SSA Q1 results: Africa takes centre stage in the hunt for yield
Improved access to capital markets (ATCM) and bank finance had a positive bearing on country risk scores for much of Africa during the first quarter of 2013. Country risk scores for Namibia, Nigeria, Kenya, Angola, Mozambique and Tanzania all rose in Q1.
In November 2012, Moodys expanded its African rating coverage, assigning new credit ratings to Zambia, Nigeria and Kenya. Botswana remains Africas only A-rated sovereign but 19 African sovereigns are now rated B or higher.
Meanwhile, 17 out of 54 countries in Africa are expected to have issued foreign currency-denominated instruments on the international markets by the end of the year, up from 13 in 2011. Angola, Rwanda, Nigeria and Kenya are all planning to make debut launch issues in 2013.
The latest issuance by sub-Saharan Africa (SSA) sovereigns reflects the pent-up demand for the dwindling pool of hard-currency emerging market sovereign debt.
The increase in African bond issuers this year was reflected by the higher scores in the surveys ATCM indicator.
The ability of SSA sovereigns to finance themselves on the international bond markets is also having a positive bearing on the scores for the regions structural assessment criteria.
Several SSA bond issuers aimed to raise finance purely to invest in infrastructure. In Rwandas case, the $400 million bond was issued with a yield of 6.875% with a 10-year maturity, to principally refinance infrastructure projects.
Rwanda central bank governor John Rwangombwa, in an interview with Euromoney Country Risk, says: We came to the market for one specific reason: to refinance infrastructure projects, so we didnt come to the market for the sake of borrowing for the budget deficit.
We wanted really to finance various economic and structural projects, and the cost of these projects added up to $400 million. However, several SSA countries did not match the strides made by Africas debut bond issuers in the rankings last year.
South Africa retained its position as Africas safest economy in Q1, but ECR contributors have shown greater anxiety in the economy after the country endured higher levels of risk last quarter. The sovereigns ECR score fell by 0.7 points (out of 100) to 56.2 in Q1 2013.
A closer inspection of South Africas ECR score demonstrates that multiple factors were to blame for a higher risk environment. Labour unrest, sluggish economic growth and widening political divisions led to the sovereigns credit rating being downgraded in 2012.
Ghana, on a score of 44.2, lies further adrift from SSAs top three performers. Economists downgraded the sovereign by 0.6 points in 2012.
Of most concern to ECR analysts in Q1 is the countrys widening fiscal deficit and rising public debt. The countrys government finances indicator declined by 0.2 points to 3.8 points (out of 10) and remains the countrys most pressing rating constraint, according to ECR analysts.
Ghanas fiscal slippage also had a negative impact on the countrys political assessment, after country risk scores fell across the countrys corruption (-0.1), institutional (-0.1) and transfer risk (-0.1) indicators in Q1.
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