Africa market update may 2014 stratlink global

MARKET UPDATE – AFRICA
THIS REPORT INCLUDES ECONOMIES OF KENYA, UGANDA, TANZANIA, RWANDA, ETHIOPIA AND NIGERIA
May 2014

www.stratlinkglobal.com StratLink - Africa, Ltd
POLITICAL RISK ANALYSIS
State of Affairs: Taking a Year’s Stock
It has been a season of stock-taking and
assessment of the Jubilee Government as it
wrapped up one year in office on April 09th
2014. In the year under review, the
government’s perception domestically and
internationally has been significantly buoyed
by an apparent weakening of cases against the
President and Deputy President at the
International Criminal Court (ICC). In March
2014, the ICC adjourned commencement of
hearings against President Uhuru Kenyatta to
October 07th
, 2014, defying the defence
lawyers’ request to have the same suspended
indefinitely. The prosecution’s efforts have
been crippled by withdrawal of witnesses.
Internally, the government is seen to be
treading a minefield with regard to insecurity
and corruption. Deportation of at least 82
suspected illegal Somali immigrants on April
10th
, 2014 came against the backdrop of
recurrent incidences of terror linked attacks
and foiled attempts especially within Nairobi
and Mombasa. On development projects,
suspected corruption and financial improbity
have marred the commencement of the
Standard Gauge Railway construction and the
planned issuance of laptops to public primary
Standard One pupils.
BUSINESS ENVIRONMENT
Kenya National Treasury and the
International Fund for Agriculture have
entered a deal towards establishment of a
USD 9.9 million risk sharing facility to
incentivise issuance of affordable credit to
small-holder farmers by lending institutions.
In the arrangement, the National Treasury
aims at having at least USD 49.6 million lent
to small-holder farmers between 2014 and
2017. Agriculture is the backbone of Kenya’s
economy, accounting for 25% of Gross
Domestic Product (GDP). 75% of Kenya’s
agricultural output is attributable to small-
holder farmers1
with farm sizes averaging 2.5
hectares. Increased access to credit will
empower small-holder farmers to engage in
increased value addition of their produce.
1
Africa Development Bank
ECONOMIC OUTLOOK
Core View: The economy has been earmarked
for middle-income status way ahead of the
2030 target. This will follow a rebasing
exercise scheduled to be completed by
September 2014 that will see the economy
rebased to 2009 from 2001. The rebasing
comes as the economy’s growth momentum
is picking up, albeit marginally, following a
4.7% GDP growth in 2013 compared to 4.6%
in 20122
.
Kenya’s GDP Size and Growth Trend
Source: BMI, KNBS, Stratlink Analysis
The rebasing is expected to see the country’s
aggregate GDP size grow by 16.27% to USD 50
billion from 2013 whereas the country’s per
capita income will grow by 20% to USD 1,1363
.
World Bank Classification of Economies
Classification
GDP Per Capita
(USD)
Low Income <=1,035
Lower Middle Income 1,036 – 4,085
Upper Middle Income 4,086 – 12,615
High Income =>12,615
Source: World Bank, Stratlink Analysis
We assess that the re-basing of the country’s
economy has been necessitated by changing
trends in the last decade. In 1999, for
instance, less than 3% of households in Kenya
owned a telephone. By 2011, 93% of the
country’s households owned at least one
mobile handset with 73% being active mobile
money service subscribers4
.
2
Kenya National Bureau of Statistics 2014
3
Kenya National Bureau of Statistics 2014
4
World Bank
12.6
18.8
32.2
43.6
50.0
0
2
4
6
8
.0
20.0
40.0
60.0
2000
2005
2010
2013
2014
(P)
GDP Size (USD Billions) - LHS
GDP Growth Rate (%)

Developments and penetration of technology
had a considerable impact on the country’s
economy. Mobile money transfer has grown
to play an increasingly central role in Kenya’s
economy since the roll out of the first
platform in 2007. By December 2011, person-
to-person transactions via mobile money
platforms in the country accounted for 30% of
GDP5
.
Use of Mobile Money Service Analysis
Source: Central Bank of Kenya, Stratlink Analysis
Further, the service sector is increasingly
playing a key role in the economy as the
country continues to shift from being agro-
based to service driven. It is our view that the
need to capture this shift has to large extent
informed the re-basing of the economy.
Implications of Re-basing the Economy
Available data indicates that re-basing the
country’s economy will see the public debt to
GDP ratio drop from 50.7% as at December
2013 to about 48.76%. Despite being above
the IMF recommended benchmark for debt-
to-GDP ratio of 40% for developing
economies, Kenya will have the benefit of
scaling down its debt burden by about 194
basis points.
In March 2014, the International Monetary
Fund and the World Bank issued a joint
statement cautioning against the country’s
rising debt levels (Please refer to our April
2014 issue for analysis of Kenya’s debt
position). The decrease in debt-to-GDP ratio
will reflect in a better debt sustainability
position for the economy.
5
World Bank
Kenya’s per capita income will also be shored
up to USD 1,136 in view of the rebasing.
Although this would be expected to translate
to higher living standards and consumption by
citizens, we assess that the impact will be
minimal, if any. This is because the situation at
hand does not represent real growth in per
capita income but merely a revaluation of the
already existing basket.
We observe that attainment of middle-
income status does not reflect real growth of
the country’s economy. As such, Kenya should
maintain a focus on implementing the
national development agenda, Vision 2030,
to ensure that growth and development are
sustained and quality of life of citizens
matches the new economic status.
DEBT MARKET UPDATE
STIRs Record Marginal Declines: April saw
STIRs register marginal declines on account of
the prevailing macroeconomic stability, albeit
marginal appreciation in inflation and
increased appetite for long term domestic
debt instruments. The 91 Day, 182 Day and
364 Day treasury bills closed the month at
8.79%, 9.77% and 10.11% down from 8.85%,
9.87% and 10.32% respectively for the month
ending March 2014.
Short-Terms Interest Rates Trend South
Source: Central Bank of Kenya, StratLink Africa
There has been a shift to longer term bonds
that can be seen from subdued bid-to-cover
ratios at 1.00 between March and April 2014
indicating low bidding by investors.
16.31
166.57
473.41
732.21
1,169.15
1,544.80
1,901.55
0
400
800
1200
1600
2000
0
5
10
15
20
25
30
2007
2008
2009
2010
2011
2012
2013
Value of Transactions (KES Billions)
Customers (Millions) - LHS
8%
9%
10%
11%
Jan-14
Jan-14
Feb-14
Feb-14
Mar-14
Mar-14
Apr-14
Apr-14
91 Day 182 Day 364 Day

91 Day Bid to Cover Ratios Analysis (KES ‘000)
Date Received Accepted
Bid-to-
Cover
07.03.14 10,523 5,279 1.99
14.03.14 7,367 7,366 1.00
21.03.14 1,048 1,042 1.00
28.03.14 4,401 3,422 1.29
04.04.14 1,020 1,020 1.00
11.04.14 1,209 1,209 1.00
17.04.14 3,519 3,498 1.00
25.04.14 2,895 2,406 1.2
Source: CBK, StratLink Africa
The bond market has maintained its first
quarter 2014 rally with the market recording a
lowering of the yield curve by 07-57bps
between 1yr to 20yr maturities. The recent 5yr
auction saw the average redemption yield at
10.87%, the cut-off rate at 10.95% with the
bond recording a performance rate of
202.67%. The 5yr yield tumbled 10-30bps in
the first week of trading effectively pulling
with it the 10-15yrs bonds of higher maturity.
Results of Five Year Treasury Bonds Issue
FXD 1/2014/5
Tenor 5 Year
Total Amount offered (Kshs. M) 15,000
Total bids received (Kshs. M) 30,270
Performance Rate (%) 203
Total Amount Accepted (Kshs. M) 17,513
Source: CBK, StratLink Africa
Given the solid short term macros released by
the Monetary Policy Committee (MPC), we
expect stability at current yields.
On the liquidity front; there has been high
liquidity in the money market anchored by
maturation of Repo and Term Auction
Deposits. Commercial banks recorded a
surplus of Kshs. 4.5 billion in their settlement
accounts in relation to the monthly average
cash reserve requirement of 5.25 percent
(Kshs. 103.1 billion) at the Central Bank in the
week to April 30, 2014, compared with a
deficit of Kshs. 1.7 billion recorded in the
previous week.
Kenya Shilling vs USD Exchange
Source: Central Bank of Kenya, StratLink Africa
-3.70%Margin by which Kenya Shilling has
depreciated in the year-to-date
The local unit has come under pressure in
April 2014. In the month under review, the
shilling touched a high of 86.44 units and a
low of 87.10 units (against a low of 86.75 in
March 2014) to the greenback. This trend has
come against the backdrop of high liquidity in
the market attributable, in part, to
government payments and net redemption of
government securities. The earlier discussed
action by the Central Bank of Kenya to
intervene in the market and mop up excess
liquidity has served to defend the local unit.
EQUITY MARKET UPDATE
NSE 20 Share Index Year-to-Date
Source: Bloomberg StratLink Africa Analysis
81
82
83
84
85
86
87
88
89
Apr-13
Jun-13
Aug-…
Oct-13
Dec-13
Feb-14
Apr-14
0
20
40
60
80
100
120
140
160
4200
4400
4600
4800
5000
5200
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Millions
Volume - RHS Last Price

+3.86%Margin by which NSE 20 Share Index has
changed in the year-to-date
+0.06%Margin by which NSE 20 Share Index has
changed in the month-to-date
NSE 20 Share Index Month-to-Date
Source: Bloomberg StratLink Africa Analysis
Market Commentary
The market has been rather volatile in April
2014. The NSE 20 Share Index has oscillated
between a high of 4,983.83 and a low of
4,896.40 in the month under review. The
peaks in the trend of the index are due to the
release of results by listed companies for the
year ended December 2013. Accordingly, we
have witnessed investors re-evaluating their
portfolio holdings in line with revised
expectations. In the coming days, we expect
Q114 financials by the banking sector to offer
requisite indications on the economy’s
trajectory going forward.
Corporate Action
Equity Bank Net Profit Grows by 20.41% in
Q114
Equity Bank, posted a PAT of USD 44.5 million
(20.41% growth) on the back of a 30% growth
in loans primarily to SME’s and a 60% growth
in its agents effectively bolstering cost-to-
income ratio.
Moving ahead, we are of the view that the
entry of the bank into the mobile telephony
space should be of key interest to investors.
Telecommunications market regulator,
Communications Commission of Kenya,
granted Equity Bank a license to become a
Mobile Virtual Network Operator. In our
assessment, entry into the lucrative mobile
money space augurs well for the bank given
its robust customer base.
Equity Bank Share Performance at NSE
Source: Bloomberg, Stratlink Analysis
TPS Serena: Weathering Adverse Business
Climate
TPS Serena, a key player in Kenya’s tourism
and hospitality industry, reported a 35.44%
growth in net profit to USD 7.7 million for the
year ended December 2013. In the period
under review, the company’s turnover grew
by 28% to close at USD 78.3 million.
Coming against the backdrop of a series of
shocks, the performance by the company is
impressive. 2013 was a particularly
challenging year for the country’s tourism
and hospitality industry. In the first half of
2013 alone, arrival numbers at Jomo
0
20
40
60
80
100
120
140
160
4800
4840
4880
4920
4960
5000
31-Mar
7-Apr
14-Apr
21-Apr
28-Apr
MillionsVolume - RHS Last Price
0
2
4
6
8
10
12
14
16
20
22
24
26
28
30
32
34
36
38
40 Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Millions
Volume Last Price - LHS

Kenyatta International Airport plummeted by
12.24% on a year-on-year basis to 495,6606
.
The drop was driven by travel bans issued by
various countries as tourists and investors
took a wait-and-see stance in anticipation of
the March 2013 General Election. The August
2013 inferno at JKIA that destroyed the
international arrivals terminal and the
September 2013 Westgate Mall attack
further dampened the country’s risk
perception.
We believe that the industry’s outlook will
remain dull until the lurking threat by the Al
Shabaab militia is brought to a halt.
Nairobi Securities Exchange to Self-list by
June
The Nairobi Securities Exchange is now set for
self-listing by June 2014. This follows
completion of the demutualization of shares
exercise that has last kicked off in October
2013. The listing which was set for June 2013
has suffered recurrent delays owing to
unresolved considerations largely between the
exchange and the Capital Markets Authority.
The exchange is expected to float 81.37
million shares each of USD 0.046 (KES 4)
through an Initial Public Offer.
The move is set to edify the exchange’s
corporate governance standing and thereby
boost investor confidence as they expect to
begin interacting with the exchange’s
financials.
6
Kenya National Bureau of Statistics

ONE ON ONE
Stratlink Africa Ltd attended the launch of the
International Monetary Fund’s Regional
Economic Outlook Report 2014 themed
‘Fostering Durable and Inclusive Growth’. In
this month’s One on One issue, we bring you
excerpts of key presenters in the forum
including Kenya’s Finance and Treasury
Cabinet Secretary, Henry Rotich and IMF’s
Director for African Department, Antoinette
Sayeh. (Note: Statements are paraphrased)
Antoinette Sayeh: Growth of Sub-Saharan
Africa’s economy is expected to pick up to
5.5% in 2014 from 4.9% in 2013.
Drivers of growth have been and will continue
to be large investment in infrastructure, the
strengthening extractive sector and foreign
direct investment flows. The region’s average
inflation rate also dropped from 9% in 2012 to
6.5% in 2013 brought about by more stable
global food and fuel prices.
Majority of the region’s economies are moving
from the phase of sustaining growth to that of
interrogating the quality of growth and this
will be a key discussion point among policy
makers moving forward. SSA still faces
challenges of making its growth more
inclusive.
One major point of concern, however, remains
the widening fiscal deficit across the region.
SSA Median Fiscal Deficit as % of GDP
2006 0.70%
2008 1.40%
2013 3.6%
Source: IMF, Stratlink Analysis
This has largely been a cause of two trends in
the region:
 Policies favouring expansion of capital
expenditure.
 Recomposition of public expenditure
away from investment that has
resulted in further increase of public
debt.
In this regard, we emphasize that it is
important economies in the region target
having their tax revenue keep pace with, and
where possible exceed, investment spending.
This will better enable them to check on
growing deficits.
Domestic risks to the outlook include:
 Rising fiscal imbalances that could
destabilize growth
 Deteriorating security conditions in
such states as South Sudan and
Central Africa Republic
Externally driven risks include:
 Decelerating growth in emerging
markets such as India and Brazil which
have become large consumers of
SSA’s output
 Scenario of tightening liquidity within
the global market especially with
tapering by USA that may stir
uncertainty on interest rates path
 Expected decline in prices for the
region’s key commodities.
Henry Rotich: Kenya’s growth recovery has
been steady and sustained since 2008. The
government has managed to maintain
inflation within single-digit levels and keep
commercial bank interest rates aligned to the
Central Bank of Kenya’s benchmark rate.
In the year to March 2014, usable foreign
exchange reserves stood at USD 6.6 billion up
20% from March 2013. This represents up 4.5
months of import cover and puts us at a better
position to manage our currency trends in
foreign exchange.
We have adopted an Economic
Transformation Agenda that intends to rein in
on the high cost of living, stagnation of the
country’s exports, stem the rising wage bill
and make the business climate more globally
competitive.

TANZANIA MARKET UPDATE

POLITICAL OUTLOOK
The Union Beyond 50 Years: Whither
Tanzania?
As the union between mainland Tanganyika
and Zanzibar marks 50 years, the country finds
itself at cross-roads with regard to the
structure of government. The choice between
maintaining a two-tier government structure
or abandoning it for a three-tier system has
formed, arguably, the most contentious bit of
the ongoing constitution reform process.
President, Jakaya Kikwete, has strongly
supported the former terming the three-tier
system as a recipe for “problems and possibly
breaking up the union eventually”.
In our analysis, the bone of contention is the
degree of autonomy that Zanzibar is bound to
receive under the three-tier system of
government. Presently, the twenty matters
including foreign affairs, defence and
citizenship are under the union’s jurisdiction.
The draft constitution truncates the matters
to seven, ceding control of such issues as land
and natural resources to state governments7
.
State versus union control will finally be a key
determinant of economic strength between
Tanganyika and Zanzibar. The investor
community will be keen to align its interest
along this line.
BUSINESS NEWS/INTERVIEWS
The government is wooing domestic and
foreign investors to capitalize on the
country’s Export Processing Zones and
Special Economic Zones to boost returns.
Investors will be better positioned to
harness market potential through
preferential trade agreements undertaken
by Tanzania including AGOA8
. Tanzania’s
trade deficit has widened sevenfold from
2000 to stand at USD 6.4 billion at the
close of 20119
.The country now seeks to
bridge the divide between imports and
exports by creating a more favourable
environment for investors. This
development is key for domestic investors
as they scout for larger markets.
7
Eastern Africa Center for Constitutional
Development
8
Ministry of Industries and Trade
9
East African Community Statistics
ECONOMIC OUTLOOK
Q313 Economic Growth Decelerates as
Service Sectors Dominates Momentum
Tanzania’s economy grew by 6.5% in the year
ending September 2013, down from 7.2% a
year earlier. The deceleration has largely been
attributed to a dip in the manufacturing sector
which grew by 5.8% in Q313, compared to
11.6% in Q31210
. In the period under review,
transport and communication sector recorded
the highest growth at 11.6%, financial
intermediation (11.6%), mining and quarrying
(10.4%), construction (7.3%) and agriculture
(6.1%).
Q312 vs Q313 Growth Engines Analysis (%)
Source: Bank of Tanzania, National Bureau of
Statistics, Stratlink Analysis
Tanzania’s GDP Comparison by Sector
Analysis (%)
Source: National Bureau of Statistics, Stratlink
Analysis
10
Bank of Tanzania Quarterly Bulletin
0.00
4.00
8.00
12.00
16.00
TransComm
Financial
Services
Manufacturing
Construction
Agriculture
Q312 Q313
29
18
45.5
7.5
23.7 22.7
44
9.6
0
10
20
30
40
50
Agriculture
Services
Industryand
Construction
Others
2001 2005 2010 2012

Over the years, we have witnessed growth in
the services sector as the agriculture sector’s
contribution to GDP lessens. Between 2001
and 2012, agriculture as a share of GDP has
dropped from 29% to 23.7% whereas services
have grown from 18% to 22.7%.
The services sector will play an increasingly
central role in the growth of the economy and
become the focal attraction of investors in
the years to come. This will be driven by its
growth margins and growing potential in the
economy.
DEBT MARKET UPDATE
Marginal Movement in STIRs Yields
There was minimal movement in short-term
interest rates during April 2014. The 91 Day
and 364 Day instruments retained the March
2014 auction yields of 12.17% and 13.33%
respectively while that of the 182 Day
instrument gained a marginal 4 bps to stand at
13.26%. Bid-to-cover ratios for the
instruments were fairly high with the 182 Day
and 364 Day registering 2.31 and 1.70 in the
April 23rd
2014 auction. This is indicative of
fairly aggressive bidding by investors in the
market.
Bank of Tanzania reports that yields in the
market trended downwards between January
and March 2014 against the backdrop of
heightened market demand.
STIRs Flatten Out in April 2014
Source: Bank of Tanzania, Stratlink Analysis
Bonds Market Activity
The primary market has been active with a
number of issues. The Treasury issued two
medium term instruments borrowing a total of
USD 47.54 million. Both issues were
oversubscribed.
Bank of Tanzania Sovereign Bond Issues in
April 2014
Bid to Cover Tenor Coupon
Amount
(USD mn)
1.32 10 yr. 11.40% 28.75
1.2 5 yr. 9.18% 18.79
1.37 15 yr. 13.5% 18.79
Investor uptake dipped in April 2014
compared to the preceding month. On March
19th
, 2014 Treasury issued a two year tenure
bond with a coupon of 7.82% offering USD
18.78 million that attracted a bid-to-cover
ratio of 1.55. The issue of a seven year tenure
bond with a coupon of 10.08% offering USD
29.79 million attracted a bid-to-cover ratio of
1.51.
5 Year Bond Yield to Maturity Trends
The flattening out of the Tbill yields as well as
the relatively little volatility in the 5 year
bond yields (within a range of 14.07 – 15.51
during the year to April 2014) points to
stability in the market with regard to
government securities.
The interbank lending market has also
witnessed higher amounts borrowed
overnight but lower frequency compared to
March 2014 during which lower volumes were
borrowed at a higher frequency.
8
10
12
14
16
18
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
91 Days 182 Days 364 Days
14.99
14.86
14.07
15.51 15.44
14.53
14.91
12
13
14
15
16
17
18
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14

Interbank Market Rates (%) vs Volumes
Traded (TzSh billions)
Foreign Exchange Front
Tanzania Shilling vs USD Trade
-0.86%
Margin by which Tanzania Shilling has shed
against USD in the year-to-date
-0.24%
Margin by which Tanzania Shilling has shed
against USD in the month-to-date
The local unit lost its appreciating tempo
exhibited towards the end of March 2014. The
depreciation of the shilling has largely been
attributed to growing demand for the
greenback from the country’s oil sector as it
services its import bills.
On April 02nd
, 2014 the Energy and Water
Utilities Authority revised the prices of
petroleum products upwards. Diesel, Kerosine
and Petrol saw their prices edge upwards
5.36%, 0.57% and 0.48% respectively in light
of rising global oil prices.
The domestic unit is experiencing
depreciation owing to the spill-over effects
from the country’s current account deficit.
Available data from the national bureau of
statistics indicates that the deficit grew by
34% to USD 4.975 billion in the year to
January 2014 to stand at 17% of GDP. In the
same period, the value of oil imports grew
27% to USD 4.32 billion.
Dar es Salaam Stock Exchange All Share Index
Source: DSE Stock Exchange, StratLink Africa
+33.05%
The year to date return on the DSE All Share
Index.
+4.37%
The one month returns on DSE All Share
Index. The index gained 3.16% in February to
close at 1923.57 points.
0
20
40
60
80
100
0
2
4
6
8
10
12
14
Oct-13
Oct-13
Nov-13
Dec-13
Dec-13
Jan-14
Feb-14
Feb-14
Mar-14
Apr-14
Volumes Traded Interbank Rate - LHS
1540
1560
1580
1600
1620
1640
1660
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
0
20
40
60
80
100
120
1400
1500
1600
1700
1800
1900
2000
2100
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Millions

Dar es Salaam Stock Exchange All Share Index
Month-to-Date change
Source: DSE Stock Exchange, StratLink Africa
Dar es Salaam Stock Exchange Leads in Bullish
Run
Index
Closing
Value
Year-to-
date
Growth
Dar es Salaam All
Share
2,043.56 33.05%
UGSE All Share 1,607.96 5.06%
RSE All Share 145.04 12.06%
NSE All Share 151.13 28.00%
Source: Bloomberg, StratLink Africa Analysis
A bullish run has prevailed across the region’s
equity markets in the last one year. The Dar es
Salaam Stock Exchange has emerged as the
leader in the year to date growth across the
region.
This has been occasioned by favourable
investor sentiment that is widely optimistic
about the region’s potential for growth in the
short to medium term. We have also
witnessed considerable regional expansion of
listed companies especially in the banking
sector which has been a driver for growth and
positive future prospects.
CRDB Declares USD 0.009 Dividend in FY13
CRDB Bank has announced a recommended
total payment of USD 18.5 million in dividends
for the year ending December 2013,
representing a 17% growth from the 2012 pay-
out.
CRDB Investment Profile FY12 vs FY13 (TZS
Mlns)
Item 31.12.13 31.12.12 Change
Total Assets 3,545,438 3,074,840 15.30%
Total
Deposits
2,966,647 2,557,903 16.00%
Loans,
advances
and
overdrafts
1,993,106 1,806,865 10.30%
Net income
after tax
85,087 80,543
0
1
2
3
4
5
1800
1850
1900
1950
2000
2050
2100
Mar-14
Apr-14
Apr-14
Apr-14
Apr-14
Millions

UGANDA MARKET UPDATE

POLITICAL OUTLOOK
Anti-Gay Law: Towards Quid pro Quo?
Uganda and the EU seem to be ceding ground
on tough stands regarding the controversial
anti-gay law. In the month under review, 28
members of the European Union unanimously
stated that, “other options to resolve
divergence of opinion ought to be identified,
as cutting aid is unnecessary”. Finland’s
International Development Minister, Pekka
Haavitso, says the EU has not suspended aid
assistance owing to the strategic significance
of Uganda in regional stability efforts.
Separately, the Ugandan government
committed to protect civilians who came
under the threat of mob justice owing to their
sexual orientation.
Coming against the backdrop of EU members
such as Netherlands and Norway threatening
stern action, the latest move signals a re-
consideration of the bloc’s initial position. In
the course of March 2014, Uganda’s business
climate was experiencing a dampening
perception that saw the shilling depreciate
steadily. This has changed in April 2014 in
light of reviewed stands by development
partners and is likely to shore up the local
unit further. The focus now shifts to bodies
such as the World Bank which with-held aid
following the signing of the law.
BUSINESS NEWS ENVIRONMENT
Yoweri Museveni hosted the President’s
Investors Round Table in Entebbe in April
2014, pledging to beef up efforts to boost
the country’s investment climate. The
Round Table took place on the side-lines of
the National Investment Summit that
sought to boost investment flows.
Uganda has led the East African region in
FDI inflows standing at USD 1.8 billion in
the year to September 201311
. However,
in 2013, the government was widely
criticized for shutting down operations of
a local daily for a fortnight. As such, the
government is keen to reassure investors
of a conducive environment for enterprise
and business growth in the country.
11
UNCTAD, Uganda Investment Authority
ECONOMIC OUTLOOK
As Uganda’s National Development Plan
Phase I (2010/11 – 2014/15) enters its
homestretch, a key assessment point has
been the country’s progress in realizing its
growth in per capita income. In this issue, we
take a deep dive and analyse how the country
has fared in this regard.
The government took stock of the National
Development Plan 2010/11 – 2014/15 which
forms the first of a series of five year plans set
to transform the country’s economy. The
plan’s overarching goals include reducing the
country’s population living in poverty from
31% (2005/06) to 24.5% by close of 2014/15
and further, boost per capita income from
USD 506 (2008/09) to USD 900 by 2014/1512
.
GDP Size and Growth Analysis 2010 - 2015
Source: BMI, Stratlink Africa Analysis
Between 2010 and 2012, the country
registered an average real GDP growth rate of
5.3%13
per annum against a projected regional
average of 6.9% (East Africa Community plus
Ethiopia)14
. Uganda’s below regional average
performance is largely attributable to 2012
that saw the country’s economic growth
decelerate to 2.8% against the backdrop of a
spike in inflation that stood at an average
18.7% in 2011 and 14.6% in 201215
.
12
Ministry of Information and National Guidance
Uganda
13
World Bank 2014
14
Business Monitor International Projections 2014
15
17.2 18.2
21.3
22.9
26.4
29.5
.0
2.0
4.0
6.0
8.0
10
20
30
40
2010
2011
2012
2013
2014(P)
2015(P)
Nominal GDP (USD Billions)
Real GDP Growth Rate (%) - RHS

GDP per Capita Income Analysis
Between 2010 and 2013, Uganda’s per capita
income has oscillated marginally above and
below the regional average. The country’s per
capita income levels have grown by 20.5% in
the period to stand at USD 675 in 2013.
A lot needs to be done to reach the country’s
per capita target of USD 900 by 2014/15. We
believe that a policy mix accelerating
economic growth through key sectors such as
agriculture and services will enable the
economy realize the target.
Consumption vs Per Capita Income Analysis
Uganda’s rise in per capita income has been
reflected in aggregate consumption. The
economy’s growth in private final
consumption has increased in general,
mimicking year-on-year growth in the per
capita income levels.
This points to great prospects as investors
should expect to see rising consumption
levels by households with the consumer
purchasing power rising. This will be boosted
further if inflation remains in check.
Taming Inflation to Boost Consumption
Bank of Uganda projects annual average
inflation will range between 7% and 8% in
2014 before ebbing downwards to remain in
range between 6% and 7% in 2015. This will be
vital in cushioning consumers and investors
from high costs and enabling the economy to
optimize on purchasing power.
Inflation vs BoU Benchmark Rate
Source: Bank of Uganda, National Bureau of
Statistics, Stratlink Africa Analysis
The bank has employed a prudent monetary
policy that has enabled it to mitigate
inflationary pressures. Inflation has dropped
to single digits through 2013 from a high of
30.5% in October 2011 against a regional
average (EAC plus Ethiopia) of 20%16
at the
time (2011). Like most of her peer economies,
Uganda faces the challenge of sustaining
inflation within the single digits territory in
an environment of vulnerability to external
and internal shocks. How this is managed is
likely to be the key focus of monetary policy
moving ahead.
DEBT MARKET UPDATE
Monetary Policy Update: Bank of Uganda
(BoU) set its benchmark lending rate
unchanged at 11.5% during the month of May
2014. In December 2013, the bank lowered
the rate by 50 bps to 11.5% and has sustained
it through April 2014.
16
500
550
600
650
700
2010
2011
2012
2013
Uganda Per Capita Income
Regional Per Capita Income Average
-5
5
10
15
20
25
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Private final consumption, US$bn
GDP per capita, % y-o-y
2%
4%
6%
8%
10%
12%
14%
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
BoU Rate Inflation

Yield Curve Changes (%)
Source: Bloomberg, Stratlink Africa Analysis
In the month of April, STIRS registered a
general decline, with the exception of the 91
Day Tbill that rose by 61.19 bps to 10.31%
from 9.70% in March 2014. On the other hand,
the 182 Day and 364 Day instruments shed
43.3 and 10.9 bps to stand at 12.07% and
12.92% respectively. Available Tbill auction
results indicate that the 91 Day, 182 Day and
364 Day instruments registered bid-to-cover
ratios of 1.27, 1.79 and 1.78 respectively
indicating fairly aggressive bidding by
investors.
The move by BoU to maintain the CBR at
11.5%, on the back of an appreciating local
unit and declining inflation, point to a solid
near term outlook. On the flipside, with the
country having opened its capital accounts to
attract funding for its nascent oil sector,
caution will have to be exercised so as to
stem potential spill over effects occasioned by
monetary policy interventions by advanced
countries resulting in higher funding costs
and a heightened risk of reversal of capital
flows. This in our view could see yields rise in
the long-term.
Uganda Shilling Gains Ground
The domestic unit bounced back following a
slide occasioned by the infamous anti-gay
legislation. In the month under review, the
UGX/USD traded within the 2,505/2,563 range
with current data pointing to possible
reversion in the unit on account of the
tenuous nature of the current account and as
mentioned in the debt market update, a
tightening of monetary policy in developed
countries. These in our view present a high
degree of uncertainty regarding the trajectory
of the exchange rate.
The Uganda Shilling has Gained Ground
against the USD: A function of increasing
dollar supply
Source: Bloomberg, StratLink Analysis
+3.56%
Year-on-year gain of Uganda shillings against
the USA dollar
+1.22%
Month-on-month gain in the Uganda shilling
against the USA dollar.
Investors most likely to be affected by this
uncertainty are those in import and export
business. A fluctuating currency subjects the
two to shifting costs as they trade in foreign
currency.
USE All Share Index gains 5.06% year-on-year
and 6.94% month-on-month. The market has
been bullish, albeit, less than its regional peers
such as Kenya and Tanzania whose All Share
Indices have been up 28% and 33%,
respectively. Activity at the exchange has
largely been driven by the manufacturing and
financial services sector. British American
Tobacco (BATU), energy distributor, Umeme,
DFCU Bank and Stanbic Uganda have been key
drivers of trade consistently accounting for at
least 90% of turnover.
8
10
12
14
16
3M
6M
1Y
2Y
3Y
5Y
10Y
Apr-14 Mar-24 Jan-14
2350
2400
2450
2500
2550
2600
2650
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14

Uganda Securities Exchange All Share Index
Source: Bloomberg, StratLink Africa
Stanbic Uganda Reports Slow Year in 2013 as
Bank of Baroda Digits Look Up; Stanbic
Uganda has attributed 2013’s decelerated
performance to high operating costs coupled
with low uptake of loans and slow growth of
deposits.
Stanbic Uganda Share Performance
In the full year to December 2013, the bank’s
Earnings per Share dipped by 22% year-on-
year to USD 0.0006 (UGX 1.56). Further, the
bank’s loans and deposits dropped by 3% and
15% respectively.
Bank of Baroda Share Performance
The fortunes were, however, markedly
different for Bank of Baroda. The bank’s loans
and advances to customers grew by 25.35% to
USD 173.41 million years-on-year. In a similar
vein, customer deposits surged by 23.5% to
stand at USD 257.76 million year-on-year.
We have not witnessed much change in the
two counters’ share prices through April
2014. Except for the one-off bullish trends
exhibited by the Stanbic Uganda towards the
end of 2013 and early phase of 2014, the
share’s price has flattened out. By the same
token, Bank of Baroda exhibited volatility
between February and March 2014 before
flattening out.
1000
1200
1400
1600
1800
2000
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
0
100
200
300
400
500
600
700
800
900
1000
22
24
26
28
30
32
34
36
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Millions
0
2
4
6
8
10
12
90
100
110
120
130
140
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Millions

RWANDA MARKET UPDATE

POLITICAL OUTLOOK
Genocide: Stirring Icy Relations 20 Years on
An air of acrimony between France and
Rwanda dominated the 20 years anniversary
of the 1994 Genocide. The Rwandese
government barred the French Ambassador
from participating in the commemoration
ceremony, citing complicity by the French
government during the genocide. President
Paul Kagame has pointed an accusatory finger
at the French government for involvement in
the massacre.
In the recent past, matters linked to the
genocide have come to haunt Rwanda.
Through Q114, the Rwandese government
has sought to vindicate itself of allegations of
orchestrating the mysterious disappearance
of persons believed to have been linked to the
1994 Hutu regime. In this regard, the country
has locked horns with France and South
Africa. We observe that there are no notable
risks to Rwanda’s investment climate due to
the above developments.
BUSINESS NEWS/INTERVIEWS
Rwanda Bureau of Standards is
implementing an Import Products
Conformity Assessment program that seeks
to protect local manufacturers. Effective
May 2014, goods will be inspected prior to
being shipped to Rwanda as opposed to the
current approach that inspects at the
country’s border17
. The move will play a
central role in protecting the economy’s
manufacturing industry from unfair
competition. Manufacturing accounts for
around 7% of GDP against a regional
average of 9.1%. The drop has been
attributed to a collapse of industries in
light of the 1994 genocide and dumping18
.
The outlook for investment in local
manufacturing is bright, pegged on steady
and successful implementation of the
program primed to be key in Rwanda’s
Vision 2020. The blue-print identifies a
strong manufacturing sector as a lead
growth driver in the country’s
development agenda.
17
Ministry of Trade and Industry Rwanda
18
International Growth Center
ECONOMIC OUTLOOK
Core View: It is our opinion that the slump in
the country’s growth momentum to 4.6% in
2013 is a one-off and unlikely to ward off
investor interest. Rwanda’s economy has had
robust growth during the period from 2003 to
2013, averaging at 7.3%19
. Further, growth is
projected to pick up to 6% in 2014 buoyed by
the service sector and resumption in donor
funding.
Dismal performance in 2013 has largely been
attributed to a slowdown in Q313 that was
attributed to the rescheduling of donor aid by
development partners. In this issue, we shall
explore this issue in-depth with a focus on the
economy’s reliance on donor aid funding.
Contextualizing the Slump: Two Fronts
At 4.6%, Rwanda’s growth has not only stood
at one of its lowest points since 2000 but also
falls significantly short of the National Bank of
Rwanda’s projection of 6.6% and 270 bps
below 2012 growth of 7.3%.
Rwanda vs Regional GDP Growth Rate (%)
Source: National Bank of Rwanda, BMI, World
Bank
In addition, Rwanda’s growth has fallen below
that of peer economies in the region with
Kenya having grown by 4.7%20
and Uganda
projected to have grown by 6.2%21
respectively in 2013.
19
BMI Statistics
20
Kenya National Bureau of Statistics
21
World Bank 2013
.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Rwanda Regional Average

The regional average economic growth for
East Africa including Ethiopia for 2013 stands
at 5.9%22
.
Q313: Main Driver of Aggregate 2013 Slump
In Q313, Rwanda’s growth dropped to 3.9%
from 5.7% in Q213 and 7.3% in Q31223
. This
came in view of re-scheduling of aid flows by
development partners following widespread
allegations that the Rwandese government
was supporting M23 Rebels in the Democratic
Republic of Congo.
Rwanda Grant Support in Relation to GDP
Rwanda Loan Support in Relation to GDP
Re-scheduling of aid flows in Q313 occasioned
a considerable impact on the execution of
development projects in the economy.
National Bank of Rwanda reports that the
22
BMI Statistics
23
National Institute of Statistics
greatest impact was manifested in the slow-
down of the service sector.
Whereas the country’s budget support loans
and grants as a percentage of GDP have been
on a steady decline, the International
Monetary Fund expects project support loans
to double to 3.6% of GDP between FY12/13
and FY14/15. We believe Rwanda is a
lucrative market for investors in the both
medium and long-term with growth expected
to correspond with the EAC regional growth.
DEBT MARKET UPDATE
Evolution of STIRs
Source: National Bank of Rwanda, Stratlink
Analysis
Interest rates in the short-term fixed income
market have declined through April 2014 with
the exception of the 182 Day instrument that
picked slightly. The 91 Day and 364 Day
instruments shed 9 and 10 bps respectively
between the start and close of the month to
stand at 5.23% and 7.75% respectively.
91 Day Tbill Bid to Cover Ratios (‘000 RWF)
Bid
to
Cover
03.06.14 5,000,000 5,000,000 1.00
03.13.14 10,506,000 4,500,000 2.33
03.20.14 7,400,000 5,000,000 1.48
03.27.14 8,660,000 5,000,000 1.73
04.03.14 8,500,000 5,000,000 1.7
04.10.14 4,000,000 4,000,000 1.00
04.17.14 8,300,000 6,000,000 1.38
04.25.14 2,000,000 2,000,000 1.00
Source: National Bank of Rwanda, Stratlink Analysis
4.10% 3.80%
7.90%
3.70%
4.10%
7.80%
0.00%
5.00%
10.00%
Budget
Support
Grants
Capital
Grants
Total Grants
2012/13 2013/14 2014/15 (P)
0.40%
1.80%
2.10%
0
3.60% 3.60%
0.00%
1.00%
2.00%
3.00%
4.00%
Budget
Support
Loans
Project
Support
Loans
Total Loans
Support
2012/13 2013/14 2014/15 (P)
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
Jan-14
Jan-14
Jan-14
Feb-14
Feb-14
Mar-14
Mar-14
Apr-14
91 Day 182 Day 364 Day

Investor uptake within the market has been
fluctuating with bid-to-cover ratios of the 91
Day instrument oscillating between 2.33 and
1.00 between March and April 2014.
The interbank market has been stable at
5.79%. Liquidity trends in the money market
have been stable although there have been
indications of skewness in the recent past.
Key Repo vs Interbank Rate Analysis
Source: National Bank of Rwanda, Stratlink Analysis
International Finance Corporation to Issue
Bonds Starting May 2014
The International Finance Corporation has
revealed plans to commence issuance of
bonds denominated in Rwanda Francs
effective May 201424
. IFC says it will roll out
the instruments as part of its agenda to
expand its debt program in Africa. In its debut
issuance, the corporation is expected to float a
USD 22 million instrument with a maturity of
five years.
In light of the precedent set in 2013 at the roll
out of the program, we assess that uptake of
the instruments is bound to be aggressive.
The issuance of USD 24 million worth of
Zambian Kwacha denominated bonds by the
IFC in 2013 that saw about 5 times
oversubscription sets a good precedent. This
is likely to have investors rally into the bonds
market and slow down activity in the short-
term interest market.
24
Standard Bank, CfC Stanbic Bank, Bank of Kigali
The corporation will use proceeds from the
bonds to fund its projects denominated in the
local unit within the country.
Currency Front: Local Unit Depreciates
8.06%
Rwanda Franc depreciation against the USD
in the year-to-date
0.37%
Rwanda Franc depreciation against the USD
in the month-to-date
The domestic unit continued to come under
depreciation pressures. In the period under
review, the Rwanda Franc touched a high of
678.81 and a low of 684.02 respectively
against the greenback.
In the April 2014 issue, we delved at length
into the pressures that the country’s import
capital expenditure is exerting on the
Rwanda Franc. We reiterate our assessment
that the domestic unit is bound to depreciate
as long as the country maintains considerable
investment in capital expenditures as it seeks
to drive its development.
In Q313, for instance, the country’s trade
deficit widened by USD 1.2 billion year-on-
year driven by importation of capital goods25
.
This widening imbalance has occasioned high
demand for the greenback resulting in further
slides by the Rwanda Franc.
25
National Institute of Statistics Rwanda
4%
6%
8%
10%
12%
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
Key Repo Interbank Rate
620
630
640
650
660
670
680
690
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14

The stock exchange exhibited a bearish trend
largely in April 2014 owing to an end of the
reporting season by listed companies that
had seen stock prices trend northwards in
March. Further, Bralirwa, a prominent
counter in the market, reported a profit drop
in its full year to December 2013.
We, however, believe that market sentiments
remain elevated anchored by plans by the
government to increase foreign investor
participation in the exchange by easing
capital controls.
Rwanda All Share Index (RASI) One Year
Movement
+12.06%
The RSE All Share Index has gained by 12.62%
over the last one year
RSE All Share Index Sheds 0.54% in April 2014
-0.54%
The RSE All Share Index has dropped by 0.54%
over the last one month
Bralirwa Full Year 2013 Profit Drops
Bralirwa’s profit for the year to December
2013 dropped by 18.8% attributable to low
sales volumes that dropped by 0.6%, limited
price increase and high cost of sales. The
company further reports a 29% dip in beer
export volumes26
due to increase in duties
levied by the Democratic Republic of Congo
which is the largest export market.
We assess that this development has been a
key driver to the bearish trends in the market.
Bralirwa is a prominent counter at the
exchange that stokes high investor appetite
in day-to-day trading. Moving ahead, we
expect the company to scout for other
markets within the region as prospects with
DRC remain uncertain.
26
Bralirwa Full Year 2013 Results
125
130
135
140
145
150
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
143
144
145
146
147
148
149
Mar-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14
Apr-14

ETHIOPIA MARKET UPDATE

POLITICAL OUTLOOK
Crackdown on Government Critics
The government has come under criticism for
what has been termed as intolerance of
opposition and freedom of expression.
Multiple arrests of independent journalists
and bloggers, and opposition voices in the last
month have indicated Ethiopia’s tight fisted
policy on freedom of expression, a year before
the general elections.
This has triggered off international concern to
end the abuse and pressure Ethiopian leaders
to respect constitutional and media freedom
rights. Despite a section of the European
Parliament piling pressure on the Ethiopian
government to review the Anti-Terrorism
Proclamation which had led to the arrest of a
section of journalists and members of the
opposition July 2013, there have been no
visible changes effected.
Concern about the government of Ethiopia’s
acts of repression of fundamental rights and
freedom are likely to dampen the country’s
recent liberalization efforts and dampen
political risk perception. In the 2013 Economic
Freedoms Index27
, Ethiopia dropped by 2.6
points to a score of 49.4 against the Sub-
Saharan Africa and global averages of 53.7
and 59.6 respectively28
.
BUSINESS ENVIRONMENT
National Oil Ethiopia has expressed interest
in helping finance construction of a refinery
that would help the region optimize on its
budding oil sector. The marketer says there
is need for concerted effort towards
upgrading the region’s oil infrastructure in
view of recent discoveries in Uganda and
Kenya.
A harmonized approach in laying
infrastructure will be crucial in a bid to
stave-off possible idle capacity and
strengthen regional integration goals. An
assessment of the generation capacity is
vital at this point to ensure the region
optimizes on its capacity.
27
Index measures degree of economic freedoms.
The higher the index, the more the freedom space
28
Heritage Foundation 2013
ECONOMIC OUTLOOK
Growth and Transformation Plan 2010 –
2015: Three Years’ Score Card
With only two years before the timeline of the
country’s economic blue-print elapses, the
government tabled before the parliament a
report assessing progress made in the three
years of implementation.
GDP Size and Growth Rate Analysis
Source: BMI Statistics, StratLink Analysis
Inflation: Persisting Strains
In the period under review, the government
identified inflation, below target performance
by the agriculture sector and dismal
engagement of the private sector as the key
challenges of realizing the macro-economic
targets29
.
Despite managing to scale down inflation to
single digit figures from March 2013,
Ethiopia’s inflation rate remains above its
East Africa peers.
In 2013, Ethiopia’s inflation averaged 8.5%
against Kenya, Uganda and Tanzania that
averaged 5.8%, 5.46% and 7.9%
respectively30
. This has had the net effect of
subjecting investors and consumers to a
comparatively higher cost of living and doing
business within Ethiopia.
29
Ministry of Finance and Economic Development
2014
30
National Bureaus of Statistics
.0
4.0
8.0
12.0
16.0
.0
100.0
200.0
300.0
2008
2009
2010
2011
2012
2013(P)
2014(P)
GDP (USD Billions)
GDP Growth (%) - RHS

Inflation: Ethiopia vs Regional Peers (%)
Source: National Bureaus of Statistics, BMI, StratLink
Analysis
Growth in Domestic Savings: Key Milestone
The Ministry of Finance and Economic
Development, however, reports success in
boosting the savings culture within the
economy. Between FY09/10 and FY12/13,
savings as a percentage of GDP grew by 1,250
bps placing it 2.70 percentage points above
the Growth and Transformation Plan target of
15%.
Savings as a Percentage of GDP
Source: MoFED31, StratLink Africa Analysis.
Growth in savings will lead to higher bank
deposits and hence increased lending to the
public sector both through direct and indirect
(via the 27% levy on new loans by private
banks to invest in government securities that
31
Ministry of Finance and Economic Development
fund public expenditure) sources. This will
lead to increased economic growth.
Between 2000 and 2010, the savings to GDP
ratio for South East Asia stood at an average
30% (against a global average of 19%) and
this has played a central role in the region’s
economic emergence32
. With average savings
to GDP ratio at 17% in Sub-Sahara Africa,
Ethiopia has made considerable gain since
the inception of the GTP in 2009/10.
Other Key Economic Indicators
Indicator 2009 2013 Variance
Urban
unemployment
18.9% 16.5% -2.4%
Per Capita
Income
USD
377
USD
550
+45.9%
Population
below poverty
line
29.6% 26.0% -3.6%
FDI inflows
USD
288.3
mln
USD
970.4
mln
+236.6%
Source: UNCTAD, MoFED, StratLink Africa Analysis.
It is our view that the GTP has been a critical
catalyst to the growth and development of
Ethiopia. Despite a slowdown in GDP growth
between 2010 and 2013, the economy
averaged 9.8% growth in the period, well
above East Africa’s 5.7% average33
.
Degree of Market Openness
The country’s service sector now contributes
the lion’s share of the GDP and is poised to
further economic gains if vital components of
it such as banking and finance are liberalized.
Liberalization of the economy will create
greater room for competition especially with
the growing service and industry sectors.
32
World Bank 2012
33
Business Monitor International
.0
10.0
20.0
30.0
40.0
50.0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Ethiopia Kenya Uganda
5.20%
17.70%
20.00%
0%
5%
10%
15%
20%
25%
2009/10
2012/13
2015/16
(P)
Actual Savings: GDP Ratio
Target Savings: GDP Ratio

Ethiopia’s Economy by Sectoral Composition
Source: KPMG Q1’13 Survey, StratLink Africa Analysis.
Market Openness Indicators (%)
Source: Heritage Economic Freedom Report 2013,
StratLink Africa Analysis.
The Heritage Economic Freedoms Index
applies as follows:
1) Trade Freedom – Measures the
degree to which tariff and non-tariff
barriers impact trade activities in an
economy
2) Investment Freedom – Measures the
constraints of flow to investment
capital in an economy
3) Financial Freedom – Measures
banking efficiency and government
control of the banking and finance
sector
In key indicators of market openness,
Ethiopia lags behind the regional average.
This creates great room for the country to
grow in the coming years through remedying
the status quo.
EXCHANGE RATE MOVEMENT
Ethiopian Birr exchange to the US$
Source: Bloomberg, StratLink Africa.
Month-on-month Trends
4.14%
1.74%
We observe that although the local unit has
continued to depreciate through April 2014,
the rate of depreciation has decreased
marginally through the month. Whereas
between the start and close of March 2014
the Birr shed 0.336% against the greenback,
it shed 0.327% in April 2014 marking a 9 bps
decrease in depreciation.
In this and preceding issues, we have argued
that the country’s current account deficit,
which has weighed down the local unit, is
likely to decrease as the Grand
44.50%
41.80%
13.60%
Service Agriculture Industry
72.95
56.25
47.5
64
25
20
0
20
40
60
80
Trade
Freedom
Investment
Freedom
Financial
Freedom
EAC Average Ethiopia
18.4
18.6
18.8
19
19.2
19.4
19.6
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
19
19.1
19.2
19.3
19.4
19.5
19.6
3-Mar
10-Mar
17-Mar
24-Mar
31-Mar
7-Apr
14-Apr
21-Apr
Ethiopian Birr has
depreciated
month-on-month
basis
Ethiopian Birr has
depreciated on a
year on year basis

Transformation Plan draws to a close. As
such, we expect to continue witnessing
decreasing depreciatory pressure on the local
unit as this continues.
Please see the April 2014 issue for a detailed
analysis of the country’s current account
position.
COMMODITIES EXCHANGE UPDATE
Change of Guard at ECX
The Ethiopian Commodities Exchange (ECX)
Board of Directors appointed Ato Shimelis
Habtewold as interim CEO to the exchange
following the resignation of Ato Anteneh
Assefa in March 2014.
Soaring Global Coffee Prices Bring Respite to
Ethiopia’s Declining Coffee Revenues
Global coffee prices hit the highest level since
March 2012 against the backdrop of high
volatility through the month of March 2014.
This has been triggered by widespread
uncertainty of the Brazilian crop.
Brazil, the world’s largest coffee producer, is
expected to suffer a decline in output in 2014
following adverse weather conditions coupled
with a reduction in the area under production.
ICO Composite Market Prices
Source: ICO, StratLink Analysis
In March 2014, coffee prices stood at an
average of US Cents 165.03/lb, representing
20% growth from February 201434
. Ethiopia,
Africa’s largest and the world’s eighth largest,
coffee producer is poised to be a key
beneficiary of the soaring global prices.
34
International Coffee Organization March 2014
Report
Ethiopia’s Coffee Exports (1,000 60Kg Bags)
Source: USDA, StratLink Analysis
The upward trend in global prices offers a
breather to farmers and the government of
Ethiopia. Export earnings in the year 2012/13
suffered a 10.6% drop to USD 745 million
driven by low global prices35
.
35
Ethiopia Coffee Exporters Association
90
110
130
150
170
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
3,140
3,280 3,280
3,050
3,100
3,150
3,200
3,250
3,300
2011/12
2012/13
2013/14(P)

NIGERIA MARKET UPDATE

POLITICAL RISK ANALYSIS
Abuja Blast Exposes Insecurity Underbelly
In what has been termed as the worst attack
on Nigeria’s administrative hub, Abuja, a
bomb exploded at a bus terminus claiming at
least 71 lives. The government has blamed the
incident on militant Islamist group, Boko
Haram, which has been on the rampage for
over four years seeking to overthrow the
government.
There have been a series of attacks that have
been linked to the militant group such as the
2011 Christmas Eve attack that claimed at
least 43 lives and a suicide bomb attack that
left at least 23 dead at the United Nations
building in Abuja. In the last month, the
insurgents abducted 276 girls from a school in
North-Eastern Nigeria.
Inability to stem Boko Haram’s activities
increases Nigeria’s political and insecurity
risks, which could cause investors to re-
evaluate their risk perception of the country.
We assess that it places Nigeria in a
precarious position ahead of the 2015
general election as the country courts a real
possibility of instability. Despite Nigeria being
one of Africa’s most promising markets for
investment, the business outlook is expected
to be cautious as a result of the rising
insecurity.
BUSINESS
Nigeria remained among the top three choice
investment destinations in SSA36
in 2013. In
the year, the country registered the third
highest number of Private Equity deals (9)
behind South Africa (10) and Kenya (12).
Between 2011 and 2013, Nigeria had the
highest valued PE deal within a single country
worth USD 750 million.
PE interest in has been skewed towards the
extractive industry accounting for 58% of
the worth of deals in 2013 at USD 2,13237
million. This augurs well for Nigeria which
has a strong oil sector. With the GDP
rebasing, investors are likely to keenly view
the manufacturing, agriculture and
education sectors as well.
36
Sub-Sahara Africa
37
Deloitte Private Equity Survey 2014
ECONOMIC OUTLOOK
Core View: Nigeria has emerged as Africa’s
largest economy following a rebasing
exercise that saw its GDP size leap-frog by
78.56% to USD 509.9 billion by-passing South
Africa at USD 384 million38
. Much like Kenya,
we hold that this has brought forth changes
in key macro-economic indicators that could
lure investment appetite into the country. In
this issue, we shall take a deep dive into such
considerations and prod trends that point to
systemic challenges.
Nigeria Economic Growth Analysis
Source: BMI, Stratlink Analysis
Between 2005 and 2013, Nigeria’s economic
growth rate averaged 6.6% per annum. In the
same period, South Africa registered an
average GDP growth of 3.3% while Angola
posted 10.6%39
, placing Nigeria mid-way
within the spectrum of rapidly growing and
slow growth resource rich economic in Sub-
Sahara Africa. We observe that rebasing the
country’s economy to 2010 from 1990 has
occasioned some changes worthy of
consideration for investors.
Leap in Per Capita Income
Nigeria’s per capita income has experienced
an 85.2% growth to USD 2,984 from USD
1,612 before rebasing. Despite the
considerable leap, this still leaves the
economy below its resource rich peers in the
Sub-Saharan African region by way of 2014
projections. Nigeria’s new per capita income
will still be a paltry 39% of Angola’s and 46%
of South Africa’s. This is largely attributable to
38
Nigeria Bureau of Statistics, World Bank 2014
39
.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
.0
50.0
100.0
150.0
200.0
250.0
300.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
GDP Size (USD Billions) - RHS
GDP Growth Rate (%)

Nigeria’s population which at about 168
million people – is thrice as large as South
Africa’s (52.27 million) and eight fold that of
Angola (20.82 million)40
.
Per Capita Income Analysis
Source: BMI, World Bank, Stratlink Analysis
Investment Outlook: New Growth Pockets
The rebased economy gives greater weighting
to such sectors as telecommunication and
financial services. This is because the sectors
are playing an increasingly central role in the
growth of the economy. The domestic
entertainment industry has also featured
prominently as a key driver behind the
rebasing. We expect that investors will be
eyeing these sectors as pockets of growth in
the years ahead.
Nigeria FDI Inflows (USD Millions)
Source: BMI, UNCTAD, Stratlink Analysis
40
World Bank Statistics
Decrease in Public Debt Burden
In our April 2014 issue, we highlighted that
Nigeria is among the Sub-Saharan African
economies with a low public debt burden at a
debt-to-GDP ratio of 20%. Rebasing the
economy reduces the ratio to about 10.6% of
GDP. In 2013, Fitch Ratings placed Nigeria’s
long-term foreign and local issuer default
ratings at BB- and BB painting stable outlook.
We expect this rating to be maintained or
improved slightly on account of the rebasing.
Comparative Analysis of Changes in Public
Debt to GDP Ratio
Source: BMI, IMF, Stratlink Analysis
Decrease in Current Account Surplus
On the flip side, however, Nigeria’s current
account surplus now stands at a modest 4% of
GDP down from the previous 7.5%41
. Nigeria
maintains a surplus position driven largely by a
favourable balance of trade and increased net
current transfers42
.
Government Breaks Trend and Proposes
Slash in Defence and Security Spending 2014
The Budget proposal for 2014 recommends an
8.26% decrease in defence spending to USD
2.11 billion, from 2013. As such, expenditure
designated for defence and security will drop
from 12% to 8% of government spending
between 2013 and 2014 respectively. This will
mark the first time since 2006 that the country
slashes its budget allocation for defence and
security.
41
42
Central Bank of Nigeria
2000
4000
6000
8000
10000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014(P)
Angola Nigeria
South Africa
4 000.0
5 000.0
6 000.0
7 000.0
8 000.0
9 000.0
10 000.0
2005
2006
2007
2008
2009
2010
2011
2012
50.70%
20.00%
48.76%
10.60%
0%
10%
20%
30%
40%
50%
60%
Kenya Nigeria
Old Rebased

Military Spending as % of GDP
Source: World Bank, Stratlink Analysis
Whereas an increase in defence spending is
not a guarantee of heightened security, it will
be an area of marked interest that the
country is scaling down its spending amidst
growing uncertainty. Widespread atrocities
by militants and the upcoming elections will
be a major challenge to an ill prepared and ill
equipped defence and security apparatus.
DEBT MARKET UPDATE
Looking Ahead: Monetary Policy Stance
The Central Bank’s Monetary Policy
Committee met on March 24th
and 25th
, 2014
and observed that money market interest
rates were within the targeted monetary
policy corridor.
The committee further agreed to continue
with a tight monetary policy especially in light
of increased inflationary pressures. The
committee therefore retained its benchmark
lending rate at 12% while raising cash reserve
ratio from 50% to 75%43
.
This is set to decrease the stock of excess cash
that commercial banks have and therefore
help rein in on excess liquidity in the money
market.
43
Central Bank of Nigeria Economic Assessment
Drop in Yields across All Tenors (%)
Yields in the debt market took a downturn
after a modest pick-up in March 2014. In the
short-term debt segment, the 91 Day, 182 Day
and 364 Day instruments shed 158 bps, 164.3
bps and 115.6 bps to stand at 11.61%, 12.27%
and 13.85% respectively.
91 Day Tbill Bid to Cover Ratios (Naira Mlns)
Bid to
Cover
05.03.14 27,728.32 22,970.71 1.21
19.03.14 42,500.94 33,266.32 1.28
26.03.14 22,548.84 21,534.34 1.05
09.04.14 50,907.57 20,159.21 2.52
23.04.14 75,002.95 34,888.90 2.14
Source: Central Bank of Nigeria, Stratlink Analysis
In April 2014, investor appetite for the STIRs
picked up with bid to cover ratios for the 91
Day instrument crossing the 2.00 mark.
Available data also indicates that bond market
activity has been high.
3 Year Bond Bid to Cover Ratios (Naira Mlns)
Bid to
Cover
12.02.14 91,000 45,000 2.02
12.03.14 71.22 35.00 2.03
23.04.14 83.22 25.00 3.33
Source: Central Bank of Nigeria, Stratlink Analysis
The drop in yields has largely been driven by
high liquidity in the market as evidenced by
the high bills and bonds subscriptions.
0.70% 0.90%
1.40%
1.20%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
2004
2005
2006
2007
2008
2009
2010
2011
2012
Nigeria South Africa
10
11
12
13
14
15
16
1M
2M
3M
6M
9M
1Y
2Y
3Y
5Y
7Y
10Y
20Y
February-14 March-14
April-14

Interbank Rates Trend Analysis (%)
The interbank market has been fairly volatile
in the last three months, indicating
interspersed liquidity. The months of February
and March 2014 were particularly spiked, an
indication of possible skewness of liquidity
amongst the banks.
In the week to April 18th
2014, the bank
reported intervening in the market to mop up
excess liquidity to a tune of USD 1.3 billion.
This came in succession to a prior mop up of
USD 383.54 million in March 2014.
Nigeria Naira Buoyed by Mop Up
Whereas this has supressed interbank rates,
from a high of 17.75% and a low of 10.75% in
March 2014 to a high of 15.54% and low of
10.75% in April 2014, it has occasioned a
strengthening domestic unit in the foreign
exchange market.
Interest rates in the short-term market and
interbank rates are expected to remain
volatile with the Central Bank using its
monetary tools for periodic intervention to
cut back on excess liquidity. Strengthening of
the local unit against major currencies is
likely to remain a key driver of the bank’s
actions as it seeks to lower the cost of
importation. In the year to April 2014, the
Naira’s strongest value has stood at 157.27
units to the greenback in May 2013.
Naira vs USD Exchange Rate
-3.88%
Margin by which Naira has shed against USD
in the year-to-date
+2.10%
Margin by which Naira has gained against
USD in the month-to-date
It has been a bearish quarter at the market
with the exchange suffering spill-over effects
from extraneous developments. In the
quarter under review, the USA Federal
Reserve began a cut-back of its quantitative
easing program that has occasioned a
slowdown in foreign investor activity.
Further, matters pertaining to the
controversial dismissal of Central Bank
Governor, Lamido Sanusi, in February 2014
cast Nigeria in negative light to both
investors and development partners.
NGSE All Share Index Trend
9
11
13
15
17
19
Dec-13
Dec-13
Dec-13
Jan-14
Jan-14
Feb-14
Feb-14
Mar-14
Mar-14
Apr-14
Apr-14
152
156
160
164
168
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
32000
34000
36000
38000
40000
42000
44000
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14

+15.08%
NGSE All Share Index year-to-date change
-6.65%
NGSE All Share Index Q114 Change
Q114 NGSE All Share Index Q114 Change
Beginning March 2014, however, we have
witnessed signs of a rebound in the market
and we expect that this will persist. The
country’s economic prospects are looking
skyward as investors are likely to position
themselves to reap from benefits from the
re-basing exercise.
Corporate Action
Zenith Bank Targets USD 1 Billion in Medium
Term Notes
Zenith Bank reported 2% growth in net profits
to USD 146.59 million for the period to Q114.
The bank has revealed plans of floating up to
USD 1 billion in Medium Term Notes with
proceeds earmarked for ‘general banking
purposes’. In April 2014, the bank also
appointed Mr.Olusola Oladipo as Executive
Director.
Unity Bank Q114 Profits Leap by 25%
Unity Bank’s net profits Q114 grew by 25% to
USD 16.58 million. During the period, net
interest income grew by 14.4% to USD 49.43
million. The bank’s Earning per Share has
grown by 14.31% to USD 0.0004.
Zenith vs Unity Banks’ Share Performance
Zenith’s stock has been generally bullish as
investors anticipated release of good results
by banking corporations. There was a
discernible upward trend in Zenith Bank’s
share price that was through April 2014 on
the back of the Q14 results.
Unity Bank’s share, on the flip side, was
unchanged. The bank undertook a share
reconstruction that saw it issue one
reconstructed ordinary share at 0.50 Naira
for every three held.
Wapco Nigeria Joins ‘High Priced Stocks’
On April 17th
2014, Lafarge Cement Company,
Wapco, joined the league of high priced stocks
at the exchange. High priced stocks are shares
that have traded at least USD 0.62 (N100) per
share on average in at least four out of the last
six months.
The exchange now has ten counters in the
‘High Priced Stocks’ including Dangote
Cement, Guinness Plc, Nestle Plc, Nigeria
Breweries, SIM Capital Fund, Skye Shelter
Fund, Nigeria Energy Sector Fund, Total plc
and Lafarge’s Wapco Cement.
36000
37000
38000
39000
40000
41000
42000
43000
2-Jan
16-Jan
30-Jan
13-Feb
27-Feb
13-Mar
27-Mar
10-Apr
24-Apr
0.4
0.5
0.6
0.7
0.8
15
18
21
24
27
30
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Zenith Bank Unity Bank - RHS

Snapshot of ‘High Priced Stocks’ Share
Performance
50
100
150
200
250
300
Jan-14
Jan-14
Jan-14
Feb-14
Feb-14
Mar-14
Mar-14
Apr-14
Apr-14
Dangote
Guiness Plc
Nigeria Breweries
Wapco Cement

STRATLINK AFRICA LTD IN THE NEWS
As part of its corporate culture, Stratlink Africa Ltd strongly believes in being an active contributor in
platform that helps inform public opinion, guide national and regional discourse and help shape
public policy. This is increasingly important in a market pervaded by marked economic shifts and an
evident knowledge gap begging for informed perspectives with regard to a rapidly changing
economic environment.
As such, the company periodically engages in commentary with regional and international media.
Stratlink Africa Ltd maintains a focus on Eastern and Western Africa economies which have emerged
as vital poles of enterprise and investment growth for the continent.
Here below is a sample of the most recent interaction in this regard:
Implications of Rebasing the Nigerian Economy
Managing Director, Konstantin Makarov, was interviewed by CCTV News and shed insight into the
implications of the rebasing of Nigeria’s economy.
 https://www.youtube.com/watch?v=bn3L_hAiWXU
April 2014 Regional Market Update
The company’s April 2014 Market Update has been widely used a reference point in guiding outlook
on the region’s growth prospects. The analysis of Kenya’s debt and equity markets has proven
especially resourceful to the public domain inviting widespread citation by media.
 http://www.businessdailyafrica.com/Banks--NSE-share-rally-lifts-investor-earnings/-
/539552/2299362/-/item/0/-/snu8xjz/-/index.html
 http://www.businessdailyafrica.com/Shilling-stable-despite-low-tourism-and-tea-
earnings/-/539552/2279732/-/item/1/-/eokrbuz/-/index.html
Diversification of Capital Markets in the Region
Research Analyst, Julians Amboko, was engaged by Bloomberg Markets in guiding the understanding
the implications of ALTX Africa Group Ltd rolling out a derivatives exchange in Uganda’s capital
market.
 http://www.bloomberg.com/news/2014-04-02/uganda-bourse-gets-competitor-as-
second-market-plans-derivatives.html

StratLink-Africa Team
Konstantin Makarov – Managing Director
konstantin@stratlinkglobal.com
Dina Farfel – Partner
dfarfel@stratlinkglobal.com
Zoravar S. Dhaliwal – Senior Consultant
zoravar@stratlinkglobal.com
Poonam Vora - Associate
poonam.vora@stratlinkglobal.com
Henry Chege – Senior Analyst
henry.chege@stratlinkglobal.com
Samuel Odero - Analyst
samuel.oyier@stratlinkglobal.com
Julians Amboko – Analyst
julians.amboko@stratlinkglobal.com
Alex Gachuiri – Analyst
alex.gachuiri@stratlinkglobal.com

StratLink Africa Ltd Disclaimer Notice
The material prepared by StratLink Africa Ltd ("StratLink ") is our opinion. StratLink believes that it fairly and accurately
represents the subject matter reported upon. This communication is neither an offer to sell, nor a solicitation of an offer
to buy or sell, any financial instrument mentioned herein. The text, images, and other materials contained or displayed on
any StratLink product, service, report, e-mail, or website are proprietary to StratLink and constitute valuable intellectual
property. This report is issued only for the information of, and may only be distributed to professional investors, or major
institutional investors (as defined in Rule 15a-6 of the US Securities Exchange Act of 1934), and dealers in securities. This
publication is confidential and for the information of the addressee only and may not be reproduced in whole or in part,
nor copies circulated to any party, without the prior written consent of StratLink.
StratLink accepts no liability for any loss resulting from the use of the material presented in this report. This disclaimer of
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officers, partners, and consultants shall have no liability, contingent or otherwise, for any claims or damages arising in
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which reach different conclusions than, the information presented in this report. Reports may reflect different
assumptions, views, analytical methods, and analysts who prepared them, and no part of the analysts compensation was,
is, or will be, directly or indirectly related to the specific recommendations or views expressed in this report. All views,
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All representations, information, opinions, and estimates contained in this report reflect a judgment of the analyst,
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issuance of this report may, from time to time (i) have positions in, and buy or sell, the securities of companies referred to
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©StratLink Africa Limited 2014

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