Post on 10-Jan-2017
31st May 2016
TABLE OF CONTENTS
1.0 Executive Summary…………………………………......Pg2
2.0 Kenya…………………………………………………….Pg2
3.0 Tanzania…………………………………………………Pg5
4.0 Uganda…………………………………………………...Pg6
1 | Page
2 | Page
EAST AFRICAN COMMUNITY
The East African region continues to be a prime investor destination following the latest developments made towards the integration of the East African Community. The region remains largely stable in terms of macro-
economic outlook and we expect growth to remain positive going forward. Integration of the East African countries is also expected to boost development and growth in the region. East Africa’s GDP is expected to rise
from 4.6% to 5.2% in the 2015/16 fiscal year despite an unexpected weaker global growth.
Rwanda recently decided to re-route its standard gauge railway (SGR) from Kenya to Tanzania. The remarks
come at a time when Kenya’s position as the region’s economic super-power is coming under threat. Kenya’s stated that Rwanda’s decision will not have adverse effects on the SGR project as 70% of the goods imported
through the port of Mombasa end up in Nairobi. Only 30% of exports from Mombasa go beyond Nairobi to other towns in the country and further into the region, including Rwanda. Rwanda stated that developing a rail
link to Indian Ocean ports through Tanzania is cheaper and shorter than the route passing through Kenya.
KENYA
Political & Economic Environment Kenya Signs Trade Pacts with South Korea Kenya signed seven trade agreements with South Korea towards improvement of health, education,
energy, ICT and industrialization sectors. One of the
deals will see the Korea Export-Import Bank pump an initial KES 5.0bn to support the agricultural
sector towards food security. President Kenyatta and President Park Geun-hye, who had earlier
chaired a bilateral meeting, witnessed the signing of
the bilateral pacts at State House, Nairobi.The memorandum with the Korean Bank was signed for
Kenya by Agriculture CS Willy Bett. The agreements will boost the country’s efforts to become an
economic, industrial and technological powerhouse in the region.
Tanzania Cuts Power Imports from Kenya By 67% In a statement last week, Dar es Salaam confirmed it would be scaling down its power imports from
Kenya, but did not go into the details of why it
would do so. Data from the Ministry of Energy already shows that between January and March this
year, Kenya exported 170,000 kilowatt-hours less to Tanzania. Kenya and Tanzania have a power
exchange agreement at their border towns. The data, however, shows Kenya ceased importing
power from Tanzania last year, following the
successful completion of electricity-generating programmes the Government is working on.
Kenya's USD 13bn Railway Project It's been billed as the most ambitious project in Kenya since it gained independence in 1963. Now,
the first section of the east African nation's USD
13.8bn railway is nearly finished. Originally planned to link Mombasa and Nairobi, the decision was
made to extend the line to the market town of Naivasha in 2015, and 75% of civil works have
reportedly been completed. This first Mombasa-
Nairobi stretch will be completed by June 2017. It is hoped that the track will shorten the journey
between the two cities from 12 hours to four hours. Passenger trains will travel at 120km/h, and freight
trains will be able to carry 25mn tonnes per year, according to the International Railway Journal.
Kenya to Close World’s Largest Refugee Camp Kenya is to send Somali refugees in the world’s
largest camp back to their war-torn country or other nations by November. The sprawling Dadaab camp
on the Kenya-Somalia border is currently home to
some 600,000 refugees, the vast majority of whom fled Somalia’s more than two-decades long conflict.
Kenya said earlier this month it would shut down the camp, and set up a team to explore how it
could be achieved. Kenya has also bemoaned the high cost of maintaining Dadaab, even though the
international community, via the UN refugee agency
(UNHCR), covers most costs. The UNHCR voiced “profound concern” over any move to shut Dadaab,
while hailing Kenya’s “extraordinary role over the years in hosting refugees.”
3 | Page
Diaspora Remittances During the month of May, Kenya’s Central Bank
released data on remittances for the month of April 2016. Remittances in Kenya increased by 15.3% to
USD 144mn in April 2016 compared with USD 124mn in January 2015. The cumulative inflows in
the 12 months to April 2016 rose by 10.7% to USD
1.62bn.
Outlook Kenya is the dominant economy in the EAC
contributing to more than 40% of the region’s GDP.
The country’s investment climate is the strongest in the region with foreign direct investment flowing in
from markets in line with its economic blueprint. We expect a stable but tight macroeconomic
environment. GDP is expected to grow by 5-6% in 2015 driven by a recovery in the Agriculture sector
despite a tougher operating environment in the
year. Economic growth in the year is expected to fall behind initial estimates of 6% to 7% as a result
of the tougher operating environment in the year in which interest rates soared, the local currency
depreciated by more than 10% and external shocks
affected most sectors. Economic growth is expected to remain investment driven going forward with the
onset of the election cycle serving to put a drag on investments towards Q4 2016 until the elections
period in August.
Kenyan Shilling The Shilling gained against all major currencies during the month. The Shilling marginally gained
slightly against the USD during the month by 0.3%. This was on the back off suppressed dollar demand
and a reducing import bill. The Shilling
strengthened against all regional currencies, gaining 1.2% 0.4% and 0.3% against the USH, TSH and
RWF.
Currency Outlook We expect the KES to trade between KES 101.00 -102.00 against the USD in June 2016.
Inflation Headline inflation decreased during the month of
May 2016 to 5.0%, up from 5.3% in the month of April 2016. The decline was mainly attributed to a
fall in food and fuel prices by 26 basis points (bps) and 14bps respectively.
The m/m Consumer Price Index (CPI) increased by 0.7% from 167.07 in April 2016 to 167.99 in May
2016.
Inflation Outlook We expect inflation to remain within Central Bank’s medium-term target of 5.0% with a 2.5% band.
Source: KNBS, CBK Interest Rates The Central Bank’s Monetary Policy Committee
(MPC) lowered the Central Bank Rate (CBR) in its latest meeting in May 2016 by 100bps to 10.50%.
The MPC decided to ease its monetary policy as inflationary pressures continued to ease. The
committee noted that overall inflation is expected to
decline and remain within the Government target range in the short-term. The MPC will have its next
meeting in July 2016.
The average rate of the 91 day Treasury bill (T-bill) stood at 8.2% in May 2016, a decrease from 8.9%
in the previous month. The average rate for the 182
day T-bill declined by 50bps to 10.3% in May 2016.
Interest Rate Outlook We foresee the Central Bank’s Monetary Policy
Committee maintaining their neutral monetary
policy stance at the next meeting so as to maintain market stability and anchor inflation pressures.
Date USD EUR GBP JPY(100) USH TSH RWF
30-Apr-16 101.14 114.50 147.52 93.14 32.95 21.65 7.38
31-May-16 100.83 112.37 147.40 90.71 33.35 21.73 7.40
MTD 0.3% 1.9% 0.1% 2.7% 1.2% 0.4% 0.3%
Kenya Exchange Rate Against Major and Regional Currencies
4 | Page
Corporate Actions Safaricom Net Profit Rises 20% to KES 38.1bn Telecommunications firm Safaricom announced a
19.6% rise in net profit to KES 38.1bn in the year to March 2016, with much of the growth coming from
non-voice services. The Nairobi Securities
Exchange-listed firm has proposed a dividend of 76 cents per share, up from 64 cents in the previous
year. Total company sales rose by 19.8% to KES 195.7bn. Revenue from services such as voice, M-
Pesa, SMS and mobile data expanded by 13.8% to
KES 177.8bn. Income from other sources such as handsets and construction brought in an extra KES
17.9bn. The single largest growth of 42.7% in revenue was in mobile data whose sales hit KES
21.2bn. The second largest growth was in M-Pesa services which expanded by 27.2% to KES 41.5bn.
The EBITDA (earnings before interest, taxes,
depreciation and amortisation) margin, which shows a firm’s ability to earn a profit and generate cash
after netting out what is not core to its internal operations was up to 44.6% compared to 43.6%
in year ending March 2015. Standard Chartered Posts 44% Jump in First Quarter After-Tax Profit Standard Chartered Bank (SCB) announced a 44.4%
growth in its net profit for the first three months to March, lifted by increased interest income. The
lender booked an after-tax profit of KES 2.6bn in
the first quarter of the year compared to KES 1.8bn in a similar period a year earlier. The jump in net
profit is the largest among top-tier banks that have announced their first quarter results. SCB’s interest
income grew to KES 6.4bn in the review period from
KES 5.4bn despite the loan book shrinking by KES 5.4bn to KES 109.7bn. Customer deposits jumped
by KES 12.5bn to KES 184.5bn. The bank recorded a rise in gross non-performing loans to KES 15.4bn
from KES 8.3bn in the period, but the loan loss
provision remained almost flat at KES 728mn. Its core capital increased by KES 1.0bn to KES 34.2bn.
The growth comes after the lender reported a 39 per cent drop in its net profit for 2015 to Sh6.3
billion weighed down by decreased lending and a sharp rise in non-performing loans.
KCB Quarter One Net Profit Rises 6.1% to KES 4.63bn as Bad Loans Surge East Africa’s largest commercial bank by assets,
KCB, was hit by a KES 7bn increase in gross non-performing loans (NPLs), even as it recorded a
6.1% growth in net profit in the first quarter of the
year compared to last year. Provisioning for loan losses more than doubled to KES 1.34bn thereby
cutting into the company’s net profit that now stands at KES 4.63bn in the quarter ending March
31, up from KES 4.36bn in the same period last
year. KCB saw its deposits fall by nearly KES 1bn, amid the industry talk about flight to safety by
customers from small banks to big banks after the collapse of several financial institutions since last
year. Its loan book remained flat. With the net profit standing at KES 4.63bn the institution now
falls behind Equity Bank which reported KES 5.1bn
in net profit for the first three months of the year. KCB was last month appointed the manager of
Chase Bank which had collapsed on April 7, but re-opened its doors on April 27.
Stock Market Performance Sector Performance National Bank of Kenya, Longhorn Kenya and Trans-Century Ltd were the top three performers in the
bourse yielding 20.2%, 14.3% and 12.4% respectively. Automobiles & Accessories, Insurance
and Investment Services were the top performing
sectors yielding a return of 2.4%, 2.0% and 1.8% respectively. The increase in performance in the
Automobiles & Accessories sector was mainly driven by Marshalls East Africa and Car & General Ltd.
Stock Market Outlook The NSEASI (Nairobi Securities Exchange All Share
Index) declined by 2.3% m/m (down 1.4% YTD) to close the month at 143.61 points, while the NSE -
20 Share Index was down 4.5% m/m (down 5.3%
YTD) to close the month at 3,827.80 points. We expect the market activity to remain subdued as
investor sentiment has dampened.
5 | Page
TANZANIA
China Fund’s Africa’s Biggest University Library in Tanzania China’s taking another step in expanding its footprint
in Africa. China is building what’s touted as Africa’s
biggest university library in Tanzania. The foundation stone for the new library at the
University of Dar es Salaam (UDSM) was laid by Tanzanian President John Magufuli. It will be built at
a cost of about USD 40mn and is fully funded by the
Chinese government. When finished, the state-of-the-art facility will total 20,000 square meters and
boast over 800,000 books. The mega-facility will also accommodate 2,600 university students at a
time.
Tanzania Tourism Sector Gets USD 100 Million World Bank Funding The Government has secured USD 100mn from the
World Bank to improve tourism in the southern circuit. The money will be spent in a five year period
starting from 2017 for improvements in
infrastructure and promotion of tourist attractions in the area. The government obtained the money to
boost the tourism industry, which has contributed 17% to the country's gross domestic product (GDP),
for the last three years.
Tanzania Purges 10,000 'Ghost Workers' In Anti-Corruption Drive Tanzania has removed more than 10,000 "ghost
workers" from its public sector payroll in a crackdown on corruption. Payments to the non-
existent employees had been costing the
government more than USD 2mn a month. The authorities say they are continuing to audit the
public payroll and expect to find more phantom workers. President John Magufuli, who was elected
in October, has promised to cut wasteful public
expenditure in office. He ordered the audit in March, calling for the money saved to be used towards
development. Mr Magufuli has announced a range of cost-cutting measures since coming to power,
including cancelling official celebrations for Independence Day. Tanzania spends more than USD
260mn a month paying the salaries of its estimated
550,000 public workers.
Tanzanian Shilling The Tanzanian Shilling (TSH) remained flat against the U.S. dollar (down 1.9% YTD) in May 2016 to
close the month at TSH 2,190.
Inflation The Annual Headline Inflation Rate for the month of April, 2016 has decreased to 5.1% from 5.4%
recorded in March, 2016. The decrease of Annual
Headline Inflation Rate for the year ending April, 2016 explains that, the speed of price increase for
commodities in the year ending April, 2016 has decreased as compared to the speed of price
increase recorded for the year ended March, 2016. The overall index went up to 102.46 in April, 2016
from 97.50 recorded in April, 2015. Food and Non
Alcoholic Beverages Inflation Rate for the Month of April 2016 has slightly decreased to 7.1% from
8.3% recorded in March, 2016.
Interest Rates The Bank of Tanzania (BOT) maintained a neutral monetary policy stance, despite marked increases in
private sector credit growth and inflation, while the TSH has also been depreciating at an alarming rate.
The Central Bank Rate remained unchanged at 12% in April. The main reason the BOT has held a neutral
stance is to encourage GDP growth in line with their
Vision 2025, where Tanzania plans to become a middle income nation.
Stock Market The DSEASI (Dar es Salaam Securities Exchange All
Share Index) fell by 4.0% m/m (up 5.3% YTD) to close at 2,457.03 points from 2,559.31 points. We
expect market activity to remain moderate supported by foreign investor participation.
Outlook We expect economic growth to remain robust in the
medium term driven by rising private consumption, strong growth in the services sector as well as
spillover effects from the massive infrastructure investments in the country. We expect the BOT to
maintain its neutral stance to first Quarter of 2016.
Tanzania is well positioned to capture strong growth in the region. We expect GDP growth in 2015/16 to
be 7.0%.
6 | Page
UGANDA
Uganda Halts Military Cooperation With North Korea Ugandan President Yoweri Museveni said his country
would halt security and military cooperation with
North Korea, following a summit in Kampala between Museveni and South Korean President Park Geun-
hye. This deprives North Korea of a crucial base for arms and other exports in Africa. In the meeting, her
President Museveni agreed to comply with United Nations sanctions aimed at limiting North Korea’s
capacity to earn foreign cash for its banned nuclear
and missile program. Instructors from North Korea have been in Uganda for years, training its police in
weapons use and in other areas, according to South Korean officials and a United Nations sanctions
report. Uganda was also believed to be a crucial
buyer of rifles and other small arms from North Korea.
France Pledges USH 667Bn for Kampala-Jinja Expressway Project The French government, through its public bank and overseas development agency, Agence Française de
Développement (AFD), has said it will commit EUR 180mn (USH 667bn) to the development of the
proposed Kampala-Jinja Expressway next year. The ambitious toll road project is estimated to cost about
USH 800bn, and will be financed through a Public-
Private Partnership (PPP). The AFD financing (loan) will, however, fit in on the side of government. The
77km stretch will start at Nakawa in Kampala and connect to Jinja Township. The road will have four to
eight lanes, respectively at various points. It will
have six lanes between Bweyogerere and Lugazi, and then a dual carriage between Lugazi and Jinja.
Trademark East Africa Gives Uganda USH100 Million for the Northern Corridor Project Trademark East Africa (TMEA) has given Uganda
office equipment worth USH 100mn to support
initiatives of creating a coordinating center for the Northern Corridor Integration Project initiatives. The
equipment which includes laptop, desk computers, printers, projectors and heavy duty photocopier will
complement the resources required to effectively
discharge the coordination role. The Northern Corridor Project is key to TMEA's activities because of
the benefits realized so far in terms of reducing time and improving business along this route.
Ugandan Shilling The Ugandan Shilling fell against the US Dollar during the month. The Shilling depreciated by 1.4%
m/m (up 0.2% YTD) against the U.S Dollar to close
the month at USH 3,365.
Inflation Uganda's annual headline inflation for May 2016 rose
to 5.4% from 5.1% a month earlier fueled by a surge in core inflation. Annual core inflation, which
excludes food, fuel, electricity and metered water
increased to 7.0% this month, from April’s 6.4%. The monthly headline inflation also increased by
0.2% for the month of May 2016 compared to 0.1% recorded in April 2016. This was caused by increase
in monthly core inflation at 0.5% increase from the
earlier 0.0% recorded in April 2016.
Interest Rates Bank of Uganda’s (BOU) Monetary Policy Committee
cut the Central Bank Rate (CBR) by 100bps to 16.0%
in its recent meeting in April 2016. The BOU cited that inflationary pressures remained subdued. The
BOU forecasts the annual both headline and core inflation will remain in the range of 6.5% ± 1% in
the first half of 2016 before gradually declining to the BoU's medium-term target of 5% in Q1-2017.
Nonetheless, there are upside risks to this outlook,
including the future path of the exchange rate, which in part is contingent on external economic
environment. The BOU cut the CBR given that the inflation outlook has improved and to ensure that
real economic growth remains close to potential. The
BoU believes that it is warranted to cautiously ease monetary policy.
Stock Market The USEASI (Ugandan Securities Exchange All Share Index) decreased by 0.9% m/m (up 0.3% YTD) to
close at 1,768.37 points from 1,784.61 points.
Outlook Economic recovery is expected to continue in 2015/16 driven by FDI inflows and growing private
sector participation in the economy. Despite huge
infrastructure investment in the oil industry, transport and power sectors economic growth is
expected to moderate to about 4.8% in 2015 and 5.5% going forward.
INVESTOR BRIEFING NOTE October 2014
10 | P a g e
KENYA | UGANDA | TANZANIA | RWANDA | SOUTH SUDAN | MOZAMBIQUE | MALAWI