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Cytonn Dar es Salaam Real Estate Investment Fortune

In a bid to offer a diversified investment portfolio for our clients, Cytonn has been conducting comprehensive research in various markets across Africa in our key focus areas of financial services, education, hospitality, and real estate. So far, we have conducted market research for Nairobi, Kigali,
Kampala, and Accra markets; this week, we look at Tanzania with a focus on Dar es Salaam, its largest city and commercial hub, where we recently conducted real estate market research. From the findings, the retail sector was the best performing sector with average rental yields of 9.4%, followed by the commercial office sector with yields of 6.4%, and finally, the residential sector with 5.2%. The hospitality sector continues to do well with international arrivals growing at a 6-year CAGR of 9.9% in the period 2012-2017 with tourism earnings growing by 11.2% during the same period, according to the Tanzania National Bureau of Statistics (NBS). The growth in the hospitality sector has been supported by holiday tourism and the country’s relative political calm and security.

Key takeaways:

None of the 4 banks has recorded a growth in core earnings per share, with the average decline in core earnings across the banking sector at 4.4%, owing to the tough operating environment as a result of the interest rate caps and political uncertainty in the country that affected the business environment,
Average deposit growth came in at 12.2%. However, despite the average deposits having grown, the interest expense paid on deposits recorded a negative growth of 4.3% on average, indicating that banks are growing deposits but opening less interest earning accounts and possibly transferring some existing interest earning accounts to transaction accounts,
Average loan growth has been recorded at 6.9%, however interest income has decreased by 1.7%, showing the effects of the rate cap,
Investment in government securities has grown by 16.7%, outpacing loan growth of 6.9%, showing increased lending to the government by banks as they avoid the risky borrowers,
Non-funded income has however grown by 2.0%, which included a Fee and Commissions growth of 12.3%. This shows that banks are charging more fee income to improve their income on loans above the rate cap maximum.
Helios Towers Plc, a telecommunications tower infrastructure company, whose Africa’s operations are headquartered in South Africa, is planning for an Initial Public Offering in Q2’2018. Helios Towers Plc is looking to sell its shares in the London Stock Exchange and Johannesburg Stock Exchange, targeting to have at least 25% of its 909.1 mn shares freely traded after the listing. This highlights the opportunities available for African firms to list in global markets, especially the London Stock Exchange (LSE), with Kenya’s National Oil Corporation also planning to list at the LSE in 2019.

In an effort to keep our rankings of companies on the Cytonn Corporate Governance Ranking (Cytonn CGR) Report up-to-date, we continually update the rankings whenever there are changes on any of the 24 metrics that we track, and how this affects the company ranking. This week, Kenya Re’s Mr. Michael Mbeshi replaced Mr. Jadiah Mwarania as Managing Director and Executive Director in the Board. The change in Executive Director did not have a change in the metrics that we track, and thus Kenya Re maintains its 34th Position with a score of 60.4%.

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