Interest in African sovereign debt has been climbing again in recent months. Angola has stil not issued a $1 billion – $2 billion benchmark bond due in May. However, Kenya, Nigeria and Mauritius and many other countries have flourishing debt markets and international interest is good in high-yielding hard-currency bonds such as those issued by the Republic of Congo and Cote d’Ivoire.
In April top bond broker Exotix (www.exotix.co.uk) gave a “buy” recommendation on the REPCON 2.5% bond, redeemable in 2029. Then it was trading at 57.0 and offered a yield of 10.8% and was the highest-performing African sovereign bond.
Trading in $2.4 billion of Cote d’Ivoire debt in US dollars trading under New York law (2.5%, redeemable in 2032) began in mid-April, after the country exchanged it for Brady bonds it had defaulted on nearly a decade ago. Exotix only rates it a “hold” at 64.2 in mid-April, when it yielded 9.6%. The bond was expected to make up 0.75% of the $400bn Emerging Market Bond Index (EMBI), according to a recent article in The Banker, and many were expected to buy it for this reason. Exotix commentary on the bond included detailed assessment of politics and economic developments including current account surpluses and International Monetary Fund assessments.
Governments in some countries are seeking to create longer-term yield curves for domestic investors, in order to provide a framework for longer-term finance and investment. For instance Barclays Kenya is offering 20-year mortgages, compared to a few years ago when the limit was 5 years. Bonds are also being moved into electronic trading and being handled by central depositories.
According to a report on 19 May on Bloomberg, Angola was awarded credit ratings of B+ by Standard &Poors and Fitch, 4 levels below investment grade, and Moody’s assigned an equivalent ranking of B1, putting Angola on par with Nigeria, Lebanon, Belarus and Ghana. The country plans to issue $1billion – $2 billion in bonds this year.
Other high-yield bonds, including in local currencies, can be found in Tanzania, Zambia, Ghana and Kenya. Economic commentators are encouraged, as debt can be a more cost effective way to fuel long-term economic growth than equity.
Better economic management and good investor interest in government debt has paved the way for more corporate bonds, including for power and telecommunications infrastructure. This site has already reported how Kengen and Nampower have issued bonds to fund urgently needed power expansion. Telecommunications giant Safaricom has also been successful.
The successes are tribute to the increasing quality of economic and fiscal management by African governments.