MARKET UPDATE – AFRICA (Abridged)
20160706%20July%20Africa%20Market%20Update%20ABRIDGED
20160706%20July%20Africa%20Market%20Update%20ABRIDGED
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A financial Advisory<br />
Company<br />
TANZANIA<br />
POLITICAL OUTLOOK<br />
Opposition asserts its Authority Amidst claims of<br />
Diminishing Freedoms<br />
President John Magufuli’s administration has come<br />
under sharp criticism following accusations of<br />
alleged abuse of the Cyber Crime Act to propagate<br />
intolerance of speech and media freedoms. This<br />
came after it was reported that the government<br />
had banned live coverage of parliamentary<br />
proceedings and all political rallies planned by the<br />
opposition. The allegation undermines Magufuli’s<br />
otherwise widely acclaimed performance as well<br />
as the political risk environment. It also derails<br />
efforts aimed at forging national unity beyond the<br />
hotly contested 2015 general election that divided<br />
the country along competing political factions.<br />
BUSINESS ENVIRONMENT<br />
Budget to Promote Business Environment<br />
Creating an enabling business environment is<br />
one of the key priorities highlighted in Tanzania’s<br />
Annual Development plan for 2016/17 given that<br />
the country trails regional peers in World Bank’s<br />
Ease of doing Business 2016, despite leading in<br />
attracting foreign direct investment. As a result,<br />
Tanzania has set aside 15.0% of the USD 13.5<br />
Billion budget for improving infrastructure in<br />
order to support the business environment and<br />
retain foreign investment into the country.<br />
ECONOMIC OUTLOOK<br />
Expansionary Budget to Stimulate Growth<br />
The government unveiled the 2016/17 national<br />
budget entailing a USD 13.5 Billion expenditure<br />
plan, an increase of 31.1%, year-on-year, focusing<br />
on industrial and infrastructural development.<br />
Moreover, government is looking to reduce the<br />
budget deficit from the current 4.5% of GDP to<br />
less than 3.0% in 2017 through prudent fiscal<br />
policy that trims on excesses in expenditure.<br />
Note: In 2016/17, domestic revenue is expected to<br />
account for 62.3% of the total budget.<br />
DEBT <strong>MARKET</strong> <strong>UPDATE</strong><br />
Yields Exhibit Mixed Movement<br />
Yields for the 182 Day and 364 Day papers exhibited<br />
signs of rising in June 2016 in an environment<br />
of tightened liquidity conditions that saw the<br />
interbank rate rise by 100.0 bps, month-onmonth,<br />
to average 13.3% in June 2016. This came<br />
even as inflation remained favourably anchored<br />
within the 5.0% - 5.5% band, with a marginal rise<br />
to 5.2% in May 2016. Budget 2016/17 projects a<br />
21.1% increase in borrowing by the government<br />
(with USD 2.5 Billion to be sourced from the<br />
domestic market) that could inflict a general<br />
upward pressure on yields going forward.<br />
T-Bill Yield Trend<br />
20.0%<br />
18.0%<br />
16.0%<br />
14.0%<br />
12.0%<br />
10.0%<br />
8.0%<br />
6.0%<br />
Apr-14<br />
Jul-14<br />
Oct-14<br />
Jan-15<br />
Apr-15<br />
Source: Bank of Tanzania, StratLink Africa<br />
Jul-15<br />
Oct-15<br />
Jan-16<br />
91 Day 182 Day 364 Day<br />
Apr-16<br />
Full report available for purchase via:<br />
JULY 2016 | <strong>MARKET</strong> <strong>UPDATE</strong> <strong>–</strong> <strong>AFRICA</strong><br />
6<br />
www.stratlinkglobal.com