Atta Financial Update

Executive summary 

In 2016, real GDP growth in sub-Saharan Africa is estimated to have been the weakest since the 2008-09 global financial crisis. This was largely because of the poor performance in its two largest economies, South Africa and Nigeria, which together make up about half of sub-Saharan Africa’s GDP.

Although oil and mining economies were hurt by the commodity slowdown, much of East Africa as well as oil-importing Francophone economies such as Côte d’Ivoire and Senegal managed robust rates of growth of above 6%. The slowdown in Africa was not uniform.

In the years following the 2008-09 global financial crisis, African economies took advantage of cheaper financing to issue record amounts of traded external debt. Many of these countries are now only five or six years away from a large amount of this Eurobond debt maturing. Ordinarily, borrowing countries would be looking to refinance their existing debt, issuing more long-term debt some time before their existing debt is due to mature. But rising US interest rates and higher bond yields may complicate this process as global investors will likely demand even higher returns for investing in sub-Saharan African debt, which is perceived to be more risky.

For African governments, borrowing internationally to invest in infrastructure is likely to become more expensive. They will have to do more to reassure lenders that they can repay existing debt. Those countries that are able to boost confidence by signing up for IMF and World Bank reforms will likely be rewarded with access to cheaper financing. Those that fail to adopt reforms could find their access to international capital markets more constrained.

While Africa’s economies face more difficult external conditions in 2017, many of the policies that have contributed to weaker economic growth are home-grown. The good news is that average regional growth should recover in 2017

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Capital Group to acquire 35% of Tsebo

 
  • Wendel Group, which agreed a deal to acquire Tsebo from Rockwood Private Equity, et. al., in a R5.25 billion (US$385m) deal last year, has invited Capital Group’s Private Markets group to co-invest in the deal and buy a 35% stake in the South African logistics firm
  • Tsebo today employs about 34,000 people across 23 countries in Africa providing a range of services to domestic and international clients on the continent
  • In its last fiscal year, ending March 31, 2016, Tsebo generated EBITDA of R507 million (US$37m) from revenues of R6.3 billion (US$462m)

Tanzania approaches partners with US$1.4 billion budget support

 
  • Tanzania is negotiating with development partners for at least US$1.4 billion to support its ongoing budget and help forestall tax increases for already struggling businesses
  • Finance and Planning Minister Philip Mpango said the government was in talks with the World Bank, the European Union, Kuwait, Abu Dhabi and the Organisation of Petroleum Exporting Countries for funds to support the current and next year’s budgets

Chinese company breaks ground on US$200 million industrial park in Nairobi

 
  • A multi-billion-shilling industrial park is set to be constructed at Kenya’s Export Processing Zone (EPZ)
  • Two Chinese companies – CIFAL International and China International Investment – are investing Kshs 20 billion (US$200 million) in the Sino-African Incubation Park, which will be located in Athi River
  • The joint investment will create 200,000 square-metres of industrial park inside the EPZ grounds occupying 60 acres of land

European lender to announce US$265 million funding for small businesses

 
  • The European Investment Bank (EIB) is Monday expected to announce at least Sh27 billion (US$265 million) of new lending to East Africa’s small and medium sized companies this year
  • Kenyan entrepreneurs will access the EIB-backed loans directly from local banks
  • The Luxembourg-based lender says the fund is likely to give priority support to agricultural investments in Kenya in a bid to promote food security and create jobs