Africa Market Update - March 2018

2MARCH 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
A Financial Advisory
Company
MARCH 2018 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA
ETHIOPIA 5
11
15
23
RWANDA 27
KENYA
UGANDA
TANZANIA 19
Table of Contents
ETHIOPIA
• Shock resignation rattles political landscape
• Monetary pressure recedes on devaluation of the Birr and policy tightening
NIGERIA
• Pressure to raise tax revenue mounts as country’s debt servicing expenses rise
• Utilization capacity hints at a rebound in the manufacturing sector
• Possible rescheduling of 2019 election portends new pressure on the political
risk profile
KENYA
• Attorney General reaffirms commitment to ICC
• Full potential of AGOA yet to be exploited
• Oversubscribed Eurobond raised USD 2 billion
At a Glance
TANZANIA
• Tanzania and Kenya seek to resolve trade disputes
• The Bank of Tanzania maintains a strong policy framework
UGANDA
• Economic Partnership Agreement between EAC and EU remains elusive
• Coffee exports gain traction
• Inflation at 3 year low
RWANDA
• Rwanda relentless stance on importation of second-hand clothing
• Escalating, but stable debt levels
• Rwanda and Uganda looking to end strained relations
http://mutuamatheka.co.ke/wp-content/uploads/2012/04/001_NAIROBI_WEBREADY_MUTUA-MATHEKA-10.jpg
Nairobi, Kenya
© Mutua Matheka
Cover image:

Capital Invested by Country (USD)
AFRICA DEALS LANDSCAPE
January - February 2018
Source: PitchBook, StratLink Africa
Deal Activity by Industry (Proportions) Deal Activity by Types (Proportions)
Snapshot of Deals
• MTN Nigeria Communications (Nigeria): The company filed to go public on the Nigeria Stock Exchange on February 8th, 2018 with an expected
offering amount of USD 500 million
• Hess Corporation (Ghana): The company reached a definitive agreement to sell its Ghana business operations to Aker Energy for USD 100 million
on February 19th, 2018
• Toliara Sands (Madagascar): The entity was acquired by Base Resources for USD 75.0 million on January 23rd, 2018
* Note, our February 2018 issue erroneously reported deals worth USD 8.0 billion having taken place in South Africa. We wish to indicate that as at
February 27th, 2018, the value of deals that had taken place in the country, year-to-date, stood at USD 792.1 million. We regret the inconvenience.
792.1 Million
532.2 Million
126.0 Million
75.0 Million
32.3 Million
10.0 Million
5.8 Million
2.0 Million
1.1 Million
South Africa
Nigeria
Ghana
Madagascar
Namibia
Congo
Egypt
Ivory Coast
Uganda
28.2%
25.0%
12.8%
5.6%
3.1%
3.8%
2.7%
1.6%
1.5%
15.7%
Communication & Networking
Apparel & Accessories
Commercial products
Exploration, Production & Refining
Metals, Minerals & Mining
Energy equipment
Software
Retail
Energy services
Others
24.2%
24.2%
21.7%
21.7%
21.4%
21.4%
7.8%
7.8%
7.7%
7.7%
4.8%
4.8%
2.7%
2.7%
9.7%
9.7%
Initial Public Offer Acquisition financing Merger & Acquisition
Asset acquisition Asset divestiture Secondary transaction, private
Later stage VC Others

East Africa’s (Kenya, Tanzania, Uganda, Rwanda and Ethiopia) exports to Pakistan have maintained an uptick over the last
six years. This growth has been propelled by Ethiopia which posted 17.6% CAGR in the period with Tanzania and Kenya
posting 11.4% and 11.0%, respectively. In stark contrast, Uganda’s exports to Pakistan contracted over the same period
due to declining appetite for Uganda’s coffee. Growth in Pakistan’s exports to the region has been concentrated in Kenya
and Tanzania.
2010 2011 2012 2013 2014 2015 2016
264
285 292
317 327
421
499
2010 2011 2012 2013 2014 2015 2016
178
338
314
399
459
399
382
Pakistan Exports to East Africa (USD Millions)
SNAPSHOT OF TRADE FLOW: EAST AFRICA AND PAKISTAN
Trade Flow in 2016
East Africa Exports to Pakistan (USD Millions)
Kenya
Tanzania
Uganda
Rwanda
Ethiopia
66.4%
8.1%
3.9%
2.2%
2.1%
1.9%
15.4%
Cereals
Felt and nonwovens
CoƩon
Salt; sulphur; earths and stone
PlasƟcs and arƟcles thereof
PharmaceuƟcal products
Others
81.5%
2.0%
Coﬀee, tea, maté and spices
Edible vegetables and tubers
Others
16.5%
Pakistan
USD 498.8 Million
USD 382.3 Million
(Value of Pakistan’s exports
to East Africa in 2016)
(Value of East Africa’s exports
to Pakistan in 2016)
Source: International Trade Center

Fruit & vegetable
juices
Mineral &
spring water
Cabornated
drinks
Fruit & vegetable
juices
Mineral &
spring water
Cabornated
drinks
Fruit & vegetable
juices
Mineral &
spring water
Cabornated
drinks
9.9%
13.6%
6.8%
6.2%
10.5%
8.7%
Uganda Kenya Ethiopia
9.5%
5.7%
11.7%
• The dominance of carbonated drinks in Uganda’s soft drinks market has increased over the last decade. There is an
indication, however, of decelerating growth in its share of the market as mineral and spring water’s share increases
• The country experienced a general slowdown in the average household disposable income between 2015 ($ 2,008)
and 2017 ($ 1,857) and this is likely to decelerate the growth momentum of soft drink sales
• Supermarkets and food service outlets are the main channels through which purchase and consumption of soft drinks
takes place
Key Observations
CAGR of Soft Drinks Sales (2005 - 2016)
Soft Drink Sales by SegmentUganda Soft Drink Sales (USD)
: UGANDA SOFT DRINKS
Source: Business Monitor International
31.8%
27.5%
12.6%
8.2%
55.6%
64.3%
22.9% 9.5% 67.6%
2005
2010
2016
Fruit & vegetable juices Mineral & spring water Cabornated drinks
2005 2010 2016
0.0
20,000,000.0
40,000,000.0
60,000,000.0
80,000,000.0
100,000,000.0
120,000,000.0
SECTOR LE

SHOCK RESIGNATION RATTLES THE POLITICAL LANDSCAPE
ETHIOPIA MARKET UPDATE

Country experiences
small-scale protests
in the Oromia region
widely aƩributed to
plans by the state to
expand Addis Ababa
April – June 2014
EPRDF secures landslide
victory in general elecƟon
May 2015
Large-scale Oromo
led protests
November 2015
Government
abandons plans to
widen the boundaries
of Addis Ababa due to
protracted protests
January 2016
Government declares
state of emergency
to last six months
October 2016
Government extends state
of emergency by 4 months
March 2017
Government liŌs state
of emergency
August 2017
Haile Mariam Desalegn resigns
as Prime Minister
February 2018

Shock Resignation Rattles Political Landscape
Former Prime Minister Haile Mariam Desalegn’s
shock resignation on February 15th, 2018 has
rattled the political landscape with pervasive
uncertainty as to what this means for the country.
Since Ethiopia’s general election in May 2015,
StratLink has maintained a position of guarded
optimism over the relative calm that has prevailed
in spite of growing political undercurrents. Whilst
still shoulderingthe baggage of a pre-election cycle
characterizedbythearrestofdissentingvoices,the
country was rocked by a series of protests, largely
in the Oromo and Amhara regions, in 2016 and
2017 signaling simmering disquiet within a section
of the population. As a result, the government
declared a state of emergency in October 2016
which was lifted in August 2017.
Ethiopia’s political landscape has come under
immense pressure in the recent past due to a
number of factors the first of which has been the
Anti-terrorism Law. Since adoption in 2009, the
law is widely alleged to have been used as the key
tool in silencing dissenting voices especially with
the arrest of journalists and bloggers. Another key
challenge facing the country has been relatively
highpovertylevelsinspiteofinspiteofaprolonged
period of robust economic growth.
POLITICAL OUTLOOK
2015 General Election Outcome
Source: National Election Board, StratLink Africa
Outlook: Is Ethiopia at a turning point?
The present development could yield two likely
scenariosforthepoliticalriskprofilegoingforward:
• Departure from the past - A journalist and a
political prisoner were released from prison
mid-February 2018 in what could be a signal
of a departure from the government’s highly
criticized approach to dissent. The ruling party
could seize the opportunity presented by
the Prime Minister’s resignation and step up
overtures of reform. A low hanging fruit in this
regard would be initiating review of the Anti-
Terrorism Act (2009) which has been a source
of disenfranchisement. If followed, this route
could present short-term adjustment pressures
whilst promising a more stable environment in
the long-term
• Retention of the clenched fist – With the
government having declared a state of
emergency following the resignation, it could
well be that the country is set for continuity
of an environment in which the democratic
space is constrained. This route could see
both protraction of protests and a build-up of
international community pressure for reform
Poverty Head Count Ratio by Region
Source: World Bank, StratLink Africa
GDP: USD 61.5 Bln | Population: 101.9 Mln
ETHIOPIA
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Afar
Somali
Gambela
Amhara
SNNP
Benishangul-Gumuz
Oromia
DireDawa
AddisAbaba
Harari
EPRDF
Somali People's DemocraƟc Party
Benishangul Gumuz People's DemocraƟc Party
Afar NaƟonal DemocraƟc Party
Others

Dangote’s Planned Investment Ignites Interest in
Construction Sector
Dangote Cement’s plan to double investment in
Ethiopia has brought the country’s construction
sector under focus. The housing subs-sector, in
particular is riding a growth wave investors would
be keen to tap into. Two factors inform this view:
• Favorable demographics: Ethiopia continues
to witness a rise in the number of households.
This growth in the number of households has
been accompanied by a rise in the country’s
urbanization rate thereby creating demand for
moreformalhousingunits(i.e.unitsconstructed
in adherence to regulatory standards) and the
supporting infrastructure such as sewerage
systems
• Government programs: The government has
adopted a program that seeks to construct an
additional one million five hundred thousand
housing units between 2015 and 2025 to
address growing demand. In this plan, Addis
Ababaaccountsforthelion’sshareofurbanarea
construction at 53.3% whilst the Oromia region
accounts for that of rural area construction at
38.4%. These two regions should therefore be
of key interest to investors targeting the cement
sector over the next decade
BUSINESS ENVIRONMENT
Number of Households
Urbanization Rate
Planned Housing Units (2015 - 2025)
Source: Business Monitor International, StratLink Africa
Source: Ministry of Industry, StratLink Africa
3.1%
CAGR of number of households in the country
between 2000 and 2015
ETHIOPIA
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
22,000,000
24,000,000
2000 2005 2010 2015
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
1990
1993
1996
1999
2002
2005
2008
2011
2014
Rural Urban

Monetary Pressure Recedes
The country’s economic outlook remains broadly
favorable in spite of emerging challenges in the
political landscape. One major upshot is that on
the monetary front, inflation is cooling off having
registered two consecutive months of a decline,
between December 2017 and January 2018, after
nine months of an uninterrupted uptick. This is
a likely result of the benchmark rate hike which
is reported to have been undertaken alongside
the devaluation of the Birr in October 2017. We,
however, expect lethargic decline between now
and Q2 2018 owing to the fact that food inflation,
having risen by 18.0% in January 2018 up from
17.4% in December 2017, continues to inflict
pressure on the Consumer Price Index.
Available data shows that despite a general
increase in the amount of precipitation during
the June – September season, the amount of rain
received has been relatively subdued falling below
the 447.1 mm average for the period 2005 – 2015.
As such, inflation mitigation measures are bound
to face resistance from food supplysideconstraints
brought about by adverse weather conditions.
Source: International Monetary Fund, StratLink Africa
Headline Inflation
ECONOMIC OUTLOOK
Still on the monetary front, the Birr has been
relatively stable since the 15.5% devaluation in
mid-October 2017. The local unit is also likely to
be benefiting from the October 2017 benchmark
rate hike.
Whereas the devaluation was aimed at propping
exports, the continued plunge in the price of
coffee (41.0% of total exports) in the global
markets threatens to derail efforts to boost inflows
into the country. Since the devaluation, the price
of coffee has fallen by 3.7% to US cents 115.6/lb
necessitating a ramp up of production to help in
boosting export revenue.
Amount of Rainfall, Mm (June - September Season)
Birr to USD Day-on-Day Change
Source: World Bank, StratLink Africa
Source: Bloomberg, StratLink Africa
ETHIOPIA
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
380.0
400.0
420.0
440.0
460.0
480.0
500.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
VolaƟlity was
relaƟvely high before
the devaluaƟon

International Price of Coffee (US Cents/lb)
Source: International Coffee Organization, StratLink Africa
Fiscal Position Still Favorable
Going forward, the country’s fiscal position is
bound to come under intense focus especially
if the Birr’s devaluation fails to rake in as much
revenue as was desired. With the 2017/18 budget,
USD 13.9 billion, posting a 17.0% growth year-on-
year, the fiscal deficit to GDP ratio is likely to swell
further edging towards the 4.5% mark.
Fiscal Balance as a Percentage of GDP
Source: International Monetary Fund, StratLink Africa
ETHIOPIA
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
2009
2010
2011
2012
2013
2014
2015
2016
2017
110.0
115.0
120.0
125.0
130.0
135.0
140.0
145.0
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18

NIGERIA MARKET UPDATE
PRESSURE TO RAISE TAX REVENUE MOBILIZATION RISES

Senate Approves Reordering of 2019 Election
Schedule
The political risk profile remains stable and
dominated by discussion over President Buhari’s
chancesinthe2019generalelection.Buhari’sparty
has come under sharp criticism following the rise
in unemployment against an ambitious election
pledge of addressing pervasive joblessness.
In the coming month, we are likely to witness a
build-up of mild pressure following the Senate’s
approval of the reordered schedule of the
2019 general election in view of the National
Assembly Conference Committee on Electoral Act
(Amendment) Bill. Whereas the initial timetable,
released by the Electoral Commission in January
2018, provided that election for the Presidency
and National Assembly would take place on the
same day, the revised schedule proposes to
have the Presidential poll as the last in the ballot
exercise. With the 1999 Constitution, 76(1),
providing that dates for election to each house
of the National Assembly should be set by the
Independent National Electoral Commission, the
move by the legislature is bound to elicit concerns
of interference with an independent institution
ahead of the much anticipated poll. President
Buhari’s approach to this bill will be closely
watched given that in its 2015 manifesto his party
pledged to strengthen the electoral commission to
eliminate electoral malpractice.
POLITICAL OUTLOOK
NIGERIA
Unemployment Rate
Number of Unemployed (‘000)
Source: Nigeria Bureau of Statistics, StratLink Africa
Manufacturing Sector Rebounds after 2016/17
Trough
Available data suggests the manufacturing sector
could be on the rebound, promising respite for
the economy. The sector’s capacity utilization
rate has been on the uptick for three consecutive
quarters, suggesting that sustained recovery
following the 2016/17 trough could be underway.
At 54.5%, capacity utilization has risen to pre-crisis
levels and bodes well for the recovery of a sector
that has been undermined by the depressed
macroeconomic environment and the shortage of
dollars which posed a challenge in importation of
inputs.
Investors continue to bank on the general
improvement of the macro-economy with the
buoyant price of oil and the country’s ramped up
production to stir sectors such as manufacturing.
BUSINESS NEWS ENVIRONMENT
Source: Central Bank of Nigeria, StratLink Africa
Manufacturing Sector Utilization Capacity
54.5%
Manufacturing sector utilization
capacity as at Q4 2017
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
16,000.0
18,000.0
2015-Q1
2015-Q2
2015-Q3
2015-Q4
2016-Q1
2016-Q2
2016-Q3
2016-Q4
2017-Q1
2017-Q2
2017-Q3
45.0%
46.0%
47.0%
48.0%
49.0%
50.0%
51.0%
52.0%
53.0%
54.0%
55.0%
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017

External Debt Service Payments
Eurobond Payments (USD)
Total Debt Service Payments as Percentage of Tax
Revenue
CAGR 2012 - 2017
Source: Debt Management Office Nigeria, StratLink Africa
NIGERIA
Country Floats USD 2.5 Billion Eurobond
Nigeria tapped into the international market
floatingaUSD2.5billionEurobond(USD1.25billion
twelve year tenor and USD 1.25 billion twenty year
tenor). Whereas the country continues to enjoy
a relatively low debt-to-GDP ratio, we note that
total debt service payments as a percentage of tax
revenue has risen over the last five years to stand
at 40.0% in 2016.
This growth has been driven by the decline in tax
revenue mobilization over the last five years on
the back of increased appetite for external credit
through Eurobond issuance.
Eurobond service expenses rose to USD 104.6
million as at the end of 2017, accounting for 25.0%
of the country’s external debt service payments.
At the same time, commercial debt now accounts
for 21.5% of the country’s stock of debt having
risen from 17.2% as at the end of 2013.
ECONOMIC OUTLOOK
25.4%
CAGR for Eurobond service payments
between 2012 and 2017
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
2012 2013 2014 2015 2016
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
External debt
servicing
Total debt
servicing
Tax revenue
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
2012 2013 2014 2015 2016
Eurobond Payments Other Payments
0.0
20.0
40.0
60.0
80.0
100.0
120.0
2012 2013 2014 2015 2016 2017
Millions

Nigeria Stock Exchange 30 Index
Day-on-Day Change - 30 Index
Sovereign Yield Curve
Headline Inflation
Market Dips
The market lost hold of its bullish trajectory in the
period under review with the 30 Index falling after
touching a high of 2,062.6 in mid-January 2018.
This dip was triggered by a notable decline in
banking stocks whose index fell by 6.0%, month-
on-month¹, compared to 2.9% for oil and 4.7%
for consumer goods. Select brokers indicate
that this trend was brought about by investors’
repositioning ahead of the earning’s season.
General Decline in Yields
Yields posted a decline, notably on the short-
term end of the market, as inflation fell to 15.1%
in January 2018, its lowest level since April 2016.
Whilst the Central Bank of Nigeria held rates in
its January 2018, it would appear investors seem
confident that inflation will be nudging further
down going forward.
Despite the optimistic inflation expectations, we
are of the view that at 610.0 bps above the target
ceiling is still high and likely to keep the Central
Bank cautious around monetary policy.
EQUITY MARKET UPDATEDEBT MARKET UPDATE
NIGERIA
1
As at February 20th, 2018
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
Jan-18
Jan-18
Jan-18
Jan-18
Jan-18
Feb-18
Feb-18
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
3M 6M 1Y 3Y 5Y 7Y 10Y 15Y 20Y
Feb-19-2018 Jan-01-2018
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Millions
Volume (RHS) 30 Index

HIGH APPETITE FOR EUROBOND AMIDST CONCERN OVER FISCAL CONSOLIDATION
KENYA MARKET UPDATE

POLITICAL OUTLOOK
KENYA
Missed Opportunities through AGOA
The East African Community (EAC) member states
have been contemplating the implementation of
a ban on the importation of second hand clothing
in a bid to boost the local textile industry. This,
however, according to the USA goes against the
principles of the African Growth and Opportunity
Act (AGOA) which waves duty on goods sold to
America by eligible sub-Saharan African countries,
including Kenya.
Kenya has been one of the main African
beneficiaries of the AGOA under which the nation’s
Export Processing Zones (EPZ) have been able
to create employment and generate increasing
export revenues over time.
With more to lose from the withdrawal of AGOA
privileges than most African peers, Kenya is very
unlikely to implement any policies that might
threaten preferential access to the American
market. That said, Kenya exports less than 1% of
the goods provided for through AGOA. With the
latest AGOA extension pushing the agreement to
2025, it would be wasted opportunity not to export
more goods under the framework, the success of
which has been curbed by lack of compliance to
required standards and insufficient awareness of
AGOA.
EPZ Apparel Performance Indicators under AGOA
Source: Kenya National Bureau of Statistics
0.0
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
30,000.0
35,000.0
40,000.0
45,000.0
2012 2013 2014 2015 2016p
Employment Exports (KES Mn)
Kenya’s Rule of Law Ranking
Kenya Reaffirms Commitment to the Rome
Statute
Reaffirmation of the country’s commitment to the
International Criminal Court (ICC) is significant for
two reasons:
• On the continental front, the development
slow-pedals a possible mass exit from being
signatories to the Rome Statute which received
a shot in the arm following Burundi’s exit in
October 2017. Kenya has been a pivotal cog in
what has been widely perceived as a rallying call
for mass withdrawal by the African Union from
the Rome Statute following ICC’s investigations
into the 2007/08 post-election violence.
• On the domestic front, it props confidence
in the government’s commitment to justice
and the rule of law especially coming after a
protracted electoral cycle whose undercurrents
continue to dominate the political landscape.
More importantly, the reaffirmation comes
at a time when the independence of Kenya’s
judiciary has been placed under the spotlight
with a watershed ruling having been passed by
the Supreme Court following the August 8th,
2017 presidential election
Is there a Credible Alternative to the ICC?
The irregularities in the elections last year
and general perceptions around corruption in
Kenya are motivators to remain in the ICC, lest a
withdrawal be interpreted as a means to protect
powerful individuals against justice. The AU is
currently trying to push for an African version of
the ICC in line with the Malabo protocol. What
is certain is that an adjudicator of last resort is
necessary to prevent impunity and it would be
beneficial for Kenya to support the same.
Sub-Saharan Africa Rank
Rule of Law Index, 2017-’18 – World Justice Project¹
Global Rank
12/18 95/113
1
NB: a larger numerical ranking implies a more deteriorated rule of law

KENYA
Foreign Reserves and Import Cover
Source: BMI, StratLink Africa
The widening fiscal deficit has driven the country’s
stock of debt up but, crucially and as highlighted
StratLink’s previous issue of the Market Update,
the sources of government debt have been shifting
away from more affordable multilateral sources
and toward more costly commercial bank debt.
The additional pressures on the government’s
liquidity management associated with the
changing structure of national debt also played a
part in Moody’s downgrade.
This comes at a time when it has come to light that
Kenya’s access to the Precautionary Arrangement
with the IMF amounting to USD 1.5 billion has
been conditional since June 2017. While this may
limit the Government’s ability to deal with severe
shocks to the shilling, it is important to note that
foreign reserves as months of import cover have
remained safely above 4 since 2013 and stood at
4.8 months or USD 7.2 billion as of 22 February
2018, offering a significant buffer to currency
volatility.
Structural Reforms Needed
Despite formidable headwinds, Kenya’s second
Eurobond issue was highly sought after however,
without committing to structural fiscal reforms the
country’s credit rating and support from IMF will
be at risk.
ECONOMIC OUTLOOK
Eurobond Raises USD 2 Billion
Kenya managed to successfully tap into
international markets to raise USD 2 billion in its
second Eurobond issue. Half of the amount raised
went towards a ten year note with a coupon of
7.3% while the other half went towards a thirty
year note with an 8.3% coupon. The issue was
heavily oversubscribed with a total of USD 14
billion worth of bids.
Moody’s and IMF Note Risks to Outlook
Investor appetite for Kenya’s Eurobond issue was
strong despite the country having to weather a
negative shift in external perceptions. Moody’s
downgraded the issuer rating for the Government
of Kenya from B1 to B2 after having put the country
under assessment for a downgrade in October
2017². The reasoning behind the altered issuer
rating is a continued deteriorating trend of fiscal
metrics. Since 2014, Kenya’s expenditure has, for
the most part, been expanding as a proportion
of GDP while revenues have been shrinking as
a percentage of GDP. This has seen the budget
deficit expand by 109.1% between 2014 and 2017
to USD 6.9 billion.
Source: BMI, StratLink Africa
Government Revenues and Expenditures
15.0%
17.0%
19.0%
21.0%
23.0%
25.0%
27.0%
29.0%
-8
-7
-6
-5
-4
-3
-2
-1
0
2010
2011
2012
2013
2014
2015
2016
2017e
USDBn
Total revenue, % of GDP
Total expenditure, % of GDP
Budget balance (LHS)
2
Moody’s Investor Service
3
Expected figure for 2017, BMI
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2010
2011
2012
2013
2014
2015
2016
2017e
Foreign reserves, USD bn (LHS)
Import cover, months (LHS)
Foreign reserves, USD bn, % y-o-y

Yields Inch Downward
Rates on the yield curve fell marginally on bonds
with maturities between one and ten years while
those on shorter term papers reduced to a greater
extent, although not significantly.
Short term papers were oversubscribed in the
month of February 2018 with the government
showing a high appetite and accepting an average
of 90.5% of bids across the four auctions that
occurred over the same month.
Bloomberg BVAL Yields Index
91, 182 and 364 Day T-Bill Performance
Source: CBK, StratLink Africa
DEBT MARKET UPDATE
KENYA
Q4-‘17 Shows Improved Performance
The NSE 20 Share price Index maintained stability
over the month of February 2018 with an average
index value of 3,730.0 relatively to an average of
3,717.3 in January 2018.
Investor participation in Kenyan securities in the
last quarter of 2017 was markedly improved
relatively to the same quarter of 2016 with equity
turnover increasing by 41.8% over the same
timeframe. Market capitalization also rose to KES
2,521.8 billion in the last quarter of 2017, up 30.5%
relatively to the same quarter of the previous year
despite the turmoil brought on by the election
period.
EQUITY MARKET UPDATE
Nairobi Securities Exchange 20 Share Index
NSE Performance, KES Billion
Source: Bloomberg, StratLink
Source: CBK, StratLink Africa
10.5%
10.9%
11.3%
11.7%
12.1%
12.5%
12.9%
13.3%
13.7%
3M 1Y 3Y 5Y 8Y 10Y 20Y 30Y
27-Feb-18 31-Jan-18
60.0%
80.0%
100.0%
120.0%
140.0%
01-Feb-18
08-Feb-18
15-Feb-18
22-Feb-18
SubscripƟon rate Amount Accepted / Bids Received
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
3,500.0
3,600.0
3,700.0
3,800.0
3,900.0
4,000.0
4,100.0
4,200.0
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Millions
Volume NSE 20 Index (LHS)
1500
1700
1900
2100
2300
2500
2700
0
10
20
30
40
Q4 2016 Q4 2017
Equity Turnover (LHS) Market CapitalizaƟon (RHS)

TANZANIA MARKET UPDATE
TANZANIA MAINTAINS STRONG MONETARY POLICY FRAMEWORK

Tanzania Ranked Best Democracy in EAC
Tanzania emerged top in democracy ranking,
leading her East Africa Community (EAC) peers
and 13th in sub-Saharan Africa, attributed to its
strict adherence to the rule of law, recording an
overall score of 5.47 and ranking position 91 out
of 165, globally. Kenya and Uganda ranked second
and third in East Africa, respectively while in sub-
Saharan Africa, they ranked position 15 and 17¹
according to the Democracy Index 2017. Even as
governmentcelebratestheranking,therehasbeen
increasing outcry from the opposition and the
human rights groups of shrinking democratic space
in Tanzania in view of the increasing clampdown
on opposition critics since President Magufuli took
office in 2015. The country has also witnessed
increasing political violence, particularly, towards
the opposition, in recent times, attributed to the
ruling CCM party.
Human Rights Agencies Bemoan Deteriorating
Human rights in Tanzania
Even as Tanzania was feted, civil society groups
have raised their voices against increasing human
and democratic rights violations in Tanzania under
President Magufuli’s government, citing among
other incidents, the attempted assassination of
opposition leader in September 2017 remains.
These actions have brought to fore the electoral
reforms debate, one of the key issues that was
advocated for by the proponents of constitutional
referendum which, hangs in limbo since April 2016
and which, may have to be revisited in view of the
currentpoliticalenvironment.Despitetheprogress
made by President Magufuli’s administration
to improve governance and service delivery in
Tanzania, national cohesion is still lacking as
accusations increase against the President’s
alleged highly authoritarian rule. We reiterate the
fact that despite the overriding positive effects of
President Magufuli’s leadership, an increasingly
authoritarian style of leadership threatens to
derail the country’s maturity as a stable multi-
party democracy over the longer-term.
POLITICAL OUTLOOK
TANZANIA
1
Economist Intelligence Unit: Democracy Index 2017
Tanzania and Kenya seek to Resolve Trade
Dispute
Intra trade within the East Africa Community (EAC)
is bound to rise following the decision by Tanzania
and its neighbor Kenya to resolve their perennial
trade dispute that has escalated in recent times,
especially considering the large trade volumes
between the two nations which, constitutes over
45.0% of the entire trade within the EAC. The
resolve bodes well, not only for the two nations
but also for the unity of the whole bloc which,
is still struggling with regional integration. Some
of the key issues that have hampered bilateral
relations that we believe should be resolved to
promote bilateral relations include; multiple levies
and delays at border checkpoints.
EAC Partners AGOA deal in Limbo
We seek to reemphasize the need for improved
trade relations within the EAC especially in
light of uncertainty around the African Growth
and Opportunity Act (AGOA) trade agreement
between the member states and the United States
of America (USA), where the latter is threatening
to review its trade ties with the former on
account that the planned ban of the importation
of used clothes by 2019 violates conditions set
to expand trade and investment in Africa under
AGOA. In March 2016, EAC states resolved to
impose a ban on importation of used clothes in
the region by 2019 as part of the bloc’s Vision
2050 and the Industrialization Policy to enhance
a manufacturing sector that currently contributes
circa 8.7% to the regional GDP to 25.0% by 2032.
Uganda, Rwanda and Tanzania have since raised
taxes for used clothes and offered incentives to
manufacturers to invest in their local textile sectors
starting in financial year 2017/18, a move that may
complicate the region’s trade arrangements with
leading partners including the USA which is also
a large exporter of used clothes to the region.
We opine that adoption of a middle ground that
reflects the status quo bodes well for all parties
involved.

Banking Sector weathers Tough Environment to
remain Stable
Commercial banks in Tanzania experienced
challengesinthelasttwoyears,traversingthrougha
bumpy road that stemmed from squeezed liquidity
as they grappled with illiquid clients resulting in
reduced lending to the private sector as well as
accumulation of high levels of non-performing
loans (NPLs). The sector remains stable, the harsh
operating environment notwithstanding. The
NPLs-to-total-gross loans ratio reached an average
of 11.2% in the year ending December 2017
compared to 9.5% in the year ending December
2016, up from an average of 6.4% recorded in
the same period in 2015, against the generally
accepted threshold of 5.0%. Nonetheless, there
seems to be a light on the horizon for the banking
sector given the improvement in the country’s
banking sector financial soundness despite closure
of five community banks over lack of adequate
capital early in the year. Available data from the
Central Bank indicates that most of the sector’s
Financial Soundness Indicators (FSIs), remained in
the green. The capital adequacy ratio rose by 1.2%,
year-on-year, to close 2017 at 18.9%, above the
industry benchmark of 10.0%, pointing towards
the sector stability. Nonetheless, the pressure on
the banking sector’s ability to lend should ease off
once the expansionary monetary policy begins to
take effect.
On the flip side, the accommodative monetary
policy should serve to stimulate private sector
lending. Available data indicates that overall
lending rates were still high − at an average of
18.4% in December 2017 − compared with 15.7%
in the corresponding month in 2016, respectively.
While, the one-year lending rate eased to 18.2%
from 17.9% in the preceding month and 12.8% in
December 2016.
Tanzania Maintains Strong Policy Framework
We expect the Bank of Tanzania to enjoy a more
sanguine inflationary outlook over the coming
quarters compared to 2017 as it maintains
an accommodative monetary policy stance to
stimulate further recovery of growth of private
sector credit and general support of economic
activity. The Central bank has recently hinted
at plans to adopt interest rate-based monetary
policy framework, where the overnight interbank
cash market interest rate will be an operational
target instead of average reserve money; Tanzania
has also been mulling introduction of rate caps
(as reported in the February Market Update).
The new policy framework is set to improve the
transmission mechanism of interest rates, thus,
making it imperative to have stable interest rates.
However, though we note that transmission of
policy is likely to become more robust, this is
bound to have a bearing on liquidity and money
supply.
Average Commercial Bank Lending Rate
Money Supply Trends
ECONOMIC OUTLOOK
Source: Bank of Tanzania, StratLink Africa
TANZANIA
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
10,000.0
12,000.0
14,000.0
16,000.0
18,000.0
20,000.0
22,000.0
24,000.0
26,000.0
Dec-11
Oct-12
Aug-13
Jun-14
Apr-15
Feb-16
Dec-16
Oct-17
Growth
TZSBillions
Money Supply Growth
15.0%
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
19.0%
Oct-16
Jan-17
Apr-17
Aug-17
Nov-17
15.7%
17.4% 17.4%
18.4% 18.4%

Yields and Interbank Rates Inch further down
Increasing liquidity in the money market
has contributed to the decline in yields to
unprecedented lows. The precipitous decline
began in mid-2017 and is bound to go on in view
of the loose monetary policy, subdued inflation
as well as declining overnight rate, supporting
lower yields. Investor appetite for government
debt instruments has continued to remain strong,
however, despite the low yields; the Bank of
Tanzania accepted bills worth USD 75.1 Million
worth of bids against USD 125.9 Million worth
of tendered bids. Consistent with liquidity easing
monetary policy stance and the sustained high
demand for treasury bills, the 91 Day, the 182 Day
and the 364 Day papers ‘yields declined by 40.0
bps, 70.0bps and 140.0bps to 3.4%, 3.7% and
6.3%, respectively, in the period under review.
Bourse Stays in the Green
The All Share Index closed the month in the
green, albeit at a slower run with 2, 387.1 points,
representing a marginal 0.2% rise, month-on-
month. The performance at the bourse was
reflected in almost all shares save for Acacia
mining, DSE and NMG shares. The performance
of Acacia mining has been driven by the long
run discount with government which, saw the
company halt dividend issuance after posting USD
700.0 Million in annual loss for the twelve months
ending December 2017. The share plunged by
12.4%, month-on-month, to USD 2.3 in the period
under review.
Overnight interest rate decreased to an average of
1.9% in January 2018 from 2.7% in the previous
month and much lower than 13.5% in December
2016.
Sector Indices Post Mixed Performance
Sector indices, on the other hand recorded mixed
performance in the period under review. The
Industrial and Allied, and the Banking indices rose
by 16.6% and 2.7% to 5,285.7 and 2,608.7 units,
year-on-year, respectively, while the Commercial
Services index fell by 21.5%, year-on-year to
2,463.9 units.
Source: Dar es Salaam Stock Exchange, StratLink Africa
T-Bill Yield Trend
Interbank Rate, month-on-month
Dar es Salaam Stock Exchange All Share Index
Sector Indices, year-on-year
TANZANIA
DEBT MARKET UPDATE
3.00%
8.00%
13.00%
18.00%
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
91 Day 182 Day 364 Day
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0.0
0.0
0.0
0.0
0.0
0.1
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
InterbankRate(Red)
VolumeinTZMillions
0.0
10.0
20.0
30.0
40.0
50.0
1,800.0
1,900.0
2,000.0
2,100.0
2,200.0
2,300.0
2,400.0
2,500.0
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Volume(Million)
Price(Green)
Price Volume
0.0
2,000.0
4,000.0
6,000.0
Industrial
Index
Commercial
Services
Index
Banking Index
Feb-17 Feb-18

LOW INFLATION CALLS FOR FURTHER RATE CUTS
UGANDA MARKET UPDATE

EAC Heads Meet at Summit
The 19th ordinary summit of heads of state of the
East African Community (EAC) took place on 23
February 2018 with the theme of enhancing socio-
economic development for deeper integration of
the community. A number of different issues were
discussed during the summit including regional
infrastructure projects, how to address non-tariff
barriers between member states, promoting local
industries, and more.
EU-EAC Partnership Agreement Remains Elusive
One important discussion focused around the
Economic Partnership Agreement (EPA) between
the East African Community (EAC) and the
European Union (EU) which would provide the east
African bloc with preferential terms with regard
to trade in goods and enhanced economic and
development cooperation, among other things.
The EPA, for which negotiations between the two
trading blocs were finalized in 2014, had only been
signed by Kenya and Rwanda prior to the summit
withthehopethatanagreementwouldbereached
this time around. However, consensus was not
attained and a further round of negotiations with
the EU will have to take place to try and satisfy
all EAC states. Objections raised revolve around
opening the EAC’s markets to European products
and the negative effects this might have on young
local industries. However, with the EU accounting
for 20.0% of Uganda’s exports in 2017, there may
well be substantial potential gains from a well-
designed EU-EAC EPA.
POLITICAL OUTLOOK
UGANDA
Source: Bank of Uganda, StratLink Africa
Exports, 2017
Coffee on Track to become Largest Foreign
Exchange Earner
The 16th African Fine Coffee Conference and
Exhibition took place in mid-February 2018 in
Uganda bringing to light the critical current and
future role the commodity plays. Last year, Uganda
recorded the highest earnings and volume of sales
for coffee exports since prior to 1994 (earliest
available data) with 4.8 million 60 kg bags worth
USD 555.3 million of the commodity being moved.
Coffee accounted for 17.6% of formal goods
export earnings between 2013 and 2017. With the
Uganda National Coffee Strategy 2040 target of 5.8
million bags by 2020 within reach, the commodity
is poised to rival tourism as the nation’s largest
foreign exchange earner.
Coffee Exports
Formal Goods Export Earnings 2013-’17
0% 20% 40% 60% 80% 100%
European Union Rest of Europe
The Americas Middle East
Asia Comesa
Rest of Africa Unclassiﬁed
2.0
2.5
3.0
3.5
4.0
4.5
5.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
550.0
2010
2011
2012
2013
2014
2015
2016
2017
Value, USD Mn (LHS)
Volume, Mn (60-Kg bags)
17.6%
Coﬀee
Gold
Oil re-exports
Fish and its products
Tea
Others

Price Rise Moderates
Inflation in February reached 2.1%, the lowest it
has been since December 2014. Since its peak last
year of 7.3% in May, headline inflation has fallen
by over five percent over a nine month period.
The main driver behind the fall in price growth
has been the rapid decline in food crops and
related items inflation which cascaded from a
high of 23.1% in May 2017, when it was propped
up by drought-induced food supply reduction, to
deflationary territory before returning to 1.4% in
January of this year. This trend has come about in
spite of relatively elevated energy, fuel and utilities
inflation which was at 9.8% in January 2018.
The Monetary Policy Committee (MPC) met on 13
February 2018 where they decided to reduce the
Central Bank Rate (CBR) by half a percent to 9.0%.
With core inflation gradually declining further
below the Bank of Uganda’s target of 5.0% since
mid-2017 to hit 1.7% in February this year, the
MPC saw it necessary to provide monetary policy
stimulus to the economy and bring inflation back
towards the MPC’s ideal levels. StratLink has in
past issues noted that the Bank of Uganda would
Inflation Breakdown
CBR, Inflation and Real Interest Rate
ECONOMIC OUTLOOK
UGANDA
need to monitor real interest rates (calculated
by deducting headline inflation from the 91 day
T-bill rate) to ensure that they do not slide into
negative territory. Inflation’s steep downward
trajectory has outpaced that of the three month
government paper resulting in rising real interest
rates which went from 2.8% to 5.2% between May
2017 and January 2018. This has provided enough
wiggle room for the Bank of Uganda to further
loosen monetary policy to achieve its price growth
objectives.
However, going forward the central bank will have
to be weary of dropping the key rate too low and
slow foreign currency inflows thereby devaluing
the shilling which has slid against the dollar in the
recent past.
Risks to Outlook
TheBankofUgandawillbecautiousaboutpressure
from rising international crude oil prices as well as
the possibility of food crop prices increasing in the
event of adverse weather. Finally, with the shilling
weakening against the greenback in February,
potential high import costs going forward will
need monitoring.
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Food Crops and Related Items
Core InflaƟon
Energy, Fuel and UƟliƟes InflaƟon
Headline InflaƟon
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0% Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Central Bank Rate (CBR)
Real Interest Rate
Headline InflaƟon

Market Stable through February
The All Share index edged up slightly in February
2018relativetothepreviousmonthwhileremaining
at significantly higher levels when compared to
January 2017. Last year saw total market turnover
fall at the Uganda Securities Exchange (USE)
relatively to 2016 with key counters like Umeme
responsible for large outflows due to bad revenue
performance. StratLink maintains a cautiously
optimistic view of the market’s performance going
forward as it is expected that improved economic
output in 2018 will buoy company performance.
Yield Remain Largely Constant
There was minimal movement in the yield curve
between 31 January and 27 February, 2018. With
inflation having taken a downward turn in February
we might see a slight fall in yields on three month
papers in the very near term. However, the recent
cut of the key rate, and the effect of previous
reductions in 2017, will likely see yields rise in
the medium term as investors anticipate a rise in
inflation.
The shilling depreciated by 0.4% to the dollar in
the month to 28 February 2018, while it was down
by 1.7% against the dollar in the year to the same
end date.
All Share Index
Sovereign Yield Curve
UGX to USD
EQUITY MARKET UPDATEDEBT MARKET UPDATE
UGANDA
All Share Index month – on
– month change as at 27
February 2018
All share index
year – on – year change
as at 27 February 2018
1.0%
45.0%
7.0%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
3M 6M 1Y 2Y 3Y 5Y 10Y
27-Feb-18 31-Jan-18
3,610.0
3,615.0
3,620.0
3,625.0
3,630.0
3,635.0
3,640.0
3,645.0
3,650.0
3,655.0
3,660.0
01-Nov-17
15-Nov-17
29-Nov-17
13-Dec-17
27-Dec-17
10-Jan-18
24-Jan-18
07-Feb-18
21-Feb-18
1,600.0
1,700.0
1,800.0
1,900.0
2,000.0
2,100.0
2,200.0
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18

ESCALATING BUT MANAGEABLE DEBT LEVELS
RWANDA MARKET UPDATE

Rwanda’s political environment is fraught with
neighbor disputes with its long time adversaries:
DR Congo and Uganda. Nonetheless, the general
political outlook remains stable.
Rwanda and Uganda Looking to end Strained
Relations
Relations between Rwanda and Uganda remain
fragile, over concerns of hostile activities by
Uganda that has seen Rwanda protest what it
considers unjustified arrests and harassment of it
citizens.Thisfollowedthearrestanddeportationof
five Rwandans living in Uganda in December 2017
with latest thorn in the bilateral relationship being
the treason charges levied against 45 Rwandans
in Uganda. Rwanda accuses Uganda of illegally
detaining its citizens and helping groups fighting
its government while Kampala accuses some
Rwandans of espionage. The tension between
the neighbours seems to have escalated following
the decision by Rwanda to send an emissary to
represent President Kagame who will skip the East
Africa Community (EAC) heads of state summit in
Kampala Uganda, whose meeting was expected
to thaw relations and ease tension that has been
simmering with resultant acts of aggression from
both sides. The two nations have been holding
talks in a bid to resolve the outstanding issues
and improve bilateral relations, given that the
deteriorating ties, if unresolved, could hamper
planned Central corridor projects and cross-
border activities.
Renewed Border Dispute with DRC
Fighting broke out between the Rwandan and
Congolese military in troubled eastern DR Congo
after an alleged incursion by Rwandan troops
which, has led to counter accusation of border
violation between the neighbours who have had
a longstanding fractious relationship, bringing to
fore memories of the 2012/13 economic shocks
arising from a similar border dispute after donors
withheld development aid accusing Rwanda of
backing the M23 rebels, leading to government’s
decision to cut down on donor dependence for
budget support.
POLITICAL OUTLOOK
RWANDA
Rwanda Unrelenting on its Stance on Second
hand Clothing
The fresh call by the United States of America
(USA) cautioning the East Africa Community (EAC)
members against their intended decision to phase
outimportationofsecondhandclothesandleather
products notwithstanding, Rwanda maintains its
tough stance on the decision in a bid to protect its
nascent local manufacturing industry, accusing the
USA of shifting goals on the regional AGOA pact
which, remains the bone of contention.
Promotion of Domestic Industries
In 2015, EAC partners resolved to phase out the
importation of second-hand clothes and footwear,
by 2019, to promote textile, apparel and leather
industries in the region and instead focus on
evolving domestic industries in a bid to make them
self-sufficient to serve the local and international
markets, including the AGOA market. Of the four
EAC members –Kenya, Rwanda, Tanzania, Uganda─
only Kenya rescinded the decision. In this regard,
Rwanda introduced the ‘Made in Rwanda’ strategy
in early 2016 in a bid to promote production and
consumption of locally made goods. Consequently,
government introduced a raft of supportive tax
measures with the aim of facilitating growth of the
local textile industry while narrowing the trade
deficit gap; Rwanda exports to the USA totaled
about USD 25.0 Million in 2016 compared to an
overwhelming USD 73.0 Million in value of imports
from the USA. The ‘Made in Rwanda’ strategy has
been lauded for the improvement in the country’s
trade balance which, declined by 21.3%, year-
on-year in 2017. Besides putting in measures to
reduce the cost of production, Rwanda should
also consider building and promoting it brands
and markets both locally and internationally,
particularly, for the growing middle class who have
a knack for new and trendy apparel.

Treasury bond received a 263.0% subscription
rate.
Exports Jump by more than half to Boost
Revenue Kitty
Rising exports are also expected to help Rwanda’s
economy reclaim its regional outperformer status.
The country’s exports soared by 57.6%, year-on-
year, to USD 943.5 Million in 2017 buoyed by
mineral exports which jumped more than two-
fold to USD 248.5Million. Agriculture exports were
also major drivers of growth in export earnings
generating revenues in excess of USD 304.6 Million
in the year ending September 2017, up from circa
USD 232.7 recorded over a similar period a year
earlier; resulting in a 21.3% reduction of the trade
deficit.
Escalating but Stable Debt Levels
Rwanda’s vision of transforming into a middle
income economy by 2035 may be derailed unless
it improves revenue mobilization efforts as well
as financial prudence in government spending.
Rwanda’s external debt level to Gross Domestic
Product (GDP) has risen slightly by 1.4%, year-on-
year to 36.6% which, is still below the East Africa
threshold of 50.0%, while domestic debt stood at
about 10.0%, an increase of 60.0bps, at the end
of 2017. The increase was driven by infrastructure
investment projects coupled with the country’s
ambition to steer away from development
assistance and donations towards dependence
and concessional loans. In this regard, government
is looking to revise the budget upwards by USD
24.1 Million from USD 2.5 Billion.
Rwanda Seeking to Widen Tax Base
As previously stated in our reports, Rwanda is
looking to widen the tax base in a bid to boost
domestic revenue in view of the increasing
expenditure needs. The Rwanda Revenue
Authority surpassed its 2016/17 fiscal year target
to collect USD 1.3 Billion in revenue representing
a performance rate of 100.8%, buoying well for
the country’s revenue mobilization efforts. RRA
also anticipates a USD 7.7 Million net increase in
domestic revenue through fixed income which,
we opine is likely to be achieved in view of the
increasing appetite for government instruments:
The newly floated USD 17.7 Million five-year
Rwanda, being a micro-player in the global
economy, the sustainability of its current account
will also be highly dependent on the overall
performance of the global economy which,
impacts the demand for Rwanda’s exports.
ECONOMIC OUTLOOK
RWANDA
Source: World Bank, National Institute of Statics if Rwanda, StratLink Africa
Total Government Debt and Revenue as % of GDP
Trade Balance (USD/Mlns)
Current Account Balance as % of GDP
2.0%
12.0%
22.0%
32.0%
42.0%
52.0%
2014 2015 2016 2017 e 2018 f
Total Debt Total Revenue
-2,000.0
-1,000.0
0.0
1,000.0
2,000.0
Exports Imports Trade
Balance
2016 2017
-15.0%
-13.0%
-11.0%
-9.0%
-7.0%
2014 2015 2016 2017 e 2018 f

RWANDA
Source: National Bank of Rwanda, StratLink Africa
T-Bill Yields
GovernmentSuccessfullyIssuesa5-YearTreasury
Bond
The National Bank of Rwanda successfully issued
an 11.8% USD 17.7 Million five-year Treasury bond
receiving a 263.0% subscription rate, highlighting
the increasing investor appetite for risk-free
government securities; the previous Treasury
bond issuance in November 2017 received one
of the top subscription rates at 178.1%. Banks
dominated the issue at 46.7%, partly due to their
financial strength while retailers and individual
investors received the least allocation at about
12.3%, highlighting the need to increase investor
education around fixed income investments to
encourage increased participation by individual
investors. The bond sale is under the government’s
quarterly issuance programme that started in 2014
to raise money to fund infrastructure projects as
well as promote Rwanda’s underdeveloped capital
markets.
Short-Term Yields Maintain a General Decline
Yields for short-term government securities in the
money market maintained a general downtrend in
February 2018. The 91 Day, the 182 Day papers’
yields declined marginally by 0.1% each to
6.1% and 7.5%, respectively. While the 364 Day
remained unchanged at 8.3%, in the period under
review, in line with our short to medium-term
expectations.
DEBT MARKET UPDATE
Franc Slips against the Greenback
The Franc lost the grip experienced in the past
two months ceding ground against the greenback
between February and March, 2018. The local
unit depreciated by 1.4% month-on-month and
4.3% year-on-year, in a fairly liquid money market
environment where the interbank rate declined
marginally by 0.1% to 5.7%, albeit under subdued
inflation at 1.3% in January 2018.
Source: NISR, StratLink Africa
Franc vs USD, month-on-month
Franc depreciation,
month-on-month
Franc depreciation,
year-on-year
-1.4%
-4.3%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
91 Day 182 Day 364 Day
800.0
810.0
820.0
830.0
840.0
850.0
860.0
870.0
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18

Rwanda All Share Index, month-on-month
Rwanda All Share Index, year-on-year
Rwanda Stock Exchange Down 0.1%
The All Share Index posted minimal changes
shedding-off 0.1% to close the month at 133.0
units supported by lackluster performance by
the Bank of Kigali share, the largest listing by
market capitalization, whose share price remained
unchangedatUSD0.3atthecloseofthemonth.The
equities market has continued to underperform
compared to the fixed income securities in view
of the continued oversubscriptions. The expected
listing of the newly floated five-year Treasury bond
on the Rwanda Stock Exchange should stimulate
increased investor activity at the bourse.
All Share Index month-on-
month change
All Share Index year-on-
year change
-0.1%
4.2%
800.0
810.0
820.0
830.0
840.0
850.0
860.0
870.0
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
132.8
132.9
133.0
133.1
133.2
133.3
133.4
133.5
Jan-18
Jan-18
Feb-18
Feb-18
Feb-18

StratLink in the News: A look into Kenya’s Post-Election Environment
Shoprite’s entry shows Kenya is still a sweet spot for retail investment in Africa
– In this article, StratLink looks into the entry of Shoprite into Kenya’s retail sector
against the backdrop of woes that have plagued large home grown players.
Zimbabwe in 2018: steering a difficult path to recovery
– The take-over of power from Robert Mugabe has been a matter of great interest
to investors. In this article, StratLink considers some of the key issues likely to shape
the new government’s reform agenda.
In the period under review, StratLink provided commentary on the transition underway in Zimbabwe and the state
of the retail segment of Kenya’s economy.

STRATLINK - AFRICA TEAM
Konstantin Makarov – Managing Partner
konstantin.makarov@stratLinkglobal.com
Dina Farfel – Partner
dfarfel@stratLinkglobal.com
Julio De Souza - Director of SME and Impact Finance
julio.desouza@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
Ahmed Wurie - Analyst
ahmed.wurie@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.

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 - March 2018

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