This Week on the Frontiers, March 16th 2019

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Global

Algeria’s president won’t seek fifth term after protests. Algeria’s ailing President Abdelaziz Bouteflika said he wouldn’t seek a fifth term in power, bowing to popular pressure after widespread protests shook the North African nation, Jared Malsin writes. Mr. Bouteflika also postponed the presidential election scheduled for April 18, according to a message by the president carried on state news agency APS. No new election date was set.

The announcement comes after more than two weeks of street protests in which Algerians called on the octogenarian leader to step down after ruling the country for nearly 20 years. The protests in recent weeks were the largest the country has seen in years. Throngs of people took to the streets on three consecutive Fridays of largely peaceful demonstrations.

Algerians celebrate President Abdelaziz Bouteflika’s announcement that he wouldn’t seek a fifth term. REUTERS

The uprising culminated in a general strike that began on Sunday, as shops closed and employees at state oil and gas companies walked off work.

African online retailer Jumia plans IPO in the U.S. Africa’s largest e-commerce platform, Jumia, has filed paperwork for an initial public offeringon the New York Stock Exchange, Alexandra Wexler writes. With a goal to one day become the Alibaba of Africa, the Lagos, Nigeria-based Jumia said it would be the first African technology company to list on the exchange. Its most recent funding round in 2016, when Goldman Sachs Group Inc. bought a stake, valued Jumia at about $1.2 billion, with that amount qualifying the company as the continent’s first technology “unicorn” in the lexicon of Silicon Valley.

Jumia has raised about $770 million from investors and has grown rapidly, with operations in 14 African countries selling products from Apple computers and Huawei smartphones to Procter & Gamble’s diapers and Nike sneakers.

Faced with poor internet connections and tight bank lending for vendors and consumers, the startup has built from scratch much of its economic infrastructure, including its own payment platform, JumiaPay, which accounted for more than half of its transactions in Nigeria and Egypt in 2018, the company said.

Benin plans debut eurobond offering. The Republic of Benin is planning its first-ever foreign-currency bond offering, hoping to capitalize on investors’ continuing search for yield, Emese Bartha reports. The West African nation with a population of 11 million is expected to issue an eight-year euro-denominated bond later this month.

Ratings firm Fitch last week gave Benin a B credit rating, noting that the country’s economy is growing rapidly while inflation remains low. Government investment has helped support economic growth, which Fitch expects to average 7% this year and next, up slightly from 2018’s 6.8%.

Asia

Sri Lanka stabilizes in wake of political turmoil. Sri Lanka may be on the road to recovery, according to Fitch Ratings, after a political crisis in late 2018 prompted a credit downgrade, a capital flight and a sharp decline in the country’s currency. The firm said last week’s $2.4 billion bond issue should help the island nation tackle its near-term fiscal and financing challenges and the revival of its funding arrangement with the IMF, which was suspended after the political crisis broke, should help the government continue its reform program.

The multilateral’s involvement in Sri Lanka is helping ease foreign investors’ concerns about the country’s high debt levels, Marco Ruijer, portfolio manager for emerging-market hard-currency debt at Netherlands-based fund manager NN Investment Partners, said. “We are more comfortable with Sri Lanka than with some other issuers because the IMF is on top of them,” he told the Journal. “The program has been a little delayed because of political turmoil and China is a big player there, but we think it makes sense as an investment.”

The island nation is not out of the woods yet, though, according to Moody’s. “Sri Lanka’s ongoing high vulnerability to tightening in external and domestic financing conditions, given very high government debt, weak debt affordability, relatively large borrowing needs, reliance on external funding and low reserves adequacy, dominates risks that could abruptly lead to further negative pressure on Sri Lanka’s credit metrics,” the ratings firm said.

Europe

U.S. bulks up Ukraine’s navy to thwart Russia. The U.S. is channeling support to Ukraine’s navy to help counter Russian efforts to choke its neighbor’s economy and destabilize its pro-Western government by blocking access to ports, James Marson reports. The U.S. is transferring two Coast Guard cutters to Kiev, it plans to send coastal radars to Ukraine and three Black Sea neighbors, and is helping construct a maritime operations center for Ukraine near Odessa and sending naval ships on port visits.

A U.S. naval destroyer, the USS Donald Cook, docked in Odessa last month. ZUMA PRESS

The fresh U.S. focus reflects concern over the Kremlin’s new maritime efforts to halt Ukraine’s westward integration and keep it in Russia’s sphere of influence. Russia is slowing access for commercial ships through a narrow strait between the Black Sea and the Sea of Azov, where two important Ukrainian ports ship grain and steel to world markets. Russian forces in November seized and detained three Ukrainian naval ships and 24 crew members who had tried to sail through the strait. The Russians are still holding the sailors and the ships, despite international appeals for their release.

“It’s not a game changer, but it’s a deterrent that will make it harder for the Russians to attack Ukraine,” said Kurt Volker, the State Department’s special representative for Ukraine negotiations.

Latin America

Ecuador gets $4.2 billion funding from the IMF. The IMF this week announced it had approved $4.2 billion in funding for Ecuador to support the country’s efforts to stabilize its economy and improve the business environment. Christine Lagarde, the IMF’s managing director, said the money would support a “comprehensive reform program aimed at modernizing the economy and paving the way for strong, sustained, and equitable growth.”

As well as focusing on reforming taxes and reducing fuel subsidies, the plan has an emphasis on reining in public-sector wages, which analysts at Citi believe are important but could prove politically costly for the country’s President Lenín Moreno.

The IMF program will last for three years and allows for an immediate payment of more than $650 million to Ecuador.

Clues emerge on cause of Venezuela’s fatal blackout. Images from NASA’s Suomi satellite suggest fires within Venezuela’s heavily-fortified El Guri hydroelectric complex could have triggered the massive blackout that plunged the nation into darkness last week, Ryan Dube reports. Experts and researchers who have studied the images say they offer the most plausible explanation yet for what sparked the blackout on March 7 that resulted in days of chaos and despair  in Venezuela, which was already struggling with a deepening economic crisis.

People try to collect water at a sewer system in Caracas amid shortages sparked by a lengthy power outage across Venezuela. SHUTTERSTOCK

Power returned to most of the country earlier this week, though electricity remains intermittent in San Cristobal, Merida and other cities in the country’s west.

Secretary of State Mike Pompeo said the U.S. would withdraw all remaining staff from its embassy in Venezuela due to the deteriorating situation there after the power outages. Critical health services, food supplies and businesses have been crippled by the blackout that has killed at least 15 people and continues across the country despite efforts to restore power.

Global

Trade fears may be overblown. Based on its analysis of high-frequency trade data, the International Institute of Finance said this week that recent fears over global trade are “overblown,” as are concerns that global growth could slow significantly. “Asian data do not paint a very optimistic picture but…deep concerns about global trade aren’t warranted unless U.S. data are also going south,” Sergi Lanau, deputy chief economist at the IIF, told the Journal. According to the IIF’s analysis, U.S. non-commodity trade stabilized early this year is now showing signs of a revival.

The fact that the impact of the trade dispute between the U.S. and China is likely to be less severe than many feared should benefit companies operating in frontier markets, Tarek Sultan, CEO of Kuwait-based logistics firm Agility, said. “Smaller frontier markets have more robust growth rates than developed economies and because of that the opportunities are generally better,” he said. “Cross-border commerce is growing at a fast pace and with the growth of technology solutions for last-mile delivery the opportunity for SMEs in frontier markets is huge.”

Interview: Julius Maada Bio, President of Sierra Leone

Sierra Leone’s great leap forward. When Julius Maada Bio took over as President of Sierra Leone in April 2018, the country was facing a daunting array of challenges. Its economy had been ravaged by the Ebola outbreak in 2014 and a sharp decline in the price of iron ore, one of the country’s key foreign-exchange generators. The government was hampered by what Mr. Bio describes as “endemic” corruption.

According to the IMF, Sierra Leone’s GDP shrank by around a fifth in 2015 and has been recovering only slowly since. Last year it grew about 4% and growth is expected to edge up to 5% this year and in 2020. Inflation is falling but remains above 15%.

The new president wants to use technology to help the country leapfrog traditional development paths to become a “valuable part of the global economy” within a decade or so. “We are putting together a critical mass of some of our brightest citizens around the world who want to help us in the administration using science and technology and innovating around governance,” he told the Journal. “We’re looking at e-government, e-health, e-learning, and trying to digitize as much as we can because the human interface is what leads to corruption.”

Julius Maada Bio pictured in Freetown, Sierra Leone. REUTERS

Mr Bio is also focusing squarely on developing Sierra Leone’s people and rooting out corruption. “Good governance is the way to go so we can plough the resources we get into human capital development, which is the most reliable and important resource for national development,” he told the Journal.

Ten months into the job, Mr. Bio has already rolled out free education for every child from primary level to the end of high school. He is also focusing his energy on creating a reliable healthcare system, boosting agricultural output and creating a more hospitable business environment.

“I am trying to create an enabling environment, an ecosystem that is inviting…so that good investors can come and help us move this nation forward.” But most importantly, he says, “We want to shed the image that Sierra Leone is a war-torn country plagued by Ebola and tell the world that, yes, we had our share of problems but now we are making an effort to grow our economy and our human capital so we can be good citizens.”

He is also mindful of the continuing tide of human migration from Africa to Europe. “It’s all about the lack of opportunity,” he says. “We want the world to help us provide those opportunities at home so people don’t have to leave.”

KEY STORIES FROM THE WSJ

Hard-Line Approach Sharply Lowers Migration from Libya to Italy

Saudi Arabia Charges Women’s Activists in Widely Scrutinized Case

JPMorgan Trading Desk Lends Ukraine $350 Million

Massive Power Outages Turn Deadly in Venezuela

AROUND THE WEB

Macron Warns of Chinese Risk to African Sovereignty

Rwanda ‘Destroys Bridges’ Leading into Uganda

Angola to Receive $1b World Bank Loan

Russia Takes Steps to Deepen Relations With Africa

Egypt Looks to Offshore Gas Field for Growth and Influence

Cambodian Farmers Struggle With Changing Climate

Japan to Fund Sri Lankan Light Rail System

Saudi Arabia Ramps up Business in Bangladesh

UN Warns Bangladesh Over Rohingya Relocation Plan

Romanian Entrepreneurs Lament Detriorating Business Environment