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Welcome to the latest edition of Frontier Markets News. As always, I would love to hear from you at dan@frontiermarkets.co with news ideas, feedback and anything else you find interesting.
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Africa
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African private wealth to multiply. Total private wealth stands to build to $3 trillion in the next decade, an increase of 38%, according to Henley Global’s 2022 Africa Wealth Report, a benchmark for private wealth research on the continent. The technological and personal services sectors will drive the majority of growth, the report says.
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Mauritius is expected to grow the fastest, with projected growth topping 80% over the next decade, according to the report. The report also predicts over 50% growth in private wealth in Kenya, Morocco, Mozambique and Zambia over the next 10 years.
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Traditionally, African centers of wealth have been on either end of the continent, with Egypt in the north and South Africa in the south.
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“The rise of frontier economies that are attracting new wealth by positioning themselves as preferred investment destinations is challenging this narrative,” CEO of MyGrowthFund Venture Partners Vusi Thembekwayo said. “Mauritius and the Seychelles have recently been the most deliberate with this strategy.”
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Kenya to raise minimum wage. Kenyan President Uhuru Kenyatta announced a 12% increase to the country’s minimum wage on Monday, noting it had been three years since the minimum wage was last reviewed and that a rising cost of living that made the previous wage untenable.
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Kenyan shillings. Photo: AFP
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The boost in wages will push the minimum monthly wage from 13,500 Kenyan shillings ($116) to 15,120 shillings. The hike falls short of the 24% increase called for by the Central Organization of Trade Unions, the country’s leading trade union organization, AfricaNews reports.
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As in many other frontier economies, inflation hit a seven-month high in Kenya in April, driven by skyrocketing food and fuel prices. Inflation reached 6.47% last month, up from 5.56% in March and 5.76% in April 2021, according to data from Kenya’s central bank.
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Lagging Nigerian and Angolan output creates oil supply gap. OPEC+ this week decided to raise production by 430,000 barrels amid high oil prices and the prospect of further disruptions in Russian supplies, the WSJ’s Benoit Faucon and Summer Said reported. Output has recently been hampered by, among other things, shortfalls from Africa’s leading oil producers.
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An oil spill at a well head in Nembe, Bayelsa, Nigeria. Photo: Reuters/Temilade Adelaja
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The challenges facing Africa's two largest oil producers highlights the pre-pandemic move of major producers away from African projects, premature underinvestment, and mismanagement which has left state-owned producers struggling.
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Asia
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Sri Lankan government faces no-confidence vote as forex reserves dwindle. Sri Lanka’s primary opposition party issued a declaration of no-confidence on Tuesday, with the goal of ousting Prime Minister Mahinda Rajapaksa. To be successful, a majority of the country’s 225 members of parliament would need to vote for the motion.
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The opposition party, United People’s Force, can count on 54 votes from its base, but hopes to gain votes from smaller opposition parties and defectors from the nearly 150 members of the ruling Sri Lanka People’s Front Party.
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A protest against the economic crisis in Colombo. Photo: AFP
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Forty members of the country’s governing coalition said last month they would no longer vote according to coalition instructions, the Associated Press reports.
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The vote comes as the country’s usable foreign reserves have shrunk to $50 million, finance minister Ali Sabry said on Wednesday. Total reserves have depleted rapidly and sat at $1.9 billion at the end of March, but many are not usable for dollar-denominated payments. This week, Sri Lanka extended its line of credit with India and began conversations to extend support with the World Bank, Reuters reports. The country is due to repay $7 billion in loans this year.
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India continues to ramp up purchases of Russian oil. As the US and Europe have announced bans on Russianoil, New Delhi has taken the opposite path. Since the start of Russia’s invasion of Ukraine, Indian purchases of Russian crude have surged to record highs.
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The South Asian nation’s purchases of Russian crude increased from negligible quantities in December and January to 300,000 barrels a day in March and 700,000 in April, the New York Times reports. Russian crude now accounts for 17% of Indian oil imports, compared to 1% before the war.
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India’s Prime Minister Narendra Modi with Putin in 2019. Photo:Alexander Nemenov/Agence France-Presse
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Discounts on Russian oil amount to $30 per barrel, compared to a benchmark barrel price of $110. “If oil is available and at a discount, why shouldn’t I buy it? I need it for my people,” Indian finance minister Nirmala Sitharaman said last month.
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Marcos in pole position in Philippines election. The Philippines is set to elect its next president on Monday in an electoral rematch of 2016’s vice presidential contest. Voters will choose between 10 candidates, chief among them Ferdinand Marcos Jr., the son of the country’s long-ruling dictator who was deposed in 1986, and Leni Robredo, a human rights attorney and the country’s current vice president.
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Supporters of Leni Robredo at a campaign
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Marcos, who goes by his childhood nickname Bongbong, topped Pulse Asia polls this week with the support of 56% of voters, a sizable lead over Robredo’s 23%. A Bongbong victory would complete a revitalization of his family’s image and status in Filipino politics, sullied in the 1980s by charges of corruption and embezzlement but refurbished in recent years through social media.
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While outgoing President Rodrigo Duterte has not personally endorsed a candidate, his party has endorsed Marcos, and his daughter, Sara Duterte-Carpio, is running as Marcos’ vice president. Elections for president and vice president are held separately.
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Europe
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Russia reverses course on ruble bond payments to avoid default. Russia avoided its first foreign default since 1917 on Wednesday after the country tapped its scarce domestic foreign currency reserves to fork out $650 million for two overdue Eurobond payments, the FT reports. The move marks a significant about-face for Moscow, which had announced that it would buy back the bonds in rubles.
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While the decision to pay enabled Russia to avoid litigation, acceleration of other debts and further economic hardship for Russians, it came at a cost. The move also forced domestic bondholders to accept unconvertible roubles while funneling much-needed hard currency out of the country.
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Latin America
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Colombia faces immediate reprisals after extraditing drug lord. Dairo “Otoniel” Usaga, the head of Colombia’s largest narco-trafficking gang, was extradited to the US to face trial for trafficking at least 73 tonnes of cocaine from 2003 to 2012, reports Al Jazeera. Usaga’s Gulf Clan was believed to be responsible for 30% of cocaine exports from Colombia, the world’s largest producer of the drug. He was the most wanted person in Colombia until he was arrested last October in the northwest of the country after a massive military operation.
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His extradition follows a flood of accusations that Colombian authorities tried to silence the narco-leader after a leaked Truth Commission document said Otoniel had implicated 63 people who were linked to the Gulf Clan, including a former minister, a former national director of intelligence, six former governors and four former members of parliament.
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Dairo Usuga after his arrest. Photo: Colombian Presidency via AFP
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Colombian police said they halted hearings in response to the Gulf Clan’s attempts to rescue their leader. Following the extradition, chaos erupted as the clan distributed pamphlets describing an “armed strike” in retaliation for Otoniel's extradition. In the country’s north especially, vehicles were burned, politicians were given extra protection, and businesses and schools were closed, reflecting a rapidly declining security situation in the country.
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Venezuela’s Maduro meets with Iranian oil minister in Caracas. Iran’s oil minister made an official visit to Venezuela to discuss cooperation in energy matters and efforts to defeat economic sanctions, Al Jazeera reports. Meetings with President Nicolás Maduro and other high-ranking Venezuelan officials saw multiple agreements signed between the two heavily sanctioned oil-producing nations.
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The two country’s oil ministers also met separately to discuss “the construction of routes and mechanisms to overcome the unilateral coercive measures imposed by the United States government and allied countries,” according to a statement from the Venezuelan petroleum ministry.
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Nicolas Maduro, center-left, shaking hands with Iranian oil minister Javad Owji in Caracas. Photo: Venezuelan presidency via AFP
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The historically strong relationship between the countries has expanded under Maduro out of isolation and necessity. Venezuela received shiploads of key fuel inputs to address domestic shortages and improve refining capacity. In return, raw crude from Venezuela has reportedly contributed to Iran’s production capacity reaching levels not seen since the reimposition of US sanctions in 2018.
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What we’re reading
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Ghana at risk of debt default, main opposition leader warns. (Bloomberg)
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Joint West African force claims 20 rebels killed in Lake Chad. (AlJazeera)
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Bitcoin adoption by Central African Republic a concern, IMF says. (Bloomberg)
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Congo plans oil bonds to refinance Glencore, Trafigura loans. (Bloomberg)
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Al Shabab militants mount deadly attack on African Union base in Somalia. (France24)
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Japan PM agrees defense deal with Thailand. (Nikkei)
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Sri Lanka and Nepal woes are both headache and opportunity for India. (Nikkei)
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Imran Khan plots comeback as Pakistan’s new leaders battle economic woes. (FT)
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Turkey’s inflation surges to 70%, putting Erdogan in bind. (Reuters)
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As bread costs skyrocket in Iran, so does the risk of social unrest. (Radio Free Europe)
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Hariri’s absence leaves Sunni voters unsure ahead of Lebanon poll. (AlJazeera)
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Russia turns on spending taps to dilute economic impact of war and sanctions. (WSJ)
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Private investors fill gaps in North Macedonia’s failing healthcare. (BalkanInsight)
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Orban says Hungary won't support proposed EU embargo on Russian oil. (Radio Free Europe)
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Britain revokes recognized status of Moscow stock exchange in blow to Russian investment. (Radio Free Europe)
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US begins issuing first visas in Cuba in more than 4 years. (France24)
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Guyana aims to avoid oil curse by spending on health and education. (FT)
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Peru prosecutors to probe plagiarism claim against president. (AP)
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Chile’s 36-year-old president promised change. Now some are worried about what that means. (MorningConsult)
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