Zambian Business Times : 2018-10-08



BUSINESS REVIEW #2: African countries are quietly building a track-record of repaying their debt. You rarely get positive headlines like ‘Nigeria repays its eurobonds’, but that is what they did in July. They repaid a $500 million eurobond they issued in 2013. This follows debut eurobond repayments by Ghana and Gabon ( in 2017). South Africa has also repaid numerous eurobonds as it has been issuing them for much longer than most sovereigns from the continent. Debut issuance was much discussed around 2012 but noting debut repayment is also important. A good signal for the continued growth of this asset class. #3: China’s lending to African countries takes the limelight. As African heads of state flocked to Beijing for a summit, there was enormous media attention. Western media has focused on alleged ‘debt-trap-diplomacy’ and singled-out the Chinese as fuelling the increasing burden. However, China is just one contributo­r to debt stocks. There is sizeable multilater­al lending ( i.e. the World bank and African Developmen­t Bank), syndicated loans from commercial banks, bilateral lending from all over the globe, and $90 billion of outstandin­g African eurobonds. When assessing risks, eurobond investors need to understand the other debt obligation­s a country has. Angola came back to the markets in July to tap a further $500 million on their May 2018 issue (on the bonds due in 2048). This increased their 2018 eurobond issuance to $3.5 billion, split between 10- and 30-year paper. They’ve also been one of the surprise better performers of 2018, with a narrative of reform, combating grand corruption, and a stated intention of entering into a funded programme with the IMF. Beyond this tap there was no other issuance in the Africa space in Q3. This contrasts the first half of the year when record issuance was achieved (see here). Zambia’s woes continued in Q3. As some countries’ eurobond recovered in Q3, Zambia’s three eurobonds continued to get hit. Prices plummeted in August and at the end of September could be bought for 70 cents on the dollar. Government has been saying the right things, but they no longer get the benefit of the doubt. Investors are looking out for whether Zambia will actually calm down its borrowing, push for better terms on Chinese loans, and agree to a long-discussed programme and with the IMF (that would replenish foreign currency reserves). African Eurobonds: Three (3) Themes from Q3: 2018 #1: Better performanc­e, but not across the board. It has been a tough year for emerging markets. African eurobonds got hit hard in the first six months of 2018, but there has been a bounce in recent months. Republic of Congo's near-default credit rating was shifted up a notch by Moody’s in September 2018. Subscribe in print and online: Tel: +260 977 754 890 / 0967799089 | www.zambiabusi­ PRINTED AND DISTRIBUTE­D BY PRESSREADE­R PressReade­ +1 604 278 4604 ORIGINAL COPY . ORIGINAL COPY . ORIGINAL COPY . ORIGINAL COPY . ORIGINAL COPY . ORIGINAL COPY COPYRIGHT AND PROTECTED BY APPLICABLE LAW

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