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Middle East & African Monitor – 22 June 2017

  • Younger Generation Take On Saudi Arabia’s Transformation Challenge.
  • Domestic Political Tensions Rising In Iran.
  • Adjustment Of Morocco’s FX Regime “Will Not Include A Devaluation”– CB Governor.
  • Saudi Arabian Markets Boosted By MSCI Decision.
  • FITCH Places Qatari Banks On Negative Watch.
  • Atlas Mara Sells 35% Stake To Fairfax Africa.
  • Dodsal Wins US$1.1 Bio Contract In Algeria.
  • Kenya Announces New Gambling Tax.

REGIONAL COMMENTARY

Younger Generation Take On Saudi Arabia’s Transformation Challenge.

Yesterday’s announcement that the 31-year old Deputy Crown Prince, Mohammed bin Salman, has assumed the title of Crown Prince of Saudi Arabia, appears to have been greeted enthusiastically by most of the Kingdom’s young citizens, an important development when you consider the fact that almost two-thirds of the local population are under the age of 30, and that creating job opportunities for this significant sector of the populace will be one of the government’s main challenges in the years ahead. The newly appointed Crown Prince will remain the driving force behind the ‘National Transformation Program' which aims to diversify the country’s economy away from its heavy reliance on oil-related revenues, towards a more dynamic and technology-led environment, which in turn will hopefully be able to absorb the expanding number of Saudi job-seekers. Meanwhile the rise of young leaders within the Kingdom has become noticeable both inside and outside the Royal court since King Salman assumed the throne in January 2015, with the appointment of many qualified but much younger ministers, ambassadors and provincial governors. These high level changes were underlined earlier this year by the decision to hand the important role of Saudi ambassador to the US to Mohammed bin Salman’s younger brother Khaled, and yesterday’s appointment of the 34 year-old Prince Abdulaziz Saud bin Naif as the country’s new Interior Minister, the youngest person in the Kingdom’s modern history to assume this role.

Domestic Political Tensions Rising In Iran.

Tensions between Iran’s recently re-elected ‘reformist’ President Rouhani, and the country’s Supreme Leader, Ayatollah Khamenei, appear to have broken out into the public arena recently. According to an article in the Guardian newspaper, the Ayatollah openly criticized Rouhani during a speech he made to a number of senior officials last week. “Mr President has talked at great lengths about the country’s economy and well, he’s said ‘this should be done’, ‘that should be done.’ But who is he addressing by mentioning the ‘should dos?’ - Himself?” the Ayatollah reportedly stated. In response President Rouhani said this week that the political legitimacy of a religious leader is determined by the “people’s will and invitation.” Such open criticism of the Ayatollah is rare, although yet again underlines the ongoing internal political battle Rouhani faces in pursuing his policy agenda against the more conservative elements of the regime despite his landslide win in last month’s Presidential election.

Adjustment Of Morocco’s FX Regime “Will Not Include A Devaluation”– CB Governor.

The Governor of Morocco’s Central Bank, Abdellatif Jouahri, claimed this week that while the bank still plans to announce the date for the initial phase of making the country’s FX regime more flexible at the end of this month, the program does not include a devaluation. "I will hold a press conference with the Minister of Finance by the end of June to announce the implementation date of the first phase. Provoking a devaluation of the Dirham prior to floating the currency would be counterproductive, thus steps will be taken progressively, taking into consideration internal and external elements,” Jouahri said. Liquidity in the MAD interbank market has tightened, and spreads widened over the past few weeks on the back of speculation and a rush to hedge, on rumours that the local currency could be devalued. The CB Governor was specifically critical of such talk and according to the ‘MoroccoWorldNews’ website, warned that the authorities will demand a justification for any excessive hard currency purchase operations, adding; “The economic operators will realize that they have carried out covert operations that serve no purpose.”

Saudi Arabian Markets Boosted By MSCI Decision.

The main stock index in Saudi Arabia rose by 5.50% yesterday and its highest level since 2015. This move was driven initially by the appointment of Mohammed bin Salman as Crown Prince, which effectively removes any lingering questions surrounding the royal succession path, but more specifically by the announcement from MSCI that it had placed the Kingdom on its watch list for a potential upgrade to Emerging Markets status. The index compilers’ final decision will be made in June next year and if confirmed would fully open up the region’s largest share market to international investors. MSCI currently estimates that Saudi Arabia’s initial weighting could be more than 2.40% on its index, but this does not include the addition of Saudi Aramco which is due to conduct an IPO next year. According to Reuters, listing Aramco in Riyadh could then double Saudi Arabia's MSCI weighting, potentially giving the country a larger presence on the index than Russia or Mexico.

FITCH Places Qatari Banks On Negative Watch.

The FITCH ratings agency has placed all its ratings on Qatar National Bank, the Commercial Bank, Doha Bank , Qatar Islamic Bank, Al Khalij Commercial Bank, Qatar International Islamic Bank , Ahli Bank, International Bank of Qatar, and Barwa Bank on negative watch. In a statement explaining its decision FITCH said; “This action follows the placement of the Qatari sovereign on RWN and reflects significant uncertainty around the Qatari banking system resulting from the decision of Saudi Arabia, the United Arab Emirates, Bahrain, Egypt and some other Arab countries to sever diplomatic and logistical ties with Qatar. While some discussions have taken place to resolve the crisis, it is becoming more likely that the crisis will be sustained and will negatively impact Qatar's economy. Ultimately, the sovereign ability to support the banking system could weaken and all nine banks' IDRs, which are driven by potential sovereign support, could be downgraded.” Meanwhile Qatar's sovereign wealth fund has transferred over $30 billion worth of its domestic equity holdings to the finance ministry and may sell other assets as part of a restructuring drive, according to unnamed sources quoted by Reuters. "The assets were transferred so that the Ministry of Finance could oversee these holdings in a more active manner," one of the sources was quoted as saying.

Atlas Mara Sells 35% Stake To Fairfax Africa.

Atlas Mara has announced that it will sell a 35% share in the company to Fairfax Africa Holdings, the proceeds of which Atlas Mara’s co-founder Bob Diamond said would be used to boost his firm’s stake in Union Bank of Nigeria. "With Fairfax, we are now better positioned to achieve our full potential and to benefit from the long-term trends we see in Nigeria and sub-Saharan Africa," Diamond was quoted as saying yesterday.

Dodsal Wins US$1.1 Bio Contract In Algeria.

The UAE based Dodsal Group has been awarded an engineering, procurement and construction contract for a gas separation and compression plant in Algeria.

Kenya Announces New Gambling Tax.

Kenya’s government has introduced a new law surrounding the taxation of gambling. The new bill imposes a flat tax rate of 35% on the gross profits achieved from any aspects of gambling. The new rate represents a sharp hike over the original tax rates, which ranged from 5 -15%, and applies to any income generated through gambling, including player winnings, although its lower than an earlier proposal for 50%.

22-6-2017

AND FINALLY…
Angola’s capital city Luanda, has reclaimed the title as the world’s most expensive city for expatriates according to the latest cost of living survey by Mercer. Hong Kong, Tokyo, Zurich and Singapore fill the following four ranked spots.

Glenn Wepener, Executive Director & Geopolitical Analyst Middle East & Africa
National Bank of Abu Dhabi
MarketInsights&Strategy@nbad.com
Tel: +971 2 6110 127

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