absa sub saharan africa bi weekly july 6

8/9/2019 ABSA Sub Saharan Africa Bi Weekly July 6

1/15

PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 13

AFRICA STRATEGY 6 July 20

Absa Capital is a division of Absa Bank Limited

SUB-SAHARAN AFRICA BI-WEEKLY Special focus: Nigerias Amcon Bill, aimed at removing toxic assets from rescued

banks, has been approved by the Senate and is awaiting presidential sign-off.

Coupled with other reforms, we expect Amcon to have a positive effect on the

stability and health of the banking system and overall economic growth.

SSA: Monetary policy in Botswana, Mauritius, Namibia and Nigeria was keptunchanged in the past week. We expect monetary tightening to be delayed until

next year as policymakers want economic growth to strengthen further.

SSA: The economic recovery continues to gain traction and, except for Mauritius,indications are that growth in several countries is going to surprise on the upside.

Technical strategy: USD/UGX we expect a break above 2,300 in the near term. Markets: Currency performance was mixed w/w with the MUR 2% firmer against

the USD. The Nigerian Stock Exchange closed 0.5% down on the week.

Special focus: Nigeria Amcon falling into place

The Amcon Bill was passed by the Senate on 23 June and is awaiting approval from

President Jonathan. Coupled with other reforms, the Central Bank of Nigeria (CBN) is

hoping that the Amcon Bill, which is aimed at removing non-performing assets from

the balance sheets of rescued banks, will help unlock credit lending and restore

confidence in the countrys banking system. However, there are costs involved, with the

CBN and federal government likely to lose a substantial amount in purchasing these

toxic assets. Moreover, apart from the fiscal effect, the injection of extra liquidity into

the banking system may also be inflationary. Nevertheless, we expect these banking

reforms to have a positive effect on economic growth over the longer term.

Figure 1: Nigerias economic growth remains brisk despite headwinds

4

5

6

7

8

2004 2005 2006 2007 2008 2009 2010F 2011F

Real GDP (%)

Source: IMF, CBN, Absa Capital

Ridle Markus

+27 (0)11 895 5374

[email protected]

Dumisani Ngwenya

+27 (0)11 895 5346

[email protected]

Judy Padayachee

+27 (0)11 895 5350

[email protected]

www.barcap.com

Currency

per USD

Weekly

close

w/w %

AOA 92.57 0.8

BWP 7.08 -0.5

GHS 1.45 -0.6

KES 81.55 0.0MUR 31.90 2.0

MZN 34.25 0.0

NGN 149.85 0.6

TZS 1492 -1.7

UGX 2261 -0.3

ZMK 5150 -0.4

Note: Week-ending 5 July 2010Source: Reuters


2/15

Absa Capital, affiliated with Barclays Capital| Sub-Saharan Africa Bi-Weekly

6 July 2010 2

Central Bank of Nigeria (CBN) Governor, Lamido Sanusi, has worked hard to restore

confidence in the Nigerian banking system since taking office in June 2009. Sanusis actions

are taking place within the broader context of the four pillars of banking reforms:

enhancing the quality of banks; establishing financial stability; enabling healthy

financial sector evolution; and ensuring the financial sector contributes to the real

economy. After determining that nine of the 24 Nigerian banks were insolvent and chronic

borrowers at the expanded discount window, Sanusi replaced the management of eightbanks (of which five banks accounted for 50% of the total exposure Figure 2) and injected

about USD4bn of Tier 2 capital into the insolvent banks (the money is a loan and will need

to be paid back to the CBN). In addition, as the first phase to improve confidence in the

countrys banking system, the CBN guaranteed all foreign credit lines and interbank

placements, extending the guarantee to 31 December 2010. Changes were also made to

banking regulations in order to improve the quality of reporting and overall management

these include the forced adoption of common accounting years for all banks, the adoption

of International Financial Reporting Standards, and limiting the term of banking CEOs in

office to a maximum of ten years.

Figure 2: Deposit money banks exposure to CBN expanded discount windowoutstanding (NGNbn)

0

50

100

150

200

250

300

350

400

450

500

Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul -09

Five Banks Total

Source: CBN

The key component of restoring confidence in the Nigerian banking system, however, was

the proposed establishment of an asset management company that would remove all the

non-performing loans from the troubled banks and clean their balance sheets. To that

end, the CBN and Ministry of Finance introduced the Asset Management Corporation of

Nigeria (Amcon) Establishment Bill. The main objectives of the Amcon Bill are to improve

liquidity; provide a vehicle for acquisition of bank shares; maximise returns on asset

disposal; and encourage investment in the capital market. Under this bill, toxic assets would

be exchanged for seven-year bonds or other debt issued by Amcon and guaranteed by the

finance ministry. The Amcon Bill has already been approved by the House of

Representatives (10 March) and the Senate (5 May), while the Senate approved the

harmonised bill (which includes the amendments of the two chambers) on 23 June. The Bill

has been submitted to President Jonathan for his approval, after which it will become an Act

of the National Assembly (The Guardian, 25 June). The CBN expects the process to be

completed by September and hopes that it will unlock credit lending and further restore

confidence into the countrys banking system.

CBN governor worked hard to

restore confidence in Nigerian

banking sector

The asset management company

which is to soak up toxic assets is

key to restoring confidence


3/15


6 July 2010 3

Figure 3: Private sector credit growth a concern to the CBN

0

2

4

6

8

10

12

Apr 06 Oct 06 Apr 07 Oct 07 Apr 08 Oct 08 Apr 09 Oct 09 Apr 10

0

20

40

60

80

100

120

PSCE (NGNtn) PSCE (% y/y, rhs)

Source: CBN, Absa Capital

ConclusionThe CBNs reform program over the past year to instil greater confidence into the sector still

has a long way to go, in our view. Indeed, on 28 June, Standard & Poors noted that the

countrys banking sector remains risky, with most banks rated in the single B category,

which is well below that of most other banks around the globe (Reuters, June 28). The

economic cost of Amcon could be significant, with the Debt Management Office (DMO)

estimating that the federal government and CBN are set to lose close to USD6bn of the

USD9bn planned to purchase toxic assets of the troubled banks. The DMO also revealed

that Amcon cost is to be shared between the Ministry of Finance and CBN in the ratio 10:90.

Apart from the fiscal effect, the injection of capital into the banking system is likely to have

an inflationary effect although the governor indicated last week that the CBN is unlikely to

tighten monetary policy any time soon because the Bank wants private sector credit growthto expand.

Overall, we expect the negative effect of the ongoing banking problems on economic

growth in 2010 to be significantly less than last year. However, we believe that these

banking reforms, if sustained and successful, should have a positive effect on economic

growth over the long term. Despite the still wobbly banking sector, we expect economic

growth of 7.3% this year, compared with 6.7% last year, as growth is likely to be

underpinned by the non-oil sector, in particular the agriculture, trade and service sectors.

The economic cost of Amcon is

likely to be significant

Capital injection through

Amcon is likely to have an

inflationary effect

Banking reforms will have

longer-term positive effect


4/15


6 July 2010 4

In review

SSA monetary policy unchanged

The past two weeks saw monetary policy meetings in Botswana, Mauritius, Namibia and

Nigeria. Despite varying inflation trends, policy makers in all four countries left their policy

rates unchanged as the economic recovery in these markets continue to gain momentum.

In Nigeria, the central bank kept the monetary policy rate (MPR) unchanged at 6% at its 5

July MPC meeting. The committee also maintained the interest rate on its standing lending

and deposit facilities at 200bp above and 500bp below the MPR, respectively. Although

inflation moderated to 11% in May, the MPC reiterated that that upside inflation risk

remained in light of the expansionary fiscal stance, liquidity injection stemming from the

operationalisation of the proposed Asset Management Corporation of Nigeria (Amcon) and

food price pressures. Nonetheless, on balance, the committee viewed that the threat to

inflation remained subdued in the short to medium-term due to underperforming monetary

aggregates and given that Amcon is not yet operational. We project inflation to ease to

about 9% by December, driven lower by food prices (this projection exclude the possible

effect of the removal of fuel prices). The weak private sector credit extension (PSCE),however, remains a key concern for the MPC. On the economic growth outlook, the

committee noted that the non-oil sector is expected to underpin growth this year with real

GDP forecast to be 7.7% (6.6% in 2009). We believe that the MPC is likely to keep rates

unchanged when it meets in September, given its concerns about weak credit extension.

Figure 4: Nigeria still faces upside inflationary risk despite the recent decline in inflation

4

6

8

10

12

14

16

Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10

Monetary pol icy rate (%) CPI (% y/y)

Source: CBN, NBS

The Bank of Botswana (BoB) kept the bank rate unchanged at 10% last Friday (2 July) in

spite of inflation concerns. Headline inflation has increased to 7.8% in May from 5.8% last

December, underpinned by a 2pp increase in value-added tax in April and an increase

electricity tariffs in May. At current levels, inflation is firmly outside the Banks 3-6% target,

and the committee now expects inflation to revert into the target range in H2 11. While

noting that upside risks to inflation outlook remain (on further adjustment to administered

prices and government levies), the committee was of the view that subdued domestic

demand and a projected benign external inflationary pressures were favourable for the

medium-term inflation outlook. In contrast, our inflation projections show inflation

remaining outside of the target range in 2011 we project inflation to end the year at 9.3%

Despite varied inflation trends,

policy rates were kept unchanged

Nigeria continue to face upside

inflationary pressures

Botswana inflation likely to

remain outside target band for

some time


5/15


6 July 2010 5

y/y. On growth, the MPC maintained that GDP is likely to remain below trend in the

medium term, curbed by a reduction in government spending and supported by sustained

recovery in external demand. Given upside inflation risk in the medium term, we believe that

the MPCs next move is likely to be up, but not until well into 2011.

The MPC of the Bank of Mauritius (BoM) released its monetary policy statement on 29 June

following its decision in the previous week to leave the repo rate unchanged at 5.75%. TheMPC noted that there were upside risks to the medium-term inflation outlook and that

downside risks to the economic growth outlook had increased. The MPC downgraded its

real GDP growth forecast (basic prices) for 2010 to 4.1% (4.6% in March meeting) owing to

risks from a weaker-than-expected recovery in the euro area and the United Kingdom.

(Jointly, these regions are the destination for about 67% of domestic exports.) The

committee also expressed concern about the significant slowdown in the annual growth

rate of private sector credit extension (4.5% y/y in April, compared with 17.2% in June

2009). Although headline inflation is sitting at comfortable levels (2.4% y/y in June), the

committee confirmed that there were upside risks in the medium term emanating from

higher imported and wage inflation. Over the next few quarters, the committee expects

inflation to rise to about 4% our inflation trajectory shows annual inflation rising steadily

in H2, ending the year at 4.9% y/y. As a result of the MPCs less optimistic view on growthand despite upside risks to inflation, we continue to expect the BoM to keep the policy rate

on hold throughout 2010. (The MPCs next meeting is set for 27 September.)

Figure 5: Mauritius inflation remains benign

0

2

4

6

8

10

12

14

Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10

Repo rate (%) CPI (% y/y)

Source: Mauritius CSO, Bank of Mauritius

In Namibia, the central banks Executive Committee (EC) was optimistic on the domestic

economic recovery. It expects the economy to grow about 4.2% this year (-0.8% in 2009),

supported by improved global demand and strengthening commodity prices. Indeed, datareleased by the mining ministry show that the domestic recovery is entrenched with

diamond mining output rising 102% y/y from January to May 2010. At 4.7% y/y in May,

inflation had fallen to its lowest level in more than four years and remains less a concern to

the EC on account of lower food inflation. We believe that with possible increases in

administered prices (mainly electricity tariffs) in H2, the inflation cycle may reach a trough

in June and we project a year-end rate of 5.9% y/y. Despite our projected uptick in inflation

and the optimistic growth outlook, we continue to expect the MPC to leave rates on hold

this year.

Mauritian inflation likely

to remain benignover medium term

Namibian policy rate likely to

remain unchanged until 2011


6/15


6 July 2010 6

SSA: Economic recovery gaining momentum

A slew of Q1 10 GDP releases for Sub-Saharan African (SSA) countries last week pointed to

solid economic growth. Overall, the readings showed that economic growth for the year as

a whole may come in stronger than expected with the key sectors of economies showing

significant rebound from last year.

In Botswana, real GDP surged from 10.7% y/y in Q4 09 to 36.4% y/y as a stronger miningsector and base factors boosted the growth rate. The mining sector (31% of GDP) grew

135.1% y/y in real terms (+21% in Q4 09). This large increase came as no surprise to us

given the low base in Q1 09 when diamond mines halted production for most of the quarter

as demand for diamonds collapsed. Diamond demand has improved markedly since, more

than doubling to USD477mn in Q1 10 compared with the corresponding period a year ago.

Other sectors with significant contributions to growth were the agriculture (+70.6% y/y)

and the trade, hotels and restaurant (+6.6%) sectors. Revisions to previous figures also

indicated that last years recession was less severe, with the domestic economy estimated

to have contracted only 3.7% (-6% previously) owing to a smaller contraction of the mining

sector than initially estimated. We expect GDP growth to normalize over the next few

quarters and, given the strong Q1 reading, we have revised our growth forecast for the year

from 6% to close to 10%.

Figure 6: Botswanas mining sector is a key growth driver

-60

-40

-20

0

20

40

60

Q109 Q209 Q309 Q409 Q110

Mining Real GDP (% y/y)

135%

Source: Botswana CSO, Absa Capital

In Mauritius, real GDP slowed to 4.1% y/y in Q1 from 6.7% in Q4 09, which is consistent

with seasonal trends. Growth in the quarter was mainly driven by the manufacturing (+4.5%

y/y), real estate, renting and business activities (+5.3%), hotels and restaurants (+7.2%) and

transport (+5.2%) sectors. Based on Q1 figures, the CSO now expects economic growth

(market prices) to be 4% this year, slightly lower than its March estimate of 4.3% (2.1% in2009). This is in line with our expectations for growth of just over 4% in 2010 underpinned

by stronger exports, substantial policy stimulus and improved tourism receipts.

Kenyas economy expanded by 4.4% y/y in Q1 rising from 3.3% in the previous quarter.

This expansion is mainly attributable to strong growth recorded by the agriculture (4.6%

y/y), manufacturing (7.8%), transport (4.7%) and financial intermediation (11.9%) sectors.

The key agricultural sector (20% of GDP) registered its first positive reading after six

quarters of contraction following improved weather conditions. We continue to project

economic growth of about 4% for Kenya this year.

Key economic sector performing

well in SSA

Botswanas mining sectorrecovery positive for

growth outlook

Real GDP outlook less optimistic

in Mauritius

Kenyas economic

recovery continues


7/15


6 July 2010 7

Mozambiques economic growth surprised to the upside, coming in at 9.5% y/y in Q1 from

7% in Q4 09. The agricultural sector remained the main contributor to growth in the quarter

with a 26% share and contributing 3.1 percentage points to overall growth. The primary

sector grew 10.8% while the tertiary and secondary sectors grew 10.7% and 5.4%,

respectively. Given the brisk growth in Q1, we now anticipate growth of about 7% for

Mozambique this year.

Ghana: On track to deliver oil by Q4

Tullow Oil, which has a 49.95% stake in the Jubilee oil field in Ghana, released its trading

and operational update on 6 July. The key messages from this update were the following:

Operations are on track following the arrival of the FPSO (on 21 June), and operationswill commence shortly to connect all the flow lines and risers to the turret.

Oil production will commence in November/December 2010 (Ghanas oil ministerearlier this year stated that it might start in December). First cargo is expected in

December 2010 to January 2011.

Initial production will be about 60,000bpd, which will be ramped up to 120,000 bpd 3-6months after first oil is pumped.

The Jubilee reservoirs are of excellent quality, and the crude is light and sweet. Lightsweet crude oil from West Africa tends to trade at a premium to dated Brent as its global

supply is in decline in general.

Further high-impact drills will be made in H2 10. Tullow Oil is trying to replicate thesuccess in Ghana by identifying new prospects across the Equatorial Atlantic region, and

there will be drilling of more high-impact exploration wells in Sierra Leone, Liberia,

French Guiana and Guyana in H2 10.

Tullow Oil expects to complete the buying of Heritage Oil & Gass 50% stake in Block 1and 3A in Uganda soon. Tullow Oil plans to enter into transactions with CNOOC andTotal to develop two-thirds of its interests in Blocks 1, 2 and 3A in the Lake Albert Rift

Basin. It expects to deliver production in excess of 200,000bpd by 2014-15.

We do not anticipate any substantial revenues for Ghanas fiscus this year, but oil revenues

in 2011 could be substantial. As such, we expect a marked narrowing in Ghanas fiscal

deficit in 2011 from our estimated 8% (of GDP) in 2010. For the economy as a whole, we

expect economic growth to surge from just over 6% in 2010 to close to 18% in 2011 as a

result of oil revenues.

Economic growth of about 7%

likely in Mozambique

Oil production to commence in

Q4 at around 60,000bpd


8/15


6 July 2010 8

Sub-Saharan Africa FX technical strategy

USD price trend USD price momentum

Weekly Monthly Weekly Monthly USD support USD resistance

USD/GHS Overbought Overbought 1.4100 / 1.4000 / 1.3975 1.4455 / 1.4500 / 1.4630

USD/KES Overbought Overbought 81.00 / 80.20 / 80.00 82.15 / 83.00 / 83.35

USD/NGN Neutral Neutral 149.00 / 148.50 / 147.30 150.75 / 151.75 / 152.50

USD/TZS Overbought Overbought 1455 / 1390 / 1360 1530 / 1565 / 1635

USD/UGX Bearish Overbought 2230 / 2200 / 2190 2285 / 2300 / 2335

USD/ZMK Neutral Overbought 5000 / 4900 / 4860 5170 / 5280 / 5315

Source: Thomson Reuters, Bloomberg, Absa Capital

Short-term view: Consolidations prevail

USD/GHS: More Our short-term target of 1.4400 (60-week average) has been reached and has further to go. We believe that

USD/GHS could extend to 1.4500 before the overbought conditions show signs of unravelling.

USD/KES: Sideways The topping signals we were watching for appear to be underway. However, the correction is subdued,taking the form of a consolidation ahead of 78.00 (trendline). While underpinned at 78.00, the correction is not expected to

damage the long-term uptrend.

USD/NGN: No change Given the tendency to consolidate for extended periods, we continue to advocate more of the same

sideways activity. However, we are changing the short-term range from 150-153 to 148-152.

USD/TZS: Impressive Notwithstanding the overbought momentum reading on the weekly and monthly charts, we have to stick

with the trend and allow for a push towards 1,535 first ahead of renewed topping potential. Support is at 1,475.

USD/ZMK: Sideways The consolidation we have been favouring is unfolding. Within this pattern, our stance is for a downward

leg towards 5,100-5,050 before the break above the range high at 5,280 occurs. Given the underpinning in the 4,700-4,500 zone,

the long-term uptrend remains firmly intact.

Chart of the week USD/UGX sideways

Source: Thomson Reuters

Although the push to 2,300 we

have been advocating has not

materialised, we remain patient.

Indeed, the pair is forming an

extended consolidation pattern

between 2,200 and 2,295 first,

which is helping to unwind the

overbought conditions. Once

the unwinding is complete, we

expect fresh demand for a breakabove 2,300, but that is probably

a story for later this month.


9/15


6 July 2010 9

Currencies and equities

Figure 7: Foreign exchange rates Figure 8: Equities

Currency

per USD

Weekly close w/w,

%

YTD

%

AOA 92.57 0.8 -3.7

BWP 7.08 -0.5 -5.9

GHS 1.45 -0.6 -1.1

KES 81.55 0.0 -7.0

MUR 31.90 2.0 -7.5

MZN 34.25 0.0 -16.9

NGN 149.85 0.6 -0.2

TZS 1492 -1.7 -10.3

UGX 2261 -0.3 -16.0

ZMK 5150 -0.4 -9.9

Country Weekly

close

w/w,

%

YTD

%

YTD USD

TR1 %

Botswana Domestic Company 7368.8 0.1 1.8 -4.2

Ghana All Share Index 6558.7 -0.6 17.7 16.4

Kenya 20-Share Index 4323.9 0.1 33.1 23.8

Mauritius All Share 1660.5 0.7 0.0 -7.5

Nigeria All Share 25149.6 -0.5 20.8 20.5

Tanzania All Share 1173.4 -0.1 -1.6 -11.7

Uganda All Share 1022.0 0.2 39.5 17.2

Zambia All Share 2974.0 2.2 6.4 -4.1

Note: Week ending 5 July 2010. Source: Reuters, Absa Capital Note: 1Total return. Week ending 5 July 2010.

Source: Reuters, Absa Capital

Figure 9: SSA currencies and equities

75

78

81

84

87

90

93

96

99

Jul-09 Oct-09 Jan-10 Apr-10 Jul-10

26

28

30

32

34

36

38Angolan Kwanza (USD/ AOA)

Mozambique Metical (USD/ MZN, rhs)

6.25

6.50

6.75

7.00

7.25

7.50

7.75


6000

6250

6500

6750

7000

7250

7500

7750

8000Botswana Pula (USD/ BWP)

BSE - Domestic Company Index (rhs)

1.40

1.42

1.44

1.46

1.48

1.50

1.52


5000

6000

7000

8000

9000

10000Ghanaian Cedi (USD/ GHS)

GSE - All Share Index (rhs)

74

75

76

77

78

79

80

81

82


2300

2600

2900

3200

3500

3800

4100

4400

4700Kenyan Shilling (USD/ KES)

NSE 20-Share Index (rhs)

28

29

30

31

32

33

34

35


1300

1400

1500

1600

1700

1800Mauritian Rupee (USD/ MUR)

All Share I ndex (rhs)

145

148

151

154

157

160


20000

21500

23000

24500

26000

27500

29000Nigerian Naira (USD/ NGN)

Nigeria Index (rhs)

1280

1320

1360

1400

1440

1480

1520


1160

1180

1200

1220

1240

1260Tanzanian Shilling (USD/ TZS)

DSE - All Share Index (rhs)

1850

1950

2050

2150

2250

2350


650

725

800

875

950

1025

1100

1175Ugandan Shilling (USD/ UGX)

USE - All Share Index (rhs)

4400

4750

5100

5450

5800


2000

2200

2400

2600

2800

3000

3200Zambian Kwacha (USD/ ZMK)

LUSE - All Share Index (rhs)

Source: Reuters, Absa Capital


10/15


6 July 2010 10

Economic data

Figure 10: Policy rates

Country Current (%)

Cumulative since

Jan 2009 (bp) Last move Next move expected (bp)

Angola 30.00 +1043 01 Oct 09 (+500) 2011 and beyondBotswana 10.00 -500 18 Dec 09 (-50) 2011 and beyond

Ghana 15.00 -200 16 Apr 10 (-100) -50 in 16 July

Kenya 6.75 -175 23 Mar 10 (-25) 2011 and beyond

Mauritius 5.75 -100 26 Mar 09 (-100) +25 in Q1 11

Mozambique 14.50 0 10 June 10 (+200) 2011 and beyond

Namibia 7.00 -300 17 Jun 09 (-50) 2011 and beyond

Nigeria 6.00 -375 07 Jul 09 (-200) +50 in H2 10

Note: No policy rates available for Tanzania, Uganda and Zambia as monetary policy is conducted through open market operations.Source: Reuters, Bloomberg, central banks, Absa Capital

Figure 11: Consumer price inflation, % y/y Figure 12: FX reserves, USD bn (eop)

Country Dec 08 Dec 09 Apr 10 May 10 Jun 10

Angola 13.2 14.0 13.7 13.9

Botswana 13.7 5.8 7.1 7.8

Ghana 18.1 16.0 11.7 10.7

Kenya* 17.8 5.3 3.7 3.9 3.2

Mauritius 6.7 1.5 2.7 2.5 2.4

Mozambique 6.2 4.2 9.1 12.7

Namibia 10.9 7.0 5.0 4.7

Nigeria 15.1 12.0 12.5 11.0

Tanzania 13.5 12.2 9.4 7.9

Uganda 14.2 11.0 5.9 4.3 4.4

Zambia 16.6 9.9 9.2 9.1 7.8

Country Dec 08 Dec 09 Feb 10 Mar 10 Apr 10

Angola 18.4 13.2 14.1 14.1 15.7

Botswana 9.1 8.7 8.7

Ghana 2.0 3.2 3.3 3.3

Kenya 2.9 3.8 3.7

Mauritius 1.7 2.0 1.9 1.9 1.9

Mozambique 1.6 1.7 1.7 1.6

Namibia 1.3 1.8 1.8 1.7 1.8

Nigeria 52.7 42.4 41.4 40.7 40.3

Tanzania 2.9 3.2 3.2 3.2 3.3

Uganda 2.3 2.8 2.7

Zambia 1.1 1.3 1.2 1.2 1.3

Note: *Based on NBSs geometric CPI calculation from December 2008 onwards.Source: Statistics offices, central banks, Absa Capital

Source: Central banks, IFS, Absa Capital

Figure 13: Real GDP, % y/y

Country 2003 2004 2005 2006 2007 2008 2009E Q4 09 Q1 10

Angola 3.3 11.2 20.6 18.6 23.3 13.8 -0.4

Botswana 6.3 6.0 1.6 5.1 4.8 3.1 -3.7 10.7 36.4

Ghana 5.2 5.6 5.9 6.4 5.7 7.3 4.7

Kenya 2.9 5.1 5.9 6.3 7.0 1.6 2.6 3.3 4.4Mauritius 4.4 5.5 1.2 3.9 5.5 5.1 2.1 6.7 4.1

Mozambique 6.5 7.9 8.4 8.7 7.3 6.8 6.4 7.0 9.5

Namibia 4.2 12.3 2.5 7.1 5.5 3.3 -0.8

Nigeria 9.6 6.6 6.5 6.0 6.4 6.0 6.7 7.4 7.2

Tanzania 6.9 7.8 7.4 6.7 7.1 7.4 5.9

Uganda 6.2 5.8 10.0 7.0 8.2 8.3 4.8

Zambia 5.1 5.4 5.3 6.2 6.2 5.7 6.4

Source: Central banks, statistics offices, IMF WEO, Absa Capital


11/15


6 July 2010 11

Auction results

Figure 14: Latest auction results

Country Date Tenor Yield (%)Previous

yield (%)

Amount offered

(mn, local

currency)

Amount

allocated (mn,

local currency)

Bid/cover ratioDate of next

auction1

Angola 2010/06/09 91 17.79 17.79 AOA 978 2010/07/07

182 18.65 18.37 AOA 2 896

364 20.52 20.40 AOA 7 015

Botswana 2010/06/01 91 6.97 6.96 BWP 2 083 BWP 2 083 1.0 2010/07/06

Ghana 2010/07/02 91 12.86 12.88 GHS 122 (Total) GHS 122 (Total) 2010/07/09

182 13.45 13.37

364 13.80 13.80

Kenya2 2010/07/01 91 1.80 2.63 KES 4 000 KES 4 619 2.3 2010/07/08

2010/06/24 182 2.45 3.30 KES 3 000 KES 3 162 2.9

2010/06/09 364 4.20 6.09 KES 4 000 KES 3 953 4.3

Mauritius 2010/07/02 91 3.44 3.64 MUR 500 (Total) MUR 167 4.5 2010/07/09

182 4.22 4.40 MUR 164

364 4.67 4.73 MUR 169

Mozambique 2010/06/30 91 12.99 12.79 MZN 120 2010/07/07

182 13.50 13.12 MZN 20

364 14.10 14.00 MZN 20

Namibia3 2010/06/03 91 6.93 6.93 NAD 160 NAD 160 1.2 2010/07/08

182 7.00 7.04 NAD 200 NAD 200 1.4

364 7.34 7.35 NAD 200 NAD 200 1.3

Nigeria 2010/06/17 91 2.52 2.11 NGN 18 700 NGN 18 700 1.3 2010/07/14

182 3.57 3.27 NGN 40 000 NGN 40 000 1.6

2010/06/10 364 4.06 4.16 NGN 40 000 NGN 40 000 1.2

Seychelles 2010/07/02 91 1.70 1.85 SCR 15.5 2010/07/09

182 2.65 2.70 SCR 4.8

364 3.99 3.98 SCR 4.8

Tanzania 2010/06/23 91 2.99 2.79 TZS 35 000 TZS 29 981 1.7 2010/07/07

182 3.08 2.09 TZS 35 000 TZS 9 196 0.3

364 6.35 5.80 TZS 30 000 TZS 13 348 3.1

Uganda3 2010/06/30 91 4.46 4.42 UGX 20 000 UGX 20 000 1.7 2010/07/14

182 5.57 5.81 UGX 30 000 UGX 30 000 1.9

364 6.58 7.64 UGX 40 000 UGX 40 000 6.7

Zambia 2010/07/01 91 4.75 4.89 ZMK 20 000 ZMK 20 000 1.6 2010/07/08

182 5.81 5.95 ZMK 20 000 ZMK 20 000 2.3

364 7.23 6.89 ZMK 40 000 ZMK 38 700 0.97

Note: 1Official auction date to be announced/confirmed by central bank; 2cut-off interest rates; and 3 effective yields.

Source: Central banks, Reuters, Barclays, Absa Capital


12/15


6 July 2010 12

Short-term rates charts

Figure 15: Short-term rates

Angola

4

9

14

19

24

29

34

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10

Rediscount rat e

91-day

182-day

Botswana

6

7

8

9

10

11

12

13

14

15

16

Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10

Bank Rate

BoBC Rate (91-day)

`

Ghana

12

15

18

21

24

27

30

33


Pr im e r ate 182 -day 9 1-day

Kenya

0

1

2

34

5

6

7

8

9

10


Central Bank Rate

91-day

182-day

Mauritius

3

4

5

6

7

8

9


Repo Rate 182-day

364-day

Mozambique

9

10

11

12

13

14

15

16


FPC 91-day

182-day

Namibia

6

7

8

9

10

11

12

13


Repo rate

91-day

364-day

Nigeria

0

2

4

6

8

10

12


Monetary Policy Rate

182-day

91-day

Seychelles

1

6

11

16

21

26

31

36


91-day 182-day

364-day

Tanzania

1

3

5

7

9

11

13

15

17


91-day

182-day

364-day

Uganda

3

5

7

9

11

13

15

17

19

Jan-09 Apr-09 Jul-09 Oct-09 Ja n-10 Apr-10 Jul-10

91-day 182-day

364-day

Zambia

0

5

10

15

20

25


91-day 182-day

364-day

Source: Central banks, Reuters, Barclays, Absa Capital


13/15


6 July 2010 13

EMERGING EMEA RESEARCH ANALYSTS

ABSA CAPITAL

Jeff GableHead of Research

ABSA Capital

+27 (0) 11 895 [email protected]

Ian MarsbergMacro Strategist

+27 11 895 5374

[email protected]

Jeffrey SchultzMacro Strategist

+27 11 895 5349

[email protected]

Divya VasantCredit Analyst

+ 27 11 895 5345

[email protected]

Ridle Markus

Africa Strategist+27 11 895 5374

[email protected]

Dumisani Ngwenya

Africa Strategist+27 11 895 5346

[email protected]

Judy Padayachee

Technical Strategist+27 11 895 5350

[email protected]

Bulent Badsha

Rates Strategist+27 11 895 5323

[email protected]

BARCLAYS CAPITAL

Piero Ghezzi

Head of Economics and EmergingMarkets Research+44 (0)20 313 42190

[email protected]

Matthew Vogel

Head of Emerging EMEA Research+44 (0)20 7773 [email protected]

Koon Chow

Senior FX Strategist+44 (0)20 777 [email protected]

Christian Keller

Chief Economist - Emerging Europe+44 (0)20 777 [email protected]

Alia Moubayed

Senior Economist Middle East &North Africa+44 (0)20 313 41120

[email protected]

Andreas Kolbe

Credit Strategist+44 (0)20 313 [email protected]

George Christou

EM Strategist+44 (0)20 777 [email protected]

Daniel Hewitt

EMEA Economist+44 (0)20 313 [email protected]

Vladimir PantyushinRussia and CIS Chief Economist

+7 495 78 68450vladimir.pantyushin @barcap.com


14/15

Analyst Certification(s)

We, Ridle Markus, Dumisani Ngwenya and Judy Padayachee, hereby certify (1) that the views expressed in this research report accurately reflect our

personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will bedirectly or indirectly related to the specific recommendations or views expressed in this research report.

Important Disclosures

For current important disclosures regarding companies that are the subject of this research report, please send a written request to: Barclays CapitalResearch Compliance, 745 Seventh Avenue, 17th Floor, New York, NY 10019 or refer to https://ecommerce.barcap.com/research/cgi-bin/all/disclosuresSearch.pl or call 212-526-1072.

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that Barclays Capitalmay have a conflict of interest that could affect the objectivity of this report. Any reference to Barclays Capital includes its affiliates. Barclays Capital and/or

an affiliate thereof (the "firm") regularly trades, generally deals as principal and generally provides liquidity (as market maker or otherwise) in the debtsecurities that are the subject of this research report (and related derivatives thereof). The firm's proprietary trading accounts may have either a long and /or short position in such securities and / or derivative instruments, which may pose a conflict with the interests of investing customers. Where permitted

and subject to appropriate information barrier restrictions, the firm's fixed income research analysts regularly interact with its trading desk personnel todetermine current prices of fixed income securities. The firm's fixed income research analyst(s) receive compensation based on various factors including,but not limited to, the quality of their work, the overall performance of the firm (including the profitability of the investment banking department), the

profitability and revenues of the Fixed Income Division and the outstanding principal amount and trading value of, the profitability of, and the potentialinterest of the firms investing clients in research with respect to, the asset class covered by the analyst. To the extent that any historical pricing informationwas obtained from Barclays Capital trading desks, the firm makes no representation that it is accurate or complete. All levels, prices and spreads are

historical and do not represent current market levels, prices or spreads, some or all of which may have changed since the publication of this document.Barclays Capital produces a variety of research products including, but not limited to, fundamental analysis, equity-linked analysis, quantitative analysis,

and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of researchproducts, whether as a result of differing time horizons, methodologies, or otherwise.


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This publication has been prepared by Barclays Capital, the investment banking division of Barclays Bank PLC, and/or one or more of its affiliates asprovided below. This publication is provided to you for information purposes only. Prices shown in this publication are indicative and Barclays Capital isnot offering to buy or sell or soliciting offers to buy or sell any financial instrument. Other than disclosures relating to Barclays Capital, the informationcontained in this publication has been obtained from sources that Barclays Capital believes to be reliable, but Barclays Capital does not represent orwarrant that it is accurate or complete. The views in this publication are those of Barclays Capital and are subject to change, and Barclays Capital has noobligation to update its opinions or the information in this publication. Barclays Capital and its affiliates and their respective officers, directors, partners andemployees, including persons involved in the preparation or issuance of this document, may from time to time act as manager, co-manager orunderwriter of a public offering or otherwise, in the capacity of principal or agent, deal in, hold or act as market-makers or advisors, brokers or commercialand/or investment bankers in relation to the securities or related derivatives which are the subject of this publication.

The analyst recommendations in this report reflect solely and exclusively those of the author(s), and such opinions were prepared independently of anyother interests, including those of Barclays Capital and/or its affiliates.

Neither Barclays Capital, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for anydirect or consequential loss arising from any use of this publication or its contents. The securities discussed in this publication may not be suitable for all

investors. Barclays Capital recommends that investors independently evaluate each issuer, security or instrument discussed in this publication and consultany independent advisors they believe necessary. The value of and income from any investment may fluctuate from day to day as a result of changes inrelevant economic markets (including changes in market liquidity). The information in this publication is not intended to predict actual results, which maydiffer substantially from those reflected. Past performance is not necessarily indicative of future results.

This communication is being made available in the UK and Europe to persons who are investment professionals as that term is defined in Article 19 of theFinancial Services and Markets Act 2000 (Financial Promotion Order) 2005. It is directed at, and therefore should only be relied upon by, persons whohave professional experience in matters relating to investments. The investments to which it relates are available only to such persons and will be enteredinto only with such persons. Barclays Capital is authorized and regulated by the Financial Services Authority ('FSA') and member of the London StockExchange.

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Subject to the conditions of this publication as set out above, Absa Capital, the Investment Banking Division of Absa Bank Limited, an authorised financialservices provider (Registration No.: 1986/004794/06), is distributing this material in South Africa. Absa Bank Limited is regulated by the South AfricanReserve Bank. This publication is not, nor is it intended to be, advice as defined and/or contemplated in the (South African) Financial Advisory and

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