June 2017 africa market update (Abridged)

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
JUNE 2017 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
ZAMBIA 4
NIGERIA 5
KENYA 6
UGANDA 8
RWANDA 9
TANZANIA 7
http://mutuamatheka.co.ke/portfolio/nairobi/#7
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Table of Contents
ZAMBIA
• Hopes of Copper breaching $ 6,000 per ton mark wane as price slides
• Widening rift between government and opposition undermines political
risk outlook
• Eyes on the business environment as energy regulator approves 75%
hike in electricity tariffs for retail consumers
NIGERIA
• Economy contracts by 0.5% in Q1 2017 with agriculture and
manufacturing as the bright spots
• Central Bank retains hawkish stance even as inflation declines gradually
• Federal government now uses soft power to address militia
KENYA
• Volvo is the latest vehicle manufacturer to set up in Kenya and take
advantage of the growing construction industry
• Food prices drive inflation up as Kenya’s main staple crop is in short
supply
• Equity prices rise firmly after hitting eight year low
At a Glance
TANZANIA
• Growing NPLs threaten banking sector stability and call for right balance
between fiscal and monetary policy
• Tanzania leads the way in fighting graft
• EU extends an olive branch as SGR faces financing hurdles
UGANDA
• Uganda on track to produce oil by 2020
• Tax revenues expected to come in below target
• Gold to boost export revenues
RWANDA
• Cautiously optimistic growth expectations
• Assassinationofoppositionleaderboundtoelevatepoliticaltemperatures
• Export growth fund to promote export trade

3JUNE 2017 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
Capital Invested by Country (USD)
AFRICA DEALS LANDSCAPE
JANUARY - MAY 2017
Source: PitchBook, StratLink Africa
Deal Activity by Industry (Proportions)
Deal Activity by Types (Proportions)
Major Deals – May 2017
• Mukabe-Kasari Copper Project (Congo) was formed for USD 250,000 as a joint venture between Red Mountain Mining and Cocu Metals on May
24th, 2017
• KARE Distribution (Uganda) received an undisclosed amount of development capital from XSML on May 22nd, 2017
• The government of Ivory Coast sold a 25% stake of Societe des Mines to Endeavour Mining
• CSquared (Kenya) raised USD 100 Million of venture funding from Google, Convergence Partners and International Finance Corporation
79.7%
79.7%
7.2%
7.2%
6.0%
6.0%
2.2%
2.2%
1.7%
1.7%
1.2%
1.2%
1.2%
1.2%
0.8%
0.8%
Secondary Transaction - Private.. Merger/Acquisition.... Corporate Divestiture......
Early stage VC................................. Growth/Expansion..... Asset Divestiture (Corp)...
Asset acquisition............................. Others.........................
2 Billion
1.2 Billion
978.3 Million
919.5 Million
299.5 Million
195.6 Million
129.3 Million
56 Million
53.5 Million
43.4 Million
42 Million
9 Million
7.9 Million
7.5 Million
7.4 Million
110,000
20,000
Egypt
South Africa
Congo
Uganda
Nigeria
Kenya
Mauritius
Ivory Coast
Morocco
Tunisia
Namibia
Lesotho
Swaziland
Tanzania
Ethiopia
Madagascar
Ghana
64.3%
21.6%
6.5%
2.2%
1.9%
3.6%
Other Business Products & Services
Metals, Minerals & Mining
Energy Services
Communications & Networking
Other Financial Services
Others

Company
Guarded Optimism over widening Government-
Opposition Rift
The political risk climate remains broadly favorable
despite experiencing undertones of growing
pressurefollowingthearrestofoppositionluminary
and United Party for National Development leader,
Hakainde Hichilema, in April 2017. Coming against
the backdrop of the hotly contested, and narrowly
won, Presidential election in August 2016, this
development undermines efforts to bridge the
divide between the government and opposition
at a time when the country needs a common
front in addressing an adverse, albeit improving,
economic environment. In the Post-Election
Review (October 2016), StratLink highlighted the
need for galvanized support across the political
divide as one of the key areas of challenge for
the Lungu administration and views the latest
development as cause for concern.
POLITICAL OUTLOOK
GDP: USD 21.5 Bln | Population: 16.7 Mln
ZAMBIA
Energy Regulator Hikes Cost of Electricity
The energy regulator’s approval of a 75.0% hike
in the price of electricity for retail consumers in
2017 shifts focus to ease of accessing electricity
in the USD 21.5 Billion economy. The hike could
potentially have a negative impact on households
and businesses. Two issues are worth considering
at this juncture:
• Zambia’s ranking, relative to regional peers, in
ease of access to electricity could be negatively
affected in light of the adjustment in tariffs
Note: Distance to Frontier (DTF) ranks countries
with regard to ease of accessing electricity with
0 indicating high difficulty whilst 100 indicates
greatest ease. The metric considers time taken to
secure connection, cost of obtaining connection,
regularity of power outage, and number of steps
taken in filing connection application.
BUSINESS NEWS ENVIRONMENT
Optimism Moderates as Price of Copper Recedes
The marginal slide in the global price of copper
between February 2017 and April 2017, a 3.7%
decline, is evoking worries that the recovering
economy is not yet out of the woods despite
general improvement in the macroeconomic
environment. Hopes that the price could cross the
USD 6,000.0 per ton threshold within Q2 2017 are
dissipating and focus shifting on the government’s
securing of up to USD 1.6 Billion in funding from
the International Monetary Fund.
ECONOMIC OUTLOOK
With liquidity high in the market, as indicated by
the falling interbank rate, and inflation on the
downtrend, there has been a sustained decline
in yields across all tenors in Q1 2017. The largest
decline, over the three months, was experienced
in the short-term end of the market with the 91
Day, 182 Day and 364 Day papers losing 640.0,
920.0 and 940.0 bps to close the quarter at 14.0%,
14.7% and 15.3%.
DEBT MARKET UPDATE
EQUITY MARKET UPDATE
The market was relatively bullish in the first five
months of 2017 in what we believe has been
supported by favorable sentiment over general
improvement in the macroeconomic environment,
notably the monetary side, and the steady decline
in fixed income yields.
Full report available for purchase via:

Company
State now uses Soft Power to address Militia
Menace
Developments in the recent past suggest the
Federal Government is engaging soft power in
efforts to address the security situation. The
following inform this position:
• The release of eighty two Chibok Girls on
May 8th, 2017 following a swap deal in which
the government released five commanders
of the Boko Haram militia. In October 2016,
twenty one girls were released on the back
of negotiations between the government and
Boko Haram. This latest development bodes
well for the government whose efforts to
address a deteriorated security situation upon
assuming office are reported to have mitigated
recurrent Boko Haram attacks
• Increase in the amnesty budget for the Niger
Delta militants by about USD 98.5 Million
is widely viewed as a shot in the arm for the
government’s quest to arrest attacks on the
country’s oil facilities. In April 2017, the Niger
Delta Revolutionary Crusaders threatened to
resume bombing of oil pipelines, threatening
the already embattled economy with disruption
of oil production
POLITICAL OUTLOOK
NIGERIA
Economy Contracts by 0.5% in Q1 2017
The economy contracted by 0.5% in Q1 2017
marking improvement from the 0.7% contraction
in Q1 2016 and 1.7% in Q4 2016. StratLink believes
there are two bright spots for the economy:
• The margin of contraction has grown smaller
over time and signals the economy is hauling
itself out of the growth rout
• Agriculture and manufacturing are the main
enginesbuoyinggrowthmomentum.Thisbodes
well for the country’s economic diversification
agenda that seeks to enhance Nigeria’s buffer
against oil related shocks in the years to come.
Central Bank Retains Benchmark Rate
TheCentralBankheldthebenchmarkrateat14.0%
in the May 2017 meeting against the backdrop of
declining inflation. A number of factors are likely
to have informed this view:
• Growth in Money Supply is Relatively High
Despite the recent downtrend in inflation, the
first four months of 2017 posted relatively high
growth in money in circulation and are likely to
have prompted a guarded stance from the market
regulator. The inflation rate is still significantly
higher than the target 6.0%- 9.0% band and it is
likely that the Central Bank will be keen to observe
how it evolves through Q3 2017.
ECONOMIC OUTLOOK
Short-Term Yields on a Gradual Decline
T-Bill yields have been on a gradual decline in the
first four months of 2017 averaging 13.6% in April
compared to 14.0% in January. In spite of this, the
average yield remains high by historical standards.
This could be a reflection of two things:
• As indicated in preceding issues, inflation
expectations remain dim despite the general
decline witnessed in Q1 2017. The Central
Bank’s decision to maintain a hawkish stance
in the latest meeting further corroborates this
view that the monetary environment is not yet
out of the woods
• In the money market, liquidity has been volatile
as indicated by changes in the interbank rate
with general tightening at the start of Q2 2017
which helped keep yields relatively high. In
April 2017, the interbank rate averaged 64.6%
compared to 8.2% in January 2017
DEBT MARKET UPDATE

Company
Suspended Health Aid Dents Kenya’s Profile
On May 9th, 2017, the USA government
suspended USD 21.0 Million in direct aid to Kenya’s
Ministry of Health citing concerns over corruption.
This came against the backdrop of recurrent
accusations and counter-accusation of corruption
within government institutions and serves as a
blow to Kenya’s profile with regard to the war on
misappropriation of state funds. Over the last two
years, the Office of the Auditor General has tabled
reports detailing alleged misuse of funds with the
2014/15 report revealing pervasive corruption at
the county government level.
Is Kenya Prepared for an Inward Looking USA
Policy?
Further to this, the development brings to the fore
Kenya’s vulnerability as USA adopts a more inward
looking policy stance under President Trump.
Kenya accounts for the lion’s share of disbursed aid
from USA, at USD 1,056.0 Million in 2015, in East
Africa and is bound to suffer a relatively greater
impact given the new administration’s intent to
slash the aid budget. The Trump administration’s
draft budget released mid-March 2017 proposes
a 28.0% reduction in funding to the US Agency for
International Development (USAID).
POLITICAL OUTLOOK
KENYA
Volvo to Set up Shop in Kenya
The Volvo Group is the latest in a series of vehicle
manufactures - including Isuzu, MAN and Iveco
- to begin operations in Kenya. The Swedish
truck manufacturer partnered with local dealer
NECST Motors and will invest USD 24.2 million
in an assembly plant in Mombasa in an effort to
increase its market share in the region. This is
an attractive destination for commercial vehicle
assembly plants for multiple reasons:
• The booming construction industry supported
by large government infrastructure projects
will provide sustained demand for commercial
vehicles. The value of the construction industry
in Kenya leaped from USD 1.8 billion to USD
3.1 billion between 2010 and 2015, a 72.2%
increase
Food Prices Keep Inflation on Upward Trajectory
Headline inflation (year on year) reached 11.7% in
May 2017, the highest it has been since May 2012.
This has been the result of sky rocketing food
prices driven by a drought that has plagued the
region which is evident when observing the prices
of the food and non-alcoholic beverage group of
commodities whose inflation soared from 12.5%
in January to 21.0% in April this year. While poor
harvests resulting from the drought have driven
food prices up they have also contributed to
shortages of key staples consumed in the country.
ECONOMIC OUTLOOK
Two Factors to Keep Domestic Borrowing High
Recently released data shows that revenue
mobilization as at end of Q3 2016/17 stood at
USD 9.5 Billion, posting a 93.7% performance
rate. Whereas this would generally be deemed to
be good performance, it is worthy of note that it
represents the lowest performance in the financial
year 2016/17 (July 2016 – June 2017). A key drag
on the performance has been PAYE⁴ remittance
which stood at 86.4% in Q3 2016/17 compared to
89.2% and 93.8% in Q2 and Q1, respectively. This
decline comes against the backdrop of a wave of
lay-offs across sectors.
DEBT MARKET UPDATE
Decelerated Foreign Investor Activity
The market maintained a general uptick in spite of
declining appetite from foreign investors. In May
2017, foreign investor participation accounted
for 61.0% of activity compared to 68.0% in the
preceding month. May 2017 also witnessed a
decline in the buy-sell ratio of foreign investors to
stand at 0.8 compared to 1.3 in April 2017.

Company
Tanzania leads the way in Fighting Graft
President Magufuli took office in November 2015
with fighting graft as one of the priority areas,
especially in view of the 2014 Energy scandal that
saw the country miss out on over USD 500 million
in funding. The President has since embarked on
a radical path of re-orienting public institutions
to streamline operations and improve service
delivery including sacking the head of the Tanzania
Revenue Authority, Tanzania Ports Authority as
well as the anti-graft body, Tanzania’s Prevention
and Combating of Corruption Bureau (PCCB) head,
over allegations of under-performance leading to
loss of revenue, in December 2015.
POLITICAL OUTLOOK
TANZANIA
EU Extends an Olive Branch as SGR Faces
Financing Hurdles
The European Union (EU) is trying once again to
woo Tanzania to accept the Economic Partnership
Agreement (EPA). Among the EAC member
states Tanzania has been the most reluctant
country to sign the deal, citing unfavorable trade
terms that will negatively impact the country’s
industrialization strategy. In this regard, the EU has
invited Tanzania to a dialogue to try and resolve
the impasse that has stalled the trade pact which
has drawn mixed reactions from EAC member
states. In what may seem as extending an olive
branch, the EU has reportedly conceded that the
requirement to remove duties and taxes on goods
traded within the EAC may lead to loss of revenue
for EAC member states, circa USD 169.0 Million,
although it hastens to add that members may
recoup this revenue through increased East African
exports to Europe. We shall closely monitor how
this evolves given its potential impact on not only
Tanzania’s bilateral trade relations with the EU, but
also the larger EAC integration agenda.
Growing NPLs Threaten Banking Sector Stability
Tanzania seems to be following in its EAC peers’
footsteps after Bank of Tanzania put two banks
under receivership in close succession: Uganda’s
Crane Bank was placed under receivership in
October 2015, while the Kenyan banking sector
witnessed one of its greatest banking crises when
Chase Bank was placed under receivership in
close succession with Imperial and Dubai banks.
The Central bank rescinded the license of Mbinga
Community bank, as part of a drive to clean up
the financial sector in the country after the bank
was found to be critically under-capitalized and
insolvent.
ECONOMIC OUTLOOK
Short-term Yields Decline
As per our projection on the yield movements
in the past two months, yields in the short-term
market continued to trend south between April
and May, 2017 as the liquidity easing effects begin
to take effect. However, the interbank rate rose by
150.0 bps to 7.4%, in the period under review as
the local unit and inflationary pressures stabilized.
However inflation stagnated at 6.4% in April 2017.
DEBT MARKET UPDATE
Mining Industry Woes affect All Share Index
Acacia mining shares, about 20.0% of total market
capitalization, tumbled about 39.0% (May 23rd-
25th) to its lowest level in nearly one year since it
listed in March 2010, after release of the Minerals
Sands Audit report on May 24th, 2017 which
alleged that Acacia was under-representing the
amount of gold in the concentrate it exports,
potentially depriving the country of millions in
royalties. Acacia mining share declined by 26.9%
month-on-month. Consequently, the bourse shed
off 10.3% and 16.1% points, month-on-month and
year-on-year, respectively, to close the month at
2116.6 units.

Company
Electoral Commission Takes on by-Election in
Kyadondo
The newly constituted Electoral Commission
has set 26th June 2017 as the by-election date
for Kyadondo East. The seat fell vacant after the
court of appeal nullified the elections due to lack
of compliance of electoral laws by some of the
aspirants. The coming elections will again test
the credibility of the Electoral Commission as
Uganda moves onwards towards the election year.
The Electoral Commission has so far carried out
elections in Toroma, Aruu and Kamuli where they,
despite minor technical hitches, went well.
POLITICAL OUTLOOK
UGANDA
Significant Strides Made Towards Oil Production
Uganda and Tanzania just signed a framework
agreement on their proposed USD 3.6 billion oil
pipeline that will transport the substance from the
former to the latter, maintaining confidence that
the project time-line remains as planned. Also, the
Ministry of Energy is to award three oil exploration
licenses in June 2017 and has narrowed down its
search for a company to develop a USD 2.5 billion
oil refinery to two firms.
Uganda has the fifth largest oil reserves in the
sub–Saharan region after Libya, Nigeria, Angola
and South Sudan. As of 2014, Uganda had an
estimated 6.5 billion barrels of oil though the
figure has increased with the recent discoveries in
Hoima and Lake Kyoga basins.
Uganda is expected to begin pumping oil by
2020, a project that is estimated to remit over
USD 43.0 billion over a period of 25.0 years.
Uganda anticipates between 200,000.0 and
300,000.0 barrels produced per day by 2021-22
which will convert the country to a net exporter
of the commodity. However, proper institutions
and frameworks will be necessary to ensure the
smooth running of the oil sector and prevent
conflicts as seen in other oil rich countries in sub
– Saharan Africa.
Modest Revenue Growth despite Missing the
Target
Uganda is likely to miss its revenue target
projected to be USD 3.7 billion by USD 37.2 million
in the financial year 2016/2017. Assumptions
made at the beginning of the financial year remain
unfulfilled with weak economic performance
contributing to a shortfall in collections. Low
aggregate demand leading to reduced production
coupled with slow credit uptake affected tax
contributions from the manufacturing, financial,
insurance and construction industries. In the first
three quarters of the financial year 2016/2017 the
Uganda Revenue Authority projected an economic
growth of 5.0% which was revised down by the
Bank of Uganda to 4.5%.
ECONOMIC OUTLOOK
Yields Remain Unchanged Across Maturities
Uganda’s sovereign yield curve showed almost no
movement in the month to 24 May, 2017 reflecting
that investor expectations around the country’s
economic outlook remained unchanged over the
period in question. Furthermore, yields on short
term securities remained constant as investors
are unsure whether the central bank will continue
its aggressive rate cutting come June when the
monetary policy committee will next meet.
DEBT MARKET UPDATE
Equities Maintain Momentum
Share prices on the All Share index appreciated
significantly in May, reaching levels last seen in
August 2016. Gains were supported by share price
increases in Kenyan firms listed on the Uganda
Securities Exchange, including KCB Group and
Equity Bank, with investors looking to gain from
their low share prices and high dividends ahead of
the earnings season.

Company
Alleged Assassination of Opposition Leader Risk
to Outlook
We may witness heightened political temperatures
following the alleged assassination of a member
of a banned opposition party, United Democratic
Forces Party (FDU), in Rwanda. The recent alleged
assassination of the FDU opposition leader raises
fear among candidates looking to challenge
President Kagame and threatens the country’s
current political stability in light of the fact that the
President has consistently been accused of stifling
free speech as well as high-handedness against
real and perceived opposition. It also remains
to be seen what ramifications, with regard to
bilateral relations, especially in light of Rwanda’s
ongoing campaign to rekindle old ties and create
new bilateral ties, these developments will have
considering previous decisions in similar situations
that have adversely impacted Rwanda’s economy.
For instance the 2013 economic shock that led to
deceleration in economic growth.
POLITICAL OUTLOOK
RWANDA
Rwanda Seeks to Scale up Financial Inclusion
Rwanda remains one of the countries with high
financial inclusion in East Africa. The country is
seeking to increase financial inclusion through
reducing lending rates to allow for more small scale
borrowers in a bid to scale up financial inclusion.
About 68.0% of adults in Rwanda have or have
used formal financial products/ services as of 2016
while access to finance for the adult population
grew from 72.0% to the current 89.0%. Likewise,
the Master Card foundation has partnered with
government in a bid to promote digital financing
as the country works towards a cashless economy.
2017 Economic Growth Projected at 6.2%
We remain cautiously optimistic about Rwanda’s
economic outlook even as the International
Monetary Fund (IMF) projects a growth of 6.2%
in 2017, recovering from a slight dip in growth of
5.9% in 2016. The projections are largely premised
on the resumption of rainfall which should boost
the agriculture sector, coupled with growth in
exports and reduction in trade deficit. The growth
expectations also come on the back of a stable
economic outlook rating by Fitch Ratings⁵. We
are of the view that the economy is on a recovery
trajectory, the current challenges notwithstanding.
ECONOMIC OUTLOOK
Yields Maintain Decline
Yields remained south between April and May,
2017 supported by declining inflation which
declined again to 7.3% in April 2017 from 7.7% in
March 2017. Similarly, the interbank rate declined,
albeit marginally, by 12.5 bps to 6.2% in April 2017
in what we believe is response to the decision by
the Central bank to reduce the benchmark rate
by 25.0 bps. However, the franc remains fragile,
though stable declining slightly by 0.3%, month-
on-month and 6.5%, year-on-year.
DEBT MARKET UPDATE
RSE Remains in the Red as Profits for Major
Stocks Thin
The Rwanda Stock Exchange remained bearish
in May 2017 in the season of reporting by listed
securities. The bourse is still struggling under low
liquidity which has seen lackluster performance of
the bourse in the past two years.

Company
StratLink in the News: The State of Southern Africa
Over the last two months, the downgrade of South Africa to junk status has preoccupied investor interest. Whereas
StratLink views the development as significant, it believes there is need for a more holistic view of developments in the
larger Southern African economy given unfolding events in the macroeconomic environments of Mozambique, Angola
and Namibia. In the article below, Senior Research Analyst, Julians Amboko, provides insight into the state of the region’s
economy.
Please click the button to view the full article:
The Southern African wild card: High foreign debt, weak currencies and default risk

Company
STRATLINK - AFRICA TEAM
Konstantin Makarov – Managing Partner
konstantin.makarov@StratLinkglobal.com
Dina Farfel – Partner
dfarfel@StratLinkglobal.com
Kyle Drexler – Associate
kyle.drexler@StratLinkglobal.com
Benson Njeri – Analyst
benson.njeri@StratLinkglobal.com
Julians Amboko – Senior Research Analyst
julians.amboko@StratLinkglobal.com
Gianluca Storchi – Senior Research Analyst
gianluca.storchi@StratLinkglobal.com
Sophia Sifuma – Research Analyst
sophia.sifuma@StratLinkglobal.com
Easton Ochieng’ – Intern Research Analyst
easton.ochieng@StratLinkglobal.com
Peter Mutisya – Director Graphic Design
peter.mutisya@StratLinkglobal.com
STRATLINK AFRICA LTD - WHO WE ARE
StratLink is an Africa focused financial advisory company
with Capital Raising Advisory, Corporate Advisory and
Market Research as our core business lines. We believe in
the growth potential of sub-Saharan African economies and
partner with our clients to execute their vision by providing
quality services and access to capital. We recognize
opportunities in the region and connect the fastest growing
middle market companies with leading global investment
banks, private equity firms and family offices. We value the
importance of making informed decisions and leverage our
regional knowledge to the advantage of our clients.
Sub-Saharan Africa: In-depth macro and microeconomic
research
Within our purview of coverage are nine economies –
Kenya, Tanzania, Uganda, Rwanda, Ethiopia, Nigeria, Ghana,
Angola and Gabon. We undertake incisive research and
analysis of each of the countries’ macro and microeconomic
environment, debt and equity markets. We also conduct
sector specific research and analysis shedding insight on
market landscape, existing gaps and opportunities as well
as potential challenges.
Our guarantee: Competent team, reliable data
Our research is anchored in a competent and versatile
team traversing the fields of economics and finance with
qualifications from globally recognized institutions. The
team is backed by subscription to reliable databases such
as Business Monitor International, Bloomberg, Thomson
One Research, World Economics and The World Today.
As such, our guarantee is reliable and up to date data in
an increasingly dynamic region. Further, we reach out to
relevant bodies in concerned markets including Central
Banks, ministries and state departments.
Authoritative voice on regional economics
StratLink has become an authoritative voice for commentary
and opinion on issues pertaining to Sub-Saharan African
economies and investment. Reputable media including
CNBC Africa, Nation Media Group, CCTV and Bloomberg
have reached out to the company for opinion and analysis.
Where we are based
Our head office is in Nairobi, Kenya with satellite offices in
New York, Kampala and Kuala Lumpur.

Company
ContactDetails
STRATLINK AFRICA
StratLink - Africa, Limited.
Delta Riverside, Block 4,
4th Floor, Riverside Drive,
Nairobi, Kenya
nairobi@stratlinkglobal.com
www.stratlinkglobal.com
+254202572792

June 2017 africa market update (Abridged)

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June 2017 africa market update (Abridged)