FEATURE ARTICLES - Rich Africa.pdf · Attijariwafa Bank (Attijariwafa, Ba1 positive, ba31), Groupe...

August 2017

CONTACTSMatt Robinson 44-20-7772-5635Associate [email protected]

Akin Majekodunmi,CFA

44-20-7772-8614

VP-Senior [email protected]

Douglas Rowlings 971-4-237-9543VP-Senior [email protected]

Aurelien Mali 971-4-237-9537VP-Sr Credit [email protected]

Zuzana Brixiova 44-20-7772-1628VP-Senior [email protected]

Dion Bate 27-11-217-5472VP-Senior [email protected]

ConstantinosKypreos

357-2569-3009

Senior Vice [email protected]

Moody's Monthly Focus on Africa Credit

This compendium brings together

Moody’s recent research on African

sovereign, banking and corporate

finance credit, in keeping with the

continent’s economic expansion, rising

international issuance and increasing

investor demand for credit ratings and

research.

FEATURE ARTICLES

Large Moroccan banks expand in Africa with uneven levels ofrisk absorption buffers

2

Three banks together represent two-thirds of Moroccan banking assets, and have seen their loanperformance weaken as a result of expanding operation into sub-Saharan Africa.

Kenya's Rated Banks Face Challenging Conditions; StrongBuffers to Mitigate Impact

5

Kenya’s three largest banks face challenges in the months ahead, with muted loan growth andmounting asset quality pressure. We expect all three banks to maintain healthy profits and strongcapital.

Ba1 issuer ratings assigned to Barclays Africa Group Limited,negative outlook

8

Barclays Africa Group Limited Ba1 issuer rating is positioned one notch below the adjustedbaseline credit assessment (BCA) of baa3 assigned to Absa Bank Limited -- the main operatingentity of the Group.

First-time Ba3 and Aaa.ng ratings assigned to DangoteCement Plc; stable outlook

9

Dangote Cement Plc's Ba3 corporate family rating, one-notch above the Government of Nigeria'srating, reflects the company's strong standalone credit profile and track record of demonstratedfinancial support from parent.

IN THIS ISSUERepublic of the Congo downgraded to Caa2, outlook remains negative 11

Gabon's rating downgraded to B3, outlook negative 13

IMF Completes Its First Review of Egypt’s Economic Reform Program 14

Tanzania's New Mining Legislation Discourages Foreign Investment 15

Tanzania’s New Mining Legislation Is Credit Negative for AngloGold Ashanti 16

Angolan Banks’ Asset Quality Will Improve with Recredit’s Purchase ofNonperforming Loans

17

Ghana’s Loan Review Process and Provisioning Clarifications Will StrengthenBanks

19

An assessment of the City of Cape Town's Green Bond 20

MOODYS.COM

https://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1085673

FEATURE ARTICLES

Large Moroccan banks expand in Africa with uneven levels of riskabsorption buffersOriginally published on 26 July 2017

Attijariwafa Bank (Attijariwafa, Ba1 positive, ba31), Groupe Banque Centrale Populaire (BCP, Ba1 positive, ba3) and BMCE Bank (BMCE,Ba1 stable, b1), together represent two-thirds of Moroccan banking assets. Acquisitive growth and universal banking strategies providethem with stable and diversified earning profiles. All have expanded into sub-Saharan Africa, and their loan performance has weakenedas a result. Despite these commonalities, we expect some differences amongst the three banks to remain, particularly in terms of thepace of their African expansion, their reliance on riskier market funding and their capacity to withstand further credit challenges.

» Dominant and diversified domestic franchises and high-yielding growth abroad support profitability. Pre-provisionincome ranged from 1.9% of average total assets for BMCE to 2.5% for Attijariwafa as of year-end 2016. Attijariwafa's operatingincome benefits from lower operating costs than its two peers, although strong net interest margins support the operating incomeof BCP and BMCE, primarily reflecting BCP's low funding costs and BMCE's larger presence in Africa, with higher-yielding loanbooks.

» All three banks face elevated levels of problem loans, albeit stabilising more rapidly for Attijariwafa. Asset quality hasdeteriorated in recent years as a result of Morocco's economic slowdown and the banks' diversification into weaker operatingenvironments in Africa. These developments have combined with high single borrower concentrations, resulting in large defaults.We expect the banks' loan performance to stabilise in the next 12-18 months as Morocco's economic growth strengthens and theirrisk management framework for foreign subsidiaries improves.

» Loss absorption capacity is relatively modest. With problem loans representing 36% of shareholders' equity and loan lossreserves (compared with 39% for BCP and 54% for BMCE) as of end-2016, Attijariwafa is best positioned to weather any additionalstress on its asset portfolio. We expect the banks' capital buffers to remain constrained over the next 12 to 18 months as a resultof sustained loan growth and acquisitive strategies, as well as additional provisioning requirements under new IFRS 9 accountingstandards.

» The banks benefit from a diversified funding base that allows for high levels of liquid assets. BCP compares favourably withpeers in terms of its funding profile. It has a lower ratio of net loans to deposits and a lower reliance on expensive and confidence-sensitive market funding. BMCE, however, has consistently displayed a higher level of liquid assets. We expect all three to maintainample levels of liquid assets over the next 12-18 months.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 4 August 2017 Inside Africa: August 2017

http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1081478

https://www.moodys.com/credit-ratings/Attijariwafa-Bank-credit-rating-600023576

https://www.moodys.com/credit-ratings/Groupe-Banque-Centrale-Populaire-credit-rating-825533907

https://www.moodys.com/credit-ratings/BMCE-Bank-credit-rating-600023577

Key financial indicators

The table below summarises Attijariwafa, BCP and BCME's ratings, along with their key financial metrics and other credit characteristics, as ofthe end of December 2016.

Exhibit 1

Attijariwafa Bank

Groupe Banque Centrale

Populaire BMCE BANK

Macro Profile Weak + Weak + Weak +

BCA ba3 ba3 b1

Global Local Currency Deposit Rating Ba1 Ba1 Ba1

Outlook Positive Positive Stable

Total assets (MAD million) 428,766 351,711 305,923

Total assets (USD million) 42,364 34,751 30,226

Tangible Common Equity (MAD million) 31,360 27,542 16,588

Tangible Common Equity (USD million) 3,125 2,721 1,639

Asset risk - assigned score b2 b2 b3

Loan Loss Provisions / Gross Loans 0.6% 1.3% 1.0%

Loan Loss Provisions / Pre Provision Income 16.7% 39.0% 29.4%

Loan Loss Reserves / Problem Loans 72.4% 76.2% 59.8%

Problem Loans / (Shareholders' Equity + Loan Loss Reserves) 36.4% 39.0% 54.4%

Problem Loans / Gross Loans 7.0% 7.7% 8.3%

Captial - assigned score b2 b2 b3

Total Capital Ratio 12.9% 11.6% 12.2%

Tier 1 Ratio 10.5% 10.5% 9.0%

Shareholders' Equity / Total Assets 9.5% 8.9% 6.0%

Tangible Common Equity / Total Assets (Adjusted) 7.4% 7.8% 5.4%

Tangible Common Equity / Risk Weighted Assets 9.2% 9.3% 7.2%

Profitability - assigned score ba1 ba2 ba3

Interest Expense / Average Total Funding 1.5% 1.6% 2.1%

Interest Income / Average Interest-Earning Assets 4.2% 4.5% 5.2%

Net Income / Tangible Assets 1.3% 0.9% 0.9%

Net Interest Margin 2.8% 3.2% 3.3%

Funding - assigned score ba2 baa3 ba3

Net Loans / Deposits 95.5% 83.6% 90.5%

Market Funds / Tangible Banking Assets 10.2% 9.9% 22.8%

Liquidity - assigned score ba2 ba2 ba1

Liquid Banking Assets / Tangible Banking Assets 29.6% 33.2% 36.9%

Support factors

Deposit market share 26.0% 26.8% 14.5%

Government support assumptions Very High Very High Very High

Key differentiating factors

Key strengths Solid profitability; sound and

stable funding and liquidity

profile

Solid profitability; sound and

stable funding and liquidity

profile

Moderate profitability; stable

funding and liquidity profile

Main challenges Elevated NPLs, high

concentration levels and

moderate capital buffers

Elevated NPLs, high

concentration levels and

moderate capital buffers

Elevated NPLs and modest

capital buffers

Note: BCA = baseline credit assessment, our view of an issuer's standalone financial strengthSource: Banks' financials and presentations, Moody's Investors Service


Dominant and diversified domestic franchises, higher-yielding growth in Africa support profitabilityAttijariwafa, BCP and BMCE, the country's three largest private banks, represent around two-thirds of the Moroccan banking system'sassets, loans and deposits. Public banks (around 17% of system assets) and private banks with majority foreign ownership (around 17%of total assets) account for the majority of the remainder. All three banks operate predominantly in Morocco (see Appendix 1), with atleast 73% of their loan book in the domestic market. As a result, Morocco's operating environment is a key driver of their profitabilityprofiles.

Moroccan banks operate in a relatively stable environment, with an industrial policy agenda that supports the development of higher-value-added exporting sectors; coherent and sound economic policies; and a high degree of political stability relative to other MiddleEast and North African countries. However, Morocco also faces structural rigidities in terms of purchasing power, unemployment andcompetitiveness. The authorities aim to tackle these rigidities by implementing major reforms, including fiscal decentralisation underthe government's Advanced Regionalisation programme, tax reforms and the gradual introduction of a more flexible exchange rate.

Banks' credit growth has slowed in recent years in this context of economic transition. Average credit growth in Morocco between 2014and 2016 was 2.6%, compared with 14% between 2006 and 2012. The decline reflects (1) high levels of banking penetration (bankingassets stand at around 120% of GDP and around 70% of the population has access to banking services); and (2) subdued investmentsand slowing household consumption moderating financing needs.

Exhibit 2

Credit growth slowed before picking up in 2016, in line withinvestment

Exhibit 3

Banking penetration in Morocco is relatively highBanking assets, % GDP

-5%

0%

5%

10%

15%

20%

25%

30%

2008 2009 2010 2011 2012 2013 2014 2015 2016

Bank Credit Growth Non-Agricultural GDP Growth

Gross Capital Formation growth Household consumption growth

Source: IMF, Haut Commissariat au Plan, Moody's Investors Service

96%

176%

119%

101%

58%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

Egypt Jordan Morocco Tunisia Sub-SaharanAfrica

Source: IMF, central banks, Moody's Investors Service

For full report, see Moodys.com.

Endnotes1 The bank ratings shown in this report are the bank's deposit rating and baseline credit assessment.

Olivier Panis, VP-Sr Credit OfficerMoody’s Investors [email protected]

Jean-Francois Tremblay, Associate Managing DirectorMoody’s Investors [email protected]

Constantinos Kypreos, Senior Vice PresidentMoody’s Investors [email protected]

Alexios Philippides, AVP-AnalystMoody’s Investors [email protected]


https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1081478

FEATURE ARTICLES

Kenya's Rated Banks Face Challenging Conditions; Strong Buffers toMitigate ImpactOriginally published on 18 July 2017

SummaryKenya’s largest three banks, KCB Bank Kenya Limited (KCB), Equity Bank Kenya Limited (Equity) and the Co-operative Bank of KenyaLimited (Co-op),1 face challenges in the months ahead, with muted loan growth and mounting asset quality pressure. Despite theirdifferent business models and areas of vulnerability, we expect all three banks to maintain healthy profits and strong capital, that willcontinue to provide substantial protection against downside risks and contribute to support their credit quality. The three banks arecurrently rated at the same level on our global scale (B1, b1)2, with a stable outlook.

Kenyan banks face a challenging environment. A combination of factors are converging and putting small borrowers underparticular stress, including a severe draught that has driven up food and fuel prices and reduced investment spending ahead of August'snational elections, contributing to create a weak business growth environment. With lending rates now capped at 14%, banks areincreasingly turning to high yielding government securities, reducing private sector lending and amplifying the economic slowdown.

Equity Bank’s focus on lending to Small- and Mid-sized Enterprises (SMEs) and micro finance means it is most exposed.These segments have seen a more acute tightening in the availability of credit, with lending rates historically above the 14% cap. Thesesmall borrowers, too, are hit hardest by rising inflation, so we expect rising delinquencies in these segments. Nonetheless, we expectany potential asset quality deterioration to remain manageable supported by Equity Bank's defensive response in meaningfully reducingrisk-taking and loan balances. KCB and Co-op Bank's focus on loans to corporates and low-risk government employees will soften theimpact.

All three banks have strong profitability and capital metrics that provides a buffer against current challenges. Kenyan banks'profitability remains one of the highest both regionally and globally, providing good protection in hard times. The three large banks’capital buffers further support their overall solvency and their ability to withstand unexpected losses.

Rated banks also have strong domestic deposit franchises, that positions them well to take advantage of Kenya's longer-term growth potential. At the same time, some of the country's smaller banks will continue to suffer from the current toughconditions.

Despite Equity Bank's high SME exposure, the bank is well placed to withstand the particular challenges it faces given its defensiveresponse in meaningfully reducing risk-taking, the granularity of its loan book and its stronger profitability metrics. Additionally, EquityBank is best positioned for future growth, given its strengthened liquidity position and the higher growth it is experiencing in its low-cost retail deposit franchise. Equity Bank's Aa1.ke national scale rating is positioned above the Aa2.ke rating of Co-op Bank. Kenya'snational scale ratings offer a greater degree of differentiation to Kenyan-based creditors and counterparties.

Exhibit 1

KCB Is the Largest Bank in Terms of AssetsRated Kenyan banks

Bank

Total Assets

March 2017

(KES mn)

Domestic Market

Share (Total Assets)

March 2017 Standalone BCA

Local Currency Bank

Deposits

Long-Term/Short-

Term

National Scale

Ratings

Long-Term/Short-

Term Outlook

KCB Bank Kenya Limited 520,535.66 13.6% b1 B1/Not-Prime -- Stable

Equity Bank Kenya Limited 393,863.65 10.3% b1 B1/Not-Prime Aa1.ke/KE-1 Stable

Co-operative of Kenya Limited 378,462.43 9.9% b1 B1/Not-Prime Aa2.ke/KE-1 Stable

Sources: Banks' financial statements, Central Bank of Kenya, Moody's Investors Service



Kenya's three largest banks face challenges over the coming quartersKenya has strong economic growth prospects, with growth rates well above the sub-Saharan African level (see Exhibit 2), supportingbusiness growth for its banks. Nevertheless some structural features and developments caused a contrast between the performanceof the economy and the performance of the banking system, which faces a number of hurdles ahead. More specifically, a severedrought has led to a spike in food and fuel inflation (Exhibit 3) reducing consumers' disposable income, at a time of reduced investmentspending (ahead of the August's national elections).

Exhibit 2

Kenya's GDP Growth Outpaces that for Sub-Saharan AfricaTrends in real GDP growth for Kenya and the Sub-Saharan African region

4.3%

5.3%5.1%

3.4%

1.4%

2.6%

3.5%

4.6%

5.9%

5.4%5.7% 5.8% 5.8%

6.0%

0%

1%

2%

3%

4%

5%

6%

7%

2012 2013 2014 2015 2016 2017 F 2018 F

Sub-Saharan Africa Kenya

Sources: International Monetary Fund (IMF), Moody's Investors Service

The banking system is also experiencing a patch of low credit and business growth. Lending rate caps have exacerbated a slowdownin credit growth that had already started in early 2016, following tighter lending criteria by banks after a spike in nonperformingloans (NPLs)3 by end-2015 (following tighter supervision and stricter enforcement of proper reporting standards) and tough fundingconditions for the country’s smaller banks (following the failure of three small banks between August 2015 and April 2016).

With rates now capped at 14%, they are very close to the government's own borrowing rates of 11%, which are becoming increasinglyattractive to banks being low-risk and tax free. Lending rates are also close to the overall inflation rates of 9% as of June 2017 (Exhibits3 and 4), further reducing banks' incentives to lend. Overall lending growth was zero year-on-year in February and credit conditions forthe country's borrowers have tightened.

Exhibit 3

Drought Has Spurred Food InflationTrends in Kenya's inflation rate components

Exhibit 4

Lending Rates Have Fallen Close to Low-Risk Government RatesTrends in Kenya's key interest rates

17.2

3.3

4.5

9.20

0

2

4

6

8

10

12

14

16

18

20

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

Food Inflation (%) Fuel Inflation (%)

Non-Food, Non-Fuel Inflation (%) Overall Inflation (%)

Source: Central Bank of Kenya, Kenya's National Bureau of Statistics

10.9%

17.7%

13.6%

6.4%7.1%

0%

5%

10%

15%

20%

25%

Jan-15 Jul-15 Jan-16 Jul-16 Jan-17

364-day TBR Average Lending Rate Average Deposit Rate

Source: Central Bank of Kenya


Interest rates on loans to SMEs and microfinance have historically been above the current 14% cap and these segments have beenhit hardest. Banks have either shied away from these segments altogether or have reduced loan tenors and amounts in order to lendprofitability at lower rates. At the same time, small companies and start ups are concentrated in the trade sector, and so they haveshouldered the effects of higher food and fuel prices on people's disposable income. As such, we believe that the SME and micro-lending segments face the highest risk of further delinquencies in the months ahead.

Other sectors of the economy are also under stress. The building and construction sector (Exhibit 5) is experiencing lower demand dueto weakness in the high-end residential market and cash-flow difficulties due to government arrears. The arrears have been causedby inefficiencies in fund disbursement and bureaucratic delays that have worsened since the disbursement of political power andeconomic resources to county governments in 2013. These can lead to only a temporary increase in NPLs, but they can also indicatecontract or performance issues by the contractors, in which case NPLs are unlikely to be swiftly addressed.

A severe drought that extends across half of the country’s 47 counties has affected agricultural and manufacturing businesses which inaddition to loss of crops, has led to water shortages, lower power supply and increased energy costs (due to the country's dependenceon hydro power).

NPLs have risen as a result, with sector-wide NPLs rising to 9.5% of total lending in March 2017, from 7.1% at the end of 2015. Weexpect these issues to continue to pressure NPLs over the next 12-18 months, with NPLs remaining close to 10% of gross loans.

Exhibit 5

NPLs Are Highest in the Building and Construction, Trade, Agriculture and Manufacturing SectorsNonperforming loans to gross loans per economic sector

4.7%

10.7%

4.5%6.2%

9.1%

17.3%

3.5%

9.3%

2.6%4.7%

14.5%

7.1%6.6%

13.1%

7.1%

10.4%8.0%

24.2%

4.9%

9.5%

2.8%

8.3%

3.2%

9.1%9.5%

0%

5%

10%

15%

20%

25%

30%

2015 2016 Mar-17

Source: Central Bank of Kenya

For full article, please see Moodys.com.

Endnotes1 Accounting for 34% of domestic assets as of March 2017.

2 The bank ratings shown in this report are the banks' local currency deposit ratings and baseline credit assessments.

3 Throughout this report we quote the NPLs as they are reported by the Central Bank and the banks, which includes interest in suspense.

Christos Theofilou, CFA, AVP-AnalystMoody’s Investors [email protected]

Savina R Joseph, Associate AnalystMoody’s Investors [email protected]


Jean-Francois Tremblay, Associate Managing DirectorMoody’s Investors [email protected]



FEATURE ARTICLES

Ba1 issuer ratings assigned to Barclays Africa Group Limited, negativeoutlookOn 17 July 2017, Moody's Investors Service, (”Moody's”) has today assigned first time long and short-term issuer ratings of Ba1/Not-prime to Barclays Africa Group Limited (BAGL and also referred as 'Group'), and Aa3.za/P-1.za national scale issuer ratings. The outlookon the long-term issuer rating is negative.

A full list of assigned ratings can be found at the end of this press release.

RATINGS RATIONALEBAGL's Ba1 issuer rating is positioned one notch below the adjusted baseline credit assessment (BCA) of baa3 assigned to Absa BankLimited (Absa: LT bank deposit Baa3 negative outlook; BCA baa3) -- the main operating entity of the Group. BAGL is a non-operationalentity and its issuer rating is mainly driven by the structural subordination of its creditors to those of Absa. BAGL has very limitedown debt outstanding, with most of the debt down-streamed to subsidiaries and no intention to deviate from this practice in theforeseeable future.

The rating also captures BAGL's good capital buffers with a Common Equity Tier 1 (CET1) ratio of 11.8% as of March 2017 and anequity-to-assets ratio of 9.3% as of December 2016; its solid profitability metrics with reported return on equity of 16.6%; risingliquidity buffers; and the Group's extensive sub-Saharan Africa operations that provide diversification benefits and growth potential.However, the rating also captures the challenging operating conditions -- in both South Africa and the wider sub-Saharan Africaregion -- which expose BAGL to asset quality pressures; BAGL's partly wholesale funding profile; and operational and performance risksrelating to Barclays Bank PLC's (LT bank deposits A1 negative, BCA baa2) sale of a majority stake in BAGL, although these are partlymitigated by Barclays' GBP765 million contribution to BAGL and the transitional services arrangement that will allow BAGL to use theBarclays brand outside South Africa until May 2020.

OUTLOOKBAGL's issuer ratings carry a negative outlook, in line with the negative outlook assigned to Absa's ratings, and primarily driven by thenegative outlook on South Africa's government rating (Baa3, negative). The negative outlook also signals the risk of a further weakeningin South Africa's macro environment and overall operating conditions, which in turn, poses risks to BAGL's credit profile.

WHAT COULD MOVE THE RATINGS UP/DOWNThere is limited upwards rating momentum for the Group's issuer rating over the near-term given the negative outlook, which is drivenby the negative outlook on both Absa's ratings and the sovereign ratings.

Since BAGL's creditors are structurally subordinated to the creditors of Absa, any downgrade of Absa's adjusted BCA, will likely result ina downgrade of BAGL's issuer ratings. In addition, downward pressure on BAGL's ratings will arise from any significant strain in BAGL'searnings stemming from its operations outside South Africa, and which would negatively impact its capitalisation and loss absorptionbuffers; and/or execution risks materialising from BAGL's separation from Barclays.

Nondas Nicolaides, VP-Sr Credit OfficerMoody’s Investors [email protected]

Sean Marion, MD-Financial InstitutionsMoody’s Investors [email protected]


FEATURE ARTICLES

First-time Ba3 and Aaa.ng ratings assigned to Dangote Cement Plc;stable outlookOn 5 July 2017, Moody's Investors Service has assigned a first-time Ba3 corporate family rating (CFR), Ba3-PD probability of defaultrating and Aaa.ng national scale rating (NSR) corporate family rating to Dangote Cement Plc (DCP), a Nigeria-based cement producer.The outlook on the ratings is stable.

“Dangote Cement Plc's Ba3 corporate family rating, one-notch above the Government of Nigeria's rating, reflects the company'sstrong standalone credit profile and track record of demonstrated financial support from a larger and more diversified parent, DangoteIndustries Limited,” says Douglas Rowlings, Vice President and lead analyst for Dangote Cement Plc at Moody's.

The ratings factor in the diversification of the company's revenue streams as DCP's new cement production plants are commissioned inAfrica with Pan-African volumes expected to reach 40% of total sales volumes by 2020.

RATINGS RATIONALE— ASSIGNMENT OF A Ba3 CFR, Ba3-PD PROBABILITY OF DEFAULT RATING AND Aaa.ng NSR—

DCP's Ba3 CFR and Ba3-PD probability of default rating reflect DCP's strong financial profile, which factors (1) high operating marginstrending above 50%; (2) low leverage as measured by debt/EBITDA trending below 1.0x over the next 18 months; (3) high interestcoverage as measured by EBIT/interest expense trending above 8x over the next 18 months; (4) conservative funding policies with debtfunding matched to the currency of cash flow generation and prudent financial policies which will ensure sustenance of strong creditmetrics through operating and project build cycles; and (5) the additional parent level financial strength afforded by being part of abroader diversified group of companies under the Dangote Industries Limited (DIL) umbrella.

The ratings also factor in (1) the relatively small scale level of cement production when compared to global peers along with productionof 23.6 million tonnes (mt) for the Financial Year Ended (FYE) 31 December 2016; and (2) a concentration of production in Nigeria,representing around 68% of revenues for the FYE 2016.

DCP's ratings are further predicated upon (1) a continuing growing cement market share of 65% in Nigeria as Africa's most populouscountry and its largest economy where GDP is expected to reset to growth levels of around 2.5% in 2017 despite the ensuing low oilprice environment; (2) protected domestic production in the various African markets in which it operates, given on-going restrictionson imports; and (3) competitive advantage brought about by an intention to always be the lowest cost cement producer in the marketswhere it operates, with a differentiated offering in Nigeria through access to low cost coal as an energy resource and a comprehensivefleet network.

LIQUIDITYUnder Moody's forecasts DCP's liquidity profile is sufficient to meet the company's cash needs over the next 12 months. Moody'sestimates that funds from operations generation of NGN493 billion ($1.5 billion) for the next 12 months and an unrestricted cashbalance of NGN136 billion ($419 million) as of 31 March 2017 are sufficient to cover maintenance capex of NGN11 billion ($34million), planned expansion capex of NGN235 billion ($724 million) and dividends of NGN145 billion ($447 million). Uncommittedexpansion capex will require external funding.

This will be supported by DCP's four committed trade finance facilities for a total amount of NGN130 billion ($401 million) to be usedto cover import payments via issuance of letters of credit.

Additionally, DCP's liquidity benefits from proven ongoing support from DIL. Although Moody's does not expect that DCP wouldrequire liquidity support from DIL, the rating agency expects that this would be forthcoming if ever needed.


RATIONALE FOR THE STABLE OUTLOOKThe stable ratings outlook reflects Moody's expectation that DCP will continue to maximize output from existing plants outsideNigeria, while continuing to observe conservative financial policies. At the same time, the stable outlook assumes the ability torefinance maturing debt predominantly due to DIL, during 2017 through a Nigerian naira denominated bond issuance.

WHAT COULD CHANGE THE RATING UP/DOWNA downgrade of DCP's rating would result if there was a move away from its conservative financial policies most notably its matchingof the currency of its underlying cash flow generation to that of its debt commitments. Downward pressure on the ratings could alsoarise should (1) liquidity become pressured; (2) adjusted debt to EBITDA trend above 4x; (3) adjusted EBIT to interest expense trendbelow 2.5x; or (4) operating margins fall below 20% on a sustained basis. Any downward momentum on the Federal Government ofNigeria's rating could also exert pressure on DCP's ratings.

Upward pressure on the ratings is constrained by the Government of Nigeria's local currency issuer rating of B1 as Moody's considers astrong interlinkage with DCP's ratings due to the high revenue contribution from its domestic operations which contains the companyto be rated one rating level above the sovereign.

Douglas Rowlings, VP-Senior AnalystMoody’s Investors [email protected]

David G. Staples, MD-Corporate FinanceMoody’s Investors [email protected]


IN THIS ISSUE

Republic of the Congo downgraded to Caa2, outlook remains negativeOn 28 July 2017, Moody's Investors Service has today downgraded the long-term local and foreign currency issuer ratings of thegovernment of the Republic of the Congo (ROC) to Caa2 from B3 and maintained the negative outlook.

Concurrently, Moody's has lowered the ROC government's local currency and foreign currency long-term bond and deposit ceilings toB2 from Ba3.

RATINGS RATIONALEThe key drivers behind the two notch rating downgrade to Caa2 from B3 and the change in ceilings are:

1) Moody's expectation that the ROC government will imminently default on its Eurobonds and could remain in default for aprotracted period of time

2) Increasingly acute liquidity pressures that could ultimately lead to sizeable losses for private sector creditors in the coming years

The negative outlook reflects the risks that private sector creditors could incur greater losses than are currently anticipated by Moody'sCaa2 rating.

IMMINENT DEFAULT ON ROC'S SOLE SOVEREIGN EUROBOND COULD BE PROTRACTEDThe government of ROC missed a $21 million coupon payment on its sole outstanding Eurobond. This will become a default eventunder Moody's definition of default unless payment is made before the 30 day grace period expires at the end of July.

On 26 June, the government sent the payment that was due to the bond Trustee, which is based in the United States. The Trusteehas not transferred the funds to the bondholders because two restraining notices were issued on behalf of Commissions Import-Export S.A. (Commisimpex, unrated). Commisimpex is a contractor that performed work in ROC in the 1980s through the enterprise'Bâtiments et Travaux Publics', and has been pursuing payment through decades of litigation in French, English and American courts.The company claims that it is now due EUR1 billion from the ROC government. The government recognizes a much smaller claim andhas not succeeded in reaching an agreement with the contractor.

The next semi-annual coupon payment on the Eurobond maturing in 2029 is due in December. If the Trustee remains unable totransfer to the bondholders the funds associated with the next coupon payments, the ROC government could remain in default underMoody's definition for a protracted period of time. Ultimately, the capacity of the government to resolve such a default event may beconstrained by factors beyond its willingness and financial capacity to pay, as this may also be dependent upon court decisions.

Even if the Trustee transfers the funds to the bondholders in the following weeks or months, there will remain a risk that future couponpayments could be blocked from reaching bondholders as long as the legal dispute between Commisimpex and the ROC governmentcontinues.

INCREASINGLY ACUTE LIQUIDITY PRESSURESThe government's default on its sole Eurobond will exacerbate liquidity pressures that have been increasingly acute since the oil priceshock that began in 2014. Liquidity pressures result from large government financing needs, themselves partly induced by falling oil-derived revenues, and increasingly limited financing options. Today's rating action also reflects Moody's view that these acute liquiditypressures have increased the risk of losses to private sector creditors in the coming years.

Government financing needs, estimated to reach at least 15% of GDP this year, result primarily from the government's large primarydeficits in cash terms. Additionally, important downside risks stem from goods and services providers' claims on the government.While there are no comprehensive statistics concerning the latter, estimated total claims that may need to be met or supported bythe government could be as large as 30% to 40% of GDP, when considering the amount Commisimpex claims it is owed (13% ofGDP) along with other claims on the government and closely-related enterprises such as national oil company Société Nationale des


Pétroles du Congo (unrated). This is particularly large compared to the government debt, which, stricto sensu (excluding arrears andother liabilities not accounted for as debt), amounted to 64% of GDP at the end of 2016.

The government's funding options are increasingly limited. The government has nearly exhausted the two financing sources it hasextensively relied on since 2014, namely its cash deposits and borrowings from its central bank, the BEAC (Banque des Etats d'AfriqueCentrale, unrated). At year-end 2016, the government only had 4% of GDP in cash deposits at the BEAC, down from 19% as ofDecember 2014. In the absence of an IMF program, which is uncertain at this time given the country's reluctance to subscribe to sucha program's conditionality, the sovereign has very few viable funding options. The regional capital markets are particularly shallowand access to international markets is unlikely given the credit event now unfolding. Moody's notes however that by far the country'smain source of funding is China (A1 stable), although there is limited visibility regarding the availability of credit under the bilateralarrangements between the two countries.

NEGATIVE OUTLOOKThe negative outlook reflects the risks that private sector creditors could incur greater loss than is currently contemplated by Moody'sCaa2 rating.

Lucie Villa, VP-Senior AnalystMoody’s Investors [email protected]

Yves Lemay, MD-Sovereign RiskMoody’s Investors [email protected]


IN THIS ISSUE

Gabon's rating downgraded to B3, outlook negativeOn July 03, 2017, Moody's Investors Service downgraded the long-term issuer and senior unsecured debt ratings of the governmentof Gabon to B3 from B1 and maintained the negative outlook. Concurrently, Moody's has lowered the government of Gabon's localcurrency as well as foreign currency bond and deposit ceilings to Ba3 from Ba1. The rating downgrade drove the change in ceilings.

RATINGS RATIONALE

The key drivers behind the downgrade to B3 are: (1) Deteriorating public finances due to persistently low oil prices and limited policyadjustment capacity; and (2) Acute government liquidity pressures, as exhibited by the accumulation of arrears. The negative outlookreflects uncertainties regarding the government's strategy to refinance maturing debt and fund its deficit despite support from officialcreditors, which remains conditional.

DETERIORATING PUBLIC FINANCES

The oil price shock has led to a marked drop in Gabon's government revenue to 17% of GDP in 2016 from 30% in 2013. As revenuesdecreased, the government faced a difficult policy trade-off between cutting expenditure, especially capital spending, which peakedat 7% of GDP in 2014, and supporting its non-oil economy. While fiscal deficits have been relatively limited on a cash basis to about5% of GDP on average over 2015-16, this has been to the detriment of the government's accumulation of arrears. In turn, governmentarrears have affected non-oil economic activity, disrupting in particular cash-flows for goods and services providers to the government.

Gabon government debt has deteriorated too, rising to 55% of GDP in 2016 from 33% in 2014, excluding accumulated arrears butincluding 5% of GDP in debt vis-à-vis the central bank (BEAC) of the Economic and Monetary Union of Central Africa (CEMAC). Duringthat period, the government contracted private sector debt to cover some of its financing needs, with the issuance in June 2015 of 10-year $0.5 billion notes as well as debt issuances on the regional market of the CEMAC. Private sector debt -- Eurobonds, loans fromcommercial banks and domestic debt, excluding the debt owed to the BEAC -- represented an estimated 77% of the total governmentdebt at the end of 2016.

While fiscal deficits should narrow going forward as part of the macroeconomic framework agreed with the IMF under the recentlyapproved Extended Fund Facility, the clearance of arrears will weigh on the government's cash balance, perpetuating the upward debttrajectory. Moody's projects the Gabon government debt level to reach 57% of GDP in 2017.

ACUTE GOVERNMENT LIQUIDITY PRESSURES

The accumulation of arrears by the government is symptomatic of rising liquidity pressures -- i.e. the difficulty of the government tomeet payments due to constrained financing sources. That said, the government of Gabon still had 2.6% of GDP in fiscal reserves atend-2016. Going forward, persistently low oil prices, the necessity to clear arrears under an IMF program in order to revive the non-oil economy, will weigh on government net financing needs which Moody's expects to peak at 12-15% of GDP in 2017 or even highershould the government's fiscal consolidation does not meet its target.

For full press release, please see Moodys.com.

Lucie Villa, VP-Senior AnalystMoody’s Investors [email protected]

Yves Lemay, MD-Sovereign RiskMoody’s Investors [email protected]


https://www.moodys.com/research/Moodys-downgrades-Gabons-rating-to-B3-outlook-negative--PR_368974

IN THIS ISSUE

IMF Completes Its First Review of Egypt’s Economic Reform ProgramOn 20 July 2017, the International Monetary Fund (IMF) announced that its Executive Board had completed the first review of Egypt’s(B3 stable) economic reform program under the Extended Fund Facility (EFF). The review’s successful conclusion is credit positivebecause it indicates Egyptian authorities’ progress in implementing reforms that will help reduce the nation’s fiscal and externalvulnerabilities. Completion of the review makes available another $1.25 billion to Egyptian authorities, bringing the total amountdisbursed so far to $3.95 billion.

Reforms are showing positive results. In particular, foreign exchange rate liberalization in November 2016 helped reduce balance-of-payment pressures from large current-account deficits and support the sovereign’s external liquidity position. Since the reform’sabolition of the Egyptian pound’s peg to the US dollar, the pound has depreciated by around 50%, which practically eliminated theparallel foreign-exchange market.

Together with the removal of almost all capital controls, foreign-exchange reform has encouraged more conversion of remittancesthrough official banking channels. As a result, the current account deficit has stabilized at 6.5% of GDP (see exhibit) as measured ona four-quarter moving-sum basis, in line with our expectation for fiscal 2017, which ended 30 June. We expect the deficit to shrinkgradually and reach about 3% of GDP by the end of fiscal 2020, supported also by a pick-up in exports.

Exhibit 1

Egypt’s Current Account Balance and Its Components as a Percent of GDPFour-quarter moving sum.

-16%

-12%

-8%

-4%

0%

4%

8%

12%

Goods Services Primary Income Secondary Income Current Account

Source: Central Bank of Egypt and Moody’s Investors Service

Exchange-rate liberalization and increased foreign investment inflows have helped restore the Central Bank of Egypt’s net internationalreserves to $31.3 billion at the end of June from $17.5 billion a year earlier. Despite the concurrent increase in total external debt, whichwe expect will rise to more than 30% of GDP by the end of the current fiscal year, restoring foreign-exchange reserve buffers reducesthe risk of a renewed balance-of-payments crisis.


Eugeniu Croitor, Associate AnalystMoody’s Investors [email protected]

Steffen Dyck, VP-Sr Credit OfficerMoody’s Investors [email protected]


http://www.imf.org/en/News/Articles/2017/07/13/pr17281-imf-executive-board-completes-first-review-under-eff-with-egypt

https://www.moodys.com/credit-ratings/Egypt-Government-of-credit-rating-258330


IN THIS ISSUE

Tanzania's New Mining Legislation Discourages Foreign InvestmentOriginally published on 06 July 2017

On 3 July 2017, Tanzania (unrated) adopted mining laws that reopen existing and future contracts between mining companies and thegovernment to renegotiation in order to strengthen government revenues and domestic value added. However, the increased legaluncertainty and adverse investment incentives create a credit-negative deterioration in the business environment and institutionalstrength with negative consequences for the country’s access to foreign capital.

The Natural Wealth and Resources Contracts (Review and Renegotiation of Unconscionable Terms) Act retroactively allows fora review of already signed agreements in case of additional recommendations by Parliament. The Natural Wealth and Resources(Permanent Sovereignty) Act assigns all natural resource exploration activities to the purview of the government and removesinternational companies’ recourse to international arbitration for dispute resolution.

A third bill amends the existing Mining and Petroleum Act to introduce a free carried interest, or minimum ownership stake, of 16%for the government with the option for increased participation, and higher royalty rates for gemstones and gold at 6% from 5%and 4%, respectively. In addition to a previously adopted 1% clearing fee on the value of all minerals exported, the bill also includesdisincentives for mineral exports in raw form. The Tanzania Chamber of Mineral and Energy deems this impractical considering thecountry’s current lack of smelters and mineral processing infrastructure necessary to increase domestic value added.

These provisions sharply reduce investment incentives for international mining corporations, which are traditionally at the forefrontof risky and capital intensive exploration activities compared with the capital-, technology-, and know how-constrained governmententities in sub-Saharan Africa. The new provisions follow the March 2017 ban on the export of mineral concentrates and ores formetallic minerals such as gold, copper, nickel and silver. Tanzania's President John Magufuli on Tuesday also ordered the suspension ofnew mining licenses until further notice.

Exploiting its natural resources is key for Tanzania’s development. Tanzania has emerged as the fourth-largest gold producer in sub-Saharan Africa after South Africa, Ghana and Mali. The country is endowed with large metals (including gold, iron ore, nickel amongothers), industrial minerals (diamond, tanzanite, ruby among others) and fuel mineral (coal, uranium) resources that could boost itsmineral rents, in addition to significant natural gas reserves. The mining and quarrying sector accounted for 4.7% of GDP in 2016, upfrom 3.4% in 2010, and should increase to 10% of GDP under the government’s Tanzania Development Vision 2025 Plan.

Minerals exports, and in particular gold, accounted for one third of total exports and constitute an important source of foreignexchange for the country. Tanzania is an oil importer, and recorded a current account deficit of 5.8% of GDP in 2016. The mining sectoris also an important source of foreign direct investment which in Tanzania amounted to 2.9% of GDP in 2016 from a high of 4.7% in2013 after gold prices peaked at an annual average of $1,670 per troy ounce in 2012.


Elisa Parisi-Capone, VP-Senior AnalystMoody’s Investors [email protected]

David Kamran, Associate AnalystMoody’s Investors [email protected]

Matt Robinson, Associate Managing DirectorMoody’s Investors [email protected]



https://www.moodys.com/credit-ratings/Tanzania-Government-of-credit-rating-600034704


IN THIS ISSUE

Tanzania’s New Mining Legislation Is Credit Negative for AngloGoldAshantiOn 13 July 2017, AngloGold Ashanti Limited (AGA, Baa3 positive) announced that it was commencing arbitration proceedings againstthe Tanzanian government under the rules of the United Nations Commission on International Trade Law. The action follows Tanzania’senactment of legislation that adversely changes the conditions for miners operating in the country.

The legislation is credit negative for AGA because it immediately increases mining royalties to 6% of gold revenues from 4% andadds a 1% levy on all exports from Tanzania. This effectively forces AGA to hand over an additional 3% of its gold revenues to thegovernment and reduces cash flow generated from operations. Additionally, AGA will no longer be able to claim back the 18% onvalue-added tax for mine inputs associated with its gold production.

AGA’s only mine in Tanzania, Geita, is the company’s largest single-producing mine in its global portfolio. The mine generated around20% of EBITDA for AGA in 2016. AGA is also the largest taxpayer in Tanzania, having paid $130 million in 2016. AGA cash receipts fromgold sales are banked outside of Tanzania in offshore bank accounts, and the Tanzanian government does not have recourse to thesecash balances. However, there is a risk that the current legislation proposes constraints on the use of offshore bank accounts.

Adding to that uncertainty is the potential for the Tanzanian government to renegotiate mine development agreements (MDA) withmining companies as a result of the legislation. Although the government has yet to inform AGA of such renegotiations, provisionsunder the newly introduced legislation allow the government to receive non-dilutable free-carried interest of no less than 16% of allmining projects. Such interest would reduce AGA’s share of the free cash flow generated by Geita by an equal amount. The Tanzaniangovernment also has the right under the new legislation to increase its free-carried interest up to a maximum of 50%, in lieu of taxbenefits provided under an MDA.

The options available to the government as a result of the legislation contravene the agreement AGA signed with the Tanzaniangovernment before developing Geita. Additionally, it calls into question the government’s respect for mineral resources developmentagreements that will have material implications for foreign direct investment in the country. The legislation also will likely affectTanzania’s independent mining survey investment attractiveness ranking by the Fraser Institute, which we use as a guide for mineoperating risk. The annual survey considers both mineral attractiveness and policy perception. In 2016, Tanzania ranked 64th of 104countries and was the 10th-best mining jurisdiction in sub-Saharan Africa for mine investment.

We expect that AGA will likely seek to have constructive discussions with the Tanzanian government, while concurrently pursuingarbitration proceedings. AGA has a track record of successfully navigating challenging operating conditions in a number of its miningjurisdictions.

For the time being, the Geita mine remains profitable, with an all-in sustaining cost of production of $844 per ounce for 2016 and cashfrom sales continuing with no effect on gold production. We expect the uncertain operating environment in Tanzania to prompt AGAto redeploy capital expenditures earmarked for Geita, notably the development of an underground mine. This will allow AGA to shiftcapital toward fast-tracking low-capital-high-return brownfield opportunities at its other mines to counter any negative effects onGeita’s contribution to overall EBITDA.

Douglas Rowlings, VP-Senior AnalystMoody’s Investors [email protected]


https://www.moodys.com/credit-ratings/AngloGold-Ashanti-Limited-credit-rating-822008488

IN THIS ISSUE

Angolan Banks’ Asset Quality Will Improve with Recredit’s Purchase ofNonperforming LoansOn 10 July 2017, media reports quoted Ricardo Viegas de Abreu, chairman of Angola state-owned bank Banco de Poupança e Crédito(BPC, unrated), as saying that Recredit, a state-owned asset management company mandated to buy nonperforming loans (NPLs), willbuy AOA231 billion ($1.4 billion) of NPLs from BPC, a credit positive.

Recredit was created as part of BPC’s 2016 restructuring plan and its mandate to buy nonperforming loans was extended to the rest ofthe Angolan banking system in December 2016 by presidential order. Recredit’s NPL purchase from BPC is its first NPL purchase andwill strengthen the bank’s credit quality by removing problem loans from its balance sheet, thereby limiting further potential losses.

Recredit’s purchase of these NPLs, as with its NPL purchases from other banks, also will allow banks’ management to focus theirresources on more productive activities. To better assess the effect of Recredit on Angola’s banking system, we await additionalinformation on Recredit’s overall capacity to buy NPLs, whether it will buy NPLs denominated in foreign currencies with foreigncurrencies, and the price at which it will purchase NPLs.

A week earlier, National Bank of Angola (BNA) Governor Valter Filipe stated that bad loans in the Angolan banking system totalledAOA639.1 billion at the end of 2016, an 80% increase from a year earlier. According to the International Monetary Fund, the ratio ofNPLs to gross loans was 15% for the Angolan banking system at year-end 2016. Recredit’s purchase of BPC’s NPLs would markedlylower NPLs systemwide. However, the magnitude of the improvement in NPLs will depend on Recredit’s resources and the scope of itsoperations, although we do expect Angola’s NPL ratio to compare favourably with that of other sub-Saharan African banking systemsonce Recredit completes its purchase of BPC’s NPLs (see Exhibit 1).

Exhibit 1

Ratio of Nonperforming Loans to Gross Loans Across Sub-Saharan Countries at Year-end 2016 or Latest

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

Angola Dem. Rep. of the Congo Ghana Kenya Nigeria Tanzania

Average = 14.1%

Source: International Monetary Fund, Central Bank of the Democratic Republic of the Congo and Moody’s Investors Service estimates

However, we expect asset risks to remain high in Angola on account of reduced government expenditures and high government arrearsfollowing a decline in oil revenues, the government’s main source of income. Additionally, the risk of further currency devaluationcontinues to threaten the performance of banks’ foreign-currency loan exposures, which constituted 30% of gross loans as of May2017, according to the BNA.

We expect banks with high NPLs that are well provisioned to benefit the most from Recredit’s NPL purchases. For Banco Angolanode Investimentos, S.A. (BAI, B1 review for downgrade, b3 review for downgrade ), the only Angolan bank we rate, reported NPLs were7.4%% for 2016 and NPL coverage was 208%. BAI’s income statement would benefit from the sale of bad loans that have been fully


https://www.moodys.com/credit-ratings/Banco-Angolano-de-Investimentos-SA-credit-rating-823609869

https://www.moodys.com/credit-ratings/Banco-Angolano-de-Investimentos-SA-credit-rating-823609869

provided for and written off to Recredit, and we expect BAI’s NPLs to compare favourably with that of the banking system even afterRecredit’s purchase of BPC’s NPLs, all else equal (see Exhibit 2).

Exhibit 2

Banco Angolano de Investimentos’ Ratio of Nonperforming Loans to Gross Loans versus System Averageor Latest

0%

2%

4%

6%

8%

10%

12%

14%

2010 2011 2012 2013 2014 2015 2016

Angola System Average

BAI in 2016 changed its NPL definition to 30 days past due from one day past due.Source: BAI’s financial statements, National Bank of Angola and Moody’s Investors Service estimates

Akin Majekodunmi, CFA, VP-Senior AnalystMoody’s Investors [email protected]

Savina R Joseph, Associate AnalystMoody’s Investors [email protected]



IN THIS ISSUE

Ghana’s Loan Review Process and Provisioning Clarifications WillStrengthen BanksOn 28 June 2017, the Bank of Ghana (BoG), the country’s central bank, published a guide that clarifies how banks should approach loanreview, loan impairment and provisioning. The clarifications are credit positive because they provide banks with consistent guidelines toassess, identify and classify problematic loan exposures. We expect that this will press banks to adequately provision for nonperformingloans (NPLs), improving their loan-loss absorption capacity.

Specifically, the BoG directs banks to individually assess their 50 largest exposures for impairments. The list of impairments includesany breach of contract; cash flow difficulties; nonpayment of interest, principal or fees; and abnormal concessions given for legal oreconomic reasons, including obligations restructured on concessionary terms. For exposures outside the top 50, the guide directs banksto assign obligations to different groups, and assess any adverse changes in payment status as well as national or local conditions thatare associated with defaults on assets in the assigned group.

The BoG instructs banks to establish a credit risk reserve fund equal to the difference between provisions based on their InternationalFinancial Reporting Standards (IFRS) impairment model and BoG prudential guidelines in cases where provisions based on the IFRSmodel are lower. As an example, loans that have been impaired for 360 days or more are fully provided for under BoG guidelines, whileIFRS rules may allow lower provision levels, depending on a bank management’s assessment of the recoverable value of underlyingcollateral. The funds allocated to the credit risk reserve are not distributable as dividends and cannot be considered for capitalcalculation, providing banks with higher total provisions. Higher loan-loss provision buffers will allow banks to absorb credit losses andgive them greater flexibility in dealing with write-offs.

The clarifications come amid Ghanaian banks’ rising NPL ratios: systemwide NPLs were 19.8% of gross loans as of 30 April 2017,up 24.5% from a year earlier, and up from 11.3% at year-end 2014. Banks’ higher asset risks reflect Ghana’s economic slowdown in2016, when real GDP growth slowed to 3.5% from an average of 7.7% during 2010-15, as high inflation and lending rates reducedaffected borrowers’ repayment capacity. High concentration risks compound banks’ asset risks: the commerce and finance, services andelectricity, water and gas sectors contributed 66% of total NPLs as of April this year. Foreign-currency loans comprised 27% of totalloans as of April 2017, and the cedi, the local currency, has depreciated roughly 14% since the end of 2015.

GCB Bank Limited (B3 stable, b31), our only rated bank in Ghana, reported stronger asset quality and more provisions than the averagefor Ghanaian banks in 2016. GCB Bank’s NPL ratio was 14.7% and the NPL coverage ratio was about 98% at year-end 2016. The bank’sexposure to foreign-currency denominated loans was lower than that of its local peers at 8% as of December 2016.

Endnotes1 The bank ratings shown in this report are the bank’s local deposit rating and baseline credit assessment.

Peter Mushangwe, CFA, Associate AnalystMoody’s Investors [email protected]



https://www.bog.gov.gh/public-notices/3082-guide-for-financial-publication-for-banks-a-bog-licensed-financial-institutions

https://www.moodys.com/credit-ratings/GCB-Bank-Limited-credit-rating-809800206

IN THIS ISSUE

An assessment of the City of Cape Town's Green BondOriginally published on 30 June 2017

Summary

Summary OpinionA GB1 (Excellent) grade is assigned to the senior unsecured amortizing green notes to be issued by Cape Town (Baa3 negative), thesecond largest city in South Africa (Baa3 negative), on or about July 17. The GB1 grade is supported by the use of proceeds dedicated torefinancing and, to a lesser degree, financing water, sanitation and transportation projects to mitigate and adapt to climate change. Keyconsiderations in our assessment include:

» The city's effective organization and formalized approach to identifying, qualifying and selecting environmentally beneficialprojects.

» Green note proceeds allocated to projects to mitigate and adapt to climate change through investments in water, sanitation andtransportation projects, in accordance with the city's green bond framework and other accepted standards.

» Summaries that outline the details of each projects, including rand amounts and, where possible, the environmental benefits ofeach project.

» A system to track proceeds and funds invested by the city in cash and cash equivalents until allocated.

» The city's adoption of comprehensive disclosure commitments that extend for the life of the notes.

Factor Factor Weights Score Weighted Score

Organization 15% 1 0.15

Use of Proceeds 40% 1 0.40

Disclosure on the Use of Proceeds 10% 1 0.10

Management of Proceeds 15% 1 0.15

Ongoing Reporting and Disclosure 20% 1 0.20

Weighted Score 1.00

The transaction's weighted score, using the green bond scorecard, is 1.0. This, in turn, corresponds to a GB1 grade.

Transaction SummaryThe City of Cape Town is planning to issue senior unsecured amortizing green notes with a tenor of 10 years, on or about 17 July 2017,in the amount of up to 1 billion rand ($77 million), pursuant to the municipality's updated R7 billion Domestic Medium Term NoteProgramme (DMTN). The notes are expected to be listed on the Johannesburg Stock Exchange (JSE).



https://www.moodys.com/credit-ratings/Cape-Town-City-of-credit-rating-806382608

https://www.moodys.com/credit-ratings/South-Africa-Government-of-credit-rating-686830

Strengths and WeaknessesStrengths Weaknesses

Well-defined organizational structure and decision making process for considering, evaluating

and selecting eligible projects

100% of the proceeds allocated to qualifying environmental projects

Project-level summaries that highlight how proceeds will be spent and the anticipated

environmental benefits

System to track remaining proceeds invested by the city in accordance with its cash

management policy

Comprehensive annual disclosures that extend through the life of the notes

Organization

Cape Town has adopted a Green Bond Framework that details how it plans to use green bonds to finance green projects. Theframework also details how projects will be identified, qualified and selected, along with the reporting and disclosure practices and cashmanagement policies. Issuance of green bonds is a citywide initiative advocated by the mayor and responds to investor appetite forgreen and sustainable investment opportunities.

The city's July green bond issuance process involved coordination with multiple city government departments and functions. Theinitiative was primarily led by the city’s Environmental Management Department, a unit under the Transport and Urban DevelopmentAuthority Directorate, which helps implement the city’s environmental strategy policy. These groups worked in conjunction withthe city's Green Economy, Environment and Climate Change Working Group to ensure Cape Town’s long-term environmentalsustainability. They also coordinated closely with the city's finance directorate.

The various parties evaluated the capital program with a view towards identifying significant projects that not only fit the climate-change adaptation and mitigation strategies, but aligned with the taxonomy established by the Climate Bonds Initiative (CBI). Projectswere screened, formally documented and evaluated on the basis of climate change vulnerability assessments.

To this end, the city has obtained pre-issuance assurance from CBI that the framework and identified programs, projects and assetsqualify for certification under the CBI taxonomy. Post-issuance assurance will be sought within three months after the registration ofthe notes in order to ensure compliance with certification requirements. The transaction will also be accompanied by pre- and post-issuance assurances by KPMG.

Any reallocation of proceeds will be done after ensuring that the program, project or asset are in compliance with the requirementsof the relevant Climate Bonds Certification Criteria. To ensure continued compliance and maintain the certification of the notes, theproceeds will be allocated in accordance with the Climate Bonds Standard version 2.1.

Factor 1: Organization (15%) Yes No

Environmental governance and organization structure appear to be effective ƔPolicies and procedures enable rigorous review and decision making process ƔQualified and experienced personnel and/or reliance on qualified third parties ƔExplicit and comprehensive criteria for investment selection, including measurable impact results ƔExternal evaluations for decision making in line with project characteristics ƔFactor Score 1


Use of Proceeds

Cape Town's green note proceeds will be allocated to projects to mitigate and adapt to climate change through investments in water,sanitation and transportation projects. The city selected the projects in accordance with its established green bond framework. Projectsalso accord with the taxonomies established by the Green Bond Principles as well as the Climate Bonds Initiative.

The proceeds will be used to finance and refinance nine projects largely intended to adapt to, but also mitigate, climate change throughinvestments in water and sanitation projects as well as transportation. These programs are intended to save water through reducedusage – especially critical given Cape Town's drought-induced water crisis – leakage and wastage, upgrading of sewage pipes andinfrastructure to avoid storm-related damage, protection against future flooding, rehabilitation and restoration of Sir Lowry's Pass River,upgrading of various seawalls and the launch of a pilot project to introduce electric buses with the aim of reducing CO2 emissions (seeExhibit 1 and highlight box).

Exhibit 1

Cape Town green bond projects largely dedicated to water

Project Type Category

Actual/Budgeted

Amounts, Fiscal 2014-

17 (Rand, millions)

Future Budgeted

Amounts, Fiscal 2018-

19 (Rand, millions)

Upgrade of Resevoirs Citywide Adaptation Water 9 -

Pressure Management: Zone Metering and Valves Adaptation Water 33 22

Treated Effluent: Reuse and Infrastructure Upgrades Adaptation Water 65 20

Meter Replacement Program Adaptation Water 639 505

Replacement and Upgrade of Sewer Pump Station Adaptation and

Mitigation

Water 6 -

Sir Lowry’s Pass River Upgrade Scheme Adaptation Water 10 140

Coastal Structures Rehabilitation Adaptation Water 19 -

Replacement and Upgrade of Sewer and Water Supply Network Citywide Adaptation Water 198 -

IRT Vehicle Acquisition (Electric Vehicles) Mitigation Transportation - 131

Totals 977 819

Source: City of Cape Town

Actual project expenditures through 31 May 2017 to be refinanced total R916 million ($71 million). The full-year fiscal 2016-17 budgetfor the green projects was revised to an amount of R220 million and approved on 31 May 2017. Under this budget, total projectexpenditures through the end of fiscal 2016-17 will total R977 million. Future budgeted project expenditures total R410 million forfiscal 2017-18 and R408 million for fiscal 2018-19.

Matthew Kuchtyak, Associate AnalystMoody’s Investors [email protected]

Henry Shilling, SVP-Env Social & GovernanceMoody’s Investors [email protected]

Thomas Brigandi, Associate AnalystMoody’s Investors [email protected]

Jim Hempstead, MD-UtilitiesMoody’s Investors [email protected]


Recent Rating Actions and Other ResearchSOVEREIGNS AND SUPRANATIONALSCredit Opinions

» Government of Uganda – B2 Stable: Regular update, 27-Jul-17

» Government of Mauritius – Baa1 Stable: Regular update, 25-Jul-17

» Government of Namibia – Baa3 Negative: Regular Update, 19-Jul-17

» Government of Ethiopia – B1 Stable: Regular update, 18-Jul-17

» Government of Nigeria – B1 stable: Regular update, 18-Jul-17

» Government of Cameroon – B2 Stable: Regular Update, 12-Jul-17

» Government of Mozambique – Caa3 Negative: Regular Update, 11-Jul-17

» Government of Senegal – Ba3 stable: Regular Update, 6-Jul-17

» Government of Kenya – B1 Stable: Regular Update, 4-Jul-17

» Government of Gabon – B3 Negative: Update Following Rating Downgrade, 3-Jul-17

» Government of Tunisia – Ba3 Negative: Regular Update, 28-Jun-17

» Government of Morocco – Ba1 Positive: Regular Update, 26-Jun-17

Rating Actions

» Moody's downgrades the Republic of the Congo's rating to Caa2, outlook remains negative, 28-Jul-17

» Moody's downgrades Gabon's rating to B3, outlook negative, 3-Jul-17

Issuer In Depth

» Government of South Africa – Baa3 Negative: Annual Credit Analysis, 14-Jul-17

» Government of Ghana – B3 Stable: Annual Credit Analysis, 30-Jun-17

» Government of Democratic Republic of the Congo – B3 Stable: Annual Credit Analysis, 26-Jun-17

FINANCIAL INSTITUTIONSCredit Opinions

» BMCE Bank: Update Following Recent Rating Action, 24-Jul-17

» Credit du Maroc: Semiannual Update, 23-Jul-17

» National Microfinance Bank Plc: Semiannual update, 21-Jul-17

» Groupe Banque Centrale Populaire: New Issuer - First rating assignment, 20-Jul-17

» Zenith Bank Plc: Semiannual Update, 20-Jul-17

» United Bank for Africa Plc: Credit Update, 20-Jul-17

» Attijariwafa bank: New issuer – First rating assignment, 20-Jul-17

» CRDB Bank Plc: Semiannual update, 20-Jul-17


http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_1083899












https://www.moodys.com/research/Moodys-downgrades-the-Republic-of-the-Congos-rating-to-Caa2--PR_370442

https://www.moodys.com/research/Moodys-downgrades-Gabons-rating-to-B3-outlook-negative--PR_368974












» Barclays Africa Group Limited: Assignment of First Time Ba1 Issuer Ratings, 18-Jul-17

» Arab Misr Insurance Group: Good Market Position and Profitability are Strengths, but Weak Operating Environment is a Challenge,11-Jul-17

» Redefine Properties Limited: Update of Key Credit Factors Following Sovereign Rating Action, 7-Jul-17

» Fortress Income Fund Limited: Update of Key Credit Factors Following Sovereign Rating Action, 7-Jul-17

» Old Mutual Life Assur. Co. (South Africa) Ltd: Update Following Rating Action, 7-Jul-17

» Hyprop Investments Limited: Update of Key Credit Factors Following Sovereign Rating Action, 4-Jul-17

» Equity Bank Kenya Limited: First Time Rating, 30-Jun-17

» Co-operative Bank of Kenya Limited: First Time Rating, 30-Jun-17

» Namibia National Reinsurance Corp Limited: Semi-Annual Update, 29-Jun-17

Rating Actions

» Moody's concludes review on Banco Angolano de Investimentos by confirming ratings, maintains negative outlook, 21-Jul-17

» Moody's assigns first-time ratings to Morocco's Attijariwafa Bank and Groupe Banque Centrale Populaire, 19-Jul-17

» Moody's affirms BMCE deposit ratings; downgrades BCA to b1, 19-Jul-17

» Moody's assigns B1 rating to United Bank for Africa Plc's senior unsecured notes, 7-Jul-17

» Moody's assigns B1 rating to Zenith Bank Plc's senior unsecured notes, 6-Jul-17

» Moody's assigns first-time ratings to Kenya's Equity Bank and Co-op Bank, 30-Jun-17

CORPORATESCredit Opinions

» Azure Power Energy Ltd: New Issue Report, 19-Jul-17

» Consolidated Infrastructure Group Limited: Update to Reflect 2017 Interim Results, 10-Jul-17

» Hyprop Investments Limited: Update of Key Credit Factors Following Sovereign Rating Action, 4-Jul-17

» Imperial Group Limited: Update of Key Credit Factors Following Sovereign Rating Action, 4-Jul-17

» Telkom SA SOC Limited: Update of Key Credit Factors Following Sovereign Rating Action, 4-Jul-17

» Barloworld Limited: Update of Key Credit Factors Following Sovereign Rating Action, 30-Jun-17

» Kagiso Tiso Holdings Proprietary Limited: Update to Discussion of Key Credit Factors, 28-Jun-17

» Liquid Telecommunications Holdings Limited: New Issue, 27-Jun-17

Rating Action

» Moody's reviews Lodha Developers' B2 rating for downgrade, 27-Jul-17






https://www.moodys.com/research/Old-Mutual-Life-Assur-Co-South-Africa-Ltd-Update-Following-Credit-Opinion--PBC_1077505





https://www.moodys.com/research/Moodys-concludes-review-on-Banco-Angolano-de-Investimentos-by-confirming--PR_369806

https://www.moodys.com/research/Moodys-assigns-first-time-ratings-to-Moroccos-Attijariwafa-Bank-and--PR_369623

https://www.moodys.com/research/Moodys-affirms-BMCE-deposit-ratings-downgrades-BCA-to-b1--PR_369395

https://www.moodys.com/research/Moodys-assigns-B1-rating-to-United-Bank-for-Africa-Plcs--PR_369191

https://www.moodys.com/research/Moodys-assigns-B1-rating-to-Zenith-Bank-Plcs-senior-unsecured--PR_369083

https://www.moodys.com/research/Moodys-assigns-first-time-ratings-to-Kenyas-Equity-Bank-and--PR_368628









https://www.moodys.com/research/Moodys-reviews-Lodha-Developers-B2-rating-for-downgrade--PR_370315

SUB-SOVEREIGNCredit Opinions

» City of uMhlathuze: First time issuer rating, 24-Jul-17

» South African National Roads Ag. Ltd (The): Update Following Sovereign Action, 21-Jun-17

Rating Actions

» Moody's assigns Ba2/A1.za first time issuer ratings to City of uMhlathuze, 18-Jul-17

» Moody's assigns Baa3/Aaa.za debt rating to City of Ekurhuleni's ZAR800 million notes due 2032, 14-Jul-17

» Moody's assigns Baa3/Aaa.za debt rating to City of Ekurhuleni's (EMM07) ZAR500 million notes due 2027, 4-Jul-17

INFRASTRUCTURE & PROJECT FINANCECredit Opinions

» Azure Power Energy Ltd: New Issue Report, 19-Jul-17

» Eskom Holdings SOC Limited: Update Following Recent Downgrade, 30-Jun-17

» Airports Company South Africa SOC Ltd: Update Following Recent Downgrade to Baa3 Negative, 26-Jun-17

To access any of these reports, click on the entry above.Note that these references are current as of the date of publication of thisreport and that more recent reports may be available. All research may not be available to all clients.




https://www.moodys.com/research/Moodys-assigns-Ba2A1za-first-time-issuer-ratings-to-City-of--PR_369264

https://www.moodys.com/research/Moodys-assigns-Baa3Aaaza-debt-rating-to-City-of-Ekurhulenis-ZAR800--PR_369641

https://www.moodys.com/research/Moodys-assigns-Baa3Aaaza-debt-rating-to-City-of-Ekurhulenis-EMM07--PR_369080




Moody’s Africa Contact ListSovereign

Yves Lemay Managing Director +44.20.7772.5512 [email protected]

Matt Robinson Associate Managing Director +44.20.7772.5635 [email protected]

Aurelien Mali Senior Analytical Adviser - Africa +917.4.237.9537 [email protected]

Zuzana Brixiova +44.207.772.1628 [email protected]

Elisa Parisi-Capone +1.212.553.4133 [email protected]

Lucie Villa +1.212.553.1990 [email protected]

Financial Institutions

Sean Marion Managing Director +44.20.7772.1056 [email protected]

Jean-Francois Tremblay Associate Managing Director +44.207.772.5653 [email protected]

Constantinos Kypreos Vice President - Senior Credit Officer +357.2.569.3009 [email protected]

Akin Majekodunmi Vice President - Senior Analyst +44.20.7772.8614 [email protected]

Christos Theofilou Assistant Vice President - Analyst +357.2.569.3004 [email protected]

Nondas Nicolaides Vice President - Senior Credit Officer +375.2.569.3006 [email protected]

Olivier Panis Vice President - Senior Analyst +971.4.237.9533 [email protected]

Peter Mushangwe Associate Analyst +44.20.7772.5224 [email protected]

Sub-Sovereign

David Rubinoff Managing Director - Sub Sovereigns +44.20.7772.1398 [email protected]

Daniel Mazibuko Associate Analyst +27.11.217.5481 [email protected]

Sebastien Hay Vice President - Senior Credit Officer +34.91.768.8222 [email protected]

Corporate Finance

David Staples Managing Director +917.4.237.9562 [email protected]

Gianmarco Migliavacca Vice President - Senior Analyst +44.20.7772.5217 [email protected]

Douglas Rowlings Assistant Vice President - Analyst +971.4.237.9543 [email protected]

Christian Rauch Senior Vice President +44.20.7772.5337 [email protected]

Dion Bate Vice President - Senior Analyst +27.11.217.5472 [email protected]

Ivan Palacios Vice President - Senior Credit Officer +34.91.768.8229 [email protected]

Ernesto Bisagno Vice President - Senior Analyst +44.20.7772.5403 [email protected]

Lynn Valkenaar Vice President - Senior Analyst +44.20.7772.8650 [email protected]

Commerical Group

David Aldrich Associate Managing Director +44.20.7772.1743 [email protected]

Michael Korwin Senior Vice President-Business Development +44.20.7772.5327 [email protected]

Regional Organization

Sylvia Chahonyo Head of Relationship Management - Africa +27.11.217.5479 [email protected]


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