Africa: Teflon-coated bonds
There is no clearer sign of the strength of investor interest in emerging markets than the scramble for African sovereign bonds, but how long can it last?
Zambia’s debut international bond issue in mid September marked a new high point of interest in emerging market sovereign debt. Lusaka had set an initial target of $500 million, but $12 billion-worth of orders came in and the scale of the demand led the government to increase the size of the issue to $750 million.
Zambia was just the latest country in sub-Saharan Africa (SSA) to tap into the market. Besides South Africa, which has long been involved, there has been a steady stream of other issuers since 2006, when the Seychelles offered a $200 million bond. In 2007, it was the turn of Congo, Gabon and Ghana. They were followed by Senegal in 2009 and the CÔte d’Ivoire in 2010. Last year, Nigeria and Namibia entered the market and Senegal returned to the scene with a $500 million issue.
All these countries have found a ready audience among investors keen to get involved in the growth of African economies, as more developed markets in Europe and the US are struggling. In a research report released in September, South Africa’s Standard Bank went so far as to describe African Eurobonds as ‘Teflon-coated’, which hints at the level of interest and confidence that now exists.