Africa Market Update January 2016

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
Table of Contents
Company
JANUARY 2016 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA
KENYA
UGANDA
TANZANIA
RWANDA
ZAMBIA
ANGOLA
GHANA
ETHIOPIA
GABON

3JANUARY 2016 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
This Issue at a Glance
• Commodities’ Price Rout
The last two years (2014 and 2015) have been characterized by elevated monetary and fiscal vulnerabilities in a number
of African economies stemming from the commodities’ price rout. Economies of commodity reliant countries such as
Nigeria (oil), South Africa (gold) and Zambia (copper) have experienced decelerated growth momentum in this regard. As
such, a number of investors have in the recent past downgraded their perception and appetite for economies in Africa,
opting for a wait and see stance. This issue (themed ‘Navigating the Commodity Oddity: Speed Bump not Dead End’)
is premised on the fact that in a number of the affected economies, bold reforms are underway with a view to buffer the
countries against such shocks in the years to come. Gabon, for instance, has been on an economic diversification agenda
that is spurring emergence of its non-oil sector and unleashing new investment opportunities. In Nigeria, economic
diversification is going hand-in-hand with heightened fiscal prudence aimed at addressing misappropriation of state
resources and bolstering growth. These are measures that should yield dividends in the long-term if sustained.
• Elections Watch
This issue also takes note of the continuing electoral cycle that began in 2015. Zambia, Uganda and Ghana are some
of the countries set to go to the polls in 2016 and political risk consideration amongst investors will be a key factor.
Despite facing setbacks, Nigeria, Tanzania and Ethiopia set a favourable precedent in 2015 with largely peaceful elections
and transfer of power that should be furthered in 2016. Undeniably, political transition remains a sticky affair in Africa
especially in view of growing civic consciousness by the public amidst, in some cases, rigid institutions that fail to change
with evolving demands. Developments of civil strife in South Sudan and Burundi remind us that political risk still abounds
as a key impediment to economic growth and development in Africa.

Company
NIGERIA MARKET UPDATE
“We expect the Naira to
remain weak through Q1, 2016
with crude oil having fallen
below USD 35.0/barrel in Q4,
2015 and the rundown of
foreign exchange reserves that
suggests depleted
ammunition to support the
local unit going forward.”
ECONOMY TO REMAIN ATTRACTIVE IN 2016 DESPITE DOWNTURN

Company
5
Anti-Terror Efforts to Lead 2016 Agenda
Focus: The insurgency, Boko Haram, is likely to remain
the key endogenous risk in 2016 whilst the communique
signed between Presidents Muhammadu Buhari
(Nigeria) and Paul Biya (Cameroon) in July 20151
, to
address border conflict between the two states, is likely
to mitigate a long running exogenous risk.
In the race to the March 2015 election, Buhari
promised a ‘Marshall Plan’ against Boko Haram that
we anticipate will continue to heighten expectations
from the public in 2016. Confidence raised by the
shake-upofthetopbrassinthemilitaryandrelocation
of the military Command Center to Maiduguri (Borno
State) has been undermined by recurrent attacks in
the recent past. Operations by the five state (Nigeria,
Niger, Chad, Benin and Cameroon) joint force against
Boko Haram will be especially critical in determining
the direction of the fight against the militia in 2016.
ECONOMIC OUTLOOK
NIGERIA
GDP: USD 545.7 Bln | Population: 177.5 Mln
1
Allafrica.com July 31st 2015
Safeguarding Lagos ─ Nigeria’s Economic Heartthrob
In October 2015, forty-five Boko Haram suspects were
charged with a foiled attack on the state of Lagos,
raising concern over the militia’s encroachment into
the country’s commercial hub. Shielding Lagos from
Boko Haram attacks will be critical in 2016 given
the economic significance of the state and Nigeria’s
present grapple with subdued oil prices.
22.0% (USD 131.0 Bln)
Lagos’ GDP as percentage of Nigeria’s GDP2
12.1%
Lagos’ population as percentage of Nigeria’s
population
Waging War on Corruption
Furthering the fight against corruption will be a major
agenda item in 2016 especially as the country faces
fiscal strain stemming from depressed oil revenue. In
September 2015, President Buhari appointed himself
Oil Minister citing need to streamline operations
around the country’s largest revenue earner.
Corruption has been a major challenge to the country’s
business climate.
Note: Nigeria’s ranking in the Global Terrorism Index
has deteriorated over the last three years from the
seventh worst performer in 2012 to the third worst in
2015. The new administration will be keen to reverse
this trend in 2016 in a bid to boost investor attraction.
2012: 7 (Beating Somalia, Yemen, India,
Afghanistan, Pakistan and Iraq)
2014: 4 (Beating Pakistan, Afghanistan and Iraq)
2015: 3 (Beating only Afghanistan and Iraq)
Source: Global Terrorism Index, StratLink Africa
Corruption Comparison
Source: World Bank, StratLink Africa
Source: Amnesty International, StratLink Africa
Number of people killed
by Boko Haram in 2014
>4,000
Number of people killed
by Boko Haram in Q1, 2015
~1,500
2
Speech by State Governor Akinwunmi Ambode, October 2015. Courtesy of allafrica.com
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Nigeria Kenya Ghana
% of firms
expected to
give giŌs in
meeƟngs with
tax officials
% of firms
expected to
give giŌs to get
an operaƟng
license
% of firms
expected to
give giŌs to
get an import
license

Company
Nigeria to Remain Attractive to Investors Despite
Challenges
Focus: Despite a generally adverse economic climate,
Nigeria is bound to remain a key investment destination
of interest in 2016 with key pointers suggesting
comparative confidence (by foreign investors) vis-à-vis
peer economies such as Kenya and Ghana. Ten year
Eurobond yields suggest Nigeria is enjoying better risk
perception, a fact that we expect will be a major driver
of investor interest in 2016.
Note: Nigeria not only posted the lowest yield as of
December 15th
, 2015 but also reported the least
rise (in yield) between November 10th
, 2014 and
December 15th
, 2015 indicative of comparatively low
risk perception. The decline in the yield between
March 2015 and May 2015 came on the back of the
relatively peaceful election and transfer of power and
is a pointer that political risk is bound to be a major
consideration for investors targeting Nigeria in 2016.
BUSINESS NEWS ENVIRONMENT
Uncertainty in Ghana Could Make Nigeria More
Attractive for West Africa Focused Investors
With political temperatures rising in Ghana ahead of
the November 2016 general election and in view of the
country’s economic downturn, investors are likely to
shift focus towards Nigeria in 2016. Whilst Ghana has
a history of democratic maturity, the country has faced
growing protests in the recent past as citizens grow
restive over an unfavourable economic environment.
Note: Nigeria and Ghana form the loci of investor
interest in West Africa accounting for 63.1% of total
Foreign Direct Investment (FDI) into the region in 2014.
Source: Bloomberg, StratLink Africa
Source: UNCTAD 2015, StratLink Africa
Ten Year Eurobond Yields
West Africa FDI Inflow 2014
Country Rise in Eurobond Yield (bps) 3
Ghana 450.0
Nigeria 210.0
Kenya 340.0
3
Refers to rise in ten year Eurobond yield between November 10th, 2014 and
December 15th, 2015
NIGERIA
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
10-Nov-14
10-Jan-15
10-Mar-15
10-May-15
10-Jul-15
10-Sep-15
10-Nov-15
Nigeria Kenya Ghana
36.8%
26.3%
6.0%
3.9%
3.6%
23.4%
Nigeria Ghana Niger
Mauritania Cote d' Ivoire Others

Company
Naira to Remain Weak, Economy to Post Anaemic
Performance
Focus: We expect the Naira to remain weak through
Q1, 2016 with crude oil having fallen below USD
35.0/barrel in Q4, 2015 and the rundown of foreign
exchange reserves that suggests depleted ammunition
to support the local unit going forward. The Central
Bank is likely to continue defying calls for devaluation
of the Naira especially in view of growing concern that
the deceleration of the economy could be heading
towards recession.
ECONOMIC OUTLOOK
Likelihood of Accommodative Monetary Policy in Q1,
2016
Note: Central Bank slashed the benchmark rate by
200.0 bps to 11.0% in November 2015.
The Naira’s weakness notwithstanding, monetary
policy is likely to remain accommodative through Q1,
2016 as the government looks to buffer the economy
from further slowdown.
The Naira is likely to breach the 200.0 units (to
exchange as low as the 200.0 – 205.0 band, subject
to the extent of oil price decline) of exchange to the
greenback in Q1, 2016. We note, however, that the
Central Bank has been aggressive in intervention in
the recent past including publication of a list of forty
items for which investors will not be able to obtain
foreign currency for import.
Foreign Exchange Reserves
(USD Mln)
GDP Growth
(General slowdown discernible)
Naira Exchange vs Global Oil Price
Source: Bloomberg, National Bureau of Statistics, StratLink Africa
NIGERIA
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
0.005
0.006
0.007
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
OPEC Benchmark Price ($/bbl)
USD to Naira Exchange (LHS)
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00
50,000.00
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Q1,2013
Q2,2013
Q23,2013
Q4,2013
Q1,2014
Q2,2014
Q3,2014
Q4,2014
Q1,2015
Q2,2015
Q3,2015

Company
Outstanding private sector credit was at near
stagnation in 2015 indicative of the impact of
monetary tightening. We expect the Central Bank to
focus on accelerating growth in the first half of 2016
with aggregate economic growth trending below
expectations in 2015.
DEBT MARKET UPDATE
Focus: 2015 presented an interesting year for Nigeria’s
fixed income market with the yield curve elevated in
the first quarter owing to pre-election uncertainty
before correcting downwards by end of Q2, 2015.
The September 2015 delisting from JP Morgan’s
Emerging Market Government Bonds Index (GBI – EM),
coupled with tightened liquidity in the money market,
heightened uncertainty amongst investors with the
yield curve rising above the January 2015 level. In
Q1, 2016, declining export earnings are likely to raise
government appetite for domestic debt, potentially
elevating yields.
Potential weakness by the Naira could also necessitate
liquidity tightening by the Central Bank, nudging yields
further upwards. Liquidity has been on the rise in the
latter half of 2015, supported by a stable currency.
Inflation to keep Potential Rate Slashes Modest
If undertaken, monetary rate slashes in Q1, 2016 are
bound to be more modest than the November 2015
200.0 bps slash owing to sustained inflation pressures.
At 9.4% (as of November 2015), inflation stands
40.0 bps above the Central Bank’s upper target band
necessitating cautious stances going forward.
Yield Curve
Private Sector Credit vs Monetary Policy Rate
Inflation Trend
Source: Central Bank of Nigeria, StratLink Africa
Change in interbank rate between January
15th, 2015 and December 15th, 2015
-450.0 bps
NIGERIA
11.5%
12.0%
12.5%
13.0%
13.5%
80.0
82.0
84.0
86.0
88.0
90.0
92.0
94.0
96.0
98.0
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Billions
Private Sector Credit (USD)
Monetary Policy Rate
7.2%
7.7%
8.2%
8.7%
9.2%
9.7%
10.2%
10.7%
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
InﬂaƟon Food InﬂaƟon
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
3M 6M 9M 1Y 3Y 5Y 7Y 10Y 15Y 20Y
Dec-14-2015 Sep-10-2015
Jun-14-2015 Jan-14-2015

Company
Gradual Tightening of Liquidity
The decline in 91 Day T-Bill bid-to-cover ratios between
November and December 2015 further suggests
that liquidity is beginning to tighten after steady rise
between September and November 2015. With the
USA Federal Reserve having hiked the Funds Rate by
0.25%onDecember16th,2015andsendingindications
of more hikes in 2016, we expect the Central Bank of
Nigeria is likely to closely monitor liquidity in Q1, 2016.
EQUITY MARKET UPDATE
Focus: The market was generally bearish in 2015
undermined by political risk considerations; the adverse
macroeconomic climate and improving climate in the
USA that is likely to have triggered outflow by foreign
investors from the Nigeria Stock Exchange. In Q1, 2016,
we expect bearish sentiments to prevail as investors
assess the government’s efforts towards addressing
the economy’s downturn ─ currency risk will remain a
major focus in Q1, 2016.
Foreign investor inflow declined progressively in 2015
touching a low of USD 129.1 Million in October 2015,
reporting 46.8% decline from January 2015.
Foreign Exchange Reserves
(USD Mln)
Nigeria Stock Exchange 30 Index
91 Day T-Bill Bid-to-Cover Ratios
1,150.0
1,250.0
1,350.0
1,450.0
1,550.0
1,650.0
25-Nov-14
25-Jan-15
25-Mar-15
25-May-15
25-Jul-15
25-Sep-15
25-Nov-15
Nigeria 30 Index year-on-year depreciation
as at December 15th, 2015
Nigeria 30 Index year-to-date depreciation
-12.6%
-6.6%
NIGERIA
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
05-Jan-15
05-Feb-15
05-Mar-15
05-Apr-15
05-May-15
05-Jun-15
05-Jul-15
05-Aug-15
05-Sep-15
05-Oct-15
05-Nov-15
05-Dec-15
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jun-3-2015
Jun-17-2015
Jun-24-2015
Jul-8-2015
Jul-22-2015
Aug-5-2015
Aug-19-2015
Sep-2-2015
Sep-23-2015
Oct-7-2015
Oct-21-2015
Nov-4-2015
Nov-18-2015
Dec-2-2015

Company
Banking counters are likely to elicit the greatest
interest in Q1, 2016 owing to better performance
than peer counters. In November 2015, the Central
Bank debunked claims that about nine banks were
in distress, a move that is likely to mitigate investor
uncertainty going forward.
Oil counters are likely to remain depressed given the
tumble in global prices and drag the market in Q1,
2016.
Foreign Investor Activity at Stock Exchange
Oil Stocks Index
Banking Stocks Index Source: Bloomberg, StratLink Africa
Source: Nigeria Stock Exchange, StratLink Africa
Source: Nigeria Stock Exchange, StratLink Africa
Banking Stocks Index change year-to-date
Oil Stocks Index change year-to-date as at
December 15th, 2015
-3.9%
-23.6%
NIGERIA
0.5
0.7
0.9
1.1
1.3
1.5
1.7
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Millions
Foreign Investor Inﬂow (USD)
Foreign Investor Ouƞlow (USD)
Inﬂow-Ouƞlow RaƟo (RHS)
230.0
250.0
270.0
290.0
310.0
330.0
350.0
370.0
390.0
410.0
430.0
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
270.0
290.0
310.0
330.0
350.0
370.0
390.0
410.0
430.0
450.0
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15

Company
IN SEARCH OF FISCAL CONSOLIDATION: REMEDYING A DETERIORATING POSITION
KENYA MARKET UPDATE
“We anticipate Q1 2016 to be
characterized by efforts to
correct the inversion by the
yield curve in view of calls for
fiscal consolidation that
should see toned down
short-term borrowing.”

Company
Asserting its Position in Africa’s Landscape
Focus: Kenya was at the center of global attention in
2015 following its hosting of United States President,
Barrack Obama, in July and being the first African
country to host a World Trade Organization Ministerial
ConferenceinDecember.In2016,weexpectthecountry
to be keen on leveraging these developments to solidify
its standing in the continent. Advanced and emerging
markets have in the recent past heightened their focus
on Africa with fora such as the India – Africa Summit,
Forum on China – Africa Co-operation and the (2014)
USA – Africa Leaders’ Summit gaining prominence.
Kenya will be keen to deploy its recent history in
anchoring its position as a key market and geopolitical
partner in Africa. The country also enters 2016 against
the backdrop of mitigated terror incidences, boding
well for its political risk environment.
Note: Kenya’s ranking in the Global Terrorism Index1
improved six places between 2014 and 2015.
POLITICAL OUTLOOK
Less Favourable Domestic Environment
On the domestic scene, the government faces the
daunting task of reigniting fast waning confidence
following allegations of pervasive corruption in 2015.
In 2015, the anti-corruption watchdog, the Ethics
and Anti-Corruption Commission, was marred with
controversy, raising uncertainty over the country’s
institutional capacity and preparedness to address the
scourge of corruption.
This is likely to remain a major pressure point for
the risk climate in 2016 with the opposition drawing
political capital from it and heightening temperatures
ahead of the 2017 general election. Whereas
the government has made steps in combating
corruption, unresolved controversy around alleged
misappropriation of Eurobond proceeds will be a
key point for risk perception in 2016. Widespread
anticipation of decelerated execution of infrastructure
projects is likely to depress investor appetite for the
economy.
Devolution: A Sticky Issue Going Forward
Co-ordination and delineation of roles between the
Central and County governments is bound to remain
a sticky issue in 2016. In 2015, industrial action by a
section of health workers paralyzed operations in
select counties evoking concern over the devolution
of vital social services. Additionally, investment into
capital spending by county governments (which stood
at 22.0% of total expenditure in 2013/14 compared
to the 30.0% target3
) has derailed the growth and
development pace of the new units.
Source: Institute for Economics and Peace, StratLink Africa
KENYA
124
Kenya’s ranking
in the 2014
Global Terrorism Index
12
124
Kenya’s ranking
in the 2015
Global Terrorism Index
18
1
The Index ranks 124 countries with declining risk from 1 to 124
Amount raised through Kenya’s
June 2014 Eurobond and
the subsequent tap sale
USD 2.75 Bln
InsƟtute of CerƟﬁed Public Accountants
esƟmate2
of amount lost to corrupƟon
in Kenya every year
USD 674.0 Mln
2
Estimates made in October 2014
3
World Bank 2014

Company
KENYA
2
World Bank Ease of Doing Business 2016
3
Resolutions circulated to shareholders requiring them to pass a vote
ECONOMIC OUTLOOK
Focus: On September 11th, 2015 a new Companies Act was signed into law, spelling a raft of changes which, by and large,
presents progressive reforms on matters pertaining registration, management and operation of firms especially for small and
medium sized domestic investors. How this translates into benefits for the investor community will be one of the key areas of
focus in 2016. The November 2015 review of the clause that would demand foreign investors surrender 30.0% shareholding
of their entities to locals arrests what would have been a potential decline in foreign investor appetite for the Kenyan market
in 2016.
Note: Between 2014 and 2015, the average number of days taken to start a business in the country decline from 30 to 26
setting a welcome precedent for the new Companies Act4
.
Old vs New Companies Acts’ Provisions (Snapshot)
Source: Companies Act of Kenya, StratLink Africa
Minimum of two persons required to
register a company.
Companies required to appoint and
have a Company Secretary qualified
as a Public Secretary.
Shareholders are required to hold
meetings to pass resolutions.
All company resolutions must be
passed at the General Meeting.
A foreign registered company seeking
to do business in Kenya does not
require to have a registered office in
the country.
One person can form a company as
the sole member.
A private company will not be obliged
to have a Company Secretary unless
its paid up capital exceeds KES 5.0
Million.
The law allows private company
shareholders to pass resolutions
through either meetings or as written
resolutions in hard copy or electronic
form.
Private companies can pass written
shareholders’ resolutions5
without
holding a general meeting except in
the case of removal of directors or
auditors before expiry of their term.
A foreign registered company seeking
to operate and do business in Kenya
must establish a registered office
in the country prior to obtaining a
certificate to do business.
This provision is likely to emerge as
a major boost for growth of small
business ventures
This is likely to greatly ease the
compliance of small ventures with
regulatory requirements since
periodically they are obliged to
contract the services of a Company
Secretary
This provision creates room for
unprecedented flexibility in making
decisions.
This furthers the flexibility with which
companies can pass resolutions and
fast-track decision making.
This threatens to raise the cost of
foreign companies’ operation in the
country.
Old Act New Act Potential Impact

Company
Shilling Likely to Remain Resilient in Q1, 2016
Focus: Despite clawing back lost ground in Q4, 2015,
the shilling is not out of the woods yet and this will
be a key point in 2016. In Q4, 2015, the Central Bank
allowed relatively eased liquidity conditions in what
we assess was driven by a combination of confidence
in the new found resilience of the shilling and need to
correct the yields anomaly in the fixed income (Please
see the Debt Market Update). In Q1, 2016, we expect
the local unit to be range-bound in the 101.0 – 103.0
band of exchange to the greenback supported by
the dissipation of disturbance from USA Fed rate
hike expectation and steady rise in foreign exchange
reserves that strengthen the Central Bank’s ability to
support the shilling.
Shilling vs USD Exchange and Interbank Rate
Source: Bloomberg, central Bank of Kenya, StratLink Africa
Global Tea Prices (USD/kg)
Usable FX Reserves vs Months of Import Cover
Global tea prices have also been comparatively
elevated in the recent past thereby propping the
shilling with strong inflow of foreign currency. How
this evolves in 2016 will be subject to output from
other key exporters such as India and Sri Lanka with a
potential decline in their output being advantageous
to Kenya.
Note: In 2014, tea was Kenya’s second largest export
earner generating USD 931.9 Million6
.
KENYA
In October 2015, foreign exchange reserves
rebounded to exceed four months of import cover
providing a buffer against depreciation pressures. As
of December 23rd, 2015, reserves stood at USD 7.2
Billion, a high last registered in March 2015.
ECONOMIC OUTLOOK
90.0
92.0
94.0
96.0
98.0
100.0
102.0
104.0
106.0
108.0
3.5%
8.5%
13.5%
18.5%
23.5%
28.5%
02-Jan-15
02-Mar-15
02-May-15
02-Jul-15
02-Sep-15
02-Nov-15
KES to USD Interbank Rate (LHS)
5,900.0
6,100.0
6,300.0
6,500.0
6,700.0
6,900.0
7,100.0
7,300.0
7,500.0
3.5
3.7
3.9
4.1
4.3
4.5
4.7
4.9
08-Jan-15
08-Mar-15
08-May-15
08-Jul-15
08-Sep-15
08-Nov-15
Usable FX Reserves (USD Mln)
Months of Import Cover (LHS)
6
Kenya National Bureau of Statistics
2.3
2.4
2.5
2.6
2.7
2.8
2.9
3.0
3.1
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15

Company
Source: Central Bank of Kenya, StratLink Africa
Bloomberg BVAL Yields Index
Revenue Mobilization Performance
Budget 2015/16 Allocation
Central Bank Likely to Maintain Benchmark Rate in Q1
2016 despite Inflation Pressures
The build-up in inflation notwithstanding, the Central
Bank is likely to hold the policy rate steady at 11.5% in
Q1 2016. Growth in money supply has been on the
decline since May 2015 suggesting the two hikes in 2015
are yielding pass through effects, already toning down
inflation pressures. Additionally, the shilling has been
resilient in the recent past indicative of a stabilizing
monetary environment.
High expenditure on capital projects such as the
Standard Gauge Railway will remain key drivers of the
deteriorating fiscal position.
KENYA
Deteriorating Fiscal Position: Consolidation Likely to
be Key 2016 Agenda
Despite posting historically higher revenue mobilization
performance, the country continues to fall short of its
target deteriorating the fiscal balance. Available data
indicates that in the first two months of financial year
2015/16 (July and August 2015), the government
realized 89.3% of its target posting the highest
performance in four years. Kenya’s fiscal deficit to
GDP ratio stands at 8.1% compared to the East African
average of 4.7%7
placing Kenya at a comparatively
weak position.
Focus: The yield curve inverted in 2015 driven by high
government appetite for short-term debt between
Q3 2015 and Q4 2015. We anticipate Q1 2016 to be
characterized by efforts to have this inversion corrected
in view of calls for fiscal consolidation that should see
toned down short-term borrowing in the near term.
Liquidity has also been on a general rise and should
further nudge yields downwards. We note, however,
that inflation breached the Central Bank’s upper target
ceiling of 7.5% to stand at 8.0% in December 2015 and
is likely to be one factor creating room for higher yields
as investor price in expectations.
79.0%
81.0%
83.0%
85.0%
87.0%
89.0%
91.0%
2012/13 2013/14 2014/15 2015/16
80.9%
85.0%
86.4%
86.4%
27.0%
22.0%
16.0%
16.0%
5.0%
4.0%
10.0%
Energy & Infrastructure EducaƟon
Public AdministraƟon NaƟonal Security
Agriculture Health
Others
DEBT MARKET UPDATE
9.5%
10.5%
11.5%
12.5%
13.5%
14.5%
15.5%
16.5%
3M 1Y 3Y 5Y 8Y 10Y 20Y 30Y
Dec-18-2015 Jun-30-2015 Jan-31-15
7
International Monetary Fund October 2015

Company
Source: National Bureau of Statistics, Central Bank of Kenya,
StratLink Africa
Inflation vs Monetary Policy Rate
Growth in Broad Money Supply
Nairobi Securities Exchange
Nairobi Securities Exchange (Month-on-Month)
KENYA
Note: In 2015, broad money supply reported the slowest
growth (year-on-year) in October posting 13.6%. Should
inflation edge into double digits, however, steady growth
by the economy provides room for further tightening. The
economy grew by 5.8% in Q3 2015, sixty and thirty basis
points higher than Q3 2014 and Q2 2015.
NSE 20 Share Index change
year-on-year
NSE 20l Share Index change
month-on-month
-19.2%
1.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
InﬂaƟon Monetary Policy Rate
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
3,700.0
3,900.0
4,100.0
4,300.0
4,500.0
4,700.0
4,900.0
5,100.0
5,300.0
5,500.0
5,700.0
17-Dec-14
17-Feb-15
17-Apr-15
17-Jun-15
17-Aug-15
17-Oct-15
17-Dec-15
Millions
Volume (RHS) NSE 20 Share Index
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
3,930.0
3,950.0
3,970.0
3,990.0
4,010.0
4,030.0
4,050.0
4,070.0
17-Nov-15
24-Nov-15
01-Dec-15
08-Dec-15
15-Dec-15
Millions
Volume (RHS) NSE 20 Share Index

Company
Focus: The market was generally bearish in 2015 in
what brokers have largely attributed to exit by foreign
investors. The depreciation of the shilling was a key
diver as it undermined the dollar value of portfolio held
by foreign investors. The market was also undermined
by high yields in the short-term fixed income market
that made debt instruments more attractive. The
number of listed companies that issued profit
warnings in 2015 was particularly high, occasioning
bearish sentiment amongst investors. In Q1 2016, we
expect considerable focus to be channelled towards
financial services (notably banks) given the placement
of Imperial Bank under receivership in October 2015
that saw the banking index report largest day-on-day
decline in 2015.
GDP Growth Momentum Could Elicit Mild Bullish
Sentiment
The economy’s 5.8% growth in Q3 2015, quantum
by historical standards, could see investors revise
assessment of the state of the economy thereby
heightening appetite for the market in the near term.
The manufacturing sector continues to post anaemic
performance (growing by 2.8% in Q3 2015) and this
is likely to keep companies listed from the sector
subdued.
Banking Sector Index Day-on-Day Change
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
02-Jan-15
02-Feb-15
02-Mar-15
02-Apr-15
02-May-15
02-Jun-15
02-Jul-15
02-Aug-15
02-Sep-15
02-Oct-15
02-Nov-15
Oct 14th, 2015: Banking
Index reports largest day
on day decline in 2015

Company
TANZANIA MARKET UPDATE
“The new administration has
assumed office with fiscal
consolidation as its key agenda.
This comes as a timely policy
stance given the mounting fiscal
challenges and image deterioration
Tanzania suffered following the USD
122.0 Million energy scandal that
saw development partners withhold
aid towards the country.”
BOLD AUSTERITY MEASURES AS NEW ADMINISTRATION TAKES CHARGE

Company
2016: Reforming the Energy Sector
Energy reliability is likely to be a key area of focus
following disruption that decelerated industry in 2015.
The energy ministry implemented power rationing in
2015ashydropowerplantssufferedreducedgeneration
owing to adverse weather conditions. As such,
Tanzania Electric Supply Company Limited (TANESCO)
has actively embarked on increasing thermal capacity
as it looks to reduce overreliance on hydropower. Total
power generation is set to increase to 5TWh in 2016 in
view of the additional 600MW gas-fired power plant
set to be constructed by Symbion Power3
.
Promising Start, Daunting Carryovers from 2015
Focus: The new administration has assumed office
with fiscal consolidation as its key agenda. This comes
as a timely policy stance given the mounting fiscal
challenges and image deterioration Tanzania suffered
following the USD 122.0 Million energy scandal1
that
saw development partners withhold aid towards the
country. Investors are likely to hold mixed view on the
country’s risk standing in view of the largely peaceful
October 2015 election whilst the deferred referendum
stands out as teething challenge.
Key Issues to be tackled in 2016:
1. Zanzibar’s Political Impasse
Zanzibar is set to carry out a repeat poll in January
2016, a development that may weigh down on
Tanzania’s near-term political outlook. How the new
administration manages the Zanzibar question will be a
key factor in determining Tanzania’s risk outlook going
forward given the island’s quest for greater autonomy.
2. The Endemic Corruption
Investors are looking to Magufuli to tackle the endemic
corruption that characterised 2015 with USD 558.0
Million in form development assistance withheld
owing to the energy corruption scandal. We assess that
Magufuli’s perceived goodwill to fight corruption will
go a long way in boosting investor confidence, in view
of the fact that Tanzania relies on donor support for the
budgetary requirements – the country receives grants
equivalent to 30.0% of its budgetary requirements2
.
3. The Constitutional Review Process
The headache of the setback laden constitutional
referendum has been carried forward to 2016.
Investors and observers are looking to Magufuli to
create a new script by re-opening debate on the
constitutional review process with the intention to
unlock the stalemate and foster national cohesion.
Note: Natural gas (and electricity) has emerged to be a
key driver of FDI into the country with its contribution
to total inflows growing from 0.1% in 2008 to 17.0% in
20114
reporting the fastest growth by sector. Depressed
prices in 2015 are bound to reverse this trend.
POLITICAL OUTLOOK BUSINESS ENVIRONMENT
Source: BMI, StratLink Africa
TANZANIA
1
Thomson Reuters Foundation February 04th, 2015
2
BMI
Electricity Generation per Capita KWh (Per Annum)
0.0
50.0
100.0
150.0
200.0
250.0
Ethiopia
Uganda
Tanzania
Nigeria
Kenya
3
Business Monitor International
4
Tanzania Investment Report 2012

Company
Treading a Tight Fiscal Rope on the back of Rising Debt
The economy faces lingering risk from the rising debt,
as well as fiscal balance (as a percentage of GDP), that
remains high by regional standards. We project that
these will be some of the key points of concern for the
new administration in 2016.
Protracted Foreign Exchange Risk from Deteriorating
Current Account Balance
Foreign exchange risks will remain at the fore over
the near term, especially given that the country is
planning to float its debut Eurobond targeted at
USD 700.0 Million in an environment of a weakened
currency7
. The Tanzanian shilling, like its East Africa
comparators, was under immense pressure in 2015
- it has depreciated 25.1% year-on-year8
against
the greenback – overtaking Uganda as the worst
performing currency in Eastern Africa. The currency
has been the chief focus for monetary policymakers
through 2015 and we expect this will remain the case
heading into Q1 2016, despite the shilling’s benign
stability in the last quarter of 2015.
Debt and Fiscal Balance as a % of GDP
Revenue Collection (USD)
Source: International Monetary Fund, StratLink Africa
5
The East African
6
OEC Tanzania, 2013
4
The East African Weekly April 25th, 2015
5
As at January 4th, 2016
TANZANIA
Bold Austerity Measures Usher in 2016
Focus: The year has begun on the back of austerity
measures. The new administration’s emphasis on
cutting down on non-priority spending, and plugging
loopholes in revenue collection underscores its focus
on fiscal consolidation and macroeconomic stability.
Tanzania Revenue Authority is reported to have
benefitedfromPresidentMagufuli’sausteritymeasures
against tax evasion, collecting over USD 602.7 in the
less than two months that he has been in office5
, a
move that serves to bolster investor confidence. The
move signals the potential start of fiscal belt-tightening
measures on the back of rising expenditure and below
target revenue mobilization —the Revenue Authority
collected USD 1,749.8 Million between July and
October 2015, representing 97.5% performance rate;
attributable to the depressed global mineral prices
given that minerals form the bulk of Tanzania’s exports
at 32.6% of total exports6
.
Source: Tanzania Revenue Authority, StratLink Africa
Note: The Revenue Authority is upbeat about
meeting the financial year 2016 expected tax revenue
collections of USD 5.7 Billion, in view of the 16.4%
increase in revenue collection in Q1 2016.
ECONOMIC OUTLOOK
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
Q1
2012
Q1
2013
Q1
2014
Q1
2015
Q1
2016
Millions
-9.0%
-8.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
2009
2010
2011
2012
2013
2014
2015(f)
Debt Fiscal Balance (RHS)

Company
Declining prices of natural gas in the global market also
threaten to derail inflow of foreign currency into the
economy as investors take a back seat. This could pile
additional pressure on the shilling in 2016.
Tanzania Shilling to USD
Natural Gas Global Price Index
(2010 = 100.0)
Source: OECD Data, StratLink Africa
Tanzania shilling change year-on-
year to December 31st, 2015
Tanzania shilling change month-on-
month to December 31st, 2015
-25.1%
+0.7%
Monetary Policy Likely to Remain Tight
Monetary policy is likely to remain tight through Q1
2016 in view of the shilling’s weakness and rising
inflation. The local unit will continue to depreciate
under the pressure of a weakening current account
deficit.
Bank of Tanzania has maintained the statutory
minimum reserve (SMR) ratio at 10.0% since May
2015 after a 200.0 bps hike amid efforts to support
the embattled local unit.
Inflation: Contained but Risks still Linger
Policy makers will be conscious to contain inflation
pressures over the coming quarters given that headline
inflation has trended above the Bank of Tanzania’s
5.0% target, since May 2015. The rise in the food index
is bound to keep inflation on the uptick in Q1 2016
Comparative Headline Inflation
Source: National Bureau of Statistics, StratLink Africa
TANZANIA
1,650.0
1,750.0
1,850.0
1,950.0
2,050.0
2,150.0
2,250.0
2,350.0
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
Q1,2014
Q2,2014
Q3,2014
Q4,2014
Q1,2015
Q2,2015
127.8
115.5
102.0 101.6
85.4
68.0
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Tanzania Uganda Kenya

Company
T-Bill Yield Trend
Source: Bank of Tanzania, StratLink Africa
T-Bill Bid-to-Cover Ratios
Interbank Rate
TANZANIA
Focus: The money market experienced anomalous
liquidity tightening in Q2 2015 as the Bank of Tanzania
soughttoarresttheslidingshillingasitunderperformed
on the back of depressed commodity prices as well as
rallying greenback. The Bank of Tanzania has raised
the statutory minimum reserve (SMR) ratio by 200.0
bps to 10.0% in May 2015 amid efforts to support the
embattled local unit, reflecting the start of the increase
in yields from May 2015. Yields are likely to moderate
in Q1 2016 given the rise in liquidity in the last quarter
of 2015. We note, however, that high inflation and
domestic revenue mobilization challenges persist as
risks that could nudge yields upwards in the near term.
The 91 Day, 182 Day and 364 Day papers closed 2015
at 9.2%, 17.4% and 18.7%, respectively, on the back
improved liquidity conditions in Q4 2015.
DEBT MARKET UPDATE
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
91 Day 182 Day 364 Day
-0.3
0.2
0.7
1.2
1.7
2.2
2.7
Mar-15 Apr-15 May-15 Jun-15
Jul-15 Aug-15 Sep-15 Oct-15
Nov-15 Dec-15
Similarly, bid-to-cover ratios for the short-term
instruments registered an increase, month-on-month,
despite tightening liquidity.
Liquidity has tightened in the money market with the
interbank rate standing at 16.0% as at December 31st,
2015, an increase of 800.0 bps month-on-month.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2.5%
7.5%
12.5%
17.5%
22.5%
27.5%
32.5%
37.5%
42.5%
47.5%
31-Dec
28-Feb
30-Apr
30-Jun
31-Aug
31-Oct
31-Dec
Volume (Tzs Mln) Interbank Rate (LHS)

Company
TANZANIA
Dar es Salaam Stock Exchange
Dar es Salaam Stock Exchange, (Month-on-Month)
Focus: The market experienced a bear run for the
better part of 2015 driven by an adverse business
environment on the back of a heated election cycle.
With the country still in transition mood, we expect the
downturn to persist as investors keep an eye on policy
direction indications from the new administration.
The planned listing of state-owned power utility
firm TANESCO, Mufindi Community Bank and YETU
Microfinance are also expected to be listed in Q1 2016
in a bid to stimulate trading at the exchange in 2016
could excite investor interest in the market potentially
reversing the nosedive
Commercial Services Counters Outperform Peers in
2015
Sector indices registered bearish results in the period
under review. However, the Commercial Services
index reported a 329.0 bps increase defying the
market downturn in the year to December 31st, 2015.
The Banking index registered the highest decline
of 126.0 bps year-on-year, nonetheless, the index
surged by 23.2% to 3,953.3 units, month-on-month
as of December 31st, 2015 on the back of profitability
reporting by banks.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
2,250.0
2,350.0
2,450.0
2,550.0
2,650.0
2,750.0
2,850.0
31-Dec
28-Feb
30-Apr
30-Jun
31-Aug
31-Oct
31-Dec
Millions
Volume DSE All Share Index (LHS)
All Share Index month-on-month
change to December 31st, 2015
All Share Index year-on-year change
to December 31st, 2015
-1.7%
-7.4%
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
2,250.0
2,270.0
2,290.0
2,310.0
2,330.0
2,350.0
2,370.0
2,390.0
2,410.0
30-Nov
7-Dec
14-Dec
21-Dec
28-Dec
Thousands
Volume DSE All Share Index (LHS)
Source: Dar es Salaam Stock Exchange, StratLink Africa
Segment Indices Change between December 2014 and
December 2015
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
Industrial
Index
Commercial
Services
Index
Banking Index
Dec-14 Dec-15

Company
LOOMING ELECTION & ECONOMIC DOWNTURN: ZAMBIA’S TWIN CHALLENGES IN 2016
ZAMBIA MARKET UPDATE
“The challenge of a weak
monetary environment has
been carried forward to 2016
with investors keen to
observe how the central bank
will address fragility exhibited
by the Kwacha.”

Company
GDP: USD 27.1 Bln | Population: 15 Mln
Elections amidst Economic Slowdown
Focus: Zambia is slated to have elections in September
2016 amidst general economic slowdown. The
main opposition party, United Party for National
Development, will be capitalizing on the adverse
economic climate to gain traction in the political
arena ahead of the election. The opposition has been
emboldenedbythefactthatincumbentPresident,Edgar
Lungu, won the January 2015 presidential by-election
by a wafer thin margin (clinching 48.3% majority
against 46.7% for Hakainde Hichilema) suggestive of
a potentially neck-to-neck race in 2016. The precedent
set by Nigeria in 2015 (in which the opposition won
the election) has been a major confidence booster for
countries such as Zambia anticipating elections.
The passing on of two seating presidents (Levy
Mwanawasa, 2008 and Michael Sata, 2014) and
Rupiah Banda’s one term stint as President have
colluded to place the country in a near constant state
of transition. For investors, the position on mining
laws, as the government looks to boost revenue
mobilization, is likely to stick out as a key issue in
2016 given developments in 2015 that saw levies
revised in January before reverting to the previous
code following investor outcry in August1
.
Managing Expectations: Tough Undertaking for
Patriotic Front
In May 2015, the government lifted the wage freeze
on public servants2
following threats from the Zambia
Congress Trade Union to stage demonstrations over
the same. This indicates that the state is growing
cognizant of the economic realities faced by citizenry
and its potential implication on state stability. How the
government manages such growing pressures going
forward will be a key determinant of risk perception by
investors in 2016.
POLITICAL OUTLOOK
1
Bloomberg August 15th, 2015
2
Lusaka May 01st, 2015
Private Sector Credit 2014
Investment Climate Remains Attractive
Focus: We expect Zambia to remain attractive for
Southern Africa focussed investors despite anemic
economic performance driven by two key factors –
the ongoing economic slump in South Africa and the
revision of mining levies:
• South Africa’s Slump: South Africa is grappling with
near economic recession creating a comparatively
more uncertain environment in the medium term
─ the economy contracted by 1.3%, year-on-year,
in Q2, 2015. Investors are therefore left with little
option given the pervasive uncertainty with which
Zimbabwe is regarded
• Revision of Mining Levies: The government’s
reconsideration of new mining levies in August 2015
is likely to further strengthen investor confidence
on the general policy outlook. This will, however,
be subject to developments around the 2016 ballot
and outcome
BUSINESS ENVIRONMENT
Source: UNCTAD 2014, StratLink Africa
ZAMBIA
Southern Africa 2014 FDI by Country
39.2%
33.6%
17.0%
3.7%
2.8%
2.7%
0.9%
South Africa Mozambique Zambia
Zimbabwe Namibia Botswana
Malawi

Company
Kwacha’s Tumble Rattles Investor Confidence
Focus: The challenge of a weak monetary environment
has been carried forward to 2016 with investors keen
to observe how the central bank will address fragility
exhibited by the Kwacha. The trend in global prices
for copper (an estimated 70.0% of export earnings) is
bound to keep the local unit under immense pressure,
further undermining investor confidence. We note,
however, that the central bank has indicated it will
be reinforcing use of the Kwacha as legal tender3
suggesting dollarization of the economy is likely to
have been a major challenge in 2015.
Liquidity will be closely monitored in Q1 2016 in a bid
to stave off the volatility witnessed in 2015. Other risks
that could pile pressure on the local unit would be if
the economy suffers another ratings downgrade such
as the September 25th, 2015 downgrade by Moodys
from B1 (Stable Outlook) to B2 (Negative Outlook)4
that could occasion capital flight from Zambia.
ECONOMIC OUTLOOK
Source: Central Bank of Kenya, StratLink Africa
Interbank Rate vs Exchange Rate
Ten Year Eurobond Yields
Global Price of Copper (USD/MT)
ZAMBIA
The Kwacha’s weakness has resulted in deteriorating
risk perception by foreign investors which can be traced
in the evolution of yield in the country’s Eurobond. The
ten year Eurobond has seen its yield soar above peers
such as Kenya and Nigeria pointing at comparatively
high risk perception.
3
Secretary of Treasury Zambia Ministry of Finance
4
Moodys Investor Service September 25th, 2015
6
Bloomberg October 2015
5,100.0
5,300.0
5,500.0
5,700.0
5,900.0
6,100.0
6,300.0
6,500.0
6,700.0
6,900.0
7,100.0
Q1,2014
Q2,2014
Q3,2014
Q4,2014
Q1,2015
Q2,2015
Q3,2015
Change in the price of copper
between Q1 2014 and Q3 2015
-25.1%
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
14.0
15.0
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
05-Jan-15
05-Mar-15
05-May-15
05-Jul-15
05-Sep-15
05-Nov-15
Interbank Rate (LHS) Kwacha to USD
Bank of Zambia hikes
statutory reserve raƟo
by 400.0 bps to 18.0%
4.5%
5.5%
6.5%
7.5%
8.5%
9.5%
10.5%
11.5%
12.5%
13.5%
12-Nov-14
12-Dec-14
12-Jan-15
12-Feb-15
12-Mar-15
12-Apr-15
12-May-15
12-Jun-15
12-Jul-15
12-Aug-15
12-Sep-15
12-Oct-15
Zambia Kenya Nigeria

Company
Other factors that are likely to have driven the spike in
inflation are:
• Impact of energy crisis ─ The energy crisis and
rationing of electricity has compelled a number of
firms to rely on more expensive alternatives whose
impact is being passed on to end consumers
• Surge in food prices ─ Food inflation galloped from
8.1% in September 2015 to 16.2% in October 20156
,
triggering the spike in overall price levels. This comes
on the back of reports of adverse weather conditions
that are likely to have impacted negatively on food
production
Treasury Bill Yields
Source: Bloomberg, Central Bureau of Statistics, StratLink Africa
Source: Bank of Zambia, StratLink Africa
ZAMBIA
5
Bloomberg
6
Central Bureau of Statistics
7
Reuters News Agency
8
International Monetary Fund
Spill-overs from Kwacha Weakness Ripple through
Economy
October 2015’s spike in inflation (from 7.7% in
September 2015 to 14.3% in October 2015) was driven,
in part, by the deterioration of the Kwacha that has
occasioned a rise in the cost of imported commodities.
This explains the 300.0 bps hike of the benchmark rate
by Bank of Zambia in November 2015 to 15.5%5
.
5.0%
7.0%
9.0%
11.0%
13.0%
15.0%
17.0%
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
InﬂaƟon
Monetary Policy Rate
Food InﬂaƟon
DEBT MARKET UPDATE
Focus: Yields in the short-term end of the market
were stable in the first half of 2015 before posting a
general rise in December 2015 reflecting tightening
liquidity conditions. The market could also have faced
high demand for domestic debt from the government
towards the end of 2015. This trend in yields is likely to
prevail through Q1 2016 given the 9.0% - 29.0% pay
rise awarded to public servants effective 20167
which
comes on the back of depressed earnings from copper.
Note: T-Bill sales rose, year-on-year, by 35.8% in the
first nine months of 2015 compared to a rise of 23.5%
in the same period between 2013 and 2014.
The deteriorating fiscal position is likely to keep
the government’s demand for domestic debt high
through 2016, potentially nudging yields upwards. The
country’s fiscal deficit is projected to have widened to
7.8% of GDP in 2015 from 6.1% in 20148
.
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
3 Mnths 6 Mnths 1 Year
Jan-22-2015 Jun-15 Dec-24-2015

Company
Fiscal Deficit as Percentage of GDP Lusaka Stock Exchange
Growth (Y-o-Y) in Money in Circulation
Source: IMF, StratLink Africa
Source: Bank of Zambia, StratLink Africa
Lusaka Stock Exchange (Month-on-Month)
Inflation Expectations could Drive Yields Upward in
Q1 2016
Whereas inflation expectations are likely to have
been tamed in the recent past, the recent spike in
inflation could see a revision of investors’ perception
of the monetary environment. This is also likely to be
aggravated by the rise in growth of money supply that
could feed into inflation pressure going forward. We
expect that this is also nudging yields upwards in the
debt market.
ZAMBIA
11
Reuters March 23rd, 2015
12
Daily Mail August 15th, 2015
-9.0%
-8.0%
-7.0%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
2009 2010 2011 2012 2013 2014 2015
(f)
4.0%
9.0%
14.0%
19.0%
24.0%
29.0%
34.0%
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15 0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
5,700.0
5,800.0
5,900.0
6,000.0
6,100.0
6,200.0
6,300.0
06-Jan-15
06-Mar-15
06-May-15
06-Jul-15
06-Sep-15
06-Nov-15
Millions
Volume LSE All Share Index
LSE All Share Index change year-
on-year as of December 31st, 2015
LSE All Share Index change month-
on-month as of December 31st, 2015
-6.3%
-0.2%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
5,700.0
5,710.0
5,720.0
5,730.0
5,740.0
5,750.0
5,760.0
5,770.0
30-Nov-15
07-Dec-15
14-Dec-15
21-Dec-15
28-Dec-15
Thousands
Volume LSE All Share Index

Company
Banking and Manufacturing Indices
ZAMBIA
Focus: The market was bearish in 2015 on the back on
an adverse economic climate and the passage of new
mining levies in January widely deemed to be punitive
to investors ─ In January 2015, the government hiked
the levy for open pit mines from 6.0% to 20.0% while
that for underground operations was raised by 200.0
bps to 8.0% (Both have since been reviewed)9
. We
expect this trend to prevail through the first half with
investors assuming cautious positions in view of rising
political temperatures and uncertainty over the state
of the economy.
Stocks for banking and manufacturing have been on
a downtrend for the better part of the year. On the
manufacturing front, we note that the ongoing energy
crisis has occasioned negative impact on industry.
Additionally, national electricity distributor, Zesco,
is expected to hike its tariffs by as much as 248.0%10
and is likely to be see investors price in the anticipated
impact of a potential rise in the cost of industry.
49.0
49.5
50.0
50.5
51.0
51.5
52.0
52.5
53.0
16.0
16.5
17.0
17.5
18.0
18.5
19.0
01-Jan-15
01-Feb-15
01-Mar-15
01-Apr-15
01-May-15
01-Jun-15
01-Jul-15
01-Aug-15
01-Sep-15
01-Oct-15
01-Nov-15
Banking Index Manutacturing Index (RHS)
9
www.mining.com
10
Bloomberg November 10th, 2015

Company
GHANA MARKET UPDATE
“Bank of Ghana will be under the
spotlight in 2016 as it looks to
tame runaway inflation whilst
maintaining a favourable
environment for accelerating
economic growth. In November
2015, inflation crept further north
to 17.6% defying the tightening
cycle that had been adopted
since April 2015.”
DELICATE BALANCING ACT AHEAD FOR BANK OF GHANA IN 2016

Company
GDP: USD 48 Bln | Population: 26.8 Mln
Race to the Poll
Focus: Ghana is set for elections in November 2016 at a
time when the country’s economy has been plagued by
weak performance driven by the slump in commodity
prices and a crippling energy crisis. The election is likely
to be a litmus test for the country’s track record of
peacefulelectionandtransitionofpowergivengrowing
disenfranchisement by the public over the state of the
economy. In 2014 and 2015, the state faced recurrent
demonstrations over adverse living conditions, an
indicator of a restive population. We expect political
temperatures to be elevated over the next ten months,
potentially dampening investor interest. Incumbent
President, John Dramani Mahama, has been cleared to
be the flag bearer of the National Democratic Congress
(NDC) in the November 2016 poll. Mahama is set to
face off with New Patriotic Party’s (NPP) Nana Akufo-
Addo in a race that is expected to have the embattled
state of the economy as the point of focus. The economy
has slowed down during Mahama’s tenure, dragged
by high inflation, foreign exchange pressures and fiscal
imbalances. Real economic growth has declined from
8.8% in 2012 when he assumed office to 4.0% in 20141
.
Strong Undertones from July 2015 Talensi By-Election
NDC’s recapture of the parliamentary seat from
opposition New Patriotic Party (NPP) has been
widely perceived as an indication of the ruling party’s
popularity. Episodes of violence during the by election
undermine the confidence that the 2016 poll could
be characterized in an environment of peace that
has characterized the country’s electoral cycle in the
recent past.
POLITICAL OUTLOOK
Real GDP Growth
1
Business Monitor International
GHANA
Source: Media Reports, StratLink Africa
Source: Electoral Commission, StratLink Africa
Source: Business Monitor International, StratLink Africa
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Growth has
slowed under
Mahama
Talensi General Election 2012 Outcome
Talensi By-Election 2015 Outcome
41.5%
33.2%
23.4%
1.9%
42.3%
27.9%
27.9%
1.9%
NDC
New PatrioƟc Party
People's NaƟonal ConvenƟon
Others

Company
Trends in Eurobond subscription also suggest investor
appetite for Ghana’s debt is on the downtrend. The
latest issuance (October 2015) reported 100.0%
oversubscription, the lowest rate since the debut
bond was floated in 2007. The onus will be on the new
administration (after the November 2016 election) to
undertake policy measures aimed at strengthening the
business climate.
Energy Crisis Derails Business Prospects
Focus: The energy crisis continues to derail the
country’s attractiveness as business decry underutilized
potential. The country is estimated to lose USD 622.0
Million per annum2
(representing about 1.8% of GDP)
owing to erratic power supply following the ongoing
energy crisis. We expect World Bank’s provision of USD
700.0 Million guarantee for the Sankofa Gas Project
(SGP) will lay the ground work for addressing the
energy crisis going forward. The guarantee enables
Ghana to seek funds from private investors towards
SGP.
Firms’ Loss due to Electricity Outage (% of Sales 2013)
Source: World Bank Enterprise Survey, StratLink Africa
Foreign Direct Investment Inflow (USD Mln)
Ghana’s Eurobond Issuance History
Source: UNCTAD, StratLink Africa
Source: Media Reports, StratLink Africa
Adverse Climate Subdues Investor Interest
Foreign Direct Investment flows suggest Ghana is
already taking a beating from its adverse economic
climate, reporting the slowest year-on-year growth
(4.0%) in West Africa between 2013 and 2014 placing
it behind peers such as Cote d’ Ivoire which posted
13.4% in the same period.
Note: In February 2015, Ivory Coast’s Eurobond
reported 400.0% subscription of its targeted USD 1.0
Bln3
.
GHANA
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Ghana Nigeria Zambia Kenya
11.5%
11.0%
5.5% 5.5%
2
Institute of Scientific Social and Economic Research, University of Ghana 3
Reuters News Agency
-100.0%
-50.0%
0.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
350.0%
400.0%
-300.0
200.0
700.0
1,200.0
1,700.0
2,200.0
2,700.0
3,200.0
3,700.0
2000
2002
2004
2006
2008
2010
2012
2014
FDI (LHS) Year-on-Year Growth
Issuance Over-subscription Yield
Oct-07 400.0% 8.5%
Sep-14 200.0% 8.1%
Aug-13 220.0% 7.9%
Oct-15 100.0% 10.2%

Company
Bank of Ghana on the Spot
Focus: Bank of Ghana will be under the spotlight in
2016 as it looks to tame runaway inflation whilst
maintaining a favourable environment for accelerating
economic growth. In November 2015, inflation crept
further north to 17.6% defying the tightening cycle that
had been adopted since April 2015. Between January
and December 2015, the monetary rate was hiked by
800.0 bps to 26.0% making one of the most aggressive
contractionary monetary policy stances in Sub-Saharan
Africa.
In this regard, benchmark rate hikes, if any, in Q1 2016
are likely to be modest (25.0 – 100.0 bps) with a view
to catalysing growth momentum in 2016.
Can the Cedi Maintain Resilience?
The Cedi closed 2015 on a resilient path buoyed by
receipt of USD 1.8 Bln in loan proceeds by the Cocoa
Board in September 2015 and moderation by the
greenback after a strong rally earlier in the year. Bank
of Ghana is likely to keep liquidity tight in Q1 2015,
supporting the Cedi below the 4.0 units of exchange
to the greenback. The interbank rate closed 2015
at 25.3%, 160.0 bps higher than it started the year
pointing at tightened liquidity conditions.
The economy’s deceleration presents Bank of Ghana
with a delicate balancing act as it risks crippling growth
through further tightening in 2016.
ECONOMIC OUTLOOK
Economic Growth
Cedi to USD Exchange vs Interbank
Source: National Statistical Service, StratLink Africa
GHANA
16.2%
16.4%
16.6%
16.8%
17.0%
17.2%
17.4%
17.6%
17.8%
18.0%
15.5%
17.5%
19.5%
21.5%
23.5%
25.5%
27.5%
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
InﬂaƟon (RHS) Monetary Policy Rate
3.3%
3.5%
3.7%
3.9%
4.1%
4.3%
4.5%
4.7%
Q4 2014 Q1 2015 Q2 2015 Q3 2015
4.5%
4.2%
3.8%
3.6%
3.0
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
22.5%
23.0%
23.5%
24.0%
24.5%
25.0%
25.5%
5-Jan-15
5-Mar-15
5-May-15
5-Jul-15
5-Sep-15
5-Nov-15
Cedi to USD(RHS) Interbank Rate
Cedi depreciation between January
01st
2015 and December 31st, 2015
-18.8%

Company
DEBT MARKET UPDATE
Fiscal Balance as Percentage of GDP
Short-Term Yields
Declining yields in short-term papers are favourable
for the government which has seen its proportion of
short-term debt rise between 2014 and 2015 relative
to medium and long-term debt.
GHANA
22.0%
22.5%
23.0%
23.5%
24.0%
24.5%
25.0%
25.5%
26.0%
26.5%
27.0%
02-Jan-15
02-Feb-15
02-Mar-15
02-Apr-15
02-May-15
02-Jun-15
02-Jul-15
02-Aug-15
02-Sep-15
02-Oct-15
02-Nov-15
02-Dec-15
91 Day 182 Day
Focus: Short-term yields were on a general downtrend
in 2015 in what we assess was driven principally
by austerity measures that could have reduced
government demand for short-term debt. The
government is reported to have slashed the budget
for agriculture by USD 10.5 Mln in November 20154
; a
move that could suggest decreasing need for domestic
borrowing. Data from Bank of Ghana also indicates
that the overall budget balance as a percentage of
GDP stood at 1.1% in Q2, 2015 compared to 2.2% in
the same period in 2014. Yields are likely to exhibit
resistance to further decline in Q1 2016 given the high
rate of inflation.
Note: The visit by IMF staff between October 21st and
November 5th, 2015 emphasized need for restoring
fiscal stability. Part of the focus is likely to have been on
the comparatively high cost of short-term borrowing
and the need to address the same.
In 2015, the 90 Day paper saw its yield decline by
300.0 bps between January and December, closing the
year at 22.8% while the 182.0 Day’s yield declined by
200.0 bps to 24.4%. These yields could decline further
given the reduction in Ghana’s fiscal deficit in 2015 and
projections set for 2016.
4
Ghanaweb.com
Domestic Debt Composition
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2014 2015
Short-Term Medium-Term Long-Term
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2010 2011 2012 2013 2014 2015 2016
(f)

Company
Ghana Stock Exchange Composite Index (Month-on-Month)
Ghana Stock Exchange Composite Index
Focus: Like most markets across the region, the stock
exchange was bearish in 2015 undermined by an
adverse economic climate and exit by foreign investors
in the face of growing uncertainty in emerging and
frontier markets. Banking stocks took a beating,
dragging the market down with the sector’s index
having posted a 16.7% decline between the start and
the end of the year (2015). High yields in the fixed
income market also provided investors with alternative
investment that we believe played a role in decelerating
investor interest at the exchange. In the first half, we
expect bearish sentiments to persist as investors assess
the political risk in view of the much awaited November
2016 election.
GHANA
Ghana Composite Index year-on-year
change as at December 31st, 2015
-13.9%
Ghana Composite Index Month-on-Month
Change as at December 31st, 2015
0.02%
Banking Stocks Index
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1,950.0
2,000.0
2,050.0
2,100.0
2,150.0
2,200.0
2,250.0
2,300.0
2,350.0
2,400.0
2,450.0
26-Nov-14
26-Jan-15
26-Mar-15
26-May-15
26-Jul-15
26-Sep-15
26-Nov-15
Millions
Volume Ghana Composite Index (LHS)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
1,950.0
1,955.0
1,960.0
1,965.0
1,970.0
1,975.0
1,980.0
17-Nov-15
24-Nov-15
01-Dec-15
08-Dec-15
15-Dec-15
Millions
Volume Ghana Composite Index
1,830.0
1,930.0
2,030.0
2,130.0
2,230.0
2,330.0
2,430.0
2,530.0
17-Dec-14
17-Feb-15
17-Apr-15
17-Jun-15
17-Aug-15
17-Oct-15
17-Dec-15

Company
MIXED MONETARY SIGNALS AS SHILLING FIRMS AND INFLATION RISE PERSISTS
UGANDA MARKET UPDATE
“Relative stability by the
Shilling against major
currencies and moderation of
rise in inflation between
October and December 2015
is likely to see Bank of
Uganda hold back on its
monetary tightening efforts in
the near term.”

Company
Museveni Set to Clinch Fifth Term
1
Bloomberg August 2015
1. Increasing Cost of Credit
UGANDA
Focus: The country heads for a general election in
February 2016 with incumbent President Yoweri
Museveni likely returning to office for a fifth term.
Uganda’s political risk perception deteriorated in
2015 driven by incidences of intimation against
opposition and dissenting voices. The opposition
has remained largely weak and disintegrated,
diminishing chances of regime change in the
forthcoming poll. Museveni is also set to benefit
from National Resistance Movement’s entrenched
advantage of incumbency. The election may prove
to be the toughest challenge that incumbent
President Museveni has faced in Uganda’s election
history given his fall-out with long-time ally Amama
Mbabazi.
Key Policy Focus Post February 2016 Polls
The oil price shock and Uganda’s bilateral relations
are likely to be the key policy considerations by
foreign investors with regard to Uganda’s business
environment beyond the 2016 poll:
• Oil Price Shock: With 6.5 Bln barrels of proven oil
reserves, Uganda is poised to become one of Africa’s
key players in commercial oil production. With
production earmarked for 2017, investors will be
keen to see how the next administration aligns its
policy in view of depressed prices
• Foreign Relations: President Museveni has lately
raffled feathers with sections of development
partners notably for his position on the anti-gay
discussion in the country, as well as high- handedness
in clamping down on perceived government criticism
and opposition, risking the country’s fiscal position
given its reliance on donor aid. Investors will be keen
to see how this develops beyond the next election
and whether Uganda warms up deteriorated
relations
Focus: The climate was unfavourable in 2015 owing
to the election risk coupled with monetary pressures
elicited by the weakening shilling. Nonetheless, with
the election slated for early 2016 and government
focus on capital spending, the business climate
is likely to improve in the year ahead. Electricity
connectivity and access to credit are some of the key
areas that the country should focus on to improve
the business environment in 2016.
Between January 2015 and July 2015, the average
commercial bank lending rate mimicked change in the
benchmark monetary rate with the former rising by
232.0 bps to 23.0%1
.
Commercial bank lending rates have remained high
threatening growth and investment prospects for
private sector players in 2015. Averaging 22.2%
in November 2015, Uganda’s average lending rate
fares poorly against Kenya’s 16.0% and presents a
challenge in access to credit which is a key catalyst for
a competitive business climate.
Benchmark Monetary Rate vs Commercial Bank
Lending Rate
19.0%
21.0%
23.0%
25.0%
27.0%
29.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
24.0%
Jan-12
Jun-12
Nov-12
Apr-13
Sep-13
Feb-14
Jul-14
Dec-14
May-15
Oct-15
Monetary Policy (LHS)
Lending Rates

Company
2
The Monitor December 24th , 2015 3
Bank of Uganda
UGANDA
Electricity Connectivity
Stable and affordable electricity remains one of the
largest obstacles to investment in Uganda compared to
peers in East Africa such as Ethiopia, Rwanda and Kenya
and this has presented an adverse investment climate
for the private sector, particularly, the manufacturing
sector ─ between 2011 and 2014, manufacturing as a
percentage of GDP has declined from 11.0% to 9.6%.
However, electricity consumers in Uganda are set
to benefit from lower end-user electricity tariffs, a
decline of about 2.5% to USD 0.19 effective January
20162
, a move likely to go a long way in improving the
environment by reducing the cost of doing business.
We are, however, cautious about Uganda’s reliance on
hydroelectric energy generation which has is affected
by adverse weather conditions.
ECONOMIC OUTLOOK
Central Bank Likely to Hold Back on Contractionary
Adjustments in Q1 2016
Focus: Relative stabilization of the shilling against
major currencies and moderation of rise in inflation
between October and December 2015 is likely to see
Bank of Uganda hold back on its monetary tightening
efforts in the near term. The benchmark rate was
retained at 17.0% in the last central bank meeting
(December 16th, 2015), potentially signalling a wait
and see approach that could prevail through Q1 2016.
In 2015, the central bank hiked the benchmark rate by
600.0 bps (compared to a 50.0 bps slash in 2014, no
change in 2013 and 1,100.0 bps slash in 2012)3
posting
its most aggressive tightening cycle in the recent past
that threatens to derail economic growth. Inflation is,
however, likely to remain on the uptrend driven by the
recent El Nino rains that have had a negative impact
on crop yields and food supplies.
Monetary Policy Rate vs Inflation
Growth in money supply decelerated through 2015
reflecting transmission of the monetary tightening that
should help tame inflation going forward.
Country Rank (Out of 189.0)
Uganda 167.0
Kenya 127.0
Rwanda 118.0
Tanzania 83.0
Hydroelectric Generation as % of Total Electricity
Generation
30.0%
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
2013 2014 2015 2016 (f) 2017 (f)
Uganda Kenya
-3.0%
2.0%
7.0%
12.0%
17.0%
22.0%
27.0%
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Monetary Policy Rate InﬂaƟon

Company
Source: Bank of Uganda, StratLink Africa
UGANDA
Private Sector Credit Suggests Economy is Cooling Off
Declining growth in private sector credit in Q4 2015
will be a key factor prompting the central bank to
assume more cautious monetary policy stance as it
risks slowing down the economy.
Private Sector Credit Trend
Money Supply
DEBT MARKET UPDATE
Focus: Liquidity eased in the second half of 2015 after
the shilling began exhibiting resilience after a period
of high depreciation. Short-term yields maintained
a steady uptrend through 2015 on the back of high
inflation risk and relatively tight liquidity conditions. In
Q1 2016, we are likely to witness mixed performance
by yields as liquidity remains comparatively high
whilst investors remain on the lookout for the general
direction of inflation. Inflation is hovering around the
10.0% mark and presents a key risk consideration for
investors especially given the unattractiveness of the
stock market that limits options.
T-Bill Yields
The 91 Day, the 182 Day and the 364 Day, yields
declined marginally 50.0, 10.0 and 80.0 bps to 18.3%,
19.5% and 18.3%, respectively, between October 2015
and November 2015. Stability by the shilling creates
headroom for the central bank to allow improved
liquidity conditions that could ease the upward
pressure on yields stemming from investors pricing in
inflation consideration.
4.5%
5.5%
6.5%
7.5%
8.5%
9.5%
10.5%
11.5%
12.5%
13.5%
14.5%
3.1
3.2
3.2
3.3
3.3
3.4
3.4
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Billions
Money Supply (USD), LHS
Growth (Year-on-Year)
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
22.0%
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
15.0%
17.0%
19.0%
21.0%
23.0%
25.0%
27.0%
2.9
3.0
3.1
3.2
3.3
3.4
3.5
3.6
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Billions
Private Sector Credit (USD),LHS
Growth (Year-on-Year)

Company
Shilling to USD, year-on-year
UGANDA
-22.2%Uganda Shilling year-on-
year depreciation
-1.3%Uganda Shilling month-on-
month depreciation
Note: The 91 Day T-Bill yield mimics inflation as
investors demand a premium given the unabated rise
of the latter between January 2015 and November
2015.
Interbank Rate, Inflation and 91 Day T-Bill Yield
Uganda Stock Exchange All Share Index
All Share Index year-on-year change
to December 31st, 2015
-8.5%
All Share Index month-on-month
change to December 31st, 2015
+0.5%
Uganda Stock Exchange All Share Index (Month-on-
Month)
2,400.0
2,600.0
2,800.0
3,000.0
3,200.0
3,400.0
3,600.0
3,800.0
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Interbank 91 Day
InﬂaƟon (RHS)
1,700.0
1,750.0
1,800.0
1,850.0
1,900.0
1,950.0
2,000.0
2,050.0
2,100.0
2,150.0
31-Dec-14
28-Feb-15
30-Apr-15
30-Jun-15
31-Aug-15
31-Oct-15
31-Dec-15
1,700.0
1,720.0
1,740.0
1,760.0
1,780.0
1,800.0
1,820.0
30-Nov-15
07-Dec-15
14-Dec-15
21-Dec-15
28-Dec-15

Company
Focus:Themarketwaspredominantlybearishin2015
on the back of high monetary risks in the economy
characterized by a weakened shilling and rising
inflation. Q1 2016 is likely to see this trend persist
in view of the forthcoming election. High yields in
the fixed income market also colluded to depress
investor interest in the stock exchange. Performance
of counters cross-listed from Kenya’s exchange will
be critical in 2016 with East African Breweries Ltd,
Kenya Commercial Bank Ltd and Equity Bank Ltd
accounting for 71.3% of market capitalization as at
January 05th, 2016. This suggests the bear run at
the Uganda Stock Exchange is likely to persist given
the below target performance posted by a number
of listed entities at the Nairobi Securities Exchange.
Market Capitalization
Electricitydistributor,UmemeLtd,willalsobeacounter
to watch given its collaboration with government
in 2015 towards investment programmes such as
implementation of the 183.0 MW Isimba Hydro Project
and the 600.0MW Karuma Hydro Project.
UGANDA
71.3%
28.7%
EABL,KCB,EBL & NMG Other Counters

Company
WEAK COMMODITY PRICES UNDERMINE ECONOMY’S REBOUND
RWANDA MARKET UPDATE
“Rwanda’s adherence to a
constitutional review process in
revision of term limits comes as
dividend for the political risk
outlook in 2016 especially
against the backdrop of the
strife that has engulfed Burundi
following President Pierre
Nkurunziza’s third term.”

Company
1
The Daily Nation November 19th, 2015 2
BMI
RWANDA
Kagame Cleared for a Third Term
Source: East African Community, StratLink Africa
Focus: Rwanda ushers in 2016 free of debate
on the constitutionality of a third bid for the
President by Paul Kagame following the December
2015 referendum in which the massess voted
overwhelmingly (98.4%) in favour of additional terms
for the incumbent (the new provisions allow Kagame
to view for an additional seven year term afterwhich
he will be eligible for two five year terms). Rwanda’s
adherence to a constitutional review process in
prolongation of term limits comes as dividend for
the political risk outlook in 2016 especially against
the backdrop of the strife that has engulfed Burundi
following Pierre Nkurunziza’s third term. Rwanda
could, however, face strained relations with a section
of development partners (who have termed the new
provision as an exercise undermining democracy) in
2016. The special and local council elections slated
for February-March 2016, are likely to set the mood
for the political environment throughout the year.
Potential Strain in International Relations
Rwanda has had diplomatic spats with its development
partners raising questions about future relations. The
United States of America had threatened to review
ties if the constitutional amendment was successful2
.
Foreign development assistance makes up 35.6% of
all government revenues3
and the anticipated dented
donor enthusiasm may have a damaging effect on
Rwanda’s economy, despite recent efforts to wean
itself off donor reliance for budgetary support. This
is likely to add onto the pressure the country is facing
following alleged involvement with the FDLR rebels in
Eastern Democratic Republic of Congo.
Intra-Regional Ties to Continue Shaping Agenda
Focus: Rwanda has been pursuing efforts aimed at
enabling its businesses deepen penetration in the East
African market and this is likely to remain a key agenda
for 2016. The country has over the years suffered trade
imbalance with all the major economies in the region
(Kenya, Uganda and Tanzania) placing its traders at a
disadvantaged position. In the last two years, Rwanda,
Kenya and Uganda have forged closer integration ties
including the removal of work permit requirements
that has been a major boost for cross-border mobility
of labour. In the last two years, Rwandan companies
such as beverage manufacturer, Bralirwa, have faced
adverse business conditions in traditional markets such
as the Democratic Republic of Congo, creating need for
an inward looking strategy towards East Africa.
Rwanda Trade Balance with East Africa Trade
Community (USD Mln)
-250.0
-200.0
-150.0
-100.0
-50.0
0.0
50.0
100.0
150.0
2008 2009 2010 2011 2012 2013
Uganda Kenya Tanzania

Company
Source: National Bank of Rwanda, StratLink Africa
4
2015 Q3 Economic and Financial Developments and Prospects Report
RWANDA
ECONOMIC OUTLOOK
Commodity Price to Weigh Down 2016 Growth
Focus: Economic growth momentum showed signs
of decelerating towards the end of 2015 in what
we assess was driven by unfavourable commodity
prices. This has weakened the economy’s rebound
from the 2013/14 slump, taking growth below the
traditional 7.0% psychological band in Q3 2015.
We expect the overhang of this trend to spill-over
into Q1 2016 as the price of key commodities in the
global market remain depressed.
Percentage Change in Commodity Prices,
(Quarter-on-Quarter)
Unlike regional peers such as Kenya and Uganda,
Rwanda maintained an accommodative monetary
policy in 2015 and this is likely to remain a growth
catalyst in Q1 2016 supported by the continued
investment in the private sector. Outstanding credit
to the private sector increased by 26.3%, year-on-
year, as of November 2015, compared to an increase
of 17.5% in the same period a year earlier, auguring
well for private sector investment and consumption.
GDP Growth, (Quarter-on-Quarter)
Source: National Institute of Statistics of Rwanda, StratLink Africa
Current Account Balance Remains in the Red
The plunge in commodity prices will keep the current
account in deficit in 2016 having been projected
to stand at 10.6% of GDP in 2015 and 9.6% in 2016.
Rwanda’s exports in general dropped in value by 7.9%
in the year to November 2015 despite a 20.2% growth
in export volumes, owing to unfavourable international
commodity prices .
Current Account Balance as perecentage of GDP
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
Beverages
Cereals
Minerals
2.5%
3.5%
4.5%
5.5%
6.5%
7.5%
8.5%
2013Q3
2013Q4
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2009
2010
2011
2012
2013
2014
2015(f)
2016(f)

Company
RWANDA
DEBT MARKET UPDATE
Source: National Institute of Statistics, StratLink Africa
Source: National Institute of Statistics, StratLink Africa
Franc Weathers Monetary Storm
The effects of Rwanda’s poor export earnings
and a stronger greenback in 2015 were felt in the
foreign exchange market as high demand for the
greenback was met with low supply, admittedly one
of National Bank of Rwanda’s top challenges of 2015.
Consequently, the local unit depreciated by 7.7% year-
on-year as at January 02nd, 2015, the highest loss in a
five ─ year period since 2010, against the bank’s target
of an annual depreciation of 5.0%.
Despite a harsh monetary environment, the franc
maintained resilience in 2015 emerging as the least
affected in the currency rout that was witnessed for the
better part of 2015 on the back of declining revenues
and a stronger greenback.
Franc to USD, year-on-year
Focus: Yields in the T-Bill market were on the downtrend
in the first half of 2015 reflecting subdued appetite for
domestic debt by the government. This trend reversed
in the latter half as inflation assumed an uptick and
liquidity tightened relatively to support the Franc
against depreciation. Nonetheless, there has been a
mild rise in domestic borrowing of 0.3% to USD 63.9
million, month-on-month as of November 2015; from
a low of USD 40.3 million in September 2015, and this
could keep yields on the uptrend if sustained.
Note: Inflation rose from 1.4% in January 2015 to 4.8%
in November 2015.
The 91 Day paper and 364 Day paper yields increased
by 15.0 bps and 33.0 bps to 4.2% and 7.0%, as at the
end of December 2015 while the 182 Day paper saw
its yield marginally decrease by 15.0 bps to 5.4% in the
same period.
Amount Borrowed through T-Bills
(USD Mln)
T-Bill YieldsRwanda franc month-on-month
appreciation to January 2nd, 2015
+0.4%
Rwanda franc year-on-year
depreciation to January 2nd, 2015
-7.7%
680.0
690.0
700.0
710.0
720.0
730.0
740.0
750.0
760.0
770.0
780.0
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
35.0
45.0
55.0
65.0
75.0
85.0
95.0
105.0
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15

Company
RWANDA
Interbank Rate
Source: National Bank of Rwanda, StratLink Africa
Investors’ anticipation of further build up in inflation
risk based on the currency volatility will serve to stoke
potential uptick in yields in Q1 2016. As such, the
National Bank of Rwanda is bound to keep a cautious
eye on monetary management in 2016 to mitigate
excessive liquidity in the money market.
Market Looks Forward to a Vibrant Year
Focus: The market witnessed in two new listings –
Equity Group Holdings Limited and Crystal Telecom, in
2015 which excited investor interest stoking a short-
lived rally in June 2015 that disrupted the general
downtrend. The stock exchange is working on full
automation and listing Real Estate Investment Trust
(REIT) products as well as regional infrastructure to link
the East African Community (EAC) markets by Q1 2016,
in a bid to diversify and stimulate the exchange.
Beer manufacturer, Bralirwa, and Bank of Kigali
continue to post bearish trends and are likely to
continue undermining the market in Q1 2016.
Bralirwa, the largest counter by market capitalisation
on the bourse, tanked by 52.4% year-on-year and
3.3%, month-on-month, to close December 2015 at
USD 0.2. The company has been grappling with high
cost of production that is depressing its revenues ─ the
company’s 2015 first half pre-tax profit declined by
25.0% to USD 7.0.
RSE All ShareIndex (Month-on-Month)
Bralirwa Share Performance, (Month-on Month)
Rwanda Stock Exchange All Share Index
-54.2%Bralirwa share year-on-year change
-3.3%Bralirwa share month-on-month change to
December 31st, 2015
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
120.0
125.0
130.0
135.0
140.0
145.0
150.0
155.0
160.0
165.0
Oct-14
Dec-14
Feb-15
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
130.5
130.6
130.7
130.8
130.9
131.0
131.1
131.2
131.3
Nov-15
Dec-15
Dec-15
Dec-15
Dec-15
150.0
200.0
250.0
300.0
350.0
400.0
450.0
5-Dec
5-Feb
5-Apr
5-Jun
5-Aug
5-Oct
5-Dec

Company
ANGOLA MARKET UPDATE
“On the fiscal front, the
country is likely to face a
less strenuous year given
the USD 1.5 Billion October
2015 Eurobond proceeds
and World Bank’s USD
650.0 Million support
received in 2015.”
MONETARY PRESSURES REMAIN ELEVATED AS FISCAL BURDEN EASES

Company
Re-engineering MPLA Ahead of 2017
Focus: The political landscape will be dominated by
succession politics in 2016 ahead of the 2017 general
election. Investors will focus on the ruling party
(MPLA’s) Seventh Congress slated for August 2016
in which the party is widely expected to re-engineer
itself in structure and composition in readiness for
the next election. Reports indicate that 30.0% of the
party’s composition will be reserved for delegates
under 35.0 years while female representation will be
expected to constitute at least 40.0%1
. Angola has
had one President for 36.0 years and the prospect of
transition is likely to present sentiments of uncharted
waters amongst investors. By and large, there is a
pervasive feeling that despite adopting multi-party
democracy in 1992, the country suffers constrained
democratic space. In November 2013, Human Rights
Watch called for investigation into what it termed as
arbitrary arrest and use of excessive force in dispersing
protesters perceived to be under opposition party,
UNITA’s, umbrella2
.
Note: In 2010, the country adopted a new constitution
that did away with direct election of the President. In
its stead, it provides that the leader of the party with
majority seats in Parliament becomes President.
Recent History Could Embolden Opposition
Whereas MPLA won the 2012 election with a decisive
margin, it will be noted that its share of the total
vote at 71.8% was considerably lower than the 81.6%
registered in the 2008 ballot3
. At the same time,
UNITA’s share of votes scaled up from 10.4% in 2008
to 18.7% in 20124
suggesting growing traction within
the electorate.
POLITICAL OUTLOOK
ANGOLA
1
Agencia Angola Press July 4th 2015
2
Human Rights Watch 2013
3
Freedom House 2013
4
Chatham House
Manufacturing and Construction Grow in Share of
Economy
Focus: Manufacturing and Construction have grown
(as a percentage of GDP) between 2009 and 2014 by
40.0 and 220.0 bps to 4.1% and 10.4, respectively, and
could be key attraction points for investors scouting for
new opportunities in 2016. In manufacturing, Angola
is experiencing one of Africa’s fastest growth rates in
food consumption and we expect food and beverage
processing to be a key attraction.
Evolution of GDP Composition
Source: Africa Development Bank, StratLink Africa
Country CAGR ’10 – ‘15 Food Consumption ($ Bln)
Tanzania 11.7% 17.8
Nigeria 6.8% 60.6
Angola 11.5% 14.1
Kenya 2.2% 14.3
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2009 2014
Others
Wholesale & Retail
Finance & Real Estate
Transport & CommunicaƟon
ConstrucƟon
Manufacturing
Mining
Agriculture

Company
Kwanza to Face Mounting Pressure in Q1 2016
Focus: It was a turbulent year for the local unit
(Kwanza) in 2015 driven by the tank of oil prices. This is
bound to remain the key focus in 2016 with the Central
Bank having been on aggressive monetary tightening
in 2015. The Central Bank is likely to remain hawkish
in Q1 2016 with the price of oil remaining weak and
elevating foreign exchange risk in the economy.
Note: We observe that the Kwanza exhibited resilience
in Q4 2015 in what we assess could have been driven
by moderation of the greenback’s rally towards the
end of 2015. Additionally, proceeds from the issuance
of a USD 1.5 Bln Eurobond in October 2015 and World
Bank’s USD 650.0 Mln support5
could have helped
support the local unit.
ECONOMIC OUTLOOK
ANGOLA
5
Bloomberg June 02nd, 2015
The decline in foreign exchange reserves held by the
Central Bank further indicate waning ability to support
the local unit and this could be a pointer towards
more depreciation in 2016. Between January 2015
and September 2015, the country’s foreign exchange
reserves declined by 12.8% to USD 23.8.
On the fiscal front, the country is likely to face a less
strenuous year given the Eurobond and World Bank
support received in 2015.
Fiscal Balance as Percentage of GDP
Kwanza to USD Exchange vs Monetary Policy Rate
Foreign Exchange Reserves vs OPEC Basket Price
Kwanza change between January
05th, 2015 and December 31st, 2015
-31.2%
8.8%
9.3%
9.8%
10.3%
10.8%
11.3%
100.0
105.0
110.0
115.0
120.0
125.0
130.0
135.0
140.0
05-Jan-15
05-Mar-15
05-May-15
05-Jul-15
05-Sep-15
05-Nov-15
Kwanza to USD Exchange
Monetary Policy Rate (RHS)
23,000.0
24,000.0
25,000.0
26,000.0
27,000.0
28,000.0
29,000.0
30,000.0
31,000.0
32,000.0
33,000.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
01-Jan-14
01-Apr-14
01-Jul-14
01-Oct-14
01-Jan-15
01-Apr-15
01-Jul-15
FX Reserves (Mln USD)
OPEC Basket Monthly Average (LHS,$/Barrel)
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
2010 2011 2012 2013 2014 2015 2016
(f)

Company
HEADWINDS AS DROUGHT DERAILS GROWTH PROSPECTS
ETHIOPIA MARKET UPDATE
“We expect Ethiopia to register
strong economic growth and
maintain its status as the
Eastern Africa outperformer
driven by on-going large-scale
government infrastructural
investment under the second
phase of the Growth and
Transformation Plan (GTP II).”

Company
CountrytoLeverageGrowingGeopoliticalSignificance
Focus: Whereas concern still abounds pertaining the
credibility of the May 2015 general election, Ethiopia
navigated the poll with relative calm buoying the
country’s risk perception amongst investors. The visit
by USA President, Barrack Obama, augmented the
country’s position as a key geopolitical ally in the
Horn of Africa region, coming on the back of the 2014
visits by China’s and Japan’s Premiers, Li Keqiang and
Shinzo Abe, respectively. Ethiopia has also emerged
as a strong geo-strategic partner in the volatile Horn
of Africa region playing critical roles such missions as
African Union Mission to Somalia (Amisom). We expect
Ethiopia to capitalize on this growing significance to
boost its political standing as one of Africa’s pivotal
states. The ruling party, Ethiopia People’s Revolutionary
and Democratic Front, will be at pains to bridge
rifts created by allegations of state patronage and
intimidation of dissenting voices during the election.
Key issues for the government will be:
The Ghost of the Controversial Anti-Terrorism Law
(2009)
The Anti-terrorism Law (2009) widely criticised for
creating an avenue through which the state can stifle
dissenting voices, is bound to continue being a pressure
point in the country’s political risk outlook in 2016.
Whilst Ethiopia has been a bulwark against regional
terrorism, the law has been alleged to be abused in the
random arrest of journalists and bloggers. The country
has embarked on changes aimed at fostering a sense
of national unity beyond the May 2015 election such
as the release of four Ethiopian bloggers who were
among journalists and bloggers arrested in April 2014
in view of alleged links to terror groups on October
15th 2015.
POLITICAL OUTLOOK
ETHIOPIA
2016: A case for Improving Infrastructure and Logistics
Ethiopia is fast emerging as an investment hub in
the Eastern Africa, thus, its ongoing infrastructure
developments bode well for the business environment
in the landlocked nation. The government has put in
place a raft of initiatives likely to shape the business
climate in 2016.
1. Diversifying the Port of Djibouti
Ethiopia plans to commence using the port of Djibouti
for imports as well as exports in view of the fast
growing economy. We also expect the implementation
of the National Logistics Strategy unveiled in April
2015, should be a key focus in 2016.
2. Ethiopia-Djibouti Rail Project and Pipeline Deal
The ongoing construction of the Sebeta-Mieso-
Djibouti Railway project will 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 trade1
. Similarly, Ethiopia and Djibouti
signed a USD 1.4 Billion agreement in November
2015, for the construction of a petrol pipeline which,
on completion, will play a major role in reducing fuel
transportation cost from the Port of Djibouti.
Status of Infrastructure
The projects promise to increase the efficiency in
Ethiopia’s supply chain by reducing transport costs and
potentially lowering the cost of doing business.
1
The Reporter, January 2015

Company
Famine to Decelerate Economic Growth
Focus: The biting drought dims Ethiopia’s economic
outlook even as the IMF gives it an elevated economic
growth outlook of 8.7% in 2015 and 8.1% in 2016,
outperforming its Eastern Africa peers. The worsening
drought which is attributed to below normal rainfall
has left approximately 10.0 million people in need of
urgent food aid.
2016: Can the Economy Maintain its Status as the
Eastern Africa Outperformer?
We expect Ethiopia to register strong and stable
economic growth and maintain its status as the
Eastern Africa outperformer driven by on-going large-
scale government infrastructural investment under
the second phase of the Growth and Transformation
Plan (GTP II). Ethiopia’s economic growth mimics
government expenditure in view of the state-led
nature of the economy.
ECONOMIC OUTLOOK
ETHIOPIA
2
Business Monitor International December 15th, 2015
Manufacturing to Drive Growth in 2016
The manufacturing sector is poised to be the key FDI
recipient for Ethiopia in 2016 in view of the planned
investments into the sector. Government plans to
invest USD 10.0 Billion in development and expansion
of industrial parks in the next decade (2015 – 2025)
indicative of focus on boosting the manufacturing
industry. Ethiopia is fast emerging as a manufacturing
hub in the Eastern Africa region driven by export-
oriented government reforms and low-cost labour
supply.
Gross fixed capital formation rose from 32.7% of GDP
in 2011 to 40.3% of GDP in 20142
, an indication of the
extent of investment over the first phase of the GTP
and signalling to further investment in GTP II. We
expect that the infrastructural investment will improve
operating conditions for investors looking to invest,
particularly, in the agriculture and manufacturing
sectors.
Manufacturing Growth Rate
Source: BMI, StratLink Africa
Source: National Bureau of Statistics, StratLink Africa
Economic Growth
GDP & Gross Fixed Capital Formation Growth
Source: IMF, BMI, StratLink Africa
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
2004
2006
2008
2010
2012
2014
2016(f)
Real GDP Growth
Govt Expenditure Growth (RHS)
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
5.0%
7.0%
9.0%
11.0%
13.0%
2011 2012 2013 2014 2015
(f)
2016
(f)
GDP Fixed Capital FormaƟon (RHS)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2010 2011 2012
Ethiopia Kenya

Company
The planned construction of special economic zones
is bound to attract foreign investment into the
manufacturing sector given planned incentives such as
exemptions from certain custom duties and taxes.
Mounting Inflation Risk from Persistent Drought
Ethiopiaislikelytofacemountinginflationarypressures
in 2016 attributable to rising food prices in the wake of
persistent droughts.
The threat of inflation is bound to be aggravated by the
weakening Birr which, comparatively was resilient in
2015. We observe that the local unit, however, remains
weak and is bound to remain a point of fragility in the
economy’s 2016 near-term outlook on the back of
deteriorating balance of payments.
ETHIOPIA
The weakening of the Birr comes on the back of
depressed coffee prices in the global markets.
Inflation vs Food Inflation, year-on-year
Ethiopian Birr to USD
Global Coffee Prices (US Cents/lb)
Source: Central Statistical Agency, StratLink Africa
Ethiopian Birr depreciation year-on-
year as at January 4th, 2016
Ethiopian Birr depreciation month-
on-month as at December 31st, 2015
-5.3%
-1.1%
20.0
20.2
20.4
20.6
20.8
21.0
21.2
21.4
Jan-15
Feb-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Nov-15
Dec-15
90.0
110.0
130.0
150.0
170.0
190.0
210.0
230.0
250.0
270.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015f
2016f
2.5%
4.5%
6.5%
8.5%
10.5%
12.5%
14.5%
16.5%
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
InﬂaƟon Food Index

Company
Company
STRONG NON-OIL GROWTH BUFFERS ECONOMY AGAINST OIL PRICE SHOCK
GABON MARKET UPDATE
“We expect Gabon to remain one
of Central Africa’s most
attractive investment
destinations in 2016 driven by its
economic diversification agenda
that has cushioned it, relatively,
against adverse effects of the
collapse in oil prices.”

Africa Market Update January 2016

Africa Market Update January 2016

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