Archive for the 'Zambia' Category
November 16th, 2011 by Tom Minney
2012 could be an active year for African bonds and particularly eurobonds, judging by the 5.5 times oversubscription for the “Namibia 21″, the country’s debut $500 million, 10-year Eurobond. According to a recent story on Reuters, Florian von Hartig, head of debt capital markets at Standard Bank which was one of the lead arrangers,said it demonstrated the appetite for liquid African paper. He added that 2012 was likely to be active if the markets bear up: “I think Namibia is just another sign of how much African credits are in demand. The economy in Africa has been doing very well at times when the so-called developed world (has experienced) zero growth or even recession. Naturally, investors want to get exposure to an area where growth is steady so it ticks all the boxes.”
Zambia is among countries also considering a 10-year $500m Eurobond. Reuters quotes Stuart Culverhouse, chief economist at London-based broker Exotix as saying finding the best moment in turbulent markets will be key: “The external environment is driving a lot of considerations at the moment and therefore finding a window of opportunity in the market so the issuer can get the best possible terms will be a crucial factor.” He added that Zambia’s strong fundamentals, including increasing copper production, single-digit inflation and relatively low debt, made it an attractive issuer. “I think the underlying strengths are there to elicit investor interest, but the new government has to build on that and consolidate on that rather than reverse direction,” he said.
Kevin Daly, emerging market debt portfolio manager at Aberdeen Asset Management, which bought the Namibian Eurobond, said it depends on the terms of the issue: “There’s enough African names in the market to use as a pricing reference. When you look at current yields on Senegal 10-year bond it’s around 8.3/8.4%, so that’s a good starting point for them.”
Namibia’s Finance Minister Saara Kuugongelwa-Amadhila, said in an interview yesterday (15 Nov) on ABN digital; “We think that this does not only enable us to raise the funding that we need to finance our deficit, but it has enabled us also to realize the objective of providing a benchmark for future raising of funds by Namibia’s private sector, which is very important for the Namibian economy going forward.”
March 3rd, 2011 by Tom Minney
Fitch Ratings agency (www.fitchratings.com) has given Zambia a “B+” rating on long-term foreign and local currency, with a stable outlook. Fitch has also assigned a Short-term rating of ‘B’ and a Country Ceiling of ‘BB-’. This could pave the way for a $500 million Eurobond, according to Standard Bank, but the country has plenty of local deposits seeking homes as local interest rates are attractive and the currency that looks strong against the US dollar.
Veronica Kalema, Director in Fitch’s Sovereign Group, says in a statement: “The ratings reflect the marked improvement in Zambia’s economic performance since 2003 driven by improved macroeconomic stability, economic liberalisation, rising private investment and production in the mining sector, and more recently, a strong agricultural performance.
“The rating is also supported by Zambia’s resilience to the global financial crisis, with growth accelerating in 2009 and 2010, and comfortable external and public debt ratios, which deteriorated only slightly in 2009 before recovering in 2010. After spiking in 2008 and 2009, inflation fell to high single digits in 2010 and the currency has been stronger and more stable since H2 2009.”
Fitch notes real GDP growth has averaged 6.3% since 2006 and accelerated to 7.1% in 2010. Copper production reached a record high of 820,000 metric tonnes (MT) in 2010, ahead of targets, and the Government expects it to reach 1m MT in 2012. Standard Bank, in a research note today (3 March) notes that the price of copper is up from $2,800/tonne in Dec 08 and passed $10,000/tonne during Feb 11. Zambia also grew more maize than it could consume locally last year and exported some. The harvest is looking even better this year.
“Predictably, the country’s trade balance has improved to record a large surplus during 2010, roughly 20% of GDP,” writes Standard Bank analyst Phumelele Mbiyo. Fitch also gives B+ ratings to Angola, Ghana, Kenya. Nigeria and Gabon (BB-) are more highly rated, Mozambique and Rwanda (B) are lower.
The Government is planning extensive infrastructure investment, chiefly on energy and roads. in 2008 it has postponed plans for a $1 billion bond due to the global financial crisis. In 2010 it has raised funds separately to extend the Kariba North Bank power station and build the Kafue Gorge Lower power plant. This would cut the size of any potential Eurobond.
October 17th, 2010 by Tom Minney
The African bond market continues to expand, with many countries raising money on world capital markets. They are taking advantage of low global interest rates and many investors turning to African debt, partly fuelled by better economic management in Africa. Yields are near zero in Europe, the U.S. and Japan, and investors are looking to new frontiers.
Africa has massive capital needs to fuel its anticipated long growth run. The temptations to rack up debt again remain. The World Bank estimates that Africa needs to spend $93 billion a year on power, transport and water projects over the next decade to lift growth in the world’s poorest continent.
Bloomberg news agency reports that Nigeria appointed Barclays Capital in October as an adviser for its planned $500 million Eurobond. Zambia plans to raise $1 billion on the back of a planned sovereign credit rating this year.
Other African nations are dusting off plans to sell Eurobonds – bonds issued in an international currency, not the local one – to international investors. Many plans had been shelved in the global financial crisis in late 2008.
Bloomberg quotes Tanzania’s Deputy Finance Minister Omar Yusuf Mzee as saying that Tanzania is returning to work on its bond plan after postponing a sale of $500 million of the securities in 2008.
Angola has been talking for some time about raising $1 billion – $2 bln through international bonds this year. It received a B+ credit rating from Standard & Poor’s and Fitch Ratings in May.
Kenya plans to wait on its planned $500 million sovereign bond as the global recovery is “still uncertain,” according to Geoffrey Mwau, economic secretary in the Finance Ministry reportedly in August.
Sudan is next year to seek investors from the Persian Gulf region for $300 million of Islamic bonds because U.S. economic sanctions have denied the country access to other international markets, central bank Governor Sabir Hassan told the agency in an interview in Khartoum on 6 Sept.
Economic growth for Africa is expected to be more than 5% a year, says Bloomberg, fuelled partly by investment from China and India and partly by its own growing consumer spending. Infrastructure to be upgraded includes obsolete road and rail networks and power generation, where may countries face more power shortages – Bloomberg says that a continent of 1 billion people that has electricity capacity equivalent to Spain.
Bloomberg cites Samir Gadio, an emerging- markets strategist in London at Standard Bank Group Ltd: “The timing is perfect. Global yields are extremely low and that’s pushed a lot of countries to tap international markets. We’ll see good demand for these bonds. There’s just so much excess liquidity across the globe.”
South Africa’s $2 billion bond maturing in March 2020, yielded 3.69% recently (on 11 October), 138 basis points lower than when the securities were sold in June, according to data compiled by Bloomberg. The yield on Ghana’s 8.5% dollar-denominated bonds, due October 2017, has fallen 239 basis points to 5.78% during 2010.
According to the report, David Damiba, managing director in London for Renaissance Asset Managers,says: “It’s a fantastic idea to diversify their sources of funding. It’s important that these countries would want a benchmark bond” so that other assets can be priced appropriately by investors.
Another proponent is Stuart Culverhouse, chief economist of London-based Exotix Ltd., which advises clients on investments in illiquid markets. “Africa is relatively new to investors. After the last 20 to 30 years of really bad news, the past 5 to 6 years have been generally positive. There’s a cash pile just waiting to be invested. African Eurobonds will definitely be well-received.”
Some economic fundamentals have improved in Ghana, Zambia, Nigeria, Tanzania and Uganda. Most of their foreign debt, totaling about $33 billion, was canceled by lenders such as the International Monetary Fund and the U.S. starting in 2000.
Nigeria’s sovereign debt was 15% of gross domestic product in 2009, according to data from the IMF. That compares with 115% in Greece, 77% in Portugal and 116% in Italy. The report cites the IMF’s April 2010 Regional Economic Outlook for Sub-Saharan Africa. as saying in 2009 government debt was 26% of GDP in Zambia, 37% in Tanzania and 60% in Ghana.
Eurobond sellers will have to rein in fiscal deficits and limit any shortfall in their current accounts, to show that they can repay the money.
“It puts the countries on their toes,” said Kofi Wampah, first deputy governor of the central bank of Ghana, which is considering selling its second security in international markets, speaking to Bloomberg in an interview from his office in Accra on 7 Oct: “You have to ensure that your fundamentals are always right.”
July 31st, 2010 by Tom Minney
Zambia’s Lusaka Stock Exchange (LUSE – www.luse.co.zm) will host the 14th African Stock Exchange Association (ASEA) conference from 10 -12 November. The theme this year is “Integration of African Capital Markets through Technology” which occupies a few sessions are dedicated to this (see the list below and the conference pages on the website).
The meeting will be in the tourist capital, Livingstone, which has international flights, but in quiet moments you can still hear the impressive Victoria Falls. LUSE Chief Executive Officer, Beatrice Nkanza.says the stock exchange has been preparing for the conference since 2008, when it was agreed Zambia would host this year’s event. Previously LUSE successfully hosted the 5th conference in September 1998.
The agenda includes: capital markets and economic growth in Africa, the role of financial systems in capital market developments, a road map for the future of African stock exchanges, regulation, investor protection and corporate governance, credit rating, IT solutions & the role of technology, valuation, research, asset management, bond market development strategies, regional Integration, cross-border securities settlement and
private equity vs. public-private partnerships.
ASEA is a not-for-profit association of 20 stock exchanges drawn from 27 African countries. It was founded in Kenya in 1993 for systematic mutual co-operation and exchange of information among its members. It seeks to increase the visibility of African stock exchanges as the preferred frontier markets for investments including attracting foreign direct investments (FDI).
Speakers and panellists from Africa and elsewhere could include World Bank Zambia representative from Washingston, Dr. Sam Maimbo; Bank of Zambia Governor Dr. Caleb Fundanga; CEO of Johannesburg Stock Exchange Russell Loubser; FSB South Africa Director Markets Supervision Anna Manganyi and Common Market for Eastern and Southern Africa (COMESA) Director General Mr. S. N. Ngwenya..
Topics & Speakers:
Capital markets and economic growth in Africa – the link and way forward: Dr. Kapil Kapoor- World Bank country representative Zambia
The role of financial systems in capital market developments: Dr. Caleb Fundanga- Bank of Zambia Governor
African Stock Exchanges – a road map for the future: Russell Loubser, CEO Johannesburg Stock Exchange
Regulation of Stock Markets – Current trends & issues: Panel discussion Anna Manganyi – FSB South Africa, Michael Liweleya – Director Markets Supervision, SEC Zambia
Investor protection and corporate governance in African capital markets: Panel discussion Dr. Joshua Okumbe – CEO, Centre for Corporate Governance (Kenya), Mr. Mumba Kapumba – President Institute of Directors Zambia
Credit rating – is it still relevant? Panel discussion Dr. Denny Kalyalya – Deputy Governor Operation Bank of Zambia; Mr. Konrad Reuss – Managing Director, Standard & Poor’s sub–Saharan Africa; Mr. Michael Mwaanga – Debt Management Department, Ministry of Finance and National Planning, Zambia
IT solutions & the role of technology in African capital markets: Millennium IT- Malabe, Sri Lanka.
Private Equity vs PPP in Africa – trends and way forward: JP Fourier – Executive Director, Southern Africa Venture Capital Association
Valuation and Research on African Markets: Panel discussion, Hubert Danso – Managing Director, Africa Investor – South Africa
Asset Management in African emerging markets – fund manager’s perspective: John Legat- Managing Director IMARA Asset Management; Jonathan Auerbach – co-founder & Managing Director, Auerbach Grayson & Co., New York.
Bond Market development strategies: Panel discussion Mr. Peter Banda – Director Financial Markets, Bank of Zambia; Dr. Graham Smale – Head of Fixed-Income Securities JSE; Almet Keshkilner – Turkish Treasury; Nigeria Stock Exchange
Regional Integration: What are the opportunities & challenges? Mr. S. N Ngwenya – Director General, COMESA
Cross-Border Securities Settlement: Panel discussion Vipin Y. S Mahabirsingh – Managing Director CSD Mauritius; Rose Mambo – CEO, CSDS Kenya; Steve Everettee – Strate, South Africa.
May 31st, 2010 by Tom Minney
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.