02 Jan

From Angola to Zimbabwe: Guide to Key Africa Markets in 2018

For bond investors, Africa was a happy hunting ground last year. Its local-currency and dollar securities easily outperformed those of emerging markets overall as investors piled into a continent offering high yields and starting to recover from the commodity bust of three years ago.

Africa Outperformed

African bonds returned more than the emerging-market average last year but risks abound, among them policy tightening in advanced economies, local and global politics, weakening currencies and another fall in oil prices. And then there is credit risk.

Mozambique and Republic of Congo missed Eurobond payments in 2017, while countries including Cameroon and Zambia agreed or began talks on bailouts with the International Monetary Fund. And since Namibia and South Africa were downgraded to junk, the continent has been left without any investment-grade foreign-currency issuers.

Christine Lagarde, for one, thinks Africa’s debt problems “could very well” worsen in 2018 as the dollar appreciates and the U.S. raises interest rates, according to an interview with Quartz magazine in December. The IMF’s managing director said yield-hungry bond investors “were so eager to lend that I don’t think they were very serious about assessing the risks.”

Africa’s debt is already less attractive on a relative basis. U.S. 10-year yields rose to their highest in nine months two weeks ago, which narrowed African dollar-spreads to 352 basis points, around the lowest in three years, according to Standard Bank Group Ltd.

Read the full article here: From Angola to Zimbabwe: Guide to Key Africa Markets in 2018

 

 

22 Nov

South Africa Awaits $7 Billion Ratings Double Jeopardy

South Africa will confront the threat of a $7 billion debt selloff this week as it awaits two concurrent judgments on its credit status.

Opinion among economists is divided as to how stark a danger that is. Fifty-six percent of respondents in a Bloomberg survey said S&P Global Ratings will reduce its assessment on rand-denominated debt to the highest non-investment grade on Friday. Moody’s Investors Service, which is scheduled to make a decision, will likely leave it unchanged, according to three-quarters of those asked.

Should both companies cut, rand debt would fall out of gauges including Citigroup Inc.’s World Government Bond Index, sparking outflows of 80 billion to 100 billion rand, Citigroup economist Gina Schoeman said. This would raise borrowing costs for the nation that’s selling more debt to plug a widening budget gap.

Conflict in the ruling party in the run-up to its leadership election next month has hamstrung efforts to bolster the Africa’s most-industrialized economy, which had its second recession in less than a decade earlier this year. Business confidence is near the lowest in more than three decades amid allegations of corruption against state companies’ managers and politicians including President Jacob Zuma.

“Given the fraught political context in which South Africa finds itself, alongside the negative repercussions of downgrades in triggering ejection from key bond indices, we believe that the rating agencies will not rush to cement decisions to downgrade this month,” said Phoenix Kalen, director for emerging-markets strategy at Societe Generale SA in London.

The sustainability of the nation’s debt will be at risk unless government presents a credible fiscal-consolidation plan in 2018, Moody’s said after the mid-term budget last month.

While the outcome of the ruling African National Congress’s elective conference next month will be of interest to ratings companies, it’s the February budget that they’ll be watching for clues on the country’s debt direction, said Annabel Bishop, the chief economist at Investec Bank Ltd.

Read more: South Africa Awaits $7 Billion Ratings Double Jeopardy

 

21 Nov

Mugabe’s Woes Wipe Out $5 Billion From Zimbabwe’s Skewed Stocks

Investors dumped Zimbabwean stocks every day since the military seized power on optimism that 93-year-old President Robert Mugabe will be forced to step down.

The stocks, which are denominated in U.S. dollars and were used to hedge against rising inflation, fell 10 percent on Monday to an eight-week low of 387.38, bringing the Zimbabwe Stock Exchange Industrial Index’s retreat since the army’s takeover on the morning of Nov. 15 to 27 percent.

The bourse’s market capitalization has plunged $4.8 billion in that period to $11.1 billion, according to data compiled by Bloomberg and the Zimbabwe Stock Exchange.

Zimbabwe’s stocks soared this year after the government printed a new form of money — called bond notes — to deal with a cash shortage, stoking concerns over price growth in a nation that saw inflation jump into the billions of percent about a decade ago. While the southern African nation has mostly used the dollar since scrapping its own worthless currency in 2009, greenbacks have become scarce as Zimbabwe’s balance of payments position has worsened.

Read more: Mugabe’s Woes Wipe Out $5 Billion From Zimbabwe’s Skewed Stocks

13 Nov

African Economic Growth Rides on Wireless Rails

A telecommunications boom is lifting an industry and a continent.

In Kenya, hundreds of thousands of people are rising out of poverty as mobile-money services turn subsistence farmers into business people. A similar dynamic drives Ethiopia, the fastest-growing economy in Africa, where the gross domestic product is forecast to climb 8 percent in 2019. Borrowing costs in Ghana plummeted almost 2.5 percentage points during the past 12 months amid an unprecedented gain in GDP that’s been led by the growth of the telecom industry.

From the Atlantic to the Indian Ocean, hand-held phones are letting people become their own ATMs, increasing economic activity by enabling payments for food, travel, school and business. Wireless communication is driving economic growth in sub-Saharan Africa much as the railroad did in the 19th-century U.S., accounting for almost a tenth of global mobile subscribers and a growth rate that’s beating the world.

The transformation is reflected in the more than 1,300 publicly-traded companies that make up corporate Africa. The value of communications firms increased during the past five years to 25 percent of the total market capitalization of African companies, up from 16 percent, according to data compiled by Bloomberg. Materials and energy, the natural-resources benchmarks that defined the region since its colonial days, diminished to a combined 18 percent from 27 percent during the same period.

Read more here: African Economic Growth Rides on Wireless Rails