africa market update january 2016

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com


Table of Contents


JANUARY 2016 | MARKET UPDATE – AFRICA www.stratlinkglobal.com

NIGERIA

KENYA

UGANDA

TANZANIA

RWANDA

ZAMBIA

ANGOLA

GHANA

ETHIOPIA

GABON

3JANUARY 2016 | MARKET UPDATE – AFRICA www.stratlinkglobal.com


This Issue at a Glance

• Commodities’PriceRout

The last two years (2014 and 2015) have been characterized by elevated monetary and fiscal vulnerabilities in a number of African economies stemming from the commodities’ price rout. Economies of commodity reliant countries such as Nigeria (oil), South Africa (gold) and Zambia (copper) have experienced decelerated growth momentum in this regard. As such, a number of investors have in the recent past downgraded their perception and appetite for economies in Africa, opting for a wait and see stance. This issue (themed ‘Navigating the Commodity Oddity: Speed Bump not Dead End’) is premised on the fact that in a number of the affected economies, bold reforms are underway with a view to buffer the countries against such shocks in the years to come. Gabon, for instance, has been on an economic diversification agenda that is spurring emergence of its non-oil sector and unleashing new investment opportunities. In Nigeria, economic diversification is going hand-in-hand with heightened fiscal prudence aimed at addressing misappropriation of state resources and bolstering growth. These are measures that should yield dividends in the long-term if sustained.

• ElectionsWatch

This issue also takes note of the continuing electoral cycle that began in 2015. Zambia, Uganda and Ghana are some of the countries set to go to the polls in 2016 and political risk consideration amongst investors will be a key factor. Despite facing setbacks, Nigeria, Tanzania and Ethiopia set a favourable precedent in 2015 with largely peaceful elections and transfer of power that should be furthered in 2016. Undeniably, political transition remains a sticky affair in Africa especially in view of growing civic consciousness by the public amidst, in some cases, rigid institutions that fail to change with evolving demands. Developments of civil strife in South Sudan and Burundi remind us that political risk still abounds as a key impediment to economic growth and development in Africa.


NIGERIA MARKET UPDATE

“We expect the Naira to remain weak through Q1, 2016 with crude oil having fallen below USD 35.0/barrel in Q4, 2015 and the rundown of foreign exchange reserves that suggests depleted ammunition to support the local unit going forward.”

ECONOMY TO REMAIN ATTRACTIVE IN 2016 DESPITE DOWNTURN



5

Anti-TerrorEffortstoLead2016Agenda

Focus: The insurgency, Boko Haram, is likely to remain the key endogenous risk in 2016 whilst the communique signed between Presidents Muhammadu Buhari (Nigeria) and Paul Biya (Cameroon) in July 20151, to address border conflict between the two states, is likely to mitigate a long running exogenous risk.

In the race to the March 2015 election, Buharipromiseda‘MarshallPlan’againstBokoHaramthatweanticipatewillcontinuetoheightenexpectationsfrom the public in 2016. Confidence raised by theshake-upofthetopbrassinthemilitaryandrelocationofthemilitaryCommandCentertoMaiduguri(BornoState)hasbeenunderminedby recurrentattacks intherecentpast.Operationsbythefivestate(Nigeria,Niger,Chad,BeninandCameroon)jointforceagainstBokoHaramwillbeespeciallycriticalindeterminingthedirectionofthefightagainstthemilitiain2016.

ECONOMIC OUTLOOK

NIGERIA

GDP:USD545.7Bln|Population:177.5Mln

1 Allafrica.com July 31st 2015

SafeguardingLagos─Nigeria’sEconomicHeartthrob

In October 2015, forty-five Boko Haram suspects were charged with a foiled attack on the state of Lagos, raising concern over the militia’s encroachment into the country’s commercial hub. Shielding Lagos from Boko Haram attacks will be critical in 2016 given the economic significance of the state and Nigeria’s present grapple with subdued oil prices.

22.0% (USD 131.0 Bln)Lagos’ GDP as percentage of Nigeria’s GDP2

12.1% Lagos’ population as percentage of Nigeria’s population

WagingWaronCorruption

Furthering the fight against corruption will be a major agenda item in 2016 especially as the country faces fiscal strain stemming from depressed oil revenue. In September 2015, President Buhari appointed himself Oil Minister citing need to streamline operations around the country’s largest revenue earner. Corruption has been a major challenge to the country’s business climate.

Note: Nigeria’s ranking in the Global Terrorism Index has deteriorated over the last three years from the seventh worst performer in 2012 to the third worst in 2015. The new administration will be keen to reverse this trend in 2016 in a bid to boost investor attraction.

2012: 7 (Beating Somalia, Yemen, India, Afghanistan, Pakistan and Iraq)

2014: 4 (Beating Pakistan, Afghanistan and Iraq)

2015: 3 (Beating only Afghanistan and Iraq)

Source: Global Terrorism Index, StratLink Africa

CorruptionComparison

Source: World Bank, StratLink Africa

Source: Amnesty International, StratLink Africa

Number of people killed by Boko Haram in 2014

>4,000

Number of people killed by Boko Haram in Q1, 2015

~1,500

2 Speech by State Governor Akinwunmi Ambode, October 2015. Courtesy of allafrica.com

0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%

Nigeria Kenya Ghana

% of firms expected to give gi�s in

mee�ngs with tax officials

% of firms expected to

give gi�s to get an opera�ng

license

% of firms expected to give gi�s to

get an import license



Nigeria to Remain Attractive to Investors DespiteChallenges

Focus: Despite a generally adverse economic climate, Nigeria is bound to remain a key investment destination of interest in 2016 with key pointers suggesting comparative confidence (by foreign investors) vis-à-vis peer economies such as Kenya and Ghana. Ten year Eurobond yields suggest Nigeria is enjoying better risk perception, a fact that we expect will be a major driver of investor interest in 2016.

Note: Nigeria not only posted the lowest yield as of December 15th, 2015 but also reported the least rise (in yield) between November 10th, 2014 and December 15th, 2015 indicative of comparatively low risk perception. The decline in the yield between March 2015 and May 2015 came on the back of the relatively peaceful election and transfer of power and is a pointer that political risk is bound to be a major consideration for investors targeting Nigeria in 2016.

BUSINESS NEWS ENVIRONMENT

Uncertainty in Ghana Could Make Nigeria MoreAttractiveforWestAfricaFocusedInvestors

With political temperatures rising in Ghana ahead of the November 2016 general election and in view of the country’s economic downturn, investors are likely to shift focus towards Nigeria in 2016. Whilst Ghana has a history of democratic maturity, the country has faced growing protests in the recent past as citizens grow restive over an unfavourable economic environment.

Note: Nigeria and Ghana form the loci of investor interest in West Africa accounting for 63.1% of total Foreign Direct Investment (FDI) into the region in 2014.

Source: Bloomberg, StratLink Africa

Source: UNCTAD 2015, StratLink Africa


TenYearEurobondYields

WestAfricaFDIInflow2014

Country RiseinEurobondYield(bps)3

Ghana 450.0

Nigeria 210.0

Kenya 340.0

3 Refers to rise in ten year Eurobond yield between November 10th, 2014 and December 15th, 2015

NIGERIA

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

10-N

ov-1

4

10-Ja

n-15

10-M

ar-1

5

10-M

ay-1

5

10-Ju

l-15

10-S

ep-1

5

10-N

ov-1

5

Nigeria Kenya Ghana

36.8%

26.3%

6.0%

3.9%

3.6%

23.4%

Nigeria Ghana Niger

Mauritania Cote d' Ivoire Others



Naira to Remain Weak, Economy to Post AnaemicPerformance

Focus: We expect the Naira to remain weak through Q1, 2016 with crude oil having fallen below USD 35.0/barrel in Q4, 2015 and the rundown of foreign exchange reserves that suggests depleted ammunition to support the local unit going forward. The Central Bank is likely to continue defying calls for devaluation of the Naira especially in view of growing concern that the deceleration of the economy could be heading towards recession.

ECONOMIC OUTLOOK

LikelihoodofAccommodativeMonetaryPolicyinQ1,2016

Note: Central Bank slashed the benchmark rate by 200.0 bps to 11.0% in November 2015.

The Naira’s weakness notwithstanding, monetary policy is likely to remain accommodative through Q1, 2016 as the government looks to buffer the economy from further slowdown.

The Naira is likely to breach the 200.0 units (to exchange as low as the 200.0 – 205.0 band, subject to the extent of oil price decline) of exchange to the greenback in Q1, 2016. We note, however, that the Central Bank has been aggressive in intervention in the recent past including publication of a list of forty items for which investors will not be able to obtain foreign currency for import.

ForeignExchangeReserves(USDMln)

GDPGrowth(Generalslowdowndiscernible)

NairaExchangevsGlobalOilPrice


Source: Bloomberg, National Bureau of Statistics, StratLink Africa


NIGERIA

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

0.005

0.006

0.007

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15

Apr-1

5

Jul-1

5

Oct-1

5

OPEC Benchmark Price ($/bbl)

USD to Naira Exchange (LHS)

25,000.00

30,000.00

35,000.00

40,000.00

45,000.00

50,000.00

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Q1,

201

3Q

2, 2

013

Q23

, 201

3Q

4, 2

013

Q1,

201

4Q

2, 2

014

Q3,

201

4Q

4, 2

014

Q1,

201

5Q

2, 2

015

Q3,

201

5



Outstanding private sector credit was at near stagnation in 2015 indicative of the impact of monetary tightening. We expect the Central Bank to focus on accelerating growth in the first half of 2016 with aggregate economic growth trending below expectations in 2015.

DEBT MARKET UPDATE

Focus: 2015 presented an interesting year for Nigeria’s fixed income market with the yield curve elevated in the first quarter owing to pre-election uncertainty before correcting downwards by end of Q2, 2015. The September 2015 delisting from JP Morgan’s Emerging Market Government Bonds Index (GBI – EM), coupled with tightened liquidity in the money market, heightened uncertainty amongst investors with the yield curve rising above the January 2015 level. In Q1, 2016, declining export earnings are likely to raise government appetite for domestic debt, potentially elevating yields.

Potential weakness by the Naira could also necessitate liquidity tightening by the Central Bank, nudging yields further upwards. Liquidity has been on the rise in the latter half of 2015, supported by a stable currency.

InflationtokeepPotentialRateSlashesModest

If undertaken, monetary rate slashes in Q1, 2016 are bound to be more modest than the November 2015 200.0 bps slash owing to sustained inflation pressures. At 9.4% (as of November 2015), inflation stands 40.0 bps above the Central Bank’s upper target band necessitating cautious stances going forward.

YieldCurve

PrivateSectorCreditvsMonetaryPolicyRate

InflationTrend



Source: Central Bank of Nigeria, StratLink Africa

ChangeininterbankratebetweenJanuary15th,2015andDecember15th,2015

-450.0 bps

NIGERIA

11.5%

12.0%

12.5%

13.0%

13.5%

80.0 82.0 84.0 86.0 88.0 90.0 92.0 94.0 96.0 98.0

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15

Apr-1

5

Jul-1

5

Oct-1

5

Billi

ons

Private Sector Credit (USD)Monetary Policy Rate

7.2%

7.7%

8.2%

8.7%

9.2%

9.7%

10.2%

10.7%

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

Infla�on Food Infla�on

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

3M 6M 9M 1Y 3Y 5Y 7Y 10Y 15Y 20Y

Dec-14-2015 Sep-10-2015

Jun-14-2015 Jan-14-2015



GradualTighteningofLiquidity

The decline in 91 Day T-Bill bid-to-cover ratios between November and December 2015 further suggests that liquidity is beginning to tighten after steady rise between September and November 2015. With the USA Federal Reserve having hiked the Funds Rate by 0.25% on December 16th, 2015 and sending indications of more hikes in 2016, we expect the Central Bank of Nigeria is likely to closely monitor liquidity in Q1, 2016.

EQUITYMARKETUPDATE

Focus: The market was generally bearish in 2015 undermined by political risk considerations; the adverse macroeconomic climate and improving climate in the USA that is likely to have triggered outflow by foreign investors from the Nigeria Stock Exchange. In Q1, 2016, we expect bearish sentiments to prevail as investors assess the government’s efforts towards addressing the economy’s downturn ─ currency risk will remain a major focus in Q1, 2016.

Foreign investor inflow declined progressively in 2015 touching a low of USD 129.1 Million in October 2015, reporting 46.8% decline from January 2015.

ForeignExchangeReserves(USDMln)

NigeriaStockExchange30Index

91DayT-BillBid-to-CoverRatios




1,150.0

1,250.0

1,350.0

1,450.0

1,550.0

1,650.0

25-N

ov-1

4

25-Ja

n-15

25-M

ar-1

5

25-M

ay-1

5

25-Ju

l-15

25-S

ep-1

5

25-N

ov-1

5

Nigeria30Indexyear-on-yeardepreciationasatDecember15th,2015

Nigeria30Indexyear-to-datedepreciationasatDecember15th,2015

-12.6%

-6.6%

NIGERIA

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

05-Ja

n-15

05-F

eb-1

505

-Mar

-15

05-A

pr-1

5

05-M

ay-1

5

05-Ju

n-15

05-Ju

l-15

05-A

ug-1

5

05-S

ep-1

5

05-O

ct-1

5

05-N

ov-1

5

05-D

ec-1

5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Jun-

3-20

15Ju

n-17

-201

5Ju

n-24

-201

5Ju

l-8-2

015

Jul-2

2-20

15Au

g-5-

2015

Aug-

19-2

015

Sep-

2-20

15Se

p-23

-201

5Oc

t-7-2

015

Oct-2

1-20

15No

v-4-

2015

Nov-

18-2

015

Dec-

2-20

1 5



Banking counters are likely to elicit the greatest interest in Q1, 2016 owing to better performance than peer counters. In November 2015, the Central Bank debunked claims that about nine banks were in distress, a move that is likely to mitigate investor uncertainty going forward.

Oil counters are likely to remain depressed given the tumble in global prices and drag the market in Q1, 2016.

ForeignInvestorActivityatStockExchange

OilStocksIndex

BankingStocksIndex Source: Bloomberg, StratLink Africa

Source: Nigeria Stock Exchange, StratLink Africa

Source: Nigeria Stock Exchange, StratLink Africa

BankingStocksIndexchangeyear-to-dateasatDecember15th,2015

OilStocksIndexchangeyear-to-dateasatDecember15th,2015

-3.9%

-23.6%

NIGERIA

0.5

0.7

0.9

1.1

1.3

1.5

1.7

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Mill

ions

Foreign Investor Inflow (USD)

Foreign Investor Ou�low (USD)

Inflow-Ou�low Ra�o (RHS)

230.0

250.0

270.0

290.0

310.0

330.0

350.0

370.0

390.0

410.0

430.0

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov-

15

Dec-

15

270.0

290.0

310.0

330.0

350.0

370.0

390.0

410.0

430.0

450.0

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov-

15

Dec-

15


IN SEARCH OF FISCAL CONSOLIDATION: REMEDYING A DETERIORATING POSITION

KENYA MARKET UPDATE

“We anticipate Q1 2016 to be characterized by efforts to correct the inversion by the yield curve in view of calls for fiscal consolidation that should see toned down short-term borrowing.”



AssertingitsPositioninAfrica’sLandscape

Focus: Kenya was at the center of global attention in 2015 following its hosting of United States President, Barrack Obama, in July and being the first African country to host a World Trade Organization Ministerial Conference in December. In 2016, we expect the country to be keen on leveraging these developments to solidify its standing in the continent. Advanced and emerging markets have in the recent past heightened their focus on Africa with fora such as the India – Africa Summit, Forum on China – Africa Co-operation and the (2014) USA – Africa Leaders’ Summit gaining prominence. Kenya will be keen to deploy its recent history in anchoring its position as a key market and geopolitical partner in Africa. The country also enters 2016 against the backdrop of mitigated terror incidences, boding well for its political risk environment.

Note: Kenya’s ranking in the Global Terrorism Index1

improved six places between 2014 and 2015.

POLITICAL OUTLOOK

LessFavourableDomesticEnvironment

On the domestic scene, the government faces the daunting task of reigniting fast waning confidence following allegations of pervasive corruption in 2015. In 2015, the anti-corruption watchdog, the Ethics and Anti-Corruption Commission, was marred with controversy, raising uncertainty over the country’s institutional capacity and preparedness to address the scourge of corruption.

This is likely to remain a major pressure point for the risk climate in 2016 with the opposition drawing political capital from it and heightening temperatures ahead of the 2017 general election. Whereas the government has made steps in combating corruption, unresolved controversy around alleged misappropriation of Eurobond proceeds will be a key point for risk perception in 2016. Widespread anticipation of decelerated execution of infrastructure projects is likely to depress investor appetite for the economy.

Devolution:AStickyIssueGoingForward

Co-ordination and delineation of roles between the Central and County governments is bound to remain a sticky issue in 2016. In 2015, industrial action by a section of health workers paralyzed operations in select counties evoking concern over the devolution of vital social services. Additionally, investment into capital spending by county governments (which stood at 22.0% of total expenditure in 2013/14 compared to the 30.0% target3) has derailed the growth and development pace of the new units.

Source: Institute for Economics and Peace, StratLink Africa

KENYA


124

Kenya’s ranking in the 2014 Global Terrorism Index

12

124

Kenya’s rankingin the 2015

Global Terrorism Index

18

1 The Index ranks 124 countries with declining risk from 1 to 124

Amount raised through Kenya’s June 2014 Eurobond and the subsequent tap sale

USD 2.75 Bln

Ins�tute of Cer�fied Public Accountants es�mate2 of amount lost to corrup�on in Kenya every year

USD 674.0 Mln

2 Estimates made in October 20143 World Bank 2014



KENYA

2 World Bank Ease of Doing Business 20163 Resolutions circulated to shareholders requiring them to pass a vote

ECONOMIC OUTLOOK

Focus: On September 11th, 2015 a new Companies Act was signed into law, spelling a raft of changes which, by and large, presents progressive reforms on matters pertaining registration, management and operation of firms especially for small and medium sized domestic investors. How this translates into benefits for the investor community will be one of the key areas of focus in 2016. The November 2015 review of the clause that would demand foreign investors surrender 30.0% shareholding of their entities to locals arrests what would have been a potential decline in foreign investor appetite for the Kenyan market in 2016.

Note: Between 2014 and 2015, the average number of days taken to start a business in the country decline from 30 to 26 setting a welcome precedent for the new Companies Act4.

OldvsNewCompaniesActs’Provisions(Snapshot)

Source: Companies Act of Kenya, StratLink Africa

Minimum of two persons required to register a company.

Companies required to appoint and have a Company Secretary qualified as a Public Secretary.

Shareholders are required to hold meetings to pass resolutions.

All company resolutions must be passed at the General Meeting.

A foreign registered company seeking to do business in Kenya does not require to have a registered office in the country.

One person can form a company as the sole member.

A private company will not be obliged to have a Company Secretary unless its paid up capital exceeds KES 5.0 Million.

The law allows private company shareholders to pass resolutions through either meetings or as written resolutions in hard copy or electronic form.

Private companies can pass written shareholders’ resolutions5 without holding a general meeting except in the case of removal of directors or auditors before expiry of their term.

A foreign registered company seeking to operate and do business in Kenya must establish a registered office in the country prior to obtaining a certificate to do business.

This provision is likely to emerge as a major boost for growth of small business ventures

This is likely to greatly ease the compliance of small ventures with regulatory requirements since periodically they are obliged to contract the services of a Company Secretary

This provision creates room for unprecedented flexibility in making decisions.

This furthers the flexibility with which companies can pass resolutions and fast-track decision making.

This threatens to raise the cost of foreign companies’ operation in the country.

Old Act New Act PotentialImpact



ShillingLikelytoRemainResilientinQ1,2016

Focus: Despite clawing back lost ground in Q4, 2015, the shilling is not out of the woods yet and this will be a key point in 2016. In Q4, 2015, the Central Bank allowed relatively eased liquidity conditions in what we assess was driven by a combination of confidence in the new found resilience of the shilling and need to correct the yields anomaly in the fixed income (Please see the Debt Market Update). In Q1, 2016, we expect the local unit to be range-bound in the 101.0 – 103.0 band of exchange to the greenback supported by the dissipation of disturbance from USA Fed rate hike expectation and steady rise in foreign exchange reserves that strengthen the Central Bank’s ability to support the shilling.

ShillingvsUSDExchangeandInterbankRateSource: Bloomberg, StratLink Africa

Source: Bloomberg, central Bank of Kenya, StratLink Africa


GlobalTeaPrices(USD/kg)

UsableFXReservesvsMonthsofImportCover

Global tea prices have also been comparatively elevated in the recent past thereby propping the shilling with strong inflow of foreign currency. How this evolves in 2016 will be subject to output from other key exporters such as India and Sri Lanka with a potential decline in their output being advantageous to Kenya. Note: In 2014, tea was Kenya’s second largest export earner generating USD 931.9 Million6.

KENYA

In October 2015, foreign exchange reservesrebounded to exceed four months of import coverprovidingabufferagainstdepreciationpressures.AsofDecember23rd,2015, reserves stoodatUSD7.2Billion,ahighlastregisteredinMarch2015.

ECONOMIC OUTLOOK

90.0

92.0

94.0

96.0

98.0

100.0

102.0

104.0

106.0

108.0

3.5%

8.5%

13.5%

18.5%

23.5%

28.5%

02-Ja

n-15

02-M

ar-1

5

02-M

ay-1

5

02-Ju

l-15

02-S

ep-1

5

02-N

ov-1

5

KES to USD Interbank Rate (LHS)

5,900.06,100.06,300.06,500.06,700.06,900.07,100.07,300.07,500.0

3.5

3.7

3.9

4.1

4.3

4.5

4.7

4.9

08-Ja

n-15

08-M

ar-1

5

08-M

ay-1

5

08-Ju

l-15

08-S

ep-1

5

08-N

ov-1

5

Usable FX Reserves (USD Mln)Months of Import Cover (LHS)

6 Kenya National Bureau of Statistics

2.3

2.4

2.5

2.6

2.7

2.8

2.9

3.0

3.1

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15




Source: Central Bank of Kenya, StratLink Africa


BloombergBVALYieldsIndexRevenueMobilizationPerformance

Budget2015/16Allocation

CentralBankLikely toMaintainBenchmarkRate inQ12016despiteInflationPressures

The build-up in inflation notwithstanding, the Central Bank is likely to hold the policy rate steady at 11.5% in Q1 2016. Growth in money supply has been on the decline since May 2015 suggesting the two hikes in 2015 are yielding pass through effects, already toning down inflation pressures. Additionally, the shilling has been resilient in the recent past indicative of a stabilizing monetary environment.

High expenditure on capital projects such as the Standard Gauge Railway will remain key drivers of the deteriorating fiscal position.

KENYA

DeterioratingFiscalPosition:ConsolidationLikely tobeKey2016Agenda

Despite posting historically higher revenue mobilization performance, the country continues to fall short of its target deteriorating the fiscal balance. Available data indicates that in the first two months of financial year 2015/16 (July and August 2015), the government realized 89.3% of its target posting the highest performance in four years. Kenya’s fiscal deficit to GDP ratio stands at 8.1% compared to the East African average of 4.7%7 placing Kenya at a comparatively weak position.

Focus: The yield curve inverted in 2015 driven by high government appetite for short-term debt between Q3 2015 and Q4 2015. We anticipate Q1 2016 to be characterized by efforts to have this inversion corrected in view of calls for fiscal consolidation that should see toned down short-term borrowing in the near term. Liquidity has also been on a general rise and should further nudge yields downwards. We note, however, that inflation breached the Central Bank’s upper target ceiling of 7.5% to stand at 8.0% in December 2015 and is likely to be one factor creating room for higher yields as investor price in expectations.

79.0%

81.0%

83.0%

85.0%

87.0%

89.0%

91.0%

2012/13 2013/14 2014/15 2015/16

80.9%

85.0%

86.4%

86.4%

27.0%

22.0%16.0%

16.0%

5.0%4.0%

10.0%

Energy & Infrastructure Educa�onPublic Administra�on Na�onal SecurityAgriculture HealthOthers

DEBT MARKET UPDATE

9.5%

10.5%

11.5%

12.5%

13.5%

14.5%

15.5%

16.5%

3M 1Y 3Y 5Y 8Y 10Y 20Y 30Y

Dec-18-2015 Jun-30-2015 Jan-31-15

7 International Monetary Fund October 2015



Source: National Bureau of Statistics, Central Bank of Kenya, StratLink Africa




InflationvsMonetaryPolicyRate

GrowthinBroadMoneySupply

NairobiSecuritiesExchange

NairobiSecuritiesExchange(Month-on-Month)

KENYA

Note: In 2015, broad money supply reported the slowest growth (year-on-year) in October posting 13.6%. Should inflation edge into double digits, however, steady growth by the economy provides room for further tightening. The economy grew by 5.8% in Q3 2015, sixty and thirty basis points higher than Q3 2014 and Q2 2015.

NSE20ShareIndexchangeyear-on-year

NSE20lShareIndexchangemonth-on-month

-19.2%

1.5%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Jan-

12M

ay-1

2Se

p-12

Jan-

13M

ay-1

3Se

p-13

Jan-

14M

ay-1

4Se

p-14

Jan-

15M

ay-1

5Se

p-15

Infla�on Monetary Policy Rate

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

Jan-

12

May

-12

Sep-

12

Jan-

13

May

-13

Sep-

13

Jan-

14

May

-14

Sep-

14

Jan-

15

May

-15

Sep-

15

EQUITYMARKETUPDATE

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

3,700.0

3,900.0

4,100.0

4,300.0

4,500.0

4,700.0

4,900.0

5,100.0

5,300.0

5,500.0

5,700.0

17-D

ec-1

4

17-F

eb-1

5

17-A

pr-1

5

17-Ju

n-15

17-A

ug-1

5

17-O

ct-1

5

17-D

ec-1

5

Mill

ions

Volume (RHS) NSE 20 Share Index

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

3,930.0

3,950.0

3,970.0

3,990.0

4,010.0

4,030.0

4,050.0

4,070.0

17-N

ov-1

5

24-N

ov-1

5

01-D

ec-1

5

08-D

ec-1

5

15-D

ec-1

5

Mill

ions

Volume (RHS) NSE 20 Share Index



Focus: The market was generally bearish in 2015 in what brokers have largely attributed to exit by foreign investors. The depreciation of the shilling was a key diver as it undermined the dollar value of portfolio held by foreign investors. The market was also undermined by high yields in the short-term fixed income market that made debt instruments more attractive. The number of listed companies that issued profit warnings in 2015 was particularly high, occasioning bearish sentiment amongst investors. In Q1 2016, we expect considerable focus to be channelled towards financial services (notably banks) given the placement of Imperial Bank under receivership in October 2015 that saw the banking index report largest day-on-day decline in 2015.

GDP Growth Momentum Could Elicit Mild BullishSentiment

The economy’s 5.8% growth in Q3 2015, quantum by historical standards, could see investors revise assessment of the state of the economy thereby heightening appetite for the market in the near term. The manufacturing sector continues to post anaemic performance (growing by 2.8% in Q3 2015) and this is likely to keep companies listed from the sector subdued.


BankingSectorIndexDay-on-DayChange

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

02-Ja

n-15

02-F

eb-1

5

02-M

ar-1

5

02-A

pr-1

5

02-M

ay-1

5

02-Ju

n-15

02-Ju

l-15

02-A

ug-1

5

02-S

ep-1

5

02-O

ct-1

5

02-N

ov-1

5

Oct 14th, 2015: Banking Index reports largest day on day decline in 2015


TANZANIA MARKET UPDATE

“The new administration has

assumed office with fiscal

consolidation as its key agenda.

This comes as a timely policy

stance given the mounting fiscal

challenges and image deterioration

Tanzania suffered following the USD

122.0 Million energy scandal that

saw development partners withhold

aid towards the country.”

BOLD AUSTERITY MEASURES AS NEW ADMINISTRATION TAKES CHARGE




2016: Reforming the Energy Sector

Energy reliability is likely to be a key area of focus following disruption that decelerated industry in 2015. The energy ministry implemented power rationing in 2015 as hydropower plants suffered reduced generation owing to adverse weather conditions. As such, Tanzania Electric Supply Company Limited (TANESCO) has actively embarked on increasing thermal capacity as it looks to reduce overreliance on hydropower. Total power generation is set to increase to 5TWh in 2016 in view of the additional 600MW gas-fired power plant set to be constructed by Symbion Power3.

PromisingStart,DauntingCarryoversfrom2015

Focus: The new administration has assumed office with fiscal consolidation as its key agenda. This comes as a timely policy stance given the mounting fiscal challenges and image deterioration Tanzania suffered following the USD 122.0 Million energy scandal1 that saw development partners withhold aid towards the country. Investors are likely to hold mixed view on the country’s risk standing in view of the largely peaceful October 2015 election whilst the deferred referendum stands out as teething challenge.

KeyIssuestobetackledin2016:

1. Zanzibar’s Political Impasse

Zanzibar is set to carry out a repeat poll in January 2016, a development that may weigh down on Tanzania’s near-term political outlook. How the new administration manages the Zanzibar question will be a key factor in determining Tanzania’s risk outlook going forward given the island’s quest for greater autonomy.

2. The Endemic Corruption

Investors are looking to Magufuli to tackle the endemic corruption that characterised 2015 with USD 558.0 Million in form development assistance withheld owing to the energy corruption scandal. We assess that Magufuli’s perceived goodwill to fight corruption will go a long way in boosting investor confidence, in view of the fact that Tanzania relies on donor support for the budgetary requirements – the country receives grants equivalent to 30.0% of its budgetary requirements2.

3. The Constitutional Review Process

The headache of the setback laden constitutional referendum has been carried forward to 2016. Investors and observers are looking to Magufuli to create a new script by re-opening debate on the constitutional review process with the intention to unlock the stalemate and foster national cohesion.

Note: Natural gas (and electricity) has emerged to be a key driver of FDI into the country with its contribution to total inflows growing from 0.1% in 2008 to 17.0% in 20114 reporting the fastest growth by sector. Depressed prices in 2015 are bound to reverse this trend.

POLITICAL OUTLOOK BUSINESS ENVIRONMENT

Source: BMI, StratLink Africa

TANZANIA

1 Thomson Reuters Foundation February 04th, 20152 BMI

ElectricityGenerationperCapitaKWh(PerAnnum)

0.0

50.0

100.0

150.0

200.0

250.0

Ethi

opia

Ugan

da

Tanz

ania

Nige

ria

Keny

a

3 Business Monitor International4 Tanzania Investment Report 2012



TreadingaTightFiscalRopeonthebackofRisingDebt

The economy faces lingering risk from the rising debt, as well as fiscal balance (as a percentage of GDP), that remains high by regional standards. We project that these will be some of the key points of concern for the new administration in 2016.

ProtractedForeignExchangeRiskfromDeterioratingCurrentAccountBalance

Foreign exchange risks will remain at the fore over the near term, especially given that the country is planning to float its debut Eurobond targeted at USD 700.0 Million in an environment of a weakened currency7. The Tanzanian shilling, like its East Africa comparators, was under immense pressure in 2015 - it has depreciated 25.1% year-on-year8 against the greenback – overtaking Uganda as the worst performing currency in Eastern Africa. The currency has been the chief focus for monetary policymakers through 2015 and we expect this will remain the case heading into Q1 2016, despite the shilling’s benign stability in the last quarter of 2015.

DebtandFiscalBalanceasa%ofGDP

RevenueCollection(USD)

Source: International Monetary Fund, StratLink Africa

5 The East African6 OEC Tanzania, 2013

4 The East African Weekly April 25th, 20155 As at January 4th, 2016

TANZANIA

BoldAusterityMeasuresUsherin2016

Focus: The year has begun on the back of austerity measures. The new administration’s emphasis on cutting down on non-priority spending, and plugging loopholes in revenue collection underscores its focus on fiscal consolidation and macroeconomic stability. Tanzania Revenue Authority is reported to have benefited from President Magufuli’s austerity measures against tax evasion, collecting over USD 602.7 in the less than two months that he has been in office5, a move that serves to bolster investor confidence. The move signals the potential start of fiscal belt-tightening measures on the back of rising expenditure and below target revenue mobilization —the Revenue Authority collected USD 1,749.8 Million between July and October 2015, representing 97.5% performance rate; attributable to the depressed global mineral prices given that minerals form the bulk of Tanzania’s exports at 32.6% of total exports6.

Source: Tanzania Revenue Authority, StratLink Africa

Note: The Revenue Authority is upbeat about meeting the financial year 2016 expected tax revenue collections of USD 5.7 Billion, in view of the 16.4% increase in revenue collection in Q1 2016.

ECONOMIC OUTLOOK

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

1,400.0

Q12012

Q12013

Q12014

Q12015

Q12016

Mill

ions

-9.0%

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

2009

2010

2011

2012

2013

2014

2015

(f)

Debt Fiscal Balance (RHS)



Declining prices of natural gas in the global market also threaten to derail inflow of foreign currency into the economy as investors take a back seat. This could pile additional pressure on the shilling in 2016.

TanzaniaShillingtoUSD

NaturalGasGlobalPriceIndex(2010=100.0)


Source: OECD Data, StratLink Africa

Tanzaniashillingchangeyear-on-yeartoDecember31st,2015

Tanzaniashillingchangemonth-on-monthtoDecember31st,2015

-25.1%

+0.7%

MonetaryPolicyLikelytoRemainTight

Monetary policy is likely to remain tight through Q1 2016 in view of the shilling’s weakness and rising inflation. The local unit will continue to depreciate under the pressure of a weakening current account deficit.

Bank of Tanzania has maintained the statutory minimum reserve (SMR) ratio at 10.0% since May 2015 after a 200.0 bps hike amid efforts to support the embattled local unit.

Inflation:ContainedbutRisksstillLinger

Policy makers will be conscious to contain inflation pressures over the coming quarters given that headline inflation has trended above the Bank of Tanzania’s 5.0% target, since May 2015. The rise in the food index is bound to keep inflation on the uptick in Q1 2016

ComparativeHeadlineInflation

Source: National Bureau of Statistics, StratLink Africa

TANZANIA

1,650.0

1,750.0

1,850.0

1,950.0

2,050.0

2,150.0

2,250.0

2,350.0

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

140.0

Q1,

2014

Q2,

2014

Q3,

2014

Q4,

2014

Q1,

2015

Q2,

2015

127.8

115.5

102.0 101.6

85.4

68.0

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%Ja

n-15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov-

15Tanzania Uganda Kenya



T-BillYieldTrend

Source: Bank of Tanzania, StratLink Africa



T-BillBid-to-CoverRatios

InterbankRate

TANZANIA

Focus: The money market experienced anomalous liquidity tightening in Q2 2015 as the Bank of Tanzania sought to arrest the sliding shilling as it underperformed on the back of depressed commodity prices as well as rallying greenback. The Bank of Tanzania has raised the statutory minimum reserve (SMR) ratio by 200.0 bps to 10.0% in May 2015 amid efforts to support the embattled local unit, reflecting the start of the increase in yields from May 2015. Yields are likely to moderate in Q1 2016 given the rise in liquidity in the last quarter of 2015. We note, however, that high inflation and domestic revenue mobilization challenges persist as risks that could nudge yields upwards in the near term.

The 91 Day, 182 Day and 364 Day papers closed 2015 at 9.2%, 17.4% and 18.7%, respectively, on the back improved liquidity conditions in Q4 2015.

DEBT MARKET UPDATE

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Dec-

14

Feb-

15

Apr-1

5

Jun-

15

Aug-

15

Oct-1

5

Dec-

15

91 Day 182 Day 364 Day

-0.3

0.2

0.7

1.2

1.7

2.2

2.7


Mar-15 Apr-15 May-15 Jun-15Jul-15 Aug-15 Sep-15 Oct-15Nov-15 Dec-15

Similarly, bid-to-cover ratios for the short-term instruments registered an increase, month-on-month, despite tightening liquidity.

Liquidity has tightened in the money market with the interbank rate standing at 16.0% as at December 31st, 2015, an increase of 800.0 bps month-on-month.

010,00020,00030,00040,00050,00060,00070,00080,00090,000100,000

2.5%7.5%

12.5%17.5%22.5%27.5%32.5%37.5%42.5%47.5%

31-D

ec

28-F

eb

30-A

pr

30-Ju

n

31-A

ug

31-O

ct

31-D

ec

Volume (Tzs Mln) Interbank Rate (LHS)



TANZANIA

DaresSalaamStockExchange

DaresSalaamStockExchange,(Month-on-Month)



Focus: The market experienced a bear run for the better part of 2015 driven by an adverse business environment on the back of a heated election cycle. With the country still in transition mood, we expect the downturn to persist as investors keep an eye on policy direction indications from the new administration.

The planned listing of state-owned power utility firm TANESCO, Mufindi Community Bank and YETU Microfinance are also expected to be listed in Q1 2016 in a bid to stimulate trading at the exchange in 2016 could excite investor interest in the market potentially reversing the nosedive

Commercial Services Counters Outperform Peers in2015

Sector indices registered bearish results in the period under review. However, the Commercial Services index reported a 329.0 bps increase defying the market downturn in the year to December 31st, 2015. The Banking index registered the highest decline of 126.0 bps year-on-year, nonetheless, the index surged by 23.2% to 3,953.3 units, month-on-month as of December 31st, 2015 on the back of profitability reporting by banks.

EQUITYMARKETUPDATE

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

2,250.0

2,350.0

2,450.0

2,550.0

2,650.0

2,750.0

2,850.0

31-D

ec

28-F

eb

30-A

pr

30-Ju

n

31-A

ug

31-O

ct

31-D

ec

Mill

ions

Volume DSE All Share Index (LHS)

AllShareIndexmonth-on-monthchangetoDecember31st,2015

AllShareIndexyear-on-yearchangetoDecember31st,2015

-1.7%

-7.4%

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

2,250.0

2,270.0

2,290.0

2,310.0

2,330.0

2,350.0

2,370.0

2,390.0

2,410.0

30-N

ov

7-De

c

14-D

ec

21-D

ec

28-D

ec

Thou

sand

s

Volume DSE All Share Index (LHS)

Source: Dar es Salaam Stock Exchange, StratLink Africa

SegmentIndicesChangebetweenDecember2014andDecember2015

0.0

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

6,000.0

7,000.0

IndustrialIndex

CommercialServices

Index

Banking Index

Dec-14 Dec-15


LOOMING ELECTION & ECONOMIC DOWNTURN: ZAMBIA’S TWIN CHALLENGES IN 2016

ZAMBIA MARKET UPDATE

“The challenge of a weak monetary environment has been carried forward to 2016 with investors keen to observe how the central bank will address fragility exhibited by the Kwacha.”



GDP:USD27.1Bln|Population:15Mln

ElectionsamidstEconomicSlowdown

Focus: Zambia is slated to have elections in September 2016 amidst general economic slowdown. The main opposition party, United Party for National Development, will be capitalizing on the adverse economic climate to gain traction in the political arena ahead of the election. The opposition has been emboldened by the fact that incumbent President, Edgar Lungu, won the January 2015 presidential by-election by a wafer thin margin (clinching 48.3% majority against 46.7% for Hakainde Hichilema) suggestive of a potentially neck-to-neck race in 2016. The precedent set by Nigeria in 2015 (in which the opposition won the election) has been a major confidence booster for countries such as Zambia anticipating elections.

The passing on of two seating presidents (LevyMwanawasa, 2008 and Michael Sata, 2014) andRupiah Banda’s one term stint as President havecolludedtoplacethecountryinanearconstantstateof transition. For investors, the position on mininglaws, as the government looks to boost revenuemobilization, is likely to stick out as a key issue in2016 given developments in 2015 that saw leviesrevised in January before reverting to the previouscodefollowinginvestoroutcryinAugust1.

Managing Expectations: Tough Undertaking forPatrioticFront

In May 2015, the government lifted the wage freeze on public servants2 following threats from the Zambia Congress Trade Union to stage demonstrations over the same. This indicates that the state is growing cognizant of the economic realities faced by citizenry and its potential implication on state stability. How the government manages such growing pressures going forward will be a key determinant of risk perception by investors in 2016.

POLITICAL OUTLOOK

1 Bloomberg August 15th, 20152 Lusaka May 01st, 2015

PrivateSectorCredit2014

InvestmentClimateRemainsAttractive

Focus: We expect Zambia to remain attractive for Southern Africa focussed investors despite anemic economic performance driven by two key factors – the ongoing economic slump in South Africa and the revision of mining levies:

• SouthAfrica’sSlump: South Africa is grappling with near economic recession creating a comparatively more uncertain environment in the medium term ─ the economy contracted by 1.3%, year-on-year, in Q2, 2015. Investors are therefore left with little option given the pervasive uncertainty with which Zimbabwe is regarded

• Revision of Mining Levies: The government’s reconsideration of new mining levies in August 2015 is likely to further strengthen investor confidence on the general policy outlook. This will, however, be subject to developments around the 2016 ballot and outcome

BUSINESS ENVIRONMENT

Source: UNCTAD 2014, StratLink Africa

ZAMBIA

SouthernAfrica2014FDIbyCountry

39.2%

33.6%

17.0%

3.7%

2.8%2.7%0.9%

South Africa Mozambique Zambia

Zimbabwe Namibia Botswana

Malawi



Kwacha’sTumbleRattlesInvestorConfidence

Focus: The challenge of a weak monetary environment has been carried forward to 2016 with investors keen to observe how the central bank will address fragility exhibited by the Kwacha. The trend in global prices for copper (an estimated 70.0% of export earnings) is bound to keep the local unit under immense pressure, further undermining investor confidence. We note, however, that the central bank has indicated it will be reinforcing use of the Kwacha as legal tender3

suggesting dollarization of the economy is likely to have been a major challenge in 2015.

Liquidity will be closely monitored in Q1 2016 in a bid to stave off the volatility witnessed in 2015. Other risks that could pile pressure on the local unit would be if the economy suffers another ratings downgrade such as the September 25th, 2015 downgrade by Moodys from B1 (Stable Outlook) to B2 (Negative Outlook)4 that could occasion capital flight from Zambia.

ECONOMIC OUTLOOK


Source: Central Bank of Kenya, StratLink Africa


InterbankRatevsExchangeRate

TenYearEurobondYields

GlobalPriceofCopper(USD/MT)

ZAMBIA

The Kwacha’s weakness has resulted in deteriorating risk perception by foreign investors which can be traced in the evolution of yield in the country’s Eurobond. The ten year Eurobond has seen its yield soar above peers such as Kenya and Nigeria pointing at comparatively high risk perception.

3 Secretary of Treasury Zambia Ministry of Finance4 Moodys Investor Service September 25th, 2015

6 Bloomberg October 2015

5,100.0

5,300.0

5,500.0

5,700.0

5,900.0

6,100.0

6,300.0

6,500.0

6,700.0

6,900.0

7,100.0

Q1,

2014

Q2,

2014

Q3,

2014

Q4,

2014

Q1,

2015

Q2,

2015

Q3,

201

5

ChangeinthepriceofcopperbetweenQ12014andQ32015

-25.1%

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

14.0

15.0

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

05-Ja

n-15

05-M

ar-1

5

05-M

ay-1

5

05-Ju

l-15

05-S

ep-1

5

05-N

ov-1

5

Interbank Rate (LHS) Kwacha to USD

Bank of Zambia hikes statutory reserve ra�o by 400.0 bps to 18.0%

4.5%

5.5%

6.5%

7.5%

8.5%

9.5%

10.5%

11.5%

12.5%

13.5%

12-N

ov-1

412

-Dec

-14

12-Ja

n-15

12-F

eb-1

512

-Mar

-15

12-A

pr-1

512

-May

-15

12-Ju

n-15

12-Ju

l-15

12-A

ug-1

5

12-S

ep-1

512

-Oct

-15

Zambia Kenya Nigeria



Other factors that are likely to have driven the spike in inflation are:

• Impact of energy crisis ─ The energy crisis and rationing of electricity has compelled a number of firms to rely on more expensive alternatives whose impact is being passed on to end consumers

• Surge in food prices ─ Food inflation galloped from 8.1% in September 2015 to 16.2% in October 20156, triggering the spike in overall price levels. This comes on the back of reports of adverse weather conditions that are likely to have impacted negatively on food production

TreasuryBillYields

Source: Bloomberg, Central Bureau of Statistics, StratLink Africa

Source: Bank of Zambia, StratLink Africa

ZAMBIA


5 Bloomberg6 Central Bureau of Statistics

7 Reuters News Agency 8 International Monetary Fund

Spill-overs from Kwacha Weakness Ripple throughEconomy

October 2015’s spike in inflation (from 7.7% in September 2015 to 14.3% in October 2015) was driven, in part, by the deterioration of the Kwacha that has occasioned a rise in the cost of imported commodities. This explains the 300.0 bps hike of the benchmark rate by Bank of Zambia in November 2015 to 15.5%5.

5.0%

7.0%

9.0%

11.0%

13.0%

15.0%

17.0%

Jul-1

4

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Infla�onMonetary Policy RateFood Infla�on

DEBT MARKET UPDATE

Focus: Yields in the short-term end of the market were stable in the first half of 2015 before posting a general rise in December 2015 reflecting tightening liquidity conditions. The market could also have faced high demand for domestic debt from the government towards the end of 2015. This trend in yields is likely to prevail through Q1 2016 given the 9.0% - 29.0% pay rise awarded to public servants effective 20167 which comes on the back of depressed earnings from copper. Note: T-Bill sales rose, year-on-year, by 35.8% in the first nine months of 2015 compared to a rise of 23.5% in the same period between 2013 and 2014.

The deteriorating fiscal position is likely to keep the government’s demand for domestic debt high through 2016, potentially nudging yields upwards. The country’s fiscal deficit is projected to have widened to 7.8% of GDP in 2015 from 6.1% in 20148.

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

19.0%

3 Mnths 6 Mnths 1 Year

Jan-22-2015 Jun-15 Dec-24-2015



EQUITYMARKETUPDATE

FiscalDeficitasPercentageofGDP LusakaStockExchange

Growth(Y-o-Y)inMoneyinCirculation

Source: IMF, StratLink Africa


Source: Bank of Zambia, StratLink Africa

LusakaStockExchange(Month-on-Month)


Inflation Expectations couldDrive YieldsUpward inQ12016

Whereas inflation expectations are likely to have been tamed in the recent past, the recent spike in inflation could see a revision of investors’ perception of the monetary environment. This is also likely to be aggravated by the rise in growth of money supply that could feed into inflation pressure going forward. We expect that this is also nudging yields upwards in the debt market.

ZAMBIA

11 Reuters March 23rd, 201512 Daily Mail August 15th, 2015

-9.0%

-8.0%

-7.0%

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%2009 2010 2011 2012 2013 2014 2015

(f)

4.0%

9.0%

14.0%

19.0%

24.0%

29.0%

34.0%

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

150.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

5,700.0

5,800.0

5,900.0

6,000.0

6,100.0

6,200.0

6,300.0

06-Ja

n-15

06-M

ar-1

5

06-M

ay-1

5

06-Ju

l-15

06-S

ep-1

5

06-N

ov-1

5

Mill

ions

Volume LSE All Share Index

LSEAllShareIndexchangeyear-on-yearasofDecember31st,2015

LSEAllShareIndexchangemonth-on-monthasofDecember31st,2015

-6.3%

-0.2%

0.050.0100.0150.0200.0250.0300.0350.0400.0450.0500.0

5,700.0

5,710.0

5,720.0

5,730.0

5,740.0

5,750.0

5,760.0

5,770.0

30-N

ov-1

5

07-D

ec-1

5

14-D

ec-1

5

21-D

ec-1

5

28-D

ec-1

5

Thou

sand

s

Volume LSE All Share Index




BankingandManufacturingIndices

ZAMBIA

Focus: The market was bearish in 2015 on the back on an adverse economic climate and the passage of new mining levies in January widely deemed to be punitive to investors ─ In January 2015, the government hiked the levy for open pit mines from 6.0% to 20.0% while that for underground operations was raised by 200.0 bps to 8.0% (Both have since been reviewed)9. We expect this trend to prevail through the first half with investors assuming cautious positions in view of rising political temperatures and uncertainty over the state of the economy.

Stocks for banking and manufacturing have been on a downtrend for the better part of the year. On the manufacturing front, we note that the ongoing energy crisis has occasioned negative impact on industry. Additionally, national electricity distributor, Zesco, is expected to hike its tariffs by as much as 248.0%10 and is likely to be see investors price in the anticipated impact of a potential rise in the cost of industry.

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

16.0

16.5

17.0

17.5

18.0

18.5

19.0

01-Ja

n-15

01-F

eb-1

501

-Mar

-15

01-A

pr-1

5

01-M

ay-1

5

01-Ju

n-15

01-Ju

l-15

01-A

ug-1

5

01-S

ep-1

5

01-O

ct-1

5

01-N

ov-1

5

Banking Index Manutacturing Index (RHS)

9 www.mining.com10 Bloomberg November 10th, 2015

www.mining.com


GHANA MARKET UPDATE

“Bank of Ghana will be under the spotlight in 2016 as it looks to tame runaway inflation whilst maintaining a favourable environment for accelerating economic growth. In November 2015, inflation crept further north to 17.6% defying the tightening cycle that had been adopted since April 2015.”

DELICATE BALANCING ACT AHEAD FOR BANK OF GHANA IN 2016



GDP:USD48Bln|Population:26.8Mln

Race to the Poll

Focus: Ghana is set for elections in November 2016 at a time when the country’s economy has been plagued by weak performance driven by the slump in commodity prices and a crippling energy crisis. The election is likely to be a litmus test for the country’s track record of peaceful election and transition of power given growing disenfranchisement by the public over the state of the economy. In 2014 and 2015, the state faced recurrent demonstrations over adverse living conditions, an indicator of a restive population. We expect political temperatures to be elevated over the next ten months, potentially dampening investor interest. Incumbent President, John Dramani Mahama, has been cleared to be the flag bearer of the National Democratic Congress (NDC) in the November 2016 poll. Mahama is set to face off with New Patriotic Party’s (NPP) Nana Akufo-Addo in a race that is expected to have the embattled state of the economy as the point of focus. The economy has slowed down during Mahama’s tenure, dragged by high inflation, foreign exchange pressures and fiscal imbalances. Real economic growth has declined from 8.8% in 2012 when he assumed office to 4.0% in 20141.

StrongUndertonesfromJuly2015TalensiBy-Election

NDC’s recapture of the parliamentary seat from opposition New Patriotic Party (NPP) has been widely perceived as an indication of the ruling party’s popularity. Episodes of violence during the by election undermine the confidence that the 2016 poll could be characterized in an environment of peace that has characterized the country’s electoral cycle in the recent past.

POLITICAL OUTLOOK

RealGDPGrowth

1 Business Monitor International

GHANA

Source: Media Reports, StratLink Africa

Source: Electoral Commission, StratLink Africa

Source: Business Monitor International, StratLink Africa

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Growth has slowed under Mahama

TalensiGeneralElection2012Outcome

TalensiBy-Election2015Outcome

41.5%

33.2%

23.4%

1.9%

42.3%

27.9%

27.9%

1.9%

NDCNew Patrio�c PartyPeople's Na�onal Conven�onOthers



Trends in Eurobond subscription also suggest investor appetite for Ghana’s debt is on the downtrend. The latest issuance (October 2015) reported 100.0% oversubscription, the lowest rate since the debut bond was floated in 2007. The onus will be on the new administration (after the November 2016 election) to undertake policy measures aimed at strengthening the business climate.

EnergyCrisisDerailsBusinessProspects

Focus: The energy crisis continues to derail the country’s attractiveness as business decry underutilized potential. The country is estimated to lose USD 622.0 Million per annum2 (representing about 1.8% of GDP) owing to erratic power supply following the ongoing energy crisis. We expect World Bank’s provision of USD 700.0 Million guarantee for the Sankofa Gas Project (SGP) will lay the ground work for addressing the energy crisis going forward. The guarantee enables Ghana to seek funds from private investors towards SGP.

Firms’LossduetoElectricityOutage(%ofSales2013)

Source: World Bank Enterprise Survey, StratLink Africa

ForeignDirectInvestmentInflow(USDMln)

Ghana’sEurobondIssuanceHistory

Source: UNCTAD, StratLink Africa

Source: Media Reports, StratLink Africa

AdverseClimateSubduesInvestorInterest

Foreign Direct Investment flows suggest Ghana is already taking a beating from its adverse economic climate, reporting the slowest year-on-year growth (4.0%) in West Africa between 2013 and 2014 placing it behind peers such as Cote d’ Ivoire which posted 13.4% in the same period.

Note: In February 2015, Ivory Coast’s Eurobond reported 400.0% subscription of its targeted USD 1.0 Bln3.


GHANA

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

Ghana Nigeria Zambia Kenya

11.5%11.0%

5.5% 5.5%

2 Institute of Scientific Social and Economic Research, University of Ghana 3 Reuters News Agency

-100.0%-50.0%0.0%50.0%100.0%150.0%200.0%250.0%300.0%350.0%400.0%

-300.0200.0700.0

1,200.01,700.02,200.02,700.03,200.03,700.0

2000

2002

2004

2006

2008

2010

2012

2014

FDI (LHS) Year-on-Year Growth

Issuance Over-subscription Yield

Oct-07 400.0% 8.5%

Sep-14 200.0% 8.1%

Aug-13 220.0% 7.9%

Oct-15 100.0% 10.2%



BankofGhanaontheSpot

Focus: Bank of Ghana will be under the spotlight in 2016 as it looks to tame runaway inflation whilst maintaining a favourable environment for accelerating economic growth. In November 2015, inflation crept further north to 17.6% defying the tightening cycle that had been adopted since April 2015. Between January and December 2015, the monetary rate was hiked by 800.0 bps to 26.0% making one of the most aggressive contractionary monetary policy stances in Sub-Saharan Africa.

In this regard, benchmark rate hikes, if any, in Q1 2016 are likely to be modest (25.0 – 100.0 bps) with a view to catalysing growth momentum in 2016.

Can the Cedi Maintain Resilience?

The Cedi closed 2015 on a resilient path buoyed by receipt of USD 1.8 Bln in loan proceeds by the Cocoa Board in September 2015 and moderation by the greenback after a strong rally earlier in the year. Bank of Ghana is likely to keep liquidity tight in Q1 2015, supporting the Cedi below the 4.0 units of exchange to the greenback. The interbank rate closed 2015 at 25.3%, 160.0 bps higher than it started the year pointing at tightened liquidity conditions.

The economy’s deceleration presents Bank of Ghana with a delicate balancing act as it risks crippling growth through further tightening in 2016.

ECONOMIC OUTLOOK


EconomicGrowth

CeditoUSDExchangevsInterbank


Source: National Statistical Service, StratLink Africa


GHANA

16.2%16.4%16.6%16.8%17.0%17.2%17.4%17.6%17.8%18.0%

15.5%

17.5%

19.5%

21.5%

23.5%

25.5%

27.5%

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

Infla�on (RHS) Monetary Policy Rate

3.3%

3.5%

3.7%

3.9%

4.1%

4.3%

4.5%

4.7%

Q4 2014 Q1 2015 Q2 2015 Q3 2015

4.5%

4.2%

3.8%

3.6%

3.0

3.2

3.4

3.6

3.8

4.0

4.2

4.4

4.6

22.5%

23.0%

23.5%

24.0%

24.5%

25.0%

25.5%

5-Ja

n-15

5-M

ar-1

5

5-M

ay-1

5

5-Ju

l-15

5-Se

p-15

5-No

v-15

Cedi to USD(RHS) Interbank Rate

CedidepreciationbetweenJanuary01st2015andDecember31st,2015

-18.8%



DEBT MARKET UPDATE

FiscalBalanceasPercentageofGDP

Short-TermYields



Declining yields in short-term papers are favourable for the government which has seen its proportion of short-term debt rise between 2014 and 2015 relative to medium and long-term debt.

GHANA

22.0%22.5%23.0%23.5%24.0%24.5%25.0%25.5%26.0%26.5%27.0%

02-Ja

n-15

02-F

eb-1

502

-Mar

-15

02-A

pr-1

502

-May

-15

02-Ju

n-15

02-Ju

l-15

02-A

ug-1

5

02-S

ep-1

502

-Oct

-15

02-N

ov-1

502

-Dec

-15

91 Day 182 Day

Focus: Short-term yields were on a general downtrend in 2015 in what we assess was driven principally by austerity measures that could have reduced government demand for short-term debt. The government is reported to have slashed the budget for agriculture by USD 10.5 Mln in November 20154; a move that could suggest decreasing need for domestic borrowing. Data from Bank of Ghana also indicates that the overall budget balance as a percentage of GDP stood at 1.1% in Q2, 2015 compared to 2.2% in the same period in 2014. Yields are likely to exhibit resistance to further decline in Q1 2016 given the high rate of inflation.

Note: The visit by IMF staff between October 21st and November 5th, 2015 emphasized need for restoring fiscal stability. Part of the focus is likely to have been on the comparatively high cost of short-term borrowing and the need to address the same.

In 2015, the 90 Day paper saw its yield decline by 300.0 bps between January and December, closing the year at 22.8% while the 182.0 Day’s yield declined by 200.0 bps to 24.4%. These yields could decline further given the reduction in Ghana’s fiscal deficit in 2015 and projections set for 2016.

4 Ghanaweb.com

DomesticDebtComposition

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

2014 2015

Short-Term Medium-Term Long-Term


-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%2010 2011 2012 2013 2014 2015 2016

(f)



EQUITYMARKETUPDATE

GhanaStockExchangeCompositeIndex(Month-on-Month)

GhanaStockExchangeCompositeIndex


Focus: Like most markets across the region, the stock exchange was bearish in 2015 undermined by an adverse economic climate and exit by foreign investors in the face of growing uncertainty in emerging and frontier markets. Banking stocks took a beating, dragging the market down with the sector’s index having posted a 16.7% decline between the start and the end of the year (2015). High yields in the fixed income market also provided investors with alternative investment that we believe played a role in decelerating investor interest at the exchange. In the first half, we expect bearish sentiments to persist as investors assess the political risk in view of the much awaited November 2016 election.

GHANA


GhanaCompositeIndexyear-on-yearchangeasatDecember31st,2015

-13.9%

GhanaCompositeIndexMonth-on-MonthChangeasatDecember31st,2015

0.02%

BankingStocksIndex


0.0

1.0

2.0

3.0

4.0

5.0

6.0

1,950.02,000.02,050.02,100.02,150.02,200.02,250.02,300.02,350.02,400.02,450.0

26-N

ov-1

4

26-Ja

n-15

26-M

ar-1

5

26-M

ay-1

5

26-Ju

l-15

26-S

ep-1

5

26-N

ov-1

5

Mill

ions

Volume Ghana Composite Index (LHS)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

1,950.0

1,955.0

1,960.0

1,965.0

1,970.0

1,975.0

1,980.0

17-N

ov-1

5

24-N

ov-1

5

01-D

ec-1

5

08-D

ec-1

5

15-D

ec-1

5

Mill

ions

Volume Ghana Composite Index

1,830.0

1,930.0

2,030.0

2,130.0

2,230.0

2,330.0

2,430.0

2,530.017

-Dec

-14

17-F

eb-1

5

17-A

pr-1

5

17-Ju

n-15

17-A

ug-1

5

17-O

ct-1

5

17-D

ec-1

5


MIXED MONETARY SIGNALS AS SHILLING FIRMS AND INFLATION RISE PERSISTS

UGANDA MARKET UPDATE

“Relative stability by the Shilling against major currencies and moderation of rise in inflation between October and December 2015 is likely to see Bank of Uganda hold back on its monetary tightening efforts in the near term.”




MuseveniSettoClinchFifthTerm



1 Bloomberg August 2015

1.IncreasingCostofCredit

UGANDA

Focus: The country heads for a general election in February 2016 with incumbent President Yoweri Museveni likely returning to office for a fifth term. Uganda’s political risk perception deteriorated in 2015 driven by incidences of intimation against opposition and dissenting voices. The opposition has remained largely weak and disintegrated, diminishing chances of regime change in the forthcoming poll. Museveni is also set to benefit from National Resistance Movement’s entrenched advantage of incumbency. The election may prove to be the toughest challenge that incumbent President Museveni has faced in Uganda’s election history given his fall-out with long-time ally Amama Mbabazi.

KeyPolicyFocusPostFebruary2016Polls

The oil price shock and Uganda’s bilateral relations are likely to be the key policy considerations by foreign investors with regard to Uganda’s business environment beyond the 2016 poll:

• Oil Price Shock: With 6.5 Bln barrels of proven oil reserves, Uganda is poised to become one of Africa’s key players in commercial oil production. With production earmarked for 2017, investors will be keen to see how the next administration aligns its policy in view of depressed prices

• Foreign Relations: President Museveni has lately raffled feathers with sections of development partners notably for his position on the anti-gay discussion in the country, as well as high- handedness in clamping down on perceived government criticism and opposition, risking the country’s fiscal position given its reliance on donor aid. Investors will be keen to see how this develops beyond the next election and whether Uganda warms up deteriorated relations

Focus: The climate was unfavourable in 2015 owing to the election risk coupled with monetary pressures elicited by the weakening shilling. Nonetheless, with the election slated for early 2016 and government focus on capital spending, the business climate is likely to improve in the year ahead. Electricity connectivity and access to credit are some of the key areas that the country should focus on to improve the business environment in 2016.

Between January 2015 and July 2015, the average commercial bank lending rate mimicked change in the benchmark monetary rate with the former rising by 232.0 bps to 23.0%1 .

Commercial bank lending rates have remained high threatening growth and investment prospects for private sector players in 2015. Averaging 22.2% in November 2015, Uganda’s average lending rate fares poorly against Kenya’s 16.0% and presents a challenge in access to credit which is a key catalyst for a competitive business climate.

BenchmarkMonetaryRatevsCommercialBankLendingRate

19.0%

21.0%

23.0%

25.0%

27.0%

29.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

Jan-

12

Jun-

12

Nov-

12

Apr-1

3

Sep-

13

Feb-

14

Jul-1

4

Dec-

14

May

-15

Oct-1

5Monetary Policy (LHS)Lending Rates




2 The Monitor December 24th , 2015 3 Bank of Uganda

UGANDA

ElectricityConnectivity

Stable and affordable electricity remains one of the largest obstacles to investment in Uganda compared to peers in East Africa such as Ethiopia, Rwanda and Kenya and this has presented an adverse investment climate for the private sector, particularly, the manufacturing sector ─ between 2011 and 2014, manufacturing as a percentage of GDP has declined from 11.0% to 9.6%.


However, electricity consumers in Uganda are set to benefit from lower end-user electricity tariffs, a decline of about 2.5% to USD 0.19 effective January 20162 , a move likely to go a long way in improving the environment by reducing the cost of doing business. We are, however, cautious about Uganda’s reliance on hydroelectric energy generation which has is affected by adverse weather conditions.


ECONOMIC OUTLOOK

Central Bank Likely toHold Back on ContractionaryAdjustmentsinQ12016

Focus: Relative stabilization of the shilling against major currencies and moderation of rise in inflation between October and December 2015 is likely to see Bank of Uganda hold back on its monetary tightening efforts in the near term. The benchmark rate was retained at 17.0% in the last central bank meeting (December 16th, 2015), potentially signalling a wait and see approach that could prevail through Q1 2016. In 2015, the central bank hiked the benchmark rate by 600.0 bps (compared to a 50.0 bps slash in 2014, no change in 2013 and 1,100.0 bps slash in 2012)3 posting its most aggressive tightening cycle in the recent past that threatens to derail economic growth. Inflation is, however, likely to remain on the uptrend driven by the recent El Nino rains that have had a negative impact on crop yields and food supplies.

MonetaryPolicyRatevsInflation

Growth in money supply decelerated through 2015 reflecting transmission of the monetary tightening that should help tame inflation going forward.

CountryRank(Outof189.0)

Uganda 167.0

Kenya 127.0

Rwanda 118.0

Tanzania 83.0

HydroelectricGenerationas%ofTotalElectricityGeneration

30.0%

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

2013 2014 2015 2016 (f) 2017 (f)

Uganda Kenya

-3.0%

2.0%

7.0%

12.0%

17.0%

22.0%

27.0%Ja

n-12

May

-12

Sep-

12Ja

n-13

May

-13

Sep-

13Ja

n-14

May

-14

Sep-

14Ja

n-15

May

-15

Sep-

15

Monetary Policy Rate Infla�on



Source: Bank of Uganda, StratLink Africa

UGANDA


PrivateSectorCreditSuggestsEconomyisCoolingOff

Declining growth in private sector credit in Q4 2015 will be a key factor prompting the central bank to assume more cautious monetary policy stance as it risks slowing down the economy.

PrivateSectorCreditTrend

MoneySupply

DEBT MARKET UPDATE

Focus: Liquidity eased in the second half of 2015 after the shilling began exhibiting resilience after a period of high depreciation. Short-term yields maintained a steady uptrend through 2015 on the back of high inflation risk and relatively tight liquidity conditions. In Q1 2016, we are likely to witness mixed performance by yields as liquidity remains comparatively high whilst investors remain on the lookout for the general direction of inflation. Inflation is hovering around the 10.0% mark and presents a key risk consideration for investors especially given the unattractiveness of the stock market that limits options.

T-BillYields


The 91 Day, the 182 Day and the 364 Day, yields declined marginally 50.0, 10.0 and 80.0 bps to 18.3%, 19.5% and 18.3%, respectively, between October 2015 and November 2015. Stability by the shilling creates headroom for the central bank to allow improved liquidity conditions that could ease the upward pressure on yields stemming from investors pricing in inflation consideration.

4.5%

5.5%

6.5%

7.5%

8.5%

9.5%

10.5%

11.5%

12.5%

13.5%

14.5%

3.1

3.2

3.2

3.3

3.3

3.4

3.4

Jan-

15

Feb-

15

Mar

-15

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Billi

ons

Money Supply (USD), LHS

Growth (Year-on-Year)

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

Feb-

14

Apr-1

4

Jun-

14

Aug-

14

Oct-1

4

Dec-

14

Feb-

15

Apr-1

5

Jun-

15

Aug-

15

Oct-1

5


15.0%

17.0%

19.0%

21.0%

23.0%

25.0%

27.0%

2.9

3.0

3.1

3.2

3.3

3.4

3.5

3.6

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Billi

ons

Private Sector Credit (USD),LHSGrowth (Year-on-Year)



ShillingtoUSD,year-on-year


UGANDA

-22.2%UgandaShillingyear-on-

yeardepreciation

-1.3%UgandaShillingmonth-on-

monthdepreciation

Note: The 91 Day T-Bill yield mimics inflation as investors demand a premium given the unabated rise of the latter between January 2015 and November 2015.

InterbankRate,Inflationand91DayT-BillYield


EQUITYMARKETUPDATE

UgandaStockExchangeAllShareIndex


AllShareIndexyear-on-yearchangetoDecember31st,2015

-8.5%

AllShareIndexmonth-on-monthchangetoDecember31st,2015

+0.5%

UgandaStockExchangeAllShareIndex(Month-on-Month)


2,400.0

2,600.0

2,800.0

3,000.0

3,200.0

3,400.0

3,600.0

3,800.0

Jan-

15

Feb-

15M

ar-1

5

Apr-1

5M

ay-1

5

Jun-

15Ju

l-15

Aug-

15

Sep-

15Oc

t-15

Nov-

15De

c-15

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%10.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

Interbank 91 DayInfla�on (RHS)

1,700.0

1,750.0

1,800.0

1,850.0

1,900.0

1,950.0

2,000.0

2,050.0

2,100.0

2,150.0

31-D

ec-1

4

28-F

eb-1

5

30-A

pr-1

5

30-Ju

n-15

31-A

ug-1

5

31-O

ct-1

5

31-D

ec-1

5

1,700.0

1,720.0

1,740.0

1,760.0

1,780.0

1,800.0

1,820.0

30-N

ov-1

5

07-D

ec-1

5

14-D

ec-1

5

21-D

ec-1

5

28-D

ec-1

5



Focus: The market was predominantly bearish in 2015 on the back of high monetary risks in the economy characterized by a weakened shilling and rising inflation. Q1 2016 is likely to see this trend persist in view of the forthcoming election. High yields in the fixed income market also colluded to depress investor interest in the stock exchange. Performance of counters cross-listed from Kenya’s exchange will be critical in 2016 with East African Breweries Ltd, Kenya Commercial Bank Ltd and Equity Bank Ltd accounting for 71.3% of market capitalization as at January 05th, 2016. This suggests the bear run at the Uganda Stock Exchange is likely to persist given the below target performance posted by a number of listed entities at the Nairobi Securities Exchange.

MarketCapitalization


Electricity distributor, Umeme Ltd, will also be a counter to watch given its collaboration with government in 2015 towards investment programmes such as implementation of the 183.0 MW Isimba Hydro Project and the 600.0MW Karuma Hydro Project.

UGANDA

71.3%

28.7%

EABL,KCB,EBL & NMG Other Counters


WEAK COMMODITY PRICES UNDERMINE ECONOMY’S REBOUND

RWANDA MARKET UPDATE

“Rwanda’s adherence to a constitutional review process in revision of term limits comes as dividend for the political risk outlook in 2016 especially against the backdrop of the strife that has engulfed Burundi following President Pierre Nkurunziza’s third term.”





1 The Daily Nation November 19th, 2015 2 BMI

RWANDA

KagameClearedforaThirdTerm

Source: East African Community, StratLink Africa

Focus: Rwanda ushers in 2016 free of debate on the constitutionality of a third bid for the President by Paul Kagame following the December 2015 referendum in which the massess voted overwhelmingly (98.4%) in favour of additional terms for the incumbent (the new provisions allow Kagame to view for an additional seven year term afterwhich he will be eligible for two five year terms). Rwanda’s adherence to a constitutional review process in prolongation of term limits comes as dividend for the political risk outlook in 2016 especially against the backdrop of the strife that has engulfed Burundi following Pierre Nkurunziza’s third term. Rwanda could, however, face strained relations with a section of development partners (who have termed the new provision as an exercise undermining democracy) in 2016. The special and local council elections slated for February-March 2016, are likely to set the mood for the political environment throughout the year.

PotentialStraininInternationalRelations

Rwanda has had diplomatic spats with its development partners raising questions about future relations. The United States of America had threatened to review ties if the constitutional amendment was successful2. Foreign development assistance makes up 35.6% of all government revenues3 and the anticipated dented donor enthusiasm may have a damaging effect on Rwanda’s economy, despite recent efforts to wean itself off donor reliance for budgetary support. This is likely to add onto the pressure the country is facing following alleged involvement with the FDLR rebels in Eastern Democratic Republic of Congo.

Intra-RegionalTiestoContinueShapingAgenda

Focus: Rwanda has been pursuing efforts aimed at enabling its businesses deepen penetration in the East African market and this is likely to remain a key agenda for 2016. The country has over the years suffered trade imbalance with all the major economies in the region (Kenya, Uganda and Tanzania) placing its traders at a disadvantaged position. In the last two years, Rwanda, Kenya and Uganda have forged closer integration ties including the removal of work permit requirements that has been a major boost for cross-border mobility of labour. In the last two years, Rwandan companies such as beverage manufacturer, Bralirwa, have faced adverse business conditions in traditional markets such as the Democratic Republic of Congo, creating need for an inward looking strategy towards East Africa.

RwandaTradeBalancewithEastAfricaTradeCommunity(USDMln)

-250.0

-200.0

-150.0

-100.0

-50.0

0.0

50.0

100.0

150.0

2008 2009 2010 2011 2012 2013

Uganda Kenya Tanzania



Source: National Bank of Rwanda, StratLink Africa


4 2015 Q3 Economic and Financial Developments and Prospects Report

RWANDA

ECONOMIC OUTLOOK

CommodityPricetoWeighDown2016Growth

Focus: Economic growth momentum showed signs of decelerating towards the end of 2015 in what we assess was driven by unfavourable commodity prices. This has weakened the economy’s rebound from the 2013/14 slump, taking growth below the traditional 7.0% psychological band in Q3 2015. We expect the overhang of this trend to spill-over into Q1 2016 as the price of key commodities in the global market remain depressed.

PercentageChangeinCommodityPrices,(Quarter-on-Quarter)

Unlike regional peers such as Kenya and Uganda, Rwanda maintained an accommodative monetary policy in 2015 and this is likely to remain a growth catalyst in Q1 2016 supported by the continued investment in the private sector. Outstanding credit to the private sector increased by 26.3%, year-on-year, as of November 2015, compared to an increase of 17.5% in the same period a year earlier, auguring well for private sector investment and consumption.

GDPGrowth,(Quarter-on-Quarter)

Source: National Institute of Statistics of Rwanda, StratLink Africa

CurrentAccountBalanceRemainsintheRed

The plunge in commodity prices will keep the current account in deficit in 2016 having been projected to stand at 10.6% of GDP in 2015 and 9.6% in 2016. Rwanda’s exports in general dropped in value by 7.9% in the year to November 2015 despite a 20.2% growth in export volumes, owing to unfavourable international commodity prices .

CurrentAccountBalanceasperecentageofGDP

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Q41

3

Q11

4

Q21

4

Q31

4

Q41

4

Q11

5

Q21

5

Q31

5

BeveragesCerealsMinerals

2.5%

3.5%

4.5%

5.5%

6.5%

7.5%

8.5%

2013

Q3

2013

Q4

2014

Q1

2014

Q2

2014

Q3

2014

Q4

2015

Q1

2015

Q2

2015

Q3

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2009

2010

2011

2012

2013

2014

2015

(f)

2016

(f)



RWANDA

DEBT MARKET UPDATE

Source: National Institute of Statistics, StratLink Africa

Source: National Institute of Statistics, StratLink Africa

FrancWeathersMonetaryStorm

The effects of Rwanda’s poor export earnings and a stronger greenback in 2015 were felt in the foreign exchange market as high demand for the greenback was met with low supply, admittedly one of National Bank of Rwanda’s top challenges of 2015. Consequently, the local unit depreciated by 7.7% year-on-year as at January 02nd, 2015, the highest loss in a five ─ year period since 2010, against the bank’s target of an annual depreciation of 5.0%.

Despite a harsh monetary environment, the franc maintained resilience in 2015 emerging as the least affected in the currency rout that was witnessed for the better part of 2015 on the back of declining revenues and a stronger greenback.

FranctoUSD,year-on-year


Focus: Yields in the T-Bill market were on the downtrend in the first half of 2015 reflecting subdued appetite for domestic debt by the government. This trend reversed in the latter half as inflation assumed an uptick and liquidity tightened relatively to support the Franc against depreciation. Nonetheless, there has been a mild rise in domestic borrowing of 0.3% to USD 63.9 million, month-on-month as of November 2015; from a low of USD 40.3 million in September 2015, and this could keep yields on the uptrend if sustained.

Note: Inflation rose from 1.4% in January 2015 to 4.8% in November 2015.

The 91 Day paper and 364 Day paper yields increased by 15.0 bps and 33.0 bps to 4.2% and 7.0%, as at the end of December 2015 while the 182 Day paper saw its yield marginally decrease by 15.0 bps to 5.4% in the same period.

AmountBorrowedthroughT-Bills(USDMln)

T-BillYieldsRwandafrancmonth-on-monthappreciationtoJanuary2nd,2015

+0.4%

Rwandafrancyear-on-yeardepreciationtoJanuary2nd,2015

-7.7%

680.0

690.0

700.0

710.0

720.0

730.0

740.0

750.0

760.0

770.0

780.0

Jan-

15

Feb-

15M

ar-1

5

Apr-1

5M

ay-1

5

Jun-

15Ju

l-15

Aug-

15

Sep-

15Oc

t-15

Nov-

15De

c-15

35.0

45.0

55.0

65.0

75.0

85.0

95.0

105.0

Oct-1

4

Dec-

14

Feb-

15

Apr-1

5

Jun-

15

Aug-

15

Oct-1

5

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15




RWANDA

InterbankRate

Source: National Bank of Rwanda, StratLink Africa




Investors’ anticipation of further build up in inflation risk based on the currency volatility will serve to stoke potential uptick in yields in Q1 2016. As such, the National Bank of Rwanda is bound to keep a cautious eye on monetary management in 2016 to mitigate excessive liquidity in the money market.

MarketLooksForwardtoaVibrantYear

Focus: The market witnessed in two new listings – Equity Group Holdings Limited and Crystal Telecom, in 2015 which excited investor interest stoking a short-lived rally in June 2015 that disrupted the general downtrend. The stock exchange is working on full automation and listing Real Estate Investment Trust (REIT) products as well as regional infrastructure to link the East African Community (EAC) markets by Q1 2016, in a bid to diversify and stimulate the exchange.

Beer manufacturer, Bralirwa, and Bank of Kigali continue to post bearish trends and are likely to continue undermining the market in Q1 2016. Bralirwa, the largest counter by market capitalisation on the bourse, tanked by 52.4% year-on-year and 3.3%, month-on-month, to close December 2015 at USD 0.2. The company has been grappling with high cost of production that is depressing its revenues ─ the company’s 2015 first half pre-tax profit declined by 25.0% to USD 7.0.

RSEAllShareIndex(Month-on-Month)

BralirwaSharePerformance,(Month-onMonth)

RwandaStockExchangeAllShareIndex

-54.2%Bralirwashareyear-on-yearchange

-3.3%Bralirwasharemonth-on-monthchangeto

December31st,2015

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

EQUITYMARKETUPDATE

120.0

125.0

130.0

135.0

140.0

145.0

150.0

155.0

160.0

165.0

Oct-1

4

Dec-

14

Feb-

15

Apr-1

5

Jun-

15

Aug-

15

Oct-1

5

Dec-

15

130.5130.6130.7130.8130.9131.0131.1131.2131.3

Nov-

15

Dec-

15

Dec-

15

Dec-

15

Dec-

15

150.0

200.0

250.0

300.0

350.0

400.0

450.0

5-De

c

5-Fe

b

5-Ap

r

5-Ju

n

5-Au

g

5-Oc

t

5-De

c


ANGOLA MARKET UPDATE

“On the fiscal front, the country is likely to face a less strenuous year given the USD 1.5 Billion October 2015 Eurobond proceeds and World Bank’s USD 650.0 Million support received in 2015.”

MONETARY PRESSURES REMAIN ELEVATED AS FISCAL BURDEN EASES



Re-engineeringMPLAAheadof2017

Focus: The political landscape will be dominated by succession politics in 2016 ahead of the 2017 general election. Investors will focus on the ruling party (MPLA’s) Seventh Congress slated for August 2016 in which the party is widely expected to re-engineer itself in structure and composition in readiness for the next election. Reports indicate that 30.0% of the party’s composition will be reserved for delegates under 35.0 years while female representation will be expected to constitute at least 40.0%1. Angola has had one President for 36.0 years and the prospect of transition is likely to present sentiments of uncharted waters amongst investors. By and large, there is a pervasive feeling that despite adopting multi-party democracy in 1992, the country suffers constrained democratic space. In November 2013, Human Rights Watch called for investigation into what it termed as arbitrary arrest and use of excessive force in dispersing protesters perceived to be under opposition party, UNITA’s, umbrella2.

Note: In 2010, the country adopted a new constitution that did away with direct election of the President. In its stead, it provides that the leader of the party with majority seats in Parliament becomes President.

Recent HistoryCouldEmboldenOpposition

Whereas MPLA won the 2012 election with a decisive margin, it will be noted that its share of the total vote at 71.8% was considerably lower than the 81.6% registered in the 2008 ballot3. At the same time, UNITA’s share of votes scaled up from 10.4% in 2008 to 18.7% in 20124 suggesting growing traction within the electorate.

POLITICAL OUTLOOK

ANGOLA


1 Agencia Angola Press July 4th 20152 Human Rights Watch 20133 Freedom House 20134 Chatham House

Manufacturing and Construction Grow in Share ofEconomy

Focus: Manufacturing and Construction have grown (as a percentage of GDP) between 2009 and 2014 by 40.0 and 220.0 bps to 4.1% and 10.4, respectively, and could be key attraction points for investors scouting for new opportunities in 2016. In manufacturing, Angola is experiencing one of Africa’s fastest growth rates in food consumption and we expect food and beverage processing to be a key attraction.

EvolutionofGDPComposition


Source: Africa Development Bank, StratLink Africa

Country CAGR’10–‘15 FoodConsumption($Bln)

Tanzania 11.7% 17.8

Nigeria 6.8% 60.6

Angola 11.5% 14.1

Kenya 2.2% 14.3


0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

2009 2014

OthersWholesale & RetailFinance & Real EstateTransport & Communica�onConstruc�onManufacturingMiningAgriculture



KwanzatoFaceMountingPressureinQ12016

Focus: It was a turbulent year for the local unit (Kwanza) in 2015 driven by the tank of oil prices. This is bound to remain the key focus in 2016 with the Central Bank having been on aggressive monetary tightening in 2015. The Central Bank is likely to remain hawkish in Q1 2016 with the price of oil remaining weak and elevating foreign exchange risk in the economy.

Note: We observe that the Kwanza exhibited resilience in Q4 2015 in what we assess could have been driven by moderation of the greenback’s rally towards the end of 2015. Additionally, proceeds from the issuance of a USD 1.5 Bln Eurobond in October 2015 and World Bank’s USD 650.0 Mln support5 could have helped support the local unit.

ECONOMIC OUTLOOK

ANGOLA

5 Bloomberg June 02nd, 2015

The decline in foreign exchange reserves held by the Central Bank further indicate waning ability to support the local unit and this could be a pointer towards more depreciation in 2016. Between January 2015 and September 2015, the country’s foreign exchange reserves declined by 12.8% to USD 23.8.

On the fiscal front, the country is likely to face a less strenuous year given the Eurobond and World Bank support received in 2015.

FiscalBalanceasPercentageofGDP



KwanzatoUSDExchangevsMonetaryPolicyRate

ForeignExchangeReservesvsOPECBasketPrice


KwanzachangebetweenJanuary05th,2015andDecember31st,2015

-31.2%

8.8%

9.3%

9.8%

10.3%

10.8%

11.3%

100.0

105.0

110.0

115.0

120.0

125.0

130.0

135.0

140.0

05-Ja

n-15

05-M

ar-1

5

05-M

ay-1

5

05-Ju

l-15

05-S

ep-1

5

05-N

ov-1

5

Kwanza to USD Exchange

Monetary Policy Rate (RHS)

23,000.024,000.025,000.026,000.027,000.028,000.029,000.030,000.031,000.032,000.033,000.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

110.0

120.0

01-Ja

n-14

01-A

pr-1

4

01-Ju

l-14

01-O

ct-1

4

01-Ja

n-15

01-A

pr-1

5

01-Ju

l-15

FX Reserves (Mln USD)

OPEC Basket Monthly Average (LHS,$/Barrel)

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2010 2011 2012 2013 2014 2015 2016(f)


HEADWINDS AS DROUGHT DERAILS GROWTH PROSPECTS

ETHIOPIA MARKET UPDATE

“We expect Ethiopia to register strong economic growth and maintain its status as the Eastern Africa outperformer driven by on-going large-scale government infrastructural investment under the second phase of the Growth and Transformation Plan (GTP II).”



CountrytoLeverageGrowingGeopoliticalSignificance

Focus: Whereas concern still abounds pertaining the credibility of the May 2015 general election, Ethiopia navigated the poll with relative calm buoying the country’s risk perception amongst investors. The visit by USA President, Barrack Obama, augmented the country’s position as a key geopolitical ally in the Horn of Africa region, coming on the back of the 2014 visits by China’s and Japan’s Premiers, Li Keqiang and Shinzo Abe, respectively. Ethiopia has also emerged as a strong geo-strategic partner in the volatile Horn of Africa region playing critical roles such missions as African Union Mission to Somalia (Amisom). We expect Ethiopia to capitalize on this growing significance to boost its political standing as one of Africa’s pivotal states. The ruling party, Ethiopia People’s Revolutionary and Democratic Front, will be at pains to bridge rifts created by allegations of state patronage and intimidation of dissenting voices during the election. Key issues for the government will be:

The Ghost of the Controversial Anti-Terrorism Law(2009)

The Anti-terrorism Law (2009) widely criticised for creating an avenue through which the state can stifle dissenting voices, is bound to continue being a pressure point in the country’s political risk outlook in 2016. Whilst Ethiopia has been a bulwark against regional terrorism, the law has been alleged to be abused in the random arrest of journalists and bloggers. The country has embarked on changes aimed at fostering a sense of national unity beyond the May 2015 election such as the release of four Ethiopian bloggers who were among journalists and bloggers arrested in April 2014 in view of alleged links to terror groups on October 15th 2015.

POLITICAL OUTLOOK

ETHIOPIA


2016:AcaseforImprovingInfrastructureandLogistics

Ethiopia is fast emerging as an investment hub in the Eastern Africa, thus, its ongoing infrastructure developments bode well for the business environment in the landlocked nation. The government has put in place a raft of initiatives likely to shape the business climate in 2016.

1.DiversifyingthePortofDjibouti

Ethiopia plans to commence using the port of Djibouti for imports as well as exports in view of the fast growing economy. We also expect the implementation of the National Logistics Strategy unveiled in April 2015, should be a key focus in 2016.

2.Ethiopia-DjiboutiRailProjectandPipelineDeal

The ongoing construction of the Sebeta-Mieso-Djibouti Railway project will play a major role in easing transportation of cargo from the Port of Djibouti which is reported to account for over 90.0% of the country’s import-export trade1. Similarly, Ethiopia and Djibouti signed a USD 1.4 Billion agreement in November 2015, for the construction of a petrol pipeline which, on completion, will play a major role in reducing fuel transportation cost from the Port of Djibouti.

StatusofInfrastructure

The projects promise to increase the efficiency in Ethiopia’s supply chain by reducing transport costs and potentially lowering the cost of doing business.


1 The Reporter, January 2015



FaminetoDecelerateEconomicGrowth

Focus: The biting drought dims Ethiopia’s economic outlook even as the IMF gives it an elevated economic growth outlook of 8.7% in 2015 and 8.1% in 2016, outperforming its Eastern Africa peers. The worsening drought which is attributed to below normal rainfall has left approximately 10.0 million people in need of urgent food aid.

2016: Can the Economy Maintain its Status as theEasternAfricaOutperformer?

We expect Ethiopia to register strong and stableeconomic growth and maintain its status as theEasternAfricaoutperformerdrivenbyon-goinglarge-scale government infrastructural investment underthesecondphaseoftheGrowthandTransformationPlan (GTP II). Ethiopia’s economic growth mimicsgovernment expenditure in view of the state-lednatureoftheeconomy.

ECONOMIC OUTLOOK

ETHIOPIA

2 Business Monitor International December 15th, 2015

ManufacturingtoDriveGrowthin2016

The manufacturing sector is poised to be the key FDI recipient for Ethiopia in 2016 in view of the planned investments into the sector. Government plans to invest USD 10.0 Billion in development and expansion of industrial parks in the next decade (2015 – 2025) indicative of focus on boosting the manufacturing industry. Ethiopia is fast emerging as a manufacturing hub in the Eastern Africa region driven by export-oriented government reforms and low-cost labour supply.

Gross fixed capital formation rose from 32.7% of GDP in 2011 to 40.3% of GDP in 20142, an indication of the extent of investment over the first phase of the GTP and signalling to further investment in GTP II. We expect that the infrastructural investment will improve operating conditions for investors looking to invest, particularly, in the agriculture and manufacturing sectors.

ManufacturingGrowthRate

Source: BMI, StratLink Africa

Source: National Bureau of Statistics, StratLink Africa

EconomicGrowth

GDP&GrossFixedCapitalFormationGrowth

Source: IMF, BMI, StratLink Africa

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

2004

2006

2008

2010

2012

2014

2016

(f)

Real GDP Growth

Govt Expenditure Growth (RHS)

0.0%5.0%10.0%15.0%20.0%25.0%30.0%

5.0%

7.0%

9.0%

11.0%

13.0%

2011 2012 2013 2014 2015(f)

2016(f)

GDP Fixed Capital Forma�on (RHS)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2010 2011 2012

Ethiopia Kenya



The planned construction of special economic zones is bound to attract foreign investment into the manufacturing sector given planned incentives such as exemptions from certain custom duties and taxes.

MountingInflationRiskfromPersistentDrought

Ethiopia is likely to face mounting inflationary pressures in 2016 attributable to rising food prices in the wake of persistent droughts.

The threat of inflation is bound to be aggravated by the weakening Birr which, comparatively was resilient in 2015. We observe that the local unit, however, remains weak and is bound to remain a point of fragility in the economy’s 2016 near-term outlook on the back of deteriorating balance of payments.

ETHIOPIA

The weakening of the Birr comes on the back of depressed coffee prices in the global markets.


InflationvsFoodInflation,year-on-year

EthiopianBirrtoUSD

GlobalCoffeePrices(USCents/lb)

Source: Central Statistical Agency, StratLink Africa


EthiopianBirrdepreciationyear-on-yearasatJanuary4th,2016

EthiopianBirrdepreciationmonth-on-monthasatDecember31st,2015

-5.3%

-1.1%

20.0

20.2

20.4

20.6

20.8

21.0

21.2

21.4

Jan-

15

Feb-

15M

ar-1

5

Apr-1

5

May

-15

Jun-

15

Jul-1

5

Aug-

15

Sep-

15

Oct-1

5

Nov-

15

Dec-

15

90.0110.0130.0150.0170.0190.0210.0230.0250.0270.0

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

f

2016

f

2.5%

4.5%

6.5%

8.5%

10.5%

12.5%

14.5%

16.5%

Sep-

14

Nov-

14

Jan-

15

Mar

-15

May

-15

Jul-1

5

Sep-

15

Nov-

15

Infla�on Food Index



STRONG NON-OIL GROWTH BUFFERS ECONOMY AGAINST OIL PRICE SHOCK

GABON MARKET UPDATE

“We expect Gabon to remain one of Central Africa’s most attractive investment destinations in 2016 driven by its economic diversification agenda that has cushioned it, relatively, against adverse effects of the collapse in oil prices.”



Eyeson2016Election:OnthePoliticalChessBoard

Focus: Gabon is set for a presidential election in August 2016 with a potentially fragile environment likely to keep investors cautious over political risk. Protests rocked the capital, Libreville, in April 2015 following the death of opposition luminary Andre Mba Obame1. The protests bespeak salient political tensions reminiscent of the unrest that characterized the disputed victory of Ali Bongo Ondimba in the 2009 presidential poll2. Ondimba’s appointment of opposition stalwart, Jean de Dieu Moukagni Iwangou, hitherto an outspoken critic of the state, to the cabinet in September 20153, has been widely interpreted as a charm offensive aimed at muzzling criticism ahead of the polls.

Bloated Cabinet in the Face of Austerity: Cause forPublicDisenfranchisement

The increase in cabinet ministers from 34 to 41, at a time when the economy is grappling with fiscal strain is bound to elicit concern from the public. The country has already faced industrial action from teachers and a section of health workers on demand for higher wages4. The wave of industrial action and growing dissatisfaction over the state of the economy places the government in an increasingly precarious position ahead of the election.

Note: Teachers have demanded a 274.8% increase in minimum monthly salary to USD 515.0 (300,000.0 Central African Francs)5 having rejected the government offer of an 18.0% increase.

POLITICAL OUTLOOK

GABON


GabontoRetainPolePositioninCentralAfrica

Focus: We expect Gabon to remain one of Central Africa’s most attractive investment destinations in 2016 driven by its economic diversification agenda that has cushioned it, relatively, against adverse effects of the collapse in oil prices. Cameroon, a peer oil exporting economy, suffered contraction in FDI between 2009 and 2014 whilst Equatorial Guinea posted more modest growth at 3.4%.


1 Al Jazeera April 14th, 20152 Reuters September 3rd, 20092 Reuters September 11th, 20154 www.news24.com 5 Yahoo News March 18th, 2015

From a consumer facing investment perspective, Gabon’s comparatively high expenditure makes the country a choice investment destination.

Source: UNCTAD 2015. StratLink Africa

Source: Business Monitor International. StratLink Africa

GrowthinForeignDirectInvestment(‘09-‘14)

PrivateFinalConsumptionperCapita(USD)

-20.0% 0.0% 20.0% 40.0%

Congo

DRC

Chad

Gabon

Equatorial Guinea

Cameroon

0.0

1,000.0

2,000.0

3,000.0

4,000.0

2010 2011 2012 2013 2014 2015

Gabon Angola GhanaKenya Nigeria

http://www.news24.com/



StrongNon-OilGDPGrowthMitigatesOilImpact

Focus: Gabon is expected to post one of Africa’s fastest non-oil GDP growth rates in 2016, at 6.1%6, (amongst oil rich economies) presenting the economy with much needed buffer at a time when subdued oil prices present considerable risk. This lends credence to the country’s diversification agenda and provides an alternative engine to drive growth in the medium to long-term. This comes as welcome news for investors seeking to reduce exposure to oil related risks in markets such as Angola and Nigeria. Oil revenue as a percentage of total revenue and grants is projected to decline from 58.0% in 2012 to 38.4% in 20167 boding well for the economy in view of depressed oil prices.

Total revenue and grants are projected to grow between 2015 and 2016, reducing the fiscal strain suffered by the economy in the recent past.

ECONOMIC OUTLOOK

Fiscal deficit as a percentage of GDP is expected to narrow from 3.6% to 2.5% on the back of better revenue mobilization. We, however, expect the external account to remain under pressure with the current account deficit remaining in deficit, at about 4.2% of GDP, and exposing the Central African Franc (the local currency) to depreciation.



Non-OilGDPGrowth

TotalRevenue&Grants(USD)

FiscalBalanceas%ofGDP


GABON

6 International Monetary Fund 20157 International Monetary Fund 2015

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2011 2012 2013 2014 2015 2016(f)

Angola Gabon Nigeria

2,300

2,800

3,300

3,800

4,300

2012 2013 2014 2015 2016(f)

Mill

ions

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

2010 2011 2012 2013 2014 2015 2016(f)



StratLinkintheNews

StratLink Africa Ltd continues to make commentary in the media on topical issues such as opportunities in emerging markets; intra-regional trade in Africa; ongoing elections in Africa and growing Sino-Africa ties.

Please click the buttons to view the full articles

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CNBCAfrica─AssessingTanzania’sElectoralCycle: In this interview, we discussed factors that were likely to shape Tanzania’s October 2015 election. In line with our assessment, the new administration has begun with fiscal consolidation.

http://www.stratlinkglobal.com/blog/assessing-tanzanias-electoral-cycle-2015/

http://blogs.lse.ac.uk/businessreview/2015/11/20/to-deal-with-slow-growth-african-countries-embrace-intra-regional-trade/

http://seekingalpha.com/article/3575846-opportunities-in-crisis-why-emerging-markets-still-make-great-investments

http://qz.com/529410/africas-commodities-slump-is-a-gold-mine-for-investors/

http://ventureburn.com/2015/11/3-ways-investors-can-navigate-africas-mobile-markets/

http://ventureburn.com/2015/11/3-ways-chinas-position-in-africa-is-good-news-for-other-foreign-investors/



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The material prepared by StratLink Africa Ltd (“StratLink “) is our opinion. StratLink believes that it fairly and accurately represents the subject matter reported upon. This report does not include a personal recommendation and does not constitute an offer, or the solicitation of an offer for the sale or purchase of any financial product, service, investment or security mentioned herein. The text, images, and other materials contained or displayed on any StratLink product, service, report, e-mail, or website are proprietary to StratLink and constitute valuable intellectual property. This report is issued only for the information of, and may only be distributed to professional investors, or major institutional investors (as defined in Rule 15a-6 of the US Securities Exchange Act of 1934), and dealers in securities. This publication is confidential and for the information of the addressee only and may not be reproduced in whole or in part, nor copies circulated to any party, without the prior written consent of StratLink. StratLink accepts no liability for any loss resulting from the use of the material presented in this report. This disclaimer of liability may be prohibited, or limited, by specific statutes, laws, or regulations. StratLink affiliates, shareholders, directors, officers, partners, and consultants shall have no liability, contingent or otherwise, for any claims or damages arising in connection with any errors, omissions, or inaccuracies. This report is not to be relied upon in substitution for the exercise of independent judgment.

The investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Whilst every care has been taken in preparing this presentation, StratLink does not give any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy, or completeness, of the information in this report

StratLink may have issued, and may in the future issue, reports that are inconsistent with, and which reach different conclusions than, the information presented in this report. Reports may reflect different assumptions, views, analytical methods, and analysts who prepared them, and no part of the analysts compensation was, is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. All views, opinions, and estimates contained in this document may be changed after publication at any time without notice. Past performance is not indicative of future results and should not be taken as an indication or guarantee of future performance. No warranty, express or implied, is made regarding such performance. The investments and strategies discussed here may not be suitable for all investors or any particular class of investors; if you have any doubts you should consult your investment advisor. All representations, information, opinions, and estimates contained in this report reflect a judgment of the analyst, effective as of its original date of publication by StratLink, and are subject to change without notice. The price, value of, and income from any of the securities mentioned in this report can fall as well as rise. The value of securities is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities. Investors in securities and other instruments, the values of which are influenced by currency volatility, must assume this risk. StratLink personnel, or other professionals, may provide oral or written commentary or trading strategies to our clients that reflect opinions that are their own and are contrary to the opinions expressed in StratLink’s research. StratLink is under no obligation to ensure that such other reports are brought to the attention of any recipient of any report. StratLink and its respective affiliates, officers, directors, partners, and consultants, including persons involved in the preparation or issuance of this report may, from time to time (i) have positions in, and buy or sell, the securities of companies referred to in this report (or in related investments); (ii) have a consulting, investment banking or broking relationship with a company referred to in this report; and (iii) to the extent permitted under applicable law, have acted upon or used the information contained or referred to in this report including effecting transactions for their own account in an investment (or related investment) in respect of any company referred to in this report, prior to or immediately following its publication. To the extent applicable and permitted by law or regulation, StratLink believes that the direct author of this report has no position in, fiduciary interest proscribed, nor has been compensated by the subject(s) of this report, or other entities for the content, other than through direct compensation by StratLink.

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