Frontier Africa’s Wilderness Trek Trails

Sub-Saharan markets continued their drag on the MSCI Frontier Index with Kenya off 40 percent in dollar terms at the bottom of the pile as officials sought emergency IMF credit to stem a shilling shellacking past 100 to the dollar as the central bank resorted to a 400 basis point rate rise to 14 percent to counter double-digit inflation. The authority had resisted drastic moves since early in the year, insisting that monetary policy could not address embedded steep food and fuel costs and was widely criticized for interbank intervention moves instead aimed at punishing “speculators.” T-bill rates have tripled since 2010 knocking the wind out of equities with slumping volume and the lowest valuations in a decade. Plans for a maiden external sovereign bond have again been shelved as the government turns to tax-free infrastructure instruments to plug budget gaps, the latest aimed at individual diaspora investors. Attention has shifted to upcoming elections that hope to avoid a repeat of the last race’s controversy and carnage, with several cabinet members after lengthy investigations facing human rights indictments from the Hague tribunal. GDP growth will roughly match the annual population jump at 3 percent as rural drought has brought large internal displacement alongside the cross-border influx in war-torn Somalia and new movements from Uganda and Malawi following political unrest there. Protests have erupted in both places against authoritarian incumbents at the same time prices for respective commodity mainstays like coffee and tobacco have softened. Uganda’s longtime leader Museveni has been buoyed by the discovery of oil, but opponents draw a contrast between his decades-long tenure and the peaceful presidential rotation in Ghana which has recently joined the petroleum export ranks. The Accra exchange is flat on world beating GDP growth estimated in the 15 percent range despite a fiscal deficit of 5 percent and mounting arrears that must be cleared under IMF program conditions. The benchmark rate has stayed above 12 percent and the currency is supported by firm cocoa and gold values, but international debt has returned to pre-HIPC levels with $3 billion in Chinese project borrowing.

Zambia, although not in any collective mainstream index, has been the regional frontrunner with a 15 percent gain as anti-Chinese populist Sata takes the helm with the expectation of a greater copper-revenue split. In the presidential contest before, Beijing had expressed a preference for the ruling party standard-bearer but this time it kept a diplomatic distance. Sata as a candidate railed against low-cost imports and local worker treatment, but in victory insisted on welcoming China’s aid and investment. He then proceeded to dismiss the long-serving central bank chief who has clamped down on non-residents’ T-bill access with higher taxes and loan restrictions. Their ownership stake is 5 percent versus a majority portion in the past as old African champions look to reassert control.