Africa Market Update - February 2017

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
FEBRUARY 2017 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA 5
KENYA 6
TANZANIA 7
RWANDA 9
ANGOLA 10
UGANDA 8
http://www.africlandpost.com/angola-launches-crackdown-amid-plunging-oil-prices/
Cover image:
© Ademar Rangel
Table of Contents

3FEBRUARY 2017 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
Company
Central Banks Step Gingerly on a Balance of Domestic and External Risks…
Major central banks in sub-Saharan Africa ushered in 2017 with retention of benchmark rates (Reserve Bank of
South Africa, Central Bank of Nigeria, Bank of Ghana, Central Bank of Egypt¹ and Central Bank of Kenya) at a time
when prevailing macroeconomic conditions would have ordinarily triggered anticipation of more dovish signals. This
position is likely to have been informed by two key considerations:
• The December 2016 USA Federal Reserve rate hike and prospect of a sustained exit from the zero-range interest
rates horizon in the coming months saw the greenback rally whilst subjecting most emerging and frontier market
currencies to mounting pressure. Relatively bullish expectations around Trump’s policy outlook also helped drive
the greenback to a rally in the period preceding January 20th, 2016
• With commodity prices on a general uptrend, central banks are likely to be growing increasingly wary of the waning
buffer against a rise in inflation that has been enjoyed in view of the general commodity price rout
• For countries caught between economic recovery and a shift to more flexible exchange rate regime (Nigeria and
Egypt), monetary policy adjustment remains a matter of treading a tight rope between helping catalyze growth and
shielding currencies from wild swings in an increasingly volatile global economy
Best and Worst Performing Currencies: Year to Date Change (to USD) as at Jan 30th, 2017
Source: Bloomberg, StratLink Africa
1
December 29th, 2016 MPC Meeting
-6.0% -5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0%
Sierra Leone Leone
Mozambique New MeƟcal
MauriƟan Rupee
South African Rand
Botswana Pula
Angolan Kwanza
Rwandan Franc
Malawian Kwacha
Ugandan Shilling
Ethiopian Birr
Kenyan Shilling
Nigerian Naira
Gambian Dalasi
Tanzanian Shilling
EgypƟan Pound
Ghanaian Cedi
Congolese Franc

Company
Capital Invested by Country (USD)
AFRICA DEALS LANDSCAPE
JANUARY 2017
Source: PitchBook, StratLink Africa
7.8 Million
7.5 Million
127.0 Million
10,000
35.0 Million
270,000
Egypt
Uganda
Kenya
Tanzania
Mauritius
2 Billion
Swaziland
Deal Activity by Industry (Proportions) Deal Activity by Types (Proportions)
Major Deals – January 2017
• Energy exploration company, Eni (Egypt), sold a 30.0% stake in Zohr Acreage to Rosneft for USD 1.6 Billion
• International Financial Services (Mauritius) was acquired by Sanne Group for USD 127.3 Million
• International Finance Corporation acquired a 10.4% stake in Britam Holdings (Kenya) through private placement
• Oﬀ Grid Electric (Tanzania) received USD 7.5 Million of debt ﬁnancing from Developing World Markets
91.8%
1.6%
0.2%
6.0%
0.4%
Secondary Transaction - Private... Merger & Acquisition ..........
PIPE ................................................. Seed .....................................
Angel ...............................................
0.2%
0.4%
0.4%
91.4%
1.6%
6.0%
Media
Energy Equipment
Other Financial Services
Pharmaceuticals & Biotech
Capital Markets & Institutions
Business Products & Services
91.8%
6.0%
1.6%
0.4%
0.2%
Morocco

Company
Stable Environment with Mild Pressures
We hold a favorable outlook on the political risk
environment in the coming months with the
following bound to shape perception:
• Investigation into the January 17th, 2017
accidental bombing of a refugee camp that
occasioned loss of tens of lives is likely to be a
key factor shifting focus back to the competence
and preparedness of the military to combat
militia such as Boko Haram and Niger Delta
Avengers. Nigeria’s capacity to arrest the threat
of militia has been tested over the last five
years with Boko Haram orchestrating atrocities
against civilians, mostly, in the Northern part of
the country
POLITICAL OUTLOOK
GDP: USD 481.1 Bln | Population: 187.0 Mln
NIGERIA
Dollar Aridity Continues to Bedevil the Market
Scarcity of the greenback continues to dominate
the business environment as investors encounter
challenges in meeting dollar denominated
obligations. This remains one of the key challenges
facing the business environment in the country.
Two things are important in this regard:
• Tailwind: This is bound to prevail through the
end of Q1 2017 with a key factor to watch out
for being the touted Eurobond that could help
ease the pressure upon successful issuance
• Headwind: From a structural perspective,
however, the fact that the country’s trade
balance is still in the negative and imports
growing faster than exports (please refer to
the Economic Outlook for more detail on this)
suggests Nigeria is likely to face this challenge
for the better part of 2017, subject to trends in
global oil prices.
BUSINESS NEWS ENVIRONMENT
External Position Remains in Deficit despite
Improvement
We maintain a largely dimmed view of the Naira in
view of the following considerations:
• Thecountry’sexternalpositionremainsindeficit
in spite of the fact that there has been general
improvement over the last two quarters. A key
factor to watch out for in the period to Q2 2017
will be the extent to which the Organization
of Petroleum Exporting Countries (OPEC) deal
boosts oil prices and whether the ongoing
rally will be sustained in a manner that would
provide a prop for economies like Nigeria
ECONOMIC OUTLOOK
Yield Curve Inversion Persists
The yield curve remained inverted through
January 2017 as inflation crept further north to
18.6% in December 2016. Concern over the short-
term horizon of the economy abounds with little
to suggest general improvement on the monetary
front especially as reports of dollar aridity continue
to cloud investors’ optimism about recovery of
the economy’s key engines of growth such as
manufacturing.
DEBT MARKET UPDATE
Bourse Holds Firm against Pressures
The market held firm against pressures with the
30 Index posting a generally flat terrain in January
2017. We assess this trend has been supported by
relatively strong performance by banking sector
stocks which posted a general rally in the month
under review. The rally by banking stocks is a likely
reflection of two critical developments:
• Investors opting for the market in view of
uncertainty around Kenya’s banking sector and
the adoption of a ceiling and floor on lending
and deposit rates, respectively
EQUITY MARKET UPDATE
Full report available for purchase via:

Company
New Team at the Helm of Electoral Oversight
Body
The first month of 2017 was characterized by
key developments that are bound to be pivotal
in shaping the country’s political risk climate in
the coming months. On the whole, we maintain
a close watch over developments with a focus
on realignments within both government and
opposition factions especially within potential
swingvotingblocs.Twodevelopmentssurrounding
the electoral oversight body and registration of
voters as well as the President’s ascent of the
controversial amendment on electoral laws stood
out in the month under review.
• The President signed into law the Election Laws
AmendmentAct(2016)thatpolarizedparliament
owing to the provision allowing the Electoral
oversight body to put in place complementary
mechanisms for voter identification and
transmission of results. This is bound to remain
an emotive issue for the country with factions of
the opposition alleging plans to undermine the
credibility of the electoral process
POLITICAL OUTLOOK
KENYA
Protracted Lethargy of the Business Climate
Looms
StratLink foresees two major risks to the business
environment over the coming months:
• Protracted Lethargy: Generally, the fourth
quarter is relatively slow in Kenya’s business
environment. With the general election set for
August 2017, the implication is that the business
environment is likely to face protraction in the
deceleration of the economic environment with
most investors likely to adopt a wait and see
stance ahead of the polls which take place at the
start of Q3 2017. The investment community
will be particularly interested to observe how
the next administration approaches sticky policy
concerns such as the adoption of a ceiling and
floor to commercial bank lending and deposit
rates, respectively
Monetary Environment under Pressure
We hold a dimmed view of the country’s monetary
environment with shilling opening 2017 on a
rout whilst there are indications of a build-up of
upward forces on inflation given adverse weather
conditions that are bound to create supply side
constraints from a food perspective. There is
likelihood on weakened resilience by the shilling in
the coming months underpinned by the following
considerations:
• The rise in global oil prices triggered by the
November 2016 Organization of Petroleum
Exporting Countries (OPEC) deal to slash
production suggests Kenya’s external position
is unlikely to benefit from a favorable relatively
import bill as it has in the recent past. With crude
petroleum and petroleum products accounting
for about 20.8% of the importation of principal
commodities, the surge in oil prices is likely to
reflect in higher demand for dollars by importers
thus piling pressure on the shilling
ECONOMIC OUTLOOK
Liquidity Tightens amidst Weakening Foreign
Exchange Environment
Yields rose marginally in the short-term end of
the market between December 2016 and January
2017 as liquidity tightened in the money market
in a likely move by the Central Bank aimed at
stemming the slide by the shilling. The interbank
rate climbed to an average of 7.7% in January 2016
compared to an average of 6.0% in December
2016. In line with this, subscription in the T-Bill
market has been relatively low with aggregate
bids received for the 182 and 364 Day papers in
the January 23rd, 2017 issue standing at 68.9% of
the amount offered.
DEBT MARKET UPDATE

Company
Deepening Concern over the Government’s
Stance on Dissent
The government’s warning of possible closure
and prosecution of media houses deemed to
be encouraging dissent adds to the concern of
mounting intolerance by the state. The Tanzanian
government has in the recent past come under
sharp scrutiny for stifling freedom of expression
especially following enactment of the Cyber
Crimes Act (2015) which has attracted criticism
for alleged constriction of democratic space in the
country. In the period under review, two other
developments led to deepening concern over
President Magufuli’s regime:
• Oppositionleader,EdwardLowassa wasdetained
briefly for allegedly holding an illegal meeting, a
fact that served to fan further concern that the
country could be steering towards reversion of
gains made towards protecting fundamental
freedoms
POLITICAL OUTLOOK
TANZANIA
Shock to Agriculture to Derail Business Climate
Growth in the agriculture sector slumped to 0.3%,
near stagnation, in Q3 2016 compared to 5.1%
in the corresponding quarter of 2015, signaling a
shock to key drivers at the tail end of 2016. Two
factors are likely to be underlying this trend:
• Decelerating growth momentum in credit to
the sector, with a 940.0 bps between 2012/13
and 2014/15, is indicative of declining appetite
by investors in the sector which could signal
perceived risks. The sector has been the only one
posting such a strong and sustained downtrend
in private sector credit and is bound to face
subdued growth through Q2 2017
High but Weak Growth
Despite posting relatively high economic growth in
Q3 2016 (latest available statistics), we view the
performance as an indication of high but weak
growth informed by downward forces as discussed
below:
• At 6.2%, growth stood 110.0 bps lower than that
posted in the same quarter in 2015, a year that
was characterized by high monetary instability
and elevated fiscal pressures in the economy.
Near stagnation in the agriculture sector, as
mentioned in the foregoing section, was a key
factor informing this downtrend in aggregate
economic growth
ECONOMIC OUTLOOK
Yields on the short-term end of the market
maintained a flat terrain between December 2016
and January 2017 even as liquidity rose with the
interbank rate averaging 10.4% in January 2017
compared to 13.6% and 13.5% in December
2016 and November 2016, respectively. Appetite
for instruments offered was relatively high with
the ten year bond attracting a performance rate
of 114.9% whilst the January 25th, 2016 T-Bill
auction saw the 182 Day and 364 Day papers
report 208.0% and 346.0%, respectively.
DEBT MARKET UPDATE
The market continues to be subdued as the main
counter, Tanzania Breweries Ltd accounting for
45.4% of market capitalization, posts bearish
performance. The manufacturing sector of the
economy has been facing an adverse operating
environment, growing by 4.5% in Q3 2016, 170.0
bps lower than the economy’s aggregate growth.

Company
Recent Appointment Stirs Up Succession Debate
President Yoweri Museveni’s appointment of
Major General Muhoozi Kainerugaba, his son, as
Special Advisor in January 2017 is a key indicator
for the political risk profile owing to the following:
• On the surface, it has been widely deemed as
part of efforts by the President to groom persons
within his family in light of growing debate over
the country’s succession politics following the
last election in which he secured a fifth term
in office. In June 2016, Museveni appointed
Janet Kataaha Museveni, his wife, as Education
Minister
• More consequentially, this development throws
a spanner into the works within the ruling
National Resistance Movement (NRM) which,
in the run up to the 2016 general election,
faced internal fault lines as stalwarts like
Amama Mbabazi bolted out of the party. This is
bound to have been a key driver of Museveni’s
comparatively poor performance in the last
election, and one which the opposition will be
keen to leverage.
POLITICAL OUTLOOK
UGANDA
Local Manufacturers Bear the Brunt of the South
Sudan Conflict
TheconflictinSouthSudanhasnegativelyimpacted
manufacturing in Uganda given significant cross-
border trade between the two countries. South
Sudan is the third largest export destination
for Uganda, receiving about 10.6% of Uganda’s
exports as at 2014. The government reported
that Uganda’s economy was losing about USD 0.8
Million daily due to the resumption of conflict in
South Sudan. Roofings Limited, the largest steel
manufacturing plant in East Africa and controlling
about 60.0% of the steel market in Uganda, is
reported to have lost about 50.0% in sales due to
the conflict in South Sudan, reflecting the negative
impact of the ongoing war on local industries.
Optimistic Outlook despite Headwinds
The International Monetary Fund projects
Uganda’s economy will grow by 6.0% in 2016
and about 5.0% in 2017, buoyed by ongoing
infrastructure developments, recovery in
investments in the oil sector and new trade
opportunities from integration in the East Africa
Community. However, this projection maybe
overstretched given Uganda’s economy has been
sluggish in the past year on the back of harsh
macroeconomic environment. Q1 2017 adjusted
real GDP (July-September, 2016) contracted by
0.2% compared to a growth of 1.0% in the same
quarter a year earlier.
ECONOMIC OUTLOOK
Marginal Rise in Yields on Increasing Liquidity
Liquidity in the money market continues to rise
despite signs of volatility in the foreign exchange
market. The interbank rate declined by 71.0 bps,
month-on-month, to 11.2% as at December 2016.
Nonetheless, yields rose, marginally, in the period
under review, in likely response to the rising
inflation which steadily rose from 4.2% in October
to 5.7% in December, 2016
DEBT MARKET UPDATE
Banking Stocks Gain Marginally as DFCU Takes
Over Crane
The market heaved a sigh of relief as DFCU Bank
took over Crane Bank, following placement of the
latter under statutory management in October
2016, with banking stocks gaining marginally
on the day of the takeover. The banking stocks
index closed January 2017 at 905.0 units, 2.3%
higher than the low registered on November
1st, 2016, a week after placement of Crane Bank
under statutory management. Banking stocks are,
however, bound to remain subdued in the coming
months as investors hold a cautious stance over
the state of the sector.

Company
Opposition Seeking to Present a United Front in
August Election
Rwanda’s political environment is pervaded with
the August 2017 election debate. The eleven
opposition parties that previously backed the
2015 constitutional amendment on term limits
that allows the incumbent to seek re-election for
a seven year term in 2017 and two five-year terms
thereafter, have backtracked on their decision and
are now in favor of an opposition coalition to field
a single presidential candidate to face-off with
President Kagame. The Democratic Green Party of
Rwanda, the sole opposition party that opposed
the constitutional amendment, had previously
indicated its decision not to boycott elections but
instead field a candidate to challenge President
Paul Kagame. The decision to coalesce under one
umbrella by the opposition elicits mild political
excitement in view of President Kagame’s high
popularity levels ─ in light of the resounding
endorsement during the 2015 referendum as well
as votes garnered in previous election.
Banking on Dovish Stance
The business environment is banking on dovish
signals sent by Bank of Rwanda to stimulate
the economy coming against the backdrop of
indications from the Finance Ministry that the
government would need additional support from
the International Monetary Fund to help balance
the external position.
Rate Slash Signals Change of Stance
Bank of Rwanda’s key repo rate now stands at
6.25%, following a twenty five basis points slash
in the December 2016 monetary policy meeting.
Coming as the first rate slash since 2014, the
move signaled a change of stance by the market
regulator that could potentially help stir up the
business climate at a time when commercial bank
lending rates have been creeping up to stand at
17.0% as at December 2016.
POLITICAL OUTLOOK
RWANDA
Declining Deficit as Revenues Pick-Up
The economy started the year on a positive
note with a decline in the country’s fiscal
and trade deficits supported by improving
revenue mobilization and declining government
expenditure. The fiscal deficit narrowed to 3.5%
of GDP in 2015/16 on the back of improved tax
collections and lower government spending. Total
imports decreased by 8.7% to USD 439.4 Million,
while exports decreased marginally by 1.5% to
USD 112.5 Million, in the period under review
ECONOMIC OUTLOOK
Yields posted a general declining trend across all
tenors in the period under review, despite inflation
uptick on the back of relatively tight liquidity.
Investors still exhibit high appetite for government
instruments as the equities market continues to
be subdued. The rising inflation may nudge yields
upwards in the near-term.
DEBT MARKET UPDATE
Crystal Ventures Props Market
The market remains subdued with Crystal Ventures
standing out as the out-performer in January 2016,
maintaining the high registered in December 2016
following the rally witnessed between Q3 2016
and Q4 2016. With Bank of Kigali and Bralirwa
on the downtrend, however, the market is set to
remain subdued in the coming months.

Company
Calm Environment ahead of General Election
The political climate was quiet in January 2017
even as the country gears for the August general
election that could be potentially consequential in
the event that incumbent President Jose Eduardo
dos Santos and the ruling MPLA party are voted
out. At the moment, the political landscape is
dominated by policy response to the economic
downturn with attentional focused on the impact
that the deal by OPEC member states could have in
helping address the strain faced over the last one
year. One key advantage for Angola is that over
the years, its production of oil, unlike Gabon’s,
has been on a general uptick and the country is
poised to draw greater benefit from a resurgence
in prices.
POLITICAL OUTLOOK
ANGOLA
Banks Appeal for Bailout Package
The banking sector comes under sharp focus
following the appeal for a bailout package from
the government in view of the knock-on effects of
subdued oil prices on the economy. Available data
shows that banks’ excess reserves at the Central
Bank declined by 75.3% between January 2016
and November 2016 to USD 380.7 Million, sending
a signal with regard to the state of the sector as
the economy faces headwinds.
ECONOMIC OUTLOOK
With crude oil maintaining the lion’s share of
Angola’s export revenue and uncertainty of the
recovery of global oil prices on the back of the
OPEC production slash deal, we will keep a keen
eye on the banking sector and how it evolves in
the coming months. A key challenge for the sector,
much like Nigeria, will be scarcity of the greenback
in a market that has, for a long time, used the
currency and only recently experienced strong de-
dollarization efforts by the government.
Source: Central Bank of Angola, StratLink Africa
Economy by Sector Composition
Oil Merchant Services ConstrucƟon
Agriculture Manufacturing Others
46.9% 22.1% 8.6%
7.0% 6.8% 8.6%
Angola Exports
Source: Central Bank of Angola, StratLink Africa
Crude Oil Diamonds Reﬁned Oil
94.6% 3.2% 1.2%
Gas Others
0.3% 0.7%

Company
StratLink in the News
In the period under review, StratLink’s research department gave insight on Ghana’s macroeconomic climate, in view of
the new administration’s blue print for recovery, highlighting both strengths from a historical standpoint and potential
weaknesses in light of an evolved environment.
Please click the button to view the full article:
Ghana won’t be able to fix its economy if it uses last decade’s rule book

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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
George Waithaka – Senior Corporate Finance Analyst
george.waithaka@StratLinkglobal.com
Benson Njeri – Analyst
benson.njeri@StratLinkglobal.com
Julians Amboko – Senior Research Analyst
julians.amboko@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

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

Africa Market Update - February 2017

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