Africa Beat for the week ended 3 November 2017

By Alexander Forbes Investments on Nov 07, 2017 in General


Economic Update

Kenya – Price pressures decrease further in October

  • The consumer price index (CPI) rate has dropped to the lowest level since May 2016 which was 5.0% y-o-y, CPI decreased from 7.1% y-o-y in September to 5.7% y-o-y in October
  • The primary driver of the disinflation was the food and non-alcoholic beverages sub-index falling from 11.5% y-o-y in September to 8.5% y-o-y in October
  • The majority of other major sub-indices saw marginal increases in October, including utilities & energy (+3.6% y-o-y), transport (+3.8% y-o-y) and clothing & footwear (2.9% y-o-y)

Mozambique – Fitch affirms credit rating

  • On 27 October, Fitch Ratings announced that it has affirmed Mozambique’s long-term foreign currency Issuer Default Rating 
    The country’s long-term foreign currency credit rating was affirmed at “Restrictive Default” (RD), following the downgrade from “CC” to “RD” at the end of November 2016
  • Furthermore, the ratings agency affirmed the country’s long-term local currency IDR at “CC”
  • In the press release it was mentioned that, “the affirmation of the credit rating reflects the Mozambican government’s inability to cure the default on external debt to external commercial creditors”
  • Since the ratings agency downgraded the sovereign to “RD” in November last year, the Mozambican government has missed two coupon payments on its only Eurobond as well as principal and interest payments on guaranteed loans to two state-owned companies Proindicus and Mozambique Asset Management
  • Mozambican government is yet to attain an agreement with creditors that will allow it to service any outstanding debt hence Fitch expects the process of debt restructuring to be prolonged as there is uncertainty around the timing and arrangement of steps required for talks to proceed

Egypt – External debt to increase

  • Over the past few months the level of external debt has increased extensively, as a result of severe external shortfalls and as a result higher foreign borrowing
  • According to the Central Bank of Egypt (CBE), external debt augmented by 41.7% y-o-y to US$ 79 billion at the end of Q2 2017 (which is approximately equal to just over 40% of GDP)
  • Egypt’s external debt is mainly credited to borrowing by the CBE and the government
  • Jointly, the central bank and government held US$ 65.2 billion worth of external debt at the end of Q2 2017, which is equal to 82.5% of total external debt and slightly above 30% of GDP
  • Government debt increased by 42.7% y-o-y to US$ 34.9 billion by the end of Q2 2017, whereas debt payable by monetary authorities increased by 36.8% y-o-y to US$ 30.3 billion

General News

Kenya – Five-month clinic and hospital strike comes to an end

  • According to Xinhua reports, on 2 November, nurses called off their five-month-long strike after attaining an agreement with the country’s Council of Governors
  • According to Kenya National Union of Nurses. Secretary-General, Seth Panyak, the collective bargaining agreement will be implemented entirely within 30 days and advised the nurses to resume work on Friday, 3 November
  • Furthermore, it has been mentioned that health workers will have their nursing, uniform and nursing service allowances increased as well as all cases related to the contest currently before court withdrawn
  • The strike immobilised the health sector in the country with patients compelled to seek costly services in private hospitals
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Tanzania – Banks told to be more ground-breaking to survive

  • At the launch of Barclays Bank Tanzania’s ultra-modern branch in Moshi (a town in northern Tanzania), Ms Mghwira (Kilimanjaro Regional Commissioner) mentioned that financial institutions need to come up with products that are pertinent with local realities and banking needs instead of implementing products from overseas which fail in the market
  • Ms Mghwira also noted that the international bank’s persistence in providing some of the best banking services in the country for 17 years in a row was model and could build trust in other international investors and subsequently encourage them to open projects in the country
  • She further stated that “As the government strives to tackle challenges facing the financial sector, we request stakeholders to play an active role in improving the lives of Tanzanians”
  • In addition “apart from launching new products they should also give mass education on banking services, as this can boost financial inclusion”
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Rwanda – KCB Bank reveals mobile micro-credit facility

  • Thanks to the bank’s new mobile credit facility, it will now be easy for KCB Bank Rwanda customers to access small loans to cater for emergencies
  • According to George Odhiambo, the KCB Bank acting managing director, customers will be able to apply and receive small loans of between 500 Rwandan franc and 500,000 Rwandan franc promptly on their mobile phones
  • However, in order to receive the small loans one must be a KCB account holder, registered on KCB Mobi and must meet set criteria
  • The customer access to small loans will help boost financial inclusion
  • The National Bank of Rwanda Director, John Karamuka, challenged banks to safeguard transparency and protect consumer rights as they introduce new financial technology services and products
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Africa – Transparency, timelines vital for investors in infrastructure

  • As stated by David Walker, managing director and head of public sector group for Europe, Middle East and Africa at Citi, transparency is important for potential investors in infrastructure development projects in Africa
  • Separately from transparency, clearness of who is doing what and of investment timelines are very imperative to the bank’s client
  • The investors typically favour to invest in tangible infrastructure rather than at the development stage of the infrastructure
  • David Walker further stated that, if certainty is created investors are more willing to invest and that financial transparency attracts more investors and leads to more investable products
  • David Walker also mentioned that there is an opportunity to create new growth asset classes via infrastructure development in Africa
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Companies Expanding in the Rest of Africa

Kenya – Shoprite to open stores initially run by Nakumatt Holdings 

  • Africa’s biggest food retailer, Shoprite, announced 6.4% growth in turnover for Q3 2017
  • The food retailer further announced that it would resume its international growth programme to shore up its base
  • Reports have developed that Shoprite was preparing to enter into Kenya, by filling retail space left empty as the local Nakumatt business struggles, but nothing has been signed
  • Shoprite is pending the outcome of merger talks between Nakumatt and local rival Tusker Mattresses before deciding whether to progress
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Sources: Africa News, Fin24, Mfw4a, NKC

Alexander Forbes Investments

Alexander Forbes Investments

Alexander Forbes Investments was established in 1997. We are a forward-thinking and trusted global investment provider, with roots in Africa. In pursuit of certainty we set out to understand our retail and institutional clients’ circumstances and risk tolerance to set clear goals. Our adaptive investment approach, called Living*Investing allows us to maximise opportunity and minimise risk at every stage of the investment cycle.

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