of gas reserves that have been discovered offshore and in the deep sea.

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Sep 2012 The Swahili Coast is a Potential TinderBox

Then, last week, on the 27th of August, Aboud Rogo Mohammed was shot on the always busy Bamburi Road, not far from Pirates. This proved the spark that ignited a tinderbox

My concern remains that what appear like uncorre- lated spikes and paroxysms of violence conflate, become more broad based and amplify.

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31 OCT 16 :: Mozambique from Boom to Bust - A Cautionary Tale

I said "Mozambique could be the next Qatar." as we stuffed ourselves with wonderfully flavour some tiger prawns.

Then I noticed that Credit Suisse and VTB sold some ‘’Tuna’’ Bonds on behalf of Mozambique. The story around these bonds was opaque.

Ematum’s results pointed to the fleet catching just $450,000 of tuna a year, compared with sales of $18-million forecast at that stage of its life in a 2013 feasibility study circulated by the government.

Further loans were uncovered spanning not only Empresa Moçambicana de Atum (Ematum), but other companies Proindicus and Mozambique Asset Management (MAM). The Total is around $2 billion.

Africa Confidential reported that Chancellor Angela Merkel asked President Nyusi when he met her in Berlin on 19 April 2016, ‘Where is the money?’ and also, ‘Are you in charge?’

If you are mortgaging the future, you need to make sure can first afford the mortgage payments and second that the investments you are making are going to provide a meaningful return on your investment

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Ethiopia Seeks Market-Friendly Solution to Debt Restructuring @markets @Habesh_ & Alonso Soto

Ethiopia’s government wants to find a “market friendly” solution for a planned debt restructuring to ensure it has access to the markets for more capital in coming years, State Minister for Finance Eyob Tekalign Tolina said.

Eyob set out the state’s intentions on a call with investors on Thursday to discuss the proposed reorganization of Ethiopia’s loans under a Group-of-20 initiative.

“We want this liability exercise to not affect our ability to raise more capital,” Eyob said by text message Friday. 

“It’s the government’s intention to “find a market friendly solution given Ethiopia’s interest to raise significant capital from the market in the next couple of years,” he said.

Yields on Ethiopia’s $1 billion of 2024 Eurobonds soared to nine-month highs after the government’s said on Jan. 29 it intends to restructure its external debt. 

The announcement led Fitch Ratings to downgrade the nation’s credit and warn of an increased risk of default.

Ethiopia, like other African nations, is looking to offset the fallout from the coronavirus pandemic on its economy. 

Its position has been exacerbated by fighting in the northern Tigray region and a border dispute with Sudan that’s disrupting trade flows.

Eyob said the state will pay a coupon on the debt that falls due in June.

Two investors who attended Thursday’s call said the government indicated it will include include Eurobonds in an overhaul of its external debt. 

That would mark a shift in the government’s position after the state earlier this year said it would only as a last resort include private creditors in the planned restructuring.

Eyob denied the government has made any decision on how Eurobond holders will be treated.

“There is no indication whatsoever from us one way or the other,” he said. “We did indicate that given the phrase ‘comparable treatment’ in the common framework, the issue may come up at the creditors committee,” Eyob said, adding that the government is awaiting advice from the Paris Club of creditors on the matter.

Yields on the 2024 dollar bonds dropped one basis point on Friday to 8.98%.

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Cameroon in Talks With Rothschild to Advise on Eurobond Sale @markets

Cameroon is in talks with Rothschild & Co. to advise on a planned Eurobond sale in the first half of this year, Treasury officials said.

“The government is in negotiations with Rothschild to pilot the next Eurobond for Cameroon,” Department of Treasury Director Tela Samuel said by phone from the capital, Yaounde. 

A Rothschild spokesperson declined to comment when contacted by Bloomberg.

The proceeds from the sale will be used to help repay $750 million of debt the government issued in 2015, Treasury Director-General Moh Sylvester said by phone on Friday. “The intention is to issue before June 30,” he said.

Cameroon’s planned sale comes as increased spending by the U.S. on economic stimulus is driving up global borrowing costs. 

It would follow offerings by Benin, Egypt, Ivory Coast and Ghana so far this year, while Kenya and Nigeria have announced plans for issues.

The debt sales are taking place as African nations seek funds to roll over debt and finance budgets strained by the coronavirus pandemic. 

Other countries, including Ethiopia, have opted to seek debt relief under a Group-of-20 initiative.

Yields on Cameroon’s 2015 bonds have almost halved after reaching a record high in April last year, and traded at 7.16% in London on Friday.

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“Not only are we not out of the woods – this pandemic is not nearly over – but I think in Africa you could almost say it is just beginning,” Dr @yodifiji told The @Telegraph

According to Dr Ayoade Alakija, co-chair of the Africa Union Vaccine Delivery Alliance, a lack of testing has masked the true scale of the outbreak of the continent’s “hidden pandemic”.

Dr Alakija warned the region is still “flying blind” as it teeters on the edge of a surge of cases, triggered by the emergence of highly infectious new variants, lockdown fatigue and limited vaccine supplies.  

“Not only are we not out of the woods – this pandemic is not nearly over – but I think in Africa you could almost say it is just beginning,” Dr Alakija told The Telegraph. 

But to date, the virus does not appear to have taken hold in the same way it has done in other parts of the world: between February and December 2020, Africa accounted for just 3.4 per cent of Covid cases globally and 3.6 per cent of deaths. 

Dr John Nkengasong, the head of Africa’s Centre for Disease Control, told the Telegraph last October that early doomsday scenarios had been based on a “shallow understanding of the continent”.

However, Africa has not been immune to the virus. According to a paper in the Lancet  published this week the region’s first wave was relatively small, followed by a bigger peak in December and January. 

The highly infectious variant first detected in Kent, B.1.1.7, took hold in northern Africa while the southern tip of the continent was hit by the resistant B.1.351 variant which emerged in South Africa. 

Many African nations locked down early on in the pandemic – even when they only had a handful of cases. But by the second wave lockdown fatigue had set in. 

Economic necessity meant that many countries were forced to open up again and a lack of social safety net mean citizens had little choice but to go back to work. Social distancing and mask wearing have also been less adhered to. 

There are concerns that cases are now rising in the east. 

“A decline in the pandemic’s trajectory since January has now plateaued, and we are concerned about increasing numbers of cases in a few countries,” Dr Richard Mihigo, of the World Health Organization’s Africa office,

Kenya and Ethiopia are among the worst hit, with a 66 and 28 per cent rise in cases in the last week respectively. 

In Kenya, cases have risen from around 250 a day at the beginning of March to over 1,000 this week (see chart below). Its doctors’ union said on Tuesday that the country’s intensive care units were full.

And while the continent’s testing capacity may have grown since the beginning of the pandemic, it is still patchy. 

The Lancet study showed that at the peak of the second wave only a third – 36 per cent of countries – had adequate testing capacity.

Since the virus was first detected in Africa in February 2020, only 39.8 million tests have been carried out in a population of 1.2 billion – compared to 114 million in the UK, home to just 66 million people. 

In a commentary accompanying the Lancet paper three African researchers say that the true picture of the pandemic is “limited by incomplete data for surveillance, testing and reporting of Covid-19 cases… It is possible that the toll of Covid-19 on African countries could be higher than reported here”. 

Dr Alakija agreed: “We don’t know what's happening in Africa, we’re flying blind. You can say that Africa’s numbers haven’t been huge, and it doesn’t look like health systems have been overwhelmed and we haven’t seen so many deaths – but is that true?” 

She added that while health systems have not been overwhelmed with Covid-19 patients like South America, this is paradoxically because the region has a “way more functional health systems than we do here”.

“So the reason you know people are dying is because people are going to hospitals. But over here, that is not what pertains. Cases don’t go up because you’re not testing; there are limited hospitalisations because of how few people have access to hospital care.

“Africa has a hidden pandemic,” she said.

The Lancet paper shows that nine countries accounted for 82 per cent of cases last year – these countries are not connected geographically and range from South Africa to Morocco in the north, Kenya in the east and Nigeria in the west. 

Identifying the coronavirus pandemic has been complicated by widespread misdiagnosis of cases – symptoms such as fever are similar to those triggered by diseases including malaria – while a popular narrative of Covid-19 a “disease of the outside” has persisted. 

It has also been seen as a disease of the elite, taking out many of Africa's ageing officials. 

Malawi declared a state of emergency after two government ministers died in the same week, Burundi’s president also reportedly succumbed to the disease and last week, Tanzanian president John Magufuli – who repeatedly denied the existence of the disease – was also said to have been killed by the virus.

On top of this is the uneven vaccine supply. According to the WHO, just 7.7 million vaccine doses have been administered, mainly to high-risk population groups, across a continent home to 1.2 billion people.

So far 32 countries have started administering jabs, which have been secured via a combination of bilateral deals with companies and countries including China and Russia, and the WHO-led Covax scheme, which has delivered 16 million doses to 28 African nations. 

“The only game changer right now is vaccinations… but we just don’t have the supply,” said Dr Alakija. 

She urged countries further along in their immunisation campaigns to share doses and for the global community to issue limited intellectual property waivers. 

Delays not only allow the virus to spread – costing lives and allowing new coronavirus variants the space to emerge –  but have “humongous” ripple effects on social issues like girls' education and the economy, Dr Alakija added. 

The World Bank estimates that $13.8 billion is lost by Africa for every month delay in vaccination. 

“I cannot be optimistic about it, we have a very rough year ahead of us… because we don't yet have the tools at our disposal to fight this virus in Africa,” said Dr Alakija. 

“There's been a lot of pain, both in health and economics. And until we vaccinate our population, we cannot recover.”

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Voyage and vaccine inequities spark diplomatic row ⁦ A 'special relationship' between President Uhuru Kenyatta and Premier Boris Johnson seems to have gone off the rails @Africa_Conf

Angered by Britain's decision to put Kenya on its 'red list' of banned countries with coronavirus infection rates, President Uhuru Kenyatta's government responded by cancelling all direct flights from Britain. 

The foreign ministry also accused Britain and other wealthy countries of practising 'vaccine apartheid' by 'hoarding' jabs

Having initially stayed off Britain's 'red list' of countries from which arriving travellers must quarantine for 10 days in a designated hotel at a cost of £1,750 per person –  even though all of Kenya's neighbours were on it – Kenya was added on Friday (9 April) after a sharp rise in Covid cases as it suffers a third wave of the pandemic.

That was seen as an affront by the Kenyatta government, which has been promised privileged trade and security relations with Britain's Conservative government, and signed a post-Brexit trade agreement with the former colonial power last month (AC Vol 62 No 5, In on the act).

Should the tit-for-tat travel blockade last more than a matter of weeks, however, that will leave a big dent in bilateral trade and tourism receipts. 

London is likely to allow foreign travel to resume from mid-May, though only a handful of countries are likely to allow quarantine-free travel.

On 9 April, the Mo Ibrahim Foundation argued that vaccine access should be seen as security issue in Africa.

It reports that the latest data shows a 9% rise in Coronavirus cases in Africa in a month, and that the average 2.7% case fatality in Africa is now higher than the global average of 2.2%. 

By mid-March, the Foundation said, Africa had received just 0.5% of available global vaccines although the continent has 17% of the world's population.

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by Aly Khan Satchu (www.rich.co.ke)
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April 2021

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