Africa Market Update - April 2015

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MARKET UPDATE – AFRICA | March 2015 BUSINESS ENVIRONMENT The passage of the law is likely to deteriorate the good will of citizens across the region in accelerating regional integration since it is widely perceived as exclusionist. Further to that, the law is bound to adversely impact Tanzania’s human capital base as indicated by the literacy levels comparison. From a skillset perspective, Tanzania also presents a comparatively high risk in access to labour force with tertiary education skillsets in view of Business Monitor International’s Operational Risk Index (With 0% representing the highest risk while 100% represents the lowest risk). As such, investors in Tanzania are bound to face challenges in accessing high skilled and technical labourers. BMI Tertiary Education Risk Index Source: BMI, StratLink Africa Tanzania’s risk profile is likely to deteriorate in view of the new legislation which could effectively impede access to high skilled labour. Assessment of the enrolment rate to tertiary institutions indicate that Tanzania is trailing Kenya. Enrolment to Tertiary Institutions Source: BMI, StratLink Africa Year-on-Year Growth in Private Sector Credit to Agriculture services and make Tanzania competitive against its regional peers. Financial Services Penetration (15Yrs+) Source: Bank of Tanzania, StratLink Africa The telephony segment of the economy has been vibrant with growing penetration and is poised to play an increasingly vital role in driving growth in the coming years. We expect growth to be strongly underpinned by investment in infrastructure (fuelling growth in the transport and construction sectors) and mobile telephony driven e- commerce solutions. Telephony penetration has increased from 15.0% in 2005 to 67.0% in 2013 and should be central in increasing access to financial Source: World Bank, StratLink Africa Agriculture Portends Risks to Growth Credit to the agriculture sector contracted, year-on-year, reflecting a general bearish outlook by investors. The country’s top two agricultural exports tobacco and coffee (5.9% and 3.4% of export earnings) confronted an adverse climate driven by growing health consciousness that is denting 10 | StratLink Africa Ltd. www.stratlinkglobal.com
MARKET UPDATE – AFRICA | March 2015 returns from tobacco and depressed prices that affected coffee. Agriculture Credit Growth Year-on-Year T-Bill Yields +37.3 % All Share Index year-on-year change Source: Bank of Tanzania, StratLink Africa With agriculture as the mainstay of the economy, depressed performance is bound to undermine growth momentum in the years ahead. Agriculture in the Tanzanian Economy Consideration Agriculture Size Size of GDP 24.7% Source: Bank of Tanzania, StratLink Africa The 91 Day paper yield declined by 370.0 bps to 7.6% while the 182 Day paper yield declined by 420.0 bps to 9.2%. The 364 Day paper, on the other hand, saw its yield decline by 310.0 bps to close the month at 10.3%. Average Bid-to-Cover Ratios -3.2 % All Share Index month-on-month change Traditional Export Earnings 20.0% National Food Demand 90.0% Employment of Labour Force 75.0% Coupon Rate 11.0% Source: Tanzania Government, StratLink Africa DEBT MARKET UPDATE In line with our forecast, inflation nudged upwards by a marginal 20.0 bps to 4.2% in February 2015 on the back of rising food costs. This notwithstanding, yields reported a considerable decline in March 2015 in what we assess is likely to have been driven by trends in government borrowing. We note that this decline comes on the back of development partners disbursing USD 44.0 Billion of with-held donor funding that should have eased the strain on the country’s fiscal position. As such, the government is likely to have been under less pressure to borrow from the domestic market. Source: Bank of Tanzania, StratLink Africa Uptake of short term instruments has been constrained by tightening liquidity in the money market. The interbank rate closed March 2015 at 7.7%, 460.0 bps higher than it did February 2015. Liquidity is likely to be tightening driven by government intervention with foreign exchange dealers having reported strong dollar demand in March from importers. As such, the shilling has been weakened against major currencies, likely necessitating intervention by Bank of Tanzania. www.stratlinkglobal.com StratLink Africa Ltd.| 11
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Africa Market Update - April 2015

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