Africa’s Next Generation Power Trip
US President Obama aided Sub-Saharan frontier markets adjusting to global commodity and monetary pullback with energy and trade initiatives during his first multi-country swing in a “new partnership” to target the region’s leading GDP growth pace and match recent Chinese commercial inroads against the former colonial European powers. The Power Africa plan seeks to double electricity access through adding 10000 megawatt capacity in six initial countries over the next five years. The facilities will draw on both traditional and alternative sources and government agencies led by OPIC and the Export-Import Bank are to provide $7 billion in funding with an equal commitment over the period by private direct and portfolio investors including Symbion whose plant in Tanzania was chosen for the launch. Dedicated transaction units will be established in Washington and on the ground and will also advise on natural resource management for onshore and offshore hydrocarbon discoveries. The simultaneous free trade effort focuses on the East African Community with a “globalized middle class” and combined output of $80 billion. Through the AGOA duty-preference scheme and normal channels it intends to almost double exports to the US and will also work to facilitate intra-regional business. A bilateral investment treaty will be considered and technical assistance will strengthen local banking and industry associations. As AGOA’s renewal approaches in 2015, capital market linkages which were previously overlooked could enter into provisions, especially with the continent’s representation in standard benchmark securities indices since the program began in 2000. As an example, Nigeria came to market with a $1 billion sovereign bond for infrastructure needs at the same time as the President’s visit, and months after it was included in JP Morgan’s domestic GBI roster. The issue yield was almost 6.5 percent, reflecting a 200 basis point premium for the African complex since April lows allowing a dramatic debut by aid-suspended Rwanda. That paper is now trading at 8 percent, a level that the central bank governor acknowledged as prohibitive had it been demanded in May. The Nigerian deal was four times oversubscribed and the well-regarded Finance Minister, who was a candidate for World Bank president, went on to Beijing afterward to raise another $3 billion. At mid-year equity gains slipped to 10 percent on the MSCI index as petroleum sector reforms remained under debate with world prices skittish on both demand and supply doubts.
Ghana and Kenya also have imminent debt offers and are Power Africa pilot countries with their stock markets up 45 percent and 25 percent respectively. President Obama skipped them both on his journey this time as he headed to South Africa. Kenya’s president faces an international war crimes tribunal and Ghana’s still confronts claims his party stole 2012 elections. South African bonds were unmoved upon arrival as ailing post-apartheid hero Mandela was placed on life support and the investment grade sovereign rating also dimmed amid perennial electricity crisis defying official solution.
