Africa Market Update - July 2015

July 2015 

Market Update - Africa 

This report includes economies of 

Kenya, Gabon, Tanzania, Uganda, 

Rwanda and Ethiopia 

“We are honoured to be 

the recipient of Capital 

Finance International’s Best 

Economic Research Team 

in Kenya Award 2015”

MARKET UPDATE – AFRICA | July 2015 

01. Kenya 

HAWKISH STANCE AS CENTRAL BANK 

MAKES MONETARY ADJUSTMENTS 

2 | StratLink Africa Ltd. 

www.stratlinkglobal.com


POLITICAL OUTLOOK 

Foiled Attack Buoys Political Risk 

Profile 

The killing of eleven Al Shabaab militants on 

June 14th, 2015 following a foiled terror attack 

in the Mpeketoni area of Lamu County 1 

came as a much needed shot in the arm for 

the country’s political risk profile. In the recent 

past Kenya has been a soft target for 

the Somalia based militia with deterioration 

of security emerging as a sore thumb in the 

investment climate. 

Building Confidence in Counterterror 

Efforts 

Coming on the back of a change in the top 

brass of the security apparatus and an apparent 

change of tact since the April 2015 

Garissa University attack (May 2015 Update 

– Anti-terror Efforts: Change of Tact? 

[http://www.stratlinkglobal.com/download/ 

May%202015%20Africa%20Market%20Update.pdf], 

the foiled attack could serve as a 

major confidence builder amongst would 

be investors as the anti-terror efforts are 

being adopted and implemented. Of greater 

significance is that the foiled attack came 

about a day after Kenya Police Service reported 

receiving intelligence on a planned 

attack by the militia. It could well be that after 

repeated false starts on acting on intelligence 

(including the September 2013 and 

April 2015 attacks on Westgate Shopping 

Mall and Garissa University, respectively), 

the government is finally getting its grip on 

pre-emptive measures in counter terrorism. 

Security Receives Key Focus in 

2015/16 

In the budget for financial year 2015/16, the 

National Treasury scaled up allocation to security 

organs by 13.8% to USD 2.3 Billion accounting 

for 10.2% of the budget, a marginal 

70.0 bps lower than 2014/15’s allocation . Increased 

allocation signifies the measure of 

efforts being taken to address the perennial 

Achilles’ heel in the business climate in the 

next twelve months (July 2015 – June 2016). 

The state of security will be on the spotlight 

especially as the country approaches 

1 Government of Kenya 

2 Kenya National Treasury 

BUSINESS ENVIRONMENT 

Energy, Infrastructure and ICT to Maintain Pole Position 

The government will continue looking to Energy, Infrastructure and 

Information Communication Technology in boosting the business 

climate in the next twelve 

months. Allocation in 

2015/16 Budget Allocation by Sectors 

2015/16 budget indicates 

the three will receive the 

lion’s share of state funds, 

as the country targets asserting 

its commercial and 

industrial hub status in an 

increasingly competitive 

region. 

Project Acceleration and 

Growth Catalyst 

The considerable allocation 

to the three targets 

accelerating completion 

of mega infrastructure 

projects such as the 

Source: National Treasury, StratLink Africa 

Standard Gauge Railway 

as well as leveraging on 

ICT as a catalyst for economic growth. This, in our view, is also in 

line with efforts to trim recurrent expenditure from 16.4% of GDP 

in 2014/15 to 15.5% in 2015/16 3 ; a matter that has been of great 

concern in resource allocation. 

Raft of Proposals Could Raise Cost of Doing Business 

In the 2015/16 budget, the government has proposed a USD 0.03 

(Kes 3.0)/litre of Petrol and Diesel hike in view of the Roads Maintenance 

Levy that could occasion an uptick in the cost of transport and 

doing business as a whole - transport costs account for 8.7% of the 

weighting in the Consumer Price Index (CPI) being the third largest 

component of the CPI after food and household utilities. 

3 National Budget 2015/16 

the much-awaited visit by United States of 

America President, Barrack Obama in July 

2015. 

ECONOMIC OUTLOOK 

Central Bank Hikes Benchmark Rate 

by 150.0 Bps 

The Central Bank hiked its benchmark rate 

by 150.0 bps to 10.0% on June 09th, 2015 as 

it engaged levers to provide a buffer against 

elevated monetary risks in the economy. 

Our June 2015 Africa Market Update [http:// 

www.stratlinkglobal.com 

StratLink Africa Ltd.| 3


BUSINESS ENVIRONMENT ...cont’d 

Mixed Fortunes for Manufacturers 

Additionally, the proposed 

raise in import duty on plastic 

tubes used to package 

toothpaste and imported 

aluminium milk cans from 

10.0% to 25.0% 4 could 

similarly inflict a rise in the 

cost of inputs for investors 

in the concerned industries. 

On the other hand, 

however, paper and paper 

products will now attract 

a common external tariff 

of 10.0% in stark contrast 

with the 25.0% adopted in 

October 2014. This bodes 

well for the section of the 

packaging industry dealing 

in paper products and is a 

testament that the Government 

is listening to the 

observations of the private sector. 

4 National Budget 2015/16 

Despite posting 

resilient growth 

in 2014, we 

note that yearon-year 

Gross 

Domestic Product 

(GDP) expansion 

decelerated by 

40.0 bps to 5.3%. 

As such, CBK could 

be keen to use the 

’10.0 bps bargain 

tightening’ 

to assess the 

potential 

deceleration effect 

on the economy in 

Q3 and Q4, 2015. 

Consumer Price Index by 

Composition 

Source: National Bureau of Statistics, 

StratLink Africa 

www.stratlinkglobal.com/download/June%20 

2015%20Africa%20Market%20Update.pdf] 

highlighted the steady decline in usable 

foreign exchange reserves and the upward 

nudge in inflation as indicators that were 

bound to elicit “greater focus from a monetary 

policy standpoint in supporting the 

shilling and mitigating inflationary spill-over 

effects”. 

CBK Benchmark Rate vs Inflation 

Source: Central Bank of Kenya, National Bureau of Statistics, 


This comes as the first monetary tightening 

since September 2012 (100.0 bps to 13.0%) 

at a time when the economy was still reeling 

from an episode of double-digit inflation 

stemming from a spike in global commodity 

prices. We further note that the last hike of 

150.0 bps took place in December 2011 when 

inflation touched a high of 19.7% (November 

2011) and the shilling was struggling to claw 

back after ceding ground to as low as 106.2 

units to the greenback in October 2011. 

What is the significance of the 

present 150.0 bps hike? 

CBK Hike: Bold or Testing the 

Waters? 

Much as the hike by CBK has been widely 

deemed as ‘considerable’, StratLink Africa 

is of the view that it could be an indicator 

that the monetary watchdog is ‘testing the 

waters’ on the impact of tightening on the 

broader economy. In essence, the 150.0 bps 

hike takes advantage of the headroom created 

by the June 2014 – March 2015 140.0 

bps decline in average commercial banks’ 

lending rate to 15.5% 5 . This translates, effectively, 

to 10.0 bps (150.0 bps – 140.0 bps) 

as the ‘bargain tightening’ undertaken by 

CBK in the June 2015 hike. 

Average Commercial Bank Lending Rate 

Source: National Bureau of Statistics, StratLink Africa 

Despite posting resilient growth in 2014, 

we note that year-on-year Gross Domestic 

Product (GDP) expansion decelerated 

by 40.0 bps to 5.3%. As such, CBK could be 

keen to use the ’10.0 bps bargain tightening’ 

to assess the potential deceleration effect 

on the economy in Q3 and Q4, 2015. 

Typically, tightening tends to slow down the 

5 National Treasury June 2015 




economy’s growth momentum due to constriction 

of the flow of credit to the private 

sector. This can be corroborated by taking 

a historical analysis of Kenya’s quarter-onquarter 

economic growth between 2010 

and 2014. 

Between 2010 and 2014, the quarter that 

registered the slowest economic growth 

(Q2, 2012 at 3.3%) coincided with the most 

contractionary monetary policy (with the 

benchmark rate at 18.0%). Similarly, the 

quarter that registered the fastest growth 

(Q4, 2010 at 7.3%) coincided with the lowest 

benchmark rate at 6.0%. 

GDP Growth vs Benchmark 

Monetary Rate 

Source: National Bureau of Statistics, Bloomberg, StratLink Africa 

Could Another Hike be in the Offing? 

The greenback has been rallying and oil 

prices correcting upwards with the OPEC 

benchmark basket price standing at a 

monthly average of USD 62.7 as at May 2015 

(9.4% up month-on-month). In this regard, 

the threat of an upward nudge in inflation 

could persist in the near term necessitating 

further intervention by CBK. Additionally, 

year-on-year growth in broad money supply 

averaged 18.0% in the full year to April 

2015, compared to 14.9% in the same period 

a year earlier. 

Broad Money, Inflation and CBK Rate 

Source: Bloomberg, CBK, StratLink Africa 

In view of underlying factors, CBK could further 

hike the benchmark rate (or revise the 

Kenya Banks’ Reference Rate upward) in a 

bid to tone down inflationary pressures. In 

November 2011, the CBK rate was hiked by 

150.0 bps slowing down the rate of money 

supply growth from an average of 19.5% 

between September and November 2011 

to an average of 15.6% between December 

and February 2012. In the same period 

average inflation declined by 60.0 bps to 

18.0% 6 . 

CBK Hike: Why Commercial Banks 

Could be a Factor 

We further observe that growth in non-performing 

loans has emerged as a concern in 

the economy with the International Monetary 

Fund raising question over the same 

in February 2015. Non-performing loans as 

a percentage of gross loans have risen from 

4.7% as at December 2012 to 5.6% as at December 

2014 representing what appears to 

be a marginal ten bps rise compared to the 

period December 2011 – December 2013 7 . 

However, based on personal testimonials 

and reviewing the current best practices of 

the banking sector, we assess that NPL’s 

will continue to accelerate in the short term 

leading most banks to reassess current 

lending practices. A sharp increase in NPL 

may have a long lasting impact on the relatively 

small mortgage industry in Kenya. In 

2014, we anticipate year-on-year growth in 

6 Bloomberg Data 

7 Central Bank of Kenya 

The greenback 

has been rallying 

and oil prices 

correcting 

upwards with the 

OPEC benchmark 

basket price 

standing at a 

monthly average 

of USD 62.7 as at 

May 2015 (9.4% 

up month-onmonth). 




A bout of 

resilience by the 

shilling could be 

one of the main 

factors that have 

created a window 

for the Central 

Bank to allow a 

rise in liquidity 

in the money 

market. 

-1.3 % 

Kenya Shilling 

change month-onmonth 

NPLs to range from 32.0% - 35.0% based on 

the prevailing business climate. 

NPLs as a % of Total Loans 

Source: Bloomberg, StratLink Africa 

With the business climate battered by a 

high risk perception following terror-linked 

threats, the hike in the benchmark rate 

could also be geared towards dis-incentivizing 

commercial bank lending to adversely 

affected businesses. The National Treasury 

has also proposed to raise the core capital 

requirement for commercial banks five-fold 

to USD 51.3 Million by 2018. 

DEBT MARKET UPDATE 

Yields continued to rise between May and 

June 2015 on the back of tightening liquidity 

that saw the interbank rate soar to a 

high of 13.6% on June 05th, 2015. We note, 

however, that in the latter half of June 2015 

liquidity was on the rise driven by government 

payments, net redemptions of government 

securities and maturities of Term 

Auction Deposits. As such, we could see a 

downtrend in yields if this trend persists in 

the near term. We note, however, that monetary 

policy is likely to remain focussed on 

the strength of the shilling, necessitating 

tightening as and when the local unit shows 

fragility. 

Bloomberg BVAL Yields Index 


Interbank Rate Corrects to Single Digits 

In the latter half of June 2015, the interbank 

rate corrected back to single digits with the 

money market experiencing a net liquidity 

injection of USD 106.6 Million between 

June 11th and 17th, 2015, up from USD 43.6 

Million in the preceding week 8 . In line with 

rising liquidity, bid-to-cover ratios in the T- 

Bill market surged with the 91.0 Day paper 

touching a high of 3.1 in the week to June 

04th, 2015. 

Interbank Rate Trend 

Source: Central Bank of Kenya, StratLink Africa 

Shilling Claws Back Lost Ground 

A bout of resilience by the shilling could be 

one of the main factors that have created a 

window for the Central Bank to allow a rise 

in liquidity in the money market. We expect 

the shilling is to remain in the 97.0 – 100.0 

units of exchange to the greenback band 

between July and August 2015. 

8 Central Bank of Kenya 




Kenya Shilling vs USD Exchange 

EQUITY MARKET UPDATE 

NSE 20 Share Index Year-on-Year 

-1.3 % 

NSE 20 Share Index 

change year-on-year 

-2.0 % 

NSE 20 Share 

Index change 

month-on-month 

Source: Central Bank of Kenya, StratLink Africa 

Kenya Shilling change month-on-month 

Note: Government to Widen 

Borrowing Reach through 

M-Akiba 

Plans are afoot to widen the government’s 

revenue mobilization reach by 

the bonds market through a mobile 

platform dubbed ‘M-Akiba’. The government 

indicates that the platform will allow 

a minimal investment of USD 30.5 

compared to the present USD 507.8 9 . 

This development is significant in that 

it shows the extent to which mobile 

based innovations are integrating into 

the economy and redefining the investment 

landscape. It will be interesting to 

see the logistical groundwork laid to execute 

the same given that it has been in 

consideration since 2012. 


NSE 20 Share Index Month-on-Month 


Market Resists ‘Tumble’ Below 

4,744.0 Mark 

The market showed signs of a rebound in 

the latter half of June 2015 after finding an 

apparent resistance point at the 4,744.0 

mark for the NSE 20 Share Index. The rebound 

(coming in the period after the tabling 

of budget 2015/16) suggests the markets 

positive response to the elimination of 

the 5.0% Capital Gains Tax (CGT) on returns 

arising from the sale of shares. Since re-introduction 

through the 2014/15 budget, the 

CGT has been a thorny issue for the market 

with brokers citing it as a major drawback 

on investor activity. 

We note that 

Centum has 

been aggressively 

diversifying its 

investment and 

is expected to 

deploy the returns 

from the sale in 

consolidating 

its footprint in 

sectors such 

as Fast Moving 

Consumer Goods. 

9 National Treasury June 2015 




Crown Paints 

saw its share 

price surge by 

9.7% month-onmonth 

to USD 

1.8 propelled by 

bold plans for 

consolidating its 

regional footprint. 

The company is 

reported to have 

opened two new 

plants in Ethiopia 

and South 

Sudan alongside 

two depots in 

Tanzania. 

Centum Investment’s Performance 

Props Uptick 

The uptick has been further catalysed by 

bullish results from financial services provider, 

Centum Investment, which reported 

160.0% growth in net profit to USD 80.6 

Million, year-on-year, to March 2015. A key 

driver of this performance was the company’s 

sale of its stake in insurance company, 

UAP, through which it earned USD 52.8 Million. 

We note that Centum has been aggressively 

diversifying its investment and is expected 

to deploy the returns from the sale 

in consolidating its footprint in sectors such 

as Fast Moving Consumer Goods. 

Centum Share Performance 

Crown Paints Share Performance 



Crown Paints Emerges as Star 

Performer 

Crown Paints saw its share price surge by 

9.7% month-on-month to USD 1.8 propelled 

by bold plans for consolidating its regional 

footprint. The company is reported to have 

opened two new plants in Ethiopia and 

South Sudan alongside two depots in Tanzania. 

Crown Paints has also revealed plans 

to inject USD 1.2 Million towards satellite 

plants in Rwanda and Tanzania. Such expansion 

plans are an indication of a vote of 

confidence by consumer facing companies 

in their estimates of market growth in the 

coming years. 




02. Gabon 

ECONOMY SCOUTS FOR SOFT LANDING 

AS OIL PRICE SHOCK PERSISTS 




Recent 

developments 

suggest there are 

rising political 

temperatures 

ahead of the 2016 

ballot. We expect 

the prolonged 

rule by the Bongo 

dynasty and the 

death of Obame 

to be key pressure 

points, potentially 

deteriorating 

political risk 

perception. 


Lifting Ban on Opposition: Real 

Democracy or Charm Offensive? 

Debate abounds as to whether the lifting 

of the ban on the main opposition party, 

Union Nationale, on February 04th, 2015 

was a genuine act of broadening democratic 

space or a charm offensive ahead of 

the 2016 Presidential election. Snap Presidential 

polls in 2009 evolved into a precarious 

political episode for the country with 

factions of the opposition decrying the outcome 

that saw Ali Bongo Ondimba succeed 

his deceased father. 

Defusing Mounting Pressure 

We assess that the move to lift the ban is 

geared towards defusing growing pressure 

on the government following an adverse 

economic climate driven by depressed 

oil revenues. In February 2015, a strike by 

trade unions threatened to grind the faltering 

economy to a halt as labourers agitated 

for a hike in the minimum wage. In the same 

period, the government was reported to be 

considering trimming fuel subsidies 10 and, if 

actualized, the move could be heightening 

inflation pressures. 

Death of Opposition Luminary 

Stokes Unrest 

Unrest rocked the Capital City of Libreville 

following the death of Union Nationale’s 

stalwart, Andre Mba Obame on April 12th, 

2015. Widespread protests that saw the Embassy 

of Benin set ablaze are indicative of a 

restive section of the electorate over what 

has been widely deemed as a ‘mysterious 

death’. Of significance is that Obame led 

his party in denouncing the official results 

of the 2009 election that saw Ali Bongo Ondimba 

succeed his deceased father. 

Recent developments suggest there are rising 

political temperatures ahead of the 2016 

ballot. We expect the prolonged rule by the 

Bongo dynasty and the death of Obame to 

be key pressure points, potentially deteriorating 

political risk perception. 


Fiscal Balance in the Red 

Fitch’s May 2015 downgrade of Gabon’s 

long-term foreign and local currency issuer 

default rating to B+ (Stable Outlook) 

did not come as a surprise as the country’s 

fiscal balance continues to be battered by 

the global oil price plunge. For the first time 

in five years, the fiscal balance is expected 

to deteriorate to negative terrain at about 

1.9% of GDP 12 (USD 305.9 Million). On May 


Government Bets on New Mining Code 

The government is betting on a new code, adopted in February 2015, to 

Foreign Direct Investment (USD Mln) 

help catalyse investment interest in the mining industry. The new code 

adds onto efforts being taken to wean the economy of oil reliance in the 

face of depleting oil reserves. The code is expected to simplify acquisition of 

exploration licenses by would be investors; boding well for the investment 

climate. It also eliminates the flat royalty rate of 5.0% replacing it with a 3.0% 

- 7.0% band depending on the scale of the project 11 . 

Gabon Leads Central African Peers in FDI Acceleration 

The new code could see the country remain one of the leading Central 

Africa economies in acceleration of Foreign Direct Investment. Between 

2003 and 2013, foreign direct investment into Gabon accelerated by 46.2% 

Source: UNCTAD Data 2014, StratLink Africa 

(CAGR) to USD 856.0 million placing it ahead of Equatorial Guinea’s 30.8% 

to USD 1.9 billion and Cameroon’s 18.9% to USD 572.0 million. 

11 Reuters February 2015 

10 Reuters February 26th, 2015 

12 Interational Monetary Fund 




22nd, 2015, the National Assembly revised 

the 2015 budget downwards by 13.7% to 

USD 4.5 Billion 13 as it tightened its belt to 

fiscal pressures. 

Fiscal Balance to GDP Ratio 

Source: IMF 2014, StratLink Africa 

Fiscal Pressures Threaten Growth 

The economy’s growth is expected to fall 

below the 5.0% mark for the first time since 

2010 (standing at about 4.5% in 2015 14 ) indicative 

of the deceleration ensuing from 

the plummeting oil prices. Growth has been 

weighed down in the recent past principally 

by the decline in oil production capacity that 

has negatively impacted export earnings. 

The slash in budget spending in 2015 further 

threatens to keep growth subdued. 

OPEC Basket Monthly Average Price/ 

Barrel 


This notwithstanding, Gabon still stands in 

a precarious position as the OPEC Basket 

price lies far below the fiscal break-even. 

Total net oil exports are projected to decline 

by 11.9%, year-on-year, to USD 7.4 Billion in 

2015 15 . This will also be the lowest level of 

net oil exports since 2010. We note, however, 

that the local currency (Central African 

Franc) has exhibited gains in the recent past 

in line with rising oil prices. 

Central African Franc vs USD 

Exchange 

Growth has been 

weighed down 

in the recent 

past principally 

by the decline in 

oil production 

capacity that 

has negatively 

impacted export 

earnings. The 

slash in budget 

spending in 2015 

further threatens 

to keep growth 

subdued. 

-1.8 % 

Real Economic Growth 

Central African Franc 

change month-onmonth 

-20.9 % 

Central African Franc 

change year-on-year 

Source: Business Monitor International, StratLink Africa 

Source: Bloomberg, StratLink Analysis 

Oil: Too Early to Celebrate Recent 

Uptick in Price 

Oil prices have exhibited a rebound between 

March and May 2015 with the OPEC 

Basket monthly average price rising by 

19.4% to USD 62.7/barrel. 

13 www.gabonlibre.com 

14 15 Business Monitor International June 2015 Business Monitor International 




03. Tanzania 

FISCAL PRESSURES COULD DECELERATE 

2015 ECONOMIC GROWTH 





Controversial Media Law Raffles 

Feathers 

A year since the parliament rejected laws that 

were widely deemed to be inhibitive to media 

freedom, the country is confronting re-introduction 

of a similar bill. The Media Services Bill, 

for instance, provides that “a foreign company 

may own a media house on condition that 

the shareholding structure shall not exceed 

49.0%”. The move has unsettled many with 

critics alleging ill-motive by the state. The new 

bill is further reported to provide that private 

media houses “join the public broadcaster for 

prime 8:00pm news every day” 16 a measure 

that bears disconcerting implications on content 

control. In January 2015, the government 

banned circulation of the ‘East African’ weekly 

publication citing contravention of Section 6 of 

the Newspaper Act of 1976 on registration. 

Trying Moment for Tanzania 

This development comes on the back of a fairly 

challenging period for East Africa’ second largest 

economy. The postponement of the April 

2015 referendum (indefinitely) has stood out 

as a sore thumb for the government raising 

political temperatures ahead of the October 

2015 election. The proposed media law, widely 

deemed to be reversing gains made in media 

freedom, does little to tone down heightening 

temperatures in the country. 

CCM’s Increasingly Precarious 

Position ahead of October 2015 Polls 

Despite ruling Chama Cha Mapinduzi’s dominance 

in the political space, we assess that 

its clout has been eroded over time. In 2010, 

the party clinched 61.0% of the presidential 

vote compared to 80.0% in the 2005 poll. 

Developments in the recent past, such as the 

postponed referendum, place the ruling party 

on a precarious position ahead of the October 

2015 poll. 


Tanzania Shilling Remains Weak 

The local unit has remained weak against the 

USA dollar despite the latter’s loss of ground 

following indication by the USA Federal 

16 Daily Nation May 26th, 2015 


Donor Support Shock Still Lingers in the Horizon 

The country continues to take a 

beating from the energy contract 

scandal that saw a section of development 

partners with-hold budgetary 

support. The government is 

reported to have put on hold all 

new capital projects earmarked for 

2015/16 except those who funding 

negotiation is at the completion 

stage 17 . Whereas development 

spending accounted for 32.4% of 

the total budget in 2014/15, it has 

been scaled down to 26.3% in 2015/16 (at USD 2.6 Billion) indicative 

of strained purse strings. 

Is Capital Spending Focus on Decline? 

Capital expenditure to GDP ratio has been on the decline in Tanzania 

and could to evoke concern amongst investors. 

Infrastructure upgrade 

and expansion has 

been a vital catalyst in 

improving the country’s 

business climate. With 

economic growth having 

mimicked trends in 

capital spending in the 

recent past, declining 

focus on the same could dim 

investors’ sentiment on the 

country. Recurrent spending is 

bound to be high in view of the 

October 2015 election. 

Bold Targets for Revenue 

Mobilization 

In anticipation of funding 

challenges from development 

partners, the government has 

set ambitious targets for domestic 

revenue mobilization in 

2015/16 - the Revenue Authority 

has raised its mobilization target by 20.6%, year-on-year, to USD 6.4 

Billion. Noting that Tanzania’s tax revenue to GDP stands at 12.6%, 

against Kenya’s 19.3% 18 , (both cases are considered post-2014 GDP 

rebasing), we assess that Tanzania could face a tall order beefing 

up mobilized tax revenue. Budget 2015/16 proposes doing away 

with tax exemptions on government projects financed using nonconcessional 

loans except for those that had the exemptions prior 

to July 01st, 2015 19 . 

17 The East African June 13 – 19th, 2015 

18 New Vision February 12th, 2015 

19 FB Attorneys Budget 2015/16 Focus 

Budget Breakdown 

Source: Budget Statement, 


Capital Spending to GDP Ratio 

‘12 ‘13 ‘14 

Tanzania 6.6% 6.1% 5.0% 

Kenya 9.9% 5.9% 6.5% 

Uganda 7.4% 7.2% 7.4% 


GDP Growth vs 

Capital Expenditure 

Source: Business Monitor International, IMF, 





-11.5 % 

Tanzania Shilling 


change 

-1.3 % 

Kenya Shilling 


change 

Despite having a 

history of peaceful 

elections, the 

postponement of 

the constitutional 

referendum 

and widening 

rift between the 

government 

and opposition 

factions could be 

dimming investor 

perception of the 

economy in the 

near term. 

Reserve that a rate hike could be delayed. 

The June 2015 FOMC 20 states that “the first 

increase in the federal funds rate will be appropriate 

when it has seen further improvement 

in the labour market”; widely interpreted to 

be sending dovish monetary policy signals for 

the near term. Note that unlike the Tanzania 

shilling, the Kenyan currency exhibited some 

measure of resilience in what is likely to have 

been the market’s reaction to the Central Bank 

of Kenya’s hawkish move and the marginal 

weakening by the greenback. 

Tanzania and Kenya Shillings to the USD 


Despite improvement in the country’s balance 

of payment in the recent past (the ratio of 

exports to imports improved to 0.7 in the full 

year to April 2015 from 0.5 in the same period 

a year earlier 21 ), depressed usable foreign exchange 

reserves could be a key factor depressing 

the shilling. 

End of March Foreign Exchange 

Reserves (USD Mln) 

We further note that the outflow to inflow ratio 

in the primary account 22 deteriorated to 6.5 in 

the year to April 2015 from 5.2 in the full year 

to April 2014 23 and could be one of the main 

factors depreciating the local unit. 

Could this Indicate Pre-election 

Jitters? 

The trend in the primary account inflows versus 

outflows could also suggest that foreign investors 

are assuming cautious position about 

the economy as the country advances towards 

the October 2015 election. Despite having a 

history of peaceful elections, the postponement 

of the constitutional referendum and 

widening rift between the government and 

opposition factions could be dimming investor 

perception of the economy in the near term. 


Yields continued to rise on the back of tightening 

liquidity in the money market that saw the 

interbank rate rise to a high of 27.9% on June 

22nd, 2015. We note that this comes on the 

back of Bank of Tanzania’s 200.0 bps hike of 

the statutory reserve ratio for banks to 10.0% 

effective May 29th, 2015; a move that was 

geared towards cushioning the shilling from 

immense pressure in the global market. We 

also note that the government has set ambitious 

domestic revenue targets that could be 

seeing it elevate its uptake in domestic borrowing. 

T-Bill Yields 

Source: Bank of Tanzania, StratLink Africa 

Source: Bank of Tanzania, Bloomberg, StratLink Africa 

The interbank rate stands at a two year high as 

Bank of Tanzania looks to support the shilling. 

22 Records payments to and receipt from foreign investment 

20 Federal Open Market Committee 

in the current account 

21 Bank of Tanzania May 2015 

23 Bank of Tanzania May 2015 




Interbank Rate 


Tight Liquidity Strains Instruments’ 

Uptake 

Results of the May 27th, 2015 Two Year bond 

further indicate that the market is facing 

tightened liquidity. The paper registered 92.4% 

performance rate. 

May 27th, 2015 Two Year Bond 


All Share Index Year-on-Year 


All Share Index Month-on-month 

In the T-Bill 

market, bid-tocover 

ratios across 

all tenors have 

equally tanked 

close to the zero 

mark. Commercial 

banks are likely 

to be shifting 

focus into the 

more lucrative 

interbank market. 

Description 

Value 

Amount Tendered (USD Mln) 23.9 

Amount Received (USD Mln) 22.2 

Performance Rate 92.4% 

YTM 14.0% 

Bids Received 60.0 

Successful Bids 60.0 


In the T-Bill market, bid-to-cover ratios across 

all tenors have equally tanked close to the 

zero mark. Commercial banks are likely to be 

shifting focus into the more lucrative interbank 

market. 

T-Bill Bid-to-Cover Ratios 


The market registered a mild bull-run in the 

month under review with the All Share Index 

rising to a high of 2,850.15 on Friday 19th June, 

2015. Considering a fairly quiet market regarding 

corporate actions, we assess that the positive 

sentiment could have been driven by the 

publishing of the proposed Petroleum Act. 

Coming on the back of potentially vast capacity 

for natural gas exploration and export, the 

publication of the Act creates investor certainty 

on the crucial oil and gas landscape of 

the economy. Data from the stock exchange 

indicates that foreign investors have been 

more skewed towards buying into the market 

in June 2015 unlike the trend witnessed in the 

preceding month. 

+30.0 % 

All Share Index 

year-on-year 

change 

+2.0 % 



change 





Coming on the 

back of potentially 

vast capacity 

for natural gas 

exploration 

and export, the 

publication of 

the Act creates 

investor certainty 

on the crucial 

oil and gas 

landscape of the 

economy. 

Average Buy Ratio in the Dar 

Exchange 

(May 2015 – Inner Ring; June 2015 – Outer Ring) 

Source: Dar es Salaam Stock Exchange, StratLink Africa 

In June 2015, average daily purchase value 

by foreign investors stood at USD 2.4 Million 

compared to an average sale value of USD 

751,821.0, in stark contrast to the trend witnessed 

in May 2015 in which the average sale 

value (USD 6.4 Million) was 2.7 fold the value of 

buys 24 . 

24 Dar es Salaam Stock Exchange June 2015 




04. Ethiopia 

MONETARY PRESSURES BUILD-UP AS 

INFLATION CREEPS TOWARDS 10.0% MARK 




Whereas the 

scale of victory 

would be widely 

expected to bode 

well for EPRDF, it 

is bound to evoke 

grave concerns 

from investors 

on the state of 

the country’s 

democracy. 


Sweeping Victory for EPRDF in May 

2015 Poll 

In line with StratLink Africa’s pre-election 

issue (May 2015 Market Update – Is the 

Die Cast? [http://www.stratlinkglobal.com/ 

download/May%202015%20Africa%20Market%20Update.pdf] 

the ruling party, Ethiopia 

People’s Revolutionary Democratic Front 

(EPRDF), clinched landslide victory in the 

May poll. EPRDF and allied parties won all 

547.0 seats in the parliamentary election 

consolidating its foothold on the political 

landscape. As the party’s maiden election 

post-Meles Zenawi, EPRDF is well placed to 

assert its position in the wake of mounting 

clamour for broader democratic space and 

tolerance of dissent. 

What is the State of Ethiopia’s 

Democracy? 

Whereas the scale of victory would be widely 

expected to bode well for EPRDF, it is bound 

to evoke grave concerns from investors on 

the state of the country’s democracy. Of 

note is that in the May 2015 poll, external 

observers such as the Carter Center and the 

European Union were not invited (unlike in 

the 2010 election). Factions of the opposition 

have decried that the May 2015 election 

failed to provide a level playing field for 

a free and fair exercise. As such, the official 

election outcome could serve as a catalyst 

for growing anti-government sentiment. 

Civil Liberties Baggage from the Preelection 

Period 

Our pre-election issue indicated that aspects 

such as voter turnout would be critical 

in determining the state of the electorate in 

the country. As such, we await the official 

publication of the same to pass holistic assessment 

of the recent polls. We observe, 

however, that EPRDF faces a considerable 

task in addressing growing grievance by 

sections of the population over constrained 

liberties especially through the anti-terrorism 

legislation. 


Rising Inflationary Pressures 

Since April 2015, StratLink Africa has been 

cautious about inflation in Ethiopia tabling 

a case for likely hawkish monetary policy in 

the period to Q3, 2015. Available data indicates 

inflation nudged to a high of 9.4% as at 

May 2015 driven principally by food prices. 

Despite robust economic growth in the last 

decade, the country remains susceptible to 

climatic shocks with agriculture accounting 

for 46.4% of the Gross Domestic Product. 


Ethiopia-Djibouti Rail Progress Augurs Well for Logistics 

Ethiopia Railways Corporation has reported the Sebeta- 

Mieso-Djibouti Railway project is 73.0% complete 25 . We 

expect this project to play a major role in easing transportation 

of cargo from the Port of Djibouti which is reported 

to account for over 90.0% of the country’s import-export 

trade 26 . Official estimates indicate that traders spend up 

to 16.0% of the country’s value of foreign trade on transit 

cost per day 27 . 

Coming on the Back of Bold Undertakings 

We note that fast-tracking of the Ethiopia – Djibouti 

Railway project comes on the back of a raft of initiatives 

by the government geared towards improving logistics. 

In January 2015, Ethiopia announced it would begin using 

the Port of Sudan for imports (hitherto the port had been 

used exclusively for exports) in view of growing demand 

by the economy. In April 2015, the country further unveiled 

the National Logistics Strategy to be implemented 

between 2015 and 2020 28 . 

Upgrade and Expansion of Infrastructure 

Not only is Ethiopia upgrading its existing links to the Port 

of Djibouti but more importantly broadening alternatives. 

This is crucial in mitigating risks that could stem, for instance, 

from deterioration of inter-state relations between 

Ethiopia and Djibouti. This also comes in handy within the 

context of a competitive region with Kenya and Tanzania 

upgrading the ports of Mombasa and Dar es Salaam, 

respectively, in a bid to attract investors. 

25 Business Monitor International May 2015 

26 The Reporter, January 2015 

27 Ministry of State for Finance and Economic Development 

28 United Nations Development Program, Government of Ethiopia 




GDP by Sectors 


Ethiopia’s imports have been surging in the 

last five years with the export-import ratio 

deteriorating from 0.34 in 2010 to 0.27 in 

2014. This trend indicates a weakening currency 

is threatening higher inflation risk in 

the economy. 

Value of Imports vs Exports 

Inflationary 

pressures are 

bound to persist 

in the near term 

as the country 

grapples with the 

impact of delayed 

February – April 

rainfall in 2015. 

Inflationary pressures are bound to persist 

in the near term as the country grapples 

with the impact of delayed February – April 

rainfall in 2015. 

Inflation vs Food Index Trend 


Source: Central Statistical Agency, StratLink Africa 

Foreign Exchange Risks Add onto 

Inflation Pressure 

The Birr has exhibited some measure of 

resilience in June 2015 clawing back lost 

ground in the preceding month. We observe, 

however, that the local unit remains weak 

and could inflict additional pressure on the 

upward nudge in inflation in the near term. 

Inflation Could Subdue Consumer 

Spending 

Investors should note that rising inflation 

could depress spending in the economy 

as consumers tighten their belts in view of 

higher costs. In 2010, as inflation spiked 

to double digits driven by a surge in global 

commodity prices, the country’s private final 

consumption per capita declined by 

8.1%, year-on-year, to USD 245.4. 

Private Final Consumption per 

Capita (USD) vs Annual Inflation 

Ethiopia Birr vs USD Exchange 






05. Rwanda 

WHAT LABOUR MARKET DYNAMICS MEAN FOR 

RWANDA’S INVESTMENT CLIMATE 






Another Hurdle for Rwanda-UK 

Importers on Receiving End of New Levy 

Relations 

The 2015/16 national budget has proposed 1.5% infrastructure 

The arrest of Intelligence Chief, General Karenzi 

Karake, in the United Kingdom over al- 

levy on goods imported from outside East Africa Community to 

raise USD14.7 Million for regional 

infrastructure projects 30 . 

leged war crimes threatens to deteriorate 

relations between Rwanda and one its main 

Rwanda Imports by 

Whereas the government is 

sources of Official Development Assistance. 

Source Countries 

keen on weaning the country 

President Paul Kagame has since decried the 

off development assistance 

arrest of Karake exposing a potential diplomatic 

spat between the two countries. This 

in meeting budget needs, the 

fact that Rwanda imports more 

comes on the back of the suspension of British 

Broadcasting Corporation’s (BBC) Kinyar- 

from China and India combined 

(20.1% of imports) than it 

wanda frequency following a row over the 

does from Kenya and Tanzania 

controversial ‘Rwanda’s Untold Story’ documentary. 

(14.1% of imports) is likely to 

evoke concern over the proposal. 

As a net importing economy, 

Source: OEC, StratLink Analysis 

Sources of Official Development 

the levy threatens a rise in the 

Assistance 

cost of doing business for investors. 

What About Tripartite Free Trade Area? 

30 The East African, June 15th, 2015 

investors if relations with the UK become 

frosty. 

Source: Ministry of Finance 29 , StratLink Africa 


Furthering a Road of Cautious 

Cheap Labour Allures Investors in 

Relations 

Manufacturing 

The latest incident suggests the two countries 

The economy expanded by a robust 7.6% 

are experiencing a semblance of cautious relations. 

In July 2011, UK Premier, David Cam- 

in Q1, 2015 buoyed by strong growth in the 

services and manufacturing sectors. We observe 

that there has been marked improveeron, 

cancelled a planned visit to Rwanda 

in his maiden visit to Sub-Saharan Africa as 

ment since our April 2015 issue (2014 GDP 

Prime Minister. Whereas the cancellation was 

Growth - Good but Not Good Enough - 

widely attributed to the need to address the 

[http://www.stratlinkglobal.com/download/ 

Phone Hacking Scandal, undertones of possible 

concern over Rwanda’s human rights 

April%202015%20Africa%20Market%20Update.pdf] 

especially from the manufacturing 

score card failed to be suppressed. 

front. Anecdotal evidence suggests that the 

With the 2012/13 development assistance country is increasingly being viewed as a preferred 

destination by manufacturing inves- 

shock experience in mind, Rwanda will likely 

be deemed to be treading a tight rope by tors from emerging markets such as China 

29 Based on the 2010/11 and 2011/12 Reports 

31 Financial Times May 06th, 2015 

The proposed levy comes on the back of stepped up efforts to 

develop the Tripartite Free Trade Area (TFTA) encompassing Common 

Market for Eastern and Southern Arica (COMESA), East Africa 

Community (EAC) and Southern Africa Development Community 

(SADC). The new levy slapped on imports from outside EAC could 

be viewed by investors as a detractor to the steps being made in 

realizing the TFTA as it is bound to affect imports from countries 

within COMESA and SADC. 




Within 

manufacturing, 

textile and 

furniture have 

emerged as 

strong growth 

engines in Q1, 

2015 with the 

former posting 

21.0% year-onyear 

growth. 

grappling with a rise in the cost of labour 31 . 

We maintain our May 2015 assessment that 

Metal and Machinery manufacturing are 

poised to remain as key drivers of the industrial 

sector pegged on the country’s focus 

on infrastructure spending (accounting for 

16.8% of the 2015/16 budget at USD 414.7 

Million) 32 . 

Manufacturing Sector Growth 

Note: In June 2014, Rwanda 

Development Board signed a deal with 

Chinese garment manufacturer, C&H, 

to spur growth of the domestic textile 

sector. Under the agreement, C&H is 

expected to set up a manufacturing 

plant to the tune of USD 9.7 Million 33 . 

BMI Labour Cost Index 34 

(0 – Highest Risk, 100 – Lowest Risk) 

Source: Bureau of Statistics of Rwanda, StratLink Analysis 

On the whole, the manufacturing sector 

grew by a marginal 60.0 bps slower than the 

aggregate economy. This was occasioned 

by lethargic acceleration in foods and beverages 

subsectors which expanded by 7.0% 

and 5.0%, respectively. This trend in the two 

sub-sectors could be ascribed to the fact that 

agriculture is punching below its weight and 

beverage exports have faced an unfavorable 

tax regime in the Democratic Republic of 

Congo (a key export market for Rwanda) 

Source: Business Monitor International, StratLink Analysis 

Within manufacturing, textile and furniture 

have emerged as strong growth engines in 

Q1, 2015 with the former posting 21.0% yearon-year 

growth. 

Manufacturing Sub-Sectors Growth 

(Q1, 2015) 

Low Labour Cost Risks Heighten 

Rwanda’s Allure 

The Business Monitor International Index 

(June 2015) suggests that compared to peer 

economies, Rwanda poses the least labour 

cost risk in East Africa. Investors targeting the 

country face comparably less strain in workforce 

regulations (such as work permits) and 

costs of hiring than they would in neighbouring 

economies. We believe this is a major factor 

driving investor interest in setting base in 

the country. 

Source: Bureau of Statistics Rwanda, StratLink Africa 

Labour Quality: Long-term Concern 

Whereas the manufacturing sector is presently 

reaping from the available pool of semi 

and unskilled labour, this is bound to present 

a challenge for the investment climate 

32 Ministry of Finance Budget Statement 2015/16 

33 Ministry of Finance Budget Statement 2015/16 

34 The index is developed through weighting of factors such 

as labour taxation; employer contribution; minimum wage 

requirements by the government and workforce regulations 




going forward in view of growing demand 

for skilled human capital. Rwanda’s tertiary 

education risk index is comparatively high 

by regional standards plagued by low transition 

from secondary school to institutions of 

higher learning. Investors could opt for Ethiopia 

and Kenya which have a comparatively 

lower risk of accessing skilled labour. 

BMI Tertiary Education Index 35 

(0 – Highest Risk, 100 – Lowest Risk) 



T-Bill yields have nudged upwards between 

April and June 2015 in what we assess can 

be ascribed to two factors – One, there has 

been an increase in domestic borrowing 

by the government between the end of Q1, 

2015 and the first two months of Q2, 2015. 

T-Bill Yields 

Source: Bank of Rwanda, StratLink Africa 

The 91.0 Day and 364.0 Day papers saw their 

yields rise by 30.0 bps and 25.0 bps, monthon-month, 

to 3.5% and 5.8%, respectively. 

The 182.0 Day paper, on the other hand, saw 

its yield remain unchanged at 4.2%. 

Rwanda Franc Slides against 

Greenback 

June 2015 saw the Rwanda Franc come under 

intense pressure from the USA dollar. 

Demand for the greenback by importers 

has been widely cited as the key driver of the 

trend exhibited by the local unit. 

Rwanda Franc vs USD 

Rwanda’s tertiary 

education 

risk index is 

comparatively 

high by regional 

standards 

plagued by low 

transition from 

secondary school 

to institutions of 

higher learning. 

Investors could 

opt for Ethiopia 

and Kenya 

which have a 

comparatively 

lower risk of 

accessing skilled 

labour. 

Amount Borrowed through T-Bills 

(USD Mln) 

Source: Bank of Rwanda, StratLink Africa 

Two, investors are likely to be pricing in inflation 

expectations following the recent uptick. 

The Consumer Price Index was up by 1.7% 

and 2.3% in April and May 2015, respectively. 


We also observe, however, that liquidity remains 

high in the money market and could 

also be a driving factor in the Franc’s weakness. 

Available data indicates the interbank 

rate is at a low of 2.8%. 

35 The index is developed through the weighting of 

enrolment, transition and completion rates of the 

population through primary, secondary and tertiary 

institutions 




We observe, 

however, that 

liquidity remains 

high in the money 

market and could 

also be a driving 

factor in the 

Franc’s weakness. 

Available data 

indicates the 

interbank rate is 

at a low of 2.8%. 


Source: National Bank of Rwanda, StratLink Africa 


Rwanda Stock Exchange All Share 

Index 

RSE All Share Index Month-on-month 



-7.1 % 


year-on-year change 

The market continues to underperform under 

the weight of beer manufacturer Bralirwa 

and Bank of Kigali. Bank of Kigali’s average 

share price for the month under review 

fell by, month-on-month, 2.7% to USD 0.4. 

We also note that the Crystal Ventures IPO 

closed on June 05th, 2015 and could have occasioned 

decelerated investor activity in the 

market. 




06. Uganda 

CONTRACTIONARY POLICY AS MONETARY 

PRESSURES MOUNT 




Opposition 

parties are likely 

to whip up the 

clamour for 

reinstatement of 

Presidential term 

limits as the main 

agenda in the 

2016 election. 


Mbabazi Announces Presidential Bid 

Former Premier, Amama Mbabazi, announced 

his bid to be National Resistance 

Movement’s (NRM) Presidential flag bearer 

in view of the 2016 ballot on June 15th, 2015. 

The move portends a potential game changer 

for the country’s political landscape in line 

with StratLink Africa’s October 2014 analysis 

- Ruling Party, Cracks in the Edifice [ http:// 

www.stratlinkglobal.com/download/research/ 

October%202014%20Africa%20Market%20Update.pdf 

] that the dismissal of Mbabazi was 

bound to destabilize NRM ahead of the ballot. 

Whereas incumbent President, Yoweri 

Museveni, is widely expected to emerge as 

the party’s presidential candidate, the lasting 

impact of Mbabazi’s bid is likely to be deceleration 

of the party’s momentum. Opposition 

parties such as Forum for Democratic 

Change, led by Kizza Besigye, are likely to 

capitalize on this development in their bid to 

either form an umbrella coalition or independently 

push for regime change in Uganda. 

Alleged Intimidation Casts Shadow 

There have been reports of arrests of Mbabazi’s 

supporters after the announcement 36 

in what suggests political intimidation by the 

government. Such developments could depress 

investors’ risk perception of the country 

in the run-up to the 2016 polls necessitating 

a ‘wait and see’ stance pegged on the 

evolution of political risk. In the recent past 

Uganda’s risk perception has taken a beating 

especially in view of the controversial antigay 

law of 2014. 

Opposition Likely to Anchor on Term 

Limits 

Opposition parties are likely to whip up the 

clamour for reinstatement of Presidential 

term limits as the main agenda in the 2016 

election. In 2005, the Parliament amended 

the constitution scrapping the two term limit, 

paving the way for Museveni’s bid for a third 

term. This is likely to be a contentious matter 

in the coming polls with Uganda being the 

only member state in the East African Community 

without a constitutional provision for 

term limits. 


Uganda Hikes Benchmark Rate as 

Monetary Pressures Rise 

Bank of Uganda hiked its benchmark rate by 

100.0 bps to 13.0% in June 2015 as the economy 

grappled with mounting monetary pressures 

from inflation and depreciation by the 

shilling. The uptick in inflation is in line with 

StratLink Africa’s March 2015 assessment - 

Risks Lurk in the Horizon [ http://www.stratlinkglobal.com/download/March%202015%20 

Africa%20Market%20Update.pdf ] in which we 


Tullow Oil Tax Settlement Bodes 

Well for Budding Oil Sector 

The settlement of USD 250.0 Million 

in a Capital Gains Tax dispute by oil 

exploration company, Tullow, serves 

as a good indicator that steps are 

being taken to alleviate hurdles being 

faced in unlocking the budding sector. 

In the recent past, the government 

has been undertaking reforms in a 

bid to attract investors even as oil 

prices remain subdued in the global 

market. The settlement between 

Tullow Oil and the government could 

send signals of an improving legal 

and exploration environment in the 

country. (Please see our June 2015 

Market Update – Wooing Investors 

in a Price Precarious Environment 

[ http://www.stratlinkglobal.com/ 

download/June%202015%20Africa%20 

Market%20Update.pdf ] 

Building Investor Confidence in 

Existing Institutions 

The resolution of the matter by the 

Tax Appeals Tribunal could also 

serve as a major indicator of strong 

regulatory institutions in the country’s 

business environment. This will be 

crucial even as the budding oil sector 

faces challenges on matters such 

as the resettlement and compensation 

of displaced persons in view of 

exploration undertakings. The case 

between Tullow Oil and the government 

is reported to have been before 

the tribunal for three years 37 and 

its resolution could come as a much 

needed breather for investors targeting 

the Ugandan market. 

37 Daily Monitor June 29th, 2015 

36 Bloomberg News, 19th June, 2015 




advanced a case for a likely upward nudge 

going forward driven by the weakening shilling 

and potential rise in food demand from 

neighbouring countries such as Kenya. 

Monetary Policy Rate vs Inflation 

22nd, 2015 signifying prevailing weakness by 

the local unit. This is poised to remain a key 

pressure point for the investment climate 

as it translates into imported inflation in the 

economy. 

Uganda Shilling vs USD Exchange Rate 

Yields in the T-Bill 

market have 

declined in the 

recent past on 

the back of rising 

liquidity in the 

money market. 


+7.5 % 

Shilling depreciation 


Near Term Outlook: Possible Uptick 

Albeit Benign 

Inflation is likely to remain on the uptick 

through Q3, 2015 based on the weakening 

of the shilling and rising food prices. We observe, 

however, that the pressure is likely 

to be benign in view of the transmission of 

the recent monetary tightening (April 2015’s 

100.0 bps to 12.0% and June 2015’s 100.0 

bps to 13.0%). Growth in money supply has 

been decelerating between Q3, 2014 and Q1, 

2015 38 and is bound to tone down inflation 

pressures in the near term. 

Money Supply Growth (Year-on-Year) 



T-Bills Decline on Rising Liquidity 

Yields in the T-Bill market have declined in 

the recent past on the back of rising liquidity 

in the money market. The average interbank 

rate stood at 9.5% in May 2015, 170.0 bps 

and 450.0 bps lower than the April 2015 and 

March 2015 averages, respectively. In the 

recent past, dealers have reported liquidity 

injection by Bank of Uganda in a bid to ease 

tightened conditions in the money market. 

The government is likely to be targeting low 

interest rates by commercial banks to borrowers. 

T-Bill Yields 


Foreign Exchange Risks Persist 

The shilling touched a new low of 3,300.0 

units of exchange to the greenback on June 

38 Bloomberg Data June 2015 

Source: Bank of Uganda, StratLink Africa 




+18.6 % 


year-on-year change 

The latest available data indicates the interbank 

rate touched a low of 7.0% on May 

29th, 2015. The 91.0 Day yield declined by 

130.0 bps, month-on-month, to 12.9% while 

the 182 Day declined by 160.0 bps to 13.9% 

in June 2015. 



Uganda Stock Exchange All Share Index 

+5.6 % 



change 

The market 

has been fairly 

bullish in June 

2015 backed 

by positive 

news on energy 

distributor, 

Umeme Ltd 

(72.9% of market 

turnover in June 

2015), which 

could have 

occasioned 

bullish investor 

sentiments. 

Source: Bank of Uganda, StratLink Africa 

Yields could, however, resume an uptrend in 

the months ahead based on inflation expectations 

by investors and domestic borrowing 

in financial year 2015/16. The planned 

expenditure for 2015/16 surged by 55.2%, 

year-on-year, to USD 7.3 Billion compared to 

an increase of 28.3% between 2013/14 and 

2014/15. As a result, the government may 

face fiscal pressures in funding the budget 

and possibly necessitate an increase in domestic 

borrowing. 

As indicated in the graph below, whereas 

expenditure is expected to grow by 55.2%, 

year-on-year, in 2015/16, revenue is projected 

to grow by a lean 15.7% in the same period. 

This could be a major catalyst for rising 

domestic borrowing in the months to come. 

Expenditure vs Revenue (USD Mln) 


The market has been fairly bullish in June 

2015 backed by positive news on energy 

distributor, Umeme Ltd (72.9% of market 

turnover in June 2015), which could have 

occasioned bullish investor sentiments. The 

company announced 19.5 Uganda Shillings 

per share in dividend payments despite a 

15.7% year-on-year decline in net profits to 

USD 21.5 Million in 2014. The company is further 

expected to raise electricity tariffs for industrial 

users by 0.2% to USD 0.09/Kilowatthour 

in Q4, 2015, a matter widely expected 

to boost its revenue. 

UGSE All Share Month-on-month 


Source: Ministry of Finance, StratLink Africa 




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 

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

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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, 

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

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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 

Jackson Mwatha– Senior Analyst 

jackson.mwatha@stratlinkglobal.com 

Samuel Odero - Analyst 

samuel.oyier@StratLinkglobal.com 

Lewis Muguro - Analyst 

lewis.muguro@StratLinkglobal.com 

Julians Amboko – Research Analyst 

julians.amboko@StratLinkglobal.com 

Sophia Sifuma – Intern Research Analyst 

sophia.sifuma@StratLinkglobal.com 

Benson Njeri– Intern Analyst 

benson.njeri@stratlinkglobal.com 




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effect on the price or income of such securities. Investors 

in securities and other instruments, the values 

of which are influenced by currency volatility, 

must assume this risk. StratLink personnel, or other 

professionals, may provide oral or written commentary 

or trading strategies to our clients that reflect 

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©StratLink Africa Limited 2015

Africa Market Update - July 2015

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