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Kenyan shilling strengthens against the dollar

Investors advised to buy Kenyan Eurobonds to mitigate against the expected weakness of the local currency

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With strong dollar inflows from buyers of Treasury bonds, remittances by Kenyans in the Diaspora and   hard currency inflows from horticulture exports, the Kenyan shilling strengthened to its strongest level in six months against the dollar.

 At 9:49am  (EAT), commercial banks quoted the shilling at 100.20/40 per dollar. This level was last recorded in September 2018, compared with 100.40/60 at Friday’s close.

Last week, Kenya’s Capital Markets Authority Kenya advised the country’s central bank to issue local-currency debt outside the country to check depreciation of the shilling, rather than managing the unit.

In October 2018, The International Monetary Fund reclassified the shilling from “floating” to “other managed arrangement” to reflect the currency’s limited movement due to periodic central bank interventions. It said the unit was overvalued by about 17.5 percent.

The strengthening of the local currency came even as some analysts warned that it remained exposed to weakness because of the current account and fiscal deficits.

Some have advised investors to buy Kenyan Eurobonds to mitigate against the expected weakness of the local currency.

Meanwhile, following its Monetary Policy Committee (MPC) meeting last week, the committee indicated that the shilling was well cushioned, noting that the country had adequate foreign exchange reserves amounting to 5.3 months of import cover.

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World’s biggest marine diamond mining vessel to be financed by African banks

Nedbank Namibia, RMB Namibia, Standard Bank, ABSA and Bank Windhoek agreed to provide 80% of the funding for the ship

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African banks to finance World’s biggest marine diamond mining vessel
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Five African commercial banks have partnered in a $375 million financing deal to build a new diamond mining vessel for a subsidiary of Anglo American’s diamond unit, De Beers. 

Nedbank Namibia, RMB Namibia, Standard Bank, ABSA and Bank Windhoek agreed to provide 80% of the funding for the ship, which will be the world’s largest of its type. 

Debmarine Namibia – a 50-50 joint venture company between De Beers and the government of Namibia – will provide the balance of $94 million. 

The ship, to be known as the AMV3, will be the seventh in the Debmarine Namibia joint venture’s fleet, which mines high-quality diamonds from the ocean floor using hi-tech surveying equipment. 

The AMV3 has the capacity to add 500,000 carats of annual production from 2022, and is expected to contribute 2 billion Namibian dollars ($137.64 million) a year in taxes and royalties to the Namibian treasury in its first five years of production.

“The highest quality diamonds in the world are found in our ocean,” Debmarine Namibia Chief Executive Otto Shikongo said in a statement. 

“With this investment, we will be able to optimize new technology to find and recover diamonds more efficiently and meet growing consumer demand”.

Nedbank Namibia, which facilitated the arrangement, will contribute 40% of the financing and will also provide currency hedging for the deal, according to Karl-Stefan Altmann, an executive at Nedbank Corporate and Investment Banking and Treasury.

Mining, of which uranium and diamonds are a major part, contributed 14% of Namibia’s gross domestic product in 2018, according to the latest annual report of Namibia’s Chamber of Mines. 

Diamonds also accounted for 14% of Anglo American’s core profit in 2018.

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Zimbabwe’s inflation soars, stocks hit record high

Stocks are rising because local investors are desperate to hedge against inflation

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Zimbabwe's inflation soars, stocks hit record high | News Central TV
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Zimbabwe’s stock market has hit a record high, for all the wrong reasons as the country’s Industrial Index rose 5.6 per cent on Monday to extend its gain this quarter to 80 per cent.

Stocks are rising because local investors are desperate to hedge against inflation, which accelerated to 98 per cent in May. Prices are rocketing amid a scarcity of foreign exchange, which is causing shortages of fuel, medicine, and other imported goods.

In Zimbabwe, investors’ fears about inflation are heightened by a plunging currency.

The RTGS$, which the government de-linked from the U.S. dollar in February, has sunk about 57 per cent since March on the black market.

On the streets of Harare, the capital, it trades at 9.7 against the greenback. That compares with the central bank’s official and much stronger rate of 6.08.

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Anadarko, Mozambique to proceed on $20 billion LNG export project

The gas liquefaction and export terminal in Mozambique will be the the largest single LNG project approved in Africa.

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An Andarko official looks on as Mozambique and Andarko seal LNG deal

U.S. energy firm, Anadarko Petroleum Corp on Tuesday, gave the go-ahead for the construction of a $20 billion gas liquefaction and export terminal in Mozambique, the largest single LNG project approved in Africa.

The announcement had been expected after Anadarko flagged the decision date last month.

“As the world increasingly seeks cleaner forms of energy, the Anadarko-led Area 1 Mozambique LNG project is ideally located to meet growing demand, particularly in expanding Asian and European markets,” Chief Executive Officer Al Walker said in a statement.

Anadarko has agreed to be taken over by Occidental Petroleum Corp. Once that deal goes ahead, Occidental has agreed to sell assets including the Mozambique LNG project to French oil major and large LNG trader Total SA. 

Natural gas use is growing rapidly around the world as countries seek to meet rising energy demand and wean their industrial and power sectors off dirtier coal. 

The project, which has committed long-term supplies to utilities, major LNG portfolio holders and state companies around the world, underscores the industry’s conviction that LNG demand will soar in years to come despite a slump in prices this year. 

Low prices for the gas that is super-cooled for transportation prompted fears final investment decisions (FIDs) such as Anadarko’s would be delayed or scrapped. But enough long-term buyers were gathered to underpin the project’s financing.

LNG prices slumped this year as a jump in supply from new terminals in the United States, Australia and Russia were not totally met by higher demand in Asia. 

The trade is also nowhere near as developed as the market for crude oil, causing erratic price movements and is expected to be transformational for Mozambique, beset by economic crisis, conflict stemming from a civil war and governance malaise, whose annual gross domestic product is just $13 billion. 

According to the government of Mozambique, the project is expected to create more than 5,000 direct jobs and 45,000 indirect jobs. 

With a 12.88 million tonne per year (mtpa) capacity, Mozambique LNG is one of the largest greenfield LNG facilities to have ever been approved. It involves building infrastructure to extract gas from a field offshore northern Mozambique, pump it onshore and liquefy it, ready for further export by LNG tankers. 

On the African east coast, the liquefaction plant will be able to sell LNG to both the lucrative Asian market, home to 75%of global LNG demand, and to the flexible European market, which helps balance global LNG trade by soaking up excess supply. 

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