Francophone Africa’s Stung Barracudas
Senegal’s external bond and main regional bourse share Sonatel sputtered as President Wade, after receiving judicial clearance to run for a third term, was forced into a second-round runoff with a former prime minister. He had previously assured backers of easy victory as the “barracuda among little fish” following the popular singer Youssou N’Dour’s ballot rejection for insufficient voter signatures. The incumbent’s insistence on prolonging his tenure in defiance of constitutional provisions has angered donors in Europe and the US, which has awarded a large grant under the Millennium Challenge Corporation that emphasizes good governance standards. He has assigned power to his banker son in a potential succession move as economic management strives to diversify from traditional commodities and tourism into high-tech services. State spending has been criticized by the business community and development lenders alike, with a showpiece independence monument in the capital a visible illustration of fiscal overreach. Before the decision to allow re-election, street demonstrations had mounted against power shortages and food costs, as immigrants returned home from Europe’s crisis facing slim employment prospects. After a record 2011 for Sub-Saharan international issuance at $12.5 billion another bond placement was contemplated under peaceful transition and rising agricultural export prices which both may now prove elusive. Oil giant Gabon, with a BB- credit rating, in contrast just completed its own disputed parliamentary contest with $1 billion available to park in a sovereign wealth fund for infrastructure and other purposes. President Bongo’s party got all but 5 of 120 seats despite a 75 percent abstention rate. Ample budget and balance of payments surpluses will underwrite the premier African football event, which has generated near-term outlays to quell popular discontent.
In Cote d’Ivoire legislative polls were completed about the same time with the Outtara coalition gaining a clear majority, but the ICC in the Hague has stepped up its investigation of civil war crimes which may target administration allies and members. Defaulted bonds had rallied toward 60 cents to the dollar but corrected on the likelihood of indictments and delays in resuming symbolic coupon payments. Finance Minister Diby informed investors that an installment is seen toward mid-year on the $90 million already accumulated in arrears. Full normalization is not expected until attainment of the HIPC completion point, which requires good performance under the new IMF program including cocoa and coffee sector overhaul. According to official presentations, the primary fiscal balance will remain negative through mid-decade, with shortfalls to be partially bridged by commercial borrowing on the West African securities market where pricing may sharply sting.
