Africa Market Update - May 2018: Ghana, Nigeria, Kenya and more

2MAY 2015 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
A Financial Advisory
Company
MAY 2018 | MARKET UPDATE – AFRICA www.stratlinkglobal.com
NIGERIA
GHANA 5
10
15
23
RWANDA 27
KENYA
UGANDA
TANZANIA 19
Table of Contents
GHANA
• Why Banking Reference Rate needs greater clarity
• Plans to issue sixth eurobond at odds with the economic recovery strategy
NIGERIA
• Business environment to be propped by surge in price of oil
• Reforms momentum risks deceleration as electoral cycle commences
KENYA
• Talks around constitutional amendment
• Interoperability of mobile money services set to increase competition in the
market
• Shilling gains on the dollar
At a Glance
TANZANIA
• Performance of the fiscal account buoyed by rising revenue collections
• New online content law undermines freedom of expression and stifles
budding ICT sector
UGANDA
• Controversy around proposed tax on mobile money transactions
• 2017 was a bumper year for remittances
• Economic activity maintained momentum in last quarter of 2017
RWANDA
• Defusing tension between Rwanda and Uganda bodes well for regional
economic integration
• Export access fund to boost SME financing
• Agricultural transformation to boost trade balance
http://mutuamatheka.co.ke/wp-content/uploads/2012/04/001_NAIROBI_WEBREADY_MUTUA-MATHEKA-10.jpg
Nairobi, Kenya
© Mutua Matheka
Cover image:

Value of Deals by Country (USD)
AFRICA DEALS LANDSCAPE
January - April 2018
Source: PitchBook, StratLink Africa
Deal Activity by Industry (Proportions) Deal Activity by Types (Proportions)
Snapshot of Deals
• TradeDepot (Nigeria): The company raised USD 3.0 million of venture funding on April 26th, 2018
• Africa’s Talking (Kenya): The company raised USD 8.6 million in deal led by the International Finance Corporation
• Eureka Gold Mine (Zimbabwe): The company was acquired by Dallaglio Investments for USD 4.5 million on April 20th, 2018
Health devices & supplies
Insurance
Communications & networking
Metals, minerals & mining
Exploration, production & reﬁning
Energy services
Apparel & accessories
Commercial products
Others
3.1 Billion
1.3 Billion
1.2 Billion
948.0 Million
386.0 Million
374.7 Million
142.6 Million
94.2 Million
69.4 Million
55.0 Million
45.0 Million
34.8 Million
10.5 Million
10.0 Million
7.7 Million
1.1 Million
South Africa
Nigeria
Morocco
Egypt
Senegal
Ethiopia
Ghana
Madagascar
Kenya
Tanzania
Mauritius
Namibia
Congo
Ivory Coast
Lesotho
Uganda
20,000.0Niger
38.3%
38.3%
28.1%
28.1%
14.2%
14.2%
6.4%
6.4%
3.8%
3.8%
2.5%
2.5%
1.8%
1.8%
4.9%
4.9%
Merger/Acquisition Secondary Transaction - Private
Corporate Divestiture IPO
Acquisition Financing PIPE
Asset Acquisition Others
13.5%
10.2%
9.8%
6.3%
5.4%
4.6%
4.4%
4.3%
41.5%

Rwanda’s stance on phasing out importation of second hand clothing and ramifications with regard to AGOA sanctions
has elicited considerable interest. This development is significant for a number of reasons two of which are:
• Rwanda’s action was informed by the Joint Communique of the 17th Ordinary Summit of East African Heads of
State which, in part, agreed to promote vertically integrated industries in the textile and apparel sector with a view
to phasing out importation of used textiles. In 2017, Rwanda’s exports under AGOA stood at USD 2.0 mln compared
to Kenya’s USD 403.0 mln and Tanzania’s USD 41.0 mln, indicating that Rwanda was punching below its peers in
tapping into the USA market. With the likelihood that other economies in the region could be reconsidering their
stand on importation of second hand clothing, this development brings to focus the tight rope that is management
of regional heterogeneity in East Africa
• Between 2012 and 2013, StratLink Africa Ltd was contracted by a USA based multinational to undertake research
whose goal was to inform efforts to widening its apparel sourcing footprint to include East Africa. One of the key
factors that informed the multinational’s interest in East Africa was the duty free access availed under the AGOA
arrangement. Rwanda’s stance is poised to begin casting the region in a different light as the push for strengthening
domestic industry gains momentum and presents a potential threat to the AGOA arrangement
Used Clothing Imports from USA (USD)
: APPAREL IN EAST AFRICASECTOR LE
Source: USAID, StratLink Africa
11,402,000
19,467,000
7,190,000
1,001,000
47,283,000
25,576,000
11,264,000
2,071,000
101,077,000
66,879,000
27,151,000
4,272,000
0
Kenya Tanzania Uganda Rwanda Burundi
1997 2007 2015
18,151,000
32,870,000
62,730,000

WHY BANKING REFERENCE RATE NEEDS GREATER CLARITY FOR BETTER CREDIT PRICING
GHANA MARKET UPDATE

Plans Underway to Issue Sixth Eurobond
In the period under review the country has
maintained a favorable political risk profile
with concern over the March 2018 move by
the Parliament to approve plans to issue a USD
1.0 billion Eurobond to meet the government’s
funding needs. If it sees the light of day, this will
be the country’s sixth Eurobond and prods us
into a cautious stance on the policy environment
especially with regard to debt sustainability. In the
run-up to the 2016 election, the New Patriotic
Party’s manifesto spoke, in part, to the exposure
to debt distress that the country faced and
pledged to address the same. As such, the recent
development makes for a stark departure from the
planned agenda.
Surging External Debt
Ghana’s external debt-to-GDP ratio stands at
40.2%, having risen from 19.2% in 2009 , and
is higher than peer economies such as Kenya
(27.7%), Tanzania (30.3%) and Zambia (35.2%).
Whereas fiscal consolidation under the New
Patriotic Party has thus far been a good score for
the policy environment, failure to slow-pedal the
country’s external debt binge is bound to expose it
to vulnerabilities in the years ahead.
POLITICAL OUTLOOK
Ghana Eurobond Issuances
Source: Bloomberg, StratLink Africa
Diversifying Product Mix Bodes Well for Mobile
Money Investment
MFS Africa, a company which partners with mobile
network operators to facilitate cross-border
remittances, raised USD 4.5 million in April 2018
with the goal of accelerating its expansion across
Africa. We believe this deal is significant for two
reasons:
• It is indicative of the investment opportunities
in the mobile payments space in the continent
especially with the uptake of mobile wallets and
cashless payments
• Therearesignsthatovertime,sub-SaharanAfrica
(SSA) is experiencing gradual diversification in
mobile money transactions from person-to-
person transfers to larger portions being taken
up by bill payment and merchant payments. In
view of this, we foresee significant opportunity
in the mobile payments space especially with
untapped markets such as Ethiopia
BUSINESS ENVIRONMENT
Mobile Money Transactions SSA (Value)
Source: GSMA, StratLink Africa
GDP: USD 42.9 Bln | Population: 28.0 Mln
GHANA
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
2011 2016
P2P transfer
Merchant payment
InternaƟonal remiƩance
Bulk disbursement
Bill payment
AirƟme top-up
USD 750.0 Mln
Issued in 2016
USD 1.0 Bln
issued in 2013
USD 1.0 Bln
issued in 2014
USD 1.0 Bln
issued in 2015
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
0 5 10 15 20
YieldatIssuance
Tenor (Years)

Bank of Ghana Adopts Reference Rate
Bank of Ghana has adopted a Banking Reference
Rate, with its maiden rate set at 16.8%, with a view
to providing a guide to commercial banks on the
pricing of credit. It is a signal that the economy is
facing challenges in monetary transmission with
commercial bank lending rate failing to reflect
changesinthemonetarypolicystance.Onetailwind
that Bank of Ghana could ride in this effort is that
over the last two years the proportion of public
debt held by commercial banks has declined from
27.9% to 15.6% as shown in the chart below. What
this implies is that over the period, commercial
banks have had greater capacity to lend to the
private sector as their lending to the government
decreased. This creates a need for banks to adopt
favorable pricing to attract retail borrowers.
Note: The inner circle represents January 2018
whilst the outer represents December 2016.
A potential hurdle that we foresee in the reference
rate helping to nudge lending rates downwards is
the scarcity of information as to how the rate is
determined. In the Kenyan experience in 2015,
it was public knowledge that the reference rate
was computed based on the 91 Day T-Bill rate and
Source: Bank of Ghana, StratLink Africa
Holders of Public Debt
ECONOMIC OUTLOOK
The slash is an indicator that with inflation having
fallen to 10.4% in March 2018, the central bank is
confident of a sustained downtrend towards the
target band of 6.0% - 10.0% in the near-term.
the monetary policy rate. This was important in
helping inform expectations based on movements
of the 91 Day T-Bill and the benchmark rates.
Bank of Ghana Slashes Rate
Bank of Ghana slashed the benchmark rate by
200.0 bps in its March 2018 meeting, a slash
whose margin was larger than we expected in view
of the cautious undertones that characterized the
January 2018 meeting. This marks the second time
the bank has slashed the rate by 200.0 bps since it
began the unwinding cycle in Q4 2016.
Bank of Ghana Benchmark Rate Slash
Headline Inflation
Source: Ghana Statistical Service, StratLink Africa
GHANA
15.6%
19.5%
25.9%
39.0%
27.9%
24.7%
25.5%
21.9%
Banks Bank of Ghana Non-Banks Non-residents
Month Slash (Basis Points)
November 2016 50.0
March 2017 200.0
May 2017 100.0
July 2017 150.0
November 2017 100.0
March 2018 200.0
10.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
Bank of Ghana’s target
inﬂaƟon ceiling

Source: Debt Management Office, StratLink Africa
Slowdown in Trimming of Debt Appetite
Government paper yields exhibited minimal
change in the period between June 2017 and
January 2018. This trend could be driven by a
number of factors two of which are:
• After a steady decline in the government’s
appetite for domestic debt, the Q2 2018
issuance calendar indicates that the trend could
be reversing. This trend is likely to be keeping
yields at levels witnessed towards the tail end of
2017 and at the start of 2018
Bank of Ghana Policy Rate
Sovereign Yield Curve
Government Issuance of Domestic Debt (USD)
DEBT MARKET UPDATE
Monetary policy rate as at
the March 2018 Monetary
Policy Committee meeting
Target issuance of local debt
for Q2 2018 per the Bank of
Ghana issuance calendar
18.0%
USD 2.5 Bln
GHANA
• It is also likely that investors had already priced
in the decline in inflation in view of Bank of
Ghana’s policy unwind between Q4 2016 and
Q2 2017. By the start of by June 2017, Bank of
Ghana had slashed the benchmark rate by 350.0
bps. We hold the view that the policy rate still
has significant headroom for slashing, with a
high likelihood of two additional slashes in 2018,
given the present trends shown by inflation and
the resilience exhibited by the Cedi. Like most
currencies in sub-Saharan Africa, the Cedi has
held firm against the greenback year-to-date
supported by the rebound in commodity prices
(especially for oil exporting economies such
as Ghana) and the relative weakening of the
greenback.
0.0
1.0
2.0
3.0
4.0
5.0
Q1
2017
Q2
2017
Q3
2017
Q4
2017
Q1
2018
Q2
2018
Billions
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Nov-02
Mar-04
Jul-05
Nov-06
Mar-08
Jul-09
Nov-10
Mar-12
Jul-13
Nov-14
Mar-16
Jul-17
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
91
Day
182
Day
364
Day
3 Year 5 Year 7 Year
Dec-16 Jun-17 Jan-18

Market Sustains Rally
Appetite for the equities has remained high with
the Composite Index rallying through April 2018.
This is reflective of the fact that investor sentiment
remains bullish as the economy rebounds and
policy becomes more accommodative of further
growth momentum. This notwithstanding, with
fixedincomeyieldsnowshowingsignsofresistance
to further decline, the rally could moderate as
some investors shift focus to the debt segment.
Ghana Stock Exchange
Financial Services Index
EQUITY MARKET UPDATE
Meanwhile, Energy Bank has indicated plans
to list on the exchange in the near future. This
listing would be timely given that it comes against
the backdrop of efforts by the central bank to
strengthen the banking sector through raising
the capital threshold. Banking stocks have since
witnessed a rally and, on the whole, outperformed
the market’s index.
Composite Index, year-on-year,
gain as at April 26th, 2018
Composite Index, year-to-date,
gain as at April 26th, 2018
83.7%
33.8%
GHANA
0.0
5.0
10.0
15.0
20.0
25.0
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
Jan-18 Feb-18 Mar-18 Apr-18
Millions
Volume - RHS Composite Index
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
Jan-18 Feb-18 Mar-18 Apr-18
0.0
10.0
20.0
30.0
40.0
50.0
60.0
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
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Billions
Volume - RHS Composite Index

NIGERIA MARKET UPDATE
OPEC’s BASKET PRICE RACES TOWARDS USD 70.0 PER BARREL

Reforms Risk Being Decelerated as Electoral
Cycle Commences
The political risk environment remains broadly
favorable with President Buhari reported to have
made public his intention to seek re-election in
the 2019 poll. Our prime concern looking into the
remaining part of the year is the possibility that
rising political rhetoric could derail the momentum
that has been gathered by the economy as it
rebounds from the 2015/16 slump. Notably,
debate over the scheduling of the elections has
taken center stage in the recent past. Over the last
four years, Nigeria has experienced acceleration
of favorable reforms in the policy environment,
a trend that now risks being decelerated as the
country enters the 2019 electoral cycle. Some of
the key reform measures include:
• Passage of the Petroleum Industry and
Governance Bill in May 2017 was a major step in
longoverduereformoftheoilsector.Forasector
that has been plagued by mismanagement of
the country’s key resource, the policy seeks to
initiate the process of streamlining operations
and ensuring Nigeria optimizes the potential
presented by its oil sector
• Approval of the National Gas Policy by the
cabinet on July 5th, 2017. The policy is
particularly important for the country coming at
a time when it seeks to diversify from reliance on
oil through increasing investment in exploration
of gas
These policy changes have been pivotal in casting
the economy in positive light especially after
the economic slump. It is important that this
momentum be sustained through the electoral
cycle so as to consolidate the gains that could be
realized.
POLITICAL OUTLOOK
NIGERIA
Unemployment Rate
OPEC Basket Races towards USD 70 per Barrel
The Organization of Petroleum Exporting Countries
(OPEC) basket price is on a steady trajectory
towards USD 70 per barrel, a high last witnessed
in 2014. This trend presents a significant tailwind
for the country’s business environment which
has taken a major hit from the concentration
of private sector credit in the oil and gas sector
(taking the lion’s share of all credit at 30.0% as at
December 2017) amidst surging non-performing
loans. The business environment has experienced
tight lending conditions in what we assess is a
reflection of caution by commercial banks over
the high proportion of bad loans. The upswing in
the price of oil could be instrumental in changing
this stance.
Failure to Meet Production Targets to Spook
Optimism
We note, however, that the country in March 2018
failed to meet its oil production target, realizing
2.02 million barrels per day against the target 2.3
million, indicating that the economy still faces a
constraint as it looks to reap from the surge in the
price of oil.
BUSINESS NEWS ENVIRONMENT
OPEC Basket Price (USD per Barrel)
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Jan-16
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18

Federal Government Borrowing, USD (Bonds)
NIGERIA
Government Appetite for Debt Subdued
We shift focus from the monetary environment
to assess developments on the fiscal front.
Government appetite for domestic debt has
been on the decline with the amount borrowed
through bonds exhibiting a sustained downtrend
in Q1 2018. In the first three months of 2018, the
government borrowed USD 704.3 million through
bonds, a 58.7% decline from the same period in
2017. This is a likely result of the government’s
efforts in 2017 to tap into alternative sources
of revenue mobilization, notably the issuance
of a USD 3.0 billion Eurobond and the Federal
government’s debut Naira 100.0 billion (USD
279.0 million) Sukuk.
We expect this trend to provide the much needed
support for the Central Bank’s goal of addressing
tightened lending conditions without piling
pressure on the Naira. With government appetite
for debt getting subdued, commercial banks will
likely be compelled to revise high lending rates as
they target retail borrowers. As indicated in our
outlook for 2018, the Central Bank is likely to bid
its time longer, into Q3 2018, before engaging an
expansionary monetary stance owing to the risk of
perverse outcomes.
ECONOMIC OUTLOOK
Policy Rate and Commercial Bank Lending Rate
Non-Performing Loans Ratio
Source: Central Bank of Nigeria, StratLink Africa
Concern over Bad Loans Lingers
A fact that could derail this is the growth in non-
performing loans ratio, to 15.5% as at October
2017, which still sends a signal of relatively high
risk in the business environment. Lending to the
oil and gas sector, in particular, is reported to be on
the decline in what we assess is a likely indicator
that banks could be wary of possible sectoral
concentration of non-performing loans.
Average commercial bank
lending rate in January 2018
17.5%0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Jan-18 Feb-18 Mar-18
Millions
0.0%
5.0%
10.0%
15.0%
20.0%
Jan-15
May-15
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
Commercial Bank Lending Rate
Monetary Policy Rate
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17

Evolution of the Sovereign Yield Curve
Spread between Short and Long-term Papers
Thinning Out
The spread between short-term and long-
term papers is narrowing sending a signal
that a correction of the inverted yield curve is
imminent. Nigeria’s yield curve has been inverted
for the better part of the last two years driven
by pervasive bearish sentiment over the overall
macroeconomy with notable pressure emanating
from the monetary front. With the economy
on rebound and inflation getting under control,
investors’ short-term expectations of the economy
are improving.
On the whole, yields are set to continue trending
downwards with March 2018 inflation data having
relayed an important signal which is reinforcing
the expectation of subdued inflation going
forward. The decline in headline inflation seems
to be picking pace, with a 100.0 bps fall between
February 2018 and March 2018, after the lethargy
witnessed for the better part of 2017.
DEBT MARKET UPDATE
NIGERIA
Inflation
Naira to USD Exchange
Naira Holds Firm
On the foreign exchange front, the Naira remained
resilient in the period under review. With the
interbank rate at 26.2%, the Central Bank is likely
to be keeping liquidity conditions relatively tight to
prop the Naira.
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
3M 6M 1Y 3Y 5Y 7Y 10Y 15Y 20Y
Dec-14-2016 Apr-19-2017
Nov-17-2017 Apr-19-2018
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Jan-14
Jun-14
Nov-14
Apr-15
Sep-15
Feb-16
Jul-16
Dec-16
May-17
Oct-17
Headline InﬂaƟon Non-food Index
Food Index
280.0
290.0
300.0
310.0
320.0
330.0
340.0
350.0
360.0
370.0
380.0
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18

Foreign Investment Inflow to Outflow Ratio
Nigeria Stock Exchange 30 Index
Source: Nigeria Stock Exchange, StratLink Africa
Market Moderates after February Slide
Foreign investor inflow slowed down in the first
two months of 2018 to USD 254.9 million and USD
124.7 million in January and February, respectively,
compared to the average USD 282.5 million in Q4
2017.Atthesametime,outflowfromtheexchange
was on a gradual rise standing at USD 207.4 million
and USD 106.5 million in January and February,
respectively. This, in part, explains the slowdown
in the rally witnessed in the market at the tail end
of 2017. With GDP growth numbers now pointing
at sustained emergence from the 2016 recession,
the effect of pricing in the economy’s upswing is
receding.
Year-on-year gain of the 30
Index as at April 19th, 2018
Year-to-date gain of the 30
Index as at April 19th, 2018
62.2%
5.4%
Nigeria Stock Exchange 30 Index
With the general election season, 2019, on the
horizon, we expect to see the market trend further
down especially with growing debate over the
scheduling of the polls.
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
1,550.0
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
2,050.0
2,100.0
Jan-18
Jan-18
Jan-18
Feb-18
Feb-18
Mar-18
Mar-18
Apr-18
Millions
Volume - Right Hand Axis 30 Index
0.0%
100.0%
200.0%
300.0%
400.0%
500.0%
600.0%
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
0.0
500.0
1,000.0
1,500.0
2,000.0
2,500.0
3,000.0
3,500.0
4,000.0
4,500.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2,000.0
2,200.0
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
Millions
Volume - Right Hand Axis 30 Index

SHILLING GAINS ON GREENBACK
KENYA MARKET UPDATE

POLITICAL OUTLOOK
KENYA
Shifting Landscape in Telecommunications
Industry
Recent conversations around a possible merger
between Telkom Kenya and Bharti Airtel have
raised questions around Safaricom’s dominance
of the telecommunications and mobile money
space. In the last quarter of 2018, Safaricom held
69.1% of mobile subscriptions against a combined
26.2% for Airtel and Telkom while in the mobile
money market Safaricom held an even larger
stake of 79.9% of the value of transactions. A
merger between Airtel and Telkom could lead to
considerable cost savings and economies of scale
that would increase competition for Safaricom
and benefit the end user. However, some progress
towards increased competition has already been
made with the advent of interoperability of mobile
money services between telecommunications
firms. This is expected to remove barriers to
users joining networks other than Safaricom thus
promoting competition.
Market Share for Mobile Subscriptions, Q4 2017
Mobile Money - Value of Transactions, % Share Q4
2017
Source: Communications Authority of Kenya (CA), StratLink Africa
Debate over Constitutional Amendment
The country continues to ride the tailwind
presented by the truce between the two key
protagonists in the last election. However,
undercurrents of succession uncertainty
seem to be taking center stage with emerging
consideration of a possible amendment to the
constitution in a bid to change the structure
of government. Coming in quick succession to
the conclusion of the protracted 2017 electoral
cycle, debate over a possible amendment to the
constitution is deflecting focus from key issues
affecting the country and could potentially derail
the government as it settles into its second term
anchored on its Big Four agenda – affordable
housing, enhancing food security, bolstering
manufacturing and realizing universal health
coverage.
Devolution as a Growth Driver
One area which we expect to be of considerable
interest going forward is the need to spur
devolution as a catalyst for growth. Whereas
funds allocated to the county governments have
grown over the last four years, hurdles such as
delayed disbursement on the side of the central
government and below target absorption rates,
for both recurrent and development expenditure,
have stood out as impediments to the role of the
devolved units as growth drivers.
Source: Commission on Revenue Allocation, StratLink Africa
Budget Allocation to County Governments (USD)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2013/14 2014/15 2015/16 2016/17
Billions
69.1%
17.2%
9.0%
4.5% 0.2%
Safaricom Airtel Telkom Finserve Other
79.9%
19.9%
0.1%0.1%
M-Pesa Equitel Money Other Airtel Money

KENYA
Select EAC Currencies to USD,
(Baseline=100, Jan-2017)
monthly inflow of remittances to the country,
USD 210.4 million, according to data going back
to 2004¹ representing a significant expansion of
47.5% relative to receipts from the same month in
the previous year.
The Kenya shilling has outperformed regional
peers against the greenback with the Ugandan,
Tanzanian and Rwandese currencies depreciating
by2.6%,3.8%and4.3%betweenJanuary,2017and
April² this year while the Kenyan unit appreciated
by 2.0% over the same time-frame.
Inflation is currently within the lower end of
the Central Bank’s target band of two and a
half percent either side of 5.0%, having come
in at 4.2% in March, 2018. However, StratLink
anticipates that inflation will pick up going forward
thus eroding real yields on government securities
and putting depreciatory pressure on the shilling.
Indications from the Federal Reserve Bank of the
USA regarding their rate hike schedule for 2018
suggest there may be currency outflows from
Kenya towards increasingly attractive American
bonds, thereby weakening the shilling. However,
the record high 6.4 months of import cover³ (FX
reserves) are enough to counter currency volatility
going forward plus the recent political truce will
strengthen investor confidence and in turnsupport
the local unit.
ECONOMIC OUTLOOK
Shilling Strengthens Against Dollar
The local currency dipped below 100.0 shillings
to the dollar reaching 99.98 on 23 April, 2018,
the strongest position it has held against the
greenback since July, 2015.
Further support for the shilling has come in the
form of strong inflows of hard currency from
remittances. February, 2018 recorded the largest
The local unit has appreciated against the dollar,
year-on-year, since the beginning of 2018. This
trend has been supported by a narrowing current
account deficit which fell from USD 5.2 billion in
October, 2017 to USD 4.9 billion in January, 2018.
Source: Central Bank of Kenya, StratLink Africa
KES to USD
Current Account, USD Million
90.0
92.0
94.0
96.0
98.0
100.0
102.0
104.0
106.0
108.0
01-Jan-15
01-Apr-15
01-Jul-15
01-Oct-15
01-Jan-16
01-Apr-16
01-Jul-16
01-Oct-16
01-Jan-17
01-Apr-17
01-Jul-17
01-Oct-17
01-Jan-18
01-Apr-18
-5,200.0
-5,000.0
-4,800.0
-4,600.0
-4,400.0
-4,200.0
-4,000.0
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
97.0
98.0
99.0
100.0
101.0
102.0
103.0
104.0
105.0
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
KES UGX TZS RWF
1
Central Bank of Kenya (CBK)
2
As of 23 April, 2018
3
As of 19 April, 2018

Subdued Borrowing Appetite by Government to
Keep Rates Stable
The yield curve remained static in the month to
23 April, 2018 and StratLink expects that interest
rates will remain stable in the near term because
the government is approaching its borrowing
targets for the current financial year and the
Kenya Revenue Authority is on track to approach
revenue collection targets for the second half of
the financial year. A lack of inflationary pressure
will also encourage stable yields.
Subscription rates on government papers reached
a high of 162.5% during the 19 April, 2018 auction,
up from 87.1% during the previous week on the
back of improved liquidity in the market, evident
in the interbank rate which fell by 1.5% to 4.8%
between the beginning of the month and 24 April,
2018.
Bloomberg BVAL Yields Index
Interbank Rate
DEBT MARKET UPDATE
KENYA
Equity Prices Take a Slight Dip
The NSE 20 Share index has fallen since it peaked
at 3,862.3 in March, registering a 3.4% decline in
the month to 23 April, 2018. The downward trend
was driven by a fall in the stock prices of ARM
Cement, Centum Investment, Safaricom and the
Kenya Electricity Generating Company (KENGEN)
which were down 18.4%, 10.3%, 9.5% and 9.4%,
respectively, in the month to 25 April, 2018.
Innovation in Financial Markets
NairobirecentlyhostedtheseventhBuildingAfrican
Financial Markets (BAFM) seminar organized
by the African Securities Exchange Association
(ASEA) which focused on the role of innovation
in the growth and sustainable development of
financial markets. The Nairobi Securities Exchange
(NSE) discussed plans to release a mobile phone
application that will provide simple to understand
information on capital markets and how to invest
in them. This follows the same trend in Kenya
that saw the first ever issuance of a government
bond, M-Akiba, via mobile phone. The point
being to leverage on technology and high mobile
phone penetration to make investing more widely
available. However, considering the mixed success
of M-Akiba, it remains to be seen whether this
initiative will be effective.
Nairobi Securities Exchange 20 Share Index
10.4%
10.8%
11.2%
11.6%
12.0%
12.4%
12.8%
13.2%
13.6%
3M 1Y 3Y 5Y 8Y 10Y 20Y 30Y
23-Apr-18 23-Mar-18
4.0%
4.4%
4.8%
5.2%
5.6%
6.0%
6.4%
6.8%
01-Mar-18
08-Mar-18
15-Mar-18
22-Mar-18
29-Mar-18
05-Apr-18
12-Apr-18
19-Apr-18
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
3,650.0
3,700.0
3,750.0
3,800.0
3,850.0
3,900.0
02-Jan-18
16-Jan-18
30-Jan-18
13-Feb-18
27-Feb-18
13-Mar-18
27-Mar-18
10-Apr-18
Millions
Volume NSE 20 Index (LHS)

TANZANIA MARKET UPDATE
RISING REVENUE COLLECTIONS TO PROP THE FISCAL ACCOUNT

New Online Content Law Undermines Freedom
of Expression
The tussle between government and opposition
supported by Magufuli’s perceived overly firm
hand endures going by the recent events where
government arrested eight opposition members of
parliament over alleged sedition and incitement, a
trend that has recently become common practice
in Tanzania. In another seemingly retrogressive
development and what may be seen as a
culmination of President Magufuli’s government’s
clampdown on media outlets and online social
media use in the country, all parties interested
in online blogging will now require government
certification besides being charged an annual fee
of about USD 900.0, under the new Electronic
and Postal Communications (Online Content)
Regulations 2018, before commencing operations.
We are bound to witness increased clampdown
on government critics in light of the fact that
this regulation gives government autonomous
powers to police the web as it (government) seeks
to tighten its grip on both digital and traditional
media sources, a move that sets back the country’s
democracy strides as well as the budding ICT
sector.
Set-Back for the budding ICT Sector
The continued strangle-hold on the media sector
is also bound to negatively impact Tanzania’s
budding ICT sector and derail the country’s efforts
of competing with peers in the region. Restrictive
regulatory policies have been stated as some of
the reasons why Tanzania is lagging behind peers
in ICT, and such laws, in as much as they serve to
streamline the sector, they also stifle growth of the
industry if not effectively implemented.
POLITICAL OUTLOOK
TANZANIA
The key issues on the Tanzania business scene
include:
Tanzania backs out of deal on Second Hand
Clothes
Tanzania and neighboring Uganda will continue
to benefit from the duty free benefits stipulated
under the African Growth and Opportunity Act
(AGOA) on the basis that the two nations took
steps to eliminate used clothes tariffs unlike their
counterpart Rwanda, who stood her ground on
the import ban. Tanzania and Uganda are following
in the footsteps of their East Africa Community
(EAC) counterpart, Kenya, who also rescinded the
decision by the members to effect used clothes
and shoes tariffs by 2019. The decision by Tanzania
and her contemporaries to tone down on their
2016 stance to completely ban importation of
second-hand clothing into the region follows a
threat by the United States of America (USA) to
temporarily suspend the duty-free access to USA
under AGOA for all eligible exports if the ban
holds. The best option is for Tanzania and her
EAC partners to focus on boosting the textile and
footwear manufacturing in the region through
measures that will not jeopardize the AGOA
benefits. Otherwise, all the decisions being made
by individual member states indicate lack of
economic cooperation among member states.
Efficiency at the Port drives Rising Revenues
Continuous efforts being put in place by
government to improve operations at the Port
have seen revenues at the Tanga port rise by
25.0% to USD 185.0 Million between July 2016
and February 2018 attributed to efficiency in
cargo clearance which, saw a rise in cargo passing
through the port, in the period under review. The
region has seen an influx of investors with many
opting for neighboring Kenya as their entry point.
In this regard, Tanga Port is looking to increase its
cargo handling capacity more than threefold; from
its current 750,000 tonnes per year to 2.0 Million
tonnes in the coming two years, to enable it to
cope with envisaged cargo increase as investments
in the region and its hinterland rise.
ICT as a % of GDP
Source: Bank of Tanzania, StratLink Africa
0.0% 10.0% 20.0% 30.0%
2006
2009
2012
2015

Rising Revenue Collections to Prop Fiscal Balance
Tanzania Revenue Authority reported an 8.5% rise
in revenue collection, year-on-year, to USD 5,194.1
Million in the first nine months of the 2017/18
financial year against a full financial year target of
USD 7,543.6 Million which, the Revenue Authority
remains optimistic of attaining. The improved
performance has been attributed to transparency
in tax collection coupled with sealing of tax
loopholes through adoption of the electronic fiscal
devices by businesses. The Revenue Authority is
seeking an additional six million tax payers by June
2018; in this regard, new small businesses will be
allowed a grace period of three months before
they can commence paying tax.
The Increasing revenue collections should support
the budget balance which is expected to widen to
-4.1% in 2018.
Subdued Exchange Rate Risks
Pressure on the local unit remains subdued
even as the Shilling slipped by 50.0 bps, month-
on-month, to trade at 2,264.8 units against the
greenback. In October 2017, the government
directed that henceforth, all pricing in the country
will be denominated in the local unit; a directive
that has played a major role in stabilizing the local
unit.
Comparative Headline Inflation
Quarterly Revenue Collection (USD Mlns)
Budget Balance Against Total Revenue (USD Mlns)
ECONOMIC OUTLOOK
Source: Relevant Bureaus of Statics, StratLink Africa
Source: Tanzania Revenue Authority, StratLink Africa
Source: Tanzania Revenue Authority, StratLink Africa
TANZANIA
1,480.0
1,500.0
1,520.0
1,540.0
1,560.0
1,580.0
1,600.0
Q12017
Q22017
Q32017
Q42017
Q12018
-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
2014 2015 2016 2017 2018 e
Total Revenue
Budget Balance
Balance Budget as % of GDP (RHS)
Inflation Trends to a 14-Year Low as the Shilling
Slips
The March 2018 inflation dropped to 3.9% from
4.1% recorded in February 2018, a 14-year
low and comfortably below the Central bank’s
medium target of 5.0% for financial year 2018/19.
The decline was driven by both food and non-
food inflation with the former having significant
influence due to satisfactory harvests in most
parts of the country during 2016/17 crop season
leading to low food prices. Likewise, inflation
among East Africa Community (EAC) counterparts
has been trending south and below the 5.0%
general inflation target for the partners: Rwanda
recorded the lowest inflation rate at 0.9%; Uganda
at 2.0% and Kenya with the highest at 4.18%, in
the period under review.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Kenya Uganda
Tanzania Rwanda
Shilling depreciation,
month-on-month
Shilling depreciation,
year-on-year
-0.2% -1.4%

Sustained Bid Over-subscription despite
Shrinking Yields
The short-term government instruments sustained
shrinking yields in a fairly liquid environment
with all indicators pointing south: The interbank
rate declined by 50.0 bps to 1.0% while inflation
slid further south to 3.9% thus, supporting low
yields. The declining yields notwithstanding,
investors continue exhibiting strong appetite for
government securities offering better returns as
opposed to the equities market. Consequently,
the yields for three months, six months and one
year papers declined by 60.0bps, 30.0bps and
70.0bps, month-on-month, to 2.2%, 3.2% and
5.1%, respectively, in the period under review. We
anticipate a further decline in yields on the back of
increased appetite for government fixed income
instruments and subdued inflation.
The overnight interest rate decreased by 50.0 bps,
month-on-month, to an average of 1.0% in March
2018.
T-Bill Yields Trend
Interbank Rate
TANZANIA
DEBT MARKET UPDATE
0.0%
5.0%
10.0%
15.0%
20.0%
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-18
91 Day 182 Day 364 Day
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-18
Mar-18
InterbankRate(Red)
VolumeinTZMilions
All Share Index Stays in the Green
The All Share Index (DSEI) stayed in the positive
territory in April 2018, similar to the previous
month. The Index rose by 2.0% month-on-
month and 7.0%, year-on-year, to 2,460.4 points
buoyed by gains of share prices among cross
listed companies, including Acacia which, posted
a strong performance in the first quarter after a
tumultuous period that began last year. Foreigners
continue dominating the market, commanding
95.0% of the overall value of buying activities and
67.0% on the selling side, in the first quarter of the
year.
Sector Indices Rise
Maintaining trend, sector indices recorded
positive performance in the period under review.
The Industrial and Allied index rose by 0.3% to
5,455.3 units while the Banking index rose by 0.2%
to 2,543.9 units. The Commercial Services index,
in contrast, remained unchanged at 2,463.9 units.
Source: Dar es Salaam Stock Exchange, StratLink Africa
All Share Index
Sector Indices, month-on-month
1,500.0
1,700.0
1,900.0
2,100.0
2,300.0
2,500.0
2,700.0
0.0
10.0
20.0
30.0
40.0
50.0
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Price(Red)
VolumeinTZMillions
0.0
2,000.0
4,000.0
6,000.0
8,000.0
Industrial
Index
Commercial
Services Index
Banking Index
Mar-18 Apr-18

ECONOMIC GROWTH MAINTAINS MOMENTUM
UGANDA MARKET UPDATE

Government Proposes Controversial Tax
Uganda’s Ministry of State Planning has proposed
a raft of tax amendments which are expected
to generate USD 207.4 million. The proposed
measures will affect Bills pertaining to income tax,
value added tax, excise duty, gaming, stamps duty,
and traffic and road safety, among others.
One particular proposal to tax mobile money
transactions has been contentious. It proposes
a tax of 1.0% on the value of mobile money
transactions including receiving money, making
payments as well as withdrawals of money. The
issue here lies in the negative effect that this will
have on those that rely on the service the most
and who are not able to access more formal
financial services; the lower income segment of
the population. While 27.8% of Ugandan adults
have an account at a financial institution, a more
significant 35.1% have mobile accounts. Also,
while only 11.7% of Ugandans send domestic
remittances through financial institutions, 69.4%
do so via mobile money transfers. The burden of
this proposed tax is likely to be unfairly skewed
towards low income groups and will likely be very
unpopular among the voting masses.
POLITICAL OUTLOOK
UGANDA
Source: World Bank and Global Findex, StratLink Africa
Financial Inclusion Indicators
(2014, % population aged 15+)
Improved Global Output Drives Remittance
Growth
Remittance receipts in Uganda grew substantially
in 2017, expanding by 37.8% relative to the
previous year, to USD 1.4 billion thus providing
an important source of foreign exchange that will
buffer against currency volatility.
There was an uptick in remittance inflows across
low and middle income countries in 2017 on the
back of improved economic performance globally,
especially among high income countries hence
enabling migrants residing there to repatriate
more money. Sub-Saharan Africa (SSA) has been
listed as the most expensive region to send money
to with transactions costing 9.4% on average¹. In
order to exploit the recent uptick in global GDP,
Uganda would be wise to push for policies to cut
remittance costs such as support for technologies
(e.g. mobile applications and blockchain) that
improve the efficiency of transfers.
Remittance Inflows, % Change y-o-y
Top SSA Remittance Receivers 2017, USD Billions
Source: World Bank, StratLink Africa
Source: World Bank Migration and Development Brief 29, StratLink
Africa
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
AccountatFinancial
InsƟtuƟon
MobileAccount
DomesƟcRemiƩance
viaFinancialInsƟtuƟon
DomesƟcRemiƩance
viaMobile
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
2010
2011
2012
2013
2014
2015
2016
2017
0.0
5.0
10.0
15.0
20.0
25.0
Nigeria Senegal Ghana Kenya Uganda
1
World Bank Migration and Development Brief 29

Food Prices Fall in Consecutive Months
Inflation has continued to slow hitting 2.0% in
March, 2018, down from 2.1% in the previous
month, the lowest it has been in over three years.
The main driver behind the subdued price growth
has been decreasing food prices with food crops
and related items recording inflation rates of
-0.7% and-1.7% in February and March this year,
respectively. Core inflation has been very low,
registering 1.7% in both February and March this
year which, according to available data from the
Bank of Uganda (BoU), is the lowest it has been
since prior to 2006. This points towards a lack of
demand-pull inflation in the economy.
Economic Activity Shows Promise
Subdued inflation in the first quarter of the year
is somewhat in contrast with data on economic
activity. The last quarter of 2017 saw the economy
expand by 6.6%, a significantly higher figure than
the 2.8% GDP growth attained in the same quarter
of the previous year. Improvements in economic
output occurred across all sectors with services,
industry and agriculture expanding by 8.9%, 7.3%
and 3.5%, respectively, in the fourth quarter of
2017, out-pacing their respective growth figures
for the same quarter of 2016.
Source: BoU, StratLink Africa
Inflation Decomposed
GDP Growth
Sector GDP Growth
ECONOMIC OUTLOOK
UGANDA
Favorable weather conditions drove food crop
growth of 7.1% in Q4 2017, a trend that is likely to
have continued into 2018 and led to the deflation
in food prices seen in February and March. Growth
in industry was driven by crude oil mining and
exploration activities while the services sector was
buoyed by financial and insurance activities.
The Monetary Policy Committee (MPC) maintained
the key rate at 9.0% in their April meeting
citing that, barring external shocks such as oil
price pressure, inflation is expected to increase
organically towards target. However, despite
improved economic output, very low core inflation
indicates that there may be room for monetary
easing in the near term to boost demand in the
economy.
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Jan-18
Feb-18
Mar-18
Food Crops and Related Items
Core InflaƟon
Energy, Fuel and UƟliƟes InflaƟon
Headline InflaƟon
6.6%
7.5%
6.5%
4.6%
2.8%
Q42017
Q32017
Q22017
Q12017
Q42016
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Agriculture,
Forestry and
Fishing
Industry
Services
Q4 2016 Q4 2017

Uganda Securities Exchange Hits 20 Years
The Uganda Securities Exchange (USE) recently
celebrated their 20th anniversary where
discussions were held around the lack of
companies listing on the stock exchange and it was
suggested that more research into the issue needs
to be carried out. Better collaboration between
members of the East African bloc was one of the
recommendations put forward to develop the
region’s financial markets.
The All Share Index peaked at 2,269.5 on 6 April,
2018 before descending to close at 2,192.9 on 24
April, 2018.
Steady Inflation Supports Stable Yields
The yield curve remained mostly stationary in the
month to 24 April, 2018. The MPC’s latest decision
to keep the key rate constant as well as low and
relatively constant inflation will keep yields stable
in the short term. However, the anticipated strong
economic performance through the rest of 2018
will drive demand and increase price pressures
with support from the pass-through effect of rate
cuts made in 2017. As a result, StratLink expects
that higher inflation in the medium term will put
upward pressure on yields.
Short term papers were heavily demanded in the
past month with subscription rates of 142.9% and
164.5% in the first and second auctions held in
April, respectively. Between September, 2017 and
March, 2018 inflation fell by 3.4% while the 91 Day
T-Bill dropped by 1.0% thus boosting real yields
which have kept investor appetite for government
papers high.
All Share Index
Sovereign Yield Curve
91-, 182- and 364-Day T-Bill Subscription Rates
EQUITY MARKET UPDATEDEBT MARKET UPDATE
UGANDA
All Share Index month –
on – month change as at
24 April 2018
All share index year –
on – year change as at
24 April 2018
0.6%
39.2%
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
14.0%
3M 6M 1Y 2Y 3Y 5Y 10Y
24-Apr-18 23-Mar-18
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
140.0%
160.0%
180.0%
12-Apr-18 26-Apr-18
1,900.0
1,950.0
2,000.0
2,050.0
2,100.0
2,150.0
2,200.0
2,250.0
2,300.0
3-Jan-18
17-Jan-18
31-Jan-18
14-Feb-18
28-Feb-18
14-Mar-18
28-Mar-18
11-Apr-18

DEFUSING TENSION WITH UGANDA GOOD FOR REGIONAL ECONOMIC INTEGRATION
RWANDA MARKET UPDATE

Defusing Tension Bodes well for Regional
Economic Integration
Presidents Kagame and Museveni have recently
made commendable attempts at resolving the
rising tension between the neighbors that was
threatening not only their (Uganda and Rwanda)
bilateralrelations,butalsotheregionalintegration,
especially in light of the recently launched African
Continental Free Trade Area Treaty (AFCFTA),
whose success is strongly hinged on increased
regional integration in order to facilitate cross
border trade. In a strong expression of goodwill,
President Kagame made the first move through a
one-day visit to Uganda soon after his counterpart
snubbed the Free Trade Area Treaty summit
held in Kigali in March, in what was considered a
retaliatory move following the latter’s decision to
ignore the East Africa Summit meeting in Kampala
a month earlier.
Increased Economic Bargaining Power
The greatest cost for both nations, from an
escalated dispute, will be losing out on the all
important collective bargaining muscle in global
markets, a tool that is necessary for the realization
of economic bargaining power and regional
integration and which, can only be achieved
through regional cooperation. Thus, the renewed
resolve is an indication of the two countries’
appreciation of the importance of collective
bargaining especially, in the wake of the stalled
Economic Partnership Agreement trade deal with
the European Union and the recent mixed signals
being channeled by the EAC partners regarding
the African Growth Opportunities Act (AGOA) pact
with the United States of America where the failure
by partners to speak with one voice weakened
their collective agreement leading to potential
loss of economic benefits besides hurting regional
integration. Hence, we opine that the combined
commitment and efforts of African leaders is key
in improving the region’s economic negotiating
power in light of the opportunities that come with
the visible emergence of Africa markets.
POLITICAL OUTLOOK
RWANDA
Export Access Fund to Boost SME Financing
Access to funding remains a major challenge for
Small and Medium Enterprises (SMEs) in Rwanda
which, has been keen on supporting industries as
it looks to promote its exports and in turn increase
export receipts, consequently, narrowing the
balance of payments gap which, stands at USD
-1.2 billion as of 2016¹. In line with this, Rwanda
has reviewed the eligibility for financing from the
Export Growth Fund to enable export-oriented
SMEs to tap into foreign markets. This was
informed by the restrictive existing criteria; for
instance the requirement for businesses to have
previously exported 40.0% of their products in
order to qualify for financing, is punitive to start-
up SMEs. The government has since removed this
requirement, thus, creating more opportunities
for new start-ups that intend to export and who
have already secured a ready market outside
Rwanda, to have access to the subsidized loan.
The Export Growth Fund was established about
two years ago with the aim of promoting exports
through facilitating local producers and exporters
to expand their market across borders. In the
same breath Rwanda, in collaboration with private
development partners such as, the United States
Agency for International Development (USAID),
hassetuptheRwandaInnovationFund(RIF)which,
will extend support amounting to circa USD 30.0
million to SMEs, an intervention that we expect
should also support SMEs to raise investment
capital besides addressing working capital funding
gaps. Thus, we should see more SMEs listing at
the Exchange in the medium term once these
interventions are successfully implemented thus,
increasing linkages between SMEs and capital
markets.
1
The World Bank Data

agriculture value-addition, and in turn increasing
exports. Promotion of the export of semi-
processed or finished products compared to
exports of primary agricultural products which, are
less competitive on the global market should also
help narrow the current account deficit. Ongoing
export promotion has contributed to significant
growth in Rwanda’s exports value rising from USD
400.0 Million in 2007 to about USD1.6 Billion
in 2016² buoyed by growth in non-traditional
exports.
Agricultural Transformation to support Trade
Balance
A sectoral shift from reliance on primary
agriculture exports revenue to diversified
manufacturing sector exports through value
addition to agriculture is necessary, if Rwanda‘s
economy is to gain from external trade given
that diversification in manufacturing holds the
key to narrowing of the trade balance. Rwanda’s
annual agriculture sector growth rate increased
by 300.0bps, year-on-year, to 7.0% in 2017 while
its contribution to GDP rose to 31.0% in 2017
from 28.0% in 2010, a reflection of the increasing
value of the sector as Rwanda seeks to promote
non-traditional exports in its quest to reduce over-
reliance on a few primary commodity exports and
cushion against susceptibility to commodity price
shocks and weather changes.
In November 2017, the Ministry of Agriculture
and Animal Resources announced plans to launch
the fourth phase of the Strategic Plan for the
Transformation of Agriculture (PSTA 4) in financial
year 2018/19 with a view to boosting the sector
through value addition in line with Rwanda’s third
Economic Development and Poverty Reduction
Strategy (EPDRS 3) for the period 2018-2024.
These investments in Agriculture are essential
for developing the manufacturing sector through
Rwanda holds Benchmark Rate as External
Sector Improves
The improved performance of the external sector
in the first two months of 2018 where the export
value grew by 31.0% compared to a slower import
rise of about 13.2%, supported by a benign
inflationary environment, was one of the drivers
behind the Central Bank’s decision to hold the
benchmark rate at 5.5%, since December 2017,
to encourage the banking sector to continue
financing the economy. It is envisaged that
agricultural productivity will benefit from sector-
focused infrastructural developments, with the
government shifting its focus to infrastructure and
services,coupledwithplannedfiscalconsolidation.
ECONOMIC OUTLOOK
RWANDA
Source: National Institute of Statistics of Rwanda, StratLink Africa
Source: National Institute of Statistics of Rwanda, StratLink Africa
Growth Comparison
Total Trade vs Trade Balance
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
GDP Agriculture Manufacturing
-400.0
-350.0
-300.0
-250.0
-200.0
-150.0
-100.0
-50.0
0.0
500.0
550.0
600.0
650.0
700.0
750.0
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
TradeBalance(USDmln)-Red
TotalTrade(USDmln)
2
The World Bank September 2017: Rwanda Economic Update

RWANDA
Source: National Bank of Rwanda, StratLink Africa
Interbank Rate
Marginal Yield Movements
Rwanda’s short-term government instruments
continue to post lower yields backed by low
inflation and easing liquidity conditions. Inflation,
despite rising marginally, remains low, recorded at
0.9% in March 2018 from 0.7% in February, 2018.
Similarly, the interbank rate continues to trend
south, shedding off 30.0 bps to 5.2%, in the period
under review. The Central Bank held constant
the benchmark rate at 5.5% for Q2, 2018, in its
March meeting, on the back of subdued inflation
supported by a stable exchange rate. We expect
yields to remain low in the medium term as the
expansionary policy decisions by the Central Bank
gain traction.
Yields of short term government securities
recordedmarginalandmixedmovementsbetween
April and May, 2018. The 91 Day paper’s yield rose
by 0.1% to 5.1%, while the 182 Day and 364 Day
papers’ yields fell by 0.1% and 0.4% to 6.2% and
6.6%, respectively, in the period under review.
DEBT MARKET UPDATE
Easing Pressure on the Franc
As other key pointers remain subdued, the franc
maintained resilience against the greenback,
appreciating by 60.0 bps to trade at 855.9 units
against the greenback. The ease in exchange rate
pressure is mainly attributed to improving external
environment.
Source: National Bank of Rwanda, StratLink Africa
Source: NISR, StratLink Africa
T Bill Yields
Franc to USD
Franc’s change, month-on-
month, as at April 16th, 2018
Franc’s change, year-on-year,
as at April 16th, 2018
0.6%
-3.8%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Jun-17
Sep-17
Dec-17
Mar-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
91 Day 182 Day 364 Day
820.0
825.0
830.0
835.0
840.0
845.0
850.0
855.0
860.0
865.0
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18

Rwanda All Share Index
Rwanda All Share Index
Rwanda Stock Exchange Remains Docile
The All Share Index is still recording marginal
activitywithlessthanhalfofthecountersrecording
any movements in trading volumes. Consequently,
the All Share Index depreciated slightly by 0.1%,
month-on-month and gained 4.3%, year-on-year
between March and April, 2018
SME Segment to Boost Activity at the Bourse
We highlighted the collaboration by government
and the private sector to increase capital market
sensitization in Rwanda in a bid to encourage
participation in equity and fixed income trading.
Available data indicates that Rwanda Stock
Exchange is banking on the Small and Medium
Segment (SME) to infuse liquidity and activity
at the increasingly lackluster bourse, where
government remains the biggest mover of
volumes through quarterly bond issuances, by
providing investors a variety of asset classes to
invest in. The SMEs will be allowed to list for free
at the bourse to encourage them to raise capital
as government seeks to remove listing hurdles
faced by small companies. We expect that these
measures should help drive activity at the bourse
going forward.
120.0
122.0
124.0
126.0
128.0
130.0
132.0
134.0
136.0
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
133.0
133.1
133.1
133.2
133.2
133.3
133.3
Mar-18
Mar-18
Mar-18
Apr-18
Apr-18

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

STRATLINK - AFRICA TEAM
Konstantin Makarov – Managing Partner
konstantin.makarov@stratLinkglobal.com
Dina Farfel – Partner
dfarfel@stratLinkglobal.com
Julio De Souza - Director of SME and Impact Finance
julio.desouza@stratLinkglobal.com
Kyle Drexler – Associate
kyle.drexler@stratLinkglobal.com
Benson Njeri – Analyst
benson.njeri@stratLinkglobal.com
Julians Amboko – Senior Research Analyst
julians.amboko@stratLinkglobal.com
Gianluca Storchi – Senior Research Analyst
gianluca.storchi@stratLinkglobal.com
Sophia Sifuma – Research Analyst
sophia.sifuma@stratLinkglobal.com
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

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