Africa Market Update - February 2015

February.2015 

Market Update - Africa 

This report includes economies of 

Kenya,Tanzania, Uganda, Rwanda, Ethiopia 

and Ghana

01. Kenya 

2 | StratLink Africa Ltd. 

www.stratlinkglobal.com

MARKET UPDATE – AFRICA | February 2015 

POLITICAL OUTLOOK 

Muted Attacks Spell Hope for 2015 

Terror linked incidences have been muted in 

the January on the back of strategic changes 

in the top echelons of Kenya’s security apparatus 

at the end of 2014. Relative quiet 

might serve to prop up investor confidence 

in the country’s efforts to arrest the malaise 

of insecurity that plagued 2014. 

Reports of the surrender of a Senior Al Shabaab 

figure, Hassan Dhubi, to the Somali 

government (backed by Amisom 1 forces) on 

January 15th, 2015 will also serve to buoy 

perception of a fractured Al Shabaab militia. 

Investors will, however, also be on the 

lookout for possible retaliatory attacks as Al 

Shabaab seeks to rekindle hope among its 

followers. 

rate at 8.5%. In our assessment, retention 

of the benchmark rate is anchored on 

favourable trends in inflation and a need to 

check on liquidity, as the shilling remains depressed 

against major currencies. The nearterm 

outlook on price-levels is favourable 

driven by plummeting global oil prices and 

marginal movement in the food price index. 

We believe the January 2015 application for 

a precautionary loan from the International 

Monetary Fund is largely targeted at mitigating 

mounting currency risks. 

Foreign Exchange Reserves 

We believe the 

January 2015 

application for 

a precautionary 

loan from the 

International 

Monetary Fund is 

largely targeted 

at mitigating 

mounting 

currency risks. 

Anti-terrorism law: Poisoned Chalice? 

Domestically, controversy around the antiterror 

legislation is bound to heighten polarization 

along political lines. Extension of 

the period during which “suspected terrorists” 

can be held without trial from 90 to 360 

days is poised to continue eliciting concern 

as certain communities feel predisposed to 

targeting by the law. 

ECONOMIC OUTLOOK 

Monetary Policy: Cushioning the Shilling 

In line with our January 2015 update, the 

Central Bank retained an accommodative 

monetary policy keeping the benchmark 

Source: Central Bank, StratLink Africa 

Propping up the shilling against the increasingly 

strong USD will be the focus of monetary 

policy in the coming months. The local 

unit continues to negatively drift further beyond 

the 90.0 units exchange mark against 

the US dollar. 

1 African Union Mission to Somalia 

BUSINESS ENVIRONMENT 

The business climate is experiencing a mix of tail and head winds from the plummeting global oil prices. On 

the one hand, consumers and business operators are reaping from the highest drop in petroleum product 

prices. This is expected to augur well for the cost of doing business in the months ahead. 

On January 14th, 2015, market regulator, ERC 2 , reported the highest drop in benchmark prices in four years 

with Super Petrol dropping by Kes 9.13/litre to Kes 92.9 whilst that of Diesel dropped by Kes 7.50/litre to Kes 

83.4 (Nairobi prices). 

On the flip side, the plummeting price of oil is dimming oil exploration efforts in the region. The plan by British 

Oil and Gas company, Afren, to slash its exploration budget speaks volumes of potential stress on the investment 

climate. Tullow Oil has also undertaken austerity measures in neighbouring countries such as Ethiopia 

in view of oil prices. 

2 Energy Regulatory Commission 

www.stratlinkglobal.com 

StratLink Africa Ltd.| 3


Central Bank 

will cautiously 

monitor liquidity 

trends in the 

money market 

with a view to 

supporting the 

shilling. 

Kenya Shilling vs USD Exchange 

Net Liquidity Injection (USD Mln) 

Source: Central Bank of Kenya, StratLink Africa 

Source: Bloomberg, StratLink Africa 

Short-term measures to prop-up 

shilling 

We expect the local unit to remain under 

pressure in the coming months driven by 

deterioration of the current account balance. 

This has principally been brought 

about by growing merchandise imports 

against depressed export earnings. Current 

account deficit as percentage of Gross Domestic 

Product (GDP) grew by 110.0 bps to 

9.9%, year-on-year, as at September 2014. 

Current Account Deficit (USD Mln) 

Year to 

Sep-12 - 4,057.0 

Sep-13 - 4,643.0 

Sep-14 - 5,293.0 

Current Account Deficit 

Strengthening greenback to 

undermine shilling’s long-term 

strength 

Further to unfavourable balance of trade affecting 

the shilling and improved macroeconomic 

environment in the United States the 

demand for the greenback in local markets 

with continue to increase. This is bound to 

keep the shilling on a relative weakening position 

against the dollar going forward. Our 

view is that the KES will trade in the 90-93.50 

range to the USD in the short term (30 days) 

and 89-94 in the medium term (180 days) 

Industries, such as steel manufacturers, that 

rely heavily on imported inputs will bear the 

brunt of the waning value of the shilling. 

Kenya Shillings exchange Rate vs 

Cost of steel 

Source: National Treasury, StratLink Africa 

Central Bank will cautiously monitor liquidity 

trends in the money market with a view to 

supporting the shilling. In January 2015, the 

bank recorded the first net liquidity withdrawal 

from the market in four months indicative 

of response to the shilling’s trends 

against major currencies. 

Source: National Bureau of Statistics, StratLink Africa 




DEBT MARKET UPDATE 

In January 2015, the yield curve exhibited 

marginal up-tick from the preceding 

month. The short-term end of the curve has 

trended downwards compared to December 

2014, indicative of reduced borrowing 

appetite by the government. This is in line 

with the 59.0 bps slash of the Kenya Banks’ 

Reference Rate (KBRR) to 8.54% that targets 

keeping commercial bank lending rates on 

a downtrend. 

Bloomberg BVAL Yields Index 

A favourable outlook on inflation given the 

nose-diving global crude oil prices is also 

likely to further weigh down yields in the 

market. Inflation now stands at a sixteen 

months’ low and 100.0 bps above Central 

Bank’s lower margin target of 5.0%. 

Inflation Trend 

Yields are bound 

to experience 

downward 

pressure in the 

coming month 

pegged on the 

bid to tame 

government 

appetite for 

domestic 

borrowing. 



Yields are bound to experience downward 

pressure in the coming month pegged on 

the bid to tame government appetite for domestic 

borrowing. We note, however, that 

the government has faced revenue mobilization 

challenges in the first half of FY14/15 

and this could translate in borrowing above 

target. 

High Liquidity in the Money Market 

The money market has been fairly liquid in 

January 2015 driven by government payments 

and repo maturities. The interbank 

rate has been on a downtrend closing the 

month at 6.5%, 74.0 bps lower than it did in 

December 2014. 

Interbank Rate 

91 Day T-Bill Accepted Bids (USD Mln) 






We expect the 

market to remain 

on an uptrend 

in the coming 

months driven by 

corporate actions 

that are likely to 

have investors 

price in bullish 

expectations on 

select counters. 

EQUITY MARKET UPDATE 

NSE 20 Share Index Trend 

USD 1.8 billion deal to put up a 960 megawatt 

coal power plant. In view of Kenya’s 

pursuits to bridge its energy deficit by injecting 

an additional 5,000.0 megawatts by 

2016, investors are likely to take an upbeat 

view of the counter at the exchange. 

Centum Share Performance 


+3.6 % 

NSE 20 Share Index 

change year-on-year 

NSE 20 Share Index Month-on-Month 


+ 2.9 % 

NSE 20 Share Index 

change month-onmonth 


The market started the year on a resilient 

note shrugging off concerns over the Capital 

Gains Tax that was widely expected to 

dampen investor activity. We note, however, 

the refusal by investment banks to collect 

the same on behalf of the Kenya Revenue 

Authority could have served to buoy 

investor activity. 

We expect the market to remain on an uptrend 

in the coming months driven by corporate 

actions that are likely to have investors 

price in bullish expectations on select 

counters. 

Centum has also sold off its stake in UAP Insurance 

generating an estimated USD 43.7 

million. The proceeds will play a central role 

in meeting the company’s increasing investment 

in projects spanning the Fast Moving 

Consumer Goods market and property development. 

Portfolio Diversification 

The portfolio diversification also presents a 

strength for the company that could be key 

in helping it mitigate shocks that slow down 

activity in particular sectors. 

Housing Finance: Beefing up the 

‘war chest’ 

Mortgage lending company, Housing Finance 

Corporation, has received the greenlight 

from the Capital Markets Authority to 

raise additional capital to a tune of USD 38.2 

million through a rights issue in 2015. 

Centum Investment: Sealing the deal 

A consortium including financial services 

firm, Centum Investment, has inked the 




Housing Finance Share Performance 


Whereas investors are bound to be bullish 

about Housing Finance given growing demand 

for housing, the company’s mortgage 

rate could play a negating role. With growing 

pressure on credit lenders to reduce interest 

rates in the country, cost of credit and 

ability to penetrate the borrowers’ market 

will be key in determining the share’s performance. 

Mortgage Rates Comparison 3 

(November 2014) 

theirs by 80.0 bps (to 16.5%) and 90.0 bps 

(to 9.2%) respectively. 

Safaricom Share Performance 


Whereas this change might largely be 

deemed as insignificant, the fact that it 

comes against the backdrop of an anticipated 

entry by Equity Bank into the Safaricom 

dominated mobile money market could 

stoke a bearish view, albeit benignly, from 

investors. 

With growing 

pressure on 

credit lenders to 

reduce interest 

rates in the 

country, cost of 

credit and ability 

to penetrate 

the borrowers’ 

market will be key 

in determining 

the share’s 

performance. 

Source: Hass Consult 2014, StratLink Africa 

Safaricom: Fighting on two fronts 

Mobile telephony company, Safaricom Ltd, 

shed a fraction of its market share of prepaid 

mobile subscribers by 130.0 bps to 

66.7% in the first quarter of FY2014/15 while 

competitors Airtel and Orange increased 

3 SCB – Standard Chartered Bank; CBA – Commercial Bank of 

Africa;- KCB – Kenya Commercial Bank 




02. Tanzania 





Uncertainty Looms over 

Referendum 

Uncertainty abounds over the constitutional 

referendum as a section of stakeholders 

raise concern over what they term as delay 

in meeting set timelines for preparation. 

This is bound to strain the country’s political 

risk perception as a new dispensation 

is widely expected to play a central role in 

laying the ground for the October 2015 election. 

Debate on the constitution is largely informed 

by divided opinion over retention of 

a two-tier union (backed by the current government) 

or adoption of a three tier structure 

(backed by factions of the opposition) 4 . 


Investors are likely to remain guarded about the investment 

climate against the backdrop of backlash from development 

partners following the USD 122.0 million energy scandal and 

the forthcoming voting cycle. The scheduling of the referendum 

in April 2015 and the election in October 2015 means 

that the country will be caught in election mood for the better 

part of 2015. This environment is bound to decelerate 

momentum gained in boosting investor perception after the 

country lifted caps set on foreign investor participation in the 

equity and debt markets. 

Export Performance (USD Mln) 

Referendum: Bumpy Road Ahead 

Noting that the opposition boycotted the 

constitution drafting process in 2014, actualization 

of the referendum is bound to 

present the government with rough terrain. 

The opposition is capitalizing on the setback 

laden process to rally the public. 

Whereas the government insists the referendum 

will take place as planned on April 

30th, 2015, factions such as the Civic United 

Front have raised doubts about feasibility of 

the exercise on the planned date. 


Depressed Exports to Weigh Down 

Shilling 

Weak exports have set the economy on a 

feeble footing at the start of the year, with 

the shilling reflecting fragile trends in the 

global markets. Earnings from Gold and traditional 

exports stood at a three year low 

as at October 2014 (according to the latest 

data), indicating that the current account 

balance is poised to come under pressure 

in the near future. Investors should expect 

a depressed local unit and upward pressure 

on inflation owing to cost-push considerations 

from imported commodities. 

Source: Bank of Tanzania, StratLink Africa 

Export earnings are sliding on the back of 

tanking global commodity prices. The value 

of gold export earnings declined by 22.6%, 

year-on-year, to USD 1.4 billion. Earnings 

from traditional exports – tobacco, coffee, 

cotton, Cashew nuts, tea, clovers and sisal 

– declined by 8.7% to USD 768.2 million. 

In the same period, the value of imports 

nudged upwards marginally by 0.2% to USD 

10.8 billion. 

Shilling: Fragile trend 

We assess that additional pressure on the 

shilling has come from the deferred budget 

support, to the tune of USD 500.0 million, 

by development partners. This is creating 

supply shortage of foreign currency in the 

domestic market. 

Earnings from 

Gold and 

traditional exports 

stood at a three 

year low as at 

October 2014 

(according to 

the latest data), 

indicating that the 

current account 

balance is poised 

to come under 

pressure in the 

near future. 

4 Please refer to our May 2014 Market Update for detailed 

analysis of the two-tier versus three-tier union and 

implications. www.stratlinkglobal.com 




Downward 

pressure on 

the shilling will 

persist pending 

investigations on 

the graft charges 

which occasioned 

the withholding of 

budget support. 

As indicated, 

Tanzania is a 

net importing 

economy and will 

bear the brunt 

of the weakened 

shilling in the cost 

of imports. 

Tanzania Shilling vs USD Exchange 


In Q4, 2014, the local unit appeared to have 

established a resistance line of 1,749.0 units 

to the greenback. This rate was breached on 

January 15th, 2015 with the local unit plummeting 

to 1770.0 units. 

Downward pressure on the shilling will 

persist pending investigations on the graft 

charges which occasioned the withholding 

of budget support. As indicated, Tanzania is 

a net importing economy and will bear the 

brunt of the weakened shilling in the cost of 

imports. 

Food Index Harbingers Uptick in 

Inflation 

The food index has also been drifting upwards 

since the start of Q4, 2014 and despite 

favourable global oil prices, this could 

begin inflicting upward pressure on inflation. 

Inflation vs Food Index 


Yields in the T-Bill market appeared to correct 

in January 2015 after a spike in Q4, 

2014 that is likely to have been driven by 

the with-holding of budget support funding. 

In September 2014, coinciding with the suspension 

of budget support, the bids accepted 

from domestic borrowing were about 

twice as much as the monthly average. 

T-Bill Accepted Bids (USD Mln) 


January 2015 uptake of domestic debt by 

the government has been comparatively 

modest and could be signalling moderation 

of its appetite going forward. We note 

that with planned issuance of a Eurobond 

in 2015, the government will be keen to 

check its fiscal balance in a bid to create a 

favourable backdrop for tapping into the international 

market. 

T-Bill Yields 


Source: Bank of Uganda, StratLink Africa 




The 182 Day and 364 Day papers closed January 

2015 at 14.6% and 15.0%, respectively, 

100.0 bps and 160.0 bps lower than they did 

December 2014. The instruments reported 

oversubscription levels pointing at high liquidity 

in the money market. 


Dar es Salaam All Share Index 

+40.0 % 

All Share Index yearon-year 

change 

January 2015 T-Bill Subscription 

Paper 

Bid-to-cover Ratio 

91 Day 0.9 

182 Day 2.9 

364 Day 5.4 


Bank of Tanzania to Check High 

Liquidity 

In view of the depressed shilling, we anticipate 

Bank of Tanzania to be aggressive in 

mopping up excess liquidity in the coming 

months with a view to provide support. 


Dar es Salaam All Share Index 

Month-on-Month 

+11.2 % 

All Share Index 

month-on-month 

change 

Interbank Rate vs Volumes 



The market began 2015 on upbeat mode 

with apparent correction from the December 

2014 slump. The trend has been driven 

by a rebound in Tanzania Breweries Ltd’s 

counter which has rallied in the month of 

January 2015. 

The interbank rate closed January at 7.6%, 

230.0 bps lower than it stood at the close of 

December 2014. The interbank rate is now 

approaching lows last seen between in October 

2014. 




Counters in the 

industrial and 

allied segment 

have retained the 

lead in market 

performance and 

are poised to 

remain so given 

the favourable oil 

prices. 

Tanzania Breweries Ltd 


The Brewery’s rebound has been driven by 

strong results for the period to September 

2014 that saw revenues surge by 8.0% while 

operating profit grew by 17.0%. The company, 

however, faces headwinds in the quarter 

under way owing to the battered shilling 

that is bound to raise the cost of imported 

inputs. 

Oil prices likely to keep bears away 

Counters in the industrial and allied segment 

have retained the lead in market performance 

and are poised to remain so given 

the favourable oil prices. 

Sector Indices Comparison 

Dec ‘14 Jan ‘15 Change 

Industrial & Allied 3,461.0 6,260.4 80.9% 

Commercial Services 2,006.9 3,011.5 50.0% 

Banking & Finance 2,648.5 3,608.2 36.2% 


12 International Monetary Fund Region Outlook October 2014 




03. Uganda 





Uganda and International Criminal 

Court (ICC) 

President Yoweri Museveni received much 

needed support in his push for African 

states to pull out of the ICC. In the concluded 

African Union summit, Heads of State 

drummed up support against being signatories 

to the Rome Statute. Crumbled cases 

against Kenyan and Sudanese Presidents, 

Uhuru Kenyatta and Omar al-Bashir, respectively, 

are likely to give impetus to deliberations 

against ICC. Whereas there has been 

no indication of retributive action from the 

international community, concerns over 

inadequate domestic capacity to mete out 

justice in view of high crimes will top development 

partners’ concern. Ongoing turmoil 

in South Sudan will furnish a poignant case 

in point for tabling concern over vulnerability 

of states to crimes against humanity. 

Whereas the handing over of former Lord’s 

Resistance Army Commander, Dominic Ongwen, 

to the ICC was deemed confusing by 

many, we note that Uganda was compelled 

to do so as a signatory to the Rome Statute. 


Mining and Agriculture Lead Credit 

Growth 

Mining and agriculture registered the fastest 

acceleration of private sector credit between 

February and November 2014, pointing 

at investor vibrancy in the two sectors. 

We expect the mining sector to retain pole 

position in growth of credit as the country 

rushes to meet targeted commercial oil 

production by 2016. Plummeting oil prices 

could, however, keep activity at sub-optimal 

levels as investors slash exploration expenditure 

plans, especially if prices remain depressed 

into 2016. 

Growth in Private Sector Credit 

(Feb ’14 – Nov ’14) 


Commercial bank lending rates remain high in the economy 

threatening growth and investment prospects for private sector 

players in 2015. At 22.2%, Uganda’s average lending rate 

fares relatively poorly against Kenya’s 16.0% and presents 

a challenge in access to credit which is a key catalyst for a 

competitive business climate. According to World Bank’s Ease 

of Doing Business 2015 (ranking 189 countries), Uganda trails 

Rwanda and Kenya in facilitating access to credit. 

Ease of Access to Credit Ranking 2015 

Country 

Rwanda 4 

Ranking 

Kenya 116 

Uganda 131 

Tanzania 151 


New discoveries buoy investor activity 

In August 2014, discovery of new oil wells 

that increased Uganda’s projected reserves 

by 85.7% to 6.5 billion barrels occasioned a 

surge in the sector’s uptake of credit. The 

new estimate of reservoirs places Uganda 

at par with giant oil producers such as Sudan 

and South Sudan (combined) whose reserves 

are estimated at 5.0 billion barrels 5 . 

Egypt, with reserves estimated at 4.4 billion 

barrels now falls below Uganda’s capacity. 

Ethiopia 165 

Source: World Bank, StratLink Africa 

5 Sudan accounts for 1.5 billion barrels while South Sudan 

accounts for 3.5 billion barrels 




Credit to Mining Sector Breakdown 

Manufacturing Trails 


The manufacturing sector reported a comparatively 

marginal 5.7% increase in private 

sector credit between February 2014 and 

November 2014 to stand at USD 443.8 million. 

We anticipate this relatively low performance 

to persist pegged on the headwinds 

the country’s exports are facing as its key 

destination, South Sudan, remains in political 

turmoil. 

South Sudan is Uganda’s single largest export 

destination (country), after Kenya, accounting 

for 12.7% of formal exports (Kenya 

accounted for 22.8%) as at November 2014. 

Uganda Exports to South Sudan 

(USD Mln) 


Inflation is bound to remain subdued in 

the coming month as the general trend of 

food and global oil prices looks south. After 

a slight uptick in November, inflation was 

back to 1.8% in December 2014 affirming an 

investor friendly horizon in the near term. 

Inflation vs Food Index 


Long-term Inflation Subject to 

Pressures 

The long-term outlook is, however, subject 

to pressures emanating from the weakening 

shilling and seasonal shortages of food 

supplies that could push inflation upward. 

As such, we believe this could be a key factor 

driving long-term yields north while shortterm 

yields exhibit marginal movement. 

Yield Curve 

Whereas there has 

been no indication 

of retributive 

action from the 

international 

community, 

concerns over 

inadequate 

domestic capacity 

to mete out justice 

in view of high 

crimes will top 

development 

partners’ concern. 

Ongoing turmoil 

in South Sudan 

will furnish a 

poignant case in 

point for tabling 

concern over 

vulnerability of 

states to crimes 

against humanity. 






- 4.9 % 

Uganda shilling 

depreciation monthon-month 

-16.4 % 

Uganda shilling 

depreciation yearon-year 

Shilling tumbles 

The shilling started 2015 by breaching its 

2,780 units of exchange to the US dollar 

support line (Q4, 2014). High dollar demand 

by oil importers has been cited as the driving 

factor in driving depreciation of the local 

unit. Balance of payment imbalances, 

aggravated by the situation in South Sudan, 

have also been central in keeping the shilling 

under immense pressure. 

Uganda Shilling vs USD Exchange 


Uganda Stock Exchange All Share 

Index 


+31.9 % 


change 


UGSE All Share Month-on-month 

+10.8 % 



change 

We expect Bank of Uganda to continue 

tightening liquidity in the money market to 

prop up the shilling. 

Average Overnight Interbank Rate 



The market began the year on an upbeat 

mode with the All Share Index surging by 

double digits both on a month-on-month 

and year-on-year basis to the close of January 

2015. Relatively strong performance by 

banking counters, notably Stanbic and Bank 

of Baroda, has been central in driving the 

market to a rally. 




Bank of Baroda Share Performance 


Umeme likely to weigh down market 

Noting, however, that electricity distributing 

company, Umeme Ltd, accounts for about 

65.0% of market turnover, its recent tepid 

performance is likely to weigh down the 

market going forward. 

Umeme Share Performance 





04. Rwanda 





Treading a Tight Rope with DRC 

Strained relations between Rwanda and 

Democratic Republic of Congo started 2015 

on a note of uneasy calm. President Paul 

Kagame (Rwanda) has decried what he 

terms as inaction by the DRC government 

and the UN mission in Congo in efforts to 

disarm Rwandese rebel forces (FDLR 6 ) in 

DRC. Investors will be keen to place Rwanda-DRC 

relations on the radar noting that 

alleged links between Kagame’s administration 

and the M23 rebels (in DRC) occasioned 

the suspension of donor aid to Rwanda in 

2012/13. The suspension of aid adversely 

affected Rwanda’s macroeconomic and investment 

climate, decelerating growth momentum 

from 7.2% in 2012 to 4.6% in 2013. 

Will forceful disarmament be 

employed? 

FDLR has flouted the disarmament ultimatum 

(January 02nd, 2015) set by the United 

Nations. As a result, the focus going forward 

will be on measures taken towards disarmament 

of the forces and how it affects 

Rwanda’s security. 


Agriculture and Industry Growth Rates 

Source: National Bank of Rwanda, StratLink Africa 

Upbeat Service Sector to attract 

investors 

Meanwhile, the service sector remains upbeat 

registering near double digit growth, 

notably driven by the wholesale and retail 

segment. The sector’s growth has recovered 

from a mild slump in 2013 with growth now 

standing 100.0 bps above the two year average 

of 8.1% as indicated by the red line 

below. 

Investors will be 

keen to place 

Rwanda-DRC 

relations on the 

radar noting 

that alleged 

links between 

Kagame’s 

administration 

and the M23 

rebels (in DRC) 

occasioned 

the suspension 

of donor aid 

to Rwanda in 

2012/13. 

Lifting Agriculture and Industry 

Policy makers will be hard pressed to haul 

agriculture and industry out of slow growth 

rut with a view to vaulting the economy 

back to strong growth in Q1, 2015. Growth 

in the two sectors decelerated in the recent 

past as agriculture was battered by a blend 

of adverse weather and depressed prices 

while industry (driven largely by agro-processing) 

is likely to have suffered a knock-on 

effect from agriculture. 

Improving economic performance and investor 

perception tops the agenda in 2015 

and agriculture and industry (about 40.0% 

of GDP 7 ) will be central to this agenda. 

6 Democratic Forces for Liberation of Rwanda 

7 Agriculture constitutes 34% of GDP (Rwanda Agriculture 

Board) while industry constitutes 7.0% 


Investors are eagerly anticipating the New Investment Code 

following the tabling of the draft before parliament in January 

2015. Media reports 8 indicate the new code eyes scaling 

down tax rates for export oriented commodities, a matter 

poised to whet appetite towards investment in export skewed 

areas. Further, the new code is reported to be targeting lower 

electricity tariffs for industries with a view to catalysing manufacturing. 

Manufacturing and industry in Rwanda is emerging from a low 

base and there is need to catalyse growth. At an estimated 

7.0% of GDP, there is enormous room for growth. Given a relatively 

strained economic climate in the country, the adoption 

of the code is likely to be fast-tracked with a view to cushioning 

the economy by stimulating investment. 

8 The East African Weekly, January 17th, 2015 




The Consumer 

Price Index 

continues to 

trend downwards 

further giving 

impetus to 

subdued yields 

in the T-Bill 

market. The near 

term outlook is 

bound to remain 

favourable for 

investors as 

inflation risk 

is mitigated by 

depressed oil 

prices. 

Service Sector Growth 

Source: Bank of Rwanda, StratLink Africa 

Rising income levels have served to make 

the wholesale and retail segment buoyant, 

driving growth in the service sector. Investors 

are bound to maintain keen interest 

on this segment of the sector with a view to 

cashing in on growing consumption in the 

market. 

Per Capita Income (USD) 

Bids Accepted (USD Mln) 


The 91 Day paper closed January 2015 at 

4.10% while the 182 Day closed the month 

at 5.0%, representing very marginal changes 

on each from December 2014. The 364 

Day, on the other hand, closed January 2015 

at 6.0%, twenty five bps lower than it did December 

2014. 

T-Bill Yields 


Source: BMI 2014, StratLink Africa 


Yields have been largely stable in the T-Bill 

market reporting marginal movement in 

January 2015. This is consistent with government 

appetite for domestic borrowing 

which has registered marginal changes in 

the last three months. In the latter part of 

2014, we witnessed volatility in yields in 

what we believe was occasioned by hiccups 

in disbursement of public funds that could 

have seen the government reach for domestic 

borrowing. 

The Consumer Price Index continues to 

trend downwards further giving impetus to 

subdued yields in the T-Bill market. The near 

term outlook is bound to remain favourable 

for investors as inflation risk is mitigated by 

depressed oil prices. 

Consumer Price Index 





The volatile franc in the global exchange 

markets could, however, leave investors 

guarded as to what to anticipate in the coming 

months. Bouts of appreciation and depreciation 

have characterized the franc in 

the recent past, potentially inhibiting investor 

projection of the local unit’s near term 

trajectory. 


Rwanda Stock Exchange All Share Index 

-1.2 % 


change 

Rwanda Franc vs USD Exchange 

+1.7 % 



change 


RSE All Share Index Month-on-month 

+0.5 % 

Rwanda franc 


depreciation 


Likely Mounting Pressure on the Franc 

The local unit is, however, bound to face 

increasing pressure in the coming month 

pegged on rising liquidity in the money market. 

The interbank rate closed 2014 at 4.7%, 

100.0 bps lower than it did November 2014. 

Interbank Rate 



It has been a month of mixed performance 

at the exchange with the All Share Index 

plunging on January 19th, 2015 and rapidly 

correcting in the succeeding days. 

Bralirwa Share Performance 


+1.3 % 

Rwanda franc yearon-year 

depreciation 

Bralirwa remains 

the counter 

dictating market 

direction and 

investors will be 

keen to see how 

the company 

pursues new 

export markets 

in 2015 following 

punitive levies for 

their products in 

the DRC. 




05. Ethiopia 





Turkey takes a bite at the cherry 

The visit by a Turkish delegation including 

the President and business magnates 

adds a feather onto Ethiopia’s cap as a target 

trade partner for fast emerging economies. 

Turkey is among the world’s fastest 

growing emerging economies having averaged 

about 6.1% between 2010 and 2013 

and ranks as the world’s seventeenth largest 

economy. From a political stand-point, 

Ethiopia continues to be viewed as a vital 

partner in the volatile Horn of Africa with 

influence in bodies like African Union and 

IGAD 9 . The move by Turkey, coming just 

four months before the general election, 

could also be perceived by investors as a salient 

vote of confidence in view of pre- and 

post-election environment consideration. 

Voter registration ahead of the May 2015 

election commenced on January 12th, 

2015. Sixty out seventy five registered political 

parties are expected to contest in the 

race for federal parliament and/or regional 

councils. 


Investment in the manufacturing sector is poised to remain 

the focus of streamlining the business climate in the coming 

months. Between January 12th and 17th, 2015, the Ethiopian 

government engaged its Japanese counterpart in Industrial 

Development Policy dialogue aimed at improving Ethiopia’s 

competitiveness. Regionally, Ethiopia enjoys favourable cost of 

energy and labour costs that are attractive to manufacturers. 

Focusing on Export Competitiveness 

The focus, going forward, is likely to be skewed towards boosting 

exports following the World Bank’s proposal that Ethiopia 

devalues its currency in 2014. 

Economic Growth vs Govt 

Expenditure 

-0.6 % 

Birr depreciation 



Buoyed Fiscal Position 

The country starts 2015 with a buoyed fiscal 

position following the successful issuance 

of the December 2014 Eurobond that attracted 

bids worth USD 5.2 billion, reporting 

260.0% oversubscription. Strong performance 

by the bond is crucial to Ethiopia in 

view of two considerations: 

Government Driven Market 

Ethiopia’s economy is largely state driven 

and a sound fiscal position capable of 

funding infrastructure and development 

projects is a vital engine in generating a 

favourable climate for investors. As such, 

the government’s buoyed position will be 

essential in outlining the 2015 expenditure 

plan and helping to sustain the economic 

momentum. 

Source: IMF Data 2014, StratLink Africa 

Coming at the end of the Growth Transformation 

Plan (2010 – 2015), the bond’s 

proceeds will likely be channelled towards 

ongoing projects such as the Grand Renaissance 

Dam construction as well as laying 

the groundwork for the next economic 

blue-print. 

Further, Ethiopia’s fiscal deficit fares better 

than its peer Kenya which issued a similar 

instrument in 2014. 

-5.7 % 

Birr depreciation 

year-on-year 

9 Intergovernmental Authority on Development 




Between 

January 12th 

and 17th, 2015, 

the Ethiopian 

government 

engaged its 

Japanese 

counterpart 

in Industrial 

Development 

Policy dialogue 

aimed at 

improving 

Ethiopia’s 

competitiveness. 

Regionally, 

Ethiopia enjoys 

favourable cost 

of energy and 

labour costs that 

are attractive to 

manufacturers. 

Fiscal Deficit as % of GDP Estimates 

Source: IMF 2014 Data, StratLink Africa 

Strengthening the Birr 

Deteriorated balance of payments kept the 

Birr on a depreciation path through 2014. 

The Birr took a beating from a downtrend 

in global coffee prices in the latter half of 

2014. Strong performance by the Eurobond 

could inject strength into the local unit in 

the near term driven by increased supply of 

the greenback domestically. 

Birr vs USD Exchange 





06. Ghana 




In view of 

depressed global 

oil prices, Ghana 

will be even more 

pressed to pursue 

fiscal reform 

aimed at slashing 

excesses such 

as in recurrent 

spending. 


Warding off Boko Haram 

The spill-over of Boko Haram’s threat into 

Niger and Cameroon in the recent past has 

put Ghana on alert, with President John Mahama 

leading dialogue on formation of a 

multi-national force to combat the militia. 

Whereas Ghana does not share a common 

border with Nigeria, unlike Niger and Cameroon, 

historically strong ties between the 

two and close relation between Goodluck 

Jonathan’s and Mahama’s administrations 

could render Ghana predisposed to the militia. 

Masses Restive over Harsh 

Environment 

Opposition factions continue to capitalize 

on the deteriorated economic environment 

to whip up the public’s sentiment against 

the government. During its January 2015 regional 

delegates’ conference, People’s Progressive 

Party called on the public to change 

the regime in 2016. Short-term investors 

are likely to be guarded about the country’s 

risk outlook; with long-term counterparts 

banking on historic bullish performance to 

augment future expectation. 


Monetary Tightening Offers 

Breather 

The sixteen month long uptick in inflation 

has been arrested for the first time with 

the December 2014 rate standing at 17.0%. 

This comes as a much needed breather for 

investors eyeing the Ghanaian market as it 

points at gradual improvement in the economic 

environment. We attribute this development 

to prudent monetary policy action 

that has reined in the money supply. The 

November 2014 200.0 bps hike in Bank of 

Ghana’s policy rate to 21.0% is likely to be 

playing an especially central role in addressing 

the run-away cost of living and business 

operation. 

Inflation 

BUSINESS NEWS ENVIRONMENT 

Construction of a USD 60.0 million logistics park is set to be completed 

by the end of Q4, 2015. The facility, to be carried out 

through partnership between the government and Agility Group, 

targets streamlining operations for investors including fasttracking 

of raw material procurement. If implemented, this facility 

could buoy the competitive edge of Ghana’s business climate 

with regard to red-tape that renders procurement tedious and 

costly for investors. 

Key Procurement Metrics 

Country 

Number of 

Procedures 

Senegal 4 6 

Time (Days) 

Ghana 8 14 

Cameroon 5 15 

Nigeria 8 28 

Source: Bank of Ghana, StratLink Africa 

We note that money supply had grown by 

a marked 33.6% in the twelve months to 

September 2014 compared to 17.6% in the 

same period a year earlier, indicative of an 

unusually steep rise in money supply. The 

steep rise in money supply comes on the 

back of high recurrent spending with available 

fiscal data indicating for the first half of 

2014, recurrent spending constituted 82.1% 

of total expenditure 10 . 

In view of depressed global oil prices, Ghana 

will be even more pressed to pursue fiscal 

reform aimed at slashing excesses such 

as in recurrent spending. 

Source: World Bank, StratLink Africa 

10 Ministry of Finance 2015 




Bank of Ghana Benchmark Lending 

Rate 


Yields have been stable in the T-Bill market 

driven, principally, by declining borrowing 

from the domestic market. The declining 

borrowing comes on the back of reforms 

aimed at addressing the country’s fiscal imbalance 

that contributed a large part to the 

2014 economic crisis. 

T-Bill Market Accepted Bids (USD Bln) 

We anticipate the 

monetary stance 

will be kept tight as 

the Cedi remains 

vulnerable to 

depressed crude 

oil prices. 

Source: Bloomberg, Bank of Ghana, StratLink Africa 

Cedi Demonstrates Resilience 

In January 2015, the Cedi has demonstrated 

resilience against major currencies after its 

bout of depreciation for the better part of 

2014. This has been attributable to both inflow 

of foreign currency from USD 1.0 billion 

Eurobond issuance and contractionary 

monetary policy. The trend is likely to boost 

investor confidence in mitigating foreign exchange 

risk. 

We anticipate the monetary stance will be 

kept tight as the Cedi remains vulnerable to 

depressed crude oil prices. 

Cedi vs USD Exchange Rate 


This trend of stable yields could prolong 

through the coming month if efforts to 

tame run-away inflation continue yielding 

results that will buoy investor confidence. 

Jitters over rising double digit inflation by investors 

in the fixed income market played a 

role in nudging yields upward in the recent 

past. 

T-Bill Yields 






+3.6 % 

GSE Composite Index 


+0.1 % 


year-on-year 

The 91 Day, 182 Day and 364 Day papers 

closed January 2015 at 25.8%, 26.4% and 

22.5%, respectively. 

Appetite for T-Bill papers has been moderate 

with the 91 Day bid-to-cover ratio averaging 

1.0 in January 2015, unchanged from 

November and December 2014. Rising liquidity 

in the market is, however, likely to 

rev up uptake by investors in the coming 

months. We anticipate the Bank of Ghana to 

be cautious about liquidity trends as it looks 

to keep the Cedi resilient against major currencies. 

Average Overnight Interbank Rate 

GSE Month-on-Month 



The interbank rate closed January 2015 at 

23.5%, a marginal twenty bps below the December 

2014 rate. 



Economic environment subdues 

market 

Activity at the exchange started on a bearish 

note as investors assumed circumspect 

positions in view of the tumbling oil prices 

that threatens the country’s fiscal position. 

Further, it is likely that investors are awaiting 

confirmation of a possible bailout package 

from the International Monetary Fund 

to make a sound assessment of the investment 

climate going forward. Recent trends 

in inflation and the Cedi’s exchange against 

major currencies could, however, if sustained, 

help to prop up investor outlook in 

the coming months. 

Financial Services to keep market 

bearish 

The market’s aggregate performance has 

mimicked that of financial services counters 

indicative that abysmal performance by the 

sector is presenting a major drag to the exchange. 

This is likely to be occasioned, to a 

large extent, by the tightening of monetary 

policy that results in deceleration of credit 

flow into the economy. 





Bloomberg Financial Services Index 

Outlook: When Bears out-run Bulls 

It is likely to be a subdued month ahead of 

the stock exchange in February 2015 share 

prices on the downtrend outweigh those 

exhibiting resilience. Oil marketing counters, 

alongside those in financial services, 

are bound to face headwinds in the months 

to come thereby depressing the market further. 

-4.7 % 

Financial Services 

Index month-onmonth 


Bloomberg Advancers’ vs Decliners’ 

Indices 

+16.8 % 

Financial Services 

Index year-on-year 





Stratlink Africa Ltd - Who We Are 

StratLink is an Africa focused financial advisory company with Capital Raising Advisory, 

Corporate Advisory and Market Research as our core business lines. We believe in the 

growth potential of sub-Saharan African economies and partner with our clients to execute 

their vision by providing quality services and access to capital. We recognize opportunities 

in the region and connect the fastest growing middle market companies with leading 

global investment banks, private equity firms and family offices. We value the importance 

of making informed decisions and leverage our regional knowledge to the advantage of 

our clients. 

Sub-Saharan Africa: In-depth macro and microeconomic research 

Within our purview of coverage are nine economies – Kenya, Tanzania, Uganda, Rwanda, 

Ethiopia, Nigeria, Ghana, Angola and Gabon. We undertake incisive research and analysis 

of each of the countries’ macro and microeconomic environment, debt and equity markets. 

We also conduct sector specific research and analysis shedding insight on market landscape, 

existing gaps and opportunities as well as potential challenges. 

Our guarantee: Competent team, reliable data 

Our research is anchored in a competent and versatile team traversing the fields of economics 

and finance with qualifications from globally recognized institutions. The team 

is backed by subscription to reliable databases such as Business Monitor International, 

Bloomberg, Thomson One Research, World Economics and The World Today. As such, our 

guarantee is reliable and up to date data in an increasingly dynamic region. Further, we 

reach out to relevant bodies in concerned markets including Central Banks, ministries and 

state departments. 

Authoritative voice on regional economics 

StratLink has become an authoritative voice for commentary and opinion on issues pertaining 

Sub-Saharan African economies and investment. Reputable media including CNBC 

Africa, Nation Media Group, CCTV and Bloomberg have reached out to the company for 

opinion and analysis. 

Where we are based 

Our head office is in Nairobi, Kenya with satellite offices in New York, Kampala and Kuala 

Lumpur. 




StratLink-Africa Team 

Konstantin Makarov – Managing Director 

konstantin.makarov@StratLinkglobal.com 

Dina Farfel – Partner 

dfarfel@StratLinkglobal.com 

Amit Walia – Associate 

amit.walia@StratLinkglobal.com 

Poonam Vora - Associate 

poonam.vora@StratLinkglobal.com 

Samuel Odero - Analyst 

samuel.oyier@StratLinkglobal.com 

Lewis Muguro - Analyst 

lewis.muguro@StratLinkglobal.com 

Julians Amboko – Research Analyst 

julians.amboko@StratLinkglobal.com 




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Africa Market Update - February 2015

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