Exploring the potential implications of Kenya’s Finance Act

The East Africa markets have been experiencing some significant softening recently as Kenya's inflation eased and the Ugandan shilling continued to appreciate against the US dollar. Phillip Ssali, Head of Corporate Sales & Global Markets at Standard Bank Group, provided some key insights into these market trends during an interview with CNBC Africa. Phillip Ssali highlighted the positive development in Kenya, where inflation has decreased from 8% to 7.9%. He projected that inflation could further decrease to 6.4% in September and 6.3% by the end of the year. Despite some potential risks, such as the VAT and petroleum product tax hikes that could create inflationary pressure, the trajectory for Kenya's market appears positive. Discussing the implications of the Finance Act in Kenya, Ssali acknowledged the importance of raising taxes for infrastructure development while also noting the short-term impact of reduced disposable income on consumer spending. He emphasized the need for proper allocation of funds to ensure long-term economic benefits. Shifting the focus to Uganda, Ssali analyzed the performance of the Ugandan shilling, which has appreciated by 3.6% against the US dollar in the last six months. Factors contributing to this strength include seasonal exports, investor flows into the Treasury market, and stable corporate demand. Ssali projected a continued appreciation of the shilling in the coming weeks, with a potential exchange rate of 3,700-3,750 by year-end. With inflation at 3.9% in Uganda and government bond yields exceeding 14%, Ssali suggested that investing in Ugandan shillings could offer a favorable real return. The market's liquidity and convertibility of the currency further enhance Uganda's attractiveness as an investment destination. Looking ahead, Ssali expressed interest in the upcoming conversation with Rizpa Ganga from East African Breweries Limited (EABL) to gain insights into their latest earnings amidst inflationary pressures and new tax policies. He anticipated understanding the company's focus and consumer sentiment reflected in their financial reports. Overall, the East Africa markets are navigating various economic challenges, including inflation fluctuations, tax reforms, and currency dynamics. Phillip Ssali's analysis provides valuable perspectives for investors and stakeholders seeking to understand and navigate these market complexities.