This Week on the Frontiers, May 26th 2018

Zimbabwe’s government is continuing its effort to attract international capital. At an investor meeting in New York this week, Chris Mutsvangwa, special advisor to President Emmerson Mnangagwa, presented an ambitious view on the country’s future: “Zimbabwe is going to do things no other African country has ever done,” he said. “We will find a way to become a middle-income country, a model African country, by 2030.”

Mutsvangwa highlighted the potential of the textile sector, pointing out that despite the country’s recent economic travails it still had relatively good quality infrastructure, as well as factories that could be speedily redeveloped to accommodate businesses moving out of China as wages rise there.

Mutsvangwa also talked about the thorny issue of land reform, arguing that the seizure of land from Zimbabwe’s white farmers under former president Robert Mugabe had helped to “create and empower a new middle class” in Zimbabwe who are now helping drive the growth of private consumption in the country. “There is tremendous potential for agriculture in Zimbabwe,” he added.

Liberia’s former president, Ellen Johnson Sirleaf, has urged companies active in Africa to take the lead in stamping out corruption on the continent. At the Emerging Markets Private Equity Association / IFC annual meeting in Washington, DC, Sirleaf teamed up with Mo Ibrahim, creator of the Ibrahim Prize for Achievement in African Leadership, to highlight the crucial role governance will play in supporting and driving economic growth in Africa.

“Governance must start with companies—shareholders, director votes—you must show that in the management of your portfolios you have transparency, accountability, that you set the example so it also matches efforts being made by governments, which must continue to abide by international standards,” Sirleaf said.

Ibrahim argued that businesses have been responsible for creating corruption. “There is some perception that Africa cornered the market in corruption,” he said, “but for every corrupt African official there are a dozen corrupt businesspeople.”

Politicians have a responsibility, too, but “it is really difficult to promote public governance without promoting corporate governance,” Ibrahim added. “Who corrupts those politicians?” (Video—from 21’50”)

Burkina Faso severed diplomatic relations with Taiwan this week amid a Chinese campaign to suppress international recognition of the self-ruled island, which Beijing claims as part of its territory, Chun Han Wong reports. The announcement on Thursday by the West African state’s foreign minister ended a 24-year diplomatic relationship with Taiwan, just weeks after the Dominican Republic switched to recognizing Beijing instead of Taipei.

Cheering Burkina Faso’s decision, China’s foreign ministry said it welcomed the African country to “join the big family of China-Africa friendly cooperation as soon as possible.”

Another country that has been attracting considerable interest from China recently is the tiny East African nation of Djibouti. Investment, both from China and from other nations, has been growing recently but, according to Robert Besseling, executive director of research firm EXX Africa, the prospects for investors are looking increasingly shaky in the wake of the country’s cancelation of a port concession earlier this year. The move has “raised questions over Djibouti’s attitude to foreign investment,” Besseling said this week.

“The government is becoming increasingly nationalist and seems to be promoting statist interventions in the economy, [which] are likely to deter further foreign investment in the services sector,” he added. An ongoing crackdown on the political opposition in the country is also increasing the possibility of an insurgency, Besseling believes.

Egypt’s government has intensified a crackdown on political opponents, arresting a series of high-profile dissidents in raids on their homes in recent weeks as President Abdel Fattah Al Sisi prepares to begin a new term next month, Jared Malsin reports. Those detained in the current sweep are among the country’s most prominent non-Islamist activists, including three human rights advocates, a satirist, and a well-known labor lawyer.

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The roundup appeared to be one of the most far-reaching since the government clampdown that took place in 2013, after Sisi presided over the military’s removal of former Islamist President Mohammed Morsi.

Iran’s Supreme Leader Ayatollah Ali Khamenei on Wednesday scoffed at American demands that his country curb its military ambitions and issued his own set of demands to Europe to remain in the nuclear deal, Asa Fitch and Aresu Eqbali write. In his first speech since US Secretary of State Mike Pompeo laid out the US strategy against Iran, the Islamic Republic’s most senior leader fired back, threatening to withdraw from the deal and scale up Iran’s nuclear work if Europe didn’t meet seven conditions.

Khamenei’s conditions included a requirement that European countries not raise the issues of Iran’s ballistic missiles and regional presence—both central points of US concern. He sought a European guarantee to buy Iranian crude to compensate for any lost Iranian oil sales due to American sanctions. And he asked that European banks guarantee they will transact with Iran.

Pakistan’s stock market continues to struggle. Despite eking out a small gain this week, the benchmark KSE 100 index is down more than 20% from its peak a year ago and has lost almost 8% of its value this month. According to Karachi-based brokerage Elixir Securities, selling pressure from foreign investors as well as concern over the prospects for the country’s economy are helping push the market lower.

In its annual analysis of Pakistan’s economy, Moody’s presented a more positive view, suggesting that the risks to the economy are balanced by “robust growth performance and potential, a large—but low-income—economy, and an improved track record of reforms.” The ratings firm is concerned, though, that the government’s high debt burden and small revenue base could undermine the positive effects of the growth story.

Vietnam’s market has also slumped by more than 20% since its early-April high above 1,200 points. According to Marc Djandji, head of institutional sales at Ho Chi Minh-based Rong Viet Securities, “reality is starting to sink in that the market may not continue a dramatic run to 1,500.” While the market’s sharp recent rise was driven by strong increases in the largest companies’ share prices, investors are starting to look beyond the blue-chips to smaller Vietnamese public companies for growth opportunities, Djandji said.

Myanmar continues to generate headlines for all the wrong reasons, but while attention is focused on the fate of the country’s minority Rohingya population businesses are continuing to expand and develop at a rapid pace. According to Oliver Belfitt-Nash, a Yangon-based analyst at investment firm Ronoc, activity is particularly intense in the financial services and digital payments sectors. “The smart capital here is targeting tech and infrastructure rather than real estate plays as in previous years,” Belfitt-Nash told the Journal. “There seems to be much less NGO-sector funding also, which has the effect of focusing businesses on profit-driven development and longer term financial security,” he added.

Venezuela’s President Nicolás Maduro easily won last Sunday’s election after a race in which the main opposition candidates were barred, their supporters boycotted the vote, and his government controlled every aspect of the contest, including counting votes. Now comes the hard part, Kejal Vyas, Ryan Dube and Juan Forero report. Maduro has to try to pull the country out of the worst economic crisis in its history as it faces growing isolation from the international community.

Democracies around the world condemned the election. A coalition of 14 nations from throughout the Americas announced early on Monday they wouldn’t recognize the result of the vote. The diplomatic isolation is likely to increase Maduro’s reliance on a handful of other authoritarian nations, including Cuba, China, Russia, Iran and Turkey—all of which offered Maduro their congratulations.

Argentina’s woes continue to mount, Ryan Dube reports. According to the latest official statistics, the country’s trade deficit in the first four months of this year widened to $3.24 billion from $1.29 billion in the same period last year. Recent data also show that Argentina’s public debt, about two-thirds of which is in foreign currencies, will increase this year after the recent sharp depreciation of the peso. While the numbers look alarming, research firm Capital Economics said it doesn’t foresee a sovereign-debt crisis. “The public debt ratio will rise this year [but it] should stabilize if policymakers follow through with fiscal tightening,” the firm said. A major risk for Argentina is if talks for an IMF bailoutfall through, “triggering a renewed run on the peso and a surge in bond yields,” CapEc added.

Key Stories from the WSJ

Meet the Startup Building a Market From Scratch to Become Africa’s Alibaba

Experimental Ebola Treatment May Be Deployed to Congo

Hot on the Wheels of Grab, Go-Jek Rides Further Into Southeast Asia

Egypt’s Sisi Clamped Down on Political Opposition—Next Up Is the Economy

Saudi Arabia Releases Driving Activist After Wave of Arrests

North Korea Summit, Lost in Translation

Venezuela’s Maduro Sworn In for Second Term in Rushed Inauguration

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