Weekly Investor Update (August-WeekFour-2024)

16 min Read August 23, 2024 at 5:00 PM UTC

Monday

BRVM stock market rally halts on Nestle, SIB dip

The benchmark BRVM Composite index experienced a slight decline of 0.16% to close at 248.13 points last week, following a robust rally in July that saw the index gain 3.90% andsurpass the 9 trillion FCFA markearlier in August.This modest correction was driven by significant losses in the market capitalizations ofSIB(-6.69% to 6,000 FCFA) andNestlé CI(-6.84% to 7,150 FCFA), which saw their values drop by 21.50 billion FCFA and 11.59 billion FCFA, respectively.The BRVM 30indexalso fell by 0.23% to 124.45 points, ending a two-week winning streak, while the Prestige index decreased by 1.20% to 111.44 points, wiping out the gains made in the previous week.

In just four trading sessions, the total transaction volume on the BRVM significantly surpassed that of the previous week. The trading volume reached 3.26 billion FCFA, marking a substantial increase of 62.19% compared to the 2.01 billion FCFA traded the previous week. Sonatel continued to be the most actively traded stock, accounting for 42.4% of the total volume, equivalent to 1.38 billion FCFA. Other stocks that attracted considerable attention included SIB with 186.99 million FCFA, Palm CI with 182.38 million FCFA, and BOA BF with 183.99 million FCFA in trades. Overall stock market capitalization contracted by 15.01 billion FCFA, settling at 9,231.23 billion FCFA, down from 9,246.25 billion FCFA recorded last Friday.

MTN posts first loss in eight years on currency devaluations

MTN Group, Africa’s largest wireless carrier by revenue, posted a loss of 7.39 billion rand ($414.7 million) for the first half of 2024, marking its first loss since 2016. This loss contrasts sharply with a profit of 4.14 billion rand recorded in the same period last year.The financial setback is primarily due to thedevaluation of the Nigerian naira, which significantly reduced income from one of MTN’s key markets. Currency devaluations in other regions, including South Sudan, also further impacted earnings.Despite these challenges,MTNmanaged to increase its total customer base by 0.8% to 288 million. This growth occurred even as the company exited Afghanistan and faced a decline in users due to the ongoing conflict in Sudan. The last time MTN reported a loss was in 2016, following a hefty fine of over $1 billion imposed by the Nigerian government.

Since President Bola Tinubu took office in May 2023 and began implementing foreign exchange and economic reforms, the Nigerian naira has plummeted by more than 70% against the dollar. This significant devaluation has heavily impacted MTN Group, which relies on Nigeria for about a third of its earnings, with around 77 million customers in the country. In response to these challenges, MTN is considering exiting additional markets, including its unit in Guinea Conakry, and is actively engaged in talks regarding this potential move. The company also plans to reduce its stake in its Nigerian operations to as low as 65% by selling shares to local investors, as part of its broader strategy to adapt to the changing economic landscape.

BII partners with DP World to build Congo’s first deep-sea port

DP World and the British government’s development-finance arm are set to break ground on a deep-sea port in the Democratic Republic of Congo as the Emirati logistics company expands its footprint in Africa,Bloombergreported.British International Investment (BII) is investing $35 million in DP World’s infrastructure project at the Port of Banana, where the Congo River meets the Atlantic Ocean, following previous collaborations between the two entities in Somaliland, Egypt, and Senegal.The project expandsDP World’s presence in Africa, where the company plans toinvest$2 billion in port infrastructure and $1 billion in its logistics operations over the next three to five years to support long-term growth.

Africa’s wealth of natural resources, particularly in oil and gold, is attracting significant investment as global demand for critical minerals, such as copper from Zambia and the Democratic Republic of Congo (DRC), continues to surge. This demand is driving the need for enhanced logistics infrastructure across the continent. In the DRC, efforts are underway to upgrade the country’s basic infrastructure, with a key project set to add a 600-meter quay with an 18-meter draft, capable of accommodating the largest vessels currently in operation. The project, spearheaded by DP World, is expected to boost container handling capacity to approximately 450,000 units. However, a company spokesperson has not disclosed the timeline for the completion of this development.

Kenya Airways makes first half-year profit in over a decade

Kenya Airways reported its first half-year profit in over a decade, driven by an increase in passenger numbers and favorable currency conditions.Theairlineposted a profit after tax of Ksh513 million ($4 million) for January to June, a significant turnaround from a Ksh21.7 billion loss in the same period in 2023. Chief Executive Allan Kilavuka attributed the profit to a 22% rise in revenue, bolstered by a 10% increase in passenger numbers.The airline benefited from a strongerKenyan shilling, which rallied earlier in the year after the government successfully issued a new international bond to avoid defaulting on another bond due in June. The company expressed optimism about potentially breaking even for the full year.

Kenya Airways, one of Africa’s three largest airlines, fell into insolvency in 2018 after an ambitious expansion drive left it burdened with hundreds of millions of dollars in debt. The situation worsened during the COVID-19 pandemic, as the collapse in international travel severely impacted revenue. Additionally, a sharp weakening of the Kenyan shilling and rising interest rates made it increasingly difficult for the airline to service its debt. Kenya Airways has been operating at a loss since 2013, struggling to regain financial stability amid these challenges.

BRVM-listed CFAO Motors to pay out over $5m in dividends

The Ivorian unit of CFAO Motors is distributing 3.20 billion FCFA ($5.4 million) to its shareholders in dividends for the last financial year, which will be paid from August 30.That represents a distribution rate of 50% after the BRVM-listedcompany(CFAC) posted a net profit of 6.40 billion FCFA, an increase of 15.65% compared to the 5.53 billion FCFA in the previous year.With a net dividend of 15.88 FCFA per share and a share price of 665 FCFA on August 16, the dividend yield stands at 2.39%.

CFAO Motors Côte d’Ivoire is currently the 19th most valuable stock on the BRVM with a market capitalization of XOF 120 billion. Its stock continues a downward trend, having lost more than 20.83% since the beginning of the year with its price set at 665 FCFA at the close of August 16, 2024. The company remains a market leader in the Ivorian automobile distribution market, with a share of 47.3% in 2023.

Qatar Airways acquires 25% stake in South Africa’s Airlink

Qatar Airways said on Tuesday that it is acquiring a 25% stake in Africa’s Airlink, a privately owned regional airline operating in southern Africa.This investment will enableAirlinkto expand its operations into new markets, particularly in East and West Africa, according to Airlink’s Chief Executive Rodger Foster.This acquisition adds toQatar Airways’ growing portfolio of minority holdings in other airlines. It currently flies to 29 destinations across Africa and has experienced significant growth in the market, with nine new destinations added since December 2020.

Qatar Airways continues its strategic expansion in Africa with a series of acquisitions, including the finalization of a 49% stake in RwandAir. In addition to this, the carrier will hold a 60% stake in a new airport under construction near Rwanda’s capital, Kigali, aiming to capitalize on the continent’s growing travel demand. These moves are part of Qatar Airways’ broader strategy to increase its presence in key markets worldwide. Beyond Africa, Qatar Airways is also the largest shareholder in International Airlines Group (IAG), the parent company of British Airways, and holds stakes in Latam Airlines Group and Cathay Pacific Airways. The airline is currently in discussions to acquire about 20% of Virgin Australia Airlines, further expanding its global reach.

Daba partners Fundr to enable US investors back African ventures

Daba, Africa’s leading multi-asset investment infrastructure provider, is working with US-based investment platform Fundr to make African investment opportunities accessible to accredited American investors throughFundr.Dabaoffers a wide range of investment products, including a real investing app for individual investors, institutional services, and APIs that enable tech companies to integrate savings and investing products into their offerings.Meanwhile, Fundr’s platform leverages data and AI to enhance decision-making, eliminate bias, and improve efficiency in seed investing. It supports investors of all sizes by analyzing opportunities, optimizing the investment process, and providing real-time insights into their portfolios.

The African venture capital ecosystem has experienced significant expansion, with funding soaring by 1,597%, from $277 million in 2015 to $4.7 billion in 2023. This dramatic increase underscores the continent’s flourishing tech startup landscape, fueled by a young, tech-savvy population and rising smartphone penetration. Africa’s demographic dividend, coupled with rapid digital transformation, makes it an attractive investment destination. With over 60% of the population under 25 and mobile internet users projected to reach 475 million by 2025, Africa is well-positioned for sustained innovation and growth in the coming years.

Nigeria’s SEC to issue first crypto exchange licenses this month

Nigeria’s Securities and Exchange Commission (SEC) is preparing to license issuers of virtual assets, including cryptocurrencies, as demand continues to surge across the country, according to Bloomberg.The initiative marks a significant step in the formal regulation of digital assets in one of Africa’s largest economies. SEC Director-General Emomotimi Agama stated that the regulator aims to issue its first licenses for digital services and tokenized assets as soon as this month.This move is in response to the rapidly growing market for cryptocurrencies in Nigeria, with Agama highlighting the substantial and expanding market size.

Nigeria is aligning itself with other nations that have implemented or are moving towards licensing regimes for cryptocurrency companies. South Africa and Botswana have already taken steps in this direction, while Ghana has issued draft guidelines for crypto regulation. Internationally, France introduced a new regulatory framework earlier this month, and the UK has been registering crypto companies under its anti-money laundering rules since 2020, with more specific regulations expected. Nigeria also plans to introduce a bill by September that would enable the government to tax cryptocurrency transactions. Meanwhile, the country is takinglegal action against the crypto exchange Binancefor alleged tax evasion and money laundering, with one of Binance’s executives currently held in prison on money laundering charges.

South African rand slips as appetite for emerging markets assets wanes

Emerging-market assets exhibited mixed performance on Tuesday as the momentum from last week’s surge in demand for risk assets began to fade, with investors eyeing the upcoming Federal Reserve’s annual Jackson Hole meeting.Among currencies, the Indonesian rupiah, Thai baht, and Colombian peso outperformed their peers. In contrast, the Brazilian real, Mexican peso, and South African rand were the day’s biggest losers, each weakening by 0.9% against the US dollar.The overall MSCI Emerging Markets (EM) currencyindexremained relatively stable, while the MSCI EM stock index saw a modest gain, constrained by a decline in Latin American equities.

This cautious sentiment reflects market participants’ anticipation of potential signals from the Fed regarding future monetary policy. Larger reductions in US borrowing costs could prompt policymakers in developing countries to adopt a more aggressive approach to easing their monetary policies, aiming to maintain competitive economic conditions and manage capital flows. The global financial community is closely monitoring these developments, as they could significantly influence emerging markets’ economic strategies and financial stability.

Visa backs Kenyan HR and payroll startup Workpay in $5m round

Kenyan HR and payroll startupWorkpayhas secured $5 million in Series A funding, led by pan-African venture capital firm Norrsken22.The raise also saw participation from Visa and existing investors likeY CombinatorandSaviu Ventures, and brings Workpay’s total raised to nearly $10 million since its inception in 2019.The company plans to use the funds to expand its financial services offerings, enhance its performance management tools with AI, and grow its workforce, further strengthening its position in the HR tech space in Africa.

Managing payroll in Africa presents unique challenges due to varying regulations, the rise of remote and hybrid work, and the reliance on outdated tools like Excel and Google Sheets by around 80% of small and medium-sized businesses. These businesses often find it difficult to afford or maintain complex payroll systems, while on-site third-party solutions offer limited features, and global platforms like Rippling and Gusto are not always well-suited to the African market. Local solutions, such as YC-backed Workpay, have emerged as valuable alternatives, offering tailored, affordable, and user-friendly payroll management systems that address the specific needs of businesses on the continent. This local focus allows companies like Workpay to thrive, providing tools that are better aligned with the regulatory and operational complexities of African businesses.

Canada’s Lucara finds world’s second-largest diamond ever in Botswana

A rough 2,492-carat diamond, the second-largest ever discovered, has been unearthed in Botswana at the Karowe mine, operated by Canadian firmLucara Diamond.This find marks the biggest diamond discovery since the 3,106-caratCullinan diamondwas found in South Africa in 1905, which was later cut into nine separate stones, many of which are part of theBritish Crown Jewels.Located about 500km (300 miles) north of Botswana’s capital, Gaborone, the Karowe mine has once again solidified Botswana’s status as a major player in the global diamond industry. The Botswana government has confirmed that this is the largest diamond ever discovered in the country.

The previous largest diamond discovered in Botswana was a 1,758-carat stone, also found at Lucara’s Karowe mine in 2019. The Karowe mine is renowned for producing some of the world’s largest diamonds. In 2015, it yielded the 1,109-carat Lesedi La Rona, which was then the second-largest diamond ever discovered and eventually sold for $53 million. Another significant find from the same mine was an 813-carat stone that set a record by fetching $63 million. Botswana is a major player in the global diamond industry, responsible for about 20% of the world’s diamond production, solidifying its status as one of the top diamond producers globally.

Ghana kicks off construction of $12bn petroleum hub

Ghanaian President Nana Akufo-Addo officially commenced the construction of a 300,000 barrel-per-day oil refinery in Jomoro, a southwestern city, aiming to transform Ghana into a regional petroleum hub.The $12 billion project, which is being funded and constructed by a consortium that includesTouchstone, UIC Energy,China Wuhan Engineering, and China Construction Third Engineering Bureau, is expected to play a significant role in the country’s development.Akufo-Addo highlighted the project’s importance during the groundbreaking ceremony, stating that it will serve as a cornerstone of national development. However, critics have voiced concerns, questioning the project’s viability and long-term benefits.

Ghana, the world’s second-largest cocoa producer, entered the oil industry in 2010 and currently produces approximately 132,000 barrels per day (bpd) of crude oil and about 325 million standard cubic feet of natural gas per day. West Africa’s oil consumption stands at around 800,000 bpd, with nearly 90% of that being imported, according to the African Refiners and Distributors Association. The Ghanaian government’s petroleum hub project aims to meet this regional demand by 2036, as outlined in an agreement signed in June 2018. The refinery is expected to significantly reduce the region’s dependence on imported petroleum products, positioning Ghana as a key supplier in West Africa.

Nigeria’s remittance inflows hit record high at $553m in July

Data from the Central Bank of Nigeria reveals that remittance inflows reached a new high of $553 million in July this year, representing a significant 130% year-on-year increase.This growth in remittances is seen as a positive outcome of the CBN’s efforts to stabilize the country’s forex market. A raft ofpolicy reformsaimed at boosting liquidity in the foreign exchange market has been issued over the past year.These have involved streamlining processes, onboarding more International Money Transfer Operators (IMTOs), and implementing measures to increase the supply of foreign currencies.

The growth in Nigeria’s diaspora remittance figures offers the apex bank more firepower to meet the increasing demand for FX amid the country’s ongoing forex shortage crisis. Beyond that, however, the trend gives credence to several remittance-focused tech startups—like NALA, Chipper Cash, Zazuu, and Sendwave looking to capture some market share from dominant traditional players that control as much as 80% of the market—and Pangea, Daba Finance, and Bantaba, which aim to address help startups source capital by connecting founders with the diaspora wealth through digital infrastructures.

Botswana central bank cuts interest rate again by 25 basis points

Botswana’s central bank reduced its key lending rate for the second consecutive meeting on Thursday, signaling room to ease monetary policy as the economy remains underperforming.TheBank of Botswanalowered its Monetary Policy Rate by 25 basis points to 1.90%, following a similar cut in June.Governor Cornelius Dekop explained that the decision reflects ongoing expectations that Botswana’s economy will continue to operate below capacity in the medium term, thereby not generating significant demand-driven inflationary pressures.

The move is part of broader efforts to stimulate economic activity amid subdued growth. In July, Botswana’s consumer inflation accelerated to 3.7% year-on-year from 2.8% in June, remaining within the central bank’s medium-term target range of 3% to 6%. Despite this increase, inflation is projected to average 3.0% for 2024, a slight decrease from the 3.6% forecasted by the Bank of Botswana during its June meeting. Governor Cornelius Dekop emphasized that the current inflation levels still allow for the continued easing of monetary policy, as the overall economic environment remains subdued.

Solarise gets $8.9m funding from Mergence for renewable energy push

Solarise Africa, an energy-as-a-service provider catering to businesses across Africa, has secured an $8.9 million investment fromMergence Investment Managers.This funding will be pivotal in expanding the deployment of commercial and industrial-scale (C&I) renewable energy solutions across Africa’s most industrial regions.The capital will primarily be used to finance the installation and expansion of solar energy systems for commercial and industrial clients, aiming to reduce energy costs, lower carbon footprints, and promote sustainable practices.

This funding comes at a crucial time for both the company and South Africa’s energy sector. The country is currently grappling with severe energy challenges, including high costs, grid instability, and a worsening power crisis that has led to the implementation of daily electricity rationing to prevent a nationwide grid collapse. Eskom, the state-owned power generator, has reported power deficits exceeding 6,000 megawatts, highlighting the critical need for innovative solutions. This situation is reflective of the broader challenges faced by many African nations, driving the demand for clean tech startups to provide sustainable energy management solutions across the continent.

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.