Flash Report / Global

Rwanda's new airport not a game changer for East African cement suppliers

Earlier this week, the Government of Rwanda and Qatar Airways signed an agreement to build a new international airport c25km southeast of the capital Kigali. Qatar Airways has agreed to take a 60% stake in the US$1.3bn airport. The first phase of the project will take five years to complete and serve 7mn passengers every year. The second phase, which aims to serve 14mn passengers, is expected to be completed by 2032. The project will use local materials and is expected to become the single largest employer in the country. We estimate it will require 85-100 kilotonnes per annum (ktpa) of cement (c19-22% of Rwanda’s consumption).

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Company Analysis - Commissioned / Turkey

Summa Group: Kigali Arena completed in record time

Kiti Pantskhava @
Tellimer Research
15 October 2019

Summa Group continues to deliver ambitious projects in Africa and has reported outstanding financial results for FY 18. Inauguration of a 10,000-seater indoor stadium in Kigali, Rwanda, built by Summa in record time, came shortly after the company completed its reconstruction of Diori Hamani International Airport (DHIA) in Niger – becoming its sole operator under a 30-year concession agreement – and handed over Niger’s first internationally branded hotel to the owners, Radisson Hospitality.

Kigali Arena completed in just six months. Designed primarily as a venue for indoors sport competitions, Kigali Arena can also host conferences, exhibitions and concerts. Summa began construction of the arena in January and finished the project a mere 168 days later, in July. The company employed over 1,600 workers, of whom more than 70% were hired locally. Summa Group, the Rwanda Housing Authority and the Rwanda Ministry of Sports jointly financed the US$104mn design and build project. 

Excellent financial results. In 2018, Summa Group delivered its best results since at least 2012. The company reported EUR343mn in revenues (an increase of 92% yoy), EUR88mn in EBITDA (three times higher than the previous year’s result) and net income of EUR76mn (Table 1). Although the company used more debt in 2018 than in previous years, leverage remained negligible, with the debt/EBITDA ratio standing at 0.8x. The cash balance fully covered financial liabilities, resulting in a US$29mn net cash position. Summa has continued its transition from a contract-dependent construction business to a company that benefits from more sustainable revenue flow from hospitality and airport management operations. 

Non-construction revenue set to increase in 2019. In 2018, the company earned most of its EUR343mn revenues from construction contracts, with recurring non-construction revenue standing at EUR37mn. However, Summa has added two important sources of non-construction revenues this year: 

  1. It assumed operatorship of the DHIA, with the terms of the concession allowing Summa to monetise aeronautical services as well as retail, catering and other essential services of a modern airport, and to collect a EUR52 infrastructure development charge from the International Air Transport Association (IATA) for each departing international passenger; and 
  2. It opened a new 189-room Radisson Blu Hotel in Niamey, Niger.

This report has been commissioned by Summa and independently prepared and issued by Tellimer for publication. All information used in the publication of this report has been compiled from information provided to us by Summa and publicly available sources that are believed to be reliable; however, we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Tellimer at the time of publication. The sponsor has had no editorial input into the content of the note, and Tellimer’s fees are not contingent on the sponsor’s approval of the research. 

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Macro Analysis / Global

Could the Nile dispute be an opportunity to boost freshwater technology?

18 June 2020

The Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile river has become a major point of contention between Ethiopia, Egypt, and Sudan. Ethiopia, which hopes to double its electricity generation capacity through the project, is intent on starting the filling of the dam’s reservoir as early as July 2020.

Egypt, on the other hand, insists that the dam should not go operational before a binding and comprehensive agreement on its filling and long-term operation is reached. Sudan appears to take a middle ground and is helping tame the contention between Ethiopia and Egypt.

Notwithstanding the raging dispute over the dam, Ethiopia, Egypt, and Sudan are expected to face a severe water shortage because of population growth, economic development, and climate change. To alleviate a potentially devastating water crisis, they must redirect their focus from short-term problems to a strategic, long-term cooperation to address the expected shortage through water conservation, economic trade, and technological adoption.

Diplomatic contest

After the Washington-mediated negotiations faltered in mid-February, Egypt and Ethiopia have launched a full-scale diplomatic contest, each seeking support to its own cause. Egypt gained the full support of the Arab League, which passed a resolution that supported the so-called “historic rights” for the waters of the Blue Nile. Egypt then took the case to the United Nations Security Council and Ethiopia responded in kind with its own response and complaint. The Secretary-General of the U.N. has subsequently issued a statement that advised the two countries to resolve their differences at the negotiation table.

The Blue Nile and other tributaries flowing from Ethiopia make up about 86 percent of the water flows of the main Nile. However, the Anglo-Egyptian treaty, initially signed in 1929 between Britain’s colonies Sudan and Egypt, was updated and signed again in 1959 between an independent Sudan and Egypt. The treaty fully apportioned the river’s flow between the two countries, leaving Ethiopia with no share in a major waterbody that represents a vast part of its territory.

Challenging this status quo

With the construction of the GERD, Ethiopia is challenging this status quo, but Egypt worries the dam will reduce the full flow of water. Egypt justifies its claim for the full flow of the Nile by its arid climate, which makes its existence dependent on the river.

Complicating the issue, Ethiopia is facing a burgeoning population and growing economy, and lacks any significant natural resources other than its vast hydropower potential, which is estimated to be 45,000 gigawatts. About two-thirds of this hydropower capacity is located in the Blue Nile basin, but so far only one-tenth of the potential has been utilized.

With nearly two-thirds of its population lacking access to electricity, Ethiopia is keen to develop its water resources to meet its growing energy demand. Moreover, Ethiopia claims that the dam does not directly consume water once the reservoir is filled. After all, hydropower is generated by releasing water downstream at a regulated pace.

Ethiopia’s Blue Nile Dam is hence a point of inflection where the past meets the present, with a potentially significant change of course. For Egypt, this change could entail an abrogation of its age-old claim for a privileged position to virtually all of the Nile water. For Ethiopia, the hydroelectric power project will have a transformative effect on its 64 million citizens who are currently not connected to the electric grid.

This spat between Ethiopia and Egypt should be viewed as a prelude to a future of severe water scarcity in the region, as explosive population growth, economic development, and climate change threaten to plunge the entire basin into a serious water crisis.

According to U.N. data, the population of the 11 Nile Basin countries, which stood at just 83 million in 1950 and 321 million in 2000, is currently 549 million, and is expected to balloon to more than 1 billion by 2050.

Policy measures

Therefore, if water disputes today lead to knotty international legal wrangling, we should expect to encounter sever calamities when water demand increases by multiple folds in the future. Luckily, there is still a lot that can be done to diminish the likelihood of such a scenario if the region is prepared to act now.

1. Nile Basin countries—especially Egypt, Sudan, and Ethiopiashould collaborate and allocate resources for active conservation efforts to reduce desertification and ensure the sustainability of the water systems in the region.

The Nile snakes through the fragile ecosystems of the Sahel and the Sahara, and its watershed has been subjected to severe deforestation and land degradation. It is also botched by new risks such as the recent infestation of water hyacinth, an invasive weed that is threatening to choke up Lake Tana, the source of the Blue Nile.

Downstream countries that depend on the Nile could do more to invest in projects that tackle deforestation, reduce land degradation, and mitigate environmental risks. Sadly, upstream countries with limited resources have been left to their own devices: Even Egypt, which considers itself as a historical steward of the Nile, has done virtually nothing to help preserve its ecosystem. The Nile Basin countries should actively work to coordinate efforts across the full stretch of the Nile to effectively tackle budding environmental problems. This should include increasing electrification to reduce the high level of biomass consumption that fuels deforestation.

2. Serious policy effort is needed to increase the economic and technical efficiency of water usage, especially in agriculture.

Research shows that Egypt, which is the most water-scarce country in the basin, is in fact a net virtual exporter of water, with a net embedded water export of 8.4 billion cubic meters in 2007. Egypt’s virtual water export embedded in its export goods is equivalent to about 10 percent of the flow of the main Nile, and is the result of an inefficient strategy of producing water-intensive products such as feed plants, alfalfa, beans, paddy rice, vegetables, and fruits.

Improving technical efficiency is also crucial:  Producing 1 kilogram of maize consumes about 1.12 cubic meters of water per kilogram in Egypt, which is twice greater than the water usage in France. In an ideal world where the value of water is internalized, Egypt could improve its water efficiency to the level of France, or alternatively import maize from France and use the water in other areas where there is greater water efficiency. Instead, maize is the second most important crop in Egypt, being cultivated on 750,000 feddans of land.

If production was organized in a manner that economizes water use, Egyptian farmers would have received incentives to produce less water-demanding products. This is a major issue since Egypt’s population is set to more than double by the end of the century, doubling the demand even as water supply declines due to competition upstream. There is hence a need for policy attention for moving production from agriculture, which currently sustains 55 percent of the population, to other less water-consuming economic sectors. This will necessarily entail taking a risk of being dependent on food imports but would save sizable water resources considering that agriculture currently takes up more than 80 percent of Egypt’s total water consumption.

3. Nile Basin countries should turn to technology to increase freshwater availability.

What the recent water crisis indicates is that the Nile may not be a match for the rising water demand in the region. While the longest and one of the mightiest rivers in the world, the Nile’s water content is relatively small and only a fraction of other major rivers like Congo and Amazon. Even without the construction of any major dams, its flow is likely to fluctuate or decline with rising populations and intensive agricultural use in upstream countries.

For Egypt, which is the most economically strong and yet most water-scarce country in the basin, this could be an opportunity for revising its age-old water security strategy that is centered on the Nile. Just as the U.S. managed to reduce its energy dependence on the Middle East through new technologies that enabled the fracking of shale oil, Egypt too should turn to new technologies to reduce its reliance on the dwindling flows of the Nile.

Egypt is endowed with an abundant solar energy and vast water reserves at the Nubian Sandstone Aquifer, a groundwater reservoir system that is equivalent to 500 years of the Nile River water flow. It also has access to seawater from the Red Sea and the Mediterranean. With rapid cost and efficiency improvements in solar energy technologies, it is only a matter of time before it becomes affordable to build solar-fueled desalination plants to satiate a good share of its growing fresh water needs.

The bottom line

Nile basin countries are engaged in a myopic dispute on water allocation even as climate change and desertification threaten the river’s flow and water demand continues to surge. Unless the countries take early measures to invest in water use efficiency, conservation, and development, there will be a growing risk of water crisis that could undermine peace and security in the region. The riparian countries should work cooperatively with a long-term view and adopt policy and technological innovations to ensure that the region has sufficient water supply to meet the demands of its growing population.

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Company Analysis - Commissioned / Turkey

Summa: Now the sole operator of Niger’s main airport

Kiti Pantskhava @
Tellimer Research
29 July 2019

Summa strengthens its airport concession and hospitality business. In May 2019, Summa Group became the sole operator of the Diori Hamani International Airport (DHIA) in Niamey, Niger, delivering on its strategy to grow its aviation asset portfolio in SSA. During the preceding months, the company completed an ambitious airport modernisation project, having built new passenger and cargo terminals, passenger boarding bridges, a presidential pavilion, a new taxiway and an airport utility centre in less than a year (see Figures 1-6 on page 2). Simultaneously, Summa brought the first international 5-star hotel chain to Niger, having built the 189-room Radisson Blue. The inauguration of the hotel and airport took place on 11 June 2019. Summa invested EUR154mn in the airport facilities and infrastructure, and EUR38mn developing the hotel.

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Equity Analysis / Nigeria

Nigeria eases lockdown to encourage economic recovery

  • Almost 1,000 new cases in the last week bring total confirmed cases to 2,558 out of 17,566 tests, death toll rises to 87
  • Schools to stay shut, religious gatherings still suspended and inter-state and international travel restrictions remain
  • Reopening of social and economic activity could increase economic activity and/or increase the spread of infections
Nkemdilim Nwadialor @
Tellimer Research
4 May 2020

President Buhari has called for a phased easing of the two-month lockdown in Lagos, Ogun and the FCT, which began on 31 March 2020. The restriction on movement within the three states is to be lifted for 14 days from 4 May 2020, within the hours of 6am and 8pm daily. Schools and religious buildings will remain closed within this period and new standards of sanitation are to be imposed on public transport such as compulsory masks and hand-washing facilities.

Nigeria, with a total of 2,558 cases, has the highest number of confirmed infections in West Africa, making it the second most impacted in sub-Saharan Africa and fifth on the continent.

Figure 1: Countries with highest cases of Coronavirus in Africa 

Source: Africa CDC

Figure 2: Coronavirus in Africa (heat map)

The announcement of the easing is arguably ill-timed as Nigeria recorded nearly 2,000 new confirmed cases over the past month, taking total cases from 209 as at 4 April 2020 to 2,558 cases as at 3 May 2020. Food for thought is that Nigeria’s West African neighbour, Ghana, saw its confirmed cases surge to over 2,000 within days of easing its lockdown. 

In terms of distribution, 6 of 36 states account for 80% of all infected cases, with Lagos (44% of total confirmed cases), Kano (13%) and the Federal Capital Territory (11%) as the most affected cities. Currently, only two states (Cross Rivers and Kogi) do not have any confirmed cases of coronavirus.

Figure 3: Covid-19 cases in Nigeria

Source: Nigeria Centre for Disease Control

Figure 4: Distribution of Covid-19 cases by location

Source: Nigeria Centre for Disease Control

The President in his address noted that depressed economic activities during the lockdown necessitated the easing in a bid to reawaken economic activity and prevent further layoffs. He also noted that the stay-at-home order has had a strongly adverse effect on those who rely on daily wages to survive. 

Wage cuts and layoffs during lockdown. A few companies (mostly industrial and services firms) have announced layoffs and /or salary cuts during the lockdown.

Local airlines Air Peace, Arik Air, and Dana Air, whose operations have been completely grounded due to travel restrictions, have all announced varying degrees of staff lay-offs and salary cuts (as high as 80%) in the past month. The tech space is also trying to operate leaner, with Renmoney (local fintech lender) laying off 390 sales agents, following the introduction of new digital channels which rendered some agent functions redundant.

The only bank to announce any downsizing is Access Bank – which has significantly higher operating expenses with a cost-to-income ratio at 70% in Q1 20 vs 59% for our Nigerian bank’s coverage. The bank's CEO announced plans to cut salaries and lay-off some support staff during a team meeting. However, the CBN issued a directive over the weekend preventing any bank from laying off staff within this period.

Nevertheless, we can expect unemployment to increase. Nigeria already has a high rate of unemployment – it stood at 23% as per the most recent unemployment data published in 2018.

High profile deaths reintroduce succession risk. In addition to depressed economic activity, the pandemic also reintroduces succession risk, although this not a new phenomenon and not unique to only Nigeria. The Chief of Staff to President Muhammadu Buhari Abba Kyari died on 17 April 2020 after testing positive for Covid-19. Kyari, who was in his 70s, was an influential figure in the Buhari administration serving on his cabinet since 2015. Similar cases on the continent include West African neighbour Burkina Faso, which lost its first-vice president of the Parliament, Rose Marie Compaore, to the virus. Guinea’s Amadou Salif Kebe (head of the nation’s Electoral body), Sekou Kourouma, (the secretary-general of the government) and Somalia’s Khalif Mum (Minister of State for Justice) are other high-profile political deaths.

Will the easing of lockdown encourage a recovery? The gradual reopening of social and economic activity could increase economic activity or increase the spread of infections, or both. The IMF projects that Nigeria’s economy will contract by almost 3.5% in 2020, a 6ppts drop from the pre-Covid-19 projections. Following exceptionally poor Q1 export earnings (as oil accounts for c70% of exports and contributes c10% to GDP) it is quite unlikely that the easing – which still prohibits interstate travel – would significantly increase economic activity. Evidence shows that the lockdown was not fully observed, as new cases rose by an average of 100 new cases a day over the past two weeks.

Related reading

1) Death by Covid-19 or starvation: Your Hobbesian Hobson’s choice in poorer EM

2) Aged Leaders: Nigeria's Kyari Covid-19 death a reminder of elite succession risk

3) Nigeria deep value or deep trouble

4) IMF approves emergency financing to Nigeria, calls for exchange rate flexibility

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Equity Analysis / Global

Emerging Market banks: Assessing dividend vulnerabilities

  • Central banks in Vietnam, Bangladesh, Pakistan, Morocco and Ghana have restricted the dividend payouts of their banks
  • We think banks in Sri Lanka, Russia and the GCC could also prove vulnerable to dividend cuts
  • Place to hide? We highlight ten high-yielding banks in our coverage with more defendable dividends
Rahul Shah @
Tellimer Research
12 May 2020

Bangladesh Bank, the country’s central bank, announced some restrictions today on dividends that can be paid by the country’s commercial banks. This follows an edict by Morocco’s Bank al-Maghrib yesterday, with the regulator asking commercial banks to halt dividend payments. We note that similar announcements were made by the State Bank of Vietnam and State Bank of Pakistan previously.

Table 1: New central bank-imposed dividend restrictions in selected EM, FM 



CAR-based dividend restrictions (capped at BDT1.5/share)


Banks mandated not to pay dividends for 2019 and 2020


Banks urged to withhold dividends for 2020


Dividends temporarily suspended for Q1 and Q2


Central bank encourages banks not to pay 2019 dividends


Dividends payments deferred for 90 days (from Mar 2020)


Cash dividend payments suspended

Source: Central banks, IMF, Tellimer Research

Why dividends are under threat

The main rationale for all these regulatory announcements is the likelihood of higher provisioning needs as the global recession drives an increase in borrower defaults. In addition, many banks in the aforementioned markets are typically thinly capitalised. In Figure 1 below (taken from our report: The EM and FM banks best able to cope with weaker loan quality), we highlight the capacity of banks to absorb higher provisions before breaching a 12% tier 1 capital ratio threshold. Banks in Vietnam and Bangladesh fare most poorly.

Figure 1: Percentage point increase in NPLs ratio to cut tier 1 ratio to 12%

Source: Bloomberg, Tellimer Research. Note: Assumes 100% provisioning of existing and new NPLs. Calculations based on 2019 data

Where are dividends most vulnerable?

As Figure 1 highlights, in addition to banks in Vietnam, Bangladesh and Pakistan, where dividend restrictions have already been introduced, those in Sri Lanka also seem to have limited capacity to absorb higher loan defaults and could suspend quarterly dividends even if this is not a regulatory requirement.

Other at-risk sectors include Russia (the central bank has already advised banks not to pay dividends) and the GCC banks, not least given the collapse in oil prices, which poses an additional threat to loan quality in these markets (such as forcing Saudi Arabia to introduce austerity measures and hike VAT). However, ownership considerations may also play a role; for example, Bank Muscat recently paid a healthy dividend for FY 19; its core shareholder is the Royal Diwan, for whom this income is likely welcome during these tough times.

Are there any places to hide?

The charts above highlight that banks in certain SSA markets, notably Uganda, Ghana, Nigeria, Rwanda, have significant capacity to absorb new NPL formation. It is of course possible that they will experience higher new NPL formation than other markets (such as Vietnam, which has so far had a relatively mild coronavirus experience) due to, for example, a less disciplined approach to tackling the Covid-19 threat. But overall, we would argue that the risk of dividend restrictions is more remote in these markets.

A key exception is Ghana, (which incidentally has already relaxed lockdown rules, even as the Covid-19 infection rate accelerates). Here, the central bank has decreed that no dividends should be paid from FY 19 and FY20 earnings – while the names in our coverage are well-capitalised, this is not a universal trait – the regulator may prefer to keep this excess capital in the sector (eg to help rescue weaker names) than see it exit as dividends.

High yielding banks with more defendable dividends

We highlight ten names in our coverage which have high dividend yields, manageable payout ratios and strong capital ratios, drawing on work in our report FM and EM banks: Opportunities in adversity. As such, they may be of interest to yield-seeking investors, particularly those looking to reduce the volatility of their portfolios. Sign up today to access the full report. 


We thank the following for their assistance with this report:

Nkemdilim Nwadialor (Tellimer), Faith Mwangi (Tellimer), Kavinda Perera (Asia Securities), Dalia Bona (Pharos Holding), Evgeniy Kipnis (Alfa)

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