EMTA Forum on Sub-Saharan Africa (London) - Sept. 25

EMTA FORUM ON SUB-SAHARAN AFRICA
Tuesday, September 25, 2018 

Hosted by
  
20 Gresham Street
London, EC2V 7JE 

3:45 p.m. Registration 

4:00 p.m. Panel Discussion
Opportunities and Challenges for Sub-Saharan Africa
Phumelele Mbiyo (Standard Bank) – Moderator
Kevin Daly (Aberdeen Standard Investments)
Rita Babihuga-Nsanze (Barclays)
Giulia Pellegrini (BlackRock)
Neville Mandimika (Rand Merchant Bank)

5:00 p.m.
Cocktail Reception  

Additional Support Provided by Barclays and Rand Merchant Bank. 

Registration fee for EMTA Members US$75 / US$695 for Non-members.  

We regret that this event is not open to the media. 

Opportunities and Challenges in Sub-Saharan Africa Reviewed at EMTA Forum

The relative strength of Sub-Saharan African countries was the focus of EMTA’s Annual Forum on Sub-Saharan Africa (SSA). The event, held September 25, 2018 in London, was hosted by ICBC Standard, with additional support provided by Barclays and Rand Merchant Bank.

Phumelele Mbiyo (Standard Bank) resumed moderating duties, and began by asking panelists to discuss the SSA markets in the context of the EM sell-off. Rita Babihuga-Nsanze (Barclays) noted that, for SSA oil exporters, higher $80 oil prices were providing a new anchor despite overall EM outflows. She suggested that Angola, benefiting from both the oil price rebound and reforms, may be one of the pockets of opportunity.

Kevin Daly (Aberdeen Standard Investments) argued that there has not been an increase in buffers to SSA nations since the 2008 global financial crisis. While the number of issuers, the amount of debt outstanding and the tenors have all increased, the entrance of non-dedicated money overhung that asset class, and could hurt if non-dedicated investors headed to the exits.

Giulia Pellegrini (BlackRock) concurred that buffers have not improved, while stressing the importance of debt servicing. “Each SSA country is talking about how they will raise revenue, e.g. by raising taxes or expanding the tax base, but it’s not that quick and easy,” she stated.

Rand Merchant Bank’s Neville Mandimika observed that fiscal consolidation efforts in countries such as Ghana and Kenya were much better than those in Zambia, while the focus on diversifying Nigeria’s tax base depended largely on the price of oil (“it’s talked about at $40 per barrel, and forgotten at $80.”) He and Babihuga-Nsanze stressed the IMF’s role as a policy anchor overall. Pellegrini highlighted that governments recognize that IMF accords serve to boost investor confidence.

Mbiyo pondered if, given access to new sources such as Chinese or Eurobond market financing, relations between the IMF and SSA countries would decline. Babihuga-Nsanze responded that, in an analysis conducted by Barclays, there was no evidence of decreased SSA sovereign interaction with the IMF once external debt was issued. She stressed the importance of IMF deals for countries lacking a long track record of debt repayment.

The panel debated whether Ghana was on a new trajectory. “The real litmus test will be the new budget once the IMF program is over,” commented Mandimika, who stressed the country’s diversified natural resources. Pellegrini noted the country’s improved track record, while cautioning investors to “keep their eyes open” as the 2020 election approaches. Daly praised the increased professionalism of the current administration; “they are on the right path, but they are not home free yet.” He urged Accra to adopt a VAT in order to capture the informal economy, noting that revenue-raising measures remain a challenge.

Mbiyo steered the conversation to other upcoming elections. Babihuga-Nsanze believe that, “investors are waking up to the fact that the Nigerian election is closer than we had thought, and is shaping up to be a potential upset if the opposition coalition can coalesce around a single candidate.” Oil prices had been more helpful to the economy than government policies, and she didn’t expect any major changes if President Buhari is re-elected. For Pellegrini, a divided opposition meant that the election is Buhari’s to lose. Because Nigerian debt is widely owned, she reasoned that technical factors were important, as election-year scares could frighten off some creditors.
In South Africa, Ramaphoria has faded, and land reform will be a huge electoral issue in Daly’s view. He saw the ZAR as remaining vulnerable to contagion from vulnerable EM currencies such as the Argentine peso. Pellegrini admitted she was not “especially enthusiastic” about the new South African stimulus package, and stressed the seriousness of the work needed to be accomplished post-election.

The panel concluded with commentary on Kenya. Babihuga-Nsanze discussed the country’s strong growth and economic resilience, while suggesting that an IMF backstop was necessary for credibility. External financing needs will force them to tap the market in 2019, which could result in high borrowing costs. Daly noted that strong remittances and a tax amnesty have helped Kenya absorb the oil shock, but he labeled it a “slowly deteriorating story” on a medium-term basis, despite slowly improving growth.