Africa's Emerging Markets June 2016 Market Update

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
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Table of Contents
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JUNE 2016 | MARKET UPDATE – AFRICA
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www.stratlinkglobal.com
NIGERIA 4
KENYA 5
TANZANIA 6
UGANDA 8
RWANDA 9
GABON 7

3JUNE 2016 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
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459.1 Million
35.9 Million
20.0 Million
22.5 Million
499.1 Million
42.0 Million
65.0 Million
25.3 Million
5.0 Million
160.0 Million
320,000
19.9 Million
Capital Invested by Country (USD)
AFRICA DEALS LANDSCAPE JANUARY 2016 - MAY 2016
Capital Invested by Sectors
10,000
2.2 Million
820,000
20.4 Million
2.0 Million
43.8 Million
4.6 Million
149.1 Million
Capital Invested by Deal Type
Deals Snapshot
• Ghana Home Loans received USD 22.5 Million of loan ﬁnancing from European Financing Partners and Netherlands Development
Finance Company on May 23rd, 2016
• SolarNow Services (Uganda) received USD 2.0 Million of debt ﬁnancing from Sun Funder on May 19th, 2016
• XanƟum Integrated SoluƟons (South Africa) was acquired by Oberthur Technologies, for an undisclosed sum, through an LBO on
May 18th, 2016
• SteamaCo (Kenya) raised USD 938,888.0of seed funding from Andrew Reicher and other undisclosed investors on May 17th, 2016
Source: PitchBook, StratLink Africa
South Africa
Ethiopia
Egypt
Namibia
Uganda
Mozambique
Rwanda
Burkina Faso
Kenya
Madagascar
Tanzania
MauriƟus
Morocco
Tunisia
Liberia
Nigeria
75.1 Million
Congo
Eritrea
Zambia
Sierra Leone
Ghana
Merger & AcquisiƟon ................... Growth & Expansion..
Corporate DivesƟture .................. Buyout/LBO ...............
IPO ................................................... Asset AcquisiƟon ..........
PIPE ................................................. Share Repurchase ........
Angel ............................................... AcquisiƟon Financing ...
28.0% 24.5%
17.0% 11.9%
7.0% 3.0%
3.0% 2.0%
1.0%
Early Stage VC ................................. 0.0%
1.0%
Others .......................... 7.0%
27.8%
13.9%
9.9%
7.9%
4.1%
2.4%
2.2%
1.4%
1.2%
10.2%
Retail
Metals, Minerals
& Mining
CommunicaƟons
& Networking
Commercial
Services
Healthcare
PharmaceuƟcals
SoŌware
Capital Markets
Insurance
Consumer
Non-Durables
Commercial Banks Others
4.0%
13.5% 1.5%
Hospitality
28.0%
17.0%
10.0%
7.0%
3.0%
3.0%
7.0%2.0%
1.0%
1.0%
0.0%
21.0%

Company
Emerging Sectors as Oil and Agriculture Take a
Back Seat
Telecommunications, Manufacturing and Real
Estate continue to emerge as key drivers of the
economy even as the extractives and agriculture
sectors diminish as a proportion of the economy.
This presents favourable prospects for the country
as policy focuses on economic diversification to
mitigate shocks such as those being experienced
in view of oil prices presently. Manufacturing is
still punching below its weight due to challenges
including the shortage of foreign currency to
facilitate importation of inputs and ongoing issues
in supply of electricity.
Strained Economy Presents Risks for Political
Climate
With the economy contracting and inflation in
double digits, Nigeria’s political climate is exposed
to risks emanating from citizens disenfranchised
by an adverse environment. Available data shows
that youth unemployment and underemployment
have been on the rise over the last two quarters,
sendingasignalofadeterioratingeconomicclimate
that is undermining creation of opportunities for
engagement of the youth.
POLITICAL OUTLOOK
BUSINESS NEWS ENVIRONMENT
Source: National Bureau of Statistics, StratLink Africa
Economy by Sector Composition
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
1990 2016
Others TelecommunicaƟons
Agriculture Real Estate
Trade Manufacturing
Oil & Gas
NIGERIA
State Adopts More Flexible Foreign Exchange
Policy
In our February 2016 issue, we tabled a case of
likely devaluation of the Naira between Q1, 2016
and Q2, 2016. Whereas the May 2016 monetary
policy adjustment on foreign exchange restrictions
(introduction of flexibility in the interbank foreign
exchange market structure) fell short of our
anticipateddevaluation,itiswithintheexpectation
of much needed policy realignment at a time when
the economy is confronting headwinds. Tight
foreign exchange controls have hitherto been
instrumental in obscuring the pressure the Naira
has been under, with the parallel market giving a
signal of a beleaguered currency.
ECONOMIC OUTLOOK
Yield Curve Suggests Fears of Economic
Slowdown Abound
The yield curve posted a hump as at May 25th,
2016, sending indications of investors jittered
over further economic slowdown and elevated
inflation pressures in the near term. News of the
economy’s contraction in Q1, 2016 is likely to have
necessitated investors’ reconsideration of the
macroeconomic risk environment, demanding a
premium for the near term.
DEBT MARKET UPDATE
Market Rallies as Foreign Investor Inflows
Bounce Back
Strong foreign investor inflows have supported the
exchangewiththeNSE30Indexpostinganuptrend
between February and March, 2016. In the latter
month, foreign investor inflows grew by 40.6%,
month-on-month, to USD 77.3 Million whilst the
inflow-outflow ratio improved to 0.8 from a low of
0.3 in the preceding month. The market was also
buoyed by stocks in the oil sector which exhibited
a bullish trend over the last month.
EQUITY MARKET UPDATE
Full report available for purchase via:

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Can Kenya Retain Regional Hub Status?
The loss of the Uganda oil pipeline deal and
Rwanda’s Standard Gauge Railway route to
Tanzania has sent shivers over Kenya’s position
as the region’s commercial and industrial hub in
the years ahead. Whereas we believe the country
remains pivotal in the East and Central Africa
region, the emergence of economies such as,
Tanzania and Ethiopia threatens to realign the
dominance landscape. Tanzania and Uganda are
the key destinations of foreign direct investment
in the region accounting for 56.9% of total inflows
as at 2014.
Emerging Confidence Crisis Undermines Political
Risk
We place the country’s political risk climate under
watch following recurrent protests by factions of
the opposition, led by the Coalition for Reforms
and Democracy (CORD), over the Independent
Electoral and Boundaries Commission (IEBC).
The stalemate between the government and the
opposition presents a potential pressure point for
the political climate ahead of the 2017 general
election.
POLITICAL OUTLOOK
BUSINESS ENVIRONMENT
Region’s Foreign Direct Investment by Countries
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2000 2005 2010 2014
Rwanda
Burundi
United Republic of Tanzania
Uganda
Kenya
Ethiopia
Source: UNCTAD, StratLink Africa
KENYA
Government Misses Revenue Target on Adverse
Business Environment
Overall revenue mobilization by the Kenya
Revenue Authority in the first nine months of
financial year 2015/16 (July 2015 – March 2016)
stood at 92.4% performance rate raising USD
8.4 Billion. The underperformance has been
attributed to an adverse business environment
that was experienced in 2015. Notable challenges
stemmed from an unfavourable monetary
environment that saw the shilling tumble against
the dollar as inflation breached the Central Bank’s
target ceiling. The environment has since stabilized
offering some respite from disruption occasioned
by a volatile monetary climate. We expect the
shilling to hold resiliently between 100.0 and
101.0 over the next quarter while maintaining a
keen eye on possible policy adjustments by the
USA Federal Reserve.
ECONOMIC OUTLOOK
Yields Subdued as Inflation Normalizes
Liquidity remains high in the money market
supported by open market operation maturities
with the interbank rate averaging 4.0% in May
2016, posting minimal upward movement from
the preceding month. Inflation has edged further
down over the last month, standing at 5.0% in May
2016, and 132.0 bps lower than March 2016.
DEBT MARKET UPDATE

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Bold Plans for the Energy Sector
UAE’s Dubai-based Dodsal Group is reported to
have discovered 2.7 Trillion cubic feet of gas in
Tanzania’s Ruvu Basin Coast valued at USD 8.0
Billion. The initial discovery of approximately 50.5
Billion cubic feet of gas in 2011 put Tanzania firmly
on the gas map and on investors’ radar. However,
the sector has been bedevilled by corruption
scandals, thus, delaying policy decisions.
Nonetheless, the future looks bright given efforts
put in place by government to attract investment
which have seen Koyo Corporation from Japan
announce interest in investing USD 1.0 Billion in a
gas-fired power plant in the southern coast.
Upgrading the Energy Infrastructure
In a bid to upgrade energy sector infrastructure
and boost industrial growth, Tanzania plans to
invest USD 1.9 Billion each year by 2025 in energy
projects. The country is also looking to upgrade the
electricity network given that it has been losing
business to its peers attributable to unreliable
infrastructure. Tanzania, which has been hit
by power shortages due to its dependence on
hydropower and recurrent droughts, aims to
reduce dependence on hydro sources and boost
power generation capacity to 10,000.0 MW from
the current 1,500.0 MW, using natural gas and
coal.
POLITICAL OUTLOOK
East Africa Geopolitical Shift favouring Tanzania
Tanzania has secured the Uganda oil pipeline
deal and Rwanda’s rail links development deal,
wresting the two from neighbouring Kenya,
cementing its position on the regional platform.
This development anchors Tanzania as a strategic
partner to member states especially as the region,
and continent as a whole, pursues an aggressive
integration agenda meant to unlock opportunity
for future growth. The deals with Rwanda and
Uganda should play a significant role in helping
Tanzania shed the long held tag of an ‘unwilling
partner’ in the regional integration agenda.
According to the recently launched Regional
Integration Index, Tanzania is the least integrated
country in the East Africa region.
TANZANIA
Majority of Sectors Post Decline in Private Sector
Credit Growth
Year-on-yeargrowthofcredittoanumberofsectors
either stagnated or declined in 2015, pointing at a
general deceleration in private sector activity as
the economy grappled with an adverse external
environment as well as heightened political
temperatures ahead of the October 2015 poll. In
May 2015, the central bank hiked the minimum
reserve ratio requirement by 200.0 bps to 10.0%,
a fact that is also likely to have undermined banks’
capacity to lend to business. With the monetary
environment exhibiting stability and political risk
perception having improved, 2016 is bound to
witness much better performance in private sector
credit growth to majority of the sectors.
ECONOMIC OUTLOOK
Decreasing inflationary pressure as well as low
appetite for borrowing in the domestic market
was reflected in the decline in the short-term
yields albeit, marginally, in May 2016. Inflation
maintained the steady decline witnessed in
previous months, declining by 30.0 bps to 5.1% in
April 2016.
DEBT MARKET UPDATE

Company
Favourable Business Environment ahead of
Election
The business environment remains broadly stable
even as the country heads for polls in August 2016.
Gabon has a history of relative political stability,
compared to its peers across the region, which
supports investor confidence in the country’s
ability to navigate the present electoral cycle in
a favourable manner. Concern is rife, however,
over the democratic space and the possibility of a
resurgence of the strife witnessed in 2009 in the
wake of a contested election outcome. This risk
could be elevated in light of mounting opposition
to the incumbent.
Consumption on Slowdown
Bongo Seeks Second Term in Office
President Ali Bongo will be seeking a second term
in the August 2016 general election, a race that is
likely to see him emerge victorious as he enjoys
the advantage of incumbency. The election comes
against the backdrop of the death (April 12th,
2015) of opposition luminary, Andre Mba Obame,
with the focus shifting to the strategies that will
be deployed by the opposition in its efforts to turn
the tables after nearly five decades of the Bongo
dynasty.
POLITICAL OUTLOOK
Source: Business Monitor International. StratLink Africa
Private Final Consumption per Capita (USD)
0.0
1,000.0
2,000.0
3,000.0
4,000.0
2010 2011 2012 2013 2014 2015
Gabon Angola Ghana
Kenya Nigeria
GABON
Ratings Downgrade Signals Lurking Risks despite
Strong Non-Oil Growth
Fitch downgraded the country’s long-term
foreign and local currency issuer default ratings
to negative from stable, in May 2016, in line with
our anticipation that despite strong growth in
the non-oil sector, subdued oil prices are bound
to render aggregate growth fragile in 2016. We
expect pressure to continue mounting on the
economy’s external position, notably on the back
of the collapsed Doha Talks (April 2016) that
dampened hopes of a rebound in global oil prices.
Gabon’s application to re-join the Organization
of Petroleum Exporting Countries (OPEC) after
leaving in 1995 signifies its position as an economy
affected by the slump in prices and appreciation
of the need for a common voice around propping
the same.
ECONOMIC OUTLOOK
Source: Business Monitor International, StratLink Africa
Real GDP Growth Converging with Peers’
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016(f)
2017(f)
Angola Gabon Nigeria

Company
Banking Industry Risks Seen Rising in 2016
Bank of Uganda forecasts a rise in the banking
sector risk on the back of a challenging
macroeconomic environment and lingering risk
from depressed global commodity price in 2015.
The banking sector witnessed a rise in credit risk
evidenced by the increase in the ratio of non-
performing loans (NPLs) to total loans in 2015,
pointing at a business environment that has been
undermined by domestic and external challenges.
POLITICAL OUTLOOK
Museveni Sworn in as President
Yoweri Museveni was sworn in for a fifth term as
President of Uganda on May 12th, 2016 at just
about the same time opposition stalwart, Kizza
Besigye, was charged with treason for holding a
mock inauguration ceremony. It indicates that the
country still carries baggage from the concluded
electoral cycle with observer missions such as, that
from the European Union raising concern over the
degree of freedom and fairness in the election.
Key Partners Storm out of Inauguration
The opposition is likely to ride on the constitutional
set presidential age limit of 75 years to anchor
its post-election agenda on need for reform and
possibly re-introduction of term limits. A section
of delegates from Unites States of America
(USA) and the European Union stormed out of
Museveni’s inauguration ceremony following his
condemnation of the International Criminal Court
(ICC) and potentially setting his fifth term off to
an antagonistic beginning with key bilateral and
development partners. USA is the largest bilateral
donor to Uganda with aid of approximately USD
767.4 Million annually.
UGANDA
ECONOMIC OUTLOOK
Shilling Maintains Resilience as Inflation Abates
Uganda has witnessed declining inflationary
pressure since the start of the year partly
attributable to the trickle down effects of the
aggressive monetary tightening in the second
half of 2015 where the Bank of Uganda hiked
the benchmark rate by 600.0 bps cumulatively
to 17.0% in December, 2015. As reported in our
May 2016 Market Update, the Bank is adopting a
more accommodative policy stance slashing the
benchmark rate by 100.0 bps to 16.0% in April
2016. Inflation has been declining from 7.4% in
January to 5.1% in April, 2016, a marginal 10.0 bps
short of the bank’s 5.0% medium target.
Source: Bank of Uganda, StratLink Africa
Monthly Interbank Rate (Average)
DEBT MARKET UPDATE
Yields Decline on Mitigated Inflation
There was relative liquidity tightening in the
money market between April and May 2016 with
the interbank rate increasing by 90.0 bps to 12.4%
in April 2016.
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
Apr-15
Jun-15
Aug-15
Oct-15
Dec-15
Feb-16
Apr-16

Company
POLITICAL OUTLOOK
Rwanda on Track to Improve Financial
Inclusion
Efforts by government to foster a business-friendly
environment have seen Rwanda tower its regional
peers in the World Bank’s ease of doing business
rankings. Similarly, in its 2015 Global Competitive
Report, the World Economic Forum (WEF) ranked
Rwanda as the most competitive economy in the
region followed by Kenya, Tanzania, Uganda and
Burundi. Rwanda ranks favourably in its ability to
attract and retain foreign investment compared
to its peers, ranking at position 58 globally; whilst
ranked Kenya 99, Tanzania 120, Uganda 115 and
Burundi 136.
Challenges Persist
However, Rwanda still faces limitations including,
infrastructure bottlenecks, limited access to
finance and insufficient capital for innovation. The
percentage of persons aged 15 years and above
that have access to formal borrowing in Rwanda
stands at 8.0% compared to 16.0% and 15.0% for
Kenya and Uganda, respectively. This indicates that
in the crucial area of access to credit, the country
lags behind regional peers.
Deteriorating Relations with Burundi
Fragile relations with neighbouring states remains
our focus of the political environment in Rwanda
following allegations, by Burundi, that the country
expelled an estimated 1,300 of its nationals for
refusal to move to refugee camps. The allegation
comes on the heels of recent accusations by
Burundi that Rwanda was backing rebels seeking
to oust President Pierre Nkurunziza, allegations
which Rwanda has refuted. These developments
are bound to keep prospective investors cautious
over the region which has witnessed, in the
recent past, political turmoil in South Sudan and
Burundi. Rwanda’s exports to Burundi have grown
from 10.5% of its exports to the region in 2010
to 13.8% in 2015, suggesting the latter’s growing
significance as a trade partner.
RWANDA
External Position Faces Pressure as Mineral
Exports Tank
We assume a cautious position over the
economy’s external position on the back of weak
performance by principal mineral exports. The
value of Cassiterite, Coltan and Wolfram exports
posted a 42.1% decline between 2014 and 2015
to USD 117.8 Million. In the same period, the
proportion of principal mineral exports to total
exports declined from 33.9% in 2014 to 21.1% in
2015. As such, the economy faces vulnerability to
continued fiscal and monetary pressures.
ECONOMIC OUTLOOK
Uptick in Yields as Liquidity Tightens
While government borrowing maintained the
downtrend plunging by 25.3% to USD 36.1 Million
between March and April, 2016, the T-Bill market
experienced marginal, rise in yields in the period
under review reflecting the tightening liquidity.
The interbank rate rose by 41.0 bps to an average
of 5.6% in April 2016. Yields were also nudged
upwards by rising inflation which rose marginally
from 4.6% registered in March 2016 to 4.7%
in April 2016. The 91 Day, 182 Day and 364 Day
papers registered marginal gains of 0.07%, 0.07%
and 1.19% to 5.8%, 6.3% and 8.5%, respectively, in
the period under review.
DEBT MARKET UPDATE

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StratLink in the News
StratLink Africa continues to make commentary on thematic issues in frontier and emerging markets. Below please find
links to the latest pieces.
Please click the buttons to view the full articles
Ventureburn: Three Bright Spots in South Africa’s Dismal Economic Performance - In this piece, Konstantin Makarov,
analyses opportunities in South Africa that have been obscured by the economic downturn.
Entrepreneur: Five Hot African Industries Investors Should be Watching - In this piece, Konstantin Makarov discusses
opportunities in the African continent with a focus on five industries including Fintech and Online Retail.
London School of Economics Business Review: Ghana Races to the Ballot with Increased Concern over the Economy
- In this article, Senior Research Analyst, Julians Amboko, assess Ghana’s pre-election climate and investor expectations.
CCTV Africa: Thoughts on Kenya’s Monetary Policy Rate Slash - In this interview Julians Amboko, sheds light on the
factors that drove Kenya’s Central Bank to slash the benchmark rate in May 2016.

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13August 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
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STRATLINK AFRICA
StratLink - Africa, Limited.
Delta Riverside, Block 4,
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Africa's Emerging Markets June 2016 Market Update

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