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Africa Market and Lombard Fund News

Managers Report April 2017

12 May 2017

Dear Investors 

Most African markets were plagued by volatility this month, as local and international investors attempted to digest macroeconomic stresses. 

South Africa 

The main risk from the cabinet reshuffle last month has been highlighted by global investors as ‘deteriorating fiscal consolidation’. The replacement of the finance minister triggered downgrades to debt by rating agencies S&P and Fitch. Moody's has postponed its decision, until after it has had a chance to meet with the new minister and is due to announce its decision within the next month. These governmental actions have led the world bank to downrate their growth expectations for Sub-Saharan African by 0.2%. President Zuma, is expected to face a no-confidence motion in parliament this month. 


Ghana’s central bank cut its benchmark interest rate by two percentage points as inflation is trending downwards. The size of the rate cut was a surprise and the move may help increase lending and business activity in an economy which has been suffering from falling commodity prices. 


Nigerian Oil Minister announced a recovery in oil production as it finishes maintenance and repairs. The government expects the country to participate in the OPEC output restrictions once it has fully recovered the lost output. The government expects the other members of OPEC to extend the cuts to keep oil prices above $50 a barrel. Improvements in oil output and price has resulted in strengthing of the Nira on the black market. Analysts suggest that currency markets are stabilising, which could see an increase in investment inflow. In addition, Nigeria will start to reimburse a $5.1 billion debt owed to international oil companies. Finally, in an effort to capitalize on the improved currency stability, Nigeria’s central bank introduced a new policy to allow foreign investors to engage in FOREX trading at rates the buyers and sellers set. The central bank has created this new foreign-exchange platform to attract back traders to the market by allowing them to trade the currency more freely. 


Following the Palm Sunday terror attacks, local sellers of equities by local investors were met by Arab and foreign buyers. Confidence in the market has fallen, but long term fundamentals and international support appear stable. 


The IMF expects Uganda’s economic growth to increase this fiscal year. Growth will be supported by spending on infrastructure and a recovery in lending to the private sector. The IMF predicts GDP growth to increase to 5.5% as compared to 4.5% this year. The central bank of Uganda also cut the benchmark interest rate for the seventh consecutive time by 50 bps. 

The monthly fund performance this month is up 2.48%. 

Derek Seely

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