Why India May Get ‘Limited Waiver’ From Trump to Keep Buying Iranian Crude

India will very likely get a ‘limited waiver’ from the US to keep buying Iranian crude – albeit at decreasing levels into 2019. A 6-7 September “2+2” strategic dialogue between US Secretary of State Mike Pompeo and Secretary of Defense Jim Mattis with their Indian counterparts will likely result in India receiving a limited waiver in recognition of the immense geostrategic considerations at stake in the bilateral relations between the US and India. India will likely commit to gradually reducing its purchases of Iranian crude oil into 2019. While Brent briefly flirting with $70 per barrel on demand concerns this summer increasing focus on both supply reductions from Iran and the potential for ever greater military tensions in the Gulf will provide support for Brent prices as we head toward the 4 November US-imposed deadline for implementing the US sanctions. China will probably stand alone as the market of last resort to take increased volumes of distressed Iranian oil.

The complex context of the US-India relationship at present makes the decisions of both Indian and US policymakers on implementing US secondary sanctions very difficult. On the surface, there seems to be an impasse as the 2+2 ministerial meeting approaches. The US has made clear that there will be little flexibility shown in terms of granting waivers of US sanctions for countries which continue to buy Iranian crude after 4 November, and certainly no “blanket waivers” which would allow countries to continue doing business as usual with Iran in the physical oil market. For their part, Indian officials’ public statements have hewn closely to their tradition of foreign policy independence, making clear that they feel bound to comply only with sanctions endorsed by the UN Security Council.

However, despite the stated Indian policy, there seems to be accumulating evidence of an unstated policy. Shortly after the initial response, there were anonymous comments in the early summer from Indian refinery managers in the press suggesting that government officials had discussed with them the possible need to reduce Iranian crude oil supplies. More concrete support for this has emerged recently in the preliminary data from Bloomberg, with a steep drop in Indian imports from Iran in August, from 787,000 bpd in July to 376,000 bpd in August. To be sure, there are significant monthly fluctuations in normal times, but with the approach of the deadline this seems to be too large a drop to be coincidence. It also is clearly not driven by other bilateral issues, which has happened before, such as over a dispute between Iranian and Indian parastatal firms over development of a gas field. One Indian refiner, part of the huge Reliance Industries conglomerate, already has halted purchases from Iran due to the exposure of other Reliance Industries’ business lines to the US market. The big question is around the parastatal refiners IOC, HPCL, and BPCL, which own the bulk of India’s refining capacity.

Given India’s very independent foreign policy orientation, the US demand to cut off oil purchases from Iran is a significant irritant in bilateral relations. Even when similar sanctions were implemented in 2012 by President Obama prior to the 2015 nuclear deal, India never formally said it was complying with US wishes – but somehow Indian purchases declined by 20%, which Asian importers had been told would get them a waiver.

In this case, the Trump administration is taking a harder stance – trying to cut Iranian exports to zero. There also have been other irritants in the relationship besides sanctions, including social media chatter in the Indian press alleging that President Trump has mocked Prime Minister Modi’s Indian-accented English in private, and lectured him in their summit meeting about the need to ‘buy American,’ and restricted access to US visas for Indian technology workers.

Countering that, however, is that Indian-US relations have continued to grow closer under the Trump administration, propelled by the perceived need for India to balance a rising China along with the US and Japan. Recent Chinese moves to invest and strengthen relationships with Sri Lanka, the Maldives, and Nepal have added to longstanding Indian concerns about Chinese ties to Pakistan. The geopolitical pull of rising Chinese military power is a very strong force on both sides of the US-India relationship. It has led to a surge in US-India defense contracts – with India currently having $18 billion in defense sector trade with the US, and Russia falling well behind into second place. That geopolitical pull also will influence the US side. Japan and South Korea will halt purchases of Iranian crude entirely, but if there is a country with the geopolitical weight to get a waiver from the US for some level of reduced imports, it is India.

We will not know the outcome of the talks on this issue immediately after the meeting ends this week, as there is no way India will take a formal policy decision to comply, and there also is no way the Trump administration will telegraph a decision on the issuance of a waiver so far in advance of the deadline. What will be telling is the reaction next week from Indian refiners, which should come out in the press in due time, as well as the tanker loading schedule into the fall.

As outlined in previous notes, the US could tap its Strategic Petroleum Reserve (SPR) to temporarily offset the bullish price trend, but they will probably hold off and use that only as a last resort. If the market is knocking against $80 per barrel in early October, or above, that is the most likely time for President Trump to pull the trigger, for maximum effect on the 6 November midterm elections in the US.

North Korea Is Facing A New Food Famine — Worst Since Kim Jong-un Became Leader

North Korea faces a new food famine this winter. The expected fall in crop production will be the worst since Kim Jong-un became leader. A sustained famine could test the stability of his regime. Squeezed by new import restrictions induced by international enforcement of a tough UN sanctions regime, against the backdrop of a stalled nuclear negotiation with the US, a crippling heatwave, a shortage of fertilizers and the lack of farm equipment, North Korean fall crop harvests could fall by up to 20%. A new food famine in late 2018/ early 2019 is very likely unless UN sanctions are lifted, or China, Russia or others provide massive food aid to the beleaguered regime. North Korea’s precarious food balance may mollify its hard foreign policy stance at the US denuclearization talks and possibly produce a major foreign policy win for the Trump administration before the November mid-term elections.

Agriculture accounts for 22% of North Korea’s GDP, employs between 37% and 40% of the population. With a mere 22% of the total land area of North Korea arable, an imminent crop failure will have serious consequences for regime stability if no headway is made on US sanctions talks.

The likely crop failure this fall will hit the country’s west coast which shares a border with China much more significant than the rest of the country, and may see an upsurge of refugee inflows into China. The west coast of the country is the country’s ‘bread basket,’ accounting for 17% of available land. The country’s main food crops: rice, maize, potatoes, wheat and barley are all likely to be badly affected by the ongoing heatwave as they are harvested each year between August and October.

Further complicating the North Korean food situation is the poor quality seeds and proper fertilizers (made even harder by the strict oil import quota under the UN-sanctions enacted in November 2017). Frequent droughts and flooding do not help either. Additionally, environmental degradation, deforestation and economic mismanagement have conspired to stagnate crop yields over the past decade. With little economic incentives, most North Korean farms are run as socialist farm cooperatives where each household rely on a small plot of land – about 100 sq. m – to grow vegetables for their own consumption but also rear rabbits, pigs, goats and poultry to supplement household nutrition and income. The lack of economic incentives leads to massive inefficiencies and waste. The waste is staggering. A 2014 UN FAO study found that post-harvest loss of rice, maize, and wheat & barley, was 15.6%, 16.7%, and 16.4% of total production respectively.

North Korea’s food insecurity situation is so grave that the World Food Program (WFP) and its Global Hunger Index classifies the country as ‘serious’ with a rating of 28.2% of the population going hungry contrasted with India 31.4%, Sudan 35.5%, Chad 43.5% and Central African Republic 50.8% (the latter three labeled ‘alarming’/’extremely alarming’). Since 1995 WFP has regularly provided food aid and other assistance to North Korea.

The shortcoming of the agriculture sector is also visible in the trade sector. FAO’s Food Security Indicators shows that North Korea ‘average dietary requirement supply adequacy’ is just 88% – on the same level as Somalia. (Eastern Africa average 92% and world average 120%). Such shortfall ought to be met by ample food imports. That is not the case. The value of food imports as a percentage of merchandise exports is 11% (in 2013, latest available data) vs. 25% for Eastern Africa 11% – which is way below the 31% for low-income economies/frontier markets. Another way to illustrate the shortcoming is to compare with South Korea, which shares the same geographical and meteorological conditions, its southern neighbour imports 70% of its food needs.

In 2017 most of North Korea’s grain import came from China and increased three times according to Chinese customs data. Wheat (81,653 tons) was the biggest import, followed corn (57,887 tons) and rice (35,408 tons). Corn imports jumped 16 times to 31, 235 tons, and flour imports which stood at 7,000 tons increased 12 times from the previous year.

Furthermore, unregistered barter trade with China helps to mask the true size of imported agriculture products. However, the heavy trading sanction regimes levied on North Korea and stricter border controls are making increased agriculture imports challenging at the moment.

Strong Military Link

The North Korean military is called upon during labor-intensive planting and harvest periods to assist farmers. The North Korean military, the fourth largest in the world in manpower size, possesses the limited gasoline supplies and heavy machinery available. Thus military capabilities are significantly constrained during March-April and August-September months each year.

South Korea/Japan land reform model

Without a doubt the North Korean agriculture sector stands at a crucial juncture where major reforms are needed if the country is to maintain social stability. There has been some economic policy tinkering but a thorough reform package is yet to be unveiled. A Post US nuclear deal will give impetus to new economic reforms within the country.

The most likely pathway is to follow in the footsteps of South Korea and Japan on land reform. Following the end of WW2, South Korea introduced the first land reform, which involved putting a cap on rent charged to farm tenants to 1/3 of annual yield. In 1948 the government transferred farmland expropriated from the Japanese government and Japanese private owners to tenants where a cap was put on the land per tenant. The acquired land was sold to the farm tenants on generous terms. In 1950 a new Land Reform Act meant that government and government-vested lands (such as owned by absent landlords) were redistributed at similar generous terms.

The land reform led to former owners transformed into entrepreneurs who would start businesses in the manufacturing sectors the government had earmarked as having the best potential. The government also offered low-interest loans for them getting into business.

The land was distributed to recipients under strict conditions, such as they would actively farm the land. And recipients of land could only sell or donate the land after they paid it off, and the government could take the land back if the owners failed to meet regular payments. A similar reform scheme was enacted in Japan during the same period. Farmers used their land as collateral for bad loans, selected the crops cultivated, mechanized and applied fertilizers, which pushed up the yields/profitability that helped them free up family members/children to join other industries/study which oiled the fast-paced economic growth of North Asia through 1950-80s.

September 24 Harvest Festival will signal whether a famine is afoot or not

To better gauge internal North Korean sentiment around food security ahead of the winter, two major upcoming events will signal whether the food insecurity situation within the country is nearing a critical point or not. The National Day on September 9, (which also marks 70-years anniversary of the nation), and the Harvest Festival on September 24, (one of the country’s most cherished festivals) will see the regime signal the level of concern within North Korea over social stability. The regime may well push to sign a final denuclearization deal with the US by then. A sustained famine could severely challenge the stability of the Kim Jong-un led regime.

DaMina Advisors is an Africa-Asia focused independent frontier markets political risk research, due diligence, M&A transactions consulting and strategic geopolitical risks advisory firm. DaMina Advisors is legally registered and has offices in the US, Canada, The UK and Ghana. DaMina is headquartered in Toronto.

South Africa’s ANC to Ink Electoral Pact With Radical Economic Freedom Fighters (EFF) Party

South Africa’s ruling African National Congress (ANC) is poised to ink a ‘nonaggression’ pact with the radical Economic Freedom Fighters (EFF) party. Smarting from the loss of popular party campaigner former President Jacob Zuma, and fearing a massive hemorrhage of ethnic Zulu voters in 2019, the party is moving to embrace Malema. Between 2012 and 2017, 65% of all lost ANC party members hailed from Zuma’s stronghold, KwaZulu Natal province.

An ANC-EFF pact will shift the general national policy orientation in a radical leftward direction to the detriment of foreign investors. In exchange for the EFF’s support for the ANC to govern several hung municipalities, and in the 2019 polls, the ANC will agree to support some of the more radical policy platforms of EFF’s leader Julius Malema, a former ANC youth executive. While Malema was virulently opposed Zuma and helped trigger his ouster, he has maintained excellent working relations with President Cyril Ramaphosa and his deputy, David Mabuza.

The early 2018 ascension of billionaire ex-trade union executive Ramaphosa to the presidency delighted foreign investors who had grown tired of the seeming incompetence and cronyism of the Jacob Zuma era. However, a tactical electoral alliance between the ANC and EFF ahead of the 2019 polls will dramatically alter the country’s future policy trajectory in a hostile non-friendly investor direction.

The EFF favors a wider fiscal deficit, higher corporate taxes, the expropriation of white owned lands, a nationalization of the mining sector and a de-privatization of the country’s central bank. Its quasi military structures envisage a more militant Castro/Mao-style political revolution. Since taking office Ramaphosa has backed the EFF’s land expropriation bill. He may yet be politically coerced to support more radical measures ahead of 2019 poll. 2018 may yet see the country’s credit fall into junk status amid renewed capital flight.

Despite the early 2018 un-ceremonious ousting of Zuma by the ruling African National Congress (ANC), in favor of Ramaphosa, which delighted the international investment community, the recent moves by Ramaphosa to cover his left flank by moving to embrace the EFF, will ultimately shift the country’s policies beyond its current relatively center-left position, jeopardizing the country’s relative economic stability.

South Africa’s big banks, who own the lion’s share of immovable assets such as land, are likely to be hardest hit by the ANC’s leftist move.

Saudi Arabia: Currency Devaluation Next On Reform Agenda

Having consolidated unparalleled political power, Saudi Arabia’s reformers are likely to next target the country’s vastly overvalued currency, the Riyal, to jump-start the sagging economy. A major currency devaluation is inevitable. By contrast, the Russian ruble, also a major petro currency, has undergone a 100% depreciation. A probable 30%+ devaluation of the Riyal will create a large $120bn balance sheet asset-liability mismatch, requiring the Saudi central bank to liquidate over $100bn in foreign investments to fix its balance sheet. Such a major move by the central bank will see several major global asset managers, who manage Saudi investments abroad, shrink their overall assets-under-management (AUM), cut staff and exit many large equity and global corporate fixed income positions to return cash to the kingdom. In short Saudi’s pare-back of its investment portfolio will hit global capital market assets prices.

Saudi Arabia holds over $130bn in US treasuries, and over $300bn in global investment grade fixed income assets and blue chip equities. A Saudi devaluation will have major negative market reverberations. And yet without a devaluation even the planned 2018 Saudi Aramco IPO may stall.

Beyond the devaluation, the next 45 days will determine whether Saudi Arabia’s dramatic political pivot to escape its stable past and launch forth towards an unpredictable future will succeed. The ongoing reforms seek to combine features of China’s Cultural Revolution, Europe’s Protestant Reformation, and the USSR’s Perestroika/Glasnost, into a single ‘big bang’/’shock therapy’ program to pole vault the 85- year old nation, the home of Islam, into the 21st century. If however the history of revolutions is any guide, the ongoing valiant efforts are unlikely to immediately succeed. The centrifugal forces of deep religious inertia, a conservative nobility, turbulent regional geopolitics, and miscalculations by an inexperienced leader are likely to prevail over the youthful optimism and sheer force of will of the young westernized reformers. A reversal of fortunes for the reformers is inevitable.

Ultimately, Saudi Arabia’s turbulent reforms risks breaking the country apart, into waring East-West Ottoman-era enclaves, and may trigger a new Middle East geopolitical map, leaving Russia as the de- facto leader of OPEC+, as Saudi oil production enters a multi decade decline amidst protracted instability in the kingdom. With the royal family splintered, and the support for Wahabbi Islam withdrawn, in favor of modernization, the foundations of the Saudi state are imperiled.

The ongoing reforms attack several key foundations of stability of the country. Recent cuts to social services and a deregulation of the domestic petroleum sector threatens lower-middle class support for the regime. A decree to allow women to drive, a loosening of gender restrictions weakens the support of the country’s clerical classes for the throne, while the recent internecine battles within the royal court and attacks on leading businessmen has split the upper echelons of society, and sowed seeds of discord and bitterness among many key families of the kingdom. In short the reform effort has more domestic enemies than supporters – and thus at the current frenetic pace, it is likely to fail.

With King Salman himself beginning to harbor jitters over the radical pace of the reforms, with many of the country’s 7,000 princes, their multiple wives, thousands of wealthy children, elderly Wahhabi clerics and business associates beseeching the King to ‘calm down’ his son, and restore a semblance of unity within the royal family, it is only a matter of time before King Salman puts a break on the reforms or is himself is forced-out by frustrated reformers. If King Salman does not act sooner, angry conservatives may yet coalesce to force his abdication like his brother King Saud. Either the crown prince and his frenetic band of reformers will ultimately prevail, and push out the king, or both crown prince, and his father, will ultimately lose power, and lose their positions in a conservative palace coup.

In the early 1970s a similar struggle within the royal family between those princes aligned with deposed King Saud, who favored modernization, and Crown Prince Faisal, who favored status quo conservatism eventually ended in a regicide with a disgruntled young prince assassinating the king. With the splits within the ruling family among the powerful ‘Sudairi 7’ sons – particularly between late King Abdullah’s sons and King Salman’s offspring, the unity and stability of the kingdom is at risk.

Beyond politics, the country’s economy is mired in a technical recession (when Saudi GDP is discounted in real US dollars). With falling FX oil revenues, (by 40% since 2010) and an ever expanding military budget for the wars in Yemen and elsewhere in the region, unless a devaluation occurs, the Saudi economy will practically enter a period of protracted contraction – despite relatively stable global oil prices. Various sectors are poised for a pull back, not the least construction.

Regarding Saudi’s future oil production levels in the face of a devaluation, as has been witnessed in Nigeria, and Venezuela, there is a complex relationship between oil production and stable domestic monetary policy. When the Saudi Riyal is devalued the mismatch between USD costs of production (capital costs and expatriate labor) vis-à-vis, the operating costs of Saudi Aramco will widen dramatically, eventually leading to a decrease in oil production and a loss of leverage within OPEC+. A decrease in Saudi oil production will leave Russia to emerge as the de-facto leader of OPEC+, as most US production will be consumed locally. With Iraq, Iran, Venezuela, Qatar and Libya increasingly within the firm ambit of Moscow, any longer term instability within Saudi Arabia will inure to the long- term geopolitical benefit of Russia/Iran/China, and longer-term geopolitical loss of the USA/Western Europe.



DaMina Advisors is an Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Barrick And Acacia Directors Unlikely To Endorse Tanzania Mining Nationalization

In a major pyrrhic victory for Tanzania’s resource nationalist President John Magufuli, and in a key positive signal to other large mining economies in Sub-Saharan who are looking to nationalize foreign mining assets, Barrick Gold’s unprecedented capitulation today to share future gold profits from Acacia Tanzania operations on a 50:50 basis with the government, re-domicile in Tanzania, appoint a majority of local directors and senior staff, despite the state owning just 16% of equity of the new company, in addition to providing $300million to stave off a monstrous tax bill – will simply embolden Magufuli to push his nationalization agenda forward into other sectors. The country’s mining sector crisis is not over, despite today’s positive announcement.

The sigh of momentary relief and excessive market euphoria notwithstanding, a clear majority of Acacia and Barrick’s Independent board directors – are NOT – likely to endorse this deal, fearing ruinous shareholder lawsuits. Barrick’s chairman in his statement in Tanzania’s capital signaled that board approval may be hard to get. Magufuli also aware that the boards of both companies are likely to reject the deal urged Barrick’s chairman to ‘ignore uncooperative shareholders’ and force thru the deal.

The deal waives all legitimate international legal claims by both companies on Tanzania and accepts and incorporates retroactively the Tanzania’s new mining laws into the currently existing gold mining agreements. In short – Barrick has thrown Acacia to the wolves in hopes of peace. This market euphoria will be short-lived.

Split Board Votes on deal will doom agreement



DaMina Advisors is an Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Kenya’s Planned Presidential Poll Re-Run Unlikely To Happen in October

Kenya, one of Africa’s leading economies and a bulwark of stability in East Africa is spiraling downwards into a major constitutional crisis that threatens the stability of the nation. A Supreme Court mandated presidential poll re-run, set by the country’s electoral commission for October 26 is unlikely to hold due a wide array of logistical, financial personnel, and political challenges. The country is spinning into a constitutional cul-de-sac, with many of its key political institutions unraveling. Without an election within the constitutionally mandated 60-day window, Kenya will enter unmarked treacherous constitutional political terrain.

Kenya, one of Africa’s leading economies and a bulwark of stability in East Africa is spiraling downwards into a major constitutional crisis that threatens the stability of the nation. A Supreme Court mandated presidential poll re-run, set by the country’s electoral commission for October 26 is unlikely to hold due a wide array of logistical, financial personnel, and political challenges. The country is spinning into a constitutional cul-de-sac, with many of its key political institutions unraveling. Without an election within the constitutionally mandated 60-day window, Kenya will enter unmarked treacherous constitutional political terrain.

With effectively ‘no-adults-in-charge’ Kenya, once the bastion of stability in East Africa, is hurtling towards an uncertain future that could trigger the first military coup in the country’s long history. Kenya’s professional apolitical military has increasingly become internally polarized along ethnic lines, in line with the country’s political decline. And if after October 26 the country descends into chaos, it would not be impossible to imagine the military being tempted to take over.

If however over the next 21 days, Kenya’s Supreme Court and Parliament, (still largely respected by a strong majority of the electorate), moves ahead of the crisis to signal a roadmap, in case the October 26 poll cannot hold, the country may very well pull back from the brink. However if the courts remain silent, and the parliament continues its gimmicks, many foreign investors in Kenya may yet have to re-classify the country in the lower, rather than upper tier of unstable frontier markets economies.

Kenya’s deep ethno-tribal fissures that pre-date independence in 1964 have widened in recent years exposing the brittle foundations of almost all Kenyan political institutions. In 2007/2008, in less than 60 days during a similar period, about 1,500 were killed, with nearly 600,000 internally displaced. Already since the August 8 poll, dozens have died. Many more Kenyans are likely to die if the present anarchic trends continue and Kenyatta stays in office beyond October 26 without either parliamentary sanction or gain the imprimatur of the Supreme Court.


DaMina Advisors is an Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Kenya’s Raging Constitutional Crisis May Topple Country’s Democracy

Kenya, one of Africa’s leading economies and a bulwark of stability in East Africa is in the throes of a major constitutional crisis that threatens the very future of the country’s democratic experiment. The total breakdown in relations between Kenya’s president, Supreme Court, key opposition leader, police chief, head of the national electoral commission and key regional and international diplomatic allies, less than 60 days to a court ordered presidential election – after the last one held a month ago was invalidated as a sham – is a toxic brew that poses significant dangers to the survival of the country’s democracy.

In line with DaMina’s Advisors accurate, persistent forecasts and analysis over the past few months and weeks, Kenya’s Supreme Court on September 1 declared the August 8 presidential elections ‘null and void’ and ordered a ‘fresh election.’ Within hours of the announcements the embattled President Uhuru Kenyatta publicly threatened the Supreme Court judges and vowed to ‘deal with them’ and branded the judges as ‘crooks/thugs.’ Kenyatta’s incendiary statements are likely to trigger a possible contempt of court charge from the stern chief justice which could see the president sentenced to a 6 month jail term – effectively barred from a new run. A Supreme Court contempt charge can have no appeal.

To make matters worse, despite having lost the complete confidence of the country’s highest judicial body, after announcing a shambolic elections result, the country’s electoral commission head has defiantly set a new October 17 poll date for a ‘re-run’ between the president and his principal opponent, rather than organize a ‘fresh election’ in contravention of the Supreme Court’s ruling. The head of the elections body, like the president also now runs the risk of being held in contempt and jailed.

A decision by the Supreme Court to jail both public officials could see the police battle the presidential guards and army to enforce the court’s controversial edicts.

To make matters worse, key western embassies and diplomats, as well as regional leaders who could have intervened to help prevent a total breakdown of constitutional order in Kenya lost all credibility when thy rushed en-masse after the August 8 poll to publicly support the shambolic election results before they were even validated by the courts. With no credibility left, if Kenya descends into total political mayhem in coming days and weeks with an all-out institutional fight between the president, chief justice, head of the principal opposition party and head of the elections body, there will be no credible international third party left to step in and calm frayed nerves. With former US President Barack Obama’s former chief campaign strategist doubling as a highly paid advisor to Kenyatta, even a belated Obama intervention may not suffice. And with the US focused on hurricane Harvey and North Korea, and the UK focused on BREXIT, Kenya could easily unravel overnight without much warning.

Despite Kenya’s long quasi-democratic traditions since independence in 1964, the deep ethno-tribal fissures that pre-dated the advent of democracy remain. The fissures have become re-camouflaged in political party colors, but the mutual suspicions abide. In 2007/2008, in less than 60 days during a similar period, about 1,500 were killed, with nearly 600,000 internally displaced. Already since the August 8 poll, dozens have died. Sadly more will likely die between now and whenever a new president is elected/or appointed in Kenya.


DaMina Advisors is an Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

This Analysis Of Invalid Votes Cast In Kenya’s 47 Counties Shows Astonishing Electoral Malfeasance

The eye popping statistical anomalies in Kenya’s August 8 election results continue to astound. Previously DaMina Advisors had highlighted the disproportionate number of non-random high valid voter casts/ turnout in each of the 20 counties President Uhuru Kenyatta has supposedly won, relative to the consistently low turnout/ low valid votes cast in the other 27 counties the opposition has carried. An analysis of the proportion of total invalid votes cast in each of the 47 counties shows more astonishing electoral malfeasance in the dramatic number of valid votes invalidated nationwide.

In the 2013 election, the average number of invalid ballots as a percentage of valid ballots averaged 1% in all of Kenya’s 47 counties. In 2013 only one county had an invalid ballot count higher than the national average of 1%. However, not surprisingly the August 8 election ‘results’ have produced many strange nonrandom irregularities. Kenya’s electoral commission has invalidated over 408,676 ballots – which amounts to an astonishing 27% of the total number of new voters who registered to vote. (Earlier this year the electoral commission had announced that it had registered 1.53million new voters). Furthermore while the overall average number of invalid ballots in all 47 counties constituted 1% of the total in each county in 2013, in 2017 the same number dramatically rises by over 338% to three percent nationwide. Also unlike in 2013 where the 1% average was random, in 2017 the variances between counties is large and statistically significant implying that the numbers were engineered.

Just as in 2013 the raw number of invalid votes splits about 60:40 between the two major candidates, with opposition leader Raila Odinga getting more as he has consistently carried 60% of all counties, in 2017 the proportions are split around the same levels implying that the fraud occurred at the local electoral IT offices and not at the national headquarters.

For the five most competitive counties that switched sides from supporting the opposition to the incumbent – Garissa, Marsabit, Wajir, Nyamira and Narok – the counties saw a dramatic 721% increase in the amount of invalid votes cast, averaging a 360% increase over 2013 for the same five counties. In contrast, in the one county where the opposition won in 2017, which it did not in 2013, Vihiga, the average invalid voter numbers increased by just 221% when compared with the figures from 2013. This anomaly may lend credence to allegations that some of the ballot papers for Odinga’s largely rural supporters could have been intentionally mishandled by local electoral officials. Otherwise the statistical dispersion does not make logical sense.

However despite these glaring electoral results anomalies, without even waiting for the results to be gazetted, the distinguished former US Secretary of State John Kerry, a supposedly ‘independent’ international poll observer, has jumped from one local TV station to the next strenuously silencing all questions about the invalidity of the results, the targeted killing of the IT head of the electoral commission weeks to the vote, and any claims of statistical anomalies in the results. Kerry has however not disclosed that he still maintains strong links to the well-paid US advisors to the Kenyatta campaign, and that he has a former top aide directly advising the Kenyatta campaign. President Barack Obama, himself of Kenyan parentage, remains mute, knowing full well that virtually all his top 2012 campaign staff has decamped to Nairobi, and is being paid millions by Kenyatta to help campaign. Moscow will be amused at the ‘meddling.’

Table of Kenyan Election ‘Results’ Statistical Anomalies


DaMina Advisors is an Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Kenya’s Opposition Leader Poised For A 60% Landslide Win

DaMina Advisors’s widely hailed VERITAS frontier markets synthetic big data elections forecast model predicts a landslide win for Kenya’s veteran opposition leader Raila Odinga on August 8. Despite fears of widespread rigging, election day violence and heavy handed tactics by the incumbent, President Uhuru Kenyatta, aided by the country’s security forces, Odinga’s winning margins are likely to be so large nationally that any attempts at rigging will not efface the scale of his potential victory. DaMina’s Veritas model forecasts Odinga to win about 60% of the vote. In 2013, Odinga won 55% of the countries electoral counties but lost the national vote. This time, Odinga is poised to win 65%-70% of country’s 47 electoral counties to clinch a first round surprise victory. Odinga may yet surprise even his supporters and sweep nearly 60% of the first round vote, completely routing President Uhuru Kenyatta in the voter rich and much contested swing region – the Rift Valley, where the close contested will be ultimately decided.

The key province to watch ahead of the August 8 poll is Kenya’s Rift Valley. It remains the country’s major electoral ‘swing’ province and home to almost 25% of the electorate, making it the terra firma of the entire election. The Rift Valley has registered 25% of Kenya’s new voters for the 2017 polls. The Rift Valley is 32% of the total land area of Kenya, but has a very low population density of just about 55 people per square kilometer compared to Nairobi at over 4,500 for the same square footage. Yet, this sparsely populated province, which has 14 counties, remains the key battleground for the 2017 poll. In 2013 Kenyatta picked the popular MP for Eldoret North Constituency and former Minister of Agriculture, William Ruto. Together they went on to win over 70% of the Rift Valley vote, propelling both to national victory. In 2017 Kenyatta will not win the same super high margins in the Rift Valley. Continued tensions between the Moi family represented by former President Daniel Arap Moi’s son, Senator Gideon Moi and Ruto have scuttled any plans for the president to re- create his winning coalitions in the Rift Valley. DaMina’s model forecasts that this time Kenyatta may win about 50% of the vote in the Rift Valley or even less, effectively dooming his reelection prospects. In 2017, one of every four new voters will come from the Rift Valley, DaMina models expect a majority of these voters to cast their votes for Odinga, or at worse split their votes.

Beyond the Rift Valley, economic anxieties will likely underpin a big shift in the large urban areas of Nairobi and Mombasa towards Odinga, and away from Kenyatta. In 2013, Odinga won 71% of the Mombassa vote, this time he may win over 80%. In 2013 Odinga barely beat Kenyatta in Nairobi, by a 3 point margin of 49%:47%. This time with rising inflation, stagnant wage growth and high real interest rates, Kenyatta is likely to drop by at least 10% points in voter popularity, with Odinga winning Nairobi strongly. Even if the two split the Nairobi vote 50:50, Odinga will still win the national vote by a landslide. In the western province in 2013 3rd party opposition leader Musalia Mudavadi took 31% of the vote and together with other 3rd party candidates went on to win a total national tally of almost 700,000 votes or about 6%. This time there are no major strongly ethnically backed 3rd party candidates and Mudavadi has thrown his support behind Odinga. In 2013, had Odinga won the outright support of Mudavadi the final election tally would have split almost 50:50. This time Odinga is poised to sweep the western province by a margin of almost 90%. Apart from Central province, the homelands of Kenya’s Gikuyu ruling classes, where Kenyatta may get nearly 100% of the vote, Odinga may yet sweep all the remaining provinces. In 2013, even though Odinga lost the final tally, he carried a majority of counties. In 2017, Odinga will likely carry a super majority of counties to clinch the presidency on August 8 for a first round surprise victory.


DaMina Advisors is a preeminent Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Tanzania Edges Towards Mine Nationalization Amidst Disputes With Foreign Mining Companies

Tanzania is edging closer and closer to a total nationalization of the country’s mining sector. The spirit of recent laws passed by the Parliament of Tanzania signals that the ongoing disputes between the government of Tanzania and foreign mining companies is moving towards nationalization and the non-enforcement of any international arbitration awards in local Tanzanian courts. The textual essence of these new laws revolve around the notion that Tanzania’s domestic law is to be supreme over any international dispute or arbitration decision, as Tanzanian sovereignty is considered to be of utmost importance. The laws also take retroactive effect on existing mining contracts.

There are many provisions in the new laws that express the government’s statist anti-foreign investor bias. The Natural Wealth and Resources (Permanent Sovereignty) Act, 2017 Part III, Article 11 (1) specifically states, “permanent sovereignty over natural wealth and resources shall not be a subject of proceedings in any foreign court or tribunal.” Article 11 (2) goes on to declare that “disputes relating arising from extraction, exploitation or acquisition and use of natural wealth and resources shall be adjudicated by judicial bodies or other organs established in the United Republic and accordance with laws of Tanzania.” These particular provisions essentially give the government complete autonomy to dictate the current tone of ongoing discussions and re-negotiations they are conducting with mining companies, regardless of any interference by an international body decision. It also allows the government to exercise total discretion as to whether it enforces foreign arbitration judgments locally or not.

Tanzania’s new laws are conventionally written from a prospective point of view, and the retroactive wording of these laws signals that nationalization is being planned by the government and could be imminent. The freezing of various assets controlled by foreign companies has already occurred, and now the ratified retroactive laws allow the government to return to old mining contracts and renegotiate the terms, as outlined in Part III of The Natural Wealth and Resources Contracts (Review and ReNegotiation of Unconscionable Terms) Act, 2017.

This will ultimately ensue complete or partial nationalization, as renegotiations will occur on the government’s terms, allowing the state to take a major ownership stake in resource companies.

Mining companies entangled in this dispute are losing the strategic war, even if they win small battles in foreign arbitral courts. The unanimous fast-tracked passage of the new mining laws is proof that parliament is unified on this issue, and will grant enormous flexibility to the president to move aggressively against foreign firms if they balk at the spirit of the new laws.

Foreign owned mining companies in Tanzania have minimal options to protect their assets. Companies who want to survive will have to move quickly to have serious bilateral negotiations with the government, shelving some of their equity stakes to the state, or to large Chinese or Russian conglomerates. Tanzania is not likely to tear up mining contracts involving large non-western firms from China or Russia.


DaMina Advisors is a preeminent Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Nigeria’s Central Bank Fights Unwinnable War In $30 Billion Debt Crisis

Africa’s largest economy, Nigeria, is in the throes of a major multibillion-dollar banking crisis coming exactly 8 years after the country’s last financial sector meltdown in 2009. That crisis saw 40% of the country’s 24 banks become suddenly under-capitalized with five succumbing to insolvency. This time it is the stability of the country’s central bank itself that is at stake. The Nigerian Central Bank, which is ultimately the lender of last resort is itself under enormous financial strain – and unlike in 2009 – this time it will have to ultimately reach for an IMF bailout if the country’s deepening financial crisis is to be contained. An IMF bailout for Nigeria will possibly have to be on the scale of Ukraine’s 2015 $17.5bn deal to be meaningful.

In less than a year the US dollar value of the balance sheet of the Nigerian Central Bank has shrank by nearly 40% following the devaluation of the country’s currency from almost $100bn to about $60bn. Despite this, the central bank has expanded its quasi fiscal activities to unprecedented historic levels and increased its lending to the government by over 500% in less than two years. In recent weeks despite having foreign exchange reserves of only $30bn, the central bank has accelerated its sales of US dollars into the local economy at a clip of about $2.5bn per month – implying that by early 2018, the bank’s forex reserves would have virtually run out – just like Venezuela’s. The country’s local banks have between $20bn to $30bn in bad debts, threatening nearly half of the total capital base of the sector.

A conservative estimate issued by the Nigerian Deposit Insurance Corporation in early 2017 estimates the current bank losses stand around $7bn, with total private sector bank asset base of about $60bn – implying NPLs of 12%. However, if the 2008/2009 crisis is any guide, NDIC’s estimates are too conservative. Thus an estimate of $20bn – $30bn is likely more accurate with a bias towards the higher end of the spectrum.

Signaling the depth of the financial crisis facing the country, since 2015 the Nigerian central bank has dramatically increased its lending to government to finance the country’s growing fiscal deficits as oil prices have plunged. Nigerian government securities, as a percentage of total central bank assets/liabilities, have increased by over 500% in the past two years. During the 2008/2009 crisis, federal debentures constituted only 1%-2% of the central bank’s assets. The current level of central bank lending to the government is the highest it has ever been on record. Up until now the average historical exposure of the central bank to government financing during the recent democratic era was about 2%.

In 2008 at the height of the last banking crisis, Nigeria’s FX reserves stood at over $40bn, with the federal government deficit at less than 1%. Oil prices in 2008 averaged at $97 per barrel; they currently trade at around $48 per barrel, a decline of 51%. The Nigerian stock market was worth about 50% of GDP, it is today worth about 7%. Thus even if the Nigerian Central Bank still has the will to absorb the cascading multibillion-dollar NPLs from the private sector – it simply does not have the capacity to do so.

Despite the gathering storms, the central bank continues to act as if all is well. In early 2009 despite repeated denials by the then central bank governor, Charles Soludo, that the nation’s financial system was not at risk of collapse, within weeks of Soludo’s departure in May 2009, the central bank had to finance a $4bn bank bailout from its own balance sheet, with over $6bn of debts re-packaged into a government-owned ‘bad bank,’ AMCOM which is itself now nearly broke. With a much weaker macroeconomic environment, and already over exposed central bank balance sheet, the current crisis will be much harder to resolve. Even the bad bank, AMCON, which was set up in 2010 to recover the bad debts of the banks that were re-capitalized using public funds is itself today on life support. AMCON has recently had to absorb debts from several other collapsing businesses in the manufacturing, energy and aviation sectors – beyond the narrow scope of its original mandate focused on just financial institutions. With no credible lender of last resort, the current financial sector crisis may yet wipe out several billions from the local stock market and expose the country’s pension funds and insurance companies, who are heavily exposed to local bonds and equities to significant losses.

Beyond the central bank’s own stresses, there are other larger exogenous factors that indicate that the looming banking crisis may be much harder to resolve.

Unlike in 2009 where President Umaru Yar’Adua was firmly in control of the country’s political landscape, Nigeria’s current President Muhammadu Buhari is effectively a lame duck, with a vastly diminished prospect of re-election as the ruling party presidential candidate in 2018. His ill health and abysmal economic record since taking office has left many middle-class Nigerians, including his own wife, vowing to not support him for re-election in 2019. The 25 February 2017 statement by the National Leader of the ruling party Bola Tinubu that he may yet throw in his own hat into the presidential race is signal enough that Buhari, even if he recovers from his still unknown illness will not be allowed by his party to run in the 2018 party primaries. Having once lost the presidency to a southern Christian, Goodluck Jonathan, after Umaru Yar’Adua’s untimely death barely 3 years into his term, key northern Muslim political elites are determined to keep the presidency in northern Muslim hands for 8 years and won’t support Buhari for 2019 fearing he may die in office. Thus, unlike in 2008/2009, where there was national political will to address the growing financial sector crisis, this time it does not exist.

Secondly, unlike in 2009 where the then central bank governor, Charles Soludo’s term was up, and therefore easier to replace him, the current central bank governor Godwin Emefiele still has two years under his belt, and technically somewhat harder to summarily boot out of office. Thus, Buhari cannot easily remove him without further deepening the financial sector instability. Within a month of Soludo’s denial of a second term at the central bank, interbank call rates had surged by 33%. Emefiele’s departure could be even more consequential.

Beyond politics, Nigeria’s current banking crisis could not have happened at a worse time. The country’s economy is in recession with all key macroeconomic variables effectively negative when adjusted for inflation and currency depreciation. Inflation has surged to 10-year highs, FDI has collapsed by 70% and even GDP per capita in US dollar terms has regressed to below 1980 levels.

So, if the Nigerian Central Bank is unable to stem all the losses from the current crisis, will foreign investors swoop in to recapitalize the banks? No. Even in 2008/2009 despite initial hopes of several white knights picking up ‘cheap’ equity in local banks, virtually none appeared on the scene of the bank bloodbath, forcing the central bank to fork out $4bn of reserves to stabilize the banks, and packaging the rest of the bad debt into AMCON. This time may be even direr. The US has begun a multi-year process of raising interest rates to re-normalize its monetary policy. The change in US interest rates has structurally made all frontier and emerging assets relatively more risky than OECD assets. Europe is in the throes of a major political earthquake adjusting to Brexit, having barely escaped Nexit and possibly looking at a Frexit and an Italexit. With the US budget under severe strain and another debt ceiling crisis looming, the stretched Bretton Woods Institutions are unlikely to help unless formally petitioned by Nigeria. The IMF and World Bank remain largely gun shy to offer unsolicited help and will demand many stringent structural reforms of the Nigerian economy if it is approached by the Buhari government in the absence of more viable options.

While the Nigerian Senate and the National Leader of the ruling party are all very likely to strongly oppose an IMF bailout and all the attached conditionalities, Nigeria is still likely set to enter an IMF program before the end of 2017 if its socio-political stability is to be maintained. However, while Nigeria dithers, the central bank trots out short-term currency manipulation gimmicks, and the increasingly cash-strapped population prays at mosques and churches that the growing banking sector nightmares will simply vanish, several local banks are likely collapse before even an IMF deal is inked.


DaMina Advisors is a preeminent Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.

Nigeria’s Ailing President Poised To Abandon Reelection Effort

Nigeria’s ruling All Progressives Congress (APC) is sliding into a leadership crisis. 74 year old President Mohammadu Buhari, who led the party to an unprecedented and spectacular victory in 2015, where for the first time in the country’s history an incumbent president was ousted from power, is incapacitated by an unknown illness. While there is still no clarity about the extent of Buhari’s illness, (which has had him absent from office since late January), the 25 February statement by the national leader of the APC, former Governor Bola Ahmed Tinubu, widely hailed as the government’s Rasputin or Svengali, that he may run himself in 2019 – signals that even if Buhari recovers from his illness, he will effectively be blocked from standing for the party’s presidential slot in late 2018.

Probably sensing that Buhari’s political future is fast dissipating, Nigeria’s acting president, Vice President Yemi Osibanjo, has over the past few weeks taken several bold steps to assert his newfound authority. Osibanjo has revitalized the stalled Niger Delta peace process and is looking to push for a further devaluation of the country’s currency. He has taken the rare step of vetoing several bills recently passed by the country’s parliament. A Niger Delta peace deal and devaluation will jolt the country out of recession. Despite these positive moves, Vice President Osibanjo, a southern Christian pastor and distinguished law professor, will not be allowed by key Northern Muslim elites to stand for his own term in 2019, but will be allowed to complete Buhari’s term if the president succumbs to his current illnesses. In 2010 when another northern Muslim president Umaru Yar’Adua died in office, his deputy, Goodluck Jonathan who initially signaled that he will simply serve out his predecessor’s term, reneged on his promise and ultimately ran in 2011 and 2015. Northern Muslim elites, shortchanged by Jonathan’s actions, are determined that this time Osibanjo will not follow in Jonathan’s footsteps. Tinubu’s 25 February statement that he may run in 2019 is a signal that the party will field another Muslim to replace Buhari were he to withdraw from the 20182 party contest or estopped from running.

Nigeria’s recent flaccid capital markets and negative macroeconomic outlook will change dramatically if President Buhari officially signals his intent not to run for party presidential candidate in 2018. Expectations about the future value of the Naira, as well as oil production from the Niger Delta, FDI inflows and the general economic outlook will brighten sharply when it becomes clear that Buhari’s unsatisfying term will end in 2019.


DaMina Advisors is a preeminent Africa-focused independent frontier markets risk research, due diligence and Africa M&A transactions consulting and strategic advisory firm.

This column does not necessarily reflect the opinion of the editorial board or Frontera and its owners.