Monthly Highlights: May 2021

•  West African equity markets exhibited mixed performances as Ghana and Nigeria closed negative whilst the Francophone region was positive
•  In East Africa, equities were positive in the month of May, apart from Rwanda (-0.9%) which was the only East African market that recorded negative performance
•  North African equity markets were dragged lower by Egypt, after Tunisia and Morocco posted strong returns
•  Southern Africa also posted broadly positive returns with only Malawi (-0.6%) reporting negative returns
 

In May, eleven African stock markets posted positive dollar returns, with Zimbabwe (+16.4%), using official interbank rate of ZWL 84.73:USD, Francophone region (+5.7%) and Namibia (+5.2%) posting the strongest gains, whilst Ghana (-5.8%), Nigeria (-3.9%) and Egypt (-1.7%) were the laggards closing in the red. Ghana was largely dragged lower by significant profit taking in MTN Ghana which declined by -8.6%, which is 26% of the GSE market capitalisation and Nigeria’s negative performance came as the Nigeria’s Central Bank (CBN) devalued the naira by 7.6% against the dollar in an effort to migrate towards a single exchange-rate system for the local currency, replacing the fixed rate of NGN 379.00:USD used for official transactions with the more flexible investors and exporters exchange rate (Nafex) that has averaged NGN 410.25 this year.

West African equity markets exhibited mixed performances as Ghana and Nigeria closed negative whilst the Francophone region was positive

West African equity markets exhibited mixed performances as Ghana and Nigeria closed negative whilst the Francophone region was positive. In Nigeria, 1Q21 gross domestic product (GDP) grew by +0.51% y/y, slower than the +1.87% growth rate recorded in 1Q20 but higher than the +0.11% in 4Q20. The non-oil sector rose +0.79% in 1Q21 as telecoms, crop production, real estate, food manufacturing and construction lifted growth in the quarter, whilst the oil sector contracted by -2.21%. The CBN’s Monetary Policy Committee (MPC) maintained the key interest rate at 11.5%, to support the fragile economic recovery, and April 2021 annual inflation slowed for the first time in twenty months to 18.12% from 18.17% in March on lower food inflation which recorded a drop from 22.95% compared to 22.72% in March 2021. On the earnings front, we digested strong 1Q21 results from Nestle Nigeria (T/O: +24.1% y/y; PAT: +10.8% y/y) driven by strong revenues from both the food segment (+26.2% y/y) and beverages segment (+21.0% y/y). Airtel Africa exhibited weak earnings growth in FY21 (T/O: +14.2% y/y; PAT: +1.8%% y/y) as top line growth was offset by an increase in effective tax rate to 40.5% from 31.8% in FY20. In other news, Access Bank Nigeria announced the completion of its acquisition of African Banking Corporation Mozambique, a subsidiary of London Stock Exchange listed, Atlas Mara. In Ghana, the Bank of Ghana cut its benchmark interest rate to 13.5% from 14.5%, citing that inflation risks were muted in the near term. Ivory Coast’s April 2021 inflation rate accelerated from 3.3% in March to 3.9% y/y with upward pressure from food and non alcoholic beverages, housing water and energy and health prices which increased by +5.3% y/y, +4.1% y/y and +4.3% y/y respectively.

In East Africa, equities were positive in the month of May, apart from Rwanda (-0.9%) which was the only East African market that recorded negative performance

In East Africa, equities were positive in the month of May, apart from Rwanda (-0.9%) which was the only East African market that recorded negative performance. In Kenya, the MPC maintained the key interest rate at 7% and the Kenya’s May inflation rate inched higher to 5.87% y/y from +5.76% in April. On the earnings front, Safaricom released FY21 results in line with our expectations (T/O: +0.6% y/y; PAT: -6.8% y/y) driven by flat topline growth as voice (-4.6% y/y), M-Pesa (-2.1%) and SMS (-11.7%) revenues declined, whilst data revenues increased by +11.5% y/y. In 2H21, M-Pesa revenues recovered, growing +10% y/y driven by the return to charging on zero rated M-Pesa transactions in the fourth quarter. In other news, the Ethiopian government awarded the Safaricom-led consortium a telecommunications licence to operate in Ethiopia after submitting a financial bid of USD 850m. Safaricom has a 55.7% stake in the Global Partnership for Ethiopia consortium, followed by Sumitomo Corporation with 27.2%, CDC Group Plc with 10.9% and Vodacom Group Ltd with 6.2%. The licence is for an initial 15 year period with the right to apply for an extension of an additional 15 years. Equity Group Holdings published impressive 1Q21 results (GE: +31.5% y/y; PAT: +63.3% y/y) driven by a strong growth in net interest income (+29.4% y/y) and non-funded income (+30.7% y/y), as well as a -59.3% y/y decrease in loan loss provisions and the inclusion of BCDC following the acquisition of 76% the bank in the DRC. KCB Group reported relatively flat 1Q21 results (GE: -0.6% y/y; PAT: +1.8% y/y) as net interest income growth of +11.1% y/y was offset by a -20.0% y/y decline in non-funded income. Cooperative Bank of Kenya released weak 1Q21 results (GE:-3.0% y/y; PAT: -3.7% y/y) where strong net interest income growth (+30.7% y/y) was offset by a +153.5% y/y growth in impairment charges. Mauritius’s April 2021 annual inflation rate was at a two year low of 0.2% decelerating from 1% in March. On the earnings front, MCB Group posted sturdy 3Q21 results (GE: +0.1%% y/y; PAT: +177.1% y/y) driven by strong growth in non-funded income (+43.6% y/y), alongside a -44.8% y/y decrease in impairment charges. In Rwanda, the Central Bank kept the interest rate unchanged at 4.5% for the fourth straight meeting to continue underpinning economic recovery. On the earnings front, we digested solid 1Q21 results from BK Group (GE: +14.5% y/y; PAT: +79.2% y/y) fuelled by strong topline growth and a decrease in operating expenses (-6.4%y/y) as well as lower loan loss provisions (-12.5% y/y). In Tanzania, April 2021 inflation rate accelerated to 3.3% from 3.2% in March as food and non-alcoholic beverages inflation rate increased to 4.8% in April compared to 4.2% in March. On the earnings front, Vodacom Tanzania released disappointing FY21 results (T/O: -5.6% y/y; PAT: n/a) as mobile voice (-16.5% y/y), M-Pesa (-0.4%) and SMS (-24.8%) revenues decreased, this was further impacted by a +21.1% y/y increase in net finance costs. Uganda's consumer prices decelerated to 1.9% y/y in May from +2.1% in April as food and non-alcoholic beverages fell to -3.5% y/y compared -2.0% in the previous month.

North African equity markets were dragged lower by Egypt, after Tunisia and Morocco posted strong returns

North African equity markets were dragged lower by Egypt, after Tunisia and Morocco posted strong returns. In Egypt, on the earnings front, Commercial International Bank announced mixed 1Q21 results (GE: -7.6% y/y; PAT: +19.8% y/y) where despite a -8.4% y/y decrease in net interest income, profitability was boosted by a -43.4% y/y fall in impairment charges. Oriental Weavers posted impressive 1Q21results (T/O: +21.8% y/y; PAT: +71.4% y/y) as gross profit margin increased to 17.4% from 12.4% coupled with EBITDA margin expansion to 18.5% from 12.7% in 1Q20. El Sewedy Electric reported stellar 1Q21results (T/O: +14.0% y/y; PAT: +75.0% y/y) driven by strong top line mainly from its wires & cables, metres and transformer segments which reported +33.0% y/y, +25.0% and +18.0% y/y growth in revenues respectively. El Sewedy also announced that it completed 95% acquisition of Indonesia’s PT CG Power and 100% of Validus Engineering PVT Ltd in Pakistan and the deals allow it to penetrate the Southeast Asian and Australian markets in line with company’s growth strategy. Integrated Diagnostics Holdings released sturdy FY20 results (T/O: +19.3% y/y; PAT: +20.8% y/y) which we attribute to a +190bp expansion in gross profit margin to 50.5% and lower net financial expense (-77.4% y/y). Tunisia's economy decreased by -3.0% in 1Q21 compared to a -1.7% decline in 1Q20, as the coronavirus pandemic impacted the country's tourism industry.

Southern Africa also posted broadly positive returns with only Malawi (-0.6%) reporting negative returns

Southern Africa also posted broadly positive returns with only Malawi (-0.6%) reporting negative returns. Botswana’s April consumer prices rose +5.6% y/y in April vs. +3.2% in March. In Malawi, the MPC kept the interest rate at 12% to support and sustain economic recovery and inflation rate dropped to 9.2% in April mainly due to food inflation which slowed to 11.5% in April compared with 11.7% a month earlier. In Zimbabwe, May 2021 inflation rate slowed to 161.9% from 194% April and on a monthly basis, inflation was at 2.5% compared to 1.6% increase in April. Zambia’s central bank held the key interest rate at 8.5%, while Namibia’s inflation rate accelerated from 3.1% in March to % in April, as food and non alcoholic beverages prices increased by +5.9% y/y and +0.4% m/m. Mozambique’s central bank kept its benchmark interest rate unchanged at 13.25%, citing rising risks to inflation forecasts because of an insurgency in the north of the country.