By Nicolas Malaki, Chief Investment Officer, Sanlam
2020 was quite eventful but I will try to move through the months as memory serves me.
So we opened with global politics, US killing Iranian Gen Kassim Suleimani which caused oil prices shot from 50 to 80usd a barrel shortly after drones had hit Saudi Aramco fields obviously a few tensions ensued with retaliation in Iraq and other American bases.
Then came the Chinese flu, joking causing regional lockdowns and later by end of April we had a global lockdown.
Global stocks tumbled, companies laid off people (unemployment), productivity dropped and definitely a global recession started with only a handful of exceptions.
With businesses halted, no movements and planes group, along came the madness of oil based economies that kept pumping oil with no demand and ran out of storage sending the WTI trading as low as -60usd a barrel.
Then came the solutions to help prevent a global collapse. Governments gave food aid, had to quickly improve health and Medicare, and then the stimulus for developed economies.
Some companies benefited like the googles, Amazon, Netflix Teslas, zooms,pharmas etc ones that were working during lockdown so the rich who owned tech became richest. Bezos owner of Amazon at one point was richer than no2 and no3 combined before his EX wife took a piece of his wealth still leaving him with a hooping 50bn difference.
In Africa because of lack of targeted and systematic stimulus, stocks tumbled 70% and still lagging.
Banks in the region have delayed their death. We all know off the pending write offs that have been lagged by policy changes. Just wait 2022 bloodbath will be all over the place.
Obviously with banking comes real estate which has been grossly damaged, effects not yet seen but 2nd round effects will be seen as banks move in to recover. That gets to notable causalities so far who have fallen on hard times ham, Hon Kutesa, Amina, Wavamuno, etc.
Now obviously there were cases in court against regulators…Crane v BOU, CMA v ALTX, and an expectant patient v Mulago hospital, Odongo vs Stanbic.
We all know these were ones to forget by the regulators.
With hardships, then comes the brains. MTN, Airtel stanbic BOA, and other banks got hit by MM fraud account to wallet.
Then the win win..Uganda settles for less in the oil deal, MTN,Airtel renewal licenses.
Lessons
1. Humility. Analysts said forex USD/UGX would be at 4,000. It’s now at 3650…we thought that yields were going to go through the roof. They have stayed stable. So if one thought that way and put their money where their mouths are, they should be bleeding. No one can fully tell the future. Even prophets just see in part.
2. Expect the unexpected, therefore stick to the basics in a crisis.
Looking ahead 2021, will be tougher than 2020. Banks will become rougher. Whatever bad loans and losses they have hidden this year will come to the fore 2021thru to 2023.
Because the middle class had pledged property…they will become poorer as they lose property to banks, and job cuts increase.
Also after election expenditure, money will dry up, it will now be time not to impress anyone at least for the next 4 years but to work to repay debt so bigger pain coming.
Then bank regulators may have a tough job as losses hit capital and recapitalization becomes an issue because no one is doing okay. I see closure or merging of two or more banks in 2021.
Credit: The Capital Markets Observer
