After years in the cold, signs of renewed investor interest in Africa as 2024 proving bumper year (By Miranda Abraham)

Rand Merchant Bank (RMB) After years in the cold, signs of renewed investor interest in Africa as 2024 proving bumper year (By Miranda Abraham) 17-May-2024 / 14:30 CET/CEST The issuer is solely responsible for the content of this announcement.

By Miranda Abraham, Head of Loan Syndication at RMB (www.RMB.co.za) in London.

 

Over the past few years, African debt markets have faced significant challenges due to a combination of factors including soft global economic conditions, the COVID-19 pandemic and related supply chain failures.

 

These factors led to a decrease in demand for African debt and a dramatic rise in borrowing costs, placing sovereign borrowing in particular in a difficult position.

 

In fact, in 2023, there was no issuance at all in Sub-Saharan Africa, marking the first time since 2008 that this happened.

 

The global bond market was effectively frozen for Africa.

 

The funding squeeze and the closure of the bond market forced African countries to seek alternative sources of financing, such as domestic capital markets, multilateral institutions, and bilateral agreements.

 

But in January and February 2024, everything changed. 

 

Suddenly there was a rush of deals. First Cote d’Ivoire reopened the market with a bumper $2.6bn of bond issuance. Even more encouragingly, the sale was oversubscribed more than three times, with a combined demand of $8 billion.

 

Then Benin came to market with a smaller issuance of $750m at a yield of just under 9%. Kenya issued a hefty $1.5bn at a yield of 10.4%, the proceeds of which will be used to buy back most of its debt which falls due in June this year. First Quantum Minerals issued $1.6bn, closely following Kenya.

 

Moreover, these bonds actually all priced lower than initial guidance – indicating that investor demand was far stronger than initially anticipated.  The issuance was proof positive that the market had turned a corner and confidence had returned.