WSJ Emerging and Growth Markets, August 22nd 2020

Welcome to the latest edition of WSJ Pro Emerging & Growth Markets, our weekly review of key news affecting frontier and small emerging markets. This newsletter is a companion to Strategic Intelligence, an information resource focused on emerging markets that brings together the global news coverage of The Wall Street Journal with the analysis of market intelligence firm DuckerFrontier. 

Click here to receive the newsletter in your inbox every Saturday.

Africa

Hope rises that Africa is bending Covid curve. The total number of Covid-19 cases in Africa neared 1.2 million this week, but the rate of increase is slowing, George Mwangi reports. The number of new Covid-19 cases has decreased by 30% in the last two weeks in Africa, giving “signs of hope we are beginning to bend the curve slowly,” Dr. John Nkengasong, director of the Africa Centers for Disease Control and Prevention, said on Thursday.

South Africa continues to record a remarkable downward trend, though it still accounts for more than 46% of new cases in the past two weeks, World Health Organization Africa said in a report on Tuesday.

“There was also a reduction in cases in some of the previous hotspot countries, including, Nigeria, Ghana, Algeria and Kenya in the past week,” WHO Africa said.

“The region continues to observe increased incidences of importation of cases from affected countries within the region, largely fueled by long-distance truck drivers and illicit movement through porous borders,” the organization cautioned.

After Mali coup, mutineers pledge fresh elections. Military officers who staged a coup in Mali that forced the resignation of President Ibrahim Boubacar Keita pledged to form a civilian transitional government to quickly organize fresh elections, Joe Parkinson reports. Hours earlier, Mr. Keita resigned and said on state television that parliament would be dissolved after the renegade soldiers had detained him and top officials from his government.

“I want no blood to be spilled to keep me in power,” he said.

Malians celebrated in the streets of the capital, Bamako, on Tuesday after the coup. PHOTO: ASSOCIATED PRESS

The addresses confirmed that a faction of Mali’s military had seized the levers of government after months of political turmoil, and plunged the strategically important U.S. ally in the fight against jihadist extremism into a new crisis.

Protests swelled in recent months against Mr. Keita, whom opponents accused of corruption, bad economic management and mishandling a fast-spreading Islamist insurgency. Mr. Keita’s domestic popularity had tumbled since he rode to power following a military coup in 2012, with tens of thousands of people flooding the capital on several occasions this year to call for his ouster.

“I want no blood to be spilled to keep me in power”

— Malian President Ibrahim Boubacar Keita

Rice shortage prompts Cameroon government to ban exports. The government of Cameroon has banned the export of rice from the West African nation to neighboring Nigeria and Chad, Emmanuel Tumanjong writes. The decision was taken by the governor of Cameroon’s Far North Region, Midjiyawa Bakary, who blamed the country’s rice shortage on the smuggling of the crop to its two neighbors.

Last month, Cameroon’s President Paul Biya ordered the importation of 200,000 tons of rice amid price hikes caused by scarcity of the crop. With barely 150,000 metric tons of national rice harvest a year, Cameroon’s rice imports should be 600,000 tons a year, according to government data. But in June, Minister of Trade Luc Magloire Mbarga Atangana said Cameroon had imported 803,505 metric tons of rice in 2019, up 39% from the year prior.

According to the government, some businesses have been importing rice into Cameroon then exporting it to neighboring countries at higher prices, taking advantage of the country’s having dropped its import tax on the commodity, and contributing to the soaring import figure.

Zambia slashes key lending rate. Zambia’s central bank has cut its key lending rate to 8% from 9.25% as Africa’s second largest copper and cobalt producer continues a loosening of monetary policy aimed at shielding the country from the economic turmoil brought about by the coronavirus pandemic, Nicholas Bariyo reports. Bank of Zambia governor Denny Kalyalya said on Wednesday that recent inflationary pressure is expected to decline in the medium term, weighed by a improved agricultural output.

Economists at NKC Africa Economics expect Zambia to be among the hardest hit economies in Africa as the heavily indebted nation navigates through the economic damage caused by the virus. With its debt levels soaring, the southern African nation is hoping to reschedule some debt repayments. Efforts to secure a bailout loan from the IMF have so far been unsuccessful amid growing concerns over misappropriation of funds and poor audit results on project loans.

“The depth of the contraction and speed of economic recovery depend almost entirely on the success of a planned debt restructuring exercise and external support granted by international stakeholders,” Irmgard Erasmus, an analyst with NKC, said.

Islamist attacks in Mozambique threaten to disrupt natural-gas project. Fighting between Islamic extremist rebels and Mozambique’s army over a key port is threatening to disrupt the East African nation’s burgeoning natural-gas developments, Costas Paris, Sarah McFarlane and Benoit Faucon report. The insurgent group, which is affiliated with Islamic State, seized control of the Mocimboa da Praia port this month and government troops have moved into the area on Mozambique’s northern coast on the Indian Ocean to mount an effort to regain control of the site.

Passengers and cargo board a boat in Mozambique’s province of Cabo Delgado at a transit point for displaced persons fleeing armed violence. PHOTO: RICARDO FRANCO/SHUTTERSTOCK

The seizure of the port has interrupted the transit of oil and gas equipment through the port, a person close to the Mozambican government said. Much of Mocimboa’s infrastructure has been vandalized, he said.

The rising threat to Mozambique’s gas fields underscores the expansion of the radical Islamic State in new territories following the loss of its strongholds in Syria and Iraq two years ago. It also reflects the inability of the security forces to stop militants from taking over key infrastructure in regions of Africa where ISIS is now expanding.

Middle East

Israel in talks to formalize ties with Sudan. Israel and Sudan said on Tuesday they were working on an agreement to formalize relations, in the latest sign of warmer ties between Arab nations and a former enemy, Felicia Schwartz reports.

Arab states have historically refused formal diplomatic ties with Israel while its conflict with the Palestinians has remained unresolved. But a variety of factors, from security to commercial, have brought the sides closer in a reorientation of the Middle East.

Israeli Prime Minister Benjamin Netanyahu says the entire region would benefit from an agreement between Israel and Sudan. PHOTO: ABIR SULTAN

Khartoum is hoping ties with U.S. ally Israel could help remove Sudan from Washington’s list of state sponsors of terror. On Tuesday, a Sudanese Foreign Ministry official told Sky News Arabia that his government was “looking forward to concluding a peace agreement with Israel,” suggesting that the former foes were close to announcing formal ties.

If Sudan normalizes ties with Israel, it would be the fourth Arab country to do so, following Egypt in 1979, Jordan in 1994, and the U.A.E., which said last week it was establishing formal diplomatic ties with Israel.

Lebanese face hunger and virus surge after Beirut explosion. In the wake of the massive explosion that devastated large parts of the Lebanese capital, a new danger is stalking the struggling country: hunger. The early August blast, which killed more than 150 people and displaced hundreds of thousands from their homes, destroyed the grain silos storing most of the country’s wheat supplies and badly damaged the sea port through which 85% of its food imports arrive, Nazih Osseiran and Raja Abdulrahim report.

Rescue workers outside a damaged grain silo at Beirut’s port, where thousands of tons of wheat and corn were lost in the blast. PHOTO: SAM TARLING FOR THE WALL STREET JOURNAL

The destruction also threatens to deepen an economic downturn in Lebanon that has already sent unemployment soaring, sparked runaway inflation and led to an 80% depreciation of the local currency, the Lebanese pound.

The explosion also dealt a double blow to Lebanon’s health-care system, badly damaging six of the capital city’s hospitals and flooding the rest with casualties. Now, beleaguered doctors and nurses are facing a new challenge: a worrying surge in coronavirus infections that threatens to overwhelm hospitals’ diminished capacity, Isabel Coles writes.

Lebanon’s caretaker health minister on Monday called for a two-week nationwide lockdown to curb the spread of the virus as the country registered a single-day record of 439 cases.

Europe

Resistance to Belrus president gains momentum. Protests against Belarus’s president, Alexander Lukashenko grew significantly this week, prompting him to offer a power-sharing arrangement with the opposition—but only on his own terms, Ann M. Simmons reports. Demonstrators took to the streets in cities and towns around Belarus and some state-enterprise workers went on strike, venting their frustration over the country’s disputed Aug. 9 presidential vote in which Mr. Lukashenko claimed 80% of the vote.

The Belarusian leader, who has ruled the country with an iron grip since 1996, has said he would be willing to hand over power, but only after a referendum and the adoption of a new constitution and not because of street protests.

The turmoil in Belarus could raise tensions between the E.U. and Russia. On Wednesday, as protests continued to intensify and European leaders considered how they should respond, Russian President Vladimir Putin warned them to stay away. On Thursday, the E.U. apparently heeded the warning, announcing targeted sanctions against Belarus officials. 

For more on Belarus, listen to our Strategic Intelligence webinar from this week, in which I discuss the showdown with the WSJ’s Russia bureau chief, Ann M. Simmons.

Latin America

Argentines seek safety of U.S. dollars, despite debt deal. Argentines are once again rushing to the safety of the U.S. dollar, a sign the country’s deal with creditors to restructure $65 billion in foreign debt has failed to restore confidence in government policies, Santiago Pérez reports.

The agreement reached early this month to lower interest payments and extend debt maturities will provide the insolvent South American country with some $37 billion in debt relief through 2028. But there are signs of stress and rising scrutiny over the policies of nationalist President Alberto Fernández to contain the damage brought by the Covid-19 pandemic.

Output is forecast to drop more than 13% this year, and the government is resorting to old tricks to pull through: tightening restrictions on the purchase of hard currency and printing money to cover a budget gap expected to equal 10% of gross domestic product by year-end. As a result, Argentines are buying dollars to preserve the value of their savings in a country with a history of runaway inflation and devaluations.

Global

Selloff in some emerging-market currencies shows no sign of reversal. The dollar is having a bad year, but some emerging markets’ currencies have it worse, with no reprieve in sight, Caitlin Ostroff writes. The Brazilian real, the South African rand and the Turkish lira have lost about 20% of their value against the dollar this year, putting the former two on course for their biggest annual declines since 2015. The Russian ruble and the Mexican peso have dropped roughly 15%.

Investors remain wary of stuttering economic growth and high levels of coronavirus infections in poorer countries, where the pandemic has exacerbated existing problems such as underfunded health systems and strained government finances.

The developing nations’ currencies won’t recover until there is a rebound in demand for raw materials that they export, such as oil and copper, analysts said. Questions about the pace and strength of the global economic recovery are also keeping a lid on prices of industrial metals such as copper and other raw materials. “What emerging markets are going to need are real signs that the global economy has healed,” said Mark McCormick, global head of foreign-exchange strategy at TD Securities.

“What emerging markets are going to need are real signs that the global economy has healed”

— Mark McCormick, global head of foreign-exchange strategy at TD Securities 

What We’re Reading

Tensions rise in runup to C?te d'Ivoire election. (Reuters) 

Nigeria’s wet markets thrive despite coronavirus pandemic. (Reuters) 

Covid-19 raises pressure on Ghana’s textile industry. (VoA) 

Egypt, Ethiopia and Sudan resume AU-led talks over disputed dam. (AP) 

Hotel assault in Somalia’s capital raises fresh questions about Al-Shabaab. (WSJ) 

Rwanda closes markets in capital after virus surge. (BusinessGhana) 

Libya’s rival governments declare cease-fire. (WSJ) 

Morocco’s Covid-19 crisis puts 1m people at risk of poverty. (MWN) 

India launches charm offensive to head off China in Bangladesh. (Asia Times)

Cambodia's biggest lake is running dry, taking forests and fish with it. (National Geographic) 

Israel-U.A.E. ties open avenues for trade. (WSJ) 

Fitch downgrades Oman for second time this year. (Al Jazeera) 

Saudi wealth fund moves billions from blue chips to ETFs. (WSJ) 

Essay: Inside the rise of Mohammed bin Salman. (WSJ) 

Saudi Aramco halts investment in $10b China oil refinery. (Bloomberg)

Iran unveils new missiles, improving its reach at sea and to Israel. (WSJ) 

Kuwait says it doesn’t have enough liquidity to pay government salaries beyond October. (ThePrint) 

Turkey looks to vast gas discovery to bolster ailing economy. (WSJ) 

Ecuador says Chinese fishing fleet off Galapagos has gone dark. (Al Jazeera)

Soccer star could be Peru’s next president. (Americas Quarterly)