Africa Market Update - December 2018

2DECEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
A Financial Advisory
Company
DECEMBER 2018 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA
GHANA 4
9
15
24
RWANDA 28
KENYA
UGANDA
TANZANIA 19
Table of Contents
GHANA
• Why Bank of Ghana overlooked foreign exchange pressures to retain the
benchmark rate in November 2018
• Tight credit conditions impede Bank of Ghana’s attempt to stir the economy
NIGERIA
• Central bank signals most hawkish inclination in two years
• Call for nationwide strike signals underlying socio-economic pressures ahead of
the 2019 general election
KENYA
• Kenya hosts the Sustainable Blue Economy conference
• Q2 2018 sees uptick in growth
At a Glance
TANZANIA
• Tanzania’s recent policy adoptions threaten foreign relations
• Government intervention in the Cashew nut conundrum raises the possibility
of global price contortionist
UGANDA
• Parliament passes GMO Bill
• Tense trade relations with Tanzania
RWANDA
• Africa Development Bank (AfDB) project funding to improve Rwanda’s
logistics, besides increasing regional integration
• Rwanda jumps 11 places in World Bank’s Doing business rankings buoyed by
consistent reform policy
http://mutuamatheka.co.ke/wp-content/uploads/2012/04/001_NAIROBI_WEBREADY_MUTUA-MATHEKA-10.jpg
Nairobi, Kenya
© Mutua Matheka
Cover image:

AFRICA DEALS LANDSCAPE
Source: PitchBook, StratLink Africa
Note: Data for Q4 2018 is as at December 2nd, 2018
Capital Raised through Private Transactions in Africa (USD millions)
We shift from our traditional illustration of deal activity by country to provide one that focuses on activity between Q1 2017 and Q4 2018. A few
trends are worth highlighting:
• Activity in the private transactions space moderated in 2018 after steadily picking up in 2017. It is important to observe that 2018 has been
characterized by general aversion towards frontier and emerging markets thus affecting appetite for strategic investments being taken in Africa.
With growing uncertainty around the global economy, this moderation is bound to prolong into 2019 as investors weigh the impact developments
such as trade tensions are bound to have on African markets
• There has been a general slowdown as far as Initial Public Offers (IPOs) are concerned in 2018, a trend that can be attributed to the bearish trends
reflected in most stock exchanges in Africa. Capital outflows driven by the exit of foreign investors have played a major role in undermining the
performance of exchanges in the continent. In Nigeria, for instance, the stock exchange recorded a net foreign investor outflow of USD 10.9 million
in the first nine months of 2018 compared to net inflows of USD 22.9 million in the same period in 2017
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018
Private Equity Venture Capital Strategic M&A IPO

TIGHT PRIVATE SECTOR CREDIT CONDITIONS DERAIL THE ECONOMY’S REBOUND
GHANA MARKET UPDATE

Party Primaries Set Stage for 2020 Electoral Cycle
The National Democratic Congress is set to
conduct primaries for presidential hopefuls on
January 19th, 2019, setting the stage for the
general election scheduled to take place in 2020.
We hold a favorable view of the country’s political
risk profile with remote pressures likely to emerge
from the decline in the global price of oil which, if
sustained, could see fiscal and monetary pressures
rise again and spill over into the socio-economic
environment. The value of oil exports has been
rising, providing the economy with a vital source
of foreign currency inflow.
The coming months will be characterized by
a rise in political rhetoric as parties look to
consolidate their political constituencies ahead
of the next election. We expect the score card
of the incumbent New Patriotic Party to come
under intense scrutiny especially with regard
to management of the economy in the face of
significant headwinds. A key risk we will be looking
out for will be the potential derailment of the
government from its policy priorities against the
backdropofanelectoralcycle.TheDecember2018
referendum which could pave way for creation of
six new regions will be keenly followed to assess
the potential impact it could have on the political
landscape.
POLITICAL OUTLOOK
Business Environment Faces Tightened Credit
Conditions
Despite significant improvement, as shall be
shown by the pick-up in private sector credit
growth in the Economic Outlook section, the
business environment in continues to grapple with
tightened credit conditions. This has presented a
headwind to the economy and is poised to remain
a challenge looking into 2019.
We view this as a likely reflection of the
deteriorating asset quality amongst commercial
banks which is bound to have triggered high risk
aversion in lending. With non-performing loan
ratios above 20.0%, banks are likely to remain
cautious.
BUSINESS ENVIRONMENT
Average Commercial Bank Lending Rate
Non-Performing Loan Ratio
Source: Central Bureau of Statistics, StratLink Africa
Source: Bank of Ghana, StratLink Africa
GDP: USD 42.9 Bln | Population: 28.0 Mln
GHANA
Source: Central Bureau of Statistics, StratLink Africa
Value of Oil Exports (USD Mln)
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
25.0%
26.0%
27.0%
28.0%
29.0%
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Oct-14
Feb-15
Jun-15
Oct-15
Feb-16
Jun-16
Oct-16
Feb-17
Jun-17
Oct-17

In view of this and the decision by the Bank of
Ghana to hold its benchmark rate at 17.0%, we
expect the Cedi to continue coming under pressure
exacerbated by the expectation that the USA
Federal Reserve will hike its rate in its December
2018 meeting. This is further amplified by the fact
that the country’s foreign exchange reserves have
been dwindling after peaking at USD 7.8 billion
(4.2 months of import cover) in May 2018.
ECONOMIC OUTLOOK
Central Bank Keen to Accelerate Credit Growth
The move by Bank of Ghana is also likely to have
been aimed at creating an environment favorable
enough for further acceleration of growth in
private sector credit. Growth in credit to the
private sector has picked pace starting Q2 2018
register double digit growth in October 2018. This
is expected to help drive the economy’s growth
momentum and cushion any potential shocks that
would threaten to decelerate the same.
Foreign Exchange Reserves and Months of
Import Cover
Growth in Private Sector Credit
Cedi to USD
Source: Bloomberg, StratLink Africa
GHANA
Bank of Ghana Decision Leaves Cedi without
Shield
The November 2018 Monetary Policy meeting saw
the benchmark rate retained at 17.0% for the third
time. This move went contrary to our expectation
of likely tightening in Q4 2018, a view that was
anchored on the underlying macroeconomic
environment. The Cedi enters the last month
of 2018 relatively weak signaling a weakening
external position which is piling pressure on the
domestic environment. Ghana’s trade deficit
stood at USD 1.7 billion in October 2018, having
widened by 130.6% compared to the same period
in 2017.
Margin by which the Cedi has
depreciated against the USD
YTD as at November 22nd, 2018
9.2%
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
5
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
2.5
2.7
2.9
3.1
3.3
3.5
3.7
3.9
4.1
4.3
5,500.0
6,000.0
6,500.0
7,000.0
7,500.0
8,000.0
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Foreign Exchange Reserves (USD Mln)
Months of Import Cover - Right Hand Axis
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18

Source: Bank of Zambia, StratLink Africa
Total Public Debt
Source: Bank of Ghana, StratLink Africa
GHANA
Inflation Contained with Target Band
With inflation trending below the target ceiling
of 10.0% for four months (July 2018 to October
2018), it is unlikely that inflation expectations
could be a factor contributing to the uptick in
yield on the long-term of the yield curve. This is
particularly important issue for Ghana given the
rise in inflation which was experienced in Q1 2018
and at the end of Q2 2018 which undermined
investor confidence in the stance that was being
adopted by the central bank.
Sovereign Yield Curve
Month-on-Month Growth of Debt
Headline Inflation
DEBT MARKET UPDATE
Q3 2018 Sees Spike in Domestic Borrowing
The yield curve has registered minimal movement
in the short-term end of the curve through 2018
with a general rise on the long-term end of the
curve between March and September. Between
July and August 2018 the stock of domestic debt
grew by 11.8% to USD 17.0 billion, a fact that is
likely to have contributed to the rise in yields
between June and September 2018.
9.0%
11.0%
13.0%
15.0%
17.0%
19.0%
91Day
182Day
364Day
2Year
3Year
5Year
Mar-18 Jun-18 Sep-18
Stock of total public debt as at
the end of September 2018
USD 35.8 Bln
44.0%
46.0%
48.0%
50.0%
52.0%
54.0%
56.0%
58.0%
31.0
32.0
33.0
34.0
35.0
36.0
37.0
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Total Public Debt (USD Bln)
Total Public Debt to GDP RaƟo
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
DomesƟc Debt External Debt
8.8%
9.0%
9.2%
9.4%
9.6%
9.8%
10.0%
10.2%
10.4%
10.6%
10.8%
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18

Ghana Stock Exchange Composite Index (M-o-M)
Ghana Stock Exchange Composite Index
EQUITY MARKET UPDATE
Looking into 2019, we expect the market to remain
bearish in the first quarter informed by growing
caution by investors over developments in the
global markets and uncertainty over the degree
to which the domestic policy stance can shield the
economy from shocks.
Market Poised to remain Bearish in Q1 2019
The downtrend witnessed at the stock exchange
continued through November 2018. Alongside
other exchanges in emerging and frontier markets,
the Ghanaian market has taken a beating from
adverse perception by foreign investors owing
to the evolving monetary environment in the
advanced markets.
GHANA
0.0
5.0
10.0
15.0
20.0
25.0
2,000.0
2,200.0
2,400.0
2,600.0
2,800.0
3,000.0
3,200.0
3,400.0
3,600.0
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Millions
Volume - RHS Composite Index
Proportion by which the Ghana
Stock Exchange Composite Index
as at November 30th, 2018
Month-on-month change in the
Ghana Stock Exchange Composite
Index as at November 29th, 2018
-0.8%
-11.2%
Millions
0
0.5
1
1.5
2
2.5
2,300.0
2,400.0
2,500.0
2,600.0
2,700.0
2,800.0
2,900.0
3,000.0
Sep-18 Oct-18 Nov-18
Volume - RHS Last Price

NIGERIA MARKET UPDATE
MINIMUM WAGE HIKE PROPOSAL GAINS TRACTION AS AGGREGATE DEMAND SAGS

The proposal to hike the minimum wage for civil servants by 25.0% seemed to gain traction in November 2018 with
the Central Bank, in its monetary policy statement, indicating the move would help stimulate growth in output.
This development speaks volumes to challenges faced by sub-Saharan Africa governments in stimulating aggregate
demand especially as the seek recovery from the 2014 – 2016 commodity price rout. In June 2017, StratLink
published an article with the London School of Economics Business Review highlighting the growing push for a hike
in minimum wages in Africa and discussing some of the drivers underlying this push. In this article, we look at the
surge in inflation across the continent and the riddle of stagnant wages vis-à-vis rapid economic growth. The piece
also proposes a way out of this predicament.

Stable Environment ahead of Election
Thecountryhasenteredthelastlegoftheelectoral
cycle ahead of the February 2019 election with
general stability. In stark departure from the last
election, incidences indicative of glaring security
challenges are subdued boding well for Africa’s
most populous country. The period between
December 2018 and end of January 2019 will be
crucial in shaping the pre-election environment
which has thus far been characterized by a focus on
Buhari’s performance in managing the economy.
In a recent development, there is consideration
of hiking the minimum wage for civil servants by
25.0%, a proposal that is bound to stoke political
undertones given its timing (more on this issue in
the Economic Outlook).
Institutional Preparedness
Going forward, the country’s institutional
preparedness for the forthcoming election is likely
to take center stage. At the heart of this will be
the state of the Independent National Electoral
Commission (INEC) as it looks to deliver a credible
poll. The following will be key issues going forward:
• With a team from social media giant, Facebook,
having visited INEC offices, how to counter
fake news and other forms of social media
driven misinformation in the homestretch of
the campaigns will be a matter of considerable
interest. Coverage of the campaigns in the
mainstream media will also be an issue to be
looked at keenly as the election date approaches
• Ensuring credibility of the voter register to
ascertain non-existence of ghost voters is likely
to be a sticky issue ahead of the election.
POLITICAL OUTLOOK
NIGERIA
Unemployment Rate
Appetite for Nigeria Eurobond Props Investment
Landscape
Nigeria’s issuance of debt in the international
market in November was met with significant
interest signaling strong confidence in the country
at a time when mounting external debt pressures
in sub-Saharan Africa have become a matter of
concern. The country’s 7 year, 12 year and 30 year
paper attracted an order book of USD 9.5 billion
against a target mobilization of USD 2.9 billion.
Coming on the back of the country’s strained
fiscal space following the plunge in the price of oil
which laid bare Nigeria’s exposure to commodity
price risk, this scale of appetite from international
investors bodes well for the country.
This notwithstanding, a number of metrics
are bound to elicit concern over the country’s
external debt. For instance, the surge in the stock
of external debt as a proportion of exports is a
pointer to a deteriorating position as far as external
debt sustainability is concerned. Further, the grant
element of new external funding commitments to
Nigeria has declined from 79.8% in 2008 to 59.8%
in 2016 which again does not augur well for the
economy.
BUSINESS NEWS ENVIRONMENT
Source: Central Bank of Nigeria, StratLink Africa
External Debt Stock as a Proportion of Exports
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
2008
2009
2010
2011
2012
2013
2014
2015
2016

NIGERIA
Weak Aggregate Demand Dominates
Nigeria’s monetary policy stance has been the
subject of intense debate in 2018. In its last
meeting for the year, however, the Central Bank’s
Monetary Policy Committee delved into matters
regarding the prevailing minimum wage indicating
that the proposed 25.0% increase in minimum
wage for civil servants to USD 65.9 would stimulate
output growth. This statement is significant for
three reasons:
• Data shortage notwithstanding, it paints a
picture of the degree to which the economy
is grappling with a negative output gap as it
rebounds from the slump in the price of oil
• With headline inflation still in the double digits
and above the 9.0% ceiling, it shows confidence
on the part of the Central Bank that potentially
perverse outcomes from a hike in minimum
wage will be subdued
• Coming just before the February 2019 election
and the potential impact a hike in minimum
wages could have on Nigeria’s fiscal position,
the Central Bank’s position could be construed
to have political undertones
As can be seen in the chart below, Nigeria’s
economic growth momentum is yet to return to
pre-crisis (the 2016 recession) highs, a fact we
believe informed the Central Bank’s position.
ECONOMIC OUTLOOK
GDP Growth
Tax Revenue Mobilized (USD)
Performance Rate of Oil Tax Revenue
Source: National Bureau of Statistics, StratLink Africa
Hike in Minimum Wage: Potentially Derailing
Factors
In the first three quarters of 2018, the Federal
Inland Revenue Service mobilized USD 10.7 billion
in tax revenue reporting a performance rate of
76.8%. With tax revenue punching below its
target, the government is bound to face significant
pressure in meeting the intended expenditure in
hiking the minimum wage for civil servants.
Apointofconsiderableconcernisthefactthatwith
the global price of oil declining (as at November
30th, 2018 the price of WTI Crude had fallen to
USD 50.9 per barrel), revenue from oil could fall
significantly below target.
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
Q12013
Q32013
Q12014
Q32014
Q12015
Q32015
Q12016
Q32016
Q12017
Q32017
Q12018
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Q1 2018 Q2 2018 Q3 2018
Billions
Target Actual
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Q1 2018 Q2 2018 Q3 2018

Naira to USD
Structure of Public Debt
Source: Bloomberg, StratLink Africa Source: Central Bank of Nigeria, StratLink Africa
Source: Nigeria Debt Management Office, StratLink Africa
Domestic Debt Declines
The Debt Management Office reports that the
country raised, in November 2018, USD 2.9 billion
in the international market through issuance of a
7 year, 12 year and 30 year each attracting 7.6%,
8.8% and 9.3%, respectively. Coming against the
backdrop of a decline in the stock of domestic debt
between March and June 2018, this is indicative
of the federal governments to avoid crowding
the private sector out of the borrowing. Between
March and June 2018 the stock of domestic debt
declined by 3.5% to USD 33.4 billion owing to
redemption of T-bills.
As at the end of June 2018, external debt had risen
to account for 30.2% of public debt compared to
23.4% in June 2017.
DEBT MARKET UPDATE
NIGERIA
Weakening Naira Raises Foreign Exchange Risk
Even as the proportion of external debt rises, the
government will have to be wary of rising foreign
exchange risk. The Naira has come under mild
pressure in the latter half of 2018 which shows
that the economy is facing growing risk as far as
servicing foreign currency denominated debt is
concerned.
Developments in the recent past have indicated
that Nigeria faces high vulnerability to commodity
price related shocks which could undermine the
local currency. As such, it is imperative that the
government steps up efforts aimed at diversifying
the economy away from oil to mitigate the threats
that are likely to be triggered by volatility in global
commodity prices.
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
June-17 June-18
External Debt DomesƟc Debt
13.5%
14.0%
14.5%
15.0%
15.5%
16.0%
3M
6M
1Y
2Y
3Y
4Y
5Y
6Y
7Y
8Y
9Y
10Y
12Y
15Y
357.0
358.0
359.0
360.0
361.0
362.0
363.0
364.0
365.0
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Margin by which the Naira has
depreciated YTD as at November
11th, 2018
0.9%

Nigeria Stock Exchange
Rebound in Foreign Investor Inflow
The Nigeria Stock Exchange 30 Index showed signs
of flattening between September and November
2018, a trend we believe is informed by an
improving foreign investor inflow-outflow ratio
in Q3 2018. The average monthly inflows from
foreign investors stood at USD 88.9 million in Q3
2018 compared to average monthly outflows of
USD86.5million.Thismarksastarkdeparturefrom
the trend witnessed in Q2 2018 whereby inflows,
at USD 160.1 million, were only 71.5% of outflows
hence pushing the market further down. This is
likely to be an indicator that foreign investors are
revising their perception of frontier markets such
as Nigeria at the tail end a challenging second half
of the year.
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
Nov-18
Oil & Gas Banking
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Billions
Volume - RHS 30 Index
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
May-18
Millions
Margin by which the Nigeria Stock
Exchange 30 Index has fallen YTD
as at November 22nd, 2018
17.4%
Foreign Investor Inflows (USD)
Banking and Oil Stocks in 2018
Banking and oil stocks have reflected similar trends
in 2018 with their indices declining by 13.8% and
11.5%, respectively.

CENTRAL BANK HOLDS BENCHMARK RATE AT 9.0%
KENYA MARKET UPDATE

POLITICAL OUTLOOK
KENYA
Remittance Growth to Ease Pressure on Shilling
Remittancereceiptsfromdiasporahaveundergone
consistently strong growth over the past few
years with an average year-on-year growth rate
of 14.2% between 2012 and 2017. Inflows from
North America make up the bulk of remittances
comprising over half of the same in 2017 while
inflows from Europe and the rest of the world
made up 32.3% and 16.1%, respectively, over the
same period.
Remittances play an increasingly important role as
a foreign exchange earner having brought in USD
1.9 billion in 2017, more that the value of tea and
coffee exports combined (USD 1.7 billion). With
the shilling having come under pressure late this
year, continued grow in remittances will go a long
way in containing depreciation against the dollar.
Remittance Inflows, USD ‘000
Total Remittances % Change y-o-y
Source: CBK, StratLink Africa
Kenya Hosts Conference on Blue Economy
Kenya hosted the Sustainable Blue Economy
Conference between the 26th and 28th November
2018 which aimed to make progress towards
safeguarding and developing the world’s water
bodies and the ecosystems that live therein.
The conference planned to host over 18,000
participant from 184 countries and sought to
exploit the potential of oceans, seas, rivers, lakes
byleveragingonthelatestscientificknowledgeand
innovation while ensuring the proper conservation
of the aquatic resources for generations to come.
Blue Economy Objectives and the Big Four
Agenda
President Uhuru Kenyatta made a number of
pledges including enhancing security in the high
seas, combating illegal fishing while supporting
sustainable and responsible fishing of endangered
species and key fish stocks, among other things.
The pledges marry well with the Big Four agenda
aim to promote fish processing, through the
development of a USD 20 million fish feed mill
and more, to help enhance manufacturing and
increase its contribution to GDP to 15.0% by 2022.
However, the ambitious Big Four agenda target for
manufacturing that includes developing the oil,
mining and gas industry as well as iron and steel
may have negative side effects on the environment
which would go against the earth-friendly spirit of
enhanced waste management being promoted at
the Blue Economy conference. Striking a balance
between promoting manufacturing as well as
safeguarding the Blue environment may not prove
to be straightforward.
Source: Kenya Association of Manufacturers
Manufacturing Contribution to GDP
2016 Big 4 Agenda Target
for 2022
9.6% 15.0%
0
500,000
1,000,000
1,500,000
2,000,000
2017
2016
2015
2014
2013
2012
2011
North America Europe Rest of the World
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18

KENYA
ECONOMIC OUTLOOK
Good Weather Buoys Q2 Growth
Economic growth in the second quarter of 2018
registered 6.3%, the fastest Q2 expansion the
country has experienced since 2013.
The fastest growing sectors in the quarter under
review were accommodation and restaurants, ICT
and electricity and water supply at 15.7%, 12.6%
and 8.6%, respectively with each of the three
expanding faster than they did in the same quarter
of 2017. Improved weather conditions played a
key role in supporting enhanced economic activity.
Higher rainfall in the second quarter of the year
enabled substitution towards cheaper renewable
energy generation with hydroelectric output up by
77.9% while diesel powered electricity generation
was down by 57.8%.
Source: KNBS, StratLink Africa
Second Quarter GDP Growth Rates
Fastest Growing Sectors Q2 2018 GDP Growth
GDP Growth in Agriculture
Central Bank Rate (CBR)
Similarly, the agriculture sector was buoyed by
higher rainfall that led to an expansion of 5.6%
in Q2 2018, a marked improvement from the
0.8% growth the sector underwent in the same
quarter of 2017. Enhanced agricultural output
led to food price growth remaining subdued in
the quarter under review with food and non-
alcoholic beverage inflation averaging 0.5% over
the three months in question. Notably, growth in
the volumes produced of tea (18.4%) and coffee
(44.1%) as well as higher horticultural crop exports
(29.3% more in value) during the second quarter
of the year drove growth in agriculture.
The latest Monetary Policy Committee meeting
held in November saw the rate held at 9.0%
however, with inflation having risen from 3.7%
in April to 5.5% in October and with the positive
economic momentum seen this year there will
likely be upward price pressure in the medium
term. This may require an upward adjustment of
the key rate in the course of 2019 however, with
the interest rate cap still in place the effectiveness
of any rate change will be compromised.
6.3%
4.7%
6.2%
5.6%
6.0%
7.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
201820172016201520142013
0.0%
5.0%
10.0%
15.0%
20.0%
AccommodaƟon
andRestaurants
ICT
Electricityand
WaterSupply
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Q2
2018
Q1
2018
Q4
2017
Q3
2017
Q2
2017
Q1
2017
8.5%
9.0%
9.5%
10.0%
10.5%
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18

Yield Curve Remains Stable
The yield curve remained largely unchanged in the
month to 28 November 2018. Yields, especially
with regard to T-Bills, have managed to remain
subdued despite inflation having crept above
5.0% in September and October however, we
expect that the loosening of monetary policy that
has seen the CBR fall from 10.0% in February to
9.0% July this year will lead to greater inflationary
pressure in the medium term which could drive
yields upwards.
The Infrastructure Bond issued on 19 November
2018 attracted a fair amount of interest with a
performance rate of 80.8%. However, since the
Treasury only managed to raise just over half
of what was offered, a Tap sale was undertaken
which enabled them to collect a total of KES 45.2
million out of the KES 50.0 million that was initially
sought. This is despite low liquidity in the market
due to tax remittances by banks that saw the
interbank rate rise from 2.5% to 5.7% between the
1st and 27th of November.
Infrastructure Bond
19 Nov 2018 IFB1/2018/20 Tap Sale
Total Amount Offered (KES M) 50,000 22,410
Total bids Received at cost (KES M) 40,393 n/a
Amount Accepted (KES M) 27,588 17,571
Performance Rate 80.8% 78.4%
Bloomberg BVAL Yields Index
DEBT MARKET UPDATE
KENYA
NSE Implements New Rules on Bid Spreads
The NSE 20 Share Index started the month of
November at 2,820.3 and closed at 2,780.6 on 28
November 2018, down 1.4%.
The Nairobi Securities Exchange has implemented
new rules governing price movement spreads,
narrowing them in order to improve liquidity and
aid in price discovery.
The new rule will also prevent the issue that
occurred with Deacons East Africa’s share price
which was stuck at 45 cents for an extended period
of time because it could not satisfy the minimum
bid spread requirement of 5 cents without
violating another rule that limits the share price
movement of any single equity, whether a fall or a
gain, to a maximum of 10.0%.
Nairobi Securities Exchange 20 Share Index
NSE 20 index percentage change
in month to 28 November 2018
NSE 20 index percentage change
in year to 28 November 2018
-1.1%
-27.3%
8.4%
8.8%
9.2%
9.6%
10.0%
10.4%
10.8%
11.2%
11.6%
12.0%
12.4%
12.8%
13.2%
13.6%
3M 1Y 3Y 5Y 8Y 10Y 20Y 30Y
28-Nov-18 29-Oct-18
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2,650.0
2,700.0
2,750.0
2,800.0
2,850.0
2,900.0
01-Oct-18
08-Oct-18
15-Oct-18
22-Oct-18
29-Oct-18
05-Nov-18
12-Nov-18
19-Nov-18
26-Nov-18
Millions
Volume NSE 20 Index (LHS)

TANZANIA MARKET UPDATE
TANZANIA’S RECENT POLICY ADOPTIONS THREATEN FOREIGN RELATIONS

Tanzania’s Recent Policy Adoptions Threaten
Foreign Relations
Tanzania’s relations with key development
partners –the EU and the World Bank─ hangs in
the balance due to its recent policy adoptions and
pronouncements which have seen the country
shunned by funding partners, potentially putting
at risk diplomatic, trade and development links.
The EU recalled its ambassador to Tanzania citing
a deterioration of the human rights situation
in the country. Following in the EU’s footsteps,
Denmark, the second largest donor to Tanzania,
withheld about USD 10.0 million worth of aid
funding in protest to alleged human rights
abuses in Tanzania, despite government issuing
a statement to distance itself from the Regional
Commander’s homophobic remarks. While
Tanzania has made considerable effort to reduce
donor dependency for budgetary funding with
grants and concessional loans as a percentage of
total revenue falling from an average of 26.3% of
the actual budget in 2010/11 to 8.2% in fiscal year
2018/19, these developments combined could
weaken prospects for further project funding,
potentially impacting the country’s external
and fiscal accounts. This was exemplified by the
decision of the World Bank which, has been a key
source of project funding for Tanzania in recent
years, to withhold a USD300.0 million education
funding due to Tanzania’s prohibitive policy on
school girls’ rights. Likewise, in September this
year, the World Bank froze the disbursement of
a USD50.0 million grant owing to the unpopular
amendments in the Statistics Act (2015) which are
deemed to undermined production of statistical
data. Nonetheless, the World Bank has since re-
engaged Tanzania on the project after purportedly
reaching a working solution with the government.
Be that as it may, we do not expect the decline
in aid to have a material impact on government
revenue or on the fiscal deficit as a share of the
country’s Gross Domestic Product (GDP). However,
with key partners threatening to reconsider overall
relations with Tanzania, risks linger on worsening
relations which are bound to have a detrimental
effect on the country’s fiscal and current account
balances.
POLITICAL OUTLOOK
TANZANIA
Tanzania on Course to Improve Logistics
Since coming into office in 2015, President
Magufuli’s administration has implemented
several major projects in a bid to improve logistics
and contribute to economic growth. Among them
is the Standard Gauge Railway (SGR) as well as the
Kinyerezi I and II power plants adding 185.0MW
and 240.0MW to the national grid, respectively.
The Kinyerezi II power plant, Tanzania’s first
combined cycle power plant, is projected to be
commissioned within the year. Available data
shows that as of May 2018, Tanzania’s installed
capacity was 1,517.5MW against a demand of
1,100MW.
Tanzania Set for Pioneer Electric Train
Tanzania is also set to get the first electric railway
whose construction is scheduled to commence
in December 2019. Official data indicates that
the SGR project is on course with about 33.0%
of construction complete offering hope for
commencement of the construction of the electric
train on schedule. Improved rail infrastructure
has the capability to markedly boost Tanzania’s
economic performance through increased
investment and trade flows. The project is crucial
for Tanzania to achieve its target to be the region’s
main logistics hub as it competes with Kenya’s
Mombasaport,whichhasrelativelylargercapacity,
to connect the land-locked neighbors with export
markets and in turn realize the economies of scale
of a regional railway network.
Logistics Performance Index
Source: The World Bank, StratLink Africa
Note: 0=Low to 5=High
1.5
2.0
2.5
3.0
3.5
Tanzania Kenya Uganda Rwanda Ethiopia
2007 2016

Government Intervenes in Cashew Conundrum
The global prices of cashew nuts shot up by about
10.0% following the decision by government to
raise the farm gate price by more than 50.0% to
USD 1.4 per kilogram. The rise led to a purchase
baulk by private buyers prompting the President
to instruct Tanzania Agriculture Development Bank
(TADB) to provide funds for the purchase of about
200,000.0 tonnes of cashew nuts, a welcome
relief to farmers in the short run; however, the
upshot in price is uncompetitive in the long
run, with wide reaching implications on the nut
industry as it raises the prospect of the country’s
entire 2018 harvest going to waste. Likewise, the
decision by government to buy back the harvest,
has implications of bumping up its expenditure
budget. Tanzania is a top ten global producer of
cashew nuts exporting about 75.0% of East Africa’s
cashew export. Increased imports for Transport
and construction industries have seen Tanzania’s
current account deficit widen by 7.5% to USD2.2
billion in the year ending September 2018, thus,
efforts to mobilize export receipts are crucial.
Cashew Nuts Dislodge Raw Tobacco from the Top
Tobacco has dominated the value of Tanzania’s
traditional exports for about a decade. However, it
was overtaken by cashew nuts last year to become
Tanzania’s most valuable traditional export,
earning the country about USD540.0 million from
USD270.6 million in 2016. While government
intervention may have helped avert a crisis, the
flip side is that the intervention is bound to distort
global prices for the crop.
Meanwhile, global coffee prices, one of Tanzania’s
major export earners, fell by 15.0% during the
year to September 30th, relative to the previous
year as the world witnessed bumper harvests
from major farmers of the crop in Brazil, Vietnam
and Colombia. Robusta coffee prices decreased to
USD1.9 a kilo during the year to September 2018
from USD2.3 the previous year. While Arabica
coffee prices also fell to USD3.0 a kilo from USD3.5
over the same period. The Tanzania Coffee Board
projects crop production to reach 60,000 tonnes
in fiscal year 2018/19 from 41,679 tonnes in
2017/18.
Commodity Exchange to Increase Price Stability
We revive our argument that the solution for
commodity price disparities is centered on revival
of the stalled commodity exchange that should
provide transparency in commodity auctions
and an efficient price discovery mechanism for
commodities. The exchange was established in
2015 but is yet to take off due to challenges arising
from availability of warehouse facilities.
Top Export Earners for the Year Ending March 2017
Change in Select Commodity Prices in the Year
Ending September 2018
Exports and Imports quarter-on-quarter
ECONOMIC OUTLOOK
Source: Bank of Tanzania, StratLink Africa
Source: The World Bank, Bank of Tanzania, StratLink Africa
TANZANIA
20.0
40.0
60.0
80.0
Exports Imports
Jun-17 Mar-18 Jun-18
0.0 100.0 200.0 300.0 400.0
CoƩon
Tea
Cloves
Sisal
Cashew nuts
Coffee
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
RobustaCoffee
ArabicaCoffee
Tea
CoƩon
Sisal
Cloves
Gold
Crudeoil

Short-Term Bids Remain Undersubscribed
Short term government security instruments
remain undersubscribed as yields remain
low. Consequently, investors have maintained
preference for the 364 Day bid which is offering
favorable yields relatively while, the 91 Day bill
yield posted no bid in the period under review. The
bid has attracted decreasing demand over the past
months given its longstanding unattractive yield.
On the other hand, the six month paper’s yield
rose marginally by 22.0bps to 5.2%, attracting 14
bids while the 364 Day paper yield rose by 38.0bps
to 8.5%, attracting 126 bids and reflecting the
continued interest in the longer term investments.
Tanzania Suspends Five Banks from Interbank
Forex Market
The interbank rate rose by 70.0bps to 3.0% in
October 2018 signaling tightening liquidity in the
money market. The tighter liquidity may have
contributed to the halting inflation uptick, where
inflation broke the upward streak, shedding off
20.0bps to 3.2% in October, 2018. Liquidity is
bound to remain tight in the short term owing to
the decision by the Bank of Tanzania to suspend
for one month five banks: Barclays Bank Tanzania,
UBA Bank, Exim Bank, BancABC and Azania Bank
from the inter-bank foreign exchange market
on 23rd November for flouting market rules in
the ongoing crackdown on forex bureaus in the
country.
T-Bill Yields Trend
TANZANIA
DEBT MARKET UPDATE
Shilling Stabilizes on Subdued Volatility
The Shilling has depreciated by 0.3% between
September and October, 2018 and by 2.6%
year-on-year maintaining resilience against the
greenback to close the month within the 2300
units’ band. The shilling/greenback pair was kept
stable as demand for the greenback in the market
remained at par with inflows from agricultural
sector, particularly, cashew nuts. The Bank of
Tanzania placed a moratorium on licensing of
forex bureaus as the regulator moves to crack
down on illegal operations and money-laundering,
this however, is yet to have a major impact on the
movement of the local unit. Thus, we predict a
stabilization path on the back of easing pressure
and low volatility on the local unit.
Interbank Rate , month-on-month
Shilling vs USD
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
91 Day 182 Day 364 Day
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Interbankrate(Red)
VolumeinTZMlns
2,280.0
2,285.0
2,290.0
2,295.0
2,300.0
2,305.0
2,310.0
Oct-18
Nov-18
Nov-18
Nov-18
Nov-18

Losing Streak Endures at the Bourse
The bourse has maintained a losing streak for two
consecutive months as the year draws to a close.
The All Share Index fell to 2,060.9 units, shedding
off 2.7%, month-on-month. Similarly, the domestic
Tanzania Share Index declined by 2.3% to 3,694.8
units, in the period under review. Foreign investors
dominated the buyers’ market in the period under
review, representing 87.4% of total buyers while
local investors dominated the sellers’ market with
a 79.2% share of total buyers.
All Share Index, year-on-year
TANZANIA
All Share Index Change,
month-on-month, as at
28th, November 2018
All Share Index Change,
year-on-year, as at 28th,
November 2018
-2.7%
-4.5%
Source: Dar es Salaam Stock Exchange, StratLink Africa
Tanzania Share Index Month-on-Month
Sector Indices month-on-month
Sector Indices Decline
The sector indices, on the other hand, posted
mixed results. The Industrial and Allied Index
generally stagnated at 5,285.2 points. While, the
Commercial Services sector Index closed at 2282.8
units, reflecting a decline of 0.6%. The Banking
Index posted the greatest decline, dropping by
10.8%, month-on-month to 2216.9 units, in the
period under review.
Central Bank Extends Administration M Bank for
Two Months
The Bank of Tanzania (BoT) has extended
administration of Bank M which, was placed under
administration in early August 2018 owing to
undercapitalization, for sixty more days, effective
2nd November, 2018 as it seek to determine
options for the continued operation of the bank.
1,500.0
1,700.0
1,900.0
2,100.0
2,300.0
2,500.0
2,700.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Nov-18
Price(Red)
VolumeinTZMillions
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
Industrial
Index
Commercial
Services Index
Banking Index
Nov-18 Oct-18
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
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Oct-18
Nov-18
Nov-18
Nov-18
Nov-18
Price(Green)
VolumeinTZMillions

ANTICIPATED INFLATIONARY PRESSURE SEES MPC HIKE RATE
UGANDA MARKET UPDATE

Uganda Passes GMO Bill
Parliament recently passed the Genetic
Engineering Regulatory Bill 2018, formerly the
National Biotechnology and Biosafety Bill, 2012,
that will drive the formulation of regulations to
oversee the safe development and application of
biotechnology in the country.
President Museveni had previously refused to
assent to the law, having requested that it more
clearly state that genetic modification will be
restricted to plants and animals thereby ruling
out any possibility of experimentation with
human beings as well as ensuring that there be
strict containment of the Genetically Modified
Organisms (GMOs) in order to avoid contamination
of species indigenous to Uganda.
In 2010, GM crops were
commercially planted on about 100
million hectares in 22 developed and
developing countries1
One of the objectives for developing plants based
on genetically modified organisms is to improve
crop protection and durability. An increased
level of crop protection could be achieved
through the introduction of resistance against
plant diseases caused by insects or viruses or
through increased tolerance towards herbicides
while other desirable characteristics include
improved drought resistance. Developing crops
that perform better during prolonged dry spells
could have a significant and positive effect on food
security within the country and could help prevent
instances of inflation inducing food shortages like
the one experienced during the drought of 2017.
However, negative preconceptions around GMOs
still exist among consumers so it remains to be
seen what the public sentiment will be.
POLITICAL OUTLOOK
UGANDA
Friction in Tanzania-Uganda Trade
Trade relations between Tanzania and Uganda
have been strained with the former seemingly
ignoring requests from the latter to engage in
bilateral talks to address issues.
From Uganda’s perspective some of their main
grievances include Tanzania requiring Ugandan
exporters to pay for the use of Tanzanian roads,
requiringpaymentbyUgandantradersforbusiness
visas and friction with regard to free movement of
people across borders.
Furthermore, reports suggest that Tanzania has
prevented Ugandan clearing and forwarding
agents from setting up shop in their country and
Tanzania has been testing products originating
from Uganda despite them having received
certification from the Uganda National Bureau of
Standards (UNBS).
Uganda’simportsfromTanzaniahavebeengrowing
at a significantly faster pace than their exports to
Tanzania. Between January 2016 and September
2018, the value of monthly imports from Tanzania
grew by 654.0% while the comparative figure for
exports growth was 111.5%.
Trade with Tanzania, USD Million
Source: BoU, StratLink Africa
1
FAO
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Imports from Tanzania
Exports to Tanzania

Anticipated Inflationary Pressure Leads to
Preemptive Rate Hike
Theeconomyhasundergonemarkedimprovement
over recent years with GDP growth accelerating
from 2.0% in the third quarter of 2016 to a peak
of 7.0% in the third quarter of 2017 before easing
back down to 5.0% in the second quarter of the
current calendar year.
The slowed expansion of the economy over the
2017/18 financial year brings into question the
Monetary Policy Committee’s (MPC) decision to
raise the Central Bank Rate by 1.0% in their latest
meeting, held at the beginning of October, in that
it is not directly supportive of increased economic
activity.
Quarterly GDP Growth
Inflation and the CBR
Commercial Bank Credit to the Private Sector, %
Change y-o-y
ECONOMIC OUTLOOK
UGANDA
The change in the monetary policy stance reflects
a preemptive move by the Bank of Uganda (BoU)
in anticipation of increased inflationary pressure in
the medium term.
The downward trend in inflation that began in
May 2017 reached a turning point exactly a year
later when it hit 1.7% after which it rose to 3.0%
in October 2018. In addition, between June and
October this year core inflation rose from 0.8%
to 3.5%, respectively, indicating greater demand
side pressure on prices. Declining food prices have
played a major role in keeping headline inflation
in check, with food inflation averaging -1.0% in
the first ten months of the year however, there
is a real risk that adverse weather could quickly
reverse this trend as was seen in 2017 when food
crop and related items inflation averaged a high
13.4% across 12 months.
The shilling has also undergone significant
depreciation against the dollar this year, 3.3%
between 2 January and 31 October, which risks
exacerbating imports related inflation in the
medium run. Capital investments toward the
government’s Second National Development
Plan (NDP II) are likely to drive GDP going forward
and the steep growth in commercial bank credit
provided to the private sector this year likely
present upside inflationary risks for 2019 and
beyond. All in all the increase in the CBR seems
warranted but we are unlikely to see any further
hikes before late next year.
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
InﬂaƟon Central Bank Rate
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18

Equity Prices Take Dip
The All Share Index opened at 1,747.6 on 1
November 2018 and closed at 1,680.1 on 28
November 2018, marking a 3.9% drop over the
same timeframe.
Uganda Securities Exchange (USE) is set to start
charging for market data in January 2019, like
the neighboring Nairobi Securities Exchange as it
looks for new sources of revenue. The USE aims
to charge for daily reports and information on its
listed firms and will require interested parties to
subscribe for the service.
Yield Curve Stabilizes
Yields remained largely constant in the month to
27 November 2018. This comes after having seen
a relatively significant rise in T-Bill yields between
September and October following the MPC’s rate
hike.
The shilling regained some ground against the
greenback in October and November, closing at
3,736.0 on the 29th of November, representing a
4.0% appreciation relative to the low of 3,891.6 it
hit against the dollar in June 2018.
All Share Index
UGX to USD
EQUITY MARKET UPDATEDEBT MARKET UPDATE
UGANDA
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
3M 6M 1Y 2Y 3Y 5Y 10Y
27-Nov-18 29-Oct-18
3,660.0
3,680.0
3,700.0
3,720.0
3,740.0
3,760.0
3,780.0
3,800.0
3,820.0
3,840.0
01-Oct-18
08-Oct-18
15-Oct-18
22-Oct-18
29-Oct-18
05-Nov-18
12-Nov-18
19-Nov-18
26-Nov-18
1,600.0
1,650.0
1,700.0
1,750.0
1,800.0
1,850.0
1,900.0
1-Oct-18
8-Oct-18
15-Oct-18
22-Oct-18
29-Oct-18
5-Nov-18
12-Nov-18
19-Nov-18
26-Nov-18
All Share index percentage
change in month to 28
November 2018
All Share index percentage
change in year to 28
November 2018
-5.4%
-5.2%

AfDB PROJECT FUNDING KEY FOR REGIONAL ECONOMIC INTEGRATION
RWANDA MARKET UPDATE

Rwanda Pushing for Increased Regional and
Global Influence
WemaintainfocusonRwanda’sincreasingpushfor,
not only regional but also, global influence through
the African Union (AU) platform, as well as the
Francophone leadership role. President Kagame
as the chairman of the AU, is spearheading key
reforms in a bid to streamline and empower the
commission, seeking a more narrowly focused AU
headed by a powerful commission with increased
financial autonomy. Key reform achievements so
farincludetheintroductionofquotasforyouthand
women, the rationalization of working methods
and the slow but steady progress towards financial
autonomy. President Kagame also hopes to
implement structural changes at the Commission
before his one year term lapses at the end of
January 2019. As highlighted last month, Rwanda
also hopes to become the first African nation to
join the Organization for Economic Cooperation
and Development (OECD), the 36-member club
of the world’s most developed economies, a
bold step in a bid to get an alternate platform
to persuade private investors while escalating
efforts to mobilize private investments. Rwanda is
banking on its high doing business rankings which,
is key to join the organization to build on the gains
from its business reforms to learn and work closely
with developed economies.
Sour Relations with Regional Partners
Relations with key regional partners however,
remain sour occasioning slow implementation
of projects under the Northern Corridor due to
stifled regional integration efforts. Rwanda and
South Africa have had somewhat frosty relations
for the last three years which has seen Rwandans
unable to access South African visas. Nevertheless,
Rwanda has indicated its willingness to resolve
outstanding issues. Similarly, relations with
Uganda remain complicated despite expressed
commitment from both nations on resolving the
stalement.
POLITICAL OUTLOOK
RWANDA
Rwanda up 11 Places in the World Bank’s Doing
Business Ranking
Continuous and deliberate efforts to improve
the business environment has seen Rwanda post
steady improvement in the World Bank’s Doing
Business rankings, consistently towering peers in
the region. Rwanda improved eleven places this
year ranking 29th globally (out of 190 countries)
and maintaining second position in Africa after
Mauritius. The jump has been attributed to
improvements in Rwanda’s business regulatory
environment captured in the various reforms
undertaken by the country. Key highlights that
contributed to the improved ranking include:
• Improved land dispute resolution mechanisms
where It now takes 7 days to transfer property
from 365 in 2005 and costs only 0.1% of the
property value, the same as in New Zealand
• Improved ease of doing business score by 4.2
points to 77.9 in this year’s index attributed to
improved business regulations
• Increased reforms in enforcing contracts by
issuing new rules of civil procedures which limit
adjournments to unforeseen and exceptional
circumstances
• 3rd global raking in the area of access to credit
after enacting a new insolvency law
Due to improved reforms, electronic business
registration has led to a sharp rise in domestic
business registrations from 418 in 2008 to
13,394 in 2017. While, the cost of registering a
new business has dropped from 317.0% of GDP
per capita in 2005 to below 15.0% in 20181
.
However, Rwanda still lags behind in dealing with
construction permits as it takes about 113 days to
get a construction permit.
1
Government data

AfDB Project Funding Key for Economic
Integration
Rwanda is set to benefit from the African
Development Bank’s (AfDB) funding of USD 2.0
billion worth of projects over the next four years
and with the potential of scaling up to USD 3.0
billion , aimed at spearheading the structural
transformation of the region and increase its
economic competitiveness. Unlocking these
funds will be instrumental in attracting private
investment to the Eastern Africa Community
states who are struggling to attract and retain
private investors owing to the high cost of doing
business occasioned by constant power cuts,
poor transport and communication infrastructure
and low electricity connectivity. The recently
approved East Africa Regional Integration Strategy
Paper (RISP) which, seeks to promote financial
sector integration, to increase trade and to fast-
track structural transformation through joint
infrastructure development in the areas of
transport, energy, information and communication
technology, and cross border water resource
management.
Among other plans, the AfDB recently signed
a USD261.1million funding deal to support the
country’s efforts to boost electricity supply and
expand access to electricity under the Scaling
Up Electricity Access Program Phase II (SEAP II).
Rwanda, like other smaller African economies,
still grapples with inadequate resources and
infrastructure to scale up and meet the region’s
ECONOMIC OUTLOOK
RWANDA
Source: NISR, StratLink Africa
Source: NISR, StratLink Africa
Rwanda’s External Trade with EAC (USD/Mln)
Trends in Industry ,Manufacturing and Select sub-
Components
demand resulting into an economy that is
characterized by low levels of industrialization
and still punching below its weight. Nonetheless,
Rwanda (and Kenya) has been actively pushing
for pan-African economic integration initiatives
such as, the ratification of the African Continental
Free-Trade Area (AfCFTA) agreement that if
implemented, provides an estimated economic
boost of about USD22.0 billion from the
elimination of tariffs on trade between African
states. Thus, the AfDB’s funding is key in linking the
EAC to its neighbors in the Horn of Africa, but most
importantly, Rwanda as a landlocked country will
benefit from port and airline links.
Economy Reaping the Fruits of Made-in-Rwanda
Strategy
Rwanda’s trade balance narrowed by 36.0%
between 2015 and 2017 attributed to the Made-
in-Rwanda strategy which, has seen growth in the
manufacturing sector. Total exports rose by 68.9%
from USD559.0 million to USD944.0 million in
2017 while total imports decreased by 4.0% from
USD1.849 billion to USD1.772 billion, in the review
period. Consequently, in fiscal year 2017/18
manufacturing activities increased by 8.0%
boosted by a rise in food processing activities,
manufacturing of chemicals, rubber and plastic
activities and textiles sub-sectors.
-200.0
-100.0
0.0
100.0
200.0
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
Trade Balance Exports Imports
-10.0% 0.0% 10.0% 20.0% 30.0%
2013-14
2014-15
2015-16
2016-17
2017-18
Chemicals, rubber & PlasƟcs
TexƟles, clothing & Leather
Beverages & Tobacco
Manufacturing
Industry

RWANDA
Source: National Bank of Rwanda, StratLink Africa
T Bill Yields
Yields Maintain Uptick
Yields for short term government instruments
maintained an uptick in November 2018 even
as headline inflation and the interbank rates
maintained the downtrend. The 91 Day, the
182 Day and the 364 Day papers’ yields rose by
10.0bps, 110.0bps and 10.0bps to 5.5%, 6.6% and
7.3%, respectively, in the period under review
as clients seek more rewarding return on their
investment as trading on the bourse remains low.
Inflation declined to -0.6% in October 2018 from
to 1.2% in September while the interbank rate fell
slightly by 10.0bps to 5.6% in October 2018.
Easing Pressure on the Local Unit
We maintain our projection of easing exchange
rate pressure as the local unit benefits from
robust inflows and strong export earnings from
agricultural and mineral exports. The easing
pressure on the Franc is also reflected in the easing
inflationary trends buoyed by further decline in
the cost of food and non-alcoholic beverages.
DEBT MARKET UPDATE
Franc vs USD
Franc depreciation, month-on-month,
as at 30th, November, 2018
Franc depreciation, year-on-year,
as at 30th, November, 2018
-1.6%
-4.3%
850.0
855.0
860.0
865.0
870.0
875.0
880.0
885.0
890.0
895.0
900.0
Oct-18
Nov-18
Nov-18
Nov-18
Nov-18
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
91 Day 182 Day 364 Day

Rwanda All Share Index year-on-year
All Share Index Declines
The All Share Index fell by 20.0bps and 130.0bps
month-on-month and year-to-year respectively, to
131.3 units at the end of November 2018 pulled
down by Bank of Kigali shedding off 3.4% from its
share price. Secondary bond trading continues
driving activity at the bourse as low liquidity
endures.
Bank of Kigali to Cross List on NSE
The Bank of Kigali (BK) finally got a nod to cross list
on the Nairobi Securities Exchange giving Kenya
investors a chance to participate in the USD 68.4
billion rights issue by Bank of Kigali Group Plc (BK).
This follows the approval by the Capital Markets
Authority (CMA) for the company to cross-list at
the Nairobi Securities Exchange (NSE). The cross-
listing will facilitate cross-border investments in
the region offering investors an opportunity to
take advantage of the diverse income streams of
BK Group and its future capital growth. The rights
issue shares will cost about USD 0.31 (Rwf 270.0)
each.
131.0
131.5
132.0
132.5
133.0
133.5
134.0
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18

StratLink in the News: 2018 Recap
Article Publication
Emerging and frontier markets have faced a relatively turbulent year in 2018 with currencies coming under pressure
owing to capital flight driven by increasingly attractive returns in advanced economies and growing concern over debt
sustainability in sub-Saharan Africa economies. StratLink Africa Ltd has continued to provide commentary on issues
developing in emerging and frontier markets with the goal of contributing nuanced perspective to investors. Some of the
articles published in 2018 are:
• From talk to action – The pressing need for a guiding framework in impact
investing
This piece was published against the backdrop of the Alpbach Forum which
convened forty thought leaders, including StratLink Director for SME and Impact
Investment, in the global impact finance ecosystem with the aim of charting a
way forward with regard to the search for a framework that will guide investment.
The article sheds light on issues underlying impact investment and the growing
risk of ‘impact washing’ with case studies from sub-Saharan Africa
• Zimbabwe in 2018 – Steering a difficult path to recovery
With rising optimism over the change of guard in Zimbabwe which saw Robert
Mugabe deposed in November 2018 and what this portends for investors
targeting the country, this article aimed at pointing key issues underlying
Zimbabwe’s macroeconomic environment. Of particular significance was its
focus on the country’s monetary environment, cautioning against potential haste
to de-dollarize the economy
• Liberalizing the economy isn’t enough to deal with Ethiopia’s currency crunch
Robert Faced with a scarcity of hard currency in 2018, Ethiopia embarked on
accelerated liberalization of the economy, including opening up the state owned
Ethio Telecom and Ethiopian Airlines to private investors, with a view to stir
inflow of foreign currency. This article seeks to show why these measures are not
sufficient to cushion the economy from the foreign currency crunch
• The need for more competition and liquidity in Africa’s capital markets
The state of underdevelopment that dominates capital markets in sub-Saharan
Africa has been widely cited as a key challenge facing the private sector’s ability
to raise capital. In this article, we take a look at a challenge which afflicts relatively
developed capital markets in the region ─ dominance of a few listed companies
at various exchanges. Using our experience in transaction advisory aimed at
injecting impetus into capital markets in the region, we table an argument for
greater competition and liquidity in the region

Media Citation
StratLink’s Africa Market Update remains a key reference document for both investors seeking greater clarity on
developments on the ground and media in shaping public discussion on emerging issues. In 2018, some of the media
mentions were as follows:
• Shilling exposed in IMF absence
Expiry of Kenya’s access to a stand-by credit from the International Monetary
Fund in June 2018 and what this means for the economy has been a major
source of debate in the country. Whereas the country has maintained robust
foreign exchange reserves through the year, this citation voiced StratLink’s view
that the economy was left vulnerable to exogenous shocks in the absence of the
facility
• Corporate deals decrease to Kes 6.8 billion in the first quarter
StratLink’s monthly compilation of disclosed private transactions in Africa
continues to attract significant interest. In this article, a comparison is made
between activity in the first quarter of 2018 and that of the first quarter of 2017
• Time to cut? Nigeria central bank gathers for first meeting in 2018
This article cited our views on why the Central Bank of Nigeria was faced with
significant pressure to send a dovish signal in its first meeting for 2018
• Shoprite’s entry shows Kenya is still a sweet spot for retail investment in Africa
This article borrows from StratLink’s thoughts on Kenya’s position as a retail hub
in sub-Sahara Africa in spite of the challenges faced by the sector over the last
two years
• Kenya’s retail sector is one of the most attractive locations for long-term investors
in sub-Saharan Africa
Kenya’s retail sector has over the last one year faced significant headwinds
characterized principally by the turbulence faced by Nakumatt, which was one
of the country’s giant retailers before applying for and being granted placement
under administration in January 2018. This citation argues that despite present
headwinds, Kenya is still one of the continent’s most attractive destinations for
retail market facing investors
• East Africa stock markets’ half year results show mixed fortunes
In this article, our views on how stock markets in the East Africa region had
performed in the first six months of 2018 were captured. In particular, the shift
by local investors to government paper and net-selling by foreign investors were
the anchor arguments
• Attractive prices boost activity in East Africa stock markets
In this piece, our thoughts on how the developments in Tanzania’s tax
environment was impacting investor appetite for particular stocks were taken
into consideration

Blog
LinkedIn
Twitter
StratLink on the Web

• MSMEs play a significant role in creating employment opportunities in Kenya
• More than half of the employment created by MSMEs is in the wholesale and retail trade space
• MSMEs in Kenya have an average lifespan of 3.8 years
• Kenya has a much larger MSME credit gap than other economies in East Africa. This is principally a reflection of the country’s
larger private sector
• The need to address working capital needs is the key reason behind MSMEs appetite for credit in Kenya
Advisory
Research
Growth
www.stratlinkglobal.com
14,898,300 – Number of persons
employed by MSMEs in Kenya
Source: Kenya National Bureau of Statistics
Spread of Employment
by MSMEs across Sectors
53.8%
11.8%
11.1%
2.7%
20.6%
Wholesale & retail trade
Manufacturing
Accommodation & food service
Agriculture
Others
MSME Finance gap
in Kenya
$6.3 billion 68.5%
Majority of MSMEs that closed
between 2011 and 2016 were in the
wholesale and retail trade space
3.8 years
MSMEs close at an
average of 3.8 years
Note: In this regard, the MSME finance gap refers to an estimation of both
unserved and underserved funding needs i.e MSMEs that applied for loans
and were rejected as well as those that were discouraged from applying due
to unfavourable terms.
MSME Finance gap in Kenya
- $ 6.3 billion
Advisory
Research
Growth
Sources: Kenya National Bureau of Statistics
International Finance Corporate
Reasons why MSMEs in Kenya
take Credit
MSME Finance gap in Tanzania
- $ 2.5 billion
MSME Finance gap in Uganda
- $ 752.0 million
37.0%
24.9%
17.0%
13.4%
3.4%
4.3%
Working Capital
Refurbishing business
Purchase inventory
Non-business purpose
Starting another business
Others
Micro, Small & Medium (MSME) Landscape in Kenya
Below are some of the images we have shared on our digital platforms in the second half of the year

• East Africa private transactions space is dominated by small ticket deals (< $ 1 Mln)
• Kenya has a slightly larger proportion of relatively large deals (> $ 1 Mln) than peers across the region
Kenya is the hub of private transactions in East Africa both from a deal size and deal traffic perspective
• Among select countries within the East
African Community we see that a
significant proportion of deals occur
within the smaller deal size bracket
with over 60.0% of them being worth
under USD 5.0 million on average
• Kenya shows a slightly higher
prevalence of larger deal sizes relative
to Uganda, Tanzania and Rwanda while
the latter three tend to see relatively
more deals worth under USD 1.0 million
take place
• As economic development drives
forward within the region, can we
expect to see the frequency of deals
skew toward larger sizes?
Advisory
Research
Growth
Source: PitchBook
42.8%
20.8%
14.6%
8.5%
4.0%
9.3%
50.5%
19.8%
12.8%
7.0%
3.2%
6.7%
<=1 >1 and <=5 >5 and <=15 >15 and <=25 >25 and <=50 >50
%ofDeals
Deal Size (USD Million)
Proportion of Deals by Deal Size
Jan-2013 to Jul-2018
Kenya Uganda, Tanzania, Rwanda www.stratlinkglobal.com
Advisory
Research
Growth
• Kenya takes the lion share of deal
activity within the EAC posting on
average 48.6 more deals per annum
between 2013 and 2017 than Rwanda,
Tanzania and Uganda combined
• More often than not, over the period
under review, Kenya has attracted
larger deals than regional peers,
especially in 2015 and 2017 when the
differential between average deal sizes
was most significant
• What are the main factors that account
for Kenya’s comparatively high deal
activity?
Advisory
Research
Growth
Source: PitchBook
68.0
91.0
143.0
113.0
94.0
127.0
134.0
176.0
163.0
152.0
2013 2014 2015 2016 2017
No.ofDeals
Evolution of Deals Over Time
13.2 19.4
9.8 9.3
111.2
24.3
12.4
70.6
12.8
153.2
AverageDealSize
(USDMn)
Rwanda , Tanzania and Uganda Combined Kenya
2013 2014 2015 2016 2017
Advisory
Research
Growth
Disclosed Private Transactions in East Africa

Source: World Bank, StratLink Africa
Financial Account
Mobile Money Account
Digital Payment
Advisory
Research
Growth
Index:
• Financial Account: Percentage of adults with a bank account at a bank, financial institution or mobile money service
• Mobile Money Account: Percentage of adults who paid bills, sent or received money using a mobile money service
• Digital Payments: Adults using mobile money, a debit or credit card, or a mobile phone to make or receive a payment from an account; or adults using the
internet to pay bills or make online purchases
Select Financial Inclusion Metrics among Adult Population
in South Asia and Eastern Africa (2017)
34.8%
0.3%
11.9%
81.6%
72.9%
79.0%
50.0%
31.1%
38.9%
46.8%
38.5%
43.0%
59.2%
50.6%
54.7%
Pakistan India Bangladesh SriLankaEthiopia Kenya Rwanda Tanzania Uganda
21.3%
6.9%
17.7%
79.9%
2.0%
28.7%
50.0%
21.2%
34.1%
73.6%
2.4%
47.2%
Financially Constrained MSMEs as a Percentage of Total MSMEs
Source: International Finance Corporation
Note:
• Micro enterprises are those with less than 10 employees whilst small and medium are those with 11 to 250 employees
• Financially constrained enterprises refers to those which have no source of external funding and find it challenging to access credit (i.e. those whose
application for credit has been rejected) as well as those which have some form of external financing but are often discouraged from applying for
credit due to terms
Kenya
41.1%
Tanzania
71.5%
Uganda
61.5%
Ethiopia
61.7%
India
41.1%
Bangladesh
55.4%
Nepal
52.4%
Pakistan
52.6%
Advisory
Research
Growth

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

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

Africa Market Update - December 2018

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Africa Market Update - December 2018