Archive for the 'Senegal' Category

Rise of pension giants set to transform investment in Africa

New giants are arising in African investments – the domestic pension funds. In Nigeria the National Pensions Commission (PenCom) estimated registered pensions to be worth US$14bn in June 2011, with asset values up by 8% in three months; Namibia’s Government Institutions Pension Fund alone is worth some $6bn; South Africa’s pension funds grew at a compound annual growth rate of 14.3% in US dollar terms over 10 years to December 2010, including over 28% in 2010 and Tanzania’s pension industry was audited at $2.1bn for 2010, and growing by 25% a year.

The number of pensioners is set to soar, according to United Nations figures, as the number of people over 60 years in Africa will rise from 55m in 2010 to 213m by 2050, compared to 236m Europeans over 60 years old by 2050. Current pension funds cover only 5%-10% of Africans ranging from 3% in Niger but it used to be 80% in North African countries such as Egypt, Libya and Tunisia. Pensions are not available at all in some countries.

Regulatory reforms are driving the growth of African pensions. Recent reformers include Cote d’Ivoire, Gabon, Kenya, Nigeria, Senegal and Uganda. Ghana created a National Pensions Authority with a 2010 act. Reform in Kenya, including investment guidelines and a new regulator, resulted in strong growth and good investment returns. Tanzania passed the Social Security Regulatory Act in 2008. The rising pension industry is likely to boost fund management and equity industries, exits for private equity and even to fill some of the $45bn annual funding gap for infrastructure. For instance, In January 2012, Tanzania’s National Social Security Fund signed an agreement to finance 60% of the $137m cost of building Kigamboni Bridge. South Africa’s $130bn Government Employees Pension Fund is a major investor in the Pan-African Infrastructure Development Fund which raised $625m in 2007 and is targeting $1bn on its second offering.

For more details on Africa’s pension industry, please check my article published in The Africa Report magazine and website, here is the link and for brief profiles of 6 giant African funds, check here.

Senegal bond ratings comparisons with similar maturity bonds

Want to get an idea how the Senegal bond compares with the others? Exotix ( is one of the leaders when it comes to Emerging Markets bonds. In this table they give you the lowdown:


Size (US$m)    Mdur   Yield(mid)    Moody’s S&P Fitch

Senegal                                                                                                B1             B+     NR

Gabon 8.2% 2017           879                      5.2        5.344               NR           BB‐     BB
Ghana 8.5% 2017            750                     5.1         6.036              NR           B          B+
Nigeria 6.75% 2021       500                     7.2         6.165              NR            B+      BB

Sri Lanka 6.25% 2020   1000                  7.2          6.16               B1              B+       B+
Vietnam 6.75% 2020    1000                 6.7           6.015            B1              BB‐      B+
Lebanon 8.25% 2021     2092                 7.2           6.253            B1              B          B
Georgia 6.875% 2021    500                   7.3           6.953            Ba3            B+      B+
Ukraine 7.95% 2021      1500                 6.9            7.195           B2               B+      B
Dom Rep 7.5% 2021       750                  6.7             6.752          B1                B         B

Source: Bloomberg, Exotix. Close 4 May 2011.

Senegal’s $500m Eurobond offers good yield

Senegal has successfully re-priced its yield curve by issuing a more liquid 10-year $500 million Eurobond carrying a coupon of 8.75%. The bond was priced at 97.57 when it was bid on 6 May, the equivalent of a yield of 9.125%. Standard Bank noted it represented a spread of 596 basis points over comparable US Treasuries.
Senegal is rated B+ by Standard & Poors and B1 by Moody’s.
Samir Gadio of Standard Bank Research says the bond attracted a lot of interest, with final demand reaching $2.4 billion. In trading after the issue the mid-price climbed to around 102.75 on 11 May, representing a yield of 8.3% and spread of 508 bps. He adds in an investor note; “further upside is probable as the bond is likely to be included in the EMBI index in late May”.
Stuart Culverhouse of broker Exotix also tips the bond as one to watch: “There are not many places to get 9% yields these days. But we also think it overstates Senegal’s credit risk. We think the offer gives intrinsic value. Moreover, with the new issue likely meeting eligibility criteria for index inclusion (e.g. in the EMBIG) we expect there would be additional technical support for the new bond.
“We think Senegal’s credit fundamentals compare favourably with other B+ rated sovereigns. We think the new bond will offer good value compared to similarly rated peers (eg Ghana and Nigeria) with 200bps-plus upside.”
The bond replaces a $200m 8.75% bond due in 2014 which will be entirely retired. Gadio says the transaction helped significantly reduce Senegal’s credit spread by nearly 100 bps, even as the country extended its yield curve. He says “political risks remain relatively limited ahead of the 2012 general elections”, especially as Senegal’s democratisation process was initiated in the mid-1970s.
Senegal is part of the West African Economic and Monetary Union grouping of 8 West Afrian states formed in 1994, and uses the CFA Franc (XOF) currency linked to the Euro. As a WAEMU country, Senegal cannot independently determine its monetary policy. Gadio says, the Banque Central des Etats de l’Afrique de l’Ouest (regional central bank has historically been conservative in its money supply objectives, ensuring a low core inflation and interest rate environment. “The two main economic constraints remain a large current account deficit and a relatively sizeable fiscal deficit, even as public debt is sustainable.”

BRVM flees war and restarts trading from Mali

West Africa’s regional stock market the Bourse Regionale des Valeurs Mobilieres ( has started trading from a new base in Bamako, Mali, after leaving Cote d’Ivoire because of the political crisis. Trading restarted in the new office on 1 March, reports Bloomberg news agency, but volumes are much lower.
The bourse suspended operations on 11 February, after security forces loyal to incumbent Cote d’Ivoire president Laurent Gbagbo seized its main offices in Abidjan to prevent it relocating. Once senior personnel were safely out, the BRVM managed to move enough of the settlement and clearing operations to start operating in the new offices. At least 10 commercial banks in Cote d’Ivoire closed and Gbagbo’s forces “nationalized” them.
Bloomberg says that it is only operating for foreign investors since most of the stockbrokers were based in Cote d’Ivoire and their offices were part of the closed banks. However stockbroker Securities Africa says that only locals can trade. Clearing and settlement would also require banks, although the BRVM has an associated regional central depository Dépositaire Central/Banque de Règlement S.A.
The political crisis in Cote d’Ivoire is getting closer to civil war. International bodies including regional grouping ECOWAS and the African Union says that opposition leader Alassane Ouattara, won a 28 November presidential election and is the legal president of the country, but Gbagbo refuses to accept the verdict. The United Nations says that almost 400 people have been killed and tens of thousands have fled. The economy has virtually stopped, with all financial systems, and Cote d’Ivoire’s €2.3 billion Eurobond went into default on 30 January.
The BRVM lists some 39 securities and acts as the regional exchange for 8 countries as an African innovation when it opened in 1998. Bloomberg reports BRVM head Jean-Paul Gillet saying that the value of trading on 15 March was CFA 86 million (US$182,300), down from a daily average of CFA 200 mn to CFA 500 mn in 2010: “We managed to restart the operations of the bourse after we reconstructed the system and the environment. The volume of transactions has been a bit affected, but the prices haven’t dropped as there has been no haste in selling.
“Given the situation in the country, Ivorian companies face difficulties in taking part in trading, so we mostly have international clients at the moment. Companies can’t work from Abidjan because members of their staff are missing or their offices are closed.”
Stockbroker Securities Africa lists the market capital of the BRVM at CFA 3.5 trillion CFA francs. Sonatel (SNTS), Sonatel, based in Senegal and including France Telecom as a shareholder, is the biggest listed company with CFA 1.65 trn in market capitalization. Other listings include 8 banks, including SGBCI (Societe Generale SA) and Ecobank Transnational Inc. Ivorian companies make up 33 of the 39 listings, according to BRVM website, and the BRVM Composite Index peaked at 174.89 on 11 Jan, but has since fallen 7.5%, in line with many emerging markets indices.