Lead­ers have lost con­trol of ‘Africa Ris­ing rhetoric’

The Star (Kenya) - - News - ALY KHAN SATCHU

One of my favourite poets is the Ir­ish­man WB Yeats, and one of my favourite po­ems is called The Sec­ond Com­ing. And that Poem be­gins thus:

Turn­ing and turn­ing in the widen­ing gyre The fal­con can­not hear the fal­coner; Things fall apart; the cen­tre can­not hold;

Ac­cord­ing to Google an­a­lyt­ics, this poem has seen a par­a­bolic surge in ‘’men­tions’’ – and I am sure you will un­der­stand why when you read the poem in full.

Last week, I at­tended the Fi­nan­cial Times Africa Sum­mit at Clar­idge’s in Lon­don. Han­nah was im­pressed that the lift had a sofa, and of course very lit­tle beats a re­ally grand ho­tel, es­pe­cially one as ven­er­a­ble as Clar­idge’s. The pres­i­dent of the African De­vel­op­ment Bank, the very dap­per Akin Adesina said ‘’Africa is not fall­ing apart’’. Pravin Gord­han, who de­scribed him­self as more of an ac­tivist than a Fi­nance Min­is­ter in South Africa, ad­mit­ted he was just one phone call away from be­ing fired. FT ed­i­tor Lionel Bar­ber checked whether his phone was off for the du­ra­tion of the in­ter­view. Over­all, with the ex­cep­tion of, Mr Ibrahim, Mr Col­ly­more and my­self – it still felt like ev­ery­one was still singing from the same ‘’Africa Ris­ing’’ hymn sheet.

When it was my turn – and bear in mind I had Tito Mboweni (The ex-South African Cen­tral Banker) on my left – I said: ‘’SSA is pre­dicted at its slow­est rate since the early 1990s. The chal­lenge now is that you can drive a truck through the chasm be­tween the ‘’Africa Ris­ing’’ rhetoric and the real­ity (slow­est GDP ex­pan­sion in more than 25 years).’’

If you want a mar­ket mea­sure of the chasm, look at the of­fi­cial for­eign ex­change rates and com­pare them with the black mar­ket rates in so many coun­tries. In Nige­ria, the of­fi­cial rate is around 311.00, but the black mar­ket rate is close to 500.00. Look at An­gola. These black mar­ket rates are a real time tem­per­a­ture gauge, and they are clearly emit­ting a sig­nal. The point is that pol­i­cy­mak­ers have now lost con­trol of the nar­ra­tive and they need to ad­just the rhetoric, oth­er­wise cred­i­bil­ity starts slid­ing. It’s a mys­tery to me how there is even a shred of cred­i­bil­ity left in Nige­ria. It is clear now that the de­noue­ment is not be­ing side-stepped, but in­stead is be­ing hur­tled to­wards.

Given that FT Africa con­fer­ence was held in Lon­don, it is worth turn­ing to some tec­tonic shifts in ster­ling as­set prices. The cat­a­lyst for the sell-off in the pound were com­ments by the Prime Min­is­ter Theresa May at the Con­ser­va­tive Party’s con­fer­ence . “We should not let things drag on too long; hav­ing voted to leave, I know that the public will soon ex­pect to see, on the hori­zon, the point at which Bri­tain does for­mally leave the Euro­pean Union,” May said last Sun­day. “There will be no un­nec­es­sary de­lays in in­vok­ing Ar­ti­cle 50. We will in­voke it when we are ready. And we will be ready soon. We will in­voke Ar­ti­cle 50 no later than the end of March next year.”

These com­ments cou­pled with hard-line com­ments on im­mi­gra­tion sent ster­ling into a tail-spin. This tail-spin cul­mi­nated in the early hours of Fri­day morn­ing (when most of us were tucked up in bed and in the bliss­ful land of nod), when the pound fell as far as 1.1200 on some elec­tronic trad­ing plat­forms – though most fi­nan­cial news wires are talk­ing about a low around 1.1800. It is still a mat­ter of spec­u­la­tion as to what could have led to such a pre­cip­i­tous fall. Some are blam­ing au­to­mated al­go­rithm trad­ing sys­tems (which buy and sell enor­mous amounts of for­eign ex­change on the ba­sis of word counts and so on), fat fin­gers and all kinds. The point is ster­ling ‘’flash-crashed’’ big. The United King­dom runs a near 100b cur­rent ac­count deficit and debt-to-GDP is some­where around 90 per cent. And here again we can see that Prime Min­is­ter Theresa May has nailed her colours to the ‘’Brexit’’ mast. The lan­guage of ‘’Brexit’’ is hard-edged and is not con­sid­er­ing the im­pact on the fi­nan­cial mar­kets at all. Ster­ling pound has be­come a pris­oner of the hard-edged rhetoric.

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