Africa’s Multiple Affront Affirmations
Sub-Saharan African securities performance was not as scorching in Q3 after previous record sovereign bond issuance and MSCI frontier index advances, as mainstream markets regained favor and investors again turned wary over poor political and economic headlines. Islamic terrorist attacks in Kenya and Nigeria dented sentiment, although the Nairobi stock market was up 40 percent through end-September and a $1.5 billion debut Eurobond is still in the works. The Westgate mall slaughter will hurt tourism accounting for 15 percent of GDP and multinational company East Africa hub operations as the annual growth forecast was bumped to 5 percent on inflation almost double that figure on higher VAT to close the 8 percent of GDP budget hole. The central bank reiterated its availability for shilling support in the aftermath despite a management shakeup which demoted the governor from board chair. Nigerian equities (+ 15 percent) are off from earlier gains as the ruling PDP party was embroiled in a challenge to President Jonathan’s potential run for another term in 2015 as he removed disapproving cabinet members. Oil industry reform still languishes in parliament, although privatized power facilities were handed to winning bidders, including the head of the Dangote Group who is the country’s wealthiest business executive. The sovereign wealth fund completed its first $1 billion allocation as the excess crude account balance hovers at $5 billion on a 3 percent of GDP fiscal deficit. The single-digit inflation target remains intact with the benchmark policy rate at 12 percent, as the outgoing central bank chief tightened dollar access rules with international reserves standing at $45 billion. Exchange house licenses were revoked and a biweekly Dutch auction was reintroduced and remittances can be paid only in naira. A state government offered an inaugural sukuk as the North-South religious split was reinforced with bloody Boko Haram assaults on churches and schools. Part of the proceeds from July’s $1 billion 6.5 percent global bond will go to energy sector realignment, and despite the higher than planned cost it was 2 percent below the later maiden placement by neighboring Mozambique. Angola has put a public operation on hold as the president’s son was named to manage the SWF and the oil monopoly’s accounts were brought on budget at the IMF’s behest. 2013 GDP growth will be 7 percent on inflation around 9 percent as a new banking law goes into effect on government deposit handling.
Ghana’s shares have been aloof from the turmoil with a 45 percent MSCI jump, but public debt aided by Chinese concessional facilities has also spurted above 50 percent of GDP as external and local bond appetite wanes. The annual fiscal and current account shortfalls will likely exceed 10 percent of output, and utility tariff hikes will keep interest rates above the prohibitive 15 percent precipice.
