Frontiers

Dan Keeler

The Kenyan Supreme Court upheld Uhuru Kenyatta’s victory in a controversial presidential election, as riot police fought deadly battles with opposition supporters, Matina Stevis-Gridneff writes. The court decision put Kenyatta on track for inauguration on November 28 and another five years as president. However, opposition supporters protested the outcome, clashing with riot police in parts of Nairobi and Western Kenya, continuing street battles that have left at least 10 dead since last Friday.

Rioters attack a car in Kisumu, western Kenya on Monday. Reuters

In a sign of investor relief, Kenya’s stock exchange had its best day since late September and the country’s dollar-denominated Eurobond rallied after the country’s top court announced it would throw out three final legal challenges to Kenyatta’s re-election.

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Zimbabwean President Robert Mugabe stepped down on Tuesday after ruling the Southern African country for 37 years, during which he went from toppling white-minority rule to overseeing a series of punishing economic crises, Gabriele Steinhauser and Bernard Mpofu report. Few were sad to see Mugabe go, but Jan Dehn, global head of research at fund manager Ashmore, was particularly scathing: “Mugabe will go down in history as a failure and his only contribution will be the lesson his misrule can offer others,” he wrote in a note this week.

Emerson Mnangagwa, Zimbabwe’s new president. EPA/Shutterstock

On Friday, the country’s new President Emmerson Mnangagwa was sworn in before a cheering stadium crowd in Harare, Steinhauser writes. Mnangagwa used his inaugural address to reach out to political opponents and to plead with foreign investors to return to the crisis-hit country. The former revolutionary and right-hand man of his ousted predecessor said shortly after his oath of office: “I am not oblivious to the many Zimbabweans from across the political, ethnic and racial divide who have helped make this day and thus have legitimate expectation from the office now I occupy.”

According to Hasnain Malik, head of equity research at frontier- and emerging-markets investment bank, Exotix Capital, Mugabe’s demise should open the door to more foreign participation in Zimbabwe’s market. “The transition [could] put Zimbabwe back on the foreign investor radar,” he said. “Many of the ingredients of a great frontier market are in place in Zimbabwe: human capital, infrastructure, natural resources and diaspora.”

One foreign investor that almost certainly won’t be joining a rush into Zimbabwe is the private equity firm KKR, which has disbanded its Africa deal team because it couldn’t find enough big companies to buy. Four KKR executives and an adviser who explored African opportunities have left the firm, Simon Clark and Ed Ballard report. The departures come less than four years after the New York-based firm made its only investment on the continent in Afriflora, the world’s largest rose farm, in Ethiopia.

KKR’s withdrawal illustrates the challenges facing large Western private-equity firms, which have tried to do business in Africa using their traditional buyout approach. This typically involves investing hundreds of millions of dollars at a time in companies to improve performance, with the expectation of selling them within five years for a higher price. However, Africa has relatively few large companies to invest in, KKR said.

Nigeria sold $3 billion in debt this week, representing one of the largest bond sales from an African nation, Christopher Whittall writes. The bond sale attracted orders of around $11 billion indicating that demand for frontier-market debt remains strong. The enthusiastic response from investors enabled the country to offer a $1.5 billion 10-year bond with a yield of 6.5% rather than the 6.75% yield originally expected. A $1.5 billion 30-year bond sold with a yield of 7.625%.

Uganda, Africa’s leading coffee exporter, risks sliding further into turmoil as President Yoweri Museveni moves to amend the constitution to retain power beyond 2021 amid a worsening economic crisis and delayed commencement of oil production, Nicholas Bariyo writes. Economic growth has struggled to keep pace with population growth since 2011, weighed down by the commodity price slump and instability in South Sudan, formerly Uganda’s largest export market. And, according to International Crisis Group, rising popular discontent against Museveni’s 3-decade-rule could unsettle Uganda, which hosts East Africa's largest unexploited proven crude oil reserves. “Urgent infrastructure projects and the long-anticipated start of oil production have suffered delays, further depressing international investment,” ICG said.

Zambia’s continued economic malaise has prompted the country’s central bank to cut its key lending rate for the fourth time this year, Bariyo reports. The latest cut, an attempt to counter weak economic growth, brought the key lending rate to 10.25%, the lowest level in nearly five years. Zambia’s economy grew by 3% last year, the worst performance in nearly two decades, according to the IMF. The economic distress has compelled Zambia to seek a $1.3 billion rescue loan from IMF, but talks with the lender have been bogged down partly by a political standoff between President Edgar Lungu and opposition leader Hakainde Hichilema following last year’s disputed election.

The government of Vietnam has kicked off a process to find potential investors for a large stake in the country’s biggest beer company, as it looks to strike a multibillion-dollar deal in the coming weeks, P.R. Venkat and Jake Maxwell Watts report. Vietnamese government officials were in Singapore meeting investors to drum up interest in state-owned Saigon Beer Alcohol Beverage Corp., or Sabeco.

A Sabeco production line in Hanoi. Reuters

The brewer is publicly listed in Vietnam and has a market capitalization of around $8.7 billion. The government currently owns close to 90% of Sabeco. Depending on the level of buyer interest, Vietnam could sell more than 50% of the decades-old company and cease to be its majority owner.

Sri Lanka and Bangladesh are set to see continued strong economic performance in the coming years, research firm BMI said this week. In Bangladesh, BMI said, tailwinds provided by a planned significant increase in public spending on infrastructure and an improving external outlook will be offset by weakness in the agriculture and banking sectors, but the country’s growth rate should remain steady next year at 6.8%.

Continuing reform efforts by Sri Lanka’s government—particularly in reducing trade-inhibiting tariffs and restrictive labor laws—are helping to support economic growth, which BMI forecasts will increase from 4.3% this year to 4.9% in 2018. “Targeted development spending…and some fiscal consolidation [are] likely to be supportive of growth over the coming quarters,” the firm added.

Foreign investors appear to support that view and are piling into Sri Lankan equities at a record rate, according to Niroshan Wijesundere, head of market development at Colombo Stock Exchange. “2017 has recorded an all-time high in foreign purchases during any given year, with $707.4 million in foreign purchases this year,” he said. Over the first half of the year, foreign purchases were running at twice the level of the same period in 2016, he added.

US Secretary of State Rex Tillerson declared that Myanmar’s military operation against Rohingya Muslims constitutes ethnic cleansing and said the US is weighing targeted sanctions to hold perpetrators accountable, Felicia Schwartz writes. Tillerson’s assessment follows a visit last week to Myanmar, where he met with State Counselor Aung San Suu Kyi and the commander-in-chief of the armed forces, Senior General Min Aung Hlaing. Myanmar rebutted the allegation, which it said was made “without any proven facts.”

Rohingya refugees at Balukhali refugee camp in Bangladesh. Getty Images

Later in the week, Myanmar’s leadership agreed with Bangladesh to repatriate some of the hundreds of thousands of Rohingya who have fled across the border, Ben Otto and Myo Myo report. There are concerns about what kind of life they’ll return to, though, as Myanmar plans to bar Rohingya from lands they farmed before the clearances began, settling them instead in “model villages,” a strategy that the UN has previously warned would be little better than creating permanent camps.

Political upheaval in Saudi Arabia has sent shares, currencies and bonds in the Middle East lower—but not in the kingdom itself, Mike Bird reports. Riyadh’s internal crackdown and escalating tensions with Iran have barely impacted domestic markets, but have amplified troubles in smaller neighbors including Qatar and Bahrain. While the MSCI’s index for Saudi stocks has fallen just 0.3% in the past month the index of stocks listed in the other five members of the Gulf Cooperation Council—Kuwait, United Arab Emirates, Bahrain, Qatar and Oman—is down 4.9%.

Saudi Crown Prince Mohammed bin Salman. Getty Images

Saudi Arabian markets have likely been cushioned by state-led buying, no disruption to the massive oil industry and hopes of financial reform. Investors appear to be betting that Crown Prince Mohammed bin Salman’s consolidation of power, although it adds uncertainty, could also further a program of economic reforms that includes the privatization of state assets and opening markets to foreign investors.

Lebanese Prime Minister Saad Hariri said Wednesday he was holding off on submitting his resignation at the request of President Michel Aoun, Nazih Osseiran reports. The move represents another startling turn in a crisis that thrust Lebanon back into the middle of a regional power struggle between Iran and Saudi Arabia.

Shortly after the announcement, the capital Beirut erupted in celebrations, with marching crowds and convoys of cars and motorcycles pouring into the streets. Supporters chanted “Saad! Saad! Saad!” while beating drums and waving the flags of Lebanon, Saudi Arabia and the prime minister’s political party, the Future Movement. Hariri had returned to Lebanon on Tuesday night for the first time since he announced his intention to resign on November 4th while on a visit to Saudi Arabia.

Romania’s economy continues to expand at a “blistering” pace, according to London-based Capital Economics, but the pace of its growth is raising fears that it might be overheating. Recent data shows the country’s economy is expanding at 8.8% year-on-year, up from an already-quite-impressive 6.1% recorded in the second quarter of this year. “Wage growth is rapid, the current account position has deteriorated markedly over the past couple of years and inflation is now above the central bank’s target,” the firm said in its latest report on frontier markets.

Quote of the Week

“The transition [could] put Zimbabwe back on the foreign investor radar”

Hasnain Malik, head of equity research, Exotix Capital

Key Stories from WSJ

Number of the Week

$8.7 billion

The valuation of Vietnam's biggest beer company, Sabeco. The country’s government is planning to sell a substantial proportion of its 90% stake in the company.

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