MARKET UPDATE – AFRICA (Abridged)

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A financial Advisory Company TANZANIA POLITICAL OUTLOOK 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. BUSINESS ENVIRONMENT 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. ECONOMIC OUTLOOK 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. DEBT MARKET UPDATE 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 Full report available for purchase via: JULY 2016 | MARKET UPDATE – AFRICA 6 www.stratlinkglobal.com
A financial Advisory Company ZAMBIA POLITICAL OUTLOOK 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. BUSINESS ENVIRONMENT 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. ECONOMIC OUTLOOK 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. DEBT MARKET UPDATE 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. Full report available for purchase via: JULY 2016 | MARKET UPDATE – AFRICA 7 www.stratlinkglobal.com
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MARKET UPDATE – AFRICA (Abridged)

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