Weekly Investor Update (August-WeekFive-2024)

17 min Read August 30, 2024 at 5:00 PM UTC

Monday

Emerging Markets Stocks Rally as US Signals Imminent Rate Cuts

Emerging stocks advanced on Monday, led by Chinese tech giants, after Federal Reserve Chairman Jerome Powell indicated that USinterest rateswould be cut starting next month.TheMSCI Emerging Markets(EM)indexrose 0.6%, marking its highest level in five weeks, buoyed by gains inTencent HoldingsandAlibaba Group.Developing currencies showed mixed performance against the dollar, with the Thai baht and Malaysian ringgit leading the gains.

Powell’s signal of impending US rate cuts has reignited interest in emerging markets, particularly in tech-heavy stocks like Tencent and Alibaba. This anticipated monetary easing could enhance the appeal of riskier assets, potentially narrowing the gap between emerging market equities and their US counterparts, which have outperformed this year. However, the pace of rate reductions will be closely watched by investors, as it will dictate future capital flows into emerging markets, influencing both equity and currency performance in these regions.

Nigerian GDP Expands 3.2% in Second Quarter on Services Sector

Nigeria’s Gross Domestic Product (GDP) grew by 3.19% year-on-year in real terms during the second quarter of 2024, surpassing the 2.51% growth in Q2 2023 and 2.98% in Q1 2024.The performance was largely fueled by higher crude production and the services sector, which expanded by 3.79% and contributed 58.76% to the total GDP.This marks a significant boost in Nigeria’s economic momentum, highlighting the Services sector’s critical role in driving the nation’s growth.

The services sector’s strong performance underscores its increasing importance in the Nigerian economy, contributing nearly 60% to the GDP. This growth trajectory suggests that Nigeria is on a path to further economic stabilization, with the sector emerging as a key pillar. The year-on-year improvement signals positive momentum, which, if sustained, could enhance investor confidence and foster broader economic diversification in the country. Nigerians are facing one of the West African nation’s worst economic crises in years triggered by surging inflation, the result of monetary policy reforms that have pushed the currency to an all-time low against the dollar and the removal of fuel subsidy. The situation has provoked anger and protests across the country.

BRVM Stock Market Hits 7-Year High as Telecom Rivalry Spurs Rally

A rivalry for market leadership on the BRVM stock market between telecom giants Sonatel and Orange Côte d’Ivoire helped the benchmark Composite index up to a 1.93% gain last week.The market closed at 252.92 points, a recovery from theprevious week’s slight dipof 0.16%. The index has now reached a level not seen since 2017, reflecting the heightened investor interest spurred by the telecom sector’s performance.Sonatel’s stock (SNTS) rose by 2.25% to 22,495 FCFA, while Orange CI (ORAC) surged by an impressive 6.21% to 14,875 FCFA. These gains were mirrored in the BRVM 30 and BRVM Prestige indices, which climbed by 2.19% and 1.49% to 127.18 points and 113.10 points, respectively, both reaching new all-time highs since their introduction.

In addition to the telecom sector’s strong performance, the financial sector also made headlines with Coris Bank International BF and NSIA Banque CI reporting their first-half 2024 results. Coris Bank BF demonstrated resilience with a slight profit increase of 1.1%, reaching 33.5 billion FCFA, up from 33.2 billion FCFA in the same period last year. NSIA Banque CI, however, outshone with a robust 27.5% profit growth, totaling 14.5 billion FCFA. Overall, total market capitalization rose to 9,409.29 billion FCFA, up from 9,231.23 billion FCFA last Friday, underscoring the market’s bullish momentum fueled by the telecom sector’s ongoing duel and strong financial performances.

Ivorian Lender NSIA Banque CI Posts 28% Net Income Growth

BRVM-listed NSIA Banque Côte d’Ivoire reported a 27.5% increase in net income for the first half of 2024, reaching 14.53 billion FCFA ($25 million).The bank’scommercial strategy played a crucial role, with customer loans expanding by 6% to 1,382 billion FCFA as of June 30, 2024. This growth was complemented by a 7% increase in deposits, which totaled 1,511.4 billion FCFA.NSIA Banque CI (NSBC) also achieved a notable 46.7% rise in commissions, amounting to 17.5 billion FCFA, effectively offsetting a 4.5% decline in the interest margin, which stood at 28.2 billion FCFA. Overall, net banking income surged by 10.3%, reaching 45.7 billion FCFA.

NSIA Banque CI’s first-half 2024 results underscore its resilience and strategic acumen in a challenging environment. The bank’s solid growth in loans and deposits, coupled with a sharp rise in commissions, enabled it to maintain profitability despite a slight dip in interest margins. The significant reduction in non-performing liabilities and a well-managed risk portfolio highlight the bank’s commitment to asset quality, providing a robust foundation for future growth. Looking ahead, NSIA Banque CI aims to capitalize on its strong market position by exploring new strategic partnerships and opportunities. However, it remains mindful of macroeconomic uncertainties and potential regulatory shifts that could influence its operations.

African B2B E-Commerce Giants Wasoko, MaxAB Complete Merger

Two of Africa’s largest B2B e-commerce platforms, Kenya-basedWasokoand Egypt-basedMaxAB, have finalized their merger, TechCrunch reports, creating a combined entity to capture Africa’s $600 billion informal retail market.This development follows eight months of negotiations, beginning inDecember, and integrates 16 subsidiaries across multiple countries. Notable investors likeTiger Global,Silver Lake,Avenir, andBritish International Investmenthad collectively invested over $240 million in the companies before the merger.Wasoko and MaxAB have scaled back their operations from eight to five markets—Egypt, Kenya, Morocco, Rwanda, and Tanzania—reflecting broader trends in the B2B e-commerce space amid funding challenges.

The merger between Wasoko and MaxAB represents a significant consolidation in the continent’s informal retail sector. With backing from major investors, the newly combined entity is positioned as a leader in Africa’s informal retail market. Despite scaling back operations in response to industry-wide challenges, the merger strengthens the companies’ market presence with the continent’s largest B2B informal retailer network, with over 450,000 merchants, although active users number around 200,000. The retrenchment to five key markets also reflects a strategic focus on sustainable growth in a challenging funding environment.

Orange CI Drags BRVM Indices Down Amid Profit-Taking

The Bourse Régionale des Valeurs Mobilières (BRVM) experienced a notable decline on Monday, led by a significant drop in Orange Côte d’Ivoire shares.The telecom giant’s stock (ORAC) fell by 5.21% to 14,100 FCFA, resulting in a capitalization loss of 116.76 billion FCFA ($199 million). This sharp decline pulled down the BRVM Composite and BRVM 30indices, which dropped by 1.42% and 1.60%, closing at 249.33 points and 125.15 points, respectively.The decline in Orange CI is largely attributed to profit-taking by investors following recent gains. The stock’s decline positioned it among the day’s biggest losers, alongside Ecobank Group (ETIT) (-5.88% at 16 FCFA) and BOA Mali (BOAM) (-2.68% at 2,000 FCFA).

The BRVM’s performance on Monday was heavily influenced by the sharp decline in Orange CI shares, which led to a significant drop in both the BRVM Composite and BRVM 30 indices. The decline underscores the impact of profit-taking on market dynamics, particularly for stocks that have experienced recent gains. Despite this, the market saw notable performances from Total SN, Bernabé, and NSIA Banque CI, with the latter reaching a two-year high. The high trading volume in Orange CI shares reflects continued investor interest, albeit with a focus on realizing gains in the short term. Meanwhile, Sucrivoire’s planned bond issue and capital increase highlight ongoing corporate strategies to strengthen financial stability and support growth initiatives in the region.

Naspers Sees E-Commerce Boosting South Africa’s Economy by $5.2bn

Africa’s largest company by market value, Naspers, projects that e-commerce and other digital platforms could contribute 91.4 billion rand ($5.2 billion) to the South African economy by 2035. A joint research report byNaspersand the Mapungubwe Institute for Strategic Reflection (Mistra) finds this growth could account for 1.38% of the nation’s GDP within the next decade.Naspers, the owner of South Africa’s leading online retailer,Takealot, is expanding its services to include one-hour deliveries, positioning itself against Amazon, whichrecently enteredthe local market.The anticipated economic injection could occur sooner if South Africa’s growth rates rise to around 3%. Current growth has been stymied by energy shortages and collapsing infrastructure, limiting the economy’s ability to capitalize on its youthful population and upper-middle-income market.

Naspers’ vision for South Africa’s digital economy highlights the potential for significant economic growth through the expansion of e-commerce and digital platforms. With projections of a $5.2 billion contribution to GDP by 2035, the company’s initiatives, particularly through its online retail arm Takealot, reflect a broader shift toward digitalization in the country. This growth could create up to 340,000 jobs, addressing one of the world’s highest unemployment rates. However, realizing this potential will require accelerated reforms, infrastructure investment, and sustained economic growth. Naspers’ shares have gained over 16% this year, valuing the company at 662 billion rand, as of Tuesday afternoon.

Starlink Cuts Off South Africans as Regulatory Hurdles Prevent Rollout

Starlink, SpaceX’s satellite broadband service, has cut off users in South Africa who were accessing the service via regional roaming, as the company enforces restrictions on its usage outside the registered country.This move comes just as Starlink prepares to launch in Ghana by August 2024 and in Zimbabwe on September 1, 2024. South African users received a second warning from SpaceX, stating that those using the service outside their registered country for more than two months would be disconnected from August 21, 2024.Currently,Starlinkis not officially available in South Africa, and the only way to access the service is through a roaming subscription. But this method is technically unlawful as Starlink does not have the required network, spectrum, or operating licenses in the country. Starlink’s launch in South Africa has been pushed back indefinitely amidregulatory challenges.

Starlink’s delayed entry into South Africa highlights the challenges faced by international companies navigating local regulatory landscapes. Despite launching in neighboring countries, Starlink remains unavailable in South Africa due to unresolved issues related to black ownership requirements, which may have contributed to the indefinite postponement of its launch. The situation is further complicated by SpaceX’s recent directive to disconnect users operating Starlink outside their registered country for extended periods. While Starlink’s services are accessible in South Africa through roaming, the absence of official licenses or local partnerships renders this practice unlawful. The outcome of these regulatory challenges will likely influence the broader deployment of satellite internet services in Southern Africa.

Mpox Vaccines to Start Arriving in Congo From September 1

Mpox vaccines are expected to arrive in the Democratic Republic of Congo from September 1, as the region battles adeadly outbreakthat has escalated into a global health emergency.Africa Centres for Disease Control and Prevention (Africa CDC) Director General Jean Kaseya announced on Tuesday that around 380,000 vaccines have been secured, with distribution plans targeting vulnerable populations.The vaccine deployment coincides with the World Health Organization’s (WHO) launch of a preparedness and response plan on Monday. The WHO is seeking $87.4 million in initial funding to support the first six months of the program, aiming to curb human-to-human transmission of mpox.

The outbreak, originating from a new strain in Congo, has driven the number of cases in Africa to nearly 23,000, up from 19,000 last week, with 622 deaths reported. Gabon confirmed its first case last week, linked to a traveler from Uganda. Despite these developments, international travel restrictions have not been imposed. The urgency of vaccine distribution in Congo underscores the critical need for swift and coordinated global efforts to halt the disease’s spread and protect vulnerable populations.

Fitch Warns Mpox Surge in Africa May Strain Economies

The escalating mpox outbreak in sub-Saharan Africa could negatively impact economic activity and strain fiscal metrics in affected countries, according to Fitch Ratings. The virus has caused over 575 deaths in the Democratic Republic of Congo this year, the epicenter of the outbreak, and has spread to at least eight other African nations, as well as Sweden and Thailand.The World Health Organization (WHO) has declared the outbreak a global health emergency, with public health officials noting that it could have been prevented. Fitch Ratings warned that a significant increase in mpox cases could disrupt consumption and production, potentially leading to challenges in managing inflation, particularly if food production or logistics are affected.The ratings agency also noted that increased government spending on healthcare and epidemic prevention, coupled with weaker economic activity, could widen budget deficits and depress tax revenues. Vaccines areexpected to arrive in the DRC from September 1, Africa Centres for Disease Control and Prevention (Africa CDC) Director General Jean Kaseya said on Tuesday.

The spread of a new strain of mpox from Congo has increased the total number of cases in Africa this year to nearly 23,000, up from about 19,000 last week. This strain appears to be sexually transmitted, as well as through other forms of close contact, and can cause severe health outcomes, including blindness, disfigurement, and death. Fitch also noted that the mpox outbreak could hurt Africa’s tourism sector, which is vital to the economies of Kenya, Rwanda, and Uganda. Tourism accounts for 11% to 20% of these countries’ total goods and services export earnings, according to United Nations data. The outbreak’s impact on tourism could further strain public finances in these nations, Fitch warned.

Starlink Starts Operations in Botswana, Ghana After Securing Licenses

Starlink, SpaceX’s satellite internet service, has been granted an operating license in Botswana, marking a significant step in itsrocky African expansion. The approval, announced this week, follows a complex process that began with an application in May 2023 and a recent announcement that Starlink will begin operations in Ghana by the end of August.Botswana initially rejected the application in February 2024, citing missing information and imposing a ban on the use and sale ofStarlinkservices. The ban waslifted in Mayafter a meeting between SpaceX representatives and Botswana’s president at a US business event.Botswana is set to become the sixth Southern African country to host Starlink, joining Zambia, Eswatini, Malawi, Mozambique, and Madagascar. Meanwhile, itcut off users in South Africawho were accessing the service via regional roaming.

Starlink’s progress in securing an operating license in Botswana represents a critical step in its broader African expansion, reflecting the company’s growing footprint across the continent. Despite regulatory challenges, including a temporary ban, Starlink’s persistence has paid off, allowing it to add another country to its service map. However, the service’s high cost could limit its reach in the low-income, remote areas it aims to serve. Starlink’s introduction of a rental plan in Kenya is a strategic move to overcome these barriers, potentially boosting adoption among users who may find the upfront costs prohibitive. As Starlink continues to expand across Africa, its ability to balance affordability with access will be crucial to its success.

Zambia’s Inflation Hits 32-Month High Amid El Niño-Induced Drought

Zambia’s annual inflation rate reached a 32-month high in August, driven by an El Niño-induceddroughtthat has sharply increased food prices.Consumer prices rose 15.5%, up slightly from 15.4% in July, according to Statistician-General Goodson Sinyenga. Month-on-month inflation moderated slightly, with prices rising 0.9% compared to 1% in July.The ongoing drought has severely impacted Zambia’s economy, damaging crops, reducing hydropower generation, and leading to costly imports that have weakened thekwacha. Food prices, which constitute more than half of the inflation basket, increased to 17.6% from 17.4% in July, while non-food price growth slowed to 12.5% from 12.6%.

The drought complicates the central bank’s efforts to bring inflation back within its target range of 6% to 8% by next year. This month, the central bankheld its key interest rateat a seven-year high of 13.5% after six consecutive hikes totaling 450 basis points. The bank is also working on measures to limit the use of foreign currency in domestic transactions to support the kwacha. Last week, the energy regulator rejected a proposed 156% increase in electricity tariffs by state power utility Zesco, intended to cover the cost of emergency supplies. This averted a potential further spike in inflation.

Rand Hits 13-Month High on SA Economic Optimism, Rate-Cut Expectations

The South African rand reached a 13-month high on Friday, climbing 0.8% to 17.6069 per dollar, its strongest level since July 2023. This marks a 4.3% gain for the currency in 2024, the best performance among emerging markets after Malaysia’s ringgit, per Bloomberg.The rand’s rally follows positive sentiment around South Africa’s economic prospects after the May 29electionled to acoalitionbetween the African National Congress and the Democratic Alliance, raising hopes for economic reforms.In addition, easing electricity outages and expectations of Federal Reserve interest rate cuts are attracting investors to South African assets, with 16.4 billion rand ($930 million) flowing into the country’sdebtmarket in the past five days.

The rand’s rise is underpinned by improved economic conditions in South Africa, including a potential end to load-shedding and expectations of disinflation. The currency is also benefiting from anticipated rate cuts by the Federal Reserve, which makes South African assets, especially rand bonds, more attractive. The SARB forecasts economic growth of 1.1% in 2024 and 1.5% in 2025, with inflation expected to slow, which could lead to further interest rate cuts and sustained investor interest in the rand. This positive outlook for South African assets is bolstered by ongoing fiscal consolidation under the new government, reducing downside risks.

Nigerian SEC Grants First Preliminary Approval to Two Crypto Exchanges

The Securities and Exchange Commission (SEC) of Nigeria has granted provisional approval to two digital asset exchanges,BushaandQuidax. This approval, granted under the Accelerated Regulatory Incubation Programme (ARIP), marks a significant step for both companies as they begin operations in Nigeria’sevolving digital asset market.Busha facilitates cryptocurrency transactions using fiat currency through its mobile and web applications. Users can engage in activities like buying, selling, storing, and trading cryptocurrencies. Quidax operates a cryptocurrency trading platform that lists and trades existing crypto tokens using its proprietary blockchain.In addition to Busha and Quidax, five other firms, including Trovotech and Dream City Capital, have been admitted to theSEC’sRegulatory Incubation Program (RI), which evaluates business models and tests innovative digital asset products under SEC supervision.

The crypto landscape in Nigeria has been tumultuous. Following a ban on crypto-related banking transactions by the Central Bank of Nigeria (CBN), the government accused traders of manipulating the naira through P2P trading. In early 2024, reports emerged of crypto exchanges seeking licenses from the Securities and Exchange Commission (SEC) after the CBN lifted its two-year ban. However, by May, the SEC directed exchanges to remove the naira from P2P trading. This regulatory back-and-forth highlights the ongoing challenges for crypto adoption in Nigeria. For crypto services to fully integrate into the country’s financial system, alignment between the SEC and CBN’s regulatory approaches is crucial. The situation underscores the complex interplay between innovation, financial stability, and regulatory oversight in the evolving Nigerian crypto market.

South Africa’s Omnisient Raises $7.5M to Expand Privacy Tech Globally

Omnisient, a South African startup specializing in privacy-preserving data collaboration, has secured $7.5 million in Series A funding to fuel its expansion across Africa and into new markets globally.Founded in December 2019,Omnisientoffers a platform enabling data owners and users to collaborate to extract commercial insights without compromising consumer privacy. The technology allows data analysis within a controlled, secure environment.The investment comes fromArise, an investment company focused on advancing financial inclusion by supporting African financial service providers and fintechs. This funding will enable Omnisient to expand its footprint to markets in the UK, the US, and the Middle East.

Omnisient’s funding round highlights the growing importance of privacy-focused data solutions in financial services. The company’s expansion plans indicate a rising demand for secure data collaboration, especially in emerging markets. Omnisient is positioned to play a critical role in financial inclusion by protecting consumer data while enabling insights. Its technology empowers financial institutions to make informed decisions, particularly in underserved markets, where traditional credit assessments are challenging. The investment from Arise underscores a broader trend toward leveraging technology to improve access to financial services across Africa and beyond.

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Articles do not reflect the views of DABA ADVISORS LLC and do not provide investment advice to Daba’s clients. Daba is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.