Monthly Archives: May 2012

Recent Developments in African Debt Markets

Debt capital markets in Africa have historically been thin and illiquid, growing much more slowly than equity markets. Several recent events suggest a desire among market participants, governments and multilateral institutions to give the bond markets a boost.

In April, the International Finance Corporation and Standard Chartered Bank launched a pan-African bond issuance program. Officially called the Pan-African Debt Medium Term Loan Program, the initiative aims to improve the investment climate in the targeted countries and create a mechanism for long term financing for infrastructure and other projects. The program will launch initially in Botswana, Ghana, Kenya, South Africa, Uganda, and Zambia.

The African Development Bank recently received approval to issue shilling denominated bonds in Uganda. This Note Programme is part of the AfDB’s local currency initiative under which it has issued local currency bonds in Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and Nigeria.

Later this year South Africa will likely be included in the Citi benchmark World Government Bond Index. This is an index of Sovereign debt for countries that meet certain requirements for liquidity, credit worthiness, and openness to foreign capital. South Africa has met these requirement–the only sub-Saharan African country to do so. Inclusion in the WGBI means that South Africa will be eligible for inclusion in a wider range of global investors’ portfolios. It is estimated that South Africa’s government bond market could attract $8.8 billion of inflows from index trackers.

It is interesting to note that each of these events have focused on the same half dozen or so countries. The implication is that these are where the capital markets–and the institutional underpinnings of capital markets are most advanced. It is these countries that I will steer my clients toward when considering projects in Africa. They are examples for other emerging and frontier countries seeking to attract foreign investment.

Tagged , , , , , , , , , , , ,

Thoughts on Ernst & Young’s 2nd Africa Attractiveness Survey – part III

Despite the generally upbeat tone of the study E & Y recognizes that there are issues that impede FDI in Africa and prevent the continent from reaching its full economic potential. These issues—these challenges to be overcome represent not only potential stumbling blocks, but also a way forward for companies, investors, policymakers, and development institutions.







Regional integration is critical, not only for companies and projects to achieve sufficient scale to make viable investments, but to also eliminate inefficiencies in trade, transport, communications and finance that make it more difficult to do business. If done correctly, regional integration can spread the benefits of FDI to the smaller countries, and the landlocked countries that have not received the attention that has been rightly concentrated on a dozen or so countries.

Infrastructure and regional integration should be seen as goals that feed off each other. Cross-border telecommunications enabling mbanking and capital market harmonization in the East African Community, road and rail projects connecting Kenya, South Sudan and Ethiopia would encourage companies to approach these regions as a single market as attractive as other large emerging markets around the world. At the same time, harmonization of regulations, standards and measurements makes it much easier and less expensive to plan cross-border infrastructure projects.

As discussed in the previous post, improving perceptions of Africa is about businesspeople in Africa telling the story. It’s about focusing on the facts about economic growth, investment returns across a number of industries, the improved political and security environment, and the growth of the African middle class.


The findings in this latest Ernst & Young survey represent Africa moving into the mainstream of global commerce. The sense of mystery is fading and executives are prepared to evaluate African countries alongside other regions of the world. It is a departure from earlier days when Africa was seen as some strange exception whose markets and economies were not even on the map of potential FDI destinations.

Furthermore we should understand that Ernst & Young and the corporations in the survey are very much of the establishment, representative of mainstream corporate thinking. Those that maintain the old view risk losing an important round of global competition. There are advisors with country specific, industry specific, or function specific expertise who can assist with market entry, cultivating relationships and evaluating risk. We should take advantage of these resources and move decisively before the window closes.

Tagged , , , , ,

Thoughts on Ernst & Young’s 2nd Africa Attractiveness Survey – part II


While more executives are finding Africa a more attractive location for direct investment, one of the key findings of the Ernst & Young survey was a significant difference between the impressions of those who had not done business in Africa vs. those who have. The perceptions of those who do not have a presence in Africa were quite different from the reality seen by those on the ground.







The unfavorable impressions are largely due to concerns about political risk and corruption.

What will bring these perceptions closer to reality? Focus on the facts. For example, the trend toward democracy in which most countries are moving toward some form of democracy, with peaceful changes of government becoming less and less exceptional. Despite the occasional growing pains (in Mali most recently), the degree of democracy in Africa compares well with other emerging regions. As the E&Y study reports, only two African states have been classified as autocracies–(Eritrea and Swaziland) Yet three countries in South East Asia – China, North Korea and Vietnam have that designation.

Why is it continually necessary to reemphasize the true nature of Africa’s political and economic environment? It is possible that the negative impressions are rooted in the past when Africa still hamstrung by its colonial legacy and knocked around by cold war politics. Meanwhile western media and academia seem to have a hard time giving us a deep understanding of the good the bad and the vast gray area in between.

Those doing business in Africa are focused on the current reality that they see in front of them. That reality is about growth and development and emphasizes trade and investment over dependence on foreign assistance. It is up to these businesspeople, especially Africans themselves to give us the accurate, factual and nuanced story of the African business environment.

Tagged , , , , ,

Thoughts on Ernst & Young’s 2nd Africa Attractiveness Survey

Ernst & Young’s attractiveness survey is largely an evaluation of Africa as a destination for foreign direct investment. The survey uses the fDi Markets database for most of their FDI statistics.

Opinions on attractiveness for investment come from E&Y’s survey of senior executives from a wide range of large companies around the world—some with direct investments in Africa, and others with no African presence.




RISEN 20% A YEAR FROM 2007-2011, 27% IN 2011





To some extent the global business community has already gotten the message. FDI in Africa is on the rise. At the same time we see investment gravitating toward certain countries. South Africa and more developed countries in North Africa such as Egypt and Morocco are attracting the largest number of projects. Investors have shown a preference for large markets such as Nigeria and those with high growth prospects like Ghana, Angola and Kenya.

It is also interesting to note that most of the projects have not been in the extractive mining and fossil fuel industries. Instead 75% or the new projects since 2003 have been in manufacturing and services, suggesting a broadening of African economies beyond the usual natural resources toward more consumer and technology based businesses.

The rise in investment in Africa by Africans shows increased confidence in the prospects of these markets Particularly as compared to other emerging markets or the slow growing developed world. In addition, the rise of a cadre of enlightened African professionals able to analyze the risks and opportunities on the continent makes South-South trade and investment more viable than it has ever been.


Tagged , , , ,

EXIMBANK Renews and Expands Africa Insurance Initiative

The US Export Import Bank is providing record levels of insurance to a wider range of countries to enable exports to Africa. One more reason for US companies to include African markets in their business development strategy and to consider Eximbank’s role in an export business plan.


APRIL 27, 2012
CONTACT:  Linda Formella, (202) 565-3200

Cover Policy Expansions Coming in Three African Countries
WASHINGTON, D.C.: The Export-Import Bank of the United States (Ex-Im Bank) today announced a three-year renewal of the Bank’s Short-Term Africa Initiative (STAI) that provides export-credit insurance for U.S. exporters selling to 18 countries in sub-Saharan Africa, up to a program limit of $100 million. The initiative is renewed through March 31, 2015.

The Bank also anticipates expanding the availability of its export financing in three sub-Saharan African countries: Cameroon, Ethiopia and Tanzania. Ex-Im Bank’s board of directors is expected to authorize cover-policy expansions for each respective country in May. The changes will be made possible by risk-assessment upgrades that were recently approved through a federal interagency review.

“Sub-Saharan Africa offers great, untapped potential for U.S. companies looking to grow by increasing their foreign sales. Through Ex-Im’s initiative, the U.S. government is opening markets throughout this region,” said Ex-Im Bank Chairman and President Fred P. Hochberg. “We encourage more exporters to enter these markets now to establish a presence that can lead to follow-on business for years to come.”

Hochberg added that the financing risks of many sub-Saharan markets have improved significantly and are lower than commonly perceived. He noted that the Bank has had an excellent experience of repayment in these markets in recent years.

“Since 2002, Ex-Im Bank has authorized $4 billion to support U.S. exports to sub-Saharan Africa, and we’ve netted more than $150 million in fees,” Chairman Hochberg said. “Ex-Im’s net loss rate in the region is 2 percent, with our fees earning 2.5 times more than the claims we’ve received. This is a very solid repayment record. We want more U.S. exporters to initiate or expand their business in Africa.”

In FY 2011, Ex-Im Bank surpassed the $1 billion authorizations mark for the first time in sub-Saharan Africa, with almost $1.4 billion approved to support U.S. exports to the region. The Bank anticipates another strong authorizations year in FY 2012.

Under STAI, Ex-Im Bank provides support for short-term transactions (repayment terms of up to 180 days, exceptionally up to 360 days) in markets where coverage would not be available under the Bank’s standard cover policy, which is normally based upon credit-risk analysis for medium-term transactions (repayment terms up to seven years).

Currently, Ex-Im’s insurance on all short-term STAI country transactions is available only under the Bank’s single-buyer insurance policy, which is a select-risk authorization. Existing Ex-Im multibuyer policyholders with a diverse spread of country and buyer risk are also eligible but must submit separate single-buyer policy applications for each STAI country buyer. However, under the initiative’s renewal, exporters having favorable experience with highly creditworthy STAI country buyers may have these buyers endorsed to their multibuyer policy.

Ex-Im’s insurance is available to support U.S. exports of a wide range of goods, including consumer items, spare parts, raw materials, agricultural commodities, and construction and mining equipment, among others. The insurance covers irrevocable letters of credit, promissory notes and open-account repayment terms that enable the exporter to extend short-term financing to the foreign buyer. Policies are also available for eligible U.S. banks.

About Ex-Im Bank:
Ex-Im Bank is an independent federal agency that helps create and maintain U.S. jobs by filling gaps in private export financing at no cost to American taxpayers. In the past five years, Ex-Im Bank has earned for U.S. taxpayers $1.9 billion above the cost of operations. The Bank provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to help foreign buyers purchase U.S. goods and services.

Ex-Im Bank approved $32.7 billion in total authorizations in FY 2011 — an all-time Ex-Im record. This total includes more than $6 billion directly supporting small-business export sales — also an Ex-Im record. Ex-Im Bank’s total authorizations are supporting an estimated $41 billion in U.S. export sales and approximately 290,000 American jobs in communities across the country. For more information, visit