May 2017 africa market update (abridged)

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
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MAY 2017 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
ETHIOPIA 4
NIGERIA 5
KENYA 6
UGANDA 8
RWANDA 9
TANZANIA 7
http://www.africlandpost.com/angola-launches-crackdown-amid-plunging-oil-prices/
Luanda, Angola
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Cover image:
Table of Contents
ETHIOPIA
• Government extends state of emergency
• Diversifying business environment attracts investors
• Domestic and external risks undermine growth prospects
NIGERIA
• Government realigns fiscal plans
• Petroleum Industry and Governance Bill makes progress
• State signals improvement in economic conditions
KENYA
• GDP growth accelerates in 2016
• Party primaries signal shifting voter sentiment
• Inflation surges to 11.5% in April 2017
At a Glance
TANZANIA
• Constitutional reforms process likely to be revived
• Paymentarrearsthreatentocripplebudgetimplementation
• Agriculture set to benefit if 2017/18 budget is actualized
UGANDA
• New Electoral Commission put to the test
• British government doubles export credit for Uganda
• Moderate growth in economic activity
RWANDA
• Sluggish economic growth reflected in banking sector
performance
• Stable and calm outlook ahead of the general election

3MAY 2017 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
Capital Invested by Country (USD)
AFRICA DEALS LANDSCAPE
JANUARY - APRIL 2017
Source: PitchBook, StratLink Africa
Deal Activity by Industry (Proportions)
Deal Activity by Types (Proportions)
Major Deals: April 2017
• PayGo Energy (Kenya) raised USD 1.4 Million of venture funding from Novastar Ventures and Energy Access Ventures on April 19th, 2017
• The noodles business of Dangote Flour Mill (Nigeria) was acquired by De-United Foods Industries for an undisclosed amount on April 18th, 2017
• Build (South Africa) raised USD 887,500 of angel funding from Gelt Venture Capital and other undisclosed investors on April 14th, 2017
• Nimuno Loops (South Africa) raised USD 1.6 Million of product crowdfunding on April 12th, 2017
25.2%
12.6%
10.2%
6.3%
6.3%
5.5%
3.9%
3.1%
26.8%
Merger/Acquisition .............. Secondary Transaction - Private.. Seed...............................
Pre/Accelerator/Incubator....... Early stage VC.............................. Corporate Divestiture....
Asset acquisition....................... Buyout/LBO................................. Growth/Expansion........
Angel......................................... Asset Divestiture (Corp).............. Later stage VC...............
PIPE........................................... Others..........................................
25.5%
25.5%
3.6%
3.6%
4.2%
4.2%
7.3%
7.3%
4.8%
9.7%
9.7%
3.0%
3.0%
9.1%
9.1%
4.8%
4.8% 4.8% 4.8%
2.4%
2.4%
7.9%
7.9%
6.7%
6.7%
6.1%
6.1%
4.8%
Software
Other Business Products & Services
Commercial Services
Consumer Non-Durables
Metals, Minerals & Mining
Other Financial Services
Commercial Products
Energy Equipment
Others
2 Billion
1 Billion
978 Million
920 Million
294 Million
129 Million
88 Million
53 Million
42 Million
9 Million
8 Million
7.5 Million
7.4 Million
4 Million
470,000
110,000
20,000
Egypt
South Africa
Congo
Uganda
Nigeria
Mauritius
Kenya
Morocco
Namibia
Lesotho
Swaziland
Tanzania
Ethiopia
Ivory Coast
Tunisia
Madagascar
Ghana

Company
GDP: USD 61.5 Bln | Population: 101.9 Mln
ETHIOPIA
Extension of State of Emergency Dims Risk
Outlook
Two issues were significant in Q1 2017:
• The country closed Q1 2017 with the House
of Representatives extending the state of
emergency, declared in October 2016 following
a wave of protests that erupted in August 2016,
by four months casting a dim view over the
political risk climate over Q2 2017. Extension
of the state of emergency further galvanizes
our long held position that despite the ruling
Ethiopia People’s Revolutionary Democratic
Front’s (EPRDF) grip on power, simmering
disquiet amongst the public is bound to place
the government in an increasingly precarious
position.
• The Koshe rubbish dump landslide that claimed
over sixty lives, mainlysquatters, in the outskirts
of Addis Ababa in March 2017 came as a stark
reminder of ravaging urban poverty (given a
poverty threshold of below USD 1.25 per day)
that bedevils the fast growing economy
POLITICAL OUTLOOK
Diversifying Business Landscape
Norwegian investment fund, Norfund, injected a
USD 7.4 Million investment into beef producer,
VerdeBeef,bringingtofocusthecountry’sbusiness
landscape which has evolved favorably over the
last decade. Whereas between 2005 and 2009
deals in the economy were concentrated within
two sectors, commercial products and agriculture,
we have witnessed a more diversified landscape
over the last five years informed by gradual efforts
to liberalize the economy. Key milestones in this
undertaking have been:
• In 2012 Ethiopia entered into a Special Status
Agreement with Kenya, allowing businesses
from the latter to invest in the country’s
manufacturing sector
• In 2013, Ethiopia opened up energy generation
and distribution to private investors. Prior to
this, energy generation and distribution was
solely undertaken by the state owned Ethiopia
Electric Power Corporation
BUSINESS NEWS ENVIRONMENT
Eurobond Yields Towers over Regional Peers
Despite being on a general decline in Q1 2017,
Ethiopia’s Eurobond yield stood above regional
peers such as Kenya and Rwanda suggesting
relative caution by investors over the USD 61.4
Billion economy. Like most economies in the
region, favorable investor perception is likely
to be informed by the rebound in commodity
prices with Ethiopia well placed to reap from the
uptick in coffee prices. Caution from investors
is a likely result of concerns over the economy’s
vulnerability to shocks especially the ongoing
drought which threatens the agriculture sector.
Given the economy’s reliance on agriculture,
adverse weather conditions present a relatively
greater threat than they do for peers in the East
African region. Already, Ethiopia under-performs
most of its peers in the region with regard to tax
revenue mobilization with risks being heightened
by the prevailing environment of tightening
liquidity conditions globally as economies such as
USA adopt an inward looking stance.
ECONOMIC OUTLOOK
Source: World Bank, StratLink Africa
Tax Revenue as a Percentage of GDP
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Kenya Tanzania Rwanda Ethiopia Uganda
Full report available for purchase via:

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Petroleum Industry and Governance Bill Makes
Progress
We return our focus to reform efforts in the oil
sector which is a major policy pillar under the
Buhari administration. On April 8th, 2017 the
Senate Committee tasked with reviewing the
Petroleum Industry and Governance Bill tabled its
reportbeforethehousemarkingamajormilestone
in the protracted process towards reforming the
oil sector. The bill was first drafted in 2008 and
has suffered lethargy in passage due to conflicting
interests in the oil sector. A key provision of the
bill is establishment of the Downstream Petroleum
Regulatory Agency with the mandate to, amongst
other functions.
POLITICAL OUTLOOK
NIGERIA
State Expects Improvement in the Economy
Data on Q1 2017 gross domestic product growth,
due at the end of May 2017, is expected to show
improvement of the economy. This expectation is
significant for two reasons:
• It sends the signal that, by the government’s
expectation, the economy could be past the
trough of the recession that has prevailed
following the plunge in commodity prices.
This helps dissipate the uncertainty that has
dominated investor sentiment especially with
the recovery of oil prices being relatively weak
• Bolstersconfidenceinthebusinessenvironment
which has been crippled by, amongst other
factors, a shortage of the greenback over the
last one year. A key pointer to look out for
in the Q1 2017 growth numbers will be the
performance of the non-oil segment of the
economy which will be an indicator of the
extent to which an alternative engine, aside
from oil, for the economy’s growth is fairing in
light of the downturn
Realignment of Fiscal Plan
Reports indicating that the government is in talks
with the World Bank and Africa Development
Bank for a loan facility to the tune of USD 3.0
Billion before tapping into the international
capital market through a Eurobond suggest the
country could be realigning its fiscal strategy for
the months ahead. Earlier, the government had
targeted issuing a USD 1.0 Billion before the end
of Q1 2017, a move we asses is likely to have been
delayed by a number of factors.
ECONOMIC OUTLOOK
Dim Inflation Expectations
Despite March 2017 being the second consecutive
month in which there was a decline in headline
inflation, to 17.3%³, short-term yields remained
elevated with the a general uptick posted between
March 2017 and April 2017. We assess this as
an indicator that investors still hold a dim view
of inflation expectations in the near term. This
perception is likely to be informed by the fact that
in the present bout, inflation has surged to highs
last witnessed a decade ago.
DEBT MARKET UPDATE
EQUITY MARKET UPDATE
Market Rebound Weakens
The market’s bounce back from the mid February
2017 trough lost momentum in April in what we
assess is an indication of the prevailing decline in
foreign investor inflow into the market. This trend
has subdued the market and in the month under
review could have been deteriorated further by
two factors.

Company
Party Primaries Send Strong Signals on Voter
Sentiment
Political party primaries were the highlight of
April 2017 with the following being take home
observations:
• Loss by luminaries across the political divide
suggests there could be a significant shift in
voter sentiment in many parts of the country
with the electorate keen to reject the status
quo. In light of this, we are likely to see parties
step up wooing efforts in the remaining months
in a bid to deepen appeal especially amongst
the undecided electorate
POLITICAL OUTLOOK
KENYA
Revisiting Oil as Pilot Export Phase Beckons
Kenya’s pilot phase of exporting oil is expected to
commence in June 2017. We expect the timing of
this to be instrumental in helping the economy
obtain a good sense of potential proceeds from oil
in an environment of subdued prices. In light of
this, the line and environmental audit of Kenya’s
planned construction of a crude oil pipeline from
Lokichar to Lamu is due from July 2017. Reserves
at the Lokichar Basin were first estimated at 600.0
Million barrels in 2012, before the basin’s potential
was revised upwards to 750.0 Million barrels in
2016.
This places Kenya’s oil reserves slightly ahead of
producers such as Ghana (660.0 Million barrels).
Of interest will be to observe a number of issues,
including how foreign direct investment inflows,
evolve as and when exports commence (with a
focus on natural resources targeted inflows). With
the diversification of Kenya’s economy being one
of the most touted in Sub-Saharan Africa, focus
from the investment community is likely to hinge
on how robust a plan there is to avoid over-reliance
on the sector.
Marginal Improvement in Economic Growth in
2016
Recently released data shows that the Kenyan
economy grew by 5.8% in 2016, up from 5.7%
and 5.4% in 2015 and 2014, respectively, having
benefited from favorable oil prices, a generally
stable macroeconomic environment and
recovering tourism while on the other hand a
sharp fall in the growth of credit to the private
sector created head winds.
ECONOMIC OUTLOOK
Bond Issuance Signal High Appetite for Domestic
Debt
The government raised USD 290.8 Million through
the re-opening of two ten year bonds with the
two papers attracting a performance rate of
164.6%. Coming in quick succession to the March
2017 issuance of two bonds, FXD2/2014/5 and
FXD3/2013/5, in which a performance rate of
214.1% was registered with the government
accepting bids worth USD 241.1 Million, we view
this as an indicator that appetite for domestic debt
is relatively high.
DEBT MARKET UPDATE
Nairobi Bourse Shows Reassuring Signs
Equities have recorded improvement over recent
weeks with the Nairobi Stock Exchange’s All-Share
Index recording a 1.6% increase in the month to
25th April 2017, when the index closed at 132.7
which is slightly below its one year average of
135.6, a positive sign that signals a possible turn
in the market.

Company
Reviving the Constitutional Referendum Debate
President Magufuli is reportedly considering
to revive the stalled constitutional referendum
debate following the appointment to key posts of
CCM’s public secretary as well as Constitutional
and Justice Minister, two members of the defunct
Constitution Review Commission (CRC). The two
supportedthecontroversialthree-tiergovernment
model which was also preferred by the opposition
coalition, Ukawa while the ruling CCM prefers
the current two-tier system of government. The
model to be adopted was one of the contentious
issues that may have seen the referendum shelved
by former President Kikwete’s government. We
reiterate that the fate of the stalled constitutional
referendum that was postponed indefinitely in
April 2015, continues to raise concerns of lack of
goodwill on the part of government to re-open the
constitution reform dialogue and we anticipate
that President Magufuli will reignite the process
before the next election cycle. In this regard,
the appointments point towards the President’s
renewed interest in reviving the referendum talks
in line with his aggressive reform agenda.
POLITICAL OUTLOOK
TANZANIA
Agriculture set to Benefit if 2017/18 Budget is
Actualized
The agriculture sector, Tanzania economy’s main
stay contributing about 30.0% to the country’s
GDP, is set to benefit if the 2017/18 budget
provisions targeting the sector are effected. The
budget proposes to lift levies on the country’s cash
crops, tea, coffee and cotton, a move aimed at
promoting sector productivity. The levies proposed
to be scrapped levies include the USD 201.7
ginners paid as Uhuru Torch contribution and USD
112.1 meeting fee contributed by cotton buyers
to the district councils. Similarly, government has
proposed to abolish the USD 359.2 fire and rescue
levy in tea and USD 250.0 coffee processing fee.
Payment Arrears threaten to Cripple Budget
Implementation
Tanzania is struggling with revenue mobilization
even as it provides budget projections of USD 14.3
Billion for the fiscal year 2017/18. In what may
compound the budget financing problem, alleged
accumulated arrears owed to suppliers and
contractors could erode the budget’s credibility¹
as they serve to widen the fiscal deficit, projected
at 4.5% of the budget. Some of the arrears with
the greatest impact include: Arrears to pension
funds at around USD 1.3 Billion (3.3% of GDP);
contractors at about USD 0.9 Billion (1.9% of GDP)
while those to Tanesco and others constitute
about 1.1% of GDP. The continued accumulation
of domestic arrears is bound to hamper budget
implementation besides undermining the trust
of private-sector suppliers and potential investors
while also fueling the steadily rising public debt.
Budget arrears amounted to 6.3% of GDP, as at
end of June 2016²; while debt service is projected
at more than a third of domestic revenue.
ECONOMIC OUTLOOK
Short-term Yields Decline
Weprojectedafurtherdeclineinyieldsintheshort-
term market in our April Market Update following
the decision by the Central Bank to cut the Cash
Reserve ratio, to stimulate liquidity. Likewise,
the interbank rate continued on the downtrend,
declining by 240.0 bps to 5.9% between March and
April, 2017. Nonetheless, inflation has maintained
a steady uptick since September 2016, increasing
from 5.5% in February 2017 to 6.4% in March
2017.
DEBT MARKET UPDATE

Company
New Electoral Commission put to the Test
The electoral commission of Uganda has in the
past been criticized, in the 2016 presidential
election complaints around the inefficiency of the
electoral body were voiced citing, for instance,
delays in delivering voting materials to polling
stations. The new electoral commission headed by
Justice Simon Mugenyi Byabakama passed their
first test in the Aruu North County by-election. The
commission came into power on 16th January,
2017 and successfully held a by-election in Aruu
North announcing Lucy Aciro as the winner,
fending off competition from National Resistance
Movement’s James Nabinson Kidega by 63.4%
to 32.9% of the votes. The process was largely
successful with the electoral body managing to
deliver voting materials on time as well as tally
votes and release the results in a timely fashion,
not a small feat considering the size of the
constituency.
POLITICAL OUTLOOK
UGANDA
British Government Doubles Export Credit for
Uganda
The United Kingdom has increased its export
credit funding to Uganda from USD 383.8 Million
to USD 767.6 Million citing increased demand.
This financing facility that targets Uganda’s
imports from the UK is provided by the British
government’s export credit agency UKEF, a body
that provides competitive export financing for
goods and services leaving the UK. It is envisioned
that Uganda will use the competitive long-term
finance made available through this credit facility
towards the completion of its major infrastructure
projects, especially considering the requirement
to use UK content and expertise. Uganda’s imports
from the UK have been declining in absolute terms
since 2011 but also proportionately - the British
Government provided 7.6% of Ugandan imports
in 1999 in contrast to only 1.4% in 2016. It would
seem that as the process of Brexit advances, the
UK is taking steps to build relationships with non-
EU trading partners which in this case could prove
beneficial to Uganda.
Moderate Growth in Economic Activity
The second quarter of the financial year 2016/17
experienced a growth in real quarterly GDP¹ of
0.8% relatively to the previous quarter on the back
of growth in the services sector and taxes, whereas
the agriculture and industry sectors contracted
over the same period. However, quarterly GDP
growth (year on year) has fallen steadily from 6.7%
inthefirstquarterofFY2015/16(July–September)
to 1.4% in the second quarter of FY 2016/17,
raising concerns that the Bank of Uganda’s target
4.5% growth for the current financial year will not
be met.
ECONOMIC OUTLOOK
Marginal fall in Short-Term Yields
In the month to 24th April 2017 yields on bonds
with a one year maturity or longer were virtually
unchanged whereas yields on papers with shorter
maturities fell marginally. This is can be attributed
in part to the continued loosening of monetary
policy by the Bank of Uganda that cut their Central
Bank Rate by half a percent to 11.0% on 12th April
2017. In contrast, yields across all maturities have
dropped since December 2016.
DEBT MARKET UPDATE
Equities on the Rise
Equities in the market maintained their upward
trend with the All Share index posting a 6.9%
increase in the month to 25 April 2017, reaching
levels last seen in November 2016.

Company
Stable and Calm Outlook
Rwanda’s political outlook remains calm and stable
as the August 2017 election approaches; a stark
contrast from its East Africa Community (EAC)
counterpart, Kenya whose political parties are
currently holding party primaries in readiness for
the August 2017 elections. Rwanda is expected to
hold its primaries in June 2017, which are expected
to be calm given the minimal political competition.
As different political parties in Rwanda prepare
for elections, the ruling Rwandan Patriotic Front
(FPR) remains confident of a landslide win by
the incumbent President Kagame. Only the
Democratic Green Party of Rwanda has officially
fielded a candidate to challenge President Kagame,
who is running for a third-term in office, with just
four months to the general election, improving his
chances of victory given the minimal opposition to
his bid.
POLITICAL OUTLOOK
RWANDA
Rwanda Entices Foreign Investors
Rwanda has been aggressive in consolidating
existing bilateral ties as well as creating new ones
to prop the economy against possible shocks. In
this regard, Rwanda approved a law removing
double taxation for Moroccan investors, who have
shown considerable interest in Rwanda since the
Moroccan King visited Rwanda in October 2016.
Thus, the move, besides being in line with the
21 trade agreements signed between the two
countries during the state visit, it is also meant
to facilitate this renewed interest in Rwanda
from Morocco by providing incentives for foreign
investment. Other incentives include: A waiver
of corporate income tax for foreign companies
planningtorelocatetheirheadquarterstoRwanda,
as well as seven-year corporate income tax
holiday for at least USD 50.0 million investments
in manufacturing, energy, ICT and health services.
Rwanda also offers duty-free importation of
machinery, equipment and raw materials.
Sluggish Economic Growth Reflected in Banking
Sector Performance
Despite maintaining exemplary performance,
Rwanda’s economic growth slowed down to 5.9%
in 2016 from a growth of 8.9% in 2015, in line with
declining sectoral performance. The slowdown in
growth, exacerbated by the fragile Franc as well
as the ongoing drought spades, has been reflected
in the performance of the banking sector and this
is bound to result in slow growth in the already
shrinking private sector credit.
ECONOMIC OUTLOOK
Yields maintained a general downtrend in April
2017 in line with declining inflationary trends on
the back of a stable local unit. Inflation eased to
7.7% in March 2017 from 8.1% reported in the
previous month. On the other hand, the interbank
rate remained unchanged at 6.3% in the period
under review, even as the Central Bank held the
benchmark rate at 6.25% in the March 2017
monetarypolicymeeting. Thesubduedinflationary
pressure was reflected in the performance of the
short-term yields.
DEBT MARKET UPDATE
RSE Remains Bearish as I&M Gains
Shares in I&M Bank Rwanda, which was listed at
the stock exchange in March, surged by 11.0% to
trade at about USD 0.12 following their market
debut at the bourse, a boost to the local bourse
amid sustained lackluster performance by the
bourse. We are of the view that RSE should take
advantage of its membership at the East Africa
Securities Regulatory Association and East Africa
Stock Exchanges Association to bring more IPOs
to the market. We expect that the new listing
will continue to stimulate market activities at the
bourse through offering investors more options
besides attracting new investors into the market.

Company
StratLink in the News
In the period under review, StratLink’s analysis of potential hurdles to Kenya’s ambitious USD 16.5 Billion revenue target
for financial year 2017/18 was cited by Business Daily.
Please click the button to view the full article:
Weak prices, poll jitters hurdles in Sh1.7trn revenue

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STRATLINK - AFRICA TEAM
Konstantin Makarov – Managing Partner
konstantin.makarov@StratLinkglobal.com
Dina Farfel – Partner
dfarfel@StratLinkglobal.com
Vimal Parmar – Consultant
vimal.parmar@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.

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ContactDetails
STRATLINK AFRICA
StratLink - Africa, Limited.
Delta Riverside, Block 4,
4th Floor, Riverside Drive,
Nairobi, Kenya
nairobi@stratlinkglobal.com
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May 2017 africa market update (abridged)

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May 2017 africa market update (abridged)