Zambia’s default risk highlights Africa’s debt woes

Zambia’s default risk highlights Africa’s debt woes
Credit rating agency Fitch downgraded Zambia to almost junk status after the government sought to delay interest payments to bondholders in September. (Reuters)
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Updated 02 November 2020

Zambia’s default risk highlights Africa’s debt woes

Zambia’s default risk highlights Africa’s debt woes
  • A default on private debt is damaging in the eyes of investors

KAMPALA: Facing financial difficulties aggravated by the coronavirus disease (COVID-19) pandemic, the southern African nation of Zambia appears headed for a default on debt owed to private investors.

One of the world’s top copper producers, Zambia for years has been heavily indebted but now could get an undesired reputation for financial unreliability if a group of investors who hold $3 billion of the country’s eurobonds insist on payments that have come due. Zambia seeks a holiday of six months, but the bondholders’ final decision is pending.

The cash-strapped country is a strong example of the debt distress for other governments in Africa even as they try to focus limited resources on urgent problems such as healthcare and education. How Zambia fares will be watched by other nations that owe large amounts not just to private bondholders but also to commercial banks and state lenders such as China.

A default on private debt is damaging in the eyes of investors, and credit rating agency Fitch downgraded Zambia to almost junk status after the government sought to delay interest payments to bondholders in September.

Zambia’s looming default “definitely sends a wrong signal in the eyes of investors,” said Stephen Kaboyo, a Ugandan analyst who runs the asset management firm Alpha Capital Partners.

“There’s always peer comparison,” he said. “They ask themselves, ‘Who is next?’”

Abebe Selassie, the director in charge of Africa at the International Monetary Fund, sought to allay the concern in a news conference on Oct. 22, saying he hoped the market would differentiate Zambian assets from others in Africa.

“That’s what we’re seeing so far, and I hope that will continue to be the case, as is the case elsewhere,” he said.

The South Africa-based research firm NKC African Economics in an assessment related to Zambia’s troubles said it saw “moderate” contagion risk in the broader region and warned that pandemic-related disruptions to global trade could raise default risk in the entire sub-Saharan African region.

A “prolonged external shock may disrupt refinancing efforts” in Kenya, Ghana and Senegal in the debt cycle that begins in 2021, it said.

Many sub-Saharan African countries, from Cameroon to Kenya, have issued eurobonds over the years, amassing debt that is maturing at a time of rising financial burden amid the pandemic.

The World Bank and IMF have announced some relief measures, including freeing up billions in debt payments, and some African countries have secured more loans from those institutions. But debt-related anxiety will deepen as the year winds down.

Nathan Hayes, an analyst with the Economist Intelligence Unit, said for Africa “the picture in 2021 looks different” because $20 billion in private obligations are coming due in addition to $14 billion in bilateral debt.

“These debts are highly unlikely to be part of any renewed suspension initiative, as it would be negatively reflected in sovereign credit ratings and potentially restrict market access at a crucial time,” he said. The servicing burden will rise again in 2021, putting pressure on governments.

Appetite for debt has grown tremendously in Africa as governments launch ambitious public works they believe will underpin growth for years to come. The projects are often funded by Chinese capital and built with Chinese expertise. In turn, China has been keen to exploit Africa’s vast natural resources in countries such as Zambia, which also is a major producer of cobalt.

Backed by credit from China and other outside sources, Zambian authorities have been spending on everything from highways to airports in projects sometimes tainted by official corruption. Such spending likely will slow down because of pressure to reduce arrears, and there are multiple reports of stalled projects, including a $450 million dam.

China holds about a third of Africa’s sovereign debt, and there have been concerns that heavily indebted countries could fall into a trap and even lose their sovereignty. Although largely silent about global calls for debt relief to Africa, China has indicated a willingness to renegotiate and restructure debts to African countries, particularly those with significant commodity exports such as oil, according to Hayes.

It remains unclear if the international community will do more to help African governments in serious debt distress.

African finance ministers have asked the international community for a $100 billion stimulus package, of which $44 billion would come from a freeze on servicing debt. They have also said an additional $50 billion may be needed in 2021.

But while African governments can negotiate around bilateral debt and even win cancellations, sovereign bonds are a different matter.

A government is “finished” if it can’t be relied on to make payments on sovereign bonds, said analyst Julius Mukunda, who heads a budget advocacy group that has been raising alarm over Uganda’s spiraling debt levels.

Although Uganda has never issued eurobonds, he said, “we have a problem” as the East African country spends far more of its budget on foreign interest payments than on the agriculture sector, a backbone of the economy.

As far as Zambia is concerned, “they have to borrow to repay the debt,” he said. “You need an IMF package to rescue you.”


First Abu Dhabi Bank completes Bank Audi Egypt takeover

First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
Updated 50 min 38 sec ago

First Abu Dhabi Bank completes Bank Audi Egypt takeover

First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt. (Reuters/File Photo)
  • Following the transfer of shares, the acquisition will make First Abu Dhabi Bank one of the largest international banks operating in Egypt

CAIRO: First Abu Dhabi Bank has gained legal and regulatory approval to complete the acquisition of a 100 percent stake in Bank Audi Egypt, a subsidiary of the Lebanese Bank Audi Group, the bank announced on Thursday.

In a statement, the bank said that after the completion of the share transfer process, First Abu Dhabi Bank will begin merging the assets and operations of Bank Audi Egypt and First Abu Dhabi Bank — Egypt, with the merger process expected to be completed in 2022.

Following the transfer of shares, the acquisition will make First Abu Dhabi Bank one of the largest international banks operating in Egypt, with assets exceeding EGP 130 billion ($8.5 billion) after consolidating on Dec. 31, 2020.

“This step represents a strategic achievement that supports First Abu Dhabi Bank’s development aspirations at the international level and will accelerate the expansion of its business in one of the most important markets with high growth potential. This acquisition will play an essential role to enhance the volume and momentum of First Abu Dhabi Bank’s business in Egypt,” Hana Al-Rostamani, CEO of First Abu Dhabi Bank Group, said in a statement.

The banking services Bank Audi Egypt provides to individuals and companies through its wide network of branches will support the operations of First Abu Dhabi Bank in Egypt, which has operated in Egypt since 1975.

Mohamed Abbas Fayed has been appointed CEO of the combined entity. He joined First Abu Dhabi Bank in 2019 and was previously CEO and managing director of Bank Audi Egypt, which helped him gain extensive experience over three decades in the sector and in the Egyptian market.


Saudi Arabia sees 110% rise in flight searches in March

Saudi Arabia sees 110% rise in flight searches in March
Updated 22 April 2021

Saudi Arabia sees 110% rise in flight searches in March

Saudi Arabia sees 110% rise in flight searches in March
  • The Skyscanner data showed that domestic flights within Saudi Arabia were the most searched for last month

RIYADH: Saudi Arabia recorded a 110 percent month-on-month surge in people searching for flights in March, according to global online travel platform Skyscanner, as the Kingdom’s travelers get ready for international flights to reopen from May 17.
The Skyscanner data showed that domestic flights within Saudi Arabia were the most searched for last month, followed by international destinations in India, Pakistan, the Philippines and Egypt.
Flights were grounded in the Kingdom in March 2020. Domestic traffic resumed at the end of May 2020 and the Saudi General Authority of Civil Aviation (GACA) recently announced that international flights will resume by May 17, 2021.
In a bit to capitalize on this, Skyscanner has launched an Arabic language version of its platform on desktop and mobile web.
“We’re pleased to be able to offer travelers in the Middle East a far more relevant experience on desktop, allowing them to plan and book travel in their local language and currency,” Gavin Harris, director of strategic partnerships, Skyscanner, said in a press statement.
“Arabic is one of the 5th most spoken languages in the world and outbound travel from Saudi Arabia and the UAE accounts for a significant proportion of the total travel market,” he added.
In December, the “Global Holiday Intent” survey, conducted by YouGov on behalf of Reed Travel Exhibitions — organizer of the Arabian Travel Market (ATM) exhibition in Dubai — found that 46 percent of those surveyed in Saudi Arabia said that they intended to travel internationally once restrictions were lifted.
Additional research released this week by global travel services company Collinson found that more than four fifths of business travelers in Saudi Arabia had seen their job affected in some way by a lack of cross-border business travel, and about one third of survey respondents said that they felt unable to do their job effectively.


Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
Updated 22 April 2021

Evergrow signs $400m loan to restructure debts

Evergrow signs $400m loan to restructure debts
  • $74 million of loan will finance construction of fertilizer plant in Sadat City
  • Mashreq Bank and National Bank of Egypt led 12-bank syndicate

RIYADH: Egyptian fertilizer company Evergrow has signed a $400 million loan agreement with a syndicate of 12 banks led by Mashreq Bank and the National Bank of Egypt (NBE), who acted as the facility arrangers, Asharq reported citing a joint statement on Wednesday.

The plan consists of $326 million that will be used to restructure previous debts Evergrow owes to the same banks, while the remaining $74 million will finance the construction of the third phase of the company’s fertilizer plant in Sadat City, slated for completion within nine months.

The financing is one of the largest dollar loans granted by banks to private sector companies in the Egyptian market in the field of potassium fertilizers during the past 10 years.

The deal is part of Evergrow’s financial reform program sponsored by the Central Bank of Egypt.

The new funds will help raise the annual production capacity of all the company’s products from 817,000 tons currently to 1.15 million tons annually, said Evergrow Chairman Mohamed El Kheshen.

Egypt’s Minister of Trade and Industry Neveen Gamea in March said that Egypt aims to increase its exports — especially to EU, African and Arab markets — to $100 billion, through the implementation of a strategic plan.


Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
Updated 22 April 2021

Turkish crypto founder flees with reported $2bn

Turkish crypto founder flees with reported $2bn
  • Launched aggressive campaigns to lure investors
  • Founder reported to have flown to either Albania or Thailand
ISTANBUL: Turkish prosecutors on Thursday opened an investigation after the Istanbul-based founder of a cryptocurrency exchange shut down his site and fled the country with a reported $2 billion in investors’ assets.
The Thodex website went dark after posting a mysterious message saying it was suspending trading for five days on Wednesday because of an unspecified outside investment.
Turkish security officials then released a photo of Thodex founder Faruk Fatih Ozer going through passport control at Istanbul airport on his way to an unspecified location.
Local media reports said Ozer — reported to be either 27 or 28 years old — had flown either to Albania or Thailand.
HaberTurk and other media said Thodex shut down after running a promotional campaign that sold Dogecoins at a big rebate — but did not allow investors to sell.
Reports said the website and the entire exchange had shut down while holding at least $2 billion from 391,000 investors.
“The victims are panicked,” investors’ lawyer Oguz Evren Kilic was quoted as saying by HaberTurk.
“They are lodging complaints at prosecutors’ offices in the cities they reside.”
Prosecutors launched an investigation into the businessman on charges of “aggravated fraud and founding a criminal organization,” the private DHA news agency said.
Thodex has launched aggressive campaigns to lure investors.
It had first pledged to distribute luxury cars through a flashy advertising campaign featuring famous Turkish models.
The platform then launched its Dogecoin drive.
The cryptocurrency is getting particularly popular among Turks who are looking to preserve their saving in the middle of a sharp decline in the value of the local lira.
The Turkish crypto market remains unregulated despite growing skepticism from President Recep Tayyip Erdogan’s government about the safety and use of digital currencies.
The Turkish central bank has decided to ban the use of crypto currencies in payments for goods and services starting from April 30.
It warned that cryptos “entail significant risks” because the market is volatile and lacks oversight.
“Wallets can be stolen or used unlawfully without the authorization of their holders,” the central banks warned last week.

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
Updated 22 April 2021

Riyadh property prices rise 2% in Q1 even as rents fall

Riyadh property prices rise 2% in Q1 even as rents fall
  • Mortgages rise, underpinning demand
  • Office sector remains under pandemic pressure

RIYADH: Property prices in the Saudi capital edged higher in the first quarter even as rental rates eased, JLL said.
Riyadh’s residential sale prices registered an annual increase of 2 percent for apartments and villas. By contrast, rental rates reported yearly declines of 1 percent for apartments and villas, it said. Some 7,700 homes were handed over during the period, the broker said.
“Looking ahead, the government initiatives that are pushing Riyadh to be the business hub of the region are expected to spur local and international demand,” JLL said in the report.
It said that strong government support helped to boost demand for residential property in the first three months of the year.
New mortgage loans for individuals jumped by 33,000 contracts in January 2021, it said.
The total value of mortgages increased to SR16.4 billion, according to the Saudi Arabia Monetary Agency (SAMA).
The Riyadh office market remains under pressure with average lease rates across a basket of Grade A & B office spaces in the city falling by 2 percent over the quarter compared to a year earlier.