Anouar Chaouch

Gil Seong Kang

Hee-Sik Kim

English

Research Papers in Economics

        The African Development Bank Group 
      Chief Economist Complex 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contents: 
1.  Market Commentary 
 
  1.1 Stock Markets 
  1.2 Commodity Markets 
  1.3 Exchange Rates 
 
2.  Regional Developments 
 
3.  Countries in Focus 
 
4.  Development 
Partnerships 
 
5.  Summary 
 
 
 
 
 
 
 
 
1.  Market Commentary 
 
1.1  Stock Markets  
 
Despite  eased  worries  about  the 
economic  outlook  in  the  U.S.A.  and 
Asia,  African  stock  markets  registered 
mixed performance during the week of 
13  –  17  September  2010.  The  stock 
markets  of  Mauritius,  Uganda,  and 
Tunisia  recorded  substantial  gains 
exceeding  3%,  while  those  of  Kenya, 
South  Africa,  Egypt,  and  Ghana  also 
recorded  moderate  gains  of  between 
0.4%  and  1.4%.  However,  some  stock 
markets,  including  those  in  Nigeria, 
Côte  d'Ivoire  and  Morocco,  posted 
negative  returns,  with  the  Nigerian 
market  registering  the  largest  loss  of 
3.6%. 
 
Equity Focus 
 
Mauritius: The Mauritius stock market 
rose  by  5.1%  during  the  week  on  the 
back of a 50% surge in the stock price 
of Savannah Sugar. The sharp increase 
in  the  stock  price  was  triggered  by  a 
bonus  issue  of  preference  shares  to 
ordinary shareholders.  
 
Nigeria: The All Share Index dropped 
by 3.6% over the week, continuing its 
declining trend since August 2010 after 
the  Central  Bank  of  Nigeria  ordered 
banks to draw down their risk assets in 
the  capital  market  to  a  maximum  of 
10 %. Consequently, in the year-to-date, 
the index had fallen by about 10% by 
the end of the week.  
 
1.2  Commodity Markets 
 
Crude Oil (Brent):  The price of crude oil 
fell by 3.7% over the week to USD 73.7 a 
barrel.  The  decline  was  driven  by  an 
earlier than expected restart of a major oil 
pipeline  between  Canada  and  the  US, 
which was drained and shut down early in 
the week.  
 
Cotton: The price of cotton rose by 5.7% 
as  supply  concerns  continued.  In 
particular, adverse weather conditions in 
China and the export limitations in India 
are bolstering prices. 
 
 
1.3  Exchange Rates 
 
The  majority  of  African  currencies 
strengthened  against  the  US  dollar, 
tracking the movement of the Euro, which 
appreciated  by  2.8%  against  the  US 
dollar. The Euro strengthened after Spain 
conducted  a  successful  debt  auction  to 
calm fears about the fiscal situation in the 
country.  The  Mozambique  New  Metical 
recorded the highest appreciation of 3.5% 
vis-à-vis the US dollar, followed by the 
CFA franc, Morocco Dirham, Cape Verde 
Escudo,  and  Comoros  Franc,  which 
posted  gains  in  value  of  between  2.5% 
and 2.9%. Overall, 23 African currencies 
appreciated against the US dollar during 
the week under review.  
Market Brief 
Volume1, Issue 38 
24 September, 2010 
 
Africa Economic & Financial Brief 
For the period 13 – 17 September, 2010 
Prepared by the following staff:  Gil Seong Kang (g.kang@afdb.org, Tel +216 7110 2524); Hee-Sik 
Kim (h.kim@afdb.org, Tel 216 7110 2689); Chaouch Anouar  ( a.chaouch@afdb.org , Tel +216 7110  3989)                   
    
 
 
  Mthuli Ncube 
  m.ncube@afdb.org 
  +216 7110 2062 
 
  Charles Leyeka Lufumpa 
  c.lufumpa@afdb.org 
  +216 7110 2175 
 
  Léonce Ndikumana 
  l.ndikumana@afdb.org 
  +216 7110 2076 
  
 
 
 
 
 
 “The  Central  Bank  of 
Kenya  reported  that  it 
licensed  almost  5,000 
banking agents so far to 
help  bring  financial 
services  to  areas  not 
currently covered.” 
 
In  contrast,  12  African  currencies 
depreciated  against  the  US  dollar.  The 
largest depreciation was registered by the 
Gambian Dalasi (-3.1%), followed by the 
Congolese Franc (-2.2%) and the Liberian 
Dollar (-1.2%).  
 
 
2.   Regional Developments 
 
Southern  Africa:  The  African 
Development  Fund  (ADF)  will provide a 
grant  of  USD  8.6  million  to  finance  the 
Airspace  Integration  Project  of  the 
Common Market for Eastern and Southern 
Africa (COMESA). The grant will finance 
the technical assistance component of the 
project to replace existing ground-based air 
navigation  aids  by  a  more  cost-effective 
satellite-based  air  navigation.  With  this 
new  system,  Air  Traffic  Services  from  a 
single control center is expected to be able 
to cover large areas, thereby facilitating the 
rationalization  of  investments  in 
infrastructure  and  equipment  for  air 
transportation in the region. 
 
 
3.  Countries in Focus 
 
Angola:  Angola's  year-on-year  inflation 
rose to 14% in August 2010 from 13.7% 
the previous month due to higher food and 
transportation  costs.  The  Angolan 
government  said  it  expects  short-term 
inflation  to  rise  after  this  month's 
announcement  of  a  rise  of  up  to  50%  in 
fuel  prices,  prompting  taxi  drivers  to 
threaten an increase in cab fares. 
 
Egypt: The Central Bank kept its key over 
night  interest  rates  unchanged  on  16 
September  2010,  despite  an  increase  in 
core  inflation.  The  central  bank 
maintained its lending rate at 9.75% and 
its borrowing rate at 8.25%. Core inflation 
jumped  to  an  annual  level  of  8.2%  in 
August from 7.1% in the previous month, 
while urban consumer inflation inched up 
to  10.9%  from  10.7%  during  the  same 
period. 
 
Côte d'Ivoire: Annual inflation rose to 2% 
in August 2010 from 1.8% in the previous 
month  due  to  increases  in  food,  transport 
and energy prices. Food prices rose by 5.7% 
year-on-year  in  August,  while  transport 
costs rose by 2.4% and water, energy and 
accommodation costs increased by 1.9%. 
 
Kenya:  Trading  volumes  in  Kenya's  bond 
market  jumped  more than  six  times  in the 
first  eight  months  of  2010  from  the  same 
period  last  year.  Nairobi  Stock  Exchange 
(NSE)  statistics  showed  a  total  of  361.2 
billion shillings (USD 4.3 billion) worth of 
bonds  were  traded  over  January-August, 
compared  with  62.3  billion  (USD  0.7 
billion)  previously.  Market  analysts  argued 
that this rally was due to increases in the size 
and  frequency  of  government  bond  issues 
and  the  banks’  participation  in  the  debt 
market,  as  well  as  the  introduction  of  the 
automatic bond trading system.  
 
The  Central  Bank  reported  that  it  has 
licensed almost 5,000 banking agents so far 
to help bring financial services to areas not 
currently  covered.  Changes  to  Kenya’s 
banking law that took effect from January 1, 
2010  allow  for  agent-banking,  where 
commercial banks can recruit agents to offer 
front-teller  services  including  taking 
deposits  at  locations  such  as  supermarkets 
and petrol stations.  
 
Mauritius: The Central Bank plans to set a 
cap  on  commercial  banks’  holdings  of 
government securities at 15-20% of a bank's 
liquid assets, in an effort to boost lending. 
The  Central  Bank  argued  that  commercial 
banks  preferred  to  pile  surplus  funds  into 
short-term  government  and  central  bank 
securities  rather  than  lend  to  the  private 
sector. 
 
Senegal:  The  Government  revised  its 
growth  target  for  2011  upwards  to  4.4% 
from  an  earlier  forecast  of  4.1%  amid 
expectations of better performance across a 
number  of  sectors  including  mining, 
chemical, refinery and construction sectors. 
The  Government  also  raised  the  2010 
growth outlook to 4% from an earlier 3.4%. 
 
“The  Government  of 
Senegal  revised  its 
growth  target  for  2011 
upwards to 4.4% from an 
earlier  forecast  of  4.1% 
amid  expectations  of 
better  performance 
across  a  number  of 
sectors including mining, 
chemical,  and  refinery 
and building sectors.” 
 
   Africa Economic & Financial Brief: 6 – 10 September 2010                                                                                      Page 2 
 
 
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nigeria:  Inflation  rose  to  13.7%  year-on-
year  in  August  2010  from  13%  in  the 
previous  month.  Inflation  was  driven  by 
increases  in  food  prices,  which  rose  to 
15.1% year-on-year in August from 14% in 
July.  Meanwhile,  the  governor  of  the 
Central  Bank  of  Nigeria  Sanusi  Lamido 
Sanusi commented that weak bank lending 
to the Nigerian economy is a "major worry", 
compared to the risk of inflation. However 
he also noted that the central bank wanted to 
maintain  inflation  within  the  single-digit 
range by the end of the year.  
 
The  Government  is  planning  to  allow 
pension funds, which are currently restricted 
to  investing  into  government  bonds  and 
bank deposits, to invest up to 40% of their 
portfolios  in  corporate  and  infrastructure 
bonds and 5% in private equity funds. The 
Government  expects  this  measure  to  help 
pension funds improve portfolio yields and 
long-term financing for infrastructure. 
 
Uganda:  The  Government  expects  coffee 
exports to rise by 15% during the 2010/11 
season  (October  –  September)  because  of 
better  weather  and  improved  crop 
husbandry  methods.  Exports  for  the 
2010/11  season  are  expected  to  reach  3.1 
million  60-kilogram  bags,  from  the  2.7 
million bags for the 2009/10 season.  
 
As  a  part  of  the  Rural  Financial  Services 
Strategy (RFSS), the Government launched 
a  communications  strategy  to  increase 
information  dissemination  to  improve  the 
public’s financial knowledge and access to 
financial  services.  The  Government  also 
plans  to  have  a  Savings  and  Credit 
Cooperative  (Sacco)  in  each  county  to 
enable people access credit. 
 
Zambia: The Government reported that net 
tax revenue  for January-August 2010 rose 
by  29%  to  8  trillion  kwacha  (USD  1.6 
billion) from 6.2 trillion kwacha (USD 1.3 
billion)  in  the  same  period  last  year.  The 
increase  in  revenue  was  largely  due  to 
strong  performance  of  personal,  company 
and  trade  taxes.  Mining  company  tax 
collections  during  the  period  were  above 
target  by  265.3  billion  kwacha  (USD  54 
million),  reaching  503.4  billion  kwacha 
 
 “In  Nigeria,  the 
Government is planning 
to  allow  pension  funds, 
which  are  currently 
restricted  to  investing 
into  only  equities, 
government  bonds  and 
bank  deposits,  to  invest 
up  to  40%  of  their 
portfolios  in  corporate 
and  infrastructure 
bonds and 5% in private 
equity funds.” 
(USD 102 million) against a target of 239.1 
billion (USD 49 million).  
 
The Government plans to spend a total of 
71.7 trillion kwacha (USD 14.5 billion) over 
the next three years. State spending, which 
is expected to amount to 22.5% of GDP in 
2010, is expected to steadily rise to 23.8% 
of  GDP  in  2011,  24.9%  in  2012  before 
dropping to 23.7% in 2013. 
 
4.   Development Partnerships 
 
AfDB/IFC/Citigroup  –  Africa:  In 
September 2010, the African Development 
Bank  (AfDB),  the  International  Finance 
Corporation (IFC) and Citigroup approved a 
facility to provide USD 300 million in trade 
financing  for  exporters  and  importers  in 
Africa. The facility provides further support 
to the continent’s economies and address the 
shortage of trade finance.  
 
  
5.  Summary 
 
During the week of 13 – 17 September 2010, 
African  stock  and  commodity  markets 
showed  mixed  performance.  The  bond 
market in Kenya has deepened, assisted by 
government  efforts  to  improve  the 
functioning of the bond markets during the 
last  two  years.  Some  other  countries  also 
took  measures  to  improve  the  financial 
sector, with Mauritius urging banks to lend, 
Kenya and Uganda introducing innovations 
to help the unbanked have access to banking, 
and Nigeria loosening regulations on pension 
funds’  investment  in  risky  assets  such  as 
private  bonds.  Meanwhile,  the  Bank  in 
cooperation with the IFC and Citigroup has 
provided  the  much  needed  trade  finance 
resources  for  African  exporters  and 
importers.  At  the  macroeconomic  level, 
increased domestic revenues in Zambia have 
enabled  the  government  to  spend  more  for 
boosting  economic  growth.  However, 
inflation  has  started  to  pick  up  in  Angola, 
Egypt, Cote d’Ivoire, and Nigeria, requiring 
vigilance by the central banks for the lagged 
effects of the expansionary monetary policy 
they  had  adopted  to  alleviate  the 
recessionary  pressure  caused  by  the  global 
financial crisis.  
. 
   
 
 
 
“The  Government  of 
Uganda  expects  coffee 
exports to rise by 15% 
during  the  2010/11 
season  (October  – 
September)  because  of 
better  weather  and 
improved  crop 
husbandry methods.” 
  
 
   Africa Economic & Financial Brief: 6 – 10 September 2010                                                                                             Page 3 
 
 
 
 
   
 
Appendix Table 1: Stock market movements – Week ending on 17 September, 2010 
 
Côte d'Ivoire BRVM Composite Index BRVM CI 6,157 ▼ -0.86 ▼ -0.71 ▲ 15.6
Egypt* CASE 30 Index CASE30 18,398 ▲ 0.47 ▼ -0.41 ▲ 5.2
Ghana Ghana All Share GSE 12,893 ▲ 0.43 ▲ 1.49 ▲ 21.9
Kenya Nairobi SE Index- NSE 20 NSE 20 14,300 ▲ 1.42 ▲ 1.09 ▲ 40.1
Mauritius Mauritius AllShares SEMDEX 5,083 ▲ 5.30 ▼ -0.31 ▲ 7.3
Morocco Casa All Share Index MASI 14,005 ▼ -0.09 ▼ -0.06 ▲ 11.9
Nigeria NGSE All Share Index NGSE 36,237 ▼ -3.57 ▼ -1.78 ▲ 10.4
South Africa All Share Index JALSH 650,780 ▲ 1.16 ▲ 0.52 ▲ 2.7
Tunisia Tunis se Tnse Index STK TUNINDEX 7,192 ▲ 2.94 ▼ -0.12 ▲ 29.5
Uganda* Uganda SE All Share index USE 4,848 ▲ 3.67 ▼ -0.71 ▲ 49.3
Other regions
USA Dow Jones Industrial DJ Index 3,402,428 ▲ 1.39 ▲ 0.14 ▲ 1.7
France CAC 40 Index CAC40 885,304 ▼ -0.10 ▲ 1.46 ▼ -5.4
Japan Nikkei 225 Index N225 2,266,154 ▲ 4.19 ▲ 1.37 ▼ -8.7
Stock Markets
Region/Country Index Name Index Code
Previous week
Weekly % change                    
( 17-09-2010)
Year-to-date % 
Change
Africa
Week under 
review
Dec 31 - Sep 17
Market 
Capitalization  
(USD, million)               
(17-09-2010)
 
           * Value at end of 16 September, 2010 
 
   Africa Economic & Financial Brief: 13 – 17 September 2010                                                                                            Page 4 
 
 
 
 
   
 Appendix Table 2: Exchange rate movements – Week ending on 17 September, 2010 
Africa 
Algeria Algerian Dinar DZD ▼ -0.54 ▼ -0.26 ▼ -3.7
Angola New Kwanza AON ▼ -0.26 ▼ -0.42 ▼ -1.7
Botswana Pula BWP ▲ 1.21 ▲ 0.17 ▼ -0.5
Burundi Burundi Franc  BIF ▼ -0.05 ▼ -0.01 ▲ 0.9
Cape Verde Escudo  CVE ▲ 2.54 ▼ -1.12 ▼ -12.4
Comoros Comoros Franc  KMF ▲ 2.75 ▼ -0.61 ▼ -8.7
Congo. Dem. Rep. of Congolese Franc  CDF ▼ -2.19 ▲ 2.30 ▼ -11.7
Djibouti Djibouti Franc  DJF ▼ -0.45 ▲ 0.49 ▼ -2.4
Egypt Egyptian Pound  EGP ▲ 0.08 ▼ -0.02 ▼ -3.9
Ethiopia Birr  ETB ▼ -0.07 ▼ -16.58 ▼ -22.5
Gambia. The Gambian Dalasi  GMD ▼ -3.14 ▼ -0.43 ▼ -11.5
Ghana New Cedi  GHS ▲ 0.57 ▼ -0.15 ▲ 0.5
Guinea Guinea Franc  GNF ▲ 0.38 ▼ -0.36 ▼ -11.2
Kenya Kenyan Shilling  KES ▲ 0.91 ▼ -1.03 ▼ -6.2
Liberia Liberian Dollar  LRD  ▼ -0.69 ▲ 1.39 ▼ -3.4
Libya Libyan Dinar  LYD ▲ 1.48 ▼ -0.80 ▼ -2.6
Madagascar Ariary  MGA ▲ 1.60 ▲ 0.02 ▼ -2.5
Malawi Kwacha  MWK ▲ 0.66 ▼ -0.89 ▼ -3.2
Mauritania Ouguiya  MRO  ▲ 0.17 ▲ 0.13 ▼ -8.1
Mauritius Mauritius Rupee  MUR  ▲ 0.53 ▼ -0.53 ▼ -2.0
Morocco Dirham  MAD ▲ 2.54 ▼ -0.69 ▼ -6.9
Mozambique New Metical  MZN ▲ 3.54 ▲ 0.68 ▼ -22.1
Nigeria Naira  NGN ▲ 0.51 ▼ -1.38 ▼ -0.6
Rwanda Rwandan Franc  RWF ▼ -0.04 ▼ -0.23 ▼ -2.8
São Tomé & Príncipe Dobra  STD ▲ 1.67 ▼ -0.44 ▼ -16.3
Seychelles Seychelles Rupee  SCR ▲ 1.25 ▼ -0.90 ▼ -9.8
Sierra Leone Leone  SLL ▼ -1.23 ▲ 0.67 ▼ -2.5
Somalia Somali Shilling  SOS ▼ -0.11 ▼ -0.16 ▼ -7.8
South Africa Rand  ZAR ▲ 1.29 ▲ 0.59 ▲ 3.9
Sudan Sudanese Pound  SDG ▲ 0.14 ▼ -0.10 ▼ -2.0
Tanzania Tanzanian Shilling  TZS ▼ -0.19 ▲ 0.25 ▼ -11.9
Tunisia Tunisian Dinar  TND ▲ 1.93 ▼ -0.34 ▼ -9.1
Uganda Uganda Shilling  UGX ▲ 0.35 ▲ 0.07 ▼ -15.1
Zambia Zambian Kwacha  ZMK ▲ 1.12 ▲ 0.01 ▼ -3.9
CFA zone Countries CFA Franc XOF ▲ 2.89 ▼ -0.84 ▼ -8.6
Other regions
Europe Euro EUR ▲ 2.74 ▼ -0.81 ▼ -8.9
Japan Yen JPY ▼ -2.18 ▲ 0.54 ▲ 7.7
Currency 
Code
Weekly % change                    
( 17-09-2010)
Year-to-date % 
Change
Previous week
Exchange Rates (currency per US$)
Region/Country Currency Name
Week under 
review
Dec 31 -Sep 17
 
                 Sources: AfDB Statistics Department, September 2010. 
 
   Africa Economic & Financial Brief: 13 – 17 September 2010                                                                                            Page 5 
 
 
 
 
  

Market Brief-Africa Economic Financial Brief 13-17 September 2010

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Market Brief-Africa Economic Financial Brief 13-17 September 2010

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