Weekly Investor Update (August-WeekTwo-2024)

18 min Read August 9, 2024 at 5:00 PM UTC

Monday

Ecobank Group’s profit before tax jumps to $324m in half-year 2024

Despite facing macroeconomic challenges in some of its operating markets, pan-African banking group Ecobank Transnational Incorporated (ETIT) increased its net revenues to $994 million and its profit before tax by 5% to $324 million in the six months ending June.That’s according to the Togo-headquartered bank’s latest financial statement, which also shows that its after-tax profit rose to a nine-year high of $227 million in H1 from $216 million in the same period in 2023.Excluding the impact of foreign currency translation due to US dollar strength, the profit before tax increased by 23%. The return on tangible shareholder’s equity, ROTE, was 34.7%, compared to 27% in the previous year.

Ecobank Transnational Inc. (ETI) is currently the seventh most valuable stock on the BRVM with a market capitalization of XOF 307 billion, accounting for about 3.42% of the equity market. Ecobank started the year with a share price of 19 XOF but has since seen a decline of 10.5% in its price valuation, ranking it 36th on the BRVM in terms of year-to-date performance. However, shareholders may find some reassurance in the 6% increase in ETI’s share price since July 5th, making it the 11th best performer on the BRVM during this period.

Bellwether stock Orange CI helps BRVM close out July on a high

The BRVM stock market maintained its upward momentum last week, mainly thanks to a sustained rally inOrange CI(+2.96% at 13,385 FCFA), the second most valuable company on the exchange which saw its fifth week of increase.Benchmark Compositeindexcrossed the 240-point mark at 241.32 points, a new high for the market over six years. The BRVM 30 index recorded a 0.86% gain to 120.79 points after its slight contraction (-0.09%) last week, while the BRVM Prestige ended 4 consecutive increases with a 1.77% decline to 110.87 points.Overall, there was a positive balance of variations (20 values up against 18 down) during the week with stocks likeBOA MaliandEcobank CIadding substantially to their respective market capitalizations.

In other noteworthy developments, ETI (Ecobank Transnational Incorporated) and Vivo Energy CI released their financial reports for the period ending June 2024. Ecobank group reported an increase in net profit of 5.39%, reaching $227.28 million compared to $215.65 million a year earlier. Vivo Energy CI saw its results rise by 118%, ending with a profit of 2.55 billion FCFA compared to 1.17 billion FCFA achieved last year. Overall, the capitalization of the stock market increased by 75.21 billion FCFA, reaching 8.97 trillion FCFA, up from 8.90 trillion FCFA the previous week. Year to date, the market has returned about 13%.

Bank of Africa stocks rally to levels not seen in years

Bank of Africa stocks are rallying on the BRVM, with at least two driven by increasing investor interest following the group’s announcement of a share capital raise through the incorporation of reserves and premiums.The share price of BRVM-listed Bank of Africa Mali (BOAM) surged by 21.10% in a single week to reach 2,095 FCFA, its highest price in five years last week while the Bank of Africa Senegal (BOAS) saw its share price increase by 17.76% to 4,840 FCFA—its highest level since itsIPO.BOAS has accrued 26% over the past four-week period alone—second best on BRVM. These rallies are in line with a similar trend seen in their Ivorian counterpart, BOA Côte d’Ivoire (BOAC), which rose by 6.33% last Thursday to reach a six-year high of 8,400 FCFA.

Bank of Africa (BOA) is a Moroccan banking conglomerate headquartered in Casablanca, with operations in Morocco and eighteen other African countries. In francophone West Africa, it has six subsidiaries—Benin, Burkina Faso, and Niger among them—all of which are listed on the BRVM. The group’s main predecessor entities were established in 1959 in Morocco and in 1982 in Mali. Until 2020, the parent entity was known as the Banque Marocaine du Commerce Extérieur (BMCE), a name that still appears as “BMCE Group” in the BOA brand identity as of 2022. BOA has offices in Europe, Asia, and various countries including France, Spain, the United Kingdom, China, Italy, Germany, the UAE, Belgium, Canada, and the Netherlands.

South Africa’s HAVAÍC hits first close of $50m VC fund

HAVAÍChas secured $15 million in commitments for the first close of its $50 million African Innovation Fund 3. The fund is backed byUniversum Wealth,The SA SME Fund, and other local and international family offices.The African Innovation Fund 3 aims to invest in 15 early-stage, high-growth, post-revenue African companies with regional and global potential, targeting seed stage to Series A and B rounds.This is HAVAÍC’s largest fund to date, following the success of its previous funds launched in 2016 and 2020. The firm’s portfolio already serves over 20 million customers in 190 countries.

The SA SME Fund’s investment in HAVAÍC reflects a broader trend of institutional investors backing local venture capital firms, which contributes to a robust startup ecosystem in key African markets such as South Africa, Kenya, and Nigeria.HAVAÍC’s 2023 results highlighted a 400% increase in annual revenue and a landmark fifth exit, with 193% total realized exited returns and 120% unrealized carrying returns. Recent investments by HAVAÍC include the sports data company Sportable and follow-on investments in RNR, RapidDeploy, hearX Group, and AURA, all of which have achieved notable milestones.This strategic support from institutional investors is crucial in fostering innovation and growth in the African startup ecosystem.

Synapse Analytics secures $2m to drive AI expansion plans

Synapse Analytics, an Egyptian artificial intelligence (AI) startup, has secured a $2 million investment to support the expansion of its AI-powered solutions across the Gulf Cooperation Council (GCC) and Africa, with a particular focus on transforming the financial sector.The investment was led bySilicon Badia, a venture capital firm, andHub 71. This development comes two years after the company raised a $2 million pre-Series A round to accelerate efforts in helping businesses adopt AI and expand its operations.Founded in 2018, Synapse aims to help businesses leverage AI for better decision-making. The startup addresses financial inclusion and access challenges by providing modern AI software for financial decisions. Their solutions include credit scoring, cross-selling, dynamic pricing, and eKYC/eKYB (Know Your Customer/Business) processes.

Across Africa, startups are increasingly offering AI-driven services and attracting venture capital to serve various industries. Synapse Analytics currently has partnerships with major banking product providers, including Amazon Web Services (AWS), a cloud computing platform, and Crealogix, a startup that offers software solutions for digital banking, wealth management, and application processing. The Egypt Artificial Intelligence market is expected to reach $877.30 million in 2024, with an annual growth rate (CAGR 2024-2030) of 28.63%. This growth is projected to bring the market volume to $3.9 billion by 2030.

Bitcoin recovers above $55,000 after sharp decline in market rout

The price ofBitcoinrose by 8.2% to $55,690 after falling to $49,000, though the recovery of cryptocurrencies remains uncertain due to fears of a recession in the US and the potential sale of $2 billion worth of assets by the government.This recovery follows Bitcoin experiencing its worst price crash since 2022, with a drop of over 10% on Monday morning, reaching a six-month low. The world’s leading cryptocurrency fell below $50,000 for the first time since February.Other major cryptocurrencies also faced significant losses, with Ethereum (ETH), Binance Coin (BNB), Cardano (ADA), and Solana (SOL) all dropping by around 15% over the last 24 hours. The overall crypto market capitalization fell below $2 trillion to $1.85 trillion, marking a 13% decrease in the 24 hours leading up to Monday.

The latest price crash in cryptocurrencies coincides with a broader downturn in financial markets, partly triggered by fears of a looming global recession. Japan’s Nikkei 225 dropped over 12%, extending losses that began last week, marking its worst day since the “Black Monday” crash in 1987. In the U.S., the Nasdaq slid 3.4% last week into correction territory, concluding the tech-heavy index’s worst three-week stretch since September 2022, when the market was in freefall. The index fell another 3.4% on Monday. The sudden collapse in crypto prices took many market analysts by surprise, as the previous consensus among experts was that Bitcoin could rally to another new all-time high this year. This optimism was based on a successful halving and the inflow of billions of dollars worth of investment from newly approved Bitcoin spot exchange-traded funds (ETFs).

Emerging market stocks recoup some of losses in Monday rout

Emerging market assets recouped some losses on Tuesday after a significant sell-off in the previous session, though gains were tempered by a stronger dollar and continued concerns over global economic growth.Emerging market stocks in Asia, excluding Japan, rose 1%, aided by a sharp recovery in theNikkei. MSCI’s index of emerging market stocks rose 1.2% after experiencing its worst day in over two years on Monday.The previous session saw a combination of concerns about a potential U.S. economic recession, disappointing tech earnings, and geopolitical worries prompting investors to flee risk assets. Despite the recovery, some caution remained, with investors pricing in an 80% chance of a 50 basis point interest rate cut from the Federal Reserve in September, down from 86% on Monday.

Lower interest rates or policy easing in the US typically benefits emerging market stocks and currencies. The Japanese yen benefited significantly from risk aversion on Monday, which led to an unwinding of carry trades that adversely affected many high-yielding emerging market currencies. However, the yen slipped on Tuesday, as a rebound in the U.S. dollar continued to exert pressure on emerging market currencies. Kenya’s shilling edged down 0.2% against the dollar ahead of a monetary policy announcement.

Kenyan central bank surprises with first rate cut in over four years

Kenya’s central bank surprised financial markets by cutting its benchmark interest rate for the first time in more than four years, anticipating that inflation will remain below the midpoint of its target range in the near term.The Monetary Policy Committee (MPC) lowered thekey rateto 12.75% from 13%, as announced by Governor Kamau Thugge on Tuesday. This decision follows headline inflation slowing to a four-year low, after two previous monetary policy meetings where the Central Bank Rate was left unchanged.”The MPC noted that its previous measures have lowered overall inflation to below the mid-point of the target range, stabilized the exchange rate, and anchored inflationary expectations,” the central bank said in a statement.

Kenya’s rate cut mirrors a global trend of easing monetary policies aimed at fostering economic stability. As global inflation moderates and geopolitical tensions persist, Kenya’s strategy highlights the delicate balance nations must maintain. Enhanced global growth prospects in the US, China, and India could further boost Kenya’s trade and investment opportunities. Investors should note Kenya’s improved economic outlook. The real GDP growth in Q1 2024 and the projected 5.4% annual growth suggest a stable investment climate. The reduced current account deficit and rising goods exports, mainly from agriculture, signal a promising scenario. However, recent protests and high business costs pose potential risks, requiring cautious optimism.

Seychelles, Mauritius ranked best African investment destinations

Seychelles and Mauritius topped a ranking of African investment destinations, as the attractiveness of South Africa deteriorated due to the nation’s weak economic indicators, according to Rand Merchant Bank (RMB).The two Indian Ocean island nations outperformed the continent when measured by a combination of their economic performance, market accessibility, investment climate, and social and human development, the Johannesburg-based lender said in a report published on Tuesday.In that order, the top ten countries in RMB’s assessment, which evaluated 31 nations on the continent, are Seychelles, Mauritius, Egypt, South Africa, Morocco, Ghana, Tunisia, Senegal, Nigeria, and Algeria.

Geopolitical tensions caused by Russia’s war in Ukraine and the conflict between Israel and Hamas have impacted trade flows. At the same time, persistent global inflation has forced central banks to maintain high interest rates, keeping the cost of funding for African borrowers elevated.South Africa’s ranking slipped one place from a previous survey conducted in 2021 while Kenya dropped out of the top 10 to rank 11th overall. When measured by economic performance and potential alone, Egypt topped the rankings, while South Africa’s market accessibility and innovation are considered the best on the continent.

Jumia to raise over $100m in secondary shares as growth stalls

New York-listed African e-commerce company Jumia is planning to sell 20 million American depositary shares over the next couple of weeks, according to TechCrunch.With itsshare priceat around $5.70 when the stock market opened on Tuesday, the e-commerce company could potentially raise around $100 million through this new share offering. But the final amount will depend on the share price, which has since declined to $4.89 as of time of writing.This drop from around $11 on Monday, following a 200% rally over the last three months, may be attributed to shareholders reacting unfavorably to the news of dilution, the impact of global carry trades, or both.

Shares of Jumia tumbled on Tuesday after the company reported another loss, lower revenue, and flat customer growth for the second quarter. The stock fell 48% to $5.47 in early afternoon trading, although shares are still up 55% since the beginning of the year. Jumia posted an operating loss of $20.2 million, compared to a loss of $22.1 million in the same quarter last year, buoyed by cost reductions. The company reported an adjusted loss (EBITDA) of $16.3 million, compared to an adjusted loss of $18.2 million the previous year. Revenue fell 17% to $36.5 million, primarily due to foreign exchange devaluations, partially offset by higher commissions. Gross merchandise value (GMV) fell 5% from last year to $170.1 million, dragged down by currency devaluations. Total payment volume declined 7.1% to $45.9 million. The number of active customers remained flat year-over-year, while orders increased 6.9% to 4.8 million.

Egyptian fintech Lucky ONE gets $3m to scale credit platform

Lucky ONE, a leading consumer finance company in Egypt and Morocco, has raised $3 million in a convertible bond funding round.The investment, secured from existing backers includingLorax Capital Partners, KEM, andDisrupTech Ventures, will be instrumental in expanding the company’s credit platform and facilitating its entry into new regional markets.The funding marks a significant milestone for the company as it accelerates its path to profitability, targeting Q1 2025 for this achievement. Lucky ONE plans to utilize the fresh capital to enhance its credit offerings.

Credit makes the world go round.Governments, businesses, and individuals all rely on borrowing to function and grow.However, accessing credit is a major challenge across Africa.In 2023, while global debt hit a record $307 trillion, many Africans still struggled to get loans and other forms of credit. There are several key reasons why lending to Africans is uniquely difficult compared to other parts of the world. One of the biggest barriers to credit access in Africa is the lack of bank accounts and formal financial services for a large portion of the population.Countries like Morocco (71%), Egypt (67%), and Nigeria (60%) rank among the highest globally for unbanked populations.Across Africa, there are over 350 million people who have never had a bank account at all.Without this basic financial footprint, it becomes extremely difficult to access credit from traditional lenders like banks. This unbanked population is automatically excluded.

Fitch cuts Kenya’s credit rating after Moody’s downgrade

Global credit ratings agency Fitch has downgraded Kenya’s sovereign rating to ‘B-’ from ‘B’ due to heightened fiscal risks to Kenya’s public finances after the governmentdropped tax measuresin the Finance Bill 2024. It follows asimilar downgradeby counterpart Moody’s.The plan to raise an additional $2.7 billion in theFinance Bill 2024, following a recommendation by the International Monetary Fund (IMF), was abandoned after deadly protests.In response, the government announcedspending cutsto cover the fiscal deficits. Fitch notes that Kenya’s foreign exchange reserves fall below the ‘B’ median, primarily due to high external borrowing costs, which pose a greater risk to external financing.

The ratings firm anticipates a widening of Kenya’s fiscal deficit to 4.7 percent of GDP in the financial year ending June 2025 (FY25), which is 0.5 percentage points higher than the government’s revised deficit plan. This plan was adjusted up by 0.9 percentage points in the July draft supplementary budget. The inadequacy of revenue has led to more expensive borrowing from external commercial creditors and the domestic market, with average yields on short-term government papers surging. This reflects higher central bank rates and domestic liquidity constraints. However, Fitch has maintained a stable outlook for Kenya due to the continued strong support from official creditors, which will help alleviate near-term external liquidity pressures. Despite this support, the sovereign’s funding needs will remain large and are expected to rise.

Ghana opens first gold refinery to boost earnings from metal

Ghana opened its first commercial gold refinery in Accra on Thursday, marking a significant step in the country’s efforts to add value to its gold production and increase earnings from the precious metal, which has been mined for centuries.TheRoyal Ghana Gold Refinery, with a capacity to process 400 kilograms of gold per day, will initially source gold dore from small-scale and artisanal miners, with plans to acquire licenses for processing gold from large-scale miners.Currently, Ghana’s licensed gold producers export raw gold, while a substantial portion of output from unregulated artisanal miners, known locally asgalamsey, is smuggled out of the country. The refinery is a joint venture betweenRosy Royal Minerals of IndiaandGhana’s central bank, which holds a 20% stake. The facility is expected to employ 80-120 people directly and create 500 indirect jobs.

Ghana maintained its position as Africa’s largest gold producer last year, with increased output from small-scale and artisanal miners pushing production to 4.03 million ounces. The West African nation, also the world’s second-largest cocoa producer, is on track to exceed its 2024 gold output target, with production expected to reach between 4.3 million and 4.5 million ounces. In 2021, the Bank of Ghana launched a gold purchase program to build reserves through domestic acquisitions and support the cedi currency. Bank of Ghana Governor Ernest Addison says the program has accumulated 65.4 tonnes of gold, valued at around $5 billion. The central bank is now focused on ensuring that the newly opened Royal Ghana Gold Refinery quickly obtains certification from the London Bullion Market Association (LBMA), enhancing its credibility on the global market.

Tebogo becomes Botswana’s first Olympic champion with 200m win

Letsile Tebogo made history for Botswana and Africa at the Paris 2024 Olympics on Thursday, winning the first Olympic gold medal for his nation in any sport and Africa’s first in the 200 meters.Tebogo stormed to victory with an African record of 19.46 seconds, becoming the fifth fastest man in history over the distance. He held off the USA’s Kenny Bednarek, who took silver with a time of 19.62 seconds, and 100m champion Noah Lyles, who claimed bronze in 19.70 seconds.Erriyon Knighton, a two-time world medalist from the US, finished fourth in 19.99 seconds. Zimbabwe’s Tapiwanashe Makarawu and Makanakaishe Charamba made history as the first two Zimbabwean sprinters in an Olympic 200m final, finishing sixth and eighth, respectively. They were separated by Liberia’s Joseph Fahnbulleh, who came seventh, and Dominican Republic’s Alexander Ogando, who finished fifth.

This victory brings Africa’s medal count at the 2024 Olympics to five – Moroccan runner Sofiane Bakkali won gold in the men’s 3,000m steeplechase, Kenyans Beatrice Chebet and Faith Kipyegon won gold and silver in the women’s 5,000m race respectively, and Ugandan Joshua Cheptegei won gold in the men’s 10,000m race. Tebogo, who finished sixth in the 100m final, adds his Olympic gold to the two world medals he won last year in Budapest—100m silver and 200m bronze. His success at the senior level follows an impressive run at the World U20 Championships, where he claimed 100m gold and 200m silver in both 2021 and 2022. Tebogo’s rise continues to solidify his place as one of Africa’s most promising sprinters on the global stage.

Cloud adoption could generate $797bn in Africa, Europe by 2030

Cloud computing could unlock $797 billion in value for businesses in Africa and Europe by 2030, a new report from McKinsey & Company finds. That explains the recent wave of foreign investments pouring intoAfrican data centers, the physical infrastructure required to power cloud operations.The management consulting firm’s survey of over 50 major African companies found they already have an average of 45% of their workloads in the public cloud – on par or ahead of adoption rates in North America and China.”Early indications show that Africa is moving quickly onto cloud, and there are no signs of slowing down,” said Sven Blumberg, a senior partner atMcKinsey.

McKinsey projects the global cloud opportunity to reach $3 trillion, with a significant portion of that value up for grabs in Africa and Europe. Key industries like banking, telecoms, and oil and gas stand to benefit the most. However, the report also highlighted barriers like regulatory constraints and talent shortages that African businesses must overcome to fully capitalize on the cloud’s potential. Collaboration between organizations, regulators, and service providers will be crucial, the authors said.

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.