In 2013 alone, primary issuance by African sovereigns has already reached $8 billion year to date, its highest level ever, says Moody's Investors Service in a new Special Comment published on 10 October 2013
International Issuance trend expected to continue and here is significant potential in Africa for increasing the use of international capital market finance in the medium to long term, with the first-time entry of six African countries into the international debt markets being anticipated within the next few years.
The rating agency's report is an update to the markets and does not constitute a rating action.
"The African region overall has shown considerable resilience to financial shocks during the global financial crisis, and we expect that investors' interest for the region will be sustained given the strong macroeconomic growth outlook for Africa, which we estimate to average 5%-6% over the next five years," says Aurelien Mali, a Moody's Vice President -- Senior Analyst and co-author of the report.
Year-to-date primary issuance by African sovereigns has already reached $8 billion, its highest level, due to issuers returning to the international markets (Egypt (Caa1 negative), Ghana (B1 stable), Nigeria (Ba3 stable) and South Africa (Baa1 negative)), and one debut issuer, Rwanda. "Over the medium term, we expect that this continuing issuance trend will strengthen, enabling local governments, corporates and financial institutions to better access the international markets," continues Aurelien Mali.
By the end of the year, Senegal (B1 stable) is also to return to international markets. In addition, Moody's has identified six countries in sub-Saharan Africa that it believes will issue inaugural bonds in the international markets within the next few years: Angola (Ba3 positive), Cameroon, Kenya (B1 stable), Tanzania, Uganda and Mozambique (B1 stable). Most of these countries are planning to raise at least $500 million each, which will make them eligible to be included in JP Morgan's Emerging Market Bond Index (EMBIG). This will not only help raise their visibility with a larger pool of investors, but will set a benchmark yield for local corporations and banks that wish to issue internationally.
Sovereigns have other sources of external financings such as multi-/bi-lateral lending, as well as commercial loans. As such, Moody's considers that although growing, funding via international debt securities to finance a portion of infrastructure needs will likely remain a limited portion of gross capital inflows to the region.
In Moody's opinion, the region's sovereigns will likely lead bond issuance, which will promote further international issuance by government-related institutions, such as strong utility companies using the yield on any existing government bonds as a benchmark.
The complete report, "International Sovereign Issuance in Africa 2013/2014: A Rating Agency Perspective"
