Dialectic Africa Analyst

Dear Africa Interested Individuals:                                                           CRDB Bank Tanzania was trading at 125 Tanzania Shilling four years ago and now trades at 385 Tanzania Shilling.  This is a gain in excess of 200% .  Most of the movement actually happened over the past two years.  The bank's debt/capital is just at my maximum of threshold level of 30% and is expected to trend further downward.  NPL ratio of 8% still yielded a pre-tax income margin of 27%.  Its off-balance sheet items are 12% of its assets which is reasonable. CRDB is not the largest bank by assets in Tanzania.   Tanzania's economy is expected to grow close to 7% this year and Uganda just opted to route its crude-oil pipeline through Tanzania as opposed to Kenya for export purposes.  CDC group acquired a stake in CRDB in September 2015.  You may have missed out on the 200% CRDB gain thus far over four years but, this journey appears not to be over .  Over to you.   The lar

Dear Africa interested individuals:                                                                                                               I have mentioned multiple times in the past that retail investors are critical to the positive performance of any developing countries' stock market.  This has largely fallen on deaf ears in Nigeria.  The appeal of foreign portfolio investors with their large briefcases have stolen the hearts and minds of market regulators in Nigeria.   The refusal to raise the domestic retail investor to a major player from a peripheral player has been the bane of the Nigerian market for more than five years now.  This has led to market returns being consistently inconsistent.   The Exchange hierarchy have advised retail investors to invest in mutual funds instead of directly.  I have never been in support of this especially in Nigeria where their operations are shrouded in secrecy with the tacit cooperation of market regulators.   I lo

Dear Africa interested individuals:                                                        Access Bank has released its Q1 2016 earnings.  Let me state some quick observations and comments. 1. Access Bank's loan-value added has gone negative for the first time in over two years in Q1 2016.  Loan value-added is now -0.41% (negative).   It was +1.41% for FY 2015 and +1.09% for FY 2014.  It was also +0.2% for H1 2015.   This is the same quarter the bank gave out fresh loans amounting to about $355 million between January 2nd and March 31st, 2016  in a rising interest rate environment coupled with rising defaults.   2. Debt/Capital has risen from 44.4% at FY 2014 to 52.1% as at Q1 2016.  A bank is relying on capital in which it pays interest and is also depending on interest on loans disbursed to generate revenue.  Its spread will have to widen to make business meaningful.  Risks amplified.   Any bank that has a debt/capital ratio of this magnitude is living life on the edg

Dear Africa interested individuals,                                                          Business people around the world are shouting themselves hoarse for Nigeria to further devalue its currency.  Yes, it was devalued formally in February 2015 to 200 naira from 160 naira to the dollar four - five months prior.  This is a 25% devaluation.   The IMF and foreign investors want more.  The logic is that this will boost revenue oil receipts in local currency terms and help the country to generate more revenue from lower oil prices.   This will also enable foreign investors to bring in $1 million and get 300 million naira instead of 199 million naira presently.   Naira supply will flood the system, further spike inflation and send the naira on a further downward spiral post devaluation.  The naira lost a further 10% after the CBN Governor at the time (Soludo) devalued the currency in one fell swoop in December 2008 by 25% from N120 to the $.   The failure of the governme

Dear Readers :                          Ivory Coast is now the number one darling of investors interested in the continent of Africa.  The country is dependent on soft commodities for majority of its revenue with cocoa leading the way.  The country issued a $1B Eurobond in February 2015 at 6.625 per cent and in July 2014 issued a 10-year $750m Eurobond at 5.625%.  Seven months later debt investors bought more debt at a yield 100 basis points higher with a staggered repayment in 2026, 2027 and 2028.   Kenya , the number two darling of investors and multilateral institutions issued two Eurobonds in 2014 totaling $2.75B and is preparing to issue another one sometime in the second half of 2016.  Kenya is also soft commodity dependent like Ivory Coast with the country being a major exporter of tea and tobacco.  Both countries are also net crude oil importers which is looked at favorably by investors given the crude oil price decline over the past twelve months. Kenya's 2014 Eur

Dear Readers:                         On August 31, 2015, I published an article on this blog titled: "Brazil and Nigeria with a cameo from Ethiopia..."  The original article is still available on this blog for your reference.  I advise you to read/reread it before completing your visit to the blog.       On Saturday April 9th, I stumbled upon an article on page A12 in the weekend print edition of the Wall Street Journal (WSJ).  The article is titled: "Farms are Brazil's One Bright Spot."  The theme of the WSJ article is "Agriculture is the only sector growing as country faces political chaos and recession."  Brazil's economy contracted at its fastest pace in 35 years in 2015.   Brazil's crop agency, Conab, recently said it expects a record soybean crop for 2016.  A similar feat is expected for sugar cane, coffee and corn.  Exports of poultry is also expected to reach new heights. Agriculture was the only sector of Brazil's econo

Dear Readers:                         Nestlé Switzerland is cutting 15% of its workforce across twenty-one African countries because it overestimated the rise of Africa's middle class.  Nestlé says Africa's middle class is in hindsight actually extremely small and it is not really growing anywhere close to the rates in the studies they reviewed before deciding to expand capacity.  The cuts began in 2015.   Nigeria is not included among the twenty-one African countries where a reduction in workforce is expected.  Nigeria is said to have a middle class of about 8 million people.  This is less than 5% of its current population.  Barclays increased its shareholding in Absa Group from 55.5% to 62.3% in 2013 and in the same transaction handed over ownership of its banking operations in eight African countries to Absa.  Despite this, Absa did not rebrand to Barclays in South Africa.  Barclays Africa Group continued to remain a multi-branded banking group instead of the envisa