Africa Market Update - September 2018

2SEPTEMBER 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
A Financial Advisory
Company
SEPTEMBER 2018 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA
ZAMBIA 4
9
13
22
RWANDA 26
KENYA
UGANDA
TANZANIA 17
Table of Contents
ZAMBIA
• Inflation inches to breach target ceiling
• Current account deficit deteriorates as revenue from non-traditional exports
declines
NIGERIA
• Commencement of party primaries marks crucial phase ahead of 2019 general
election
• Naira volatility builds as emerging and frontier market currencies come under
pressure
KENYA
• Cement uptake falls in H1-2018
• CBR cut for second time this year
At a Glance
TANZANIA
• Declining banking profitability as Central bank moves to contain malfeasance
in the sector
• Construction sector facing headwinds from poor local demand and price
distortions
UGANDA
• Bobi Wine’s youth following poses threat to establishment
• Shilling volatility raises concerns
RWANDA
• Litmus test for opposition as Rwanda holds legislative elections
• Positive and stable outlook for the economy
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
January - August 2018
Source: PitchBook, StratLink Africa
Select Deals
• 9Mobile (Nigeria): The company was acquired by Teleology Holdings for USD 500 Mln on August 29th, 2018
• PayGo Energy (Kenya): The company raised USD 3.5 Mln of venture funding from undisclosed investors on August 29th, 2018
• Paystack Financial Software (Nigeria): The company raised USD 8.0 Mln of Series A venture funding on August 28th, 2018
Deal Activity by Industry (Proportions) Deal Activity by Types (Proportions)
Value of Transactions by Country (USD)
South Africa
Nigeria
Egypt
Morocco
Kenya
Namibia
Senegal
Ethiopia
Ghana
Mauritius
Madagascar
Tanzania
Uganda
Congo
Ivory Coast
Lesotho
Swaziland
Tunisia
Niger
7.6 Billion
3.2 Billion
1.8 Billion
1.3 Billion
874.3 Million
684.8 Million
389.0 Million
374.7 Million
142.6 Million
101.4 Million
94.2 Million
56.8 Million
46.3 Million
10.9 Million
10.0 Million
8.7 Million
8.3 Million
5.0 Million
20,000.0
14.9%
8.3%
7.1%
6.3%
5.9%
4.6%
3.6%
3.5%
2.4%
43.4%
Commercial services
Exploration, production
& reﬁning
Healthcare devices
& supplies
Insurance
Communications
& networking
Apparel
& accessories
Capital markets
Consumer
non-durables
Energy services
Others
31.2%
31.2%
30.5%
30.5%
10.3%
10.3%
6.3%
6.3%
3.6%
3.6%
18.1%
18.1%
Secondary Transaction - private Mergers & acquisitions
Corporate divestiture Growth/Expansion Capital
Secondary Transaction - open market Others

INFLATION BREACHES TARGET CEILING AS CURRENT ACCOUNT BALANCE DETERIORATES
ZAMBIA MARKET UPDATE

Strength, Weakness, Opportunity and Threat
Assessment
The country continues to enjoy a favorable post-
election environment s the government settles to
policy implementation following the last polling
exercise. In this issue, we wish to take a Strength,
Weakness, Opportunity and Threat analysis of the
political environment, highlighting the key features
that should be on investors’ radar.
Strength
Formation of the Zambia Centre for Inter-party
Dialogue has presented a much needed platform
through which acrimony related to the last general
election can be ironed out and foster a more stable
environment. This is particularly important in view
of the rift between the ruling Patriotic Front and
the United Party for National Development in the
last electoral cycle.
Weakness
A deteriorating macroeconomic environment,
especiallywithrisinginflation,presentsaweakness
for the political environment as social pressures
are bound to mount from a restive public.
Opportunity
Zambia has gone through two elections in quick
succession in an environment that has been
broadly stable. This is a major opportunity for the
country to ride the dividend of general stability in
attracting investment.
Threat
The likelihood that the inter-party dialogue could
be undermined owing to conflicting interests is
the key threat the country’s political environment
faces. This could derail the progress realized thus
far in bridging the divide that was amplified by the
last election.
POLITICAL OUTLOOK
Business Environment Headed for Tightened
Credit Conditions
The business environment will now have to grapple
with strain from both the fiscal and the monetary
side with inflation having breached the 8.0% target
ceiling in August 2018. With this development,
it is likely that we will see Bank of Zambia begin
tightening in the November 2018 meeting.
Agriculture, Retail, and Manufacturing Face
Largest Threat
As a result, there is a likelihood that the business
environment will be winding up 2018 and starting
2019 in an environment of tightened credit
conditions. Sectors likely to take a significant hit
should this materialize are agriculture, wholesale
and retail and manufacturing.
Households also face a risk of taking a significant
hit from a potential tightening of credit conditions
in the market given the fact that they constitute
the lion’s share private sector credit.
BUSINESS ENVIRONMENT
Disaggregation of Loans by Sector
Source: World Bank, StratLink Africa
GDP: USD 21.5 Bln | Population: 16.7 Mln
ZAMBIA
Personal Loans Agriculture
Wholesale and retail ConstrucƟon
Real Estate Restaurants and hotels
Others

Current Account Balance Deterioration Raises
External Pressure
In our last coverage of Zambia (June 2018), we
focused on the country’s debt position and how it
is presenting headwinds to an economy that seeks
a path to recovery following the commodity price
downturn of 2014 – 2016. In this issue, we shift
to the external position with a widening current
account balance between Q4 2017 and Q2 2018
signaling a build-up in vulnerabilities.
The country’s external position is coming under
pressure following the general decline in export
revenue as imports rise. In particular, non-
traditional exports came under pressure in Q1
2018 as the rally in global commodity prices
decelerated.
Source: Bank of Zambia, StratLink Africa
ECONOMIC OUTLOOK
Mild Pressure Piling on Kwacha
This deteriorating position could be one of the key
factors underlying the Kwacha’s mild depreciation
between the end of Q2 2018 and August 2018. The
local unit is also facing pressure from the decline
in the Central Bank’s foreign exchange reserves
which, based on latest available data, stood at USD
1.8 billion in March 2018, availing only 2.1 months
of import cover.
Gross Foreign Exchange Reserves (USD)
Kwacha to USD Exchange Rate
Current Account Balance (USD Mln)
Trade Balance (USD Mln)
Percentage by which the Kwacha
has depreciated, year-to-date, as at
August 28th, 2018
0.7%
ZAMBIA
-500.0
-400.0
-300.0
-200.0
-100.0
0.0
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
Q3 2017 Q4 2017 Q1 2018 Q2 2018
Imports Exports
8.0
8.5
9.0
9.5
10.0
10.5
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
1,500.0
1,600.0
1,700.0
1,800.0
1,900.0
2,000.0
2,100.0
2,200.0
2,300.0
2,400.0
2,500.0
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18

Headline Inflation and Consumer Price Index
Sovereign Yield Curve
Non-Resident Holding of Government Securities
(Kwacha)
USD 874.0 Mln
Non-resident Investors Focusing on Long-term
Paper
Available data shows that non-resident investors’
focus has not only been rising since mid-2016 but
more importantly focusing on bonds. We view
this as an indicator that investors are cautiously
optimistic over the country’s short-term hence
opting to concentrate on long-term risk free
investments.
Non-resident investors’ holding of government
securities as at June 30th, 2018, 17.0% higher
than the same time in 2017
This preference for long-term low risk investment
by investors is also likely to be one of the main
factors driving a bearish trend at the Lusaka Stock
Exchange.
Inflation Approaches Bank of Zambia Ceiling
In its August 2018 monetary policy meeting, Bank
of Zambia retained its benchmark rate at 9.75%
for the second time since the fifty basis points
slash in February 2018. We view this as a signal
that the central bank is cautiously monitoring the
inflation trajectory which has been on a general
uptrend between January 2018 and August 2018.
As a result, there has been a general rise in yields
across most tenures, indicative of a risk re-pricing
by investors with mounting concern over headline
inflation which breached the target ceiling of 8.0%
in August 2018.
DEBT MARKET UPDATE
ZAMBIA
185.0
190.0
195.0
200.0
205.0
210.0
215.0
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
CPI - RHS Headline InﬂaƟon
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
91
Day
182
Day
364
Day
2 Yr 5 Yr 10 Yr
Dec-17 Mar-18 Aug-18
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
Mar-15
Jul-15
Nov-15
Mar-16
Jul-16
Nov-16
Mar-17
Jul-17
Nov-17
Mar-18
Billions
Bonds Bills

Lusaka Stock Exchange All Share Index
Source: Bloomberg, StratLink Africa
Bear Trend Persist at the Bourse
Like most markets in the region, the Lusaka
Stock Exchange has been on a bearish trend
between July and August 2018. This is a likely
reflection of growing concerns over the country’s
macroeconomic environment with talks between
the country and the International Monetary Fund
on hold following the latter’s concerns over debt
management.
In the period under review, Zambia Breweries
posted a 123.0% growth in net profit for the six
months ending June 30th, 2018. This growth in
net profit was supported by the company’s savings
on borrowing costs due to divestments which
allowed repayment of loan facilities.
Lusaka Stock Exchange All Share Index (Jul - Aug 2018)
LSE All Share Index change
year-on-year as at August
22nd, 2018
LSE All Share Index change
month-on-month as at August
22nd, 2018
7.9%
-5.1%
EQUITY MARKET UPDATE
ZAMBIA
0.0
1.0
2.0
3.0
4.0
5.0
6.0
5,050.0
5,100.0
5,150.0
5,200.0
5,250.0
5,300.0
5,350.0
5,400.0
5,450.0
5,500.0
5,550.0
5,600.0
Jul-18
Jul-18
Aug-18
Aug-18
Aug-18
Millions
Volume - RHS All Share Index0.0
100.0
200.0
300.0
400.0
500.0
600.0
4,200.0
4,400.0
4,600.0
4,800.0
5,000.0
5,200.0
5,400.0
5,600.0
5,800.0
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Millions
Volume - RHS All Share Index

NIGERIA MARKET UPDATE
COMMENCEMENT OF PARTY PRIMARIES MARKS MAJOR STEP TOWARDS FEBRUARY 2019 POLL

Primaries Kick-Off Marks Important Phase in
2019 Electoral Cycle
The 2019 electoral cycle entered a key phase
with party primaries kicking off in August 2018.
With reports indicating that about sixty eight
parties, compared to forty in the last election,
have registered for the February 2019 poll at
both Presidential and legislative levels, it is widely
expected that the forthcoming election will be
characterized by heightened competition and
potentialmergersinabidtoconsolidateformidable
constituencies to challenge the incumbent. With
the official end date for primaries set for October
27th, 2018, the following two months will be
crucial in assessing the character and organization
of political parties ahead of the general election.
Whereas talk is rife that the political landscape
is poised to witness emergence of a significant
‘third force’, alongside the ruling All Progressives
Congress and the opposition party Peoples’
Democratic Party, we foresee a remote chance
of this materializing. This is due to the fact that
historically, the Presidential poll contest in Nigeria
is a two-horse race with other contesting parties
taking a small proportion of the votes.
POLITICAL OUTLOOK
NIGERIA
Credit Uptake in Agriculture Signals Bright Spot
As trends in credit uptake by the private sector
continue to evoke concern, the agriculture
sector posted surprise growth in Q2 2018. This
development is important for the Nigerian
economy in view of two considerations:
• With growth in credit uptake coming from a
non-oil sector, this serves to bolster confidence
of more balanced growth in the coming
quarters. Whereas the economy’s recovery
from the recession has been resilient, we
have consistently held the view that it was
imbalanced (oil driven) and thus put the
country in a precarious position
• Growth in the agriculture sector’s uptake of
credit suggests that there are still bright spots
in the economy in spite of the headwinds
confronted especially in view of tightened
credit conditions
Industry continues to the pose the greatest
challenge with the contraction of credit uptake
deteriorating further. This is a likely drag from
lethargy in sub-sectors such as food and beverage
and textile and apparel.
BUSINESS NEWS ENVIRONMENT
Year-on-Year Growth in Private Sector Credit
Source: National Bureau of Statistics, StratLink Africa
Outcome in 2015 Presidential Election
Source: INEC Nigeria, StratLink Africa
All Progressives Congress
Peoples' DemocraƟc Party
Others
-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

Naira to USD Spot Exchange Rate
Capital Inflows (USD Mln)
Day-on-Day Change of Naira to USD Exchange Rate
Gross Foreign Exchange Reserves
Naira Volatility Builds as Pressure Rises on
Emerging Market Currencies
We kept an eye on the Naira as emerging market
currencies came under pressure over the last one
month. The Naira exchanged at an average of
362.1 units to the USD in the month under review
with a discernible build-up in volatility towards the
end of the month.
StratLink holds the view that the Central Bank’s
signaling of a tightening cycle in the horizon
has been instrumental in propping investors’
confidence regarding the currency’s stability and
mitigation of inflation pressures in the economy.
There was a marginal decline in gross foreign
exchange reserves between July and August 2018,
closing the period under review at USD 46.1
billion, a trend that threatens to expose the Naira
to headwinds from the external environment
going forward.
Month USD (Mln)
Jan-18 40,625.0
Feb-18 42,492.0
Mar-18 46,257.0
Apr-18 47,492.0
May-18 47,741.0
Jun-18 47,788.0
Jul-18 47,119.0
Aug-18 46,100.0
ECONOMIC OUTLOOK
Source: Central Bank of Nigeria, StratLink Africa
Slowdown in Capital Inflows Poised to Persist
Available data suggests that by the end of Q2 2018,
there was a slowdown in inflow of foreign capital
with key indicators such as portfolio investment
ticking downwards compared to the high
registered in the preceding quarter. With growing
pressure on emerging and frontier markets and the
Nigerian economy approaching an election slated
for Q1 2019, this slowdown is likely to persist as
investors assume a guarded position with regard
to the economy’s outlook.
-0.5%
-0.4%
-0.3%
-0.2%
-0.1%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Aug-18
348.0
350.0
352.0
354.0
356.0
358.0
360.0
362.0
364.0
366.0
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
Q12017
Q22017
Q32017
Q42017
Q12018
Q22018
Other Investment
Porƞolio Investment
Foreign Direct Investment

NIGERIA
Source: Central Bank of Nigeria, StratLink Africa
Primary Market Issuances - July 2018 (USD)
Federal Government Wary of Expensive Debt
The federal government is refraining from high
cost credit from the domestic market. Successful
subscriptions of debt instruments in the primary
market continue to fall below the total amount
received, suggesting that the federal government
is rejecting bids it deems to be outside the target
interest rate band. For the issuances made in July
2018 (latest available data), the successful bids
stood at 82.1% of the aggregate bids received. We
note, however, that this was a significant change
from the 49.3% registered in June 2018 suggesting
that the general decline in inflation is likely to have
played a significant part in investors’ repricing of
risk.
With inflation still above the target 9.0% ceiling
and the latest Central Bank Monetary Policy
Committee statement sending undertones of a
potential rise going forward, we are likely to see
low subscriptions and a relatively low proportion
of successful bids prevailing through Q4 2018
as investors’ search for higher yield and the
government’s pursuit of low cost debt remain at
crosscurrents.
DEBT MARKET UPDATE
Nigeria Stock Exchange
Source: Nigeria Stock Exchange, StratLink Africa
Market Remains Bearish
The market remained bearish through August
2018 owing to a blend of both external and
domestic factors:
• On the external front, there has been growing
pressure on emerging and frontier markets as
the global economy wades into the uncertainty
of strained trade relations between major
economies. As indicated in the preceding
Economic Outlook, capital inflows have been
on a general slowdown in Nigeria in what we
assess could, in part, be informed by concerns
over frontier markets
• On the domestic front, concerns around the
economy’s rebound, especially with fragile
growth in the private sector, are likely to
be triggering cautious optimism within the
investor community. With the country heading
to a general election in Q1 2019, perceived risk
is likely to be amplified and derail key segments
such as the stock market
0.0
20,000.0
40,000.0
60,000.0
80,000.0
100,000.0
120,000.0
140,000.0
160,000.0
5 Year 7 Year 10 Year
Oﬀered SubscripƟons Successful
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
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Millions
Volume - RHS 30 Index

MONETARY EASING CONTINUES
KENYA MARKET UPDATE

POLITICAL OUTLOOK
KENYA
Lower Cement Uptake
Cement production and consumption fell by
10.0% and 7.4%, respectively, between the first
half of 2017 and the first half of 2018, suggesting a
slowdown in the country’s property sector.
Between2010and2017theconstructionindustry’s
value grew by 10.7% y-o-y, on average, and its
contribution to GDP went from 4.5% to 5.1%.
While a slowdown in demand from infrastructure
projects may have contributed to lower cement
uptake in H1-2018, restricted credit growth to the
private sector as a result of the interest rate cap
likely played a key role in determining the trend.
Cement Production and Consumption, Metric Tonnes
Construction Industry Value
Source: KNBS, StratLink Africa
Source: BMI, StratLink Africa
Three High Stake Engagements
A series of engagements between President Uhuru
Kenyatta and three international heavy-hitters
- USA, UK and China – are set to shape Kenya’s
relations with these economies going forward.
USA
President Kenyatta met with his US counterpart
where agreements were reached that will see over
USD 237.0 million worth of projects with American
companies take place in Kenya’s energy sector and
food security space.
UK
Theresa May’s recent visit marked the first time
since 1988 that a British Prime Minister has come
to Kenya. With Brexit around the corner, the British
Premier gave assurances that Kenya would retain
its duty-free quota access to the UK, post-exit, and
announced the entry of a number of new UK firms
in the country.
China
The President is set to attend the China-Africa
Co-operation forum in Beijing to secure financing
toward further construction of the Standard
Gauge Railway.
It remains to be seen whether these recent
engagements will see the two Western economies
chip away at China’s dominant role as Kenya’s
trading partner.
Trade, USD Million
0.0
800.0
1,600.0
2,400.0
3,200.0
4,000.0
China
(Mainland)
USA UK
Imports from Exports to
2,500,000
2,600,000
2,700,000
2,800,000
2,900,000
3,000,000
3,100,000
3,200,000
Cement
ProducƟon
Cement
ConsumpƟon
H1 2017 H1 2018
0.0%
5.0%
10.0%
15.0%
20.0%
2017e
2016
2015
2014
2013
2012
2011
2010
Real Growth, % y-o-y % of GDP

KENYA
Commodity Group Inflation and CPI Weight, July 2018
On the other hand, favorable agricultural output
led to very low inflation in the Food and Alcoholic
Beverages commodity group in July (0.5%) which,
because it makes up a weighty 36.0% of the
Consumer Price Index, reduced overall inflation.
Demand Side Factors
Non-food-non-fuel (NFNF) inflation was below
5.0% in June 2018, suggesting mild demand
driven pressure on prices thus allowing room for
economic stimulus via a rate cut. However, good
first quarter GDP growth figures, 5.8% in Q1-2018
versus 4.8% in Q1-2017, suggest that demand
should pick up through the end of the current
calendar year. Additionally, credit disbursed to the
private sector grew, year-on-year, at an accelerated
rate of 4.3% in June 2018, up from 1.8% in January
of the same year.
Outlook
Going forward, StratLink believes that demand
and supply side factors will both contribute to
increased inflation as we approach the close of
the year however, if the interest rate cap remains
in place we can expect that the MPC will be very
cautious about another rate cut considering that
there have already been two this year.
ECONOMIC OUTLOOK
Key Rate Cut for Second Time in 2018
The Monetary Policy Committee dropped the
Central Bank Rate (CBR) by 50 basis points to
9.0% in their latest meeting on 30 July, 2018. This
marks the second time this year that the MPC has
dropped the key rate after having shaved 50 basis
points off the same in March.
Inflation has remained within the lower half of the
Central Bank of Kenya’s (CBK) target band (2.5%-
5.0%) since November 2017 but it seems to have
changed trajectory since April this year, when it
bottomed at 3.7%, and nudged upwards to reach
4.4% in July. This recent slight increase in inflation
can be attributed to supply side factors pushing
costs up as opposed to demand driven causes.
Supply Side Factors
Fuel price increases contributed greatly to higher
inflation in July with kerosene, diesel and petrol
up 36.4%, 22.0%, and 15.4% respectively, relative
to the same month in 2017, with increased
international oil prices being a driving factor. The
price of electricity (50 KWh) was also up 20.8%
year-on-year in the month under review. With the
anticipated re-introduction of Value Added Tax
(VAT) on fuel around the corner, we expect that
inflation in the Housing, Water, Electricity, Gas and
other Fuels commodity group as well as Transport
inflation to drive price growth upward in the near
term.
Source: CBK, StratLink Africa
Headline Inflation and CBR
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Jul-18
Headline InﬂaƟon Avg. 2017 InﬂaƟon
CBR
0.5%
14.4%
8.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Food and
Non-Alcoholic
Beverages
Housing,
Water,
Electricity,
Gas and other
Fuels
Transport
Consumer Price Index (CPI) Weight
CPI % Change, y-o-y

Investors Take Caution Ahead of Rate Cap Vote
Theyieldcurveedgeddownonboththeshortterm
maturity end as well as the long term maturity
end in the month to 30 August 2018. The shift is in
line with the Monetary Policy Committee’s (MPC)
reduction of the CBR which was cut for the second
time this year by 50 basis points in July.
The government’s last two bond issuances in
August and July, depicted below, were received
poorly by investors with a combined subscription
rate of 54.6%, out of which only 68.4% of bids
were accepted in an effort to keep the Treasury’s
borrowing costs to a minimum. Treasury Bills
uptake was also relatively low in August with
investors opting to take a wait-and-see approach
ahead of parliament’s vote on whether to maintain
the interest rate cap.
Bloomberg BVAL Yields Index
Bonds Issued (USD Mn)
Source: CBK, StratLink Africa
DEBT MARKET UPDATE
KENYA
Equity Prices Dip
The NSE 20 share index remained relatively stable
in August until it peaked at 3,344.9 on the 22nd
of the month before dropping by 3.0% to close
at 3,245.2 on the 30th of the same month. This
marks the lowest level the Index has reached since
the second quarter of 2017.
The equities that recorded the steepest drops in
their share prices (as a percentage) in the month
to 31 August 2018 were Equity Group, KPLC,
Britam, EABL and KCB.
Nairobi Securities Exchange 20 Share Index
NSE 20 Worst Performing Stocks, % Change in month
to 31-Aug-18
Source: Capital Markets Authority, StratLink Africa
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-Aug-18 30-Jul-18
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
2 Year issued
25-Jul-2018
10 Year issued
22-Aug-2018
Amount oﬀered Bids received Amount Accepted
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
3,200.0
3,300.0
3,400.0
3,500.0
3,600.0
3,700.0
3,800.0
02-May-18
16-May-18
30-May-18
13-Jun-18
27-Jun-18
11-Jul-18
25-Jul-18
08-Aug-18
22-Aug-18
Millions
Volume NSE 20 Index (LHS)
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
EquityGroup
KPLC
Britam
EABL
KCB

TANZANIA MARKET UPDATE
DECLINING GROWTH IN THE EXTRACTIVES SECTOR TO WEIGH ON GDP IN THE SHORT TERM

By-elections: Base Test for the Opposition
Tanzania’s opposition has witnessed 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 political environment
where the President is accused of being deeply
intolerant of criticism could be one of the factors
drivingthedefections.PresidentMagufulihasbeen
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. The President has also been keen on
givingvocaloppositionmembersstatejobs,amove
that has been seen by the opposition as luring its
members in a bid to muzzle the opposition. Thus,
the upcoming by-elections following the defection
of its members to the ruling party, should serve as
a litmus test to the strength of the opposition in
the face of increasing disparities among members
who feel disenfranchised.
Tentative but Rising Resistance
President Magufuli’s win ushered in an era of
uncertainty and mixed fortune in Tanzania. Despite
his goodwill in fighting endemic corruption in
public offices and sealing tax loopholes to
bolster revenue collection however, some of the
unpopular choices that he has made as well as,
his perceived high-handed leadership style does
not seem to sit well with some of the populace as
his popularity plummets with increasing defiance.
The President was enjoying a popularity rating of
about 96.0% right after elections, nonetheless his
rating has since plummeted by 41.0% over the
past two years to 55.0% in 2018 down from 71.0%
in 2017¹, as reported by an independent research
organization in Tanzania. We reckon that the
decline in popularity could be a reflection of the
unmet desires and fear of the President’s mode
of governance. We nevertheless, expect his rating
to pick up once significant progress in project
implementation can be seen and starts to trickle
down through the economy.
POLITICAL OUTLOOK
TANZANIA
Tanzania Banking Malfeasance Endures
The Bank of Tanzania (BoT) placed Tanzania’s
Bank M under statutory management over
insolvency claims, coming months after five more
financial institutions were placed under statutory
management due to poor capitalization. Amid
these concerns surrounding the deterioration in
Tanzania’s banking sector, the BoT has stepped
up action against non-performing financial
institutions in recent months. For instance, in
January, 2018, the BoT shut down five, albeit small
banks owing to undercapitalisation, bringing to
nine the number of banks whose business licenses
have been canceled since 2017 and placed three
others under supervision, out of which, Tanzania
Women’s Bank (TWB) is now set to merge with
a state-owned bank (the Tanzania Postal Bank)
after it failed to meet the minimum capitalization
requirement of USD 250.0 million by end-July
2018. The takeover of Bank M and the recent
consolidation moves by the BoT are bound to
resultinsomemarketturbulenceintheshortterm.
Of greater concern, however, is the sector-wide
quality of loan portfolios which has deteriorated
in recent years, subsequently affecting banks’
profitability.
Declining Banking Industry Profitability
Meanwhile,theTanzaniabankingindustryrecorded
declining profit levels where the net profit declined
by 32.4%, year-on-year, to USD 125.1 million as of
2017. The sector is still recovering from the harsh
operating environment and liquidity crunch that
has seen slashed lending by commercial banks
to the private sector. Statistics in the first half
of 2018 show that the profits may plunge even
further. We opine that the BoT is simply making
precautionary moves; overall, however, the sector
remains fundamentally sound with robust financial
soundness indicators: Capitalization and liquidity
ratios remain well above the regulatory minimum
requirement of 10.0% and 20.0% respectively.
1
Twaweza.org

Construction Sector Facing Headwinds from Poor
Local demand and Price Distortion
Low local demand and price distortions,
occasioned by increased imports, offer possible
headwinds to the construction sector, factors
which are driving sector participants to opt to cut
production, the ongoing implementation of major
construction projects, notwithstanding. However,
overall industry has seen increased growth leading
to a 6.5% rise in the past four years to USD 2.1
billion from mineral receipts of which, gold
accounted for about 89.0% of the total receipts.
Nonetheless, expansion in the construction sector
is likely to remain strong, supported by robust
public investment. For instance, construction on
the Dar es Salaam-Morogoro-Makutupora section
of the Standard Gauge Railway project which
began in early 2018 as well as the expansion of
Dar es Salaam and Mtwara port, aimed at boosting
the country’s shipping capacity, will also sustain
activity in the sector.
Declining Growth in Extractives Sector to weigh
on GDP in the Short Term
Nevertheless, the mining and extractive sector
(which includes oil and gas activity) will see slower
growth as new production slows owing to the
unsupportive operating environment. We expect
this declining growth in the extractives sector to
weigh on real GDP growth in the short to medium
terms as the investment environment remains
uncertain which, should also see reduced new
Agriculture to Benefit from Bumper Harvest
In the meantime, the agricultural sector – which
accounted for 30.1% of GDP in 2017 – will likely
see tailwinds in the short-term from bumper
harvests in 2018 owing to favorable weather
conditions in the period under review, bolstering
food supply and increased production volumes. Be
that as it may, we expect structural headwinds to
the sector from erratic weather conditions in the
region as well as poor storage facilities –anecdotal
evidence shows that poor storage facilities is
among high contributors to post-harvest losses in
Tanzania- in the long term. Therefore, we expect
this acceleration to be short-lived as weather
patterns normalize.
investments in the sector. Thus, growth in the
mining sub-sector is bound to slow down after
growing at a healthy 17.5% in 2017. Moreover,
in the longer term, resource nationalism, though
noble, is likely to weigh on investment into the
extractive sector as well.
Mining Industry Value, Growth and Share of GDP
Real GDP vs Sector Growth
Select Industry sub-Sectors as % of GDP
ECONOMIC OUTLOOK
Source: Tanzania Bureau of Statistics, StratLink Africa
Source: Tanzania Bureau of Statistics, StratLink Africa
TANZANIA
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Mining and Quarrying
Manufacturing
ConstrucƟon
0.6
0.7
0.8
0.9
-10.0%
-5.0%
0.0%
5.0%
2015 2016 2017 2018 e 2019 f
Growth(year-on-year)
% of GDP
Value in USD/Bln (RHS)
0.0%
5.0%
10.0%
15.0%
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Real GDP Agriculture
Industry Services

Recovering T-bill Yields
The short-term fixed income market has witnessed
under-subscription for eight consecutive weeks,
blamed principally on the unattractively low yields.
However, the recovering yields have managed to
woo investors back to the short-term government
securities leading to a 157.9% subscription rate for
the total bids offered in August 2018.
Whereas the yield for the 91 Day paper stagnated
at 2.9%, the 182 Day and the 364 Day papers’ yields
rose by 260.0 bps and 90.0bps to 5.3% and 8.2%,
respectively, in the period under review despite
the 0.1% decline in inflation to 3.3%. Investors still
prefer long-term maturity instruments with the
364 Day paper attracting 105 bids and the 182 Day
and 91 Day papers attracting 12 and 4 bids each,
respectively. On the other hand, transactions in
the inter-bank market remained unchanged at
2.0% between June and July, 2018.
Source: Bank of Tanzania, StratLink Africa
T-Bill Yield Trend
TANZANIA
DEBT MARKET UPDATE
Source: Bank of Tanzania, StratLink Africa
Shilling vs USD
Interbank Rate, month-on-month Shilling depreciation,
month-on-month, as at
22nd August, 2018
Shilling depreciation,
year-on-year, as at
22nd August, 2018
-0.2%
-2.0%
Shilling faces Mounting Pressure against the
Greenback
The Shilling has continued to experience mounting
pressure against the greenback on the back of low
supply of the greenback compared to insufficient
inflows from exports. The local unit depreciated
by 0.2% and 2.0%, month to month and year to
year, respectively, between July and August, 2018.
The local unit is likely to remain under pressure
in the short to medium terms until the mismatch
between demand and supply of the greenback is
lessened.
0.0%
5.0%
10.0%
15.0%
20.0%
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-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
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Interbankrate(Red)
VolumeinTZMlns
2,190.0
2,200.0
2,210.0
2,220.0
2,230.0
2,240.0
2,250.0
2,260.0
2,270.0
2,280.0
2,290.0
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18

The All Share Index Falters
The Tanzania All Share Index shed off 1.0%, month-
on-month, to close August 2018 at 2,270.3 units
down from 2,293.3 units in the previous month.
While the domestic Tanzania Share Index shed off
2.1% to close the month at 4,140.9 units, in the
period under review. The decline in both indices
is attributed to two contributing factors; reducing
earnings most of the listed counters and declining
activities by foreign investors who contribute
about 80.0% of the market’s liquidity. The USA
economy and global markets have been gaining
strength recently and hence attracting foreign
portfolios back to home countries.
All Share Index, year-on-year
Sector Indices Post Mixed Results
The sector indices, on the other hand, posted
mixed results. The Industrial and Allied Index fell
by 250.0 bps to 6,238.6 points; the Banking Index
closed at 2,519.9 points, down by 10.0bps. While,
the Commercial Services sector Index remained
unchanged at 2,331.3 points, in the period under
review.
Source: Dar es Salaam Stock Exchange, StratLink Africa
All Share Index, month-on-month
Sector Indices month-on-month
TANZANIA
All Share Index Change,
21st August, 2018
year-on-year, as at 21st
August, 2018
-1.0%
5.6%
1,900.0
2,000.0
2,100.0
2,200.0
2,300.0
2,400.0
2,500.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18
Price(Red)
VolumeinTZMillions
2,230.0
2,240.0
2,250.0
2,260.0
2,270.0
2,280.0
2,290.0
2,300.0
2,310.0
2,320.0
2,330.0
2,340.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Jul-18
Jul-18
Aug-18
Aug-18
Aug-18
Price(Green)
VolumeinTZMillions
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
7,000.0
Industrial
Index
Commercial
Services Index
Banking Index
Jul-18 Aug-18

VOLATILITY IN THE SHILLING
UGANDA MARKET UPDATE

Bobi Wine’s Threat to the Establishment
The arrest of the Kyaddondo East Member of
Parliament, Robert Kyagulanyi, and the aftermath
thereof has taken over political headlines. The MP,
better known as Bobi Wine, is a popular musician
who was elected to his position in June 2017. He
was arrested after a campaign rally in the town
of Arua, where he was supporting ally Kassiano
Wadri in a by-election that he went on to win, and
is now facing charges of treason.
Bobi Wine has proven to be a threat to the
President having backed candidates who went
on to take three seats away from the President’s
National Resistance Movement (NRM) in by-
elections, as well as having actively campaigned
against the government’s social media tax and
the removal of the Presidential age limit. The key
takeaway from this is that Bobi Wine has garnered
the support of the frustrated youth, many of
whom were not alive 32 years ago when Museveni
came into power. The International Labor
Organization put youth unemployment at 5.4%
in 2012 however, other reputable sources say the
figure is much higher. President Museveni won the
2016 election with 5.97 million votes with a 67.6%
registered voter turnout. Uganda’s latest census
in 2014 counted 7.1 million people aged 15 to 24
(20.6% of the population). Thus, the support of
the youth will be key in clinching the presidential
elections in 2021 which is why Bobi Wine presents
such a threat to the ruling establishment. On the
other hand, critics question whether Bobi Wine’s
ability to mobilize crowds can effectively translate
to votes and whether he will be able to overcome
the oppression that other opposition leaders, such
as Kizza Besigye, have endured.
POLITICAL OUTLOOK
UGANDA
Source: 2014 National Census, StratLink Africa
Percentage Distribution of Population by Age Group,
2014
Banking Sector Improves with Economy
The improved state of the banking sector is set
to support the country’s economic growth going
forward. Commercial banks credit growth to
the private sector rose to 10.4% in June 2018,
up from 5.7% in January this year. The Bank of
Uganda’s (BoU) monetary easing cycle that saw
the key rate cut by a cumulative 8.0% since April
2016, has played a key role in increasing credit
disbursements to the private sector.
The Non-Performing Loans (NPL) ratio fell by
6.0% in the 18 months to June 2018, highlighting
improved asset quality that has likely been driven
by better economic output and reduced borrower
defaults as a result.
Commercial Bank Credit to the Private Sector
NPLs to Total Gross Loans, %
Source: BoU, StratLink Africa
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
0 to 14
15 to 24
25 to 34
35+
4.0%
6.0%
8.0%
10.0%
12.0%
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
Commercial Bank Credit to the Private
Sector, % Change y-o-y
Avg. % Change y-o-y, 2016 to 2017
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
Jun-18

Has the Shilling Seen the Worst of it?
The shilling has exhibited high levels of volatility
this year with the currency opening at UGX
3,642.8 to the dollar after which it depreciated to
its lowest level yet for the year, UGX 3,891.6 on 26
June 2018, before regaining some ground to close
at UGX 3,755.0 on 27 August 2018.
The graph below is a good indicator of currency
volatility and it suggests that the local unit has
shown wider swings than regional peers over the
past few years. In the Year to Date (YTD), Uganda
has had highest ratio of its weakest currency value
to its strongest currency value (1.075) followed
by Rwanda (1.045), Kenya (1.034) and Tanzania
(1.021).
Note: YTD as of 27 August 2018
UGX to USD
Ratio of Weakest Currency Value to Strongest
Currency Value, vs USD
FX Reserves and UGX to USD
Current Account Balance as % of GDP
ECONOMIC OUTLOOK
UGANDA
The country’s gross foreign exchange reserves fell
by 10.5% between March and June this year to
USD 3.2 billion, the lowest levels the reserves have
been since February 2017, in the government’s
efforts to stem the shilling’s devaluation.
The expansion of the current account deficit from
3.4% in the Financial Year (FY) 2016/17 to 5.8%
in FY 2017/18 has put depreciatory pressure on
the shilling as increased net imports of goods and
services continue to weigh on the current account
with government project-related imports being
one of the drivers behind this trend.
While the shilling seems to have regained some
stability there remain risks to the outlook including
increasing inflation as well a tightening of global
financial markets.
3,550.0
3,600.0
3,650.0
3,700.0
3,750.0
3,800.0
3,850.0
3,900.0
02-Jan-18
02-Feb-18
02-Mar-18
02-Apr-18
02-May-18
02-Jun-18
02-Jul-18
02-Aug-18
UGX to USD Avg. for 2017
1.00
1.05
1.10
1.15
1.20
1.25
1.30
1.35
1.40
2014 2015 2016 2017 2018 YTD
Uganda Kenya Tanzania Rwanda
3.0
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3,600.0
3,650.0
3,700.0
3,750.0
3,800.0
3,850.0
3,900.0
Jan-18
Feb-18
Mar-18
Apr-18
May-18
Jun-18
USDBillion
Gross FX Reserves (RHS)
Avg. UGX to USD
-3.4%
-5.8%
-6.0%
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
FY 2016/17 FY 2017/18

CiplaQCIL Receives CMA Approval for IPO
The All Share Index underwent some minor
changes in the month of August, closing 1.5%
down on the 27th day of the same month relative
to 31 days prior.
Uganda’s Cipla Quality Chemical Industries Limited
(CiplaQCIL), a pharmaceutical firm, will become
the 9th domestic company to list on the Uganda
Securities Exchange, six years after its last IPO by
Umeme Ltd. This comes after the firm received
approval from the Capital Markets Authority to
issue the equivalent of 18.0% of the total issued
shares of the company in what is hoped will boost
activity on the bourse.
Yields Curve Stabilizes
The yield curve remained largely unchanged
between 30 July and 27 August, 2018, with a slight
increase in yields on government securities with
maturities exceeding two years.
The government’s most recent bond auction
attracted investor interest with the 2 year and 15
year securities offered on 8 August 2018 garnering
subscription rates of 150.1% and 155.8%,
respectively, with the government collecting bids
worth the exact amount put on offer.
While investors are currently enjoying high real
yields, improved credit growth to the private
sector, the continued pass through effect of loose
monetary policy and stronger economic output
suggest that inflation will continue its upward
trajectory in the medium term and eat into real
yields.
All Share Index
Sovereign Yield Curve
Treasury Bond Auction Held on 8-Aug-2018
EQUITY MARKET UPDATEDEBT MARKET UPDATE
UGANDA
All Share Index month –
on – month change as at
27 August 2018
All Share Index year –
on – year change as at
27 August 2018
-1.5%
11.8%
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-Aug-18 30-Jul-18
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
2 Year 15 Year
SubscripƟon Rate
Amount Accepted / Bids Received
2,000.0
2,050.0
2,100.0
2,150.0
2,200.0
2,250.0
2,300.0
2,350.0
2-May-18
9-May-18
16-May-18
23-May-18
30-May-18
6-Jun-18
13-Jun-18
20-Jun-18
27-Jun-18
4-Jul-18
11-Jul-18
18-Jul-18
25-Jul-18
1-Aug-18
8-Aug-18
15-Aug-18
22-Aug-18

REAL TEST FOR THE OPPOSITION AS RWANDA HOLDS LEGISLATIVE ELECTIONS
RWANDA MARKET UPDATE

Another Shot for the Opposition to Shine in the
Legislative Election
Rwanda’s next legislative election will be held on
September 2nd-3rd, 2018, with 537 candidates
set to contest for eighty seats in the lower house.
In the last elections held in 2013, a ruling RPF-
led Coalition won a landslide victory, with the RPF
emerging as the single-largest party with 37 seats.
The political dominance of President Kagame’s
RPF looks set to be cemented with another strong
parliamentary victory in view of the current
state of weak, low-profile opposition parties:
Only two other political parties that currently
have representation in parliament; The Social
Democratic Party and the Liberal Party, also have
ministers in the current government, therefore,
underscoring the lack of any real alternative to
RPF.
First Legislative Election for the Green Party
The Democratic Green Party of Rwanda, the
only registered opposition party that took part
in the August 2017 presidential election, will
be participating in its first legislative election. Its
participation as well as that of the Parti Social
Imberakuri, points towards a step forward for
political pluralism in Rwanda. However, in view of
the state of oppoisition politics in Rwanda and
given that it is a stand alone opposition party which
does not possess the financial muscle necessary
to mobilize support; we do not expect the Green
party to make any material gains against the ruling
RPF in this election. A conspicuous strength of RPF
supremacy and in effect, stability, is the weakness
of the opposition parties, which lack the financial
clout, strong leadership and support base needed
to become a significant force amid the highly
restrictive political environment. Besides, the
landslide victory secured by the ruling RPF during
the August 2017 election, that saw its candidate
garner 98.8% of the vote on a high voter turnout,
highlights the incumbent’s political dominance. In
this regard, we expect the political dominance of
the RPF to be cemented yet again.
POLITICAL OUTLOOK
RWANDA
Policy Trends to Improve Business Environment
In a bid to promote the private sector, the
government has been implementing market-
related reforms under an unfunded policy support
programme with the IMF that runs until December
1st, 2018. These reforms are aimed at further
easing the business environment─ Rwanda towers
peers in the region in the Ease of Doing business
rankings and is considered among the most
business-friendly economies in Africa ─ besides
maintaining robust investor confidence. For a
while now, government policy has been hinged on
infrastructural development, however, recently,
government policy has also been tilting towards
the promotion of public-private partnership (PPP)
projects to improve doing business in Rwanda
which, recently hosted, among other significant
nations, China and India. Rwanda signed several
bilateralagreementswithbothcountries,including
trade and investments. The Chinese businesses
are also seeking to set up local manufacturing
units in a bid to deepen market penetration in
Africa, thus, China and India will remain important
trading partners for Rwanda, in this regard.
The leaning towards PPPs is also aligned with
Rwanda’s external sector-oriented economic
policy, which advocates import substitution and
export promotion through the ‘Made in Rwanda’
initiative which, has put Rwanda on a collision
course with the United States of America (USA).
The USA has since pulled the plug on Rwanda’s
duty free exports under the African Growth and
Opportunity Act (AGOA) over Rwanda’s decision
to increase tariffs on imports of used clothing and
footwear, a decision that is bound to affect about
USD 1.5 million in Rwandan exports (3.0% of
Rwanda’s total exports to the USA). Rwanda is now
banking on manufacturing, to not only support the
nascent local manufacturing sector but also, to
boost the value of its exports.

(mineralsandagriculture)sustainedbythesupport
from the export growth facility, which will further
incentivise exporters and help to boost earnings.
Coffee and Tea Farmers turn to Domestic Market
Regional coffee growers, exporters and sector
policy makers are turning their focus to domestic
consumption by tapping into the African
Continental Free Trade Area, a deal signed in
Kigali earlier this year with view to liberalize intra-
African trade. This move is intended to cushion
them against fluctuations on the international
market which, sometimes adversely affects their
incomes. Rwanda is targeting a 75.0% increase in
coffee production to 5.0 kilograms per tree, while
tea yield is expected to rise from 7.0 to 9.0 metric
tonnes (MT) per hectare.
Positive and Stable Outlook for Rwanda
Rwanda’s external adjustment policies with the
goal of reducing external financing needs as well
as buttress foreign exchange coupled with the
government’s balance of payment policies that
are projected to deliver higher exports of non-
traditional goods, including textiles and agro-
processing, have supported the improved credit
rating for Rwanda. Standard and Poor’s (S&P), has
revised Rwanda’s outlook to positive from stable
and maintained the rating at “B/B” for long and
short-term.
Rwanda witnessed Balance of Payment shocks
in the financial year 2015/16 occasioned by
depressed global commodity prices. These shocks
forced the country to seek an eighteen-month IMF
Credit facility worth USD 204.0 million as part of
the implementation of the external adjustment
policies which, has played a key role in narrowing
the current account deficit by more than half to
around 7.0% of GDP in 2017, from almost 16.0% in
2016. Following stronger than anticipated growth
inexportsagainstimportsinrecentmonthsbuoyed
by stronger economic growth, we anticipate a
narrower trade deficit in 2018 compared to the
11.4% recorded in 2017¹. The growth in export
earnings will also be supported by an expected
expansion in mining and agricultural sectors as tea
and coffee production soar on the back of stronger
global prices for Rwanda’s key export commodities
ECONOMIC OUTLOOK
RWANDA
Source: National Institute of Statics of Rwanda, StratLink Africa
Source: NISR, StratLink Africa
Growth in Exports and Imports quarter-on-quarter
Trade and Current Account Balances, as % of GDP
Volume of Tea and Coffee
1
Business Monitor International
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
2014Q2
2014Q4
2015Q2
2015Q4
2016Q1
2016Q3
2017Q1
2017Q3
2018Q1
Exports Imports
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
2015 2016 2017 2018 e 2019 f
Trade Balance % of GDP
Current Account Balance as % of GDP
15000.0
17000.0
19000.0
21000.0
23000.0
25000.0
27000.0
2010
2011
2012
2013
2014
2017
Tea coﬀee

RWANDA
Source: National Bank of Rwanda, StratLink Africa
Source: National Bank of Rwanda, StratLink Africa
Evolution of the Interbank Rate
T Bill Yields
Yields Post Mixed Results
Yields for the short term government instruments
posted mixed results in August 2018 on the back
of southward trending inflation which, fell to 2.2%
in July 2018 from the 2.9% recorded in June 2018,
attributed to favorable food prices. However, there
was marginal liquidity tightening as the interbank
rate rose slightly by 10.0bps between June and
July, 2018 to 5.6%, informing the direction of the
various yields.
As a result, the 91 Day and the 182 Day papers’
yields declined by 13.0bps and 16.0bps to 5.0%
and 6.5%, respectively, while the 364 Day paper
yield rose slightly by 56.0bps to 6.8%, in the period
under review.
DEBT MARKET UPDATE
Franc Facing Pressure from the Greenback
The Franc slipped in August 2018 giving in to
pressure from the greenback to depreciate by
0.4%, month-on-month and 4.6%, year-on-year
even as inflationary pressures remained subdued.
Franc vs USD
Franc depreciation, month-on-
month, as at 22nd August, 2018
Franc depreciation, year-on-
year, as at 22nd August, 2018
-0.4%
-4.6%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-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
91 Day 182 Day 364 Day
810.0
820.0
830.0
840.0
850.0
860.0
870.0
880.0
890.0
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Jun-18
Aug-18

Stalled Equities Market as the Bond Market Soars
As the equity market stalls, the bond market is
soaring with over-subscriptions recorded for the
government bonds issued on a quarterly basis.
Rwanda successfully issued a 15-year Treasury
bond worth USD 17.2 million (RWF 15.0 billion)
with a subscription level of 168.9% from 72
applications and a yield of 12.9%. The increased
demand for the bonds could be attributed to the
lackluster performance at the bourse. Meanwhile,
the All Share Index stagnated at 131.6 units,
month-on-month, pointing towards the continued
inactivity of the bourse.
20th August, 2018
year-on-year, as at 20th
August, 2018
0.0%
5.8%
RWANDA
Rwanda All Share Index, year-on-year
Rwanda All Share Index month-on-month
120.0
122.0
124.0
126.0
128.0
130.0
132.0
134.0
136.0
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
May-18
Jul-18
131.5
131.6
131.6
131.6
131.6
131.6
131.7
Jul-18 Jul-18 Aug-18 Aug-18 Aug-18

StratLink in the News:
Alpbach Declaration on Impact Investing - 2018
StratLink’s Director of SME and Impact Finance, Julio de Souza, participated in the August 2018 Alpbach Forum on impact
investing. With growing interest in impact investment, this forum presented an avenue for thought leaders in the impact
investment space to pool ideas and adopt principles to adopt a set of principles aimed at shaping the impact investment
space going forward. StratLink believes that impact and SME finance presents a vast and largely untapped opportunity
which, if well harnessed, could play a pivotal role in unlocking the potential of frontier and emerging markets. It is
imperative that financial advisory firms, especially those in frontier markets, structure products attractive to relatively
small ticket size transactions in bid to help unleash the potential in this space.
In December 2017, StratLink published an article with the London School of
Economics Business Review focusing on the need to scale social impact finance
beyond the traditional focus.

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

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

Africa Market Update - September 2018

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