Aurelia Butler

German gross domestic product shrank in the first quarter, revised figures show, as weak consumer and industrial activity raised fears that Europe’s largest economy will suffer a sustained recession. Destatis, the federal statistical agency, said the German economy contracted 0.3 per cent in the three months to March, after a downward revision from its initial estimate of zero growth. Some economists had expected the fall after German industrial production suffered its biggest drop for 12 months and retail sales fell sharply in March.Economists said the second consecutive quarterly decline in GDP — output contracted by a downwardly revised 0.5 per cent in the final quarter of last year — met the technical definition for Europe’s industrial powerhouse to be in a recession. Most analysts expect Germany to achieve weak growth this year — the country’s council of economic experts recently forecast 0.2 per cent growth in 2023 GDP. But many economists worry that Europe’s largest economy will remain stuck in the doldrums.“Unfortunately, a fundamental improvement in the economy is not in sight,” said Jörg Krämer, chief economist at German lender Commerzbank. “All important indicators in the manufacturing sector are pointing downwards,” he added, predicting German GDP would decline 0.3 per cent this year and be flat next year. The main cause of Germany’s disappointing performance in the first quarter was a drop in household consumption, which fell 1.2 per cent from the previous quarter, as high inflation and rising interest rates eroded consumers’ purchasing power.“The reluctance of households to buy was apparent in a variety of areas: households spent less on food and beverages, clothing and footwear, and on furnishings in the first quarter of 2023 than in the previous quarter,” Destatis said in a statement.Car sales in Germany fell, reflecting a reduction in grants and subsidies on purchases of plug-in hybrid and electric vehicles since the start of the year.German government spending was also 4.9 per cent lower. But private sector investment rebounded in the first quarter from a weak second half of 2022, driven up 3.9 per cent by higher construction activity that reflected mild weather. Trade made a positive contribution as German imports fell 0.9 per cent and exports rose 0.4 per cent.“We expect further economic weakness in both Germany and the eurozone as a whole in the coming quarters,” said Franziska Palmas, an economist at research group Capital Economics, predicting a slight second-quarter rebound would be followed by “further contractions”. Germany is expected to be the weakest performer among the world’s big economies this year, according to the IMF, which forecast the country’s output would shrink 0.1 per cent.“Germany must not become the sick man of Europe again,” said Reinhard Houben, economic spokesman for the parliamentary group of the liberal Free Democrats, which are part of the governing coalition. Government plans to cut bureaucracy and reform tax rules would make the country “more attractive again as a business location”, he added.

The downturn in the past six months means German GDP is still languishing below pre-pandemic levels, unlike the overall eurozone economy. Destatis said first-quarter output was down 0.5 per cent from the same period a year earlier.Consumers in Germany have been hit by higher inflation and rising borrowing costs, which contributed to a 8.6 per cent drop in retail sales in March from the same month a year ago, after adjusting for inflation.German companies are becoming more gloomy about the year ahead, according to the Ifo Institute’s index of business confidence, which fell in May for the first time in seven months.Some economists think a decline in inflation and an acceleration in wage growth, combined with strength in the labour market, will help the economy to achieve tepid growth in the rest of this year.Salomon Fiedler, an economist at German investment bank Berenberg, predicted German GDP would “stagnate” in the second quarter followed by “slow growth” for the rest of the year.Europe’s biggest economy has been hamstrung by weakness in its sprawling manufacturing sector, which is suffering from a shrinking backlog of orders.In the first quarter, manufacturing output rose 2 per cent from the previous quarter, but Destatis said there had been “a dampening effect in March”. Growth was weaker in the larger services sector, it said. More

Energy regulator Ofgem has cut the price cap on British domestic energy bills by £1,206 following a fall in wholesale gas and electricity prices.The price cap will fall to £2,074 a year from July for typical households, compared with £3,280 over the past three months.The cap governs the maximum energy suppliers can charge customers on default tariffs, although the government has been footing a chunk of the bill for households since October.The drop in the level of the cap means that government support will now fall away, while typical households will pay about £426 less a year.However, bills under the cap will still be about 60 per cent higher than before the surge in energy prices that started in late 2021 — in the run-up to Russia’s invasion of Ukraine — which helped push up UK inflation and triggered the cost of living crisis.Jonathan Brearley, chief executive of Ofgem, the energy regulator, said: “People should start seeing cheaper energy bills from the start of July, and that is a welcome step towards lower costs.“However, we know people are still finding it hard, the cost of living crisis continues and these bills will still be troubling many people up and down the country.”Introduced in 2018, the price cap sets a limit on the amount suppliers can charge households for each unit of electricity and gas.The £2,074 level reflects estimates for typical households under the cap, but actual bills will vary depending on usage.The new unit caps are 30p for each kilowatt-hour of electricity and 8p for each kilowatt-hour of gas, compared with 51p for each kilowatt-hour of electricity and 13p for each kilowatt-hour of gas previously.Standing charges remain the same at 53p a day for electricity and 29p a day for gas.The price cap is reset every three months to reflect changing wholesale costs. It started climbing in April 2022 following a surge in wholesale gas and electricity prices connected to Russia’s invasion of Ukraine.It hit £3,549 in October and then £4,279 in January, compared with below £1,280 in previous years.The government intervened to shield households and limit typical bills to £2,500, paying suppliers the difference between this rate and the price cap.

Estimates indicate the price guarantee, which is in place until next March, will cost the state £29.4bn.Wholesale energy prices have fallen following a relatively mild winter and efforts to save energy in Europe but remain above historic norms.Energy UK, a trade group representing energy retailers, warned that a price cap above £2,000 was set to become the “new normal”.It said industry now needed to work with government on targeted support for customers next winter.“We also need to press ahead with expanding our own sources of domestic, clean power and making more of our homes energy efficient,” said Energy UK, “as these will help bring down energy costs permanently for all customers.” More

Good morning. Ethan here; Rob is away. Thanks to everyone who wrote in about Tuesday’s letter on US equity valuations. One reader, Paul OBrien, made an important point that I missed: what if stocks are fairly priced for a lower-returns world? Could well be, though it would mean the popular Shiller p/e ratio, which is very high now, has misfired. BCA Research’s Irene Tunkel notes that Prof Shiller’s measure did accurately call the 2000 and 2008 bear markets. Any further thoughts are welcome at the email below.In other news, Fitch has put the US on “negative watch”, its equivalent of a stern talking-to. I’ve somehow managed to line up my long-planned summer holiday with the drop-dead date. You’ll be in Jennifer Hughes’ capable hands tomorrow, and Rob’s next week. But you can still email me: [email protected] things are bound to breakOne question hangs over this remarkably stable cycle: can the US return to some kind of low-inflation normal without breaking the economy in the process? Three recent pieces of Federal Reserve research offer hints and, I think, some reasons for worry.The first, published by the New York Fed, focuses on the natural rate of interest, or R-star. This is the theoretical interest rate that balances the economy, neither stoking inflation nor stifling growth. Monetary policy is only “tight” if the policy rate is well above the natural rate. If R-star were 4.5 per cent, as it was in the 1960s, today’s 5 per cent fed funds rate scarcely looks tight at all. Annoyingly, though, it is unobservable. The late economist John Henry Williams, as quoted last week by New York Fed president John Williams, wrote in 1931 that R-star is “an abstraction; like faith, it is seen by its works”.The New York Fed has just restarted publishing estimates of R-star, which were suspended after the pandemic made a hash of its models. Not a whole lot has changed; the economy’s equilibrium interest rate has stayed low:Taken at face value, policy rates are some 380bp above the estimated natural rate. Many economists, including Jay Powell, have noted how imprecise measuring R-star is, so scepticism is due. But as Williams put it last week, the bottom line is: “There is no evidence that the era of very low natural rates of interest has ended.” Policy right now is very tight.The second bit of research also comes from the New York Fed, and concerns a newer idea called the financial stability interest rate, or R-double-star. This is the theoretical rate that tips the financial system into crisis. In his excellent write-up over at FT Alphaville, Robin Wigglesworth explains:The idea is that there is also a neutral level of interest rates for financial stability, and, crucially, it is not the same as R*. Basically, R** is a measure of an economy’s financial sturdiness. When it’s low, a country is vulnerable to financial shocks from rate increases, and when it is high it can more easily shrug them off without major mishaps.Crucially, if R** drifts lower than R* — for example, if prolonged low interest rates encourage leverage, risk-taking and general stupidity — a central bank’s rate increases can cause financial calamities long before it gets to the point where rates really start to contain inflation.That the Fed’s rate increases precipitated a banking crisis before they got inflation down to even vaguely near their target looks like a good example . . . In a pair of blog posts this week, New York Fed researchers lay out how lower-for-longer rates can make the economy fragile. It’s a familiar story, but one worth rehearsing. In the short run, low interest rates are good for financial stability. Asset prices rise, leverage (ie, assets over equity) falls and everyone is happy. But over time as financial institutions, with their now-healthier balance sheets, search for new investments, low interest rates push them towards ever riskier stuff — a classic reach-for-yield dynamic. They get overextended, leaving the real economy “at greater mercy of luck”. It only takes one wrong move to get a crisis, including a rates shock meant to curb inflation.The final piece of research, released by the Kansas Fed yesterday, makes a simple point: financial crises are not very deflationary. Since financial stresses hurt both demand (through tighter credit conditions) and supply (through lower capital investment), the hit to growth is big but the drag on inflation is small to non-existent. The Kansas Fed’s chart below shows the average effect on inflation, unemployment and investment in the months following past systemic financial crises. Surprisingly, inflation (blue line) tends to tick up as unemployment surges (green):

Taking stock, we have:The natural interest rate still looks low, suggesting the past year of rate increases has delivered a big negative shock.An economy that has been through a decade of low rates is probably one bad shock away from a financial crisis.Financial crises are poor anti-inflation measures.You can imagine how this ends badly. Inflation stays stubborn but the financial system is so fragile that rates must be cut. Inflation then becomes baked into expectations and the Fed has to raise rates yet again. A deep recession ensues. Powell gets awarded the Arthur Burns Memorial Dunce Cap for Easing Too Early.There are still reasons to feel sanguine. The economy has so far withstood the banking mini-crisis. The Fed’s lending facilities are doing their job. Shelter inflation, the hottest bit, is coming down. Leverage in the system is low. But remember that cycles don’t often end smoothly. More things are bound to break, and the economy’s remarkable stability probably cannot last.One good readThe lame walk. A welcome break from all the recent AI techno-doom. More

Russia’s prime minister left China this week without a reward Moscow has long prized: a clear commitment from Beijing on Power of Siberia 2, a grand gas pipeline project to transform energy flows across Asia.Conceived more than a decade ago to help Russia “turn to the east”, the pipeline through Mongolia to China was a way to diversify gas sales, bolster revenues, and give the Kremlin more diplomatic clout. That project, first dubbed “Altai” after the mountainous region of southern Siberia, has taken on new urgency since the invasion of Ukraine, with Moscow seeking new outlets for gas that flowed to Europe before sanctions stood in the way.The hitch for Moscow is that Beijing — a crucial economic partner since the full-scale invasion of Ukraine — appears in no rush to engage. It is a reticence that analysts say shows how weak wartime Moscow’s bargaining power has become when dealing with its economically more powerful neighbour.Another Russian pipeline, the Power of Siberia, was launched in 2019 and is expected to reach its maximum capacity of 38 bcm per year by 2024. But this pipeline relied on developing new gasfields in eastern Siberia, which had never sent the fuel to Europe — making it less useful to Moscow’s diversification strategy.The PS-2, in contrast, aims to supply China with gas from the north-eastern Yamal peninsula, which historically served the European market through several pipelines, including the Nord Stream, whose supplies had ceased to flow in disputes with the EU even before it was sabotaged in 2022.Seeking alternatives has moved from being a strategic choice on Russia’s part to its only option.“Beijing has a history of prolonging negotiations to get a better deal — this was the case when the Power of Siberia 1 was negotiated,” said Alicja Bachulska, a China policy expert at the European Council on Foreign Relations. “As Russia’s aggression against Ukraine has turned into a protracted war, Beijing believes that its bargaining position vis-à-vis Moscow can only get stronger.” Taking its time may enable China to secure a lower price for gas through the pipeline, she added.Sino-Russian talks over the pipeline had intensified in the months before the war. During the Beijing Olympics, Vladimir Putin and Xi Jinping signed a 25-year contract for the far-eastern route and “definitely talked about the PS-2”, said Tatiana Mitrova, a research fellow at Columbia University’s Center on Global Energy Policy.But since then, while Russia has repeatedly emphasised its readiness to launch PS-2, Beijing has been conspicuously silent. While visiting the Kremlin in March, Xi skirted around PS-2 — while Putin spoke about the plan as if it were a done deal, saying “practically all parameters . . . have been finalised”.Mikhail Mishustin, prime minister of Russia, left, and Xi Jinping during a meeting at the Great Hall of the People in Beijing on Wednesday © Sputnik/Alexander Astafyev/Pool/ReutersCareful not to depend too heavily on any one supplier, China has been active in securing natural gas contracts for larger quantities than it actually needs, said Gergely Molnar, the International Energy Agency gas analyst.China relies on Russia for just over 5 per cent of its gas supply, he said. Together with planned increases in supply through existing routes from Russia, agreement on PS-2 would increase that share to about 20 per cent by the early 2030s.China does stand to gain from the pipeline. It is keen to diversify the country’s energy sources, especially overland supplies from Russia and Central Asia that would be more secure than sea routes in the event of geopolitical or military tensions with the west. “The transportation of gas is safer to go through Russia, through land transport, compared with [the] faraway Middle East,” said Lin Boqiang, the head of the China Institute for Studies in Energy Policy, Xiamen University.

From left, Gazprom chief executive Alexei Miller, Russian president Vladimir Putin and Chinese vice-premiere Zhang Gaoli attend the ceremony marking the welding of the first link of the Power of Siberia in 2014 © Alexey Nikolsky/RIA NOVOSTI/AFP/Getty Images

There are geopolitical complications to agreeing the deal against the backdrop of war in Ukraine. But some China policy experts believe a deeper energy partnership with Russia is only a matter of time. “No one should really expect that China should cut off its access to Russian oil and gas,” said Victor Gao, vice-president of the Beijing-based Center for China and Globalization. “This kind of trade is normal, it’s peaceful trade.” He said the huge energy trade between Russia and China would “eventually lead to a reconfiguration of the oil and gas supply in the world . . . and the west should not be surprised by that”. For Russia, the construction of the PS-2 is the only way to compensate for at least part of the EU market it has lost. That market accounted for most of the gas produced from the Yamal peninsula. But this means there is no particular incentive for China to agree to the new pipeline now.

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China, indeed, has been busy developing other overland supplies. At a summit with Central Asian countries last week, Xi championed the construction of the so-called Line D pipeline, which would be China’s fourth in the region bringing gas from Turkmenistan. About 35 bcm of gas were exported to China via three pipelines from Turkmenistan last year. That compares with 16 bcm sent by Russia via Power of Siberia.Even with the PS-2 pipeline in place, Russia would not be able to match what it has lost in European sales. The price of this gas would also be lower. Gas sent through the first Power of Siberia pipeline — on terms struck when Russia’s negotiating position was much stronger — is priced well below the European market rate.

Sergei Vakulenko, a former strategy director for Gazprom, said Russia fails to even match the price China pays for pipeline imports from other suppliers.Given these factors, PS-2 would generate an estimated $12bn a year for Gazprom, of which the state would receive about $4.6bn in duties and tax, according to Ronald Smith, senior oil and gas analyst at BCS Global Markets.This sum, equivalent to less than half of Russia’s average monthly energy revenues in 2023, would hardly be transformative. But the Kremlin is desperate for additional revenue as its budget deficit balloons, its war costs increase, and its European gas sales wane. Mitrova of Columbia University said: “This gas has nowhere else to go.” More

While shoppers contend with high inflation, the black market in currency thrives © Khaled Desouki/AFP via Getty ImagesIn October of last year, it looked like Egypt was embarkingon an economic reform programme to bring north Africa’s largest economy out of a growing crisis that had started in early 2022.This included a new agreement with the IMF, the devaluation of the Egyptian pound by 50 per cent, announcing a new policy to reduce the role of the state in the economy, and earmarking 32 state-owned companies for divestiture. These measures were met with some — albeit not overwhelming — enthusiasm that Egypt was finally taking the bold steps needed to embark on a growth trajectory.But, several months later, local and foreign investors alike, as well as rating agencies and international financial institutions, had become increasingly sceptical that the promised reforms would ever materialise — and the key economic indicators remained far from reassuring.Thus, early this month, Egypt was downgraded by Fitch Ratings — for the first time in a decade — on the basis of what the rating agency deemed to be a lack of significant reforms. It also cited the country’s high external financing requirements, combined with constraints on obtaining future funding, as well as the deterioration of public debt “metrics”. So, why have the reform efforts not materialised, nor brought about the anticipated recovery?For one thing, the denial factor continues to hamper progress. In a statement issued by the Egyptian government to rebut Fitch’s pessimism, the economic crisis was mostly attributed to the Covid pandemic and, additionally, to Russia’s war on Ukraine.

Ziad Bahaa Eldin © Fadel Dawod/Getty Images

This is no longer accepted by most independent analysts and observers. They worry about denying the additional, and significant, impact of other self-inflicted causes of the crisis: the excessive spending on long-term infrastructure projects; the lack of prudence in borrowing locally and internationally; the unprecedented growth of the state’s role in the economy; and the highly bureaucratic environment facing private sector investors.This is not a debate about the past but about the future. Recognising previous policy mistakes is a necessary precondition for embarking on an all-out reform path and turning around an economy that has seen official inflation reaching 40 per cent, the currency black market thriving, import constraints harming productive capacities, and Egypt’s debt burden reach new and alarming heights.Add to this the lukewarm support by Gulf countries — traditionally seen as a donor of last resort — and achieving genuine economic reform becomes a matter of utmost priority.But, while the economy at large, as well as the mainstream of private sector companies, have been suffering, some Egyptian enterprises — old and new, small and large — have found opportunities. Many have managed to transform themselves and adapt to a new normal.Export is the name of the game. Scores of agricultural producers, herbal and horticulture businesses, manufacturers of building materials, garments and light manufactured goods, as well as providers of technological solutions, have managed to find their way to growing markets in the region and beyond.The common features among companies in this successful club — albeit one of still limited membership — are, however, indicative of the hardship of the current economic crisis. These features include: relying mostly on local inputs and thus avoiding import constraints; avoiding competition by state companies; limiting the growth of overheads; and, largely, keeping a low profile and steering clear of the limelight.Looking ahead, professional service companies, technology providers, consultants, data processors and others, meanwhile, are aiming to increase their returns by providing back office services to neighbouring economies — and, therefore, benefiting from the opportunities created by the currency devaluation.

But this is not enough. To grow and overcome the present economic hardship, Egypt needs to transform this minority of successful businesses into an overwhelming majority.On May 16, the government announced a comprehensive package of investment-friendly measures, aimed at boosting private sector investment by reducing bureaucratic hurdles, providing some assurance of fair competition with the state and giving clarity on taxation.These are much welcomed measures — perhaps more for the positive signal they send than for their substance and content. To turn around the economy will require much more than facilitating the issuance of permits or providing some tax relief.For the message to be truly convincing, and to attract the attention of a sceptical community of international and local investors — as well as rating agencies — a comprehensive economic reform programme must be adopted, declared and followed through.Only then will success stories become the norm and will Egypt’s abundant opportunities and potentials be realised.The writer is an economist, commercial lawyer and former deputy prime minister of Egypt 2013-14  More

To get to the small town of Kasongo, in Maniema province in eastern Democratic Republic of Congo, a solar panel must travel approximately 7,000 miles. From a factory in southern China or India it is shipped to the port of Mombasa, trucked 1,200 miles across Kenya, Tanzania and Rwanda and over the border to Goma in DRC. From there, it is flown to Kindu, capital of Maniema province, before making the final bumpy journey by road to Kasongo.And the fact that a solar kit can make this journey, be sold for $63, and produce clean power for 20 years is a miracle of technology and supply chains. Increasingly, distribution networks are the key: how to get technology that mythical last mile into the hands of the customers who need it, at a price they can afford.In the case of Altech, which ranks number four in the FT-Statista list of fastest-growing companies in Africa, the answer is to use a network of roughly 4,000 so-called “solar ambassadors”. They work on commission in communities across 23 of DRC’s 26 provinces, selling the product and collecting micro-repayments, sometimes daily.“They are evangelists for our off-grid solutions,” says Iongwa Mashangao, a co-founder of Altech. “Ninety per cent of our people are living without access to electricity. This is impacting our development efforts in all aspects of life. We have this vision to eradicate energy poverty in the country.”

The story of how two exiles from the DRC brought up in a Tanzanian refugee camp hit upon the idea of bringing renewable energy to their homeland is the stuff of Hollywood movies. But the path that Mashangao and his partner, Washikala Malango, followed is, in fact, one that has been well trodden.More than a decade ago, M-Kopa, a Kenyan company that now offers its services to countries including Uganda and Nigeria, helped pioneer the pay-as-you-go-model that has allowed off-grid solar to spread rapidly around the continent. By 2021, 53mn homes in Africa were using off-grid solar, according to the International Renewable Energy Agency. But that still leaves an estimated 600mn people without reliable power in a continent whose population is likely to double to 2.5bn by 2050.Rossie Turman, international finance co-chair of the Africa Practice at Lowenstein Sandler, a US law firm, says that dozens of companies operating across the continent are fulfilling a similar need. “It’s viable because it is actually solving a need in homes in areas with no long-term hope that they’re actually going to get electrified,” he explains.M-Kopa Holdings, number 50 on the FT-Statista list, was originally built on the back of the M-Pesa system of mobile money pioneered in Kenya. That allowed the company to charge customers micropayments and, using what it calls the internet of things, to deactivate equipment should customers fail to pay.

Pay-as-you-go model has allowed off-grid solar to spread rapidly around Africa © Waldo Swiegers/Bloomberg

M-Kopa has extended the goods it offers to smartphones and, most recently, electric motorbikes. More important still, it has built a lending and insurance business on the back of the credit histories it is able to accrue from its customers. It describes itself as a fintech business.“There are companies that have picked up on our initial innovation and do a lot of good business in what you might call pay-as-you-go solar financing,” says Jesse Moore, one of M-Kopa’s co-founders. “But we always believed that we were creating a set of rails for financing and have a broader set of life-enhancing assets.”Altech — and Easy Solar, a Sierra Leone company that made the ranking’s top 50 at number 9 — are at earlier stages of development. That helps to explain their faster growth, says Turman, who notes that companies that have cracked the last-mile problem are likely to expand quickly.Altech encourages customers to pay by mobile money services offered by telecoms companies Orange and Airtel, but its “solar ambassadors” also take cash payments. That inevitably complicates the business model and increases the overhead costs.Life is made harder by the challenging geography of DRC, a country roughly the size of western Europe, much of it covered in primary forest, with more than 100mn people scattered in hard-to-get-to regions.The two Congolese founders set up what became Altech (Alternative Lighting Technologies) after seeing simple solar kits in a market in Dar es Salaam a decade ago.“We bought 50 pieces with our own savings and brought them back to Baraka,” says Mashangao, referring to the town in South Kivu on the shores of Lake Tanganyika where he is from.In Baraka, there was a lot of work to do to persuade people that the kits were reliable and safer than the kerosene equivalent.Originally, they distributed equipment to trusted members of the community — such as schools and medical dispensaries — and collected monthly repayments.

As volumes increased, they made several trips back to Tanzania, returning each time with bigger and bigger shipments. For the smallest units — which run a lightbulb and a mobile phone charger — customers put down a $3 deposit and pay $1 a day for 60 days. Altech offers a two-year service warranty.Bigger units, capable of running four bulbs and an FM radio, can also be bought over longer periods. Altech’s biggest offering, paid for over 36 months, can run televisions, fans and other household appliances.Mashangao says his company has sold 350,000 units and that it intends to increase this to 2mn by 2030.To date, fund-raising has reached $18mn, from grants and impact funds. Further financing, including $13mn from South African investment bank Verdant Capital, still undergoing due diligence, is on the way, he adds.These are small numbers for a vast country. They are, nonetheless, a start. More

Holidays are an essential, not a luxury. And a bit of luxury is also an essential. Not that my bank account would agree. In such circumstances, is it even a good idea to consider booking a hotel where it costs over £1 a minute to stay?It’s not as if I can’t escape the Big Smoke. I am fortunate to have a second home nestled on England’s Gold Coast, Frinton-on-Sea in God’s own county, Essex. I love it there. The beaches have glorious golden sand, I love my beach hut — a brilliant spot for lunch — and the wonderful lawn tennis courts at my local club. If the sun is shining, I’ll be sure to get a Frin-tan. Who needs to go abroad?I should make as much use of the house as possible. The place costs a fortune to run and now the pool is on, energy bills are burning through my cash as fast as the muntjacs are eating the roses in my garden. Staying there, I won’t have the expense of dog kennels nor suffer airport queues or being squeezed into an airline seat eating food I’d normally turn my nose up at. On my last flight, the best thing on the pay-for menu was a Marks and Spencer sarnie and a bag of M&Ms. I know it’s at altitude but that’s hardly haute cuisine.

Nowadays, researching holidays online can unleash spam hell. Type “holiday”, “flight”, “hotel” or any holiday destination into your search engine and prepare to be inundated with targeted advertisements by operators. But images of five-star hotels with their pools, sumptuous loungers, endless cocktails and delicious chefery are primarily served up for fantasy, and rarely matched by reality.Years ago, when I didn’t own a second home, holidays were the escape. Working for an investment bank, it was important to fly as far away as possible from the office. Not to show off — everyone had enough money to do that. But to be unreachable for whatever catastrophe a jealous colleague manufactured to see if they could drag you back from your travels. On one occasion, I took great pleasure in being so far away that the delay on the line allowed me to cut across everything that was said, suggest it was too difficult and that I’d leave the fax number should it really be that urgent. I didn’t hear another word.These days, communications make contact easy. One can work from pretty much anywhere if there’s WiFi. Anyway, I’m freelance. Holidays mean money lost, not freedom gained. And recently that means even more money — whether it’s food, liquid refreshment or the power to get us to where we want to be. Forget the Covid era holiday bargains. They’re long gone. Air travel was up 44.1 per cent in the year to December 2022 before easing back this year, the Office for National Statistics found. And high season holiday prices were up by 51 per cent on average, according to research by consumer group Which? International travel is back. Problem is, no one told the bank account.When it comes to holidays, other than my acceptance of the occasional Club Med activity break, I’m looking for luxury. Following my grandfather’s travel ethos, I want the hotel to be nicer than my home. The service must be exemplary. And the culinary experiences should be beyond anything I could find around the corner or a short Uber trip away. I’m not interested in slumming it for “the experience”. Nor staying in a hotel that’s so large it’s like living in an airport lounge, with the queues to match.So given the cash crunch and sheer expense, why did I buckle last week and go full tilt in booking an expensive getaway? And with my mother? I’m 53 and surely over the need for a family holiday. Over lunch we’d concocted a plan to revisit Venice, her favourite destination and a place we’ve often been before. There’s only one place to stay if you’re planning a trip: Hotel Cipriani. It’s more money per night than many package holidays are for a week, with room rates in June starting at around €1,700 a night. 

That’s not the point, though. This place is luxury personified. It’s not the smartest hotel I’ve visited, nor the one with the best decor. But it’s about coming back to a place that holds special memories. Some may argue that a Bellini at €29 a pop is pushing it. You could always go for a glass of Ruinart for €50 instead — or blow the budget and buy a bottle for a cool €200. But we all know that a pint in a pub is going to be more expensive than a tinny of own-label lager bought at the supermarket. It’s the location and ambience you’re paying for. If I’m going to take time off work and forgo the income, I don’t want to be living like a student just to save a bit of cash. Happily, I’ve already convinced myself I’m economising by opting for a four-night stay. Anyway, I need to buy some new shoes, and following Brexit, I can buy them in Venice and claim back the VAT.Fly off-season, you can grab an easyJet flight for £30-£40 each way. High season, it’s more expensive. On the face of it, BA looks pricier at a couple of hundred quid. But by the time you’ve realised you might actually want to take a piece of luggage with you, it’s not financially damaging by comparison. Booking through my Amex Centurion credit card means they provide “free” airport transfers. And if you travel midweek, even in high season, the costs are lower. It’s the hotel that will have you howling in financial agony. Again, I got Amex to make the booking. There’s no saving on the eye-watering price, but you’ll receive a daily room credit, enough for a few glasses of fizz, a “free” room upgrade and a late checkout. Handy if you want to take a cheaper evening flight home. But there is another reason for this pilgrimage. We’re all getting older, and it could be the last time we’re able to go together. And time spent together making memories is priceless.James Max is a broadcaster on TV and radio and a property expert. The views expressed are personal. Twitter: @thejamesmax More

Africa presents something of a conundrum for the world’s biggest asset managers. What should be a continent overflowing with investment opportunities is by and large no more than a side note within the trading activities of many international fund companies.Despite being home to some of the fastest growing economies, as well as an abundance of natural resources and a burgeoning middle class, it continues to be unloved by the majority of investment managers.The number of funds that invest in the continent remains small, with data from investment research firm Refinitiv showing the single biggest individual Europe-focused fund holds more money than all of the Africa funds put together.Liquidity, or the lack of it, is the sticking point. “For a lot of countries in Africa, getting your money back out is the problem,” explains Chris Tennant, a fund manager at Fidelity International, one of the world’s largest investment companies.Illiquidity makes the situation “very difficult”, affirms Mark Mobius, the veteran investor. But scratch beneath the surface and the same fund managers say the continent can provide lucrative and stable returns — as long as investors are prepared to do their homework.

As the FT-Statista 2023 ranking of Africa’s fastest-growing companies shows, the continent has plenty to offer, in sectors ranging from fintech and renewable energy to healthcare, commodities and agriculture. However, many of the names in the 100-company list are effectively off limits to mutual funds and better suited to private equity investors who, as Mobius says, can make a “five or 10-year commitment without the pressure of needing to redeem”.What countries, sectors and companies, then, do fund managers like? For Tennant, much promise lies in Zambia, commodities and the Canadian copper miner First Quantum Minerals. “I particularly like Zambia,” he says, noting that, as lots of commodity-producing nations implement windfall taxes and tighten tax regimes, Zambia is doing the opposite. President Hakainde Hichilema, since assuming office in 2021, “has improved the financial framework for mining companies” and is “pro-investment”, Tennant says. Coupled with the global move to electrify cars, and hence the growth in copper demand, this “makes a compelling case for Zambian mines, with First Quantum the standout name”.Tennant also likes Namibia, which has a “very bright future” after a big oil discovery in the Orange Basin — the area’s third discovery in just over a year. “The potential for investors here is enormous,” he says.Gregory Longe, portfolio manager of the Africa Frontiers Strategy at Cape Town-based Coronation Fund Managers, agrees. He has a significant holding in Africa Oil, a Canadian listed company that stands to benefit from its links to the recent Namibian discoveries. Africa Oil also has stakes in “high quality” oil producing fields operated by TotalEnergies and Chevron in Nigeria that will “generate more cash over the next four years” than the company’s entire market capitalisation.“But what we are really excited about is that Africa Oil also owns a stake in the Venus oil discovery in Namibia,” he says, referring to the second of the three Orange Basin discoveries. “This field is currently being explored by TotalEnergies and is estimated to be a three to 10bn barrel field. It is TotalEnergies’ number one exploration priority for this year.”Longe is also keen on Ugandan electricity distributor Umeme, despite the company being set to lose a key government contract in 2025. Reports suggest Uganda will form a state-owned electricity distributor to take over when Umeme’s concession expires next year, in an attempt to reduce power tariffs by cutting out the intermediary.But Longe believes Umeme is undervalued. “The business has just generated $40mn in net profit, up 4 per cent year on year, and declared a $30mn dividend in the previous financial year. “The company is expected to keep growing earnings over the next two years, be debt free by year-end, and receive an estimated $250mn payout” when the government contract ends.He adds that, up until December last year, Umeme had a market capitalisation of less than $100mn and that “needless to say” he was “very happy” to increase his fund’s exposure to the company.“Since then, the share [price] has doubled, yet still looks very cheap trading on a 4.3x historical price/earnings ratio and 18 per cent historical dividend yield.” 

Other companies flagged by asset managers as compelling investment opportunities include Kenyan telecoms group Safaricom, South African retailer ShopRite, and metals producer Jubilee Metals, which operates in Zambia.Overall, though, the sense from the international fund community is that the continent is still more full of promise than anything else. “Africa remains hope eternal for global investors,” says Gary Dugan, Dalma Capital’s chief investment officer. “A continent rich in resources, commodities and people [that] still struggles to live up to the aspirations of the people and international investors.”But he adds that “there is more persistence to efforts by the international community to help Africa realise its undoubted potential . . . Many of the emerging markets of the world have emerged, most notably China, and investors are seeking new ones. Maybe Africa can eventually deliver.” More