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Africa could be about to benefit from dovish policy shifts in the US

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Central bankers across Africa are paying special attention to the noises coming out of the U.S. Federal Reserve as they mull impending calls on monetary policy easing.

On Thursday, the South African Reserve Bank announced its first cut to interest rates in over a year, lowering rates by 25 basis points to 6.5% as the continent’s most industrialized economy tackles low inflation and its starkest contraction for over a decade in the first quarter.

Ghana, Nigeria, Kenya and Angola will all set rates this week. Nigeria recently passed measures compelling banks to boost lending, while a drought in Kenya drove up inflation.

“Monetary policy in Africa has been held hostage to the Fed hiking cycle for the past 18 months, with African central banks maintaining nominally high domestic interest rates to protect their currencies against capital outflows, despite an improving inflation outlook,” Ipek de Vilder, European executive director at international brokerage network Auerbach Grayson, told CNBC.

“The policy is working as 2018 was the first year since 2015, when African currencies were essentially flat vis-à-vis the U.S. dollar relative to annual deprecation about -10% over the previous four years,” she added.

When the Fed tightens policy for an extended period it tends to lower demand for traditional U.S.-based safe haven assets, sending investors searching for return elsewhere. This often facilitates a windfall for emerging markets and causes central banks to mirror Fed measures to stabilize supply and demand.

The recent shift to a more dovish tone from the Fed has allowed African central banks to begin a cautious easing of their domestic monetary stances, with rate cuts so far this year in Nigeria, Kenya, Tanzania and Malawi. Ghana’s monetary policy committee on Friday voted to maintain its current policy rate of 16%.

Thus far, these have been within the 50 to 100 basis point range, though with inflation generally on the slide, de Vilder suggested that further easing of monetary policy could be due this year. While all are due to vote on rates before the U.S. central bank makes its decision on July 31, the Fed’s dovish stance might lessen pressure on tightening and provide room for easing.

“As rates trend downwards, we are likely to see domestic institutions shift back towards higher equity allocations and underpin a rerating of the market,” de Vilder said.

Roadside vendors in Lagos central district, Nigeria.

Pius Utomi Ekpei | AFP | Getty Images

Beware the headline figures

In the context of escalating geopolitical and market uncertainty in developed economies, investors are increasingly likely to explore opportunities in “frontier” markets, according to Jeff Gable, head of research at pan-African bank Absa Group.

“I do think this is the place to be for the next 10, 20, 30 years but that doesn’t mean every day is going to be easy,” Gable told CNBC on Friday.

He stressed the importance for international investors of looking beyond the headline figures, which in aggregate terms are weaker now than they were a few years ago.

“African economies tend to be less diversified and the markets tend to have a large reliance on the informal economy. This makes it more complicated in comparing countries. For example simply looking at debt to GDP (gross domestic product) in isolation, l might not provide a useful picture. What is the debt level as compared the country’s ability to generate tax revenues, for example, or as compared the level of interest rates?” Gable explained.

The other key draw for investors in the coming years is going to be the continent’s “insatiable appetite for infrastructure,” he projected.

Structural case

Voters want clean water, access to roads, housing, a health care system and education for their children, all of which cost governments money but are indispensable at the ballot box.

“In an environment where the balance sheet is more constrained, governments are going to have to be reaching out to the private sector to look to provide infrastructure services, so those companies that are exposed to this are going to be more attractive,” Gable explained.

De Vilder also highlighted trends of generally higher GDP growth, underpinned by relatively young populations, relatively low debt and urbanization.

“In the 1950s in Africa only 20% of the population was living in the cities, these days 40% and by 2050, we are expecting this number to increase 75%. This will mean increase labor productivity, specialization and increased consumption,” she said.

At present, only 19% of African nations’ trade happened within the continent in 2018, compared to 59% and 69% for Asian countries’ intra-Asia trade and European countries’ intra-Europe trade respectively, according to Brookings Institution’s January numbers.

But the recent creation of a colossal 54-nation trade agreement, the African Continental Free Trade Area, could be set to change all that.

If the massive deal works as hoped, it will connect 1.3 billion people, create a $3.4 trillion economic bloc, and improve commerce within the continent itself.

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Bollywood’s Deepika Padukone’s battle with mental illness, depression

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Bollywood star Deepika Padukone has spoken out about her battle with depression, calling for greater public discussion to help tackle the mental health crisis.

Padukone, who is one of India’s highest-paid actresses, said her experience during a seeming “professional high” revealed the illness’ indiscriminatory nature and inspired her to campaign for other sufferers.

“Mental illness crept up on me when I least expected it,” Padukone said last week.

“The perception and the general understanding was that I was at a professional high,” she said last Tuesday at the World Economic Forum in Davos, Switzerland. “But what I was also experiencing was this hollow, empty, pittish feeling … I would just cry out of nowhere.”

Padukone was diagnosed with depression in 2014.

The 34-year-old celebrity, who has over 30 movies to her name, said she considered herself lucky that her mother had spotted her symptoms and urged her to seek medical help.

Indian actress Deepika Padukone delivers her acceptance speech during the “Crystal Award” ceremony at the World Economic Forum (WEF) annual meeting in Davos, on January 20, 2020.

Fabrice Coffrini

However, she noted that stigma and lack of awareness surrounding mental illness can make it difficult for sufferers to reach out. In India alone, an estimated 7.5% of the population suffers from some kind of mental illness, according to the World Health Organization, yet provisions remain scarce.

That inspired Padukone to set up the Live, Love, Laugh Foundation in 2015 to support other sufferers. The charity aims to spread awareness of mental health issues, having launched India’s first national campaign, as well as working to help people reach diagnoses.

Learning to understand what she was experiencing was the first step to recovery, Padukone said. She encouraged potential sufferers and the people around them to look out for telltale signs of depression, such as prolonged feelings of sadness, sleeping and eating irregularities, as well as suicidal thoughts.

“The toughest part in the journey for me was not understanding what I was feeling,” said Padukone. “Just having the diagnoses in itself felt like a massive relief.”

Padukone was speaking at the WEF meeting — a gathering of global business leaders and policymakers — where she was honored with the 2020 Crystal Award for her contributions to mental health awareness.

In 2018, she was named as one of Time magazine’s 100 most influential people of the year.

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More US service members diagnosed with brain injury after Iran missile attack

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A picture taken on January 13, 2020 during a press tour organised by the US-led coalition fighting the remnants of the Islamic State group, shows a view of the damage at Ain al-Asad military airbase housing US and other foreign troops in the western Iraqi province of Anbar.

Ayman Henna | AFP | Getty Images

A total of 50 U.S. service members suffered traumatic brain injury from this month’s Iranian missile attack on Iraqi bases hosting American troops, the Pentagon said Tuesday.

Of those TBI cases, which can include concussions, 31 were treated in Iraq and have returned to duty, Pentagon spokesman Lt. Col. Thomas Campbell said in a statement.

Last week, the Pentagon said there were 34 service members diagnosed with concussions and traumatic brain injuries.

Of the 16 new diagnosed cases, 15 service members have returned to duty in Iraq, Campbell said.

Iran launched ballistic missiles at two bases in Iraq housing American troops on Jan. 8 local time. The strike was in retaliation for the U.S. killing of Iran’s Gen. Qassem Soleimani, who was commander of its elite Quds Force, in a drone attack outside Baghdad’s airport less than a week before.

No one was killed in Iran’s strikes, and a day after targeting U.S. forces, President Donald Trump said that no one was hurt or killed.

Chief Pentagon spokesman Jonathan Hoffman has said that a lot of TBI symptoms are late developing and manifest themselves over a period of time.

The Centers for Disease Control and Prevention says on its website that some symptoms of concussions and other traumatic brain injury can appear right away, but other symptoms may not be noticed for days or months after the injury.

One of those new cases involved a service member transported to Germany for further evaluation and treatment, bringing the total taken there to 18. That person had been taken to Germany “for other health reasons and has since been diagnosed with a TBI,” Campbell said.

Last week, another Pentagon spokesman said that eight U.S. service members who were sent to Germany were then taken to the United States.

Campbell’s statement Tuesday said that there was no information as to whether anyone else has returned to the U.S.

A service member that had been taken to Kuwait for treatment has since returned to duty, Campbell said.

Hours after Iran launched missiles against U.S. forces, Iran’s armed forces shot down a Ukrainian passenger plane that departed from Tehran’s airport, in an incident that Iranian officials blamed on “human error” and which Iran’s president has called an “unforgivable mistake.”

All 176 people aboard Ukraine International Airlines Flight PS752 were killed, including many Iranians and Canadians.

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Global dissatisfaction with democracy at a record high, research says

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Pro-democracy protesters at a Thanksgiving Day rally on November 28, 2019 in Hong Kong.

Chris McGrath | Getty Images News | Getty Images

The world is unhappier with democracy than ever, new research has claimed.

In a report published Wednesday, researchers from Cambridge University analyzed the political sentiment of more than 4 million people, using data from survey projects that covered 154 countries between 1995 and 2020.

The proportion of people who said they were dissatisfied with democracy over the last year hit 57.5%, according to the report, with researchers saying 2019 marked “the highest level of democratic discontent” on record.

Authors noted that over the last 25 years, the number of individuals dissatisfied with democratic politics around the world rose from a third to more than half.

Shifts in satisfaction levels were often a response to “objective circumstances and events” such as economic shocks and corruption scandals, the report said.

Following the financial crisis in 2008, for example, global dissatisfaction with the functioning of democracy jumped by around 6.5%.

Many large democracies, including the U.S., Australia, U.K. and Brazil, were now at their highest-ever level of dissatisfaction with democracy.

According to the report, the U.S. in particular had seen a “dramatic and unexpected” decline in satisfaction with democracy.

When the surveys began in 1995, more than 75% of U.S. citizens were satisfied with American democracy. The first big knock came with the financial crisis, the report showed, and satisfaction has continued to deteriorate year-on-year ever since.

Fewer than 50% of Americans are now content with democracy in their country, marking the first time on record that a majority of U.S. citizens were dissatisfied with their system of government.

“Such levels of democratic dissatisfaction would not be unusual elsewhere,” the report said. “But for the United States, it marks an ‘end of exceptionalism’ — a profound shift in America’s view of itself, and therefore, of its place in the world.”

However, researchers noted that they had found an “island of contentment” in Europe, where satisfaction with democracy had reached all-time highs. Denmark, Switzerland and Norway were among the countries that fell into that category.

Southeast Asia was also described as a regional “bright spot.”

Latin American precedent

Speaking to CNBC in a phone call on Monday, Roberto Foa, lead author of the report, said there were a number of different factors behind the declining approval of democracy.

“In developed democracies, it’s partly about political polarization — this has been gradual in the U.S. but has spiked in the last couple of years in the U.K.,” he said. “Malaise with democracy in the West is often down to longer term economic stagnation and loss of geopolitical influence.”

He noted there was a reasonable amount of research suggesting a rise in unhappiness with democracy tended to provoke changes in political behavior. For example, people would become more likely to vote for populist parties or politicians promising to “shake up the system.”

“We expect a great deal more of this,” Foa told CNBC. “The region that proves this is Latin America — the levels of dissatisfaction have always been very high and we’re seeing (a rise in populist support) there.”

He added that the rest of history could “look more like the south of the Americas than the north” if global satisfaction levels continued to decline.

Cambridge University’s study follows a report published by the Economist Intelligence Unit last week, which found that the U.S. had a “flawed democracy” and the strength of global democracy was at its lowest since 2006.

Meanwhile, research from Edelman last week found that 70% of people around the world believed democracy was “losing its effectiveness as a form of government.”

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