MARKET UPDATE – AFRICA (Abridged)

A financial Advisory 

Company 

JULY 2016 

MARKET UPDATE – AFRICA (Abridged) 

KENYA | NIGERIA | TANZANIA | ZAMBIA | UGANDA | RWANDA


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Company 

Table of Contents 

NIGERIA 4 

KENYA 5 

TANZANIA 6 

ZAMBIA 7 

UGANDA 8 

RWANDA 9 

Cover image: http://635.gtbank.com/2015/03/african-10-top-powerhouse-economies/ 

SEPTEMBER JULY 2016 | 2015 MARKET | MARKET UPDATE UPDATE – AFRICA – AFRICA 

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AFRICA DEALS LANDSCAPE JANUARY 2016 - JUNE 2016 

Capital Invested by Country (USD) 

146.6 Million 

11.8 Million 

25.3 Million 

20.0 Million 

26.8 Million 

746.2 Million 

320,000 

40,000 

19.9 Million 

827.3 Million 

35.9 Million 

Tunisia 

Morocco 

Burkina Faso 

Sierra Leone 

Ghana 

Nigeria 

Liberia 

Malawi 

Namibia 

South Africa 

Zambia 

Egypt 

Eritrea 

Ethiopia 

Uganda 

Kenya 

Rwanda 

Mozambique 

Tanzania 

Maurius 

Madagascar 

Congo 

322.0 Million 

65.0 Million 

42.0 Million 

6.2 Million 

71.9 Million 

20.4 Million 

10,000 

2.2 Million 

820,000 

5.0 Million 

160.0 Million 

Capital Invested by Sectors 

Capital Invested by Deal Type 

1.1% 

Commercial 

Services 

18.4% 

Commercial Banks 

2.6% 

2.0% 

3.1% 

8.8% 

18.4% 

Retail 

17.9% 

Soware 

1.8% 

5.7% 

Consumer 

Non-Durables 

17.8% 

Insurance 

1.6% 

7.6% 

10.0% 

17.3% 

Pharmaceucals 

& Biotech 

9.4% 

Capital Markets 

1.5% 

10.3% 

15.7% 

Metals, Minerals 

& Mining 

8.6% 

Others 

9.8% 

18.4% 17.3% 

Merger & Acquision ................... Buyout/LBO .............. 

Communicaons 

& Networking 

6.4% 

15.7% 10.3% 

Growth & Expansion .................... Add-on ...................... 

Corporate Divesture .................. 10.0% Secondary Transacon.. 7.6% 

5.7% 3.1% 

IPO ................................................... PIPE .............................. 

Healthcare 4.2% 

2.0% 

Asset Acquision ............................. Share Repurchase ........ 

Others ............................................. 8.8% 

1.1% 

Deals Snapshot 

• Dalmaan Adversing (South Africa) was acquired by M&C Saatchi for an undisclosed amount on June 21st 2016 

• PEG Ghana raised USD 4.3 Million of Series A2 venture funding in a deal led by Energy Access Ventures on June 16th, 2016 

• SpacePointe (Nigeria) raised USD 1.2 Million of Series A angel funding from undisclosed investors on June 9th, 2016 

Source: PitchBook, StratLink Africa 

JULY 2016 | MARKET UPDATE – AFRICA 

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NIGERIA 

POLITICAL OUTLOOK 

Devaluation Elevates Confidence in Policy 

Environment 

The federal government continues to register 

progress on the political platform with the 

devaluation of the Naira (June 20th, 2016) coming 

on the back of the passage of the record USD 30.0 

Billion 2016 budget after protracted delay (three 

months). Both developments send a signal that 

policy makers take cognizance of the gravity of the 

economic downturn and are undertaking remedial 

measures. 

Good Boost for All Progressives Congress’ 

Reform Profile 

Coming just one year after President Buhari 

assumed office, such policy adjustments are critical 

in reshaping an investment landscape pervaded 

by waning confidence in the economy’s ability to 

equal its challenges. This helps build momentum of 

the new administration’s profile which has already 

been touted for its stance on anti-corruption 

measures which it has championed through the 

push for a Treasury Single Account to streamline 

payments from state ministries and departments. 

BUSINESS NEWS ENVIRONMENT 

Informal Economy Portends Investment 

Opportunity 

Arts Entertainment Recreation and Agriculture are 

the two economic areas with the largest proportion 

of informal activity, presenting both a challenge 

and opportunity for the economy. The opportunity 

lies in the fact that, through progressive reforms, 

there exists a lot of room for attraction of investors 

into these sectors in the years ahead whereas 

the challenge lies in the fact that there exists 

little incentive for the existing informal players to 

formalize operations as it would imply higher cost 

through licensing and remittance of taxes. 

ECONOMIC OUTLOOK 

Central Bank Abandons Currency Peg 

Abandonment of the currency peg for a managed 

floating regime comes as a favourable signal 

for the investment community which has been 

grappling with foreign currency shortage. The 

change of stance by the Central Bank conforms 

to our projection in February 2016 that the 

regulator would be compelled to devalue the local 

unit between Q1, 2016 and Q2, 2016, bowing 

to pressure from an adverse macroeconomic 

environment. The devaluation was welcomed by 

foreign investors being deemed as a favourable 

indication on alignment of policy with day-to-day 

developments in the economy. 

DEBT MARKET UPDATE 

Domestic Market less Rapt by Naira Devaluation 

Whereas yields in the international market 

pointed at improved perception by investors 

following devaluation of the Naira, movements in 

the domestic market suggest investors’ lingering 

concern over the state of the economy. The yield 

curve nudged further up in June 2016 in what can 

be ascribed to the sustained uptick in inflation that 

has defied monetary intervention. Inflation rose 

further in May 2016 to stand at 15.3%, 120.0 bps 

higher than the preceding month. Additionally, 

the contraction of the economy in Q1 2016 has 

elicited sentiment that the economy could be 

slipping into recession as the oil price shock takes 

a toll of growth drivers. 

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KENYA 


Country Remains under ‘Watch’ Despite Show of 

Unity 

An apparent show of unity between factions of 

the opposition and the government have served 

to defuse the build-up in political temperatures. In 

May 2016, concern emerged over the state of the 

political environment as opposition led protests 

rallying a call for the resignation of commissioners 

of the electoral commission and police retaliation 

turned chaotic in Nairobi and other parts of the 

country. 

Whereas this development is welcome and bodes 

well for the political risk environment, it remains 

to be seen whether it will be sustained through 

the pre-election period. StratLink Africa retains 

the country’s political risk environment under 

close watch with a focus on the institutional 

preparedness of the country to navigate the 

2017 general election. Utterance of potentially 

inflammatory remarks by a section of the political 

class is a particular cause for concern. 

BUSINESS ENVIRONMENT 

Regional Plan to Ban to Boost Domestic Apparel 

Sector 

The plan by East Africa member states to ban 

importation of second hand clothes effective 

2018 raises prospects of both opportunity and 

challenge in markets such as Kenya. With regard 

to opportunity, this is bound to create room for 

growth of the domestic industry creating new 

avenues for investment. Sectors such as leather 

in Kenya will have widened room for growth both 

domestically and within the region. 


Budget 2016/17 Sheds Light on Banking Sector 

Stability 

Budget 2016/17 came against the backdrop of an 

economy shaken by a succession of scares in the 

banking sector following the placement of Dubai, 

Imperial and Chase Banks under receivership. In 

light of this, emphasis on strengthening stability 

in the banking sector was elevated in this year’s 

budget including proposals to: 

• Increase the penalty for violation of the 

Banking Act prudential guidelines four-fold to 

USD 197,693.2 (Kes 20.0 Million) as well as an 

allowance for additional penalties each day 

the violation continues 

• Re-submit to the National Assembly 

measures aimed at increasing capitalization 

requirements for banks 


Liquidity Conditions Tighten 

In the period under review, yields registered 

marginal downward movement across all tenors 

with the largest change reported in the three year 

paper that saw its yield decline by 50.0 bps to 

13.0%. 

EQUITY MARKET UPDATE 

Market Remains Subdued 

The market remained subdued through June 2016 

as bearish sentiments persisted amongst investors 

with the shilling ceding ground marginally after 

a resilient phase between April and May 2016. 

Investors are likely to have been engaging in a 

waiting game ahead of the tabling of budget 

2016/17 to assess policy proposals that could have 

impacted the capital markets. 



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TANZANIA 


Opposition asserts its Authority Amidst claims of 

Diminishing Freedoms 

President John Magufuli’s administration has come 

under sharp criticism following accusations of 

alleged abuse of the Cyber Crime Act to propagate 

intolerance of speech and media freedoms. This 

came after it was reported that the government 

had banned live coverage of parliamentary 

proceedings and all political rallies planned by the 

opposition. The allegation undermines Magufuli’s 

otherwise widely acclaimed performance as well 

as the political risk environment. It also derails 

efforts aimed at forging national unity beyond the 

hotly contested 2015 general election that divided 

the country along competing political factions. 


Budget to Promote Business Environment 

Creating an enabling business environment is 

one of the key priorities highlighted in Tanzania’s 

Annual Development plan for 2016/17 given that 

the country trails regional peers in World Bank’s 

Ease of doing Business 2016, despite leading in 

attracting foreign direct investment. As a result, 

Tanzania has set aside 15.0% of the USD 13.5 

Billion budget for improving infrastructure in 

order to support the business environment and 

retain foreign investment into the country. 


Expansionary Budget to Stimulate Growth 

The government unveiled the 2016/17 national 

budget entailing a USD 13.5 Billion expenditure 

plan, an increase of 31.1%, year-on-year, focusing 

on industrial and infrastructural development. 

Moreover, government is looking to reduce the 

budget deficit from the current 4.5% of GDP to 

less than 3.0% in 2017 through prudent fiscal 

policy that trims on excesses in expenditure. 

Note: In 2016/17, domestic revenue is expected to 

account for 62.3% of the total budget. 


Yields Exhibit Mixed Movement 

Yields for the 182 Day and 364 Day papers exhibited 

signs of rising in June 2016 in an environment 

of tightened liquidity conditions that saw the 

interbank rate rise by 100.0 bps, month-onmonth, 

to average 13.3% in June 2016. This came 

even as inflation remained favourably anchored 

within the 5.0% - 5.5% band, with a marginal rise 

to 5.2% in May 2016. Budget 2016/17 projects a 

21.1% increase in borrowing by the government 

(with USD 2.5 Billion to be sourced from the 

domestic market) that could inflict a general 

upward pressure on yields going forward. 

T-Bill Yield Trend 

20.0% 

18.0% 

16.0% 

14.0% 

12.0% 

10.0% 

8.0% 

6.0% 

Apr-14 

Jul-14 

Oct-14 

Jan-15 

Apr-15 

Source: Bank of Tanzania, StratLink Africa 

Jul-15 

Oct-15 

Jan-16 

91 Day 182 Day 364 Day 

Apr-16 



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ZAMBIA 


Election Cycle enters Homestretch 

The country has entered the homestretch of the 

election cycle with the official campaign period 

commencing on May 16th, 2016. The election is 

bound to elicit enormous interest as it is widely 

perceived as a referendum on the administration 

of incumbent President, Edgar Lungu, which 

is grappling with an adverse macroeconomic 

environment. Lungu, who took office following the 

Presidential by-election of January 2015, assumed 

power a time when copper prices were on a 

nose dive in the global markets and China, one of 

Zambia’s key export markets, was decreasing its 

activity and demand for raw materials. As such, 

the economy has been buffeted by fiscal and 

monetary pressures that have seen inflation soar 

and the government tighten its belt on diminished 

export earnings. 


Solar Auction Bodes well for Business 

Environment 

The outcome of the World Bank-led solar power 

auction won by Neoen SAS and First Solar Inc 

bodes well for the economy which is grappling 

with the after effects of a protracted energy crisis. 

The two companies’ bid to generate electricity at 

6.02 cents per Kilowatt Hour and are expected to 

build a 45.0 Megawatt solar plant to help meet 

growing demand for energy in the country. 

Growing Focus on Non-hydro Energy 

This begins to raise confidence that the country 

is making steps towards addressing the ongoing 

energy crisis that has affected the investment 

climate. It also serves as a crucial signal of growing 

interest in the non-hydro renewable energy sector 

of the economy which promises to diversify further 

the pool of energy sources. 


Central Bank Remains Hawkish as Inflation 

Declines and Election Jitters Loom 

Bank of Zambia maintained a hawkish stance in 

its May 2016 meeting despite decline in inflation 

between February 2016 and May 2016 signaling a 

cautious position on the monetary environment. 

This could, in part, be informed by the drought 

afflicting Southern Africa and is feared to drive 

food inflation upwards as well as need to have the 

tightening cycle transmit through the monetary 

system. We do not anticipate expansionary change 

in the monetary policy until after the August 2016 

general election as the Central Bank maintains a 

watchful position on the state of the economy 

and potential spill-overs from the political 

environment. 


Available data indicates the yield curve humped 

sending an indication of possible jitters by 

investors over the state of the economy in the 

medium term. 

Yield Curve (May 20th, 2016) 

30.0% 

28.0% 

26.0% 

24.0% 

22.0% 

20.0% 

2 Year 3 Year 5 Year 7 Year 10 Year 15 Year 

Source: Bank of Zambia, StratLink Africa 

Foreign investor holdings have been declining 

faster in the short-term than in the long-term 

papers, further lending credence to the view of 

likely jitters over the economy’s trajectory in the 

short-term. 



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Company 

UGANDA 


Security Strategy under Focus as Somalia Pullout 

looms 

Uganda’s regional security strategy is bound to 

come under sharp focus in the coming months 

as the government revealed plans to withdraw its 

troops from Somalia by December 2017, a move 

which could bring to an end Uganda’s nine-year 

peace keeping mission in the strife torn country. 

The country’s troops are the largest contingent 

of the African Union-sponsored peacekeeping 

mission, about a third of the 22,000 troops, and 

the withdrawal could reverse the progress of the 

AU mission. Previously, Uganda failed to follow 

through on its threat to pull out of all peacekeeping 

missions in 2012, following allegations by the 

United Nations that it was backing rebels in 

eastern DR Congo. 


Import Substitution to Promote Manufacturing 

Uganda, like its East Africa counterparts, has shifted 

focus to import substitution policy to grow the 

country’s manufacturing sector. Manufacturing 

was reported as one of the sectors that registered 

the lowest performance in financial year 2015/16 

with the sector’s growth posting a measly 0.4% in 

the year under review from 11.0% in the previous 

year. Consequently, the government increased the 

specific duty rate on worn clothes and shoes from 

0.2 USD/kg to 0.4 USD/kg in the 2016/17 budget, 

in line with EAC Summit directive requiring EAC 

Partner States to gradually phase out importation 

of used clothes and footwear in the region. In 

addition, the government proposed to increase 

the environment levy on used clothes, shoes and 

other articles from the current 15.0% to 20.0% in 

the next financial year. 


Construction to Drive Economy in 2016/17 

Budget 2016/17 posts a 9.2% increase, year-onyear, 

on planned government expenditure to 

USD 7.8 Billion in line with the country’s National 

Development Plan II which seeks to scale up public 

investments, with a focus on agriculture, public 

works, transport and energy, pointing towards 

diversification as the economy gradually shifts 

from reliance on agriculture to manufacturing and 

services. Construction and public works, which 

are considered a vital growth pivot in the face of 

lurking macroeconomic pressures, received the 

lion’s share of the budget. 


Marginal Rise in Yields on Liquidity Tightening 

and Inflation Signal 

There was relative liquidity tightening in the 

money market between April and May, 2016 with 

the interbank rate rising by 130.0 bps to 13.7% in 

May 2016. As such, yields posted a marginal rise 

prompted, as well, by subtle inflation uptick ─ 

inflation increased marginally by 30.0 bps to 5.4% 

in the period under review 

Monthly Interbank Rate (Average) 

17.0% 

16.0% 

15.0% 

14.0% 

13.0% 

12.0% 

11.0% 

10.0% 

9.0% 

8.0% 

Apr-15 

Jun-15 

Aug-15 

Oct-15 

Dec-15 

Feb-16 

Apr-16 

Source: Bank of Uganda, StratLink Africa 



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RWANDA 


Stable Political Environment 

Rwanda’s political outlook remains stable, despite 

strained relations with neighboring states (Burundi 

and the Democratic Republic of Congo) presenting 

a favourable environment even as the country 

heads to the 2017 general election. In the meant 

time, President Kagame has also reached out 

to the East in a bid to court new allies given the 

recent spat with long-term trade allies notably the 

United States of America and the United Kingdom 

(UK). 

UK Extends an Olive Branch 

The UK has extended an olive branch to Rwanda 

as it looks for stronger bilateral ties; a development 

that underscores Rwanda’s position as a strong 

frontier destination for trade and investment. The 

UK is looking to leverage on Rwanda’s conducive 

business environment (Rwanda leads East Africa 

peers in World Bank’s Ease of Doing Business 

Index 2016) through introduction of direct flights 

between the two countries, to tap into available 

opportunities which many other economic rivals 

like China and other Asian nations are targeting. 


Rwanda Looks to Boost Local Manufacturing in 

the 2016/17 Budget 

Textiles, garments and leather industry, are among 

the high priority sectors envisioned to foster 

Rwanda’s economic growth in 2017 financial year, 

receiving 27.0% of the USD 2.6 Billion budget. 

Rwanda is looking to implement taxation measures 

in 2016/17 that will make good its promise 

to promote local manufacturing and reduce 

importation of goods, particularly, second-hand 

clothes and shoes. As reported in our February 

2016 Market Update, Rwanda’s textile industry 

faced a tumultuous year witnessing decelerated 

growth owing to increased second hand imports 

into the market. 


Budget Focus: Exports Promotion and Fiscal 

Tightening 

Expenditure for the period July 2016 – June 2017 is 

projected to increase by 12.6% to USD 2.6 Billion 

as government looks on further improving the 

business environment through fiscal adjustments. 

A key target for the year underway is to slash the 

fiscal deficit from the present 5.4% of GDP to 3.9% 

in 2017, signaling rationalization of expenditure 

in the months ahead. However, the government 

still faces revenue mobilization hurdles as it 

anticipates decrease of donor funding with the 

grants projected to reduce by 2.5% to USD 487.1 

Million, year-on-year, in 2016/17. 


Liquidity Tightening Endures as Government 

Borrowing Plunges 

Government borrowing maintained the 

downtrend witnessed in the past three months, 

dipping further by 20.6% to USD 27.3 Million 

between April and May, 2016. On the other hand, 

liquidity tightening prevailed in with the interbank 

rate rising by 32.0 bps, month-on-month, to 

an average of 5.9% in May 2016. The franc 

maintained resilience against the greenback in the 

period under review attributable to the tightening 

liquidity. Consequently, the T-Bill yields registered 

a general rise in the period under review. 



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Company 

Note on Brexit and sub-Saharan Africa 

The outcome of Britain’s June 2016 referendum that favored the country’s exit from the European Union has roiled global 

markets, notably in equities and foreign exchange. In sub-Saharan Africa, we anticipate the following to be key areas of 

interest: 

• With the Sterling Pound having suffered precipitous depreciation, it could present an opportune window for 

economies in sub-Saharan Africa to service Sterling Pound denominated debt at a cheaper rate. This is, however, 

complicated by the fact that a number of economies are reeling from subdued commodity prices and with little room 

for fiscal adjustment 

• Economies in sub-Saharan Africa could potentially have greater leverage in negotiation of trade terms with Britain 

going forward in view of the fact that the latter has lost the pivot of being part of the expanse European Union market 

• Should Brexit mark the onset of further fragmentation of the European Union, select sub-Saharan Africa economies 

such as Kenya stand to lose a major export destination that could affect the balance of payments 

Our team provided commentary on the World Economic Forum blog on lessons Africa could draw from Brexit with a focus 

on managing immigration. 

Please click the button to view the full article 

Elsewhere, Senior Research Analyst, Julians Amboko, provided commentary on policy options available for Egypt in light 

of its new status as Africa’s second largest economy. 

Please click the button to view the full article 


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©StratLink Africa Limited 2016 


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Contact Details 

STRATLINK AFRICA 

StratLink - Africa, Limited. 

Delta Riverside, Block 4, 

4th Floor, Riverside Drive, 

Nairobi, Kenya 

nairobi@stratlinkglobal.com 

www.stratlinkglobal.com 

+254202572792 

August 2015 | MARKET UPDATE – AFRICA 


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MARKET UPDATE – AFRICA (Abridged)

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