Mozambique’s Seared Tuna Platter

Lusophone African investors were dismayed by the revelations and terms surrounding Mozambique’s state tuna company for sovereign bond exchange, as neighboring Angola signaled interest in an IMF program after March rating agency credit watch notice for its own “B” status. The original fishing fleet funds raised were reportedly diverted for naval protection, and Credit Suisse as a lead underwriter also piled on undisclosed short-term loans. The local currency depreciated 50 percent against the dollar the past year, as external debt rose to $9.5 billion or 65 percent of GDP. The fiscal deficit is stuck at 5 percent, and the outsize current account hole reflects extreme import dependence. The April swap will create a new 7-year instrument to allow time for natural gas production to come on line, but end-decade pricing may not be favorable when operations are in full swing, according to commodity and technical experts. Oil-reliant Angola is in trouble with comparable currency devaluation and 20 percent inflation, as the central bank pushed the policy rate to 14 percent at end-March. The upper target number has been breached, and officials foresee a swing toward single digits ahead of 2017 elections. President dos Santos announced he will leave the post and leadership of the ruling MPLA party the following year, with his son, chief of the sovereign wealth fund, already telegraphed as a likely successor. The top family has worked to maintain good ties with China despite controversy over loan for infrastructure schemes where local workers were hardly used and allegedly abused. Human rights and anti-poverty campaigners have focused on political opponent crackdowns and widening income inequality between a small business elite and the rest of the country, which added a risk premium for a recent external bond issue at 9 percent yield.

Ghana accessed the market in late 2015 with a World Bank guarantee and is again testing the waters in a non-deal roadshow around the Spring Bretton Woods institution annual meetings. A 3-year $900 million IMF arrangement is designed to control the runaway budget and current account deficits over 7 percent of GDP. Debt service is one-third and public sector salaries absorb another 40 percent of domestic revenue. New indirect taxes were introduced, but borrowing rates above 20 percent remain punitive and stifle internal investment as FDI takes a wait and see stance on cocoa and energy price direction and currency stabilization. Kenya likewise will make fund manager presentations amid accusations that previous bond issue proceeds were lost or stolen. The central bank closed an institution and removed executives for misbehavior in a cleanup effort in advance of potential monetary loosening, with inflation on track at 7 percent. A $1.5 billion Fund precautionary facility is on hand and growth should hit 6 percent this year on good consumption and agriculture numbers. Zambia is still in IMF negotiations with the 7.5 percent of GDP fiscal deficit at double the target on almost 25 percent inflation. Emergency power measures will increase outlays as contact arrears have also accumulated for eventual payment. Global copper value has not rebounded with key mining operations suspended and upcoming elections may scuttle final fund agreement as presidential frontrunners fish for support and a clear outcome unlike past contests.