Weekly Investor Update (September-WeekThree-2024)

16 min Read September 20, 2024 at 5:00 PM UTC

Monday

BRVM Stock Market Maintains Upward Momentum to Reach Seven-Year High

The benchmark BRVM Composite index continued its upward trend for the fourth consecutive week, increasing by 0.76% to reach 261.24 points, marking its first return to the 260-point level since July 2017.This growth was largely driven by the performance of Sonatel (SNTS), the largest company on the BRVM, which saw a valuation increase of 4.58%, reaching 24,000 FCFA and adding 105 billion FCFA to its market capitalization to hit 2.4 trillion FCFA ($4.07 billion).The BRVM 30indexrose by 0.88% to 131.15 points, and the BRVM Prestigeindexedged up 0.07% to 126.56 points. Despite a balance of 13 stock increases against 25 decreases, the market’s overall momentum remained positive.

Notable performers included Orange CI (ORAC), which gained 1.01% to reach 14,950 FCFA, adding 22.60 billion FCFA in valuation. On the downside, Onatel BF (ONTBF) experienced the largest loss, falling by 2,400 FCFA and losing 19.72 billion FCFA in market value. Onatel BF also reported a 16.4% decline in half-year profits, down to 9.33 billion FCFA from 11.16 billion FCFA in the same period in 2023. The BRVM also announced the resumption of trading for Solibra (SLBC), which completed a stock split to comply with market regulations. Solibra’s share nominal value has been divided by ten, and trading will resume on September 30 with 3,062,240 shares available.

Solibra Resumes Trading After Share Split to Comply with BRVM Rule

The BRVM stock market said trading of Solibra (SLBC) shares resumed on September 12, 2024, after itsApril 2 suspension, due to the company’s failure to meet certain regulatory requirements.Although the Castel Group-owned company met the BRVM’s minimum free float of 15%, it fell short of the required 2 million tradable securities, having only 306,224 shares. At an extraordinary general meeting held on September 11, 2024, Solibra addressed this issue by approving a stock split.The nominal value of each share will be divided by ten, reducing the share price from 2,500 FCFA to 250 FCFA. As a result, the total number of shares will increase to 16,460,840, with 3,062,240 listed securities, meeting the BRVM’s requirements.

This split will not affect shareholder capital, as the adjustment is purely mechanical. For instance, an investor holding one share worth 100,000 FCFA will see it split into ten shares, each valued at 10,000 FCFA, maintaining the same total investment of 100,000 FCFA. Solibra’sfinancial recovery in 2023, marked by a 1,138% increase in net profit to 15.08 billion FCFA, was driven by strategic moves, including the sale of its mineral water business after ending its partnership with Coca-Cola. This stock split aims to enhance the liquidity and accessibility of Solibra shares on the market. However, other companies, such as Eviosys Packaging, remain non-compliant with BRVM regulations, with their shares still suspended from trading since January 2024.

Egypt-Born FlapKap Raises $34M for SME Financing Across MENA Region

FlapKap, a fintech platform born in Egypt and headquartered in Abu Dhabi, has secured $34 million in a pre-Series A funding round, bringing its total funding to $37.6 million. The round, led byBECO Capital, included new investment fromPact VCand follow-on support fromA15,Nclude,QED Investors, and debt financing fromChannel Capital.Co-founded in 2022,FlapKapprovidesrevenue-based and embedded financing solutions, particularly for SMEs in the e-commerce, retail, and restaurant sectors. The platform uses a data-driven approach, leveraging data sources from e-commerce platforms, social media, and payment gateways to streamline loan approval.The funds will be used to scale FlapKap’s SME financing services across the Middle East, North Africa (MENA), and the Gulf Cooperation Council (GCC) region. Part of the funding will also go toward enhancing the platform’s technology infrastructure and launching trade finance products specifically designed for B2B businesses.

FlapKap’s $34 million funding round marks a significant step toward addressing the $180 billion SME financing gap in the MENA region. More so, as the e-commerce industry in the MENA region grows, FlapKap’s market opportunity is substantial. In 2017, the market was worth $8.4 billion, with an annual growth of 25% since 2014, and was predicted to reach $28.5 billion by 2022. With the accelerated adoption of e-commerce induced by the COVID-19 pandemic, these figures are bound to have increased substantially.

Nigerian Healthtech Field Gets $11M Gates Foundation Backing

Field, a Nigerian e-health company, has launched a route-to-market service aimed at addressing critical issues in maternal mortality, newborn and child health, and nutrition.Supported by $11 million in funding from theBill & Melinda Gates Foundation, this initiative seeks to introduce emerging therapies and bolster healthcare infrastructure across Nigeria and Kenya.Founded in 2015, Field is a leading pharmaceutical supply chain provider, collaborating with African governments to scale healthcare programs. The company claims to have facilitated over 800 million health interventions in areas such as family planning, HIV, and tuberculosis.

Despite progress, 57% of all maternal deaths occur in Africa, giving the continent the highest maternal mortality ratio in the world. Weak health systems due to poor governance, poor allocation of resources for health, poor coordination, and weak accountability mechanisms drive health inequities, which in turnare a barrier to reducing the cases in these continents. Field’s new initiative includes a digitization overhaul for healthcare providers, offering financing options, last-mile delivery services, and the installation of pharma-grade refrigerators. The project will also form a coalition with governments, manufacturers, and other stakeholders to deliver one of the continent’s most ambitious maternal health programs.

Senegalese Telco Sonatel Trading at Highest Level Since 2017

Sonatel (SNTS), the largest company on the BRVM stock market, recorded a 2.13% increase on Friday, pushing its share price to 24,000 FCFA, a level not seen since August 2017.This rise added 50 billion FCFA ($85 million) to the telecommunications giant’s market capitalization, further solidifying its dominant position in the regional stock market.The performance of Sonatel drove the BRVM Composite index up by 0.26% to reach 261.24 points, its highest level in seven years. Similarly, the BRVM 30 index rose by 0.34% to 131.15 points, while the BRVM Prestige index saw a decline of 1.40% to 113.24 points.

Sonatel’s significant rise propelled the BRVM Composite to its highest level in seven years, reflecting the telecom giant’s continued dominance. Its stock began the year with a share price of 17,980 XOF and has since gained 33.5% on that price valuation, ranking it eighth on the BRVM in terms of year-to-date performance. Over the past four weeks alone, it has grown 9%.

African Economies Prepare for Interest Rate Cuts Amid Easing Inflation

Central banks in two of Africa’s largest economies, South Africa and Nigeria, are set to shift their interest rate policies for the first time in years as inflation shows signs of easing.The South African Reserve Bank is expected toreduceits benchmark interest rate by 25 basis points to 8%, as inflation appears to have eased to the midpoint of the central bank’s 4.5% target range. The stability of the rand and tapering oil prices will support this move.Several other nations, including Morocco, Mozambique, Kenya, Ghana, and Eswatini, are expected to follow South Africa’s lead by making small interest rate cuts while countries like Angola are anticipated to keep rates unchanged alongside Nigeria.

Analysts cited by Bloomberg predict a cautious rate cycle for Africa’s central banks as they focus on maintaining positive real interest rates to prevent currency depreciation. Geopolitical risks, which may affect inflation expectations, are also a key factor influencing decisions across the continent. Meanwhile, Tanzania is also set to maintain its rates, as ongoing currency depreciation pressures inflation. Despite the Lesotho central bank typically following South Africa’s lead due to its currency peg to the rand, it is expected to delay cutting rates until November, as inflation remains elevated at 6.7%.

Saudi Sovereign Wealth Fund Poised for $5B Investment in Egypt

Saudi Arabia’s sovereign wealth fund is set to invest $5 billion in Egypt, marking the latest Gulf funding for the North African nation as it recovers from a severe economic crisis.The investment, described as a “first phase” by Egypt’s cabinet, follows meetings between Egyptian Prime Minister Mostafa Madbouly and Saudi Crown Prince Mohammed bin Salman in Riyadh. However, the timeline and specific investment areas remain undisclosed.Gulf countries have been crucial investors in Egypt as it emerges from two years of economic turmoil, having secured a $57 billion bailout led by theIMFandUnited Arab Emirates. The UAE recently announced a $35 billion investment deal, which included development rights to a prime Mediterranean beachfront.

It’s uncertain whether Saudi Arabia’s funds represent new capital or part of earlier pledges, such as the $5 billion deposit in Egypt’s central bank in 2022 and a $10 billion investment commitment. To date, Saudi investments through the Public Investment Fund (PIF) have amounted to $1.3 billion. Additionally, there may be interest in developing the Ras Gamila region on the Red Sea coastline. Efforts to resolve investment disputes with Saudi firms by year-end were also discussed.

Investors Bet on Emerging Market Bonds Amid Fed Rate Cut Expectations

Investors funneled money into exchange-traded funds (ETFs) focused on emerging market bonds on Friday, anticipating a boost from the Federal Reserve’s expected rate cut this week.Two of the largest ETFs tracking emerging-market bonds saw inflows, with the $16 billion iShares J.P. Morgan USD Emerging Markets Bond ETF receiving $46.3 million and the Vanguard Emerging Markets Government Bond ETF gaining $32.9 million, per Bloomberg data.Optimism is rising as the Federal Reserve is expected to cut interest rates by 50 basis points this week. This potential rate cut could spark greater demand for higher yields in developing markets and investors are increasingly attracted to emerging-market debt as a high-yield, long-duration asset class.

Emerging market bonds are drawing investor interest as the Federal Reserve is expected to cut rates. Lower US interest rates create opportunities for higher yields in developing markets, driving inflows into ETFs. Despite recent outflows, year-to-date investments in U.S.-listed emerging-market ETFs total $3.72 billion, despite $195.9 million in outflows last week. Investors are positioning ahead of the Fed’s anticipated move, which could ease fears of a US recession and give developing nations room to relax their monetary policies. These dynamics suggest a growing appetite for risk in search of higher returns.

Benin’s National Lottery Company to List on BRVM in Historic IPO

The National Lottery of Benin SA (or Loterie Nationale du Bénin SA in French) is set to become the second Beninese company listed on the Bourse Régionale des Valeurs Mobilières (BRVM) in October 2024.LNB SA’sdecision to list follows years of significant financial growth, with revenues projected to rise from 80 billion FCFA in 2021 to 94 billion FCFA ($160 million) by 2024. It operates over 3,000 points of sale across Benin and has emerged as a key player in West Africa’s lottery sector.TheInitial Public Offeringoffers investors shares priced between 4,000 and 5,000 FCFA, providing an opportunity to benefit from the company’s continued growth. The IPO is seen as a significant step in strengthening Benin’s presence on the regional financial scene, positioning the company as a catalyst for economic development.

LNB SA’s IPO is a milestone for Benin’s financial market, enabling local companies to raise capital through regional exchanges. By listing on the BRVM, LNB SA opens doors for greater participation in West Africa’s economic growth. Investors are presented with a unique opportunity to invest in a growing company within the high-potential lottery sector. This IPO signifies broader economic ambitions for Benin, contributing to regional development and encouraging future local business listings on the exchange.

South Africa Inflation at Below Central Bank Target, Rate Cut Likely

South Africa’s annual inflation rate fell to 4.4% in August, dipping below the midpoint of the central bank’s target range for the first time in over three years. This drop, down from 4.6% in July, boosts the likelihood of an interest rate cut, the first since 2020.The South African Reserve Bank (SARB) prefers to anchor inflation at 4.5%, and with a favorable inflation outlook, officials are expected to cut the policy benchmark, currently at 8.25%. Governor Lesetja Kganyago has stated that rates will only be adjusted when inflation is firmly at the midpoint.A stronger rand, bolstered by weaker Brent crude prices and expectations of a U.S. Federal Reserve rate cut, has improved economic sentiment. The rand firmed 0.3% to 17.5611 per dollar, and bond yields fell to their lowest since February 2022.

With the rand rallying and bond yields dropping, favorable conditions may spur the SARB to ease policy. For emerging market economies like South Africa, lower inflation and stronger currencies improve investor confidence. Additionally, a potential U.S. rate cut could drive further capital inflows into emerging markets, boosting demand for local assets. These changes are likely to materialize in the coming months as markets respond to global and local monetary easing, benefiting South African bonds and currency stability.

U.S. Federal Reserve Cuts Interest Rates for First Time Since 2020

The Federal Reserve cut interest rates by half a percentage point on Wednesday, marking the first reduction since early 2020. The decision lowers rates to about 4.9%, down from a two-decade high, signaling that the central bank believes it is making progress in controllinginflation.The cut follows months of easing inflation and is aimed at preventing the economy from slowing too much, especially as unemployment edges higher. The Fed’s economic projections indicate another half-point cut by year-end, with borrowing costs expected to drop to 4.4%.The move reflects cautious optimism as inflation eases, but the central bank remains focused on preventing an economic slowdown. Fed officials aim to achieve a “soft landing,” maintaining growth without pushing the economy into recession. Additionalcutsare expected, with rates projected to fall to 3.4% by the end of 2025.

For emerging and developing market economies, the Fed’s rate cuts could have significant implications. Lower U.S. interest rates typically weaken the dollar, which can benefit emerging markets by reducing the cost of servicing dollar-denominated debt and boosting capital flows into higher-yielding assets in these regions. This shift may also increase demand for commodities and exports from developing countries. The effects of the Fed’s actions are likely to materialize in early 2024, as financial markets adjust to a prolonged period of lower U.S. borrowing costs, leading to greater investor appetite for emerging market assets.

Ghana’s Economy Grows at Fastest Pace in Five Years in Second Quarter

Ghana’s economy expanded 6.9% in the second quarter of 2024, marking its fastest growth in five years and beating economists’ estimates by more than double, driven by stronger performances in the industrial, agriculture, and services sectors.The growth follows a revised 4.8% expansion in the previous quarter, according to Government Statistician Samuel Kobina Annim. The industrial sector saw the strongest growth, expanding 9.3% year-on-year, while agriculture and services grew 5.4% and 5.8% respectively.Despite this, the cocoa subsector, a major part of Ghana’s agriculture, contracted for a fourth consecutive quarter. Ghana’s cedi remained stable, trading at 15.7 per dollar, while bonds maturing in 2032 rose slightly.

Ghana’s faster-than-expected economic growth provides a boost to Vice President Mahamudu Bawumia’s presidential campaign ahead of the December 2024 election. Bawumia has pledged to maintain growth at 6% annually, focusing on agriculture, small businesses, and mining. However, public concerns over economic management and high living costs remain a challenge for the ruling party. Ghana continues its recovery from a debt restructuring, underpinned by an IMF program that includes austerity measures.

JPMorgan CEO Jamie Dimon to Visit Ivory Coast as Part of African Tour

Jamie Dimon, CEO of JPMorgan, plans to visit Ivory Coast in mid-October 2024 during an African tour, according to sources reported by Reuters. This will be Dimon’s first visit to the French-speaking West African country, following exploratory missions by the JPMorgan team last year.Ivory Coast’s robust growth, which reached 6.5% in 2023, and its active presence on the international debt market, including a $2.6 billion Eurobond facilitated byJPMorgan, likely contributed to the country’s inclusion in Dimon’s itinerary. The bank has held discussions with key financial leaders, including theBRVMand the Ministry of the Economy, to explore opportunities in the Ivorian economy.Dimon’s African tour will also cover Kenya, Nigeria, and South Africa, reflecting JPMorgan’s broader strategy to strengthen its footprint across the continent. Present in over 100 countries, the bank manages more than $4.1 trillion across various sectors, including investment and commercial banking, making this visit a key step in its African expansion efforts.

Jamie Dimon’s visit to Ivory Coast signals JPMorgan’s growing interest in West Africa, particularly in one of the region’s fastest-growing economies. With a recent $2.6 billion Eurobond and discussions with financial authorities, Ivory Coast stands out as a strategic destination for the global banking giant. The visit highlights JPMorgan’s commitment to deepening its presence across Africa, following its office opening in Kenya and continued interest in Ghana. Expanding into these markets aligns with the bank’s broader strategy to tap into Africa’s economic potential and diversify its global operations.

South Africa’s Central Bank Cuts Rates for First Time in Four Years

South Africa’s central bank lowered its benchmark interest rate by 25 basis points to 8%, marking the first rate cut in over four years. This move follows the U.S. Federal Reserve’s 50 basis-point reduction the previous day and reflects expectations of furtherglobal financial easing.Governor Lesetja Kganyago announced the decision during a press briefing on Thursday. It aligned with the predictions of most economists. Only one analyst had forecast a larger 50 basis-point cut.The cut comes as inflation in South Africa has moderated,falling below the midpointof the central bank’s target range of 4.5%. This gives policymakers room to begin easing after maintaining rates at a 15-year high.

The South African Reserve Bank’s 25 basis-point cut reflects growing momentum for global monetary easing, following the Fed’s recent move. With inflation cooling and a stable rand, South Africa joins other central banks in reducing borrowing costs. This shift may bolster investor confidence in emerging markets, leading to more favorable financial conditions and capital inflows. Further rate cuts could follow as global financial conditions continue to ease, benefiting South Africa’s economic growth and asset markets.

Nigeria Inflation Falls to Six-Month Low Ahead of Policy Meeting

Nigeria’s annual inflation rate eased to 32.2% in August, down from 33.4% in July, marking the lowest level in six months as announced by the National Bureau of Statistics.The decline is partly attributed to reduced pressure from earlier currency devaluation and the removal of fuel subsidies in 2023. Additional factors include improved corn yields and a temporary suspension of import duties on corn and wheat.The Central Bank of Nigeria’s monetary policy committee, which has raised interest rates to 26.75% from 11.5% in two years, is expected to evaluate these factors when it meets next week to decide on potential rate adjustments.

Nigeria’s inflation rate is gradually decreasing. The impact of smaller food price increases helped counterbalance higher energy and transport costs. Analysts predict inflation could dip below 30% by early 2025. The easing of inflation, alongside current economic challenges, could support a pause in further interest rate hikes when the Central Bank of Nigeria meets next week. Despite the recent improvement, challenges remain. Currency volatility and a fuel price increase in early September, not reflected in the August data, may still contribute to inflationary pressure in the coming months. Policymakers are expected to balance these factors carefully at the next meeting.

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.