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Private Equity Outlook

Jan 13, 2019

Summary of 2018 Private Equity Activity The year 2018 saw a slight slowdown in private equity (PE) activity across Sub-Saharan Africa, with the total value of reported African private equity deals in H1’2018 being USD 0.9 bn, a 10.0% drop from USD 1.0 bn reported in H1’2017. In regards to fund raising, the total value of African PE fundraising in H1’2018 was USD 2.1 bn. This is an improvement compared to the total value fundraising in H1’2017, which was reported at USD 2.0 bn. The slowdown was attributed to macroeconomic headwinds that hit two of Africa’s most developed PE markets, South Africa and Nigeria, coupled with a slump in oil prices, which negatively affected private investments. The table below highlights fundraising activity by sector in Africa;   2018 Private Equity Fundraising Activity by Secto...

Equities Outlook

Jan 13, 2019

In 2018, the Kenyan equities market was on a downward trend, with NASI, NSE 25 and NSE 20 declining by 18.0%, 17.1% and 23.7%, respectively. Since the peak in February 2015, NASI and NSE 20 are down 20.9% and 48.4%, respectively. The only large cap gainer during the year was Barclays Bank, which gained 14.1%, while the largest losers were East Africa Breweries (EABL), Bamburi Cement, Diamond Trust Bank (DTB), NIC Group and Safaricom, which lost 26.6%, 26.4%, 18.5%, 17.6% and 17.0%, respectively. Following the sustained price declines, the market valuation declined to below its historical average with NASI P/E currently at 11.6x compared to the historical average of 13.4x. Equity turnover during the year rose by 2.3% to USD 1,723.8 mn from USD 1,684.4 mn in FY’2017. Foreign investors remained net sellers with a net outflow of USD 288.8 mn, a 146.6% increase compared to net outflows of USD 113.7 mn recorded in FY’2017. The foreign investor outflows during the year...

Fixed Income Outlook

Jan 13, 2019

The government is currently 35.9% behind its domestic borrowing target, currently having borrowed Kshs 107.2 bn domestically, against the pro-rated target of Kshs 167.2 bn, going by the revised government domestic borrowing target of Kshs 299.8 bn as per the Budget Review and Outlook Paper (BROP) 2019. The result of this is expected average monthly borrowing of Kshs 129.8 bn in the 2nd half of the current fiscal year. We however do not expect this to lead to upward pressure on interest rates, with the increased demand on government securities, driven by improved liquidity, provided the government does not accumulate too much short term debt during the year, which would worsen the government’s debt maturity profile. Below is a summary of treasury bills and bonds maturities and the expected borrowings over the same period. The government will need to borrow Kshs 129.8 bn on average each month for the rest of the fiscal year in order to meet the revised domestic borrowing...

Kenya Macro Economic Outlook

Jan 13, 2019

In 2018, the Kenyan economy recorded an average growth of 6.0% for the first three quarters of 2018, compared to an average of 4.7% in a similar period in 2017. The growth was mainly supported by (i) recovery in agriculture due to improved weather conditions, (ii) increased output in the manufacturing, and wholesale & retail trade sectors, and (iii) continued recovery of the tourism sector. We project 2019 GDP growth to come in between 5.7% and 5.9%, supported by: Continued growth of the agricultural sector, as a result of expected improvement of weather conditions and increased budgetary allocation to the sector for ongoing irrigation projects, strategic food reserves, cereal and crop enhancement and crop insurance schemes, in order to enhance food security and nutrition, which is a key pillar on the “Big 4 Agenda”, Continued strong growth in the real estate and tourism sectors....

Regional Market Outlook

Jan 13, 2019

In 2019, Sub Saharan Africa (SSA) is expected to register economic growth of 3.4%, higher than 2.7% expected in 2018 and 2.6% recorded in 2017, according to the World Bank. This is due to expectations of easing drought conditions, which will boost agricultural production and improved growth in commodity driven countries such as Nigeria and Angola, which are expected to grow by 2.2% and 2.9% in 2019, up from 1.9% and (1.8%) expected in 2018, respectively. Nigeria’s economic growth is expected to be propelled by growth in the Agriculture and Services sector and on the back of an improved outlook for oil prices despite the restrained oil production and political uncertainty ahead of February’s general elections. Angola’s economic growth is expected to return to expansion in 2019, bolstered by support from the IMF, which approved a USD 3.7 bn credit facility in December 2018 to support structural and economic reforms and help the country restore external and fiscal sus...