Mozambique’s Mechanical Murky Water Dive

2017 July 7 by

The long-awaited audit of Mozambique’s $2 billion in suspicious loans from 2013 then defaulted by New York private investigator Kroll, paid for by the Swedish Embassy upon IMF insistence before program consideration, was released by the Attorney General, which has a separate domestic criminal inquiry. One-quarter of the total could not be tracked, and the three state company borrowers,tied to the national intelligence agency, reportedly spent $700 million too much for acquired fishing vessels and security equipment. The obligations were hidden off-budget from the Fund and bilateral donors that subsequently suspended aid. The debt syndicate arrangers, Credit Suisse and Russia’s VTB Capital, came in for criticisms over high fees amounting to $200 million which they claim were overstated. The detectives noted pervasive lack of cooperation and documentation in their findings, and a Fund statement welcomed the summary despite “information gaps.” Creditors of the lapsed “tuna bond” have yet to show their hand, as the country continues to negotiate new offshore gas exploration deals. They remain reluctant to take haircuts and may also press legal action against the underwriters for alleged deception or negligence. Kroll further discovered after reviewing business plans and feasibility studies that the Mozambique companies in question were “not fully operational” with “considerable” management dereliction and excess contractor authority. The government guarantee process was “inadequate” with conflicts of interest and admission of budget law breach. Tendering also entailed questionable due diligence, and loan agreements had unexplained fees. The companies have no revenue and product supply invoices are unclear and inconsistent, although assets could be physically located. Other state enterprises rather than the borrowings provided share capital. Credit Suisse demanded prior central bank approval and IMF disclosure, but the paper trail suggested only these conditions were “overcome.” According to the authors company executives may not only have been in violation of debt covenants but the local commercial code without proper qualifications, accounting and project oversight.

Cameroon in the Central African Francophone zone is the latest oil exporter to turn to a Fund arrangement, as the fiscal toll left it unable to meet monetary union convergence targets. President Biya is one of the continent’s longest serving rulers, and the border with Nigeria has become embattled with the Boko Haram rebellion. Its President issued his first public declaration since May after unknown medical treatment. Bank exposure to oil companies has triggered fears of another crisis, as MSCI put the stock market on “self-standing” notice for its foreign exchange crunch implying near-term frontier index expulsion. Ghana has less than a year to go on its Fund facility as it registered a QI small primary fiscal surplus which may finally embed consolidation. The trade balance was also positive with cocoa exports up 25% in the quarter on forward sales. Gold and oil shipments and FDI rose as well and international reserves at $6.5 billion, a five-year high, have slowed currency intervention. Inflation is still in double digits and although foreign investors are back in the local bond market as external issuance is cautious yields may again spike on likely supply curbs to ensure that austerity is no longer finessed.


Islamic Finance’s Africa Affinity Sweepstakes

2017 June 18 by

Malaysia’s Islamic Finance Center regular bulletin surveyed the sector’s “centerpiece” status in a half dozen African countries, with 50 banks including major ones in Egypt, Nigeria, Kenya and South Africa providing sharia-compliant products through dedicated windows. Sukuk bonds in turn have spread to Senegal, Mauritius, Gambia and Morocco with the African Finance Corporation recently issuing a $150 million pilot. Globally the industry should have $6 trillion in assets by end-decade, and Kuala Lumpur’s example, with 75 percent of corporate fixed income in sukuk form, can be replicated elsewhere. The worldwide Islamic bond total last year was $350 billion, almost a 10 percent annual increase. The report argues that the style fits a “responsible investment” strategy with over $20 trillion in commitments and that the regulatory and liquidity management pieces are now in place with twenty core standards and official backstop facilities. African growth is partially due to Asian and Middle East funds seeking additional outlets and to its natural resource and demographic base creating demand for credit and savings tools. It is also a means to financial inclusion with the vast unbanked population, with family and friends relied on ten times more than formal sources for small-scale loans across eight representative countries including Niger, Uganda and Zambia. Micro-finance could be a catalyst for business such as halal food export and the Islamic Development Bank and Sudan have concentrated efforts there.  Regional infrastructure needs are close to $100 billion/year and long-term Islamic bonds should meet diversification goals as short term government activity picks up in Gambia, Cote d’Ivoire and Senegal. “ Green” clean energy projects are proliferating across the continent to relieve shortages where these techniques could be adopted at the outset, aided by technical assistance from official lenders as well as consulting and training arms attached to more advanced Islamic hubs.

Egypt’s previous push was associated with Muslim Brotherhood rule, but since President Al-Sisi came to power it has been tied to local and external bond market normalization in the context of IMF program return. Foreign investors have acquired $1 billion in domestic instruments after shunning them entirely since the Arab Spring. The first Fund mission praised the 9 percent of GDP budget deficit and 4% growth for the first quarter, although inflation spurted to 30 percent after currency and subsidy swings. The central bank hiked the policy rate 200 basis points to over 17 percent to further fatten local yields although taxation could change. Nigeria has also tightened monetary policy through open market operations and foreign exchange sales as officials try to ease currency controls in the belief that economic shock has passed with oil price recovery and non-oil sector stimulus. Spending is due to rise 10 percent in real terms in the latest budget as the government looks to foreign military and diplomatic support to fight Boko Haram and famine in the north. The president is still on extended medical leave with an undisclosed illness and the vice president is by all accounts in charge of the reform and stabilization agenda to include a new petroleum industry bill debated for years without passage. A diaspora external bond is in the pipeline with a sukuk version likely as the family expands.


Africa’s Multiple Motor Misfires

2017 May 26 by

Sub-Sahara African MSCI stock market performance was lackluster through April as the IMF released a new economic outlook underscoring the urgency of “growth engine restart.” Last year’s 1.5 percent rate was the worst in two decades, with two-thirds of countries representing 85 percent of GDP slowing. The 2017 prediction is for 2.5 percent, mainly due to commodity and drought recovery in Angola, Nigeria and South Africa. The terms of trade shock will linger for members of the Central African CFA Franc zone, as well as Ghana and Zambia both turning to the Fund for rescues. Non-resource dependent Cote d’Ivoire, Kenya and Senegal have managed high 5 percent-plus range growth, but budget deficits and public debt have run up with mounting arrears and bank bad loan ratios. Fiscal consolidation is overdue in Francophone pegged currency areas, and even where the exchange rate can act as safety valve controls hamper effectiveness. External debt costs have spiked for these frontier markets with postponed access, with the average EMBI spread near 500 basis points in March. The budget gap was 4.5 percent of output in 2016 with big payment backlogs in Gabon, Cameroon, and Mozambique, now in a second round of commercial bond rescheduling. The parallel market premium reached records in Angola and Nigeria with their official restrictions and Ethiopia also imposed import permit rules.  Regional inflation is over 5 percent, and benchmark rates are often negative in real terms and central bank refinancing facilities can offset headline tightening. Current account deficits at 4 percent of GDP are double the pre-commodity price correction level, and median government debt is over 50 percent retracing the relief from last decade’s Heavily Indebted Poor Country program. Dollar appreciation against the euro has aggravated profiles and debt service-revenue indicators for oil exporters are at almost 60 percent from previous single digits.

Bank private sector credit is down, and prudential policies like Kenya’s 400 basis point loan rate cap and the absence of consumer and corporate registries and foreclosure procedures worsen the crunch. Cross-border pan-African networks, with half of deposits in 15 countries, have a larger presence than formerly dominant European banks but pose contagion risk as home and host country regulators try to forge common reporting and oversight approaches. Natural disasters are a final blow, with widespread drought and crop infestations and famine again spreading in the Sahel region. Tax revenue mobilization should be a stabilization priority, and financial sector and business climate development are key items on the unfinished structural reform agenda. In an Article IV report for Francophone West African Monetary Union members at the same time, the Fund lauded over 6 percent growth but criticized budget shortfalls toward that number and a 40 percent public credit jump. Reserves dipped below four months imports and the security situation remained precarious with terror attack and civil unrest throughout the zone. Private participation in infrastructure and better debt management would relieve pressure, and the central bank should strengthen the interbank and securities markets for improved monetary policy. Basel II and III standards are being phased in, and only half of banks meet the current capital adequacy minimum and deposit insurance and resolution regimes are still absent with the supervisory engine idling, according to the review.


Africa’s Reshuffled Ratings Deck

2017 April 15 by

South African shares after barely positive Q1 performance on the MSCI index stumbled as longtime Finance Minister Gordhan was replaced by the former Interior Minister, a close President Zuma ally amid widening splits in the ruling African National Congress ahead of meetings to choose a successor especially if the full term is shortened with his resignation. S&P led the sovereign ratings downgrade charge to junk with the move, as political infighting will not end stagflation with 1 percent growth and 5 percent inflation forecast this year. Commodities have been battered by severe drought and mining sector consolidation despite better terms of trade bringing the current account deficit below 3 percent of GDP. The rand had stabilized as an emerging market proxy with global investor asset class embrace, but the party intrigues resumed its plunge to the 13/dollar level, postponing possible central bank rate cuts indefinitely. Local debt was not downgraded but fund managers have turned wary and are lukewarm as well on major bank prospects given high consumer borrowing. The fiscal gap target was unlikely to be met with lagging tax collection, and with Gordhan’s ouster the state enterprise reform push may also sputter, increasing contingent liabilities. The government has tried to access development bank lines for flagship utilities like Eskom, but these institutions have insisted on governance and tariff changes. President Zuma’s ex-wife, formerly a top Africa Union official, is in the running for the scheduled 2018 race but her candidacy may be tarnished with name notoriety and lack of business experience. Commentators have raised the prospect of a Trump-like challenger from outside the traditional power bases, including high-tech entrepreneurs, but none have announced intentions and the ANC stranglehold on the nomination process may be too formidable.

Kenya’s MSCI frontier gauge was flat through March ahead of August elections which will rematch incumbent President Kenyatta against perennial opposition stalwart Odinga, who has criticized preparations to date. Growth is favorable at 6 percent but the budget gap is also at that level, and the planned even split between domestic and foreign financing may prove difficult in view of investor memories of past violence and current market conditions. Inflation is again in double digits and Treasury issuance is behind schedule on higher yield demands, drifting toward the 14 percent bank lending rate cap. Externally a $750 million syndicated loan must be repaid in the second half, and concessional source reliance could be jeopardized if the polls again invite tribal warfare. Nigeria placed a Eurobond but the internal debt service/revenue ratio remains steep at 60 percent. The stock market is depressed on meager 1 percent growth, a dollar squeeze as the central bank refuses to relent on official rate control, and poor earnings and prudential results at leading banks. The current account surplus should exceed 1 percent of GDP mainly on import compression as oil production is still constrained by inefficiency and attacks despite rising world prices. The President’s return from unexplained extended medical leave abroad has not lifted sentiment despite his pledge to overhaul the economy with the fervor of the Boko Haram anti-terror campaign, which has overturned previous internal displacement numbers.


Africa Infrastructure’s Pensive Pensions

2017 April 9 by

As the G-20 Finance Ministers’ gathering in Germany offered another commitment to raising African investment, international organizations weighed in with a strategy for better mobilizing local and external pension fund assets for infrastructure development. The UN’s special adviser, New Economic Partnership (NEPAD) and the Brookings Institute co-authored a paper noting that despite its priority in the Sustainability Goals, only one-third the continent has access to electricity and roads, and 5 percent to the internet. Annual outlays needed to redress the gap are close to $100 billion, and national budgets contribute just over half that sum. A 50-year agenda envisions high-speed transport and digital networks that can lift intra-African trade from 10 percent to 50 percent, but public investment spending has often been “wasteful” with 40 percent lost to inefficiencies according to project research. Numerous regional platforms and initiatives have been launched to facilitate national and cross-border allocation, and the African Development Bank recently closed a dedicated fund with $850 million in share capital. US, Europe, Asian BRICS, and other emerging market sources are active in the space. Pensions/output is low and dominated by pay as you go schemes outside South Africa, Botswana, Kenya and Nigeria, and infrastructure lacks specific financial instruments. Tax revenue remains low and commercial sovereign bond issuance came to just $15 billion a decade after official debt relief. External development lending and public-private partnership account for $30 billion annually, but OECD-based institutional investors with over $90 trillion under management are a vast untapped pool and they increasingly emphasize environment, social and governance (ESG) factors and long-term commitments key to successful projects. Individual pension funds in advanced and emerging markets can range from $100 billion to trillions. According to surveys only 1 percent is put in infrastructure-related unlisted securities, although Canadian plans in particular are exceptions, with the Ontario Municipal Employees portion at 15 percent. They have joined with development agencies on specific channels with an evolving interest in “green” bonds to promote energy alternatives.

African countries had $380 billion in hand as of end-2013, around $60 billion outside South Africa. Nigeria is second with $25 billion, and Botswana, Kenya and Namibia range from $5-$10 billion. Nigerian funds only received infrastructure authorization under a 2014 law, and regional size is constrained by less than 10 percent labor force enrollment given large informal economies. Recent reforms have concentrate on the guaranteed defined benefit pillar rather than the private contribution supplemental tiers common in other emerging economies. In-house fund manager expertise is often limited and lack of liquidity and mandatory portfolio guidelines are additional deterrents. Municipal, project and corporate bonds are typical structures but broader capital markets are unsupportive, the review notes. Transparency, adequate pricing, government debt benchmarks, and technology platforms are lacking, and cross-border ties could be a catalyst as with the African Development Bank’s Financial Market Initiative. South Africa’s Government Employees fund (GEPF) dominates there and many state enterprises like Eskom also have big pots. The system is regulated by the Financial Services Board and the current GEPF infrastructure slice is 1.5 percent as the strongbox again may be pried open by ruling party activists demanding higher social amid urgent physical and policy building tasks.


Nigeria’s Mangled Mystery Leave Latches

2017 February 27 by

Nigerian shares tried to shake off the President’s unexplained trip for medical treatment in London and were largely flat through January after a 25 percent slide in 2016, as a $1 billion 15-year Eurobond return was well received at a near 8 percent yield. It will be used for infrastructure and deficit coverage in this year’s budget yet to be passed, and also help replenish foreign reserves which have jumped above $27 billion with an African Development Bank loan and higher oil prices. Growth has turned positive but inflation approaching 20 percent has not abated with continuous currency depreciation with the official and parallel rates around 300 and 500 per dollar respectively. The central bank vows to narrow the gap in the nominal floating regime while maintaining a web of import restrictions and deploying security forces to monitor dealers. Chronic shortages deter FDI, already hobbled in the petroleum industry with joint venture rule shifts and Niger delta rebel attacks, and resulted in the recent collapse of the main domestic airline unable to process payments and procure spare parts.  Amid the furor, media speculation has intensified over President Buhari’s health, with lack of information about his absence possibly reprising a predecessor’s pattern of leaving the country with a vaguely-described heart condition before dying in office. While under care he reportedly held a phone call with President Trump representing the first outreach to an African counterpart, but neither Abuja nor the White House would confirm details.

South Africa was up 3 percent on the MSCI index amid its own leadership struggle as two candidates, ANC Deputy Ramaphosa and his former wife who was head of the African Union, declared to succeed President Zuma, whose second term ends next year. He conceded “mistakes” in a January speech to the ruling party, which could still oust him early over corruption charges. In the latest municipal elections the opposition gained control of Johannesburg and other cities, and his address in Soweto acknowledged shortfalls in education, employment and public services. The post-independence black economic empowerment scheme has also been widely criticized, with activists from the Malema wing calling for outright nationalization while the business community seeks a more commercially-viable formula for ensuring native ownership. Mining giant Anglo-American has recommended scrapping the 26 percent equity allocation mandate with controversy swirling over deals with politically-connected insiders. A new industry charter will be presented in March and the company threatens to go to court if the requirement is preserved, as its chief executive cited two-decade decline. GDP growth is forecast at just 1 percent this year with rising commodity prices, with the fiscal gap to stay at 3.5 percent likely removing investment-grade sovereign ratings. The PMI manufacturing gauge rebounded above 50, but the consumer remains weak as reflected in falling personal income tax receipts. The central bank predicts higher food-driven inflation at 6 percent and a lower 3.5 percent of GDP current account deficit, but has refrained from hiking interest rates with the rand settling between 13-14/dollar. It can expect additional demand from Zimbabwe, which plummeted almost 10 percent on the MSCI in January, as the authorities moved to reintroduce local currency to generate cash for the sick economy and increasingly absent President there.


Mozambique’s Choppy Fishing Expedition

2017 January 29 by

Mozambique, downgraded to selective default last year after skipping interest and principal payments, stiffened its creditor renegotiation stance on the three instruments outstanding by refusing to honor a $60 million installment on the 2023 Eurobond due mid-January. The grace period lasts another month, and despite almost $2 billion in gross foreign reserves the government has signaled another restructuring after 2016’s Tuna bond swap and pari passu treatment for all obligations as it tries to resume a suspended IMF program. An audit was ordered to reveal the scope of legitimacy of liabilities arranged through investment banks and select officials, which creditors claim misrepresented contractual terms. With the standoff the currency lost one-third of its value against the dollar and the central bank was forced to raise the policy rate almost 15 percent, although it remains negative with inflation above 25 percent. A new governor came on board at year-end to help restore multilateral confidence, and has conducted minor exchange rate intervention without provoking large swings. The $5 billion current account deficit is close to half the economy’s size, with coal accounting for 15 percent of exports. Offshore gas finds will be a major contributor toward end-decade, but financing is complicated by the current sovereign debt dispute and long-term energy price uncertainty. Big bond holders include Franklin Templeton, which led the steering committee that took a haircut on Ukraine under international official pressure. The group has started to push back with threatened lawsuits against Mozambique’s Swiss and Russian transaction advisers, and has called on the Fund to reactivate lines only with full national account and private deal disclosure while looking for its injection to secure reimbursement.

Ghana also ran up large debts at 70 percent of GDP and would have been in bond refinancing difficulty without Fund and World Bank help, especially in the volatile pre-election period. Opposition standard-bearer Akufo Addo, whose father brought independence from the UK, won the December presidential contest with 55 percent of the vote after previous defeats and stints as foreign minister and attorney-general.  He condemned the “borrowing spree” during the campaign and promised tax reform and commodity diversification to bridge the near 10 percent fiscal deficit. Corruption investigations will also be a priority, after kickback allegations on large infrastructure projects supposed to be covered by oil revenue that has been slow to materialize. In agriculture the incoming President contrasted the five times more earnings from a product range in next-door Cote d’Ivoire, also the global cocoa export leader. GDP growth at 8 percent tops the sub-region, but civilian-military relations remain tentative as soldiers mutinied over back pay and other demands in January before President Ouattara reached a settlement. The army has resisted the President’s team technocrat approach aimed at luring foreign direct investment, as accused criminals from the decade-long civil war gradually face international trial. Tourism efforts were sidetracked by last year’s terror attack on the Grand Bassam resort, but the African Development Bank headquarters is again in Abidjan with frequent foreign visitors seeking to participate in new schemes like a dedicated public-private cross-border infrastructure fund which intends to overcome a legacy of past wreckage in the sector.


Ghana’s Creaky Oil Machine Clang

2016 November 30 by

Ghana stocks continued in a double-digit slump ahead of December elections, where the ruling NDC party with its vast patronage network under President Mahama is again poised to beat the opposition NPP whose same candidate came close in the last contest. Both sides endorse the IMF program’s broad lines despite lapses, as more oil production due next year helps lift 4 percent current GDP growth and relieve widespread power shortages. The fiscal deficit is above target at 6 percent of GDP with lagging revenue collection, and the government is to generate a primary surplus and pare salary costs and non-concessional borrowing in the future. Central bank financing to the Treasury and state enterprises will also be limited, with the latter to float stock exchange stakes under consensus plans. Lower inflation, which may decline to single digits next year, should enable a sizeable cut in the over 20 percent benchmark interest rate. In external accounts commodity exports should pick up in 2017 on firmer oil, gold and cocoa prices, but post-election household demand could raise imports for a stubborn 6.5 percent of GDP current account gap. Sovereign bond issuance is not a priority for now, and the next effort may be output-linked as the Fund and private sector creditors consider a proposed term sheet for such operations in a working group organized by the Bank of England.

Kenyan shares are off modestly on the MSCI Index with August 2017 elections there pitting President Kenyatta against the yet to be chosen contender from the Cord alliance. Violence has ebbed after a wave of clashes between supporters and security forces, and changes in the poll board to guard against rigging. Observers fear a return to the tribal warfare of a decade ago, but public education efforts have focused on peaceful dialogue and transition as a new less ethnically-exclusive generation of political leaders enters the mainstream. Growth should stay in the 5.5-6 percent range although bad weather may hurt agriculture, with fiscal stimulus contributing to the 6 percent of GDP budget hole. The central bank cut rates 50 basis points to 10 percent in September on 6 percent inflation, but the new loan ceiling combined with vote uncertainty will cramp household lines, which have tapered to single-digit expansion. In external accounts reserves are up to $8 billion on foreign direct and portfolio inflows to offset current account weakness, and an IMF $1.5 billion backstop facility is available. Zambia in post-election mode intends to turn again to the Fund for an estimated multi-billion dollar arrangement to cope with the aftermath of copper price collapse and chronic electricity outage. Growth could improve to 4 percent next year, but the fiscal imbalance has worsened with arrears accumulation on an 8 percent of GDP deficit. With external debt already near $7 billion the Finance Minister has ruled out another Eurobond, as the domestic policy rate for borrowing remains above 15 percent on a single-digit inflation target. Currency depreciation has stabilized as the Fund negotiations proceed and other bilateral and multilateral aid providers reiterate their engagement after a tense poll dispute period where the barely losing candidate, a wealthy business executive, tested the commercial and procedural machinery.


South Africa’s Disguised Anti-Fraud Frown

2016 November 25 by

South African shares and the rand steadied as abuse charges were dropped against Finance Minister Gordhan and President Zuma won a narrow no-confidence parliamentary vote victory with record ANC abstentions after the courts reinstated hundreds of corruption counts against him. A separate judicial inquiry into ties with the influential Gupta family warned of “state capture” by insider interests and both the ruling party leadership and political opponents have demanded a wholesale purge in the government’s top ranks to restore economic confidence. GDP growth will be less than 1 percent this year and the budget deficit will stay at 3.5 percent under the new medium-term plan, setting the stage for an end-year sovereign ratings downgrade to speculative. Lower  tax revenue  will be offset by asset revaluation and other measures without major state enterprise stake sales, and the blueprint is murky on further guarantees and recapitalization for power giant Eskom which has already been demoted. Investment-grade fund managers may dump billions of dollars in holdings, which could cramp external bond performance already lagging the EMBI’s double-digit gain. The fractured domestic picture coincides with further signs of the regime endgame in Zimbabwe, as even the security forces express discontent over salary squeezes with the chronic dollar and goods shortages. Under a new currency plan the government will seize bank accounts and replace greenbacks with artificial IOUs, as international reserves may be exhausted and the fiscal deficit is estimated in the 10 percent of GDP range. However $100 million in arrears to the IMF were repaid, by using escrow proceeds in the SDR account, but $1.5 billion is still due the World Bank and African Development Bank. The Fund acknowledged the clearance but stressed that financing access remained off the table, pending a “strong reform agenda.” The stock exchange has been one of the only safe havens since the dollar printing and a Sub-Sahara Africa MSCI pacesetter, even though foreign investment is negligible.

Nigeria in contrast was down 30 percent through end-October as the naira drifted toward 500/dollar in the free market, which has been the target of unrelenting central bank rule changes and raids. It has propelled inflation toward 20 percent with the economy in recession despite global oil price rebound. President Buhari promised launch of a comprehensive recovery plan after a year and a half in office, and agreed a $5 billion settlement with previous joint venture partners as the state petroleum company undergoes restructuring. With 50 percent currency depreciation since June’s flotation and absence of a coherent adjustment program, multilateral lenders have hesitated to offer billions of dollars in requested balance of payments aid. Banks are again ailing, and the AMCON bad loan arm is in need of additional resources as lawmakers continue to delay budget approval.  Portfolio investment has stalled with bond index expulsion as MSCI ponders stock suspension, and FDI may have been set back $400 billion the past year, according to Nigerian-American Chamber of Commerce calculations. The President has disappointed business supporters with his authoritarian management style and anti-corruption and terror focus while poverty and structural issues fester. They argue that the resumption of Delta rebel activity should be met with policy solutions beyond his soldier’s instinct as financial battles complicate conflict.



Africa’s Capped Goodwill Deposits

2016 September 7 by

As the US research group Freedom House reported that Africa’s number of democratic leaning countries was down to 60 percent, election-related political and economic jolts took their toll on MSCI frontier markets, which lagged the core universe fund flow and performance surge. Kenyan banks sold off steeply as President Kenyatta ahead of polls next year signed legislation to cap loan and deposit rates, over central bank and industry association protests. Maximum borrowing cost will be 4 percent above the benchmark rate, and savings accounts must yield at least 70 percent of that level. The banks’ lobby called the restrictions “populist and retrograde,” as it assembled a cheap credit facility to  stave off the measure, but the President argued that with double-digit rate spreads  sector return on equity was extreme for the region, and business and public opinion surveys reinforced his stance. Small and midsized firms in particular lack affordable terms, and a separate $650 million commercial-official European bank initiative, Arise, will launch in 2017 in Eastern and Southern Africa, as the IMF predicts Sub-Sahara GDP growth at just 1.5 percent for the first per-capita income drop in decades. Zambian securities were battered and the future of Fund program discussion was in doubt after the opposition presidential candidate, a wealthy entrepreneur, contested results showing a razor-thin ruling party re-election victory. The dispute may be settled in court, but shops closed in preparation for trouble. The challenger, running a second time, campaigned on an anti-corruption and economic reform platform, with cabinet ministry elimination a centerpiece. Copper is two-thirds of exports and the currency has fallen 40 percent against the dollar the past two years with price reversal. The incumbent took the post after his predecessor’s death and early in his term conducted negotiations with the IMF, but agreement was missed over required subsidy cuts to slim the budget deficit and government debt. The media questioned another arrangement given the history of confrontation with Washington, and the main independent newspaper was shuttered over alleged overdue taxes, drawing criticism from international watchdogs.

In Zimbabwe MSCI losses mounted as demonstrations spread beyond army veterans to the general public, who faced off directly against security forces. New elections are not due for two years, but opposition parties have begun to debate joint strategy to force President Mugabe’s earlier departure as his age and health also may hasten transition. Longtime ZANU party loyalists have broken with the regime, and civil servants have not been paid for months with empty coffers. China will no longer bankroll abuses and management in exchange for natural resources, and reconciliation with the Bretton Woods development lenders has been slow under shareholder doubts and outstanding arrears. The IMF notes mixed progress under a staff-monitored agreement, but current reliable statistics are absent, and signature policies such as farm nationalization are anathema to deeper engagement. The indigenization law has been adapted and delayed to allow continued foreign majority ownership, and local-currency reintroduction did not pass the planning stage. South Africa had been an escape route but sentiment has turned against immigrants, and experts fear the worsening unrest could prompt military takeover to altogether erase competitive space.