Africa Market Update - November 2018

2NOVEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
A Financial Advisory
Company
NOVEMBER 2018 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA
ZAMBIA 4
9
14
23
RWANDA 27
KENYA
UGANDA
TANZANIA 18
Table of Contents
ZAMBIA
• Rate hike likely in the November 2018 MPC meeting as inflation surges and the
Kwacha slides
• Q2 2018 GDP growth allays fears of diminishing growth momentum but lifts the
lid on imbalanced growth
NIGERIA
• Political risk not on top of investor concerns three months to the general election
• Capital flows into stock exchange slow down as frontier market rout prevails
KENYA
• External factors pose risk to the Kenya’s Economy
• Bank of Kigali to cross list on NSE
At a Glance
TANZANIA
• Regulatory bureaucracy delaying potential FDI in the energy sector
• String of losses prompts renewed calls for electoral reforms by the opposition
UGANDA
• Uganda’s rank in the Ease of Doing Business Reports falls
• Second quarter GDP growth slows
RWANDA
• Increased regional and global influence with francophone role
• Rising capital goods imports to put upward pressure on the import bill
http://mutuamatheka.co.ke/wp-content/uploads/2012/04/001_NAIROBI_WEBREADY_MUTUA-MATHEKA-10.jpg
Nairobi, Kenya
© Mutua Matheka
Cover image:

Capital Invested by Country (USD)
AFRICA DEALS LANDSCAPE
January - October 2018
Source: PitchBook, StratLink Africa
Deal Activity by Industry (Proportions) Deal Activity by Types (Proportions)
Snapshot of Deals
• Oct 25th, 2018: Dolidol (Morocco) - The company and its existing shareholders sold a 20% stake to Development Partners International for USD 30 million
• Oct 25th, 2018: Sseko Designs (Uganda) - The company raised USD 1.3 million of venture funding from undisclosed investors
• Oct 24th, 2018: Bharti Airtel Africa (South Africa) - The company received USD 1.3 billion of development capital from Singtel, Warburg Pincus, Temasek
Holdings, SoftBank Group and other investors
South Africa 12.6 Billion
Nigeria 4.2 Billion
Egypt 2.7 Billion
Morocco 1.5 Billion
Kenya 1.0 Billion
Namibia 685.9 Million
Senegal 477.0 Million
Ethiopia 405.7 Million
Uganda 324.4 Million
Ghana 202.4 Million
Mauritius 113.3 Million
Madagascar 94.2 Million
Tanzania 60.1 Million
Ivory Coast 37.8 Million
Congo 19.4 Million
Lesotho 8.7 Million
Tunisia 5.1 Million
Rwanda 1.0 Million
Niger 20,000
17.1%
11.0%
5.9%
5.0%
4.3%
4.0%
3.8%
48.9%
Exploration, Production and Reﬁning
Commercial Services
Communication & Networking
Consumer Non-durables
Healthcare Devices & Supplies
Insurance
Energy Services
Others
32.0%
32.0%
23.1%
23.1%
11.2%
11.2%
4.1%
4.1%
2.4%
2.4%
27.2%
27.2%
Mergers & Acquisitions
Secondary Transactions - Private
Corporate Divestiture
Secondary Transaction - Open Market
IPO
Others

SURGING INFLATION & WEAKENING KWACHA PLACE FOCUS ON NOVEMBER 2018
MONETARY POLICY MEETING
ZAMBIA MARKET UPDATE

Adverse Economy Presents Risk to Political
Environment
Zambia’s political risk profile is stable with
underlying pressures from an adverse economic
environment. Rising inflation, in particular,
presents a key challenge to an economy whose
majority of employed persons are in the informal
segment of the economy. Informal employment
is largely characterized by low income and less
favorable, if any, benefits. As such, persons
employed in this segment of the economy are
relatively more exposed to adverse conditions.
An unemployment rate of 42.2% in Q2 2018 also
presents a potential pressure point in the country’s
political stability especially as the government is
expected to be delivering on promises made in the
run-up to the 2016 election.
Unemployment Rate in Zambia – Q2 2018
POLITICAL OUTLOOK
Employment in Zambia
Source: Central Bureau of Statistics, StratLink Africa
GDP: USD 21.5 Bln | Population: 16.7 Mln
ZAMBIA
Budget 2019 Places Mining Under the Spotlight
The performance of the mining sector will come
under sharp focus in the coming quarters following
proposals in the budget for 2019 which seek
to raise the revenue mobilized from the sector.
Among the proposals in the budget include:
• An increase of mineral royalty rates by 1.5% at
all levels of the sliding scale
• Introduce an import duty at the rate of 5.0% on
copper and cobalt concentrates
• Lift the suspension of the export duty on
manganese ores and concentrates and increase
this duty by 500.0 bps to 15.0%
Indicator of Efforts to Address the Fiscal Deficit
The raft of taxes proposed bring to light the steps
being taken by the government as it seeks to
trim the fiscal deficit and tone down the appetite
for debt. In the first half of 2018, the mining
sector was a vital driver of Zambia’s growth at a
time when growth statistics show imbalanced
momentum. With the 2019 budget proposals
in mind, the sector’s allure for investment and
performance will be an issue of great interest.
Taxation on the mining sector has been a subject
of mixed reactions since the passage of the 2014
amendments to the Mining Act providing for
royalties that were deemed punitive
First Half
Sector 2018 Growth
Financial services 31.1%
Information and communication 24.8%
Mining and quarrying 9.8%
Manufacturing 6.0%
Construction 4.4%
Segment Rate
Aggregate 42.2%
Rural 51.7%
Urban 33.5%
BUSINESS ENVIRONMENT
30.2%
69.8%
Formal
Informal

Q2 2018 Growth Moderates Bearish Outlook
A widely unanticipated upswing in the economy’s
growth momentum in Q2 2018 has been pivotal
in moderating concern that the economy risks
slipping into low single digit growth in the near-
term. Zambia’s economy had consistently lost
growth momentum between Q3 2017 and Q1
2018, a fact that prompted a dimmed outlook
for an economy whose profile has already been
undermined by a deteriorated external debt
position. Additionally, the growth upturn in Q2
2018 has lifted the momentum for the first half
of 2018 to 3.3%, twenty bps higher than it was in
2017 which was the lowest reported over the last
four years.
Disaggregation of the growth into sectors reveals
both high growth drivers, such as financial services
which grew by 35.4% in Q2 2018, and sectors
derailingthismomentumsuchasagriculture which
contracted for the third consecutive quarter. The
high double digit growth in financial services is a
factor we can attribute to the base effects given
the contraction registered in Q2 2017. The trend,
on the whole, suggests that imbalanced growth
across the sectors remains a key threat to Zambia’s
economy.
GDP Growth
ECONOMIC OUTLOOK
Eyes on the November 2018 Monetary Policy
Meeting
Over the next three weeks, focus will shift to
the Monetary Policy Committee meeting slated
for November 19th – 20th. With inflation having
surged to 8.3% in October 2018, we expect the
regulator to tighten the benchmark rate hiking it
by at least 100.0 bps with a view to stem the rising
pressure. The second half of 2018 has in particular
been characterized by a quickened uptick in non-
food inflation, a development which is bound
to see the Bank of Zambia place more focus
on drivers such as money supply and the pass-
through effects of the weakening Kwacha against
major currencies.
The Economy by Sectors
Headline Inflation
ZAMBIA
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Wholesale & retail trade Mining & quarrying
Manufacturing ConstrucƟon
Transport Financial Services
Real Estate Others
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18

Source: Bank of Zambia, StratLink Africa
Focus on the Kwacha
The Kwacha came under immense pressure in the
second half of 2018, a factor that we anticipate
will dominate the November 2018 Monetary
Policy meeting. Whereas this has been in line with
the rout affecting frontier and emerging market
currencies, the pressure on the Kwacha has been
amplified by debt sustainability concerns which
are likely to have accelerated capital outflow.
Additionally, the current account deficit has
deteriorated closing the second half at USD 453.8
million, 54.3% higher that it was twelve months
earlier
Declining proceeds from copper have been a
key factor undermining the economy’s external
position. As at June 2018, the trade balance
widened to USD 213.1 million, having grown
nearly five-fold from June 2017.
Month Trade Balance (USD Mln)
Jun-17 -45.8
Sep-17 -126.1
Dec-17 36.7
Mar-18 -71.2
Jun-18 -213.1
Foreign Exchange Reserves and Months of Import
Cover
Sovereign Yield Curve
Kwacha to USD Exchange
ZAMBIA
DEBT MARKET UPDATE
Yield Curve Showing Signs of Imminent Inversion
In the fixed income market, yields of short-term
papers have posted a strong rise and suggest
the yield curve could be inverting in the short to
medium-term. This reflects jitters over the near-
term as investors contend with surging inflation
and concerns over the country’s fiscal position.
Margin by which the Kwacha
depreciated year-to-date as
at October 19th, 2018
19.5%
9.0
9.5
10.0
10.5
11.0
11.5
12.0
12.5
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
2,400.0
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Gross Foreign Exchange Reserves (USD Mln)
Months of Import Cover - RHS
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
91-day
182-day
273-day
364-day
2year
3year
5year
7year
10year
15year
Dec-17 Mar-18 Oct-18

Source: Bloomberg, StratLink Africa
Market Remains Bearish
CEC Liquid Telecom Net Profit for the Year (USD)
Lusaka Stock Exchange All Share Index
Lusaka Stock Exchange All Share Index - YTD
Source: CEC Annual Reports, StratLink Africa
ZAMBIA
EQUITY MARKET UPDATE
Copperbelt Energy Corporation Wraps up
Divestment
The market has remained on a general decline
with the All Share Index shedding 1.4% year-to-
date as at October 17th, 2018. In the period under
review, Copperbelt Energy Corporation (CEC)
completed divestment of its 50% shareholding in
CEC Liquid Telecom, a process which commenced
in May 2018. This is principally a move aimed at
enabling the company concentrate its resources
on its core business which is supply, transmission,
distribution and generation of electricity.
Outlook
With the Kwacha depreciating, we expect the exit
of foreign investors to send the All Share Index
further downwards for the remaining period of
the year.
Year-on-year gain by the Lusaka
Stock Exchange All Share Index
as at October 17th, 2018
Year-to-date change in the
Lusaka Stock Exchange All Share
Index as at October 17th, 2018
5.2%
-1.4%
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
2014 2015 2016 2017
Millions
0.0
100.0
200.0
300.0
400.0
500.0
600.0
4,600.0
4,800.0
5,000.0
5,200.0
5,400.0
5,600.0
5,800.0
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Millions
Volumes - RHS All Share Index
0.0
100.0
200.0
300.0
400.0
500.0
600.0
5,000.0
5,100.0
5,200.0
5,300.0
5,400.0
5,500.0
5,600.0
5,700.0
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Millions
Volumes - RHS All Share Index

NIGERIA MARKET UPDATE
POLITICAL RISK DOESN’T TOP INVESTORS’ RISK CONSIDERATION THREE MONTHS TO THE ELECTION

Primaries Wind Up – Buhari to face Atiku
With a little over four months to the February 2019
general election, Nigeria’s political risk profile is
broadly favorable with suppressed pressures from
episodes indicative of insecurity compared to the
last electoral cycle. A key factor we will be looking
out for this time is the role that social media and
the potential proliferation of fake news is bound to
have on the electorate.
The two main parties, People’s Democratic Party
(PDP) and the All Progressives Congress (APC)
selected their presidential candidates at the start
of October 2018. President Muhammadu Buhari
is set to face Atiku Abubakar in the February
19th, 2018 poll, a contest which we expect will be
significant for three reasons:
• Atiku Abubakar will be PDP’s flag bearer having
defected from Buhari’s APC in December
2017. As such, the potential impact this could
have on APC’s political capital will a matter of
significant interest in the run-up to the general
election. The last time Atiku contested in the
Presidential poll, 2007, he emerged position
three suggesting his potential should not be
undermined in the forthcoming contest
POLITICAL OUTLOOK
NIGERIA
2007 Presidential Election Outcome
Source: Electoral Commission, StratLink Africa
Average GDP Growth
Source: Electoral Commission, StratLink Africa
Source: National Bureau of Statistics, StratLink Africa
• With Atiku having served as the country’s
Vice President between 1999 and 2007, he
is likely to cast himself as an experienced
candidate, especially given that this period was
characterized by relatively strong economic
growth. The Buhari administration has come
under sharp criticism over what is perceived
as poor management of the economy with
the Nigerian economy having slumped into
recession in 2016. Whereas the economy has
emerged from the recession, factors such as
a sustained uptick in unemployment bedevil
Buhari’s re-election bid
• With its selection of a candidate who has
previously tried their hand at running for
Presidency, PDP is looking to replicate APC’s
triumph in the 2015 general election in which
Buhari beat former president Goodluck
Jonathan. The two key contenders will now
be working to consolidate their political
constituencies between now and February
Period Rate of Unemployment
Q1 2015 7.5%
Q1 2016 12.1%
Q1 2017 14.4%
Q3 2017 18.8%
69.8%
18.7%
7.5% 4.0%
Umar Yar'Adua (PDP)
Muhammadu Buhari (ANPP)
AƟku Abubakar (AC)
Others
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
1999 - 2007 2008 - 2014 2015 - 2017

Unemployment Rate
Businesses Optimistic but Wary of Headwinds
The business environment remains favorable
with players expressing a generally optimistic
outlook on the near-term. Between August 2018
and September 2018, players in the services
and industrial sector exhibited greater optimism
whilst those in construction and wholesale trade
adopted a more dimmed outlook.
Investors Pegging Expectations on Economic
Pulse and Fiscal Plans
This variation in expectations from the private
sector reflects the mixed performance posted
by the sectors in the first half of 2018. The trade
segment of the economy remains in contraction
even as the country continues exhibiting rebound
from the 2016 recession. This helps explain why
players in the wholesale and retail segment hold a
bearish outlook.
We assess that the bearish outlook regarding the
construction sector is principally driven by the
National Assembly’s slashes on key infrastructure
projects in the 2018 Federal budget. By our
estimation, slashes to the tune of USD 36.6 million
were made affecting projects such as the Mambilla
Power Plant, the East-West Road, the Lagos-Ibadan
Expressway and the Itakpe-Ajaokuta Rail Project.
BUSINESS NEWS ENVIRONMENT
Source: Central Bank of Nigeria, StratLink Africa
Business Confidence Index
Unemployment Rate
Power Supply and Cost of Credit Top Investor
Concerns
Onthewhole,privatesector’spriorityconcernsare
unreliable power supply and an adverse economic
environment. Concerns over an adverse economic
climate echo our repeated mention of the country
experiencing a fragile rebound which is propelled
mainly by the recovery of the price of oil in the
global market. Further, we reiterate the view that
constrained access to credit is hurting the private
sector’s prospects and therefore undermining
investors’ outlook.
Key Risks Perceived by Business Environment
Year-on-Year Growth in Private Sector Credit
NIGERIA
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Industrial
Services
ConstrucƟon
Retail
Aug-18 Sep-18
65.9
54.9
53.6
51.6
47.1
46.9
0.0 20.0 40.0 60.0 80.0
Insuﬃcient Power
Supply
High Interest Rate
Unfavourable
economic climate
Financial problems
Unclear laws
Unfavoutable poliƟcal
climate
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Agriculture Industry Services

Average Commercial Bank Lending Rate vs Average
T-Bill Rate
Monetary Policy Rate and Inflation Trend
Source: National Bureau of Statistics, StratLink Africa
NIGERIA
September 2018 - Second Consecutive Month of
Inflation Rise
September 2018’s headline inflation rose to
11.3%, the second consecutive month of an
uptick since the steady rise between September
and November 2016. This trend lends credence
to the increasingly hawkish bias which has been
adopted by the Monetary Policy Committee. In
its last meeting (September 2018), three out of
seven members voted in favor of a hike in the
Cash Reserve Ratio by 50.0 bps and a hike in the
benchmark rate by 25.0 bps signaling the strongest
inclination for commencement of a tightening
cycle since the July 2016 rate hike.
With one Monetary Policy Committee meeting left
in 2018 (to be held between the 19th and 20th of
November), we expect that the Central Bank will
be keen to make a move that signals aversion for
a return to high double digit inflation. The Central
Bank’s September 2018 Business Expectations
Survey shows that investors expect a decline in
inflation and a rise in interest rates going forward.
Inflation bound to Rise Sooner than Cost of
Credit
We foresee inflation rising sooner than there
would be a likelihood for an uptick in the average
commercial bank lending rate. Pressure for a rise
in commercial bank lending rates will be coming
not only from tightening monetary conditions
but also a spike in the average T-Bill yields which
suggests the Federal Government could be raising
its appetite for domestic borrowing or there could
be efforts to tighten liquidity in the money market
to stem pressures on the Naira.
Available data shows that between July and August
2018 the average T-Bill yield rose by 200.0 bps, the
largest rise since the 400.0 bps surge between
June and July 2016. It is important to observe
that this period coincided with the Central Bank’s
last monetary tightening and also the pick-up in
headline inflation.
ECONOMIC OUTLOOK
The average commercial bank
lending rate in the first eight
months of 2018
17.1%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jan-12
Aug-12
Mar-13
Oct-13
May-14
Dec-14
Jul-15
Feb-16
Sep-16
Apr-17
Nov-17
Jun-18
Monetary Benchmark Rate
Headline InﬂaƟon
Food InﬂaƟon
14.5%
15.0%
15.5%
16.0%
16.5%
17.0%
17.5%
18.0%
18.5%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Average T-Bill Rate - LeŌ Axis
Average Commercial Bank Lending Rate

Nigeria Stock Exchange
Naira to USD Exchange
Market Remains Bearish
Like a number of stock exchanges in sub-Saharan
Africa, the Nigeria bourse continued to fall with
the 30 Index plunging 15.9% between January
and October 2018. The value of securities traded
at the exchange stood at USD 184.0 million, a
66.3% decline from the same period in 2017 and
an indicator of the general sluggishness that has
gripped the market. Available data shows that
the market has experienced a general decline
in foreign investor inflows from an average USD
190.8 million in Q1 2018 to USD 77.8 million in
Q3 2018 (Q3 numbers based on data for July and
August 2018).
This is indicative of the capital flight that Nigeria,
and other frontier markets, have suffered as
investors chase increasingly attractive returns in
advanced markets. This is one of the key reasons
underlying the expectation that the Central Bank
is bound to send a hawkish signal in its next
Monetary Policy Committee meeting.
Focus on the Sliding Naira
The Naira touched 364 units of exchange to the
greenback in October 2018 as the local unit’s slide
against major currencies prevailed. As at August
2018, the country’s foreign exchange reserves
stood at USD 44.6 billion, a 6.0% decline from the
April 2018 peak. This shows that the Central Bank’s
capacity to prop the Naira has been weakened
relatively and could explain the rising pressure the
local unit is facing.
Month Foreign Exchange Reserves (USD Mln)
Dec-17 39,353.5
Mar-18 46,730.5
Jun-18 47,157.9
Aug-18 44,580.4
Investors will be looking to the November 2018
Monetary Policy meeting to see if the Central Bank
will take a stance that aids in attracting capital
flows into the economy and stem the emerging
depreciation by the Naira. Fears that the trend by
the local unit is adding onto inflation pressures
are expected to nudge the Central Bank to signal
monetary tightening. We maintain our view that,
going by history, it is unlikely that the monetary
policy rate will change between now and February.
We note, however, that tools such as the Cash
Reserve Ratio could be used to send a signal.
EQUITY MARKET UPDATEDEBT MARKET UPDATE
NIGERIA
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
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Millions
Volume 30 Index - LeŌ Axis

EXTERNAL FACTORS POSE RISK TO THE ECONOMY
KENYA MARKET UPDATE

POLITICAL OUTLOOK
KENYA
Tourism and Direct Flights to New York
The tourism sector has seen improvements since
2015 in both international visitor arrivals as well
as earnings, which increased by 20.3% to USD
1.2 billion in 2017 relative to 2016 despite the
prolonged electioneering period. What seems
to be of even more interest is that Kenya has
managed to earn more per international arrival
since 2013 regardless of the dip in visitor numbers
leading up to 2015.
The opening of Kenya Airways’ (KQ) new direct
route between Nairobi and New York City is
expected by most to provide a boost to local
tourism and facilitate better business linkages
between the two nations. However, Kenya is not
the first African city to offer direct flights to the
USA and KQ has had its struggles, both financially
and with customer experiences, hence the success
of this new flight route is all but guaranteed.
International Visitor Arrivals by Purpose of Visit, ‘000
Earnings - USD per Tourist Arrival
Source: KNBS, StratLink Africa
President Asked to Revise County Cash Allocation
Lawmakers of the Mt Kenya region recently
brought their grievances to the attention of the
President, stating that the counties they represent
are being unfairly treated with a major bone of
contention being that their development funds
receipts are not reflective of their investments.
The Mt Kenya region heavily backed the President
and his Deputy in the last elections and as a result
amassed political capital that could be used as a
bargaining chip. Lawmakers have also lamented
President Uhuru’s freeze on new projects since
it has curbed the fulfillment of promises made
during electioneering. However, before any
additional allocations are approved more pressing
issues should be addressed.
Overall, county government absorption rates
(the proportion of expenditure out of the
approved budget) could improve, especially for
development expenditure, see below. Some of the
main challenges affecting budget implementation
in the last financial year were high expenditures on
personnel remunerations, which made up almost
half of all county expenditure; under-performance
of own source revenues of which only two thirds
of the target was raised; and weak budgetary
control by county treasuries.
Source: Office of the Controller of Budget, StratLink Africa
County Government Budget and Expenditure,
FY 2017/18
87.3%
48.1%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
Recurrent
Expenditure
Development
Expenditure
KESBillion
County Budget County Expenditure
AbsorpƟon Rate (RHS)
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
2013 2014 2015 2016 2017
Holiday Business Transit Other
600.0
650.0
700.0
750.0
800.0
850.0
2013 2014 2015 2016 2017

KENYA
Inflation Categories, Sep 2018
US and China Shares of Trade with Kenya
International oil prices have subsided since
their spike in early October, partly on the back
of an anticipation that global economic growth
will slow due to the US – China trade dispute.
However, there remains a risk that further upward
movement in oil prices will feed inflation locally
which poses a problem to the Monetary Policy
Committee (MPC) because with the interest rate
cap in place, adjusting the key rate to deal with the
problem may not be as effective as it otherwise
would have been.
USA and China together account for significant
chunks of Kenya’s international trade and their
current dispute has the potential to affect export
and import flows. The resultant weakening of
global growth that is expected is likely to have
negative knock on effects on remittance inflows
and tourism thus dampening economic activity.
Brexit in Europe and tension in the Middle East
add to the air of uncertainty hence it would be
wise of the government to develop contingency
plans in order to prepare for potentially damaging
outcomes.
ECONOMIC OUTLOOK
Exogenous Risks
While the country currently remains in a relatively
stable macroeconomic state and while there exist
a multitude of factors within its borders that are a
cause for concern, there are events outside of its
control that demand attention in order to mitigate
potentially negative impacts that may affect Kenya
down the line.
Changing Oil Prices, International Trade Disputes
and More
In early October, 2018 oil prices reached highs last
seen in 2014. This poses a particularly high risk to
Kenya’s inflation because it comes at a time when
prices are already being subjected to upward
pressure from the recently effected 8.0% Value
Added Tax (VAT) on petroleum products.
Inflation in September, 2018 was 5.7%, up from
4.0% the month earlier and the highest it has been
since October, 2017. While the price growth rate is
well within the Central Bank’s target range (2.5%
percent either side of the ideal 5.0%) inflation in
theHousing,Water,Electricity,GasandOtherFuels
category was 17.4% while the Transport category
inflated by a similarly high 17.3% indicating the
immediate effect of higher fuel prices.
Oil Prices, USD per Barrel
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
02-Jan-14
02-Jul-14
02-Jan-15
02-Jul-15
02-Jan-16
02-Jul-16
02-Jan-17
02-Jul-17
02-Jan-18
02-Jul-18
WTI Crude Brent Crude
5.7%
0.0%
5.0%
10.0%
15.0%
20.0%
Housing,Water,
Electricity,Gas
andotherFuels
Transport
Headline
0.0%
10.0%
20.0%
30.0%
% Exports out
of Kenya
% Imports into Kenya
USA China

Treasury Manages to Keep Yields Low
The yield curve underwent a downward shift on
the short term maturity end in the month to 30
October, 2018. Yields fell the most drastically for
three month bills, by 0.7%, while yields on one year
and three government securities dropped by 0.5%
and 0.2%, respectively, in the period under review
despite the recent uptick in inflation beyond 5.0%.
Primary auctions of government T-Bills have more
often than not been under-subscribed in the
month of October with the last auction, held on
the 25th, garnering a subscription rate of 66.8%.
High liquidity in October, seen via the low
interbank rate, would suggest that there might
higher demand for government securities and
bonds however, that has not necessarily been the
case. The 15 year bond issued on 17 October was
also under-subscribed (67.6%) and the Treasury
collected less than a third of what they put on offer.
All signs point toward the government continuing
its efforts to keep yields low.
Bloomberg BVAL Yields Index
Interbank Rate
DEBT MARKET UPDATE
KENYA
Bank of Kigali to Cross-List on NSE
The NSE 20 Share Index reached a new low for
the year when it touched 2,749.3 on 16 October
2018 before regaining some ground to close at
2,801.2 on 30 October 2018 with the tightening of
global financial conditions among more developed
economies threatening financial flows into Kenya.
Having received approval from the Capital Markets
Authority (CMA), the Bank of Kigali Group Plc is
poised to cross list onto the NSE, marking the first
time a Rwandese company has done so. The move
is a step towards a deeper integration of capital
markets in East Africa that should see increased
investments across borders as well as further
cement Kenya’s position as a regional finance hub.
Nairobi Securities Exchange 20 Share Index
NSE 20 index percentage change
in month to 29 October 2018
NSE 20 index percentage change
in year to 30 October 2018
-2.2%
-23.8%
9.0%
9.4%
9.8%
10.2%
10.6%
11.0%
11.4%
11.8%
12.2%
12.6%
13.0%
13.4%
13.8%
3M 1Y 3Y 5Y 8Y 10Y 20Y 30Y
30-Oct-18 27-Sep-18
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
01-Aug-18
08-Aug-18
15-Aug-18
22-Aug-18
29-Aug-18
05-Sep-18
12-Sep-18
19-Sep-18
26-Sep-18
03-Oct-18
10-Oct-18
17-Oct-18
24-Oct-18
31-Oct-18
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
2,500.0
2,600.0
2,700.0
2,800.0
2,900.0
3,000.0
3,100.0
3,200.0
3,300.0
03-Sep-18
10-Sep-18
17-Sep-18
24-Sep-18
01-Oct-18
08-Oct-18
15-Oct-18
22-Oct-18
29-Oct-18
Millions
Volume NSE 20 Index (LHS)

TANZANIA MARKET UPDATE
DELICATE BALANCE BETWEEN IMPROVING INFRASTRUCTURE LOGISTICS AND
MANAGING RESULTING DEBT

Opposition Calls for Electoral Reforms amid
increasing Defections by Members
Tanzania’s Opposition Chadema is calling for
electoral reforms aimed at increasing political
democracy, after losing in the recently concluded
polls in mid-September to the ruling Chama Cha
Mapinduzi (CCM). Chadema raised allegations
against CCM of rigging local elections and accused
the National Electoral Commission (NEC) of bias
following the losses suffered by Chadema in the
by-elections which, were occasioned by defections
of opposition members to CCM. We opine the
defectingmembersareseekingtoreapthebenefits
of incumbency, against allegations of limited space
for political dissent. These allegations have raised
new concerns about democratic freedoms being
scaled back in Tanzania and further renewing calls
by the opposition for electoral reforms, while
threatening to quit the electoral process, in a bid
to increase autonomy and independence of the
electoral body.
Torrid Experience for the Opposition
The opposition has had a torrid experience with a
series of losses in the by-elections since November
2017 occasioned by a string of defections by its
members to the ruling party, further weakening
the already divided opposition with CUF already
split into two opposing factions. The current
unconducive environment for political activity
where the President has been tough on the
opposition; restricting political rallies and live
broadcasting sessions, as well as carrying out
arbitrary arrests on those perceived to defy these
orders, is one of the principal reasons for the
defections. The President has also been keen on
givingvocaloppositionmembersstatejobs,amove
that is seen by the opposition as luring its members
in a bid to muzzle the opposition. The CCM’s win in
the recent elections, therefore, reinforces our view
that it will continue to dominate domestic politics
while benefiting from a weakening opposition
which, will remain ineffective in yielding significant
electoral reforms.
POLITICAL OUTLOOK
TANZANIA
LNG Gas Plans Plagued by Delays
Tanzania is looking to increase investments in the
energy sector which, are crucial in the realization
of the country’s objective to attain the industrial-
driven economy. These industrial drive is projected
to be supplemented by mega plans like the Rufiji
Hydroelectricity Project that is expected to boost
power supply in the country by adding an extra
2,100.0 megawatts (MW) to the national grid.
Similarly, the Kinyerezi II power plant, Tanzania’s
first combined cycle power plant with over
240.0MW to the national grid is expected to be
commissioned within the year. Anecdotal data
shows that as of May, Tanzania’s installed capacity
was 1,517.5 MW against a demand of 1,100.0 MW.
Regulatory Bureaucracy Hampering Potential for
FDI Growth
Government, nonetheless, has raised concerns
over the slow development of the approximately
USD30.0 billion liquefaction facility being executed
by a consortium of international oil companies led
by Royal Dutch Shell. The facility forms a key part
of Tanzania’s plans to monetize its vast natural gas
reserves projected to deliver about 15000.0 MW
by 2025 hence, calling for expedited development
of local processing capabilities. Tanzania trampled
peers in attracting Foreign Direct Investment (FDI)
in20171
andweassessthattheLNGexportterminal
has the potential to significantly boost FDI inflows
and consequent foreign receipts with potential
higher economic growth. However, following
major gas discoveries offshore, government has
worked to incorporate new provisions to govern
the sector through the Petroleum Act 2015.
Nevertheless, these several layers of fiscal and
regulatory uncertainty coupled with significantly
expanded role for the state may dull investor
appetite. If not addressed, this aforementioned
uncertainty is considered a key barrier to progress
of the LNG project with a resultant lag effect on
the country’s energy sector plans.
1
UNCTAD

by large public infrastructure investments. And in
a move that is bound to exacerbate the country’s
projectfinancingwoes,amidlaggedrevenueflows,
the World Bank is reportedly withholding USD 50.0
million of grant intended to support government
statistical activities sighting concerns about the
recent amendments to the Statistics Act 2015
which, seeks to criminalize the collection, analysis,
and dissemination of data without authorization
from the National Bureau of Statistics.
Railway Network Modernization on Course
A USD1.5 billion loan, 75.0% of total USD1.9 billion
funding requirements, from Standard Chartered
Bank, was confirmed for the construction of the
second phase of Tanzania’s planned standard-
gauge railway (SGR) project for a 422.0 kilometers
(km) high-speed electric railway line. The line
which is part of a four-phase project, involves
modernization of 2,561.0km railroad linking the
Dar es Salaam port with landlocked neighbors and
is expected to transport about 17.0 million tonnes
of cargo yearly. The project is crucial for Tanzania to
achieve its target to be the region’s main logistics
hub as it competes with Kenya’s Mombasa port,
which has relatively larger capacity, to connect the
land-locked neighbors with export markets and in
turn realize the economies of scale of a regional
railway network.
Growing Debt Overshadows Economic Benefits
Improved rail infrastructure has the capability to
markedly boost Tanzania’s economic performance
through increased investment and trade flows,
however, the high cost associated with the project
─ estimated total cost of USD14.2 billion─ is
bound to negatively impact the country’s already
unfavorable debt status: Debt stock stood at
USD19,883.6 million as of July 2018 representing
anincreaseofUSD1,043.3million,year-on-year,on
account of new disbursements and accumulation
of interest arrears; about 30.0% of the 2018/19
budget is projected for debt servicing. We expect
this trend will continue in the medium term driven
It’s our view that Tanzania’s debt levels remain
expensive owing to its reliance on commercial
loans that pose a risk to its currency in the long
run, despite the fact that the ratio of government
debt to GDP stood at 34.4% against the 56.0%
recommended threshold as of June 20172
.
Revenue vs Expenditure for the Quarter Ending June
(USD/Mln)
Central Government Debt (USD/Mln)
Logistics Performance Index
ECONOMIC OUTLOOK
Source: Bank of Tanzania, StratLink Africa
Source: The World Bank, StratLink Africa
TANZANIA
2
Monetary Policy Statement, June 2018
1.5
2.0
2.5
3.0
3.5
Tanzania Kenya Uganda Rwanda Ethiopia
2007 2016
0.0 1,000.0 2,000.0
Total Revenue
Recurrent Expenditure
Interest Payment
Foreign-ﬁnanced
Development
Expenditure
Locally-ﬁnanced
Development
Expenditure
2018
2017
0.0
10,000.0
20,000.0
30,000.0
40,000.0
External Debt Stock DomesƟc Debt Stock
Jul-17 Jul-18

Yields Post Mixed Results
The short-lived resumption of higher yields has
failedtoattractinvestorstoshorttermgovernment
securities as the floated bids remain under-
subscribed. Similarly, the market is experiencing
marginal liquidity issues as commercial banks,
who constitute the major lenders to government
in search for better yields while seeking to write off
on-performing loans. The 91 Day bill yield seems
to be flat lining as investors shy away from the
low yields currently being offered on the security
at 3.0% for September 2018. The security did not
attract any bids in October principally blamed
on the unattractively low yield comparatively.
However, the 182 Day paper’s yield remained
unchanged at 5.0%, attracting 12 bids while the
364 Day paper yield, on the other hand, rose
marginally by 17.0 bps to 8.1%, attracting 118 bids
and reflecting the continued interest
Inflation maintained a steady uptick, growing by
10.0bps, to 3.4% in September 2018. Meanwhile,
the interbank rate remained generally unchanged
at 2.2% between August and September, 2018.
Shilling Holds Strong against the Greenback
The Shilling has depreciated by 0.3% between
September and October, 2018 and by 2.2% on
average in the past ten months, maintaining
resilienceagainstthegreenbacktoclosethemonth
at 2,291.7 units from 2,281.5 units recorded at the
start of the month. Nonetheless, we maintain our
projection of short-lived resistance as demand for
the greenback by importers continues to outweigh
supply on the back of reduced foreign inflows from
cash crops.
T-Bill Yield Trend
Interbank Rate, month-on-month
Shilling vs USD
TANZANIA
DEBT MARKET UPDATE
Shilling depreciation, month-
on-month, as at 20th October,
2018
Shilling depreciation, year-on-
year, as at 20th October, 2018
-0.3% -2.5%
0.0%
5.0%
10.0%
15.0%
20.0%
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%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
Sep-18
Interbankrate(Red)
VolumeinTZMlns
2,200.0
2,220.0
2,240.0
2,260.0
2,280.0
2,300.0
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18

Bear Run Endures
The bear run witnessed last month at the Tanzania
Securities Exchanged endured in October 2018
with the Tanzania All Share Index further shedding
off 8.6%, month-on-month and 4.2%, year-on-
year as of 20th October, 2018 to close the month
at 2,081.3 units. Similarly, the domestic Tanzania
Share Index declined by 3.1% month-on-month
and 1.7% year-on-year. The woes of Acacia mining
continue to weigh on the overall performance of
the bourse.
Sector Indices Decline
The sector indices, on the other hand, posted
mixed results. The Industrial and Allied Index fell
by 4.2% to 5418.4; the Banking Index closed at
2486.3 points, down 1.4%. While, the Commercial
Services Sector Index remained unchanged at
2295.9 units, in the period under review.
TBL Profits Dwindle by 16.0%
The profit of the Tanzania Breweries Limited (TBL)
Group of Companies dropped by 16.0% in the first
half of this year declining to USD 28,166.1 million
from USD 33,681.5 million recorded in a similar
period in 2017. Performance was negatively
impacted by the ban in spirits sachets, as well
as heavy rain recorded between April and early
June, which disrupted sales and distribution of the
brewer’s products.
All Share Index, year-on-year
Source: Dar es Salaam Stock Exchange, StratLink Africa
Tanzania Share Index Month-on-Month
Sector Indices month-on-month
TANZANIA
All Share Index Change,
month-on-month, as at 19th
October, 2018
All Share Index Change, year-
on-year, as at 19th October,
2018
-8.6%
-4.2%
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Price(Red)
VolumeinTZMillions
3,750.0
3,800.0
3,850.0
3,900.0
3,950.0
4,000.0
0.0
0.2
0.4
0.6
0.8
1.0
Sep-18
Sep-18
Oct-18
Oct-18
Oct-18
Price(Green)
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
Oct-18 Sep-18

GDP GROWTH SLOWS IN Q2 2018
UGANDA MARKET UPDATE

Tororo-Gulu Railway to Undergo Rehabilitation
The European Union provided Uganda with a
grant of USD 23.8 million to rehabilitate the 375
km railway line between Tororo and Gulu leaving
the government to raise an additional USD 15.11
million to fully fund the project. The initiative
is meant to provide a new low cost transport
alternative and support the growth of the private
sector in Northern Uganda.
The route is also expected to create strategic trade
pathways to and from South Sudan which is rapidly
gaining interest among East African Community
members as an investment destination.
Additionally, the rehabilitation of the old railway
could be key in the ecosystem that will provide
transport to Uganda’s oil belt.
Implications for the SGR Project
Uganda recently announced that it has suspended
the Standard Gauge Railway (SGR) project due to
delays that Kenya has faced in raising finance with
China to construct the Kisumu-Malaba leg of the
railway. Currently, Kenya is working on the line
connecting Nairobi to Naivasha after which it will
embark on the leg to Kisumu and finally the last
stretch to Malaba. The government has resisted
claims that it has abandoned the SGR project and
instead shifted focus towards rehabilitating its
existing railway.
The successful completion of the SGR from
Mombasa to Uganda’s capital seems to not be one
hundred percent guaranteed. China’s EXIM bank,
the provider of funds for this project, feels that
completing the entire line will be necessary for
the endeavor to be economically feasible hence
any notion that Uganda may be rethinking the
implementation of its section of the SGR could
be damaging. It remains to be seen whether, and
how soon, Kenya will be able to raise financing
to complete construction of the railway but until
then the vision of the Mombasa-Kampala SGR is
not a certainty.
POLITICAL OUTLOOK
UGANDA
Uganda’s Rank In the Ease of Doing Business
Report Drops
Uganda’s rank in the 2019 World Bank Ease of
Doing Business report has deteriorated by five
spots to 127 relative to its previous ranking, out of
a total of 190 countries surveyed. In the context of
the East African Community (EAC) Uganda scores
significantly worse than neighbors Kenya and
Rwanda but better than Tanzania, Burundi and
South Sudan.
A number of different indicators are used in
order to arrive to a final score that determines a
country’s ranking. Uganda scored very poorly in
getting electricity achieving a rank of 175 due to
the high costs incurred, the lengthy amount of
time required to setup a connection (66 days) and
the very low reliability of supply and transparency
of tariffs. Uganda also scored poorly in starting a
business (rank 164) due to the lengthy amount of
time required to open an enterprise as well as the
high number of procedures required.
On the upside, the report states that Uganda
improved the ease of cross border trade by further
implementing the Single Customs Territory as well
as by enhancing the Uganda Electronic Single
Window and the Centralized Document Processing
Centre.
World Bank Ease of Doing Business Rank 2019
Source: World Bank Group, StratLink Africa
1
BMI
185
168
144
127
61
29
SouthSudan
Burundi
Tanzania
Uganda
Kenya
Rwanda

Second Quarter GDP Growth Slows
Uganda’s economy expanded by 5.0% in the
second quarter of 2018, registering a 1.5%
deceleration relative to the same quarter of 2017.
Considering that GDP growth in the first quarter
of the year was 6.2%, the figures for the second
quarter are likely to lead to expectations of annual
economic growth being revised downwards.
Two of the economy’s three sub-sectors, services
and agriculture, accounted for 73.5% of GDP in
the second quarter of 2018 and recorded slower
growth rates relative to the same period in 2017
while industry underwent accelerated expansion.
In agriculture, cash crops and food crops grew by
2.5% and 1.0%, respectively, in the quarter under
reviewcomparedto10.7%and11.4%,respectively,
in Q2 2017 which explains to a large extent the
slowing in the sub-sector. Trade and repairs, which
made up a tenth of GDP in the quarter under
review, within the services subdivision contracted
by 1.3% while on the other hand information and
communication performed strongly expanding by
16.1%. The drivers of growth within the industry
sub-sector were mining and construction which
grew by 19.5% and 10.3%, respectively, in the
quarter under review while manufacturing, which
carries the most weight within the sub-sector,
expanded by 0.4% marking an improvement from
the 3.5% contraction it underwent in Q2 2017.
Source: BOU, StratLink Africa
Second Quarter GDP Growth Rates
Second Quarter GDP Growth Rates by Sector
Sub-Sector % Share in GDP, Quarterly
ECONOMIC OUTLOOK
UGANDA
New Policy to Drive Industrial Sub-sector
The Ministry of Trade, Industry and Cooperatives is
set to bring in the new Uganda National Industrial
Development Policy that will replace the former
Industrial Policy that expired in 2017. Under
the new directive focus will be placed on agro-
industrialization (edible oils, beverages, coffee,
cotton, tea, livestock, leather and grains), the
extractive industry (iron, steel, oil and gas) as well
as knowledge based industries.
The new policy looks to increase industry’s share
of GDP from its current 18.5%, as of the quarter
under review, to 30.0% by 2030. The plan will no
doubt rely strongly on the oil industry which has
experienced a number of delays and setbacks.
Hence, for the envisioned policy to succeed
greater efforts will need to go into achieving set
targets within the oil industry.
5.0%
6.5%
3.2%
5.4%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2018201720162015
0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
Agriculture
Industry
Services
Q2-2017 Q2-2018
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Q12014
Q32014
Q12015
Q32015
Q12016
Q32016
Q12017
Q32017
Q12018
Agriculture Industry Services

Slowed GDP Growth May Weigh on Exchange
The All Share Index was at 1,820.1 points on 1
October 2018 before dipping to 1,699.4 on the
17th of the month before rising back to 1,775.5
on the 29th.
The dip in equity prices in the middle of the month
was likely caused in part by a slip in performance of
equities cross listed from neighboring Kenya as the
market feels the effects of tightening in financial
conditions among western economies. The fall in
GDP growth observed in the second quarter of
the year might negatively weigh on the securities
exchange as investors revise expectations of
annual economic growth downwards.
Yields on Shorter Term Government Securities
Rise
Yields rose on the short term maturity end of the
curve in October 2018 between the 2nd and 30th
of the month. Yields on three month, six month
and one year government securities went up by
1.5%, 1.1% and 1.6%, respectively, over the period
in question.
The shift in the yield curve is largely the result
of an upward tilt in inflationary expectations and
the recent monetary policy move. Inflation was at
3.7% in September, up from 1.7% in May, and the
Monetary Policy Committee raised the key rate
by 1.0% to 10.0% on 3 October as it anticipated
the growing momentum in inflation to carry on
into the medium term thereby driving yields on
government papers up.
All Share Index
Sovereign Yield Curve
Headline Inflation
Source: BoU, StratLink Africa
EQUITY MARKET UPDATEDEBT MARKET UPDATE
UGANDA
All Share index percentage
change in month to 29
October 2018
All Share index
percentage change in
year to 29 October 2018
-2.7%
5.4%
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
30-Oct-18 02-Oct-18
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18
Oct-18
1,600.0
1,650.0
1,700.0
1,750.0
1,800.0
1,850.0
1,900.0
1,950.0
2,000.0
3-Sep-18
10-Sep-18
17-Sep-18
24-Sep-18
1-Oct-18
8-Oct-18
15-Oct-18
22-Oct-18
29-Oct-18

RWANDA INCREASES GLOBAL INFLUENCE WITH FRANCOPHONE ROLE
RWANDA MARKET UPDATE

Increased Influence with Francophone Role
The election of Rwanda’s former foreign affairs
minister to head the International Organization
of La Francophone (OIF); despite Rwanda’s frosty
relations with France, the shift to English as
its language of education a decade ago and its
succeeding membership to the Commonwealth;
gives a boost to President Kagame and Rwanda’s
need to increase its influence, not only in the
region but, also globally and also serves to improve
the fraught relations with France due to its alleged
complicityinthe1994civilstrife.Rwandahasslowly
been expanding its influence on the continent
while making commendable political scores: The
current leadership of the Francophone and the
election of President Kagame to Africa Union Chair
which, although short, his term will undoubtedly
bode well for general perceptions of the country
abroad. Rwanda is also pushing to become the
first African nation to join the Organization for
Economic Cooperation and Development (OECD),
the36-membercluboftheworld’smostdeveloped
economies, a bold step in a bid to get an alternate
platform to persuade private investors while
escalating efforts to mobilize private investments.
Regional Hub
While riding on its high doing business rankings,
Rwanda is engaging in massive infrastructural
investments; the national airline Rwandair and
the construction of Bugesera airport as well
as the Kigali Convention Centre which hosted
the AU general assembly in March this year,
in a bid to position itself as a regional hub. The
daunting task of balancing its strategic interests
between Francophone and Anglophone blocs
notwithstanding, we assess that by being a
member of both blocs, Rwanda gets leverage over
regional peers through enhanced competitiveness
on international labor markets, an opportunity it
should leverage to seek for optimal benefits from
both memberships.
POLITICAL OUTLOOK
RWANDA
Energy Sector Receives Funding Boost
Rwanda’s plans to improve electricity supply
reliability received a boost from the African
DevelopmentBankwhichsignedaUSD261.1million
funding deal to support the country’s efforts to
boost electricity supply and expand access to
electricity under the second phase of the Scaling
Up Electricity Access Program (SEAP II) which, is
expected to cut down the time and frequency of
service interruption to customers and network
lossesandshouldultimatelycontributetoensuring
financial sustainability of the sector. The funds will
go towards addition of over 193,000 new on-grid
and over 124,000 off-grid connections, besides
supporting the construction of 795.0 and 7,317.0
kilometers of medium and high voltage lines,
respectively. The loan is also meant to complement
the USD3.3 million budgetary allocation to the
Energy Sector Plan in the 2018/19 budget, a
plan that seeks to transform the country into an
export-oriented economy. The initial phase of
the programme which began in 2013 is currently
90.0% complete.
Rwanda has more than doubled access to
electricity in the past decade but, still remains
low. Thus, AfDB’s intervention will strengthen
institutional capacity to deliver on the ambitious
government plan to achieve universal electricity
access by 2024.
Comparative Electricity Access trends (%)
Source: World Bank, StratLink Africa
1
Business Monitor International
0.0 20.0 40.0 60.0
2012
2014
2016
Tanzania Uganda Kenya Rwanda

and agricultural exports will be offset by stronger
imports: We expect import demand to increase
substantially in the coming quarters, mainly on the
back of risingcapital goods importsas new projects
related to rail, road and energy infrastructure that
are expected to put upward pressure on the import
bill, start to be implemented, and in turn counter
the positive effects of increased export receipts,
given that a decline in import demand was the
major factor underpinning the narrowing of the
current account deficit in 2017. Consequently, the
current account may narrow but will stay in the
red.
Projected Stronger Full Year Economic Growth
Following stronger-than-anticipated growth in
exports in recent months on the back of strong
resumption of agriculture activities, we anticipate
a narrower trade deficit, underpinned by an
expected expansion in mining and agricultural
output particularly tea, as well as stronger global
prices for Rwanda’s key export commodities,
including minerals and coffee. At the same time,
we expect the external account deficit to be
financed by robust financial account inflows,
supported by Rwanda’s broad political stability
and government measures that serve to enhance
the already favorable operating environment. This
should encourage substantial foreign investment
that will support funding of the external account
deficit. Likewise, a strong double-digit economic
growth in the first half of 2018 ─ at 10.6%, year-
on-year ─ pulls up the full-year average, thus,
supporting our expectation of stronger full year
economic growth.
Rebounding Imports Curtail Narrowing Trade
Deficit
With export growth of 17.9% in the year to
August 2018 against an import growth of 7.4%
over a similar period, the trade balance should
continue to improve. However, despite the rising
exports, the rebounding imports pose a risk to
the performance of the country’s trade deficit.
In this regard, we project that Rwanda’s current
account deficit will narrow by modest margins in
the medium term, as tailwinds from rising mining
Rwanda trailed peers in the region in attracting
Foreign Direct Inflows (FDI) in 2017. Be that as
it may, the country can leverage its high Doing
Business rankings to increase foreign direct
investments which should in turn maintain the
balance of payments in surplus and support
central bank reserve accumulation.
ECONOMIC OUTLOOK
RWANDA
Source: Fitch Solutions, StratLink Africa
Source: National Bank of Rwanda, StratLink Africa
Source: BMI, StratLink Africa
Total Exports by Product-2017
Volume of Imports vs Imports (USD/Mln)
Trade Balance vs Current Account Balance (USD/Bln)
51.1%
10.3%
9.0%
2.6%
8.2%
18.8%
Gold
Coﬀee
Tin ores
Tungseten
Tea
Others
0.0%
5.0%
10.0%
15.0%
20.0%
0.0
500.0
1,000.0
1,500.0
2,000.0
Exports Imports
Jan-Aug 2017 Jan-Aug 2018 Growth (RHS)
-2.0
-1.5
-1.0
-0.5
0.0
2014 2015 2016 2017 2018
Balance of Trade Current Account

RWANDA
T Bill Yields
T-Bond Yields (Feb-Sept, 2018)
Yields Maintain Upward Trends
Yields for short term government instruments
maintained the northward trend in October 2018
even as inflation fell for the first time since April
2018, to 1.2% in September 2018 from 2.1% in the
previous month. Similarly, the interbank rate fell
slightly by 10.0bps to 5.6% in August 2018. The 91
Day, the 182 Day and the 364 Day papers’ yields
rose by 40.0bps, 30.0bps and 48.0bps to 5.4%,
6.5% and 7.2%, respectively, in the period under
review.
Yields in the bond market, on the other hand,
declined comparatively, year-on-year. The medium
term 5-Year bond yield declined by 60.0 bps, to
11.8% as of Feb 2018 while the long term yields
depicted by the 10-year bond shed off 20.0 bps to
12.2% to the year ending September 2018
5-Year 7-Year 10-Year 15-Year
Feb-18 11.8%
May-18 12.5%
Jun-18 12.2%
Aug-18 12.9%
Sep-18 12.2%
DEBT MARKET UPDATE
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
inflationary trends as the consumer price fell
1.1%, year-on-year in September 2018, following
a 0.6% gain in the previous month; the first fall
in consumer prices since April buoyed by further
decline in the cost of food and non-alcoholic
beverages, the main CPI basket component:-9.7%
from -6.3% in August. Consequently, headline
inflation declined by 90.0bps to 1.2% in the period
under review.
Franc vs USD
Franc depreciation,
month-on-month, as
at 19th October, 2018
Franc depreciation,
year-on-year, as at
19th October, 2018
-0.7%
-4.6%
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
830.0
840.0
850.0
860.0
870.0
880.0
890.0
900.0 Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
Sep-18

Bond and Equity Turnover year-on-year (USD/Mln)
Rwanda All Share Index year-on-year
Source: National Institute of Statistics of Rwanda, StratLink Africa
Bourse Remains Dormant
The All Share Index remained unchanged between
September and October, 2018 as traded volumes
remained low. Turnover in the first half of 2018
declined by about 59.0%, year-on-year, while a
decline of about 37.5% was recorded in October
2018. The bourse has been comparatively
dormant this year due to lack of listings compared
to 2017 when I&M bank listed on the Rwanda
Stock Exchange, increasing market activity then.
Current activity at the bourse is mainly driven by
secondary bond trading.
Meanwhile, the All Share Index stagnated at 131.6
units, month-on-month, reflecting the continued
inactivity of the bourse.
RWANDA
0.0
5.0
10.0
15.0
Equity
Turnover
Bond
Turnover
Market
CapitalisaƟon
Jan-June 2017 Jan-June 2018
131.0
131.5
132.0
132.5
133.0
133.5
134.0
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Oct-18

STRATLINK - AFRICA TEAM
Konstantin Makarov - Managing Partner
konstantin.makarov@stratLinkglobal.com
Dina Farfel - Partner
dfarfel@stratLinkglobal.com
Julio De Souza - Director, 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, 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
www.stratlinkglobal.com
+254202572792

Africa Market Update - November 2018

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