MARKET UPDATE – AFRICA (Abridged)

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A financial Advisory Company UGANDA POLITICAL OUTLOOK 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. BUSINESS ENVIRONMENT 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. ECONOMIC OUTLOOK 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. DEBT MARKET UPDATE 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 Full report available for purchase via: JULY 2016 | MARKET UPDATE – AFRICA 8 www.stratlinkglobal.com
A financial Advisory Company RWANDA POLITICAL OUTLOOK 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. BUSINESS ENVIRONMENT 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. ECONOMIC OUTLOOK 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. DEBT MARKET UPDATE 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. Full report available for purchase via: JULY 2016 | MARKET UPDATE – AFRICA 9 www.stratlinkglobal.com
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MARKET UPDATE – AFRICA (Abridged)

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