African governments looking to raise capital should do it soon

  • Forex: GHS settles post the surprise rate cut
  • Fixed Income: African governments need to raise capital soon
  • Macroeconomic: A deluge of PMI numbers kept African traders focused


  • The Biden administration has listed a further 59 companies on the political front in which U.S. companies are banned from investing in. The Executive Order was signed yesterday and put's to rest any debate around whether the Biden administration would undo much of the stronger stance the Trump administration adopted concerning China. On the contrary, Biden appears to be extending Trump's efforts which will do little to improve US-Sino relations, which were frosty even before this. Add the growing U.S. claims that Covid-19 was man-made and leaked from a virology institute in Wuhan, and US-Sino relations are low and set to deteriorate a lot further.

  • Copper sold off sharply yesterday with the benchmark 3m LME contract shedding around 3.6% on the day. Upbeat jobs data out of the US yesterday put stale long positions to the sword as they were forced to run for cover as the market raised expectations of a Fed entering a period of tightening in the near future. We have seen a slight recovery this morning but the contract is still on track to post its largest weekly fall since September 2020. There are a number of data releases which will hold specific relevance to the fortunes of base metals over the coming days. First off, we have the US Non-Farm Payrolls data out later this evening which will give further insight into the recovery of the US economy, second, we have the Chinese reporting trade figures on Monday. This data will give insight into the appetite for commodities in the world’s second largest economy.


  • Egypt: Data from the Central Bank of Egypt showed that gross reserves rose marginally in May. Specifically, gross reserves increased from $40.4bn y/y in April to $40.5bn in May, its highest level in fifteen months. The increase in reserves can be attributed to the rise in the US dollar gold price value. However, reserves have been rising, it remains below the levels that were seen pre-COVID-19 pandemic. However, at the current level, Egypt’s reserves remain relatively adequate to shield the economy and the Egyptian pound from external shocks.

  • Zambia: Against the backdrop of the surge in daily new confirmed coronavirus cases, Zambia’s electoral body suspended campaign rallies before the August 12 elections. The Electoral Commission of Zambia Chief Electoral Office Kryticous Nshindano was on wires saying that “Political parties should use alternative methods of campaigning that avoid crowds”, and “elections will go ahead unless a state emergency is declared.” The third wave of COVID-19 pandemic is picking up in Zambia as the Southern African countries enter into winter, and this could also trigger the government to tighten restrictions should the number of infections rise further. Note, in the last 24 hours, Zambia recorded 825 new cases, up from 149 on May 24.

  • Ethiopia: Keeping abreast with the ongoing crisis in Tigray, the Ethiopian government announced that Eritrea started withdrawing its forces from Tigray region after an official request by the government. The announcement comes after Ethiopian Prime Minister Abiy Ahmed held a briefing yesterday following pressure from the international community to end the crisis and his government facing sanctions from the US. Economic sanctions bode ill for the Nobel Peace Prize winner PM Abiy as it put pressure on the government’s finances, given that Ethiopia relies heavily on foreign aid to fund its budget.

  • Democratic Republic of Congo: In a bid to boost the country’s electrification, the Democratic Republic of Congo (DRC) signed agreements with a consortium headed by Gridworks Development Partners LLP to spend $100mn building and operating three off-grid solar-hybrid electricity facilities. In an emailed statement from the group seen by Bloomberg, the deal concluded by Congo’s Ministry of Hydraulics Re-sources and Electricity seeks to bring power to about 500k people in three cities in the north of DRC. Furthermore, the consortium is currently engaging in discussions with the African Development Bank and the Emerging Africa Infrastructure Fund about raising debt to part-finance the project. This is a massive project for DRC and could also boost the country’s infrastructure and create employment opportunities for surrounding communities.

  • Tanzania: Tanzania’s Energy Minister Medard Kalemani announced that the country plans to begin constructing a delayed $30bn liquified natural gas project in 2023, with the construction expected to take five years. Progress on the project came after the resumption of talks with companies following President Samia Suluhu Hassan took office in March and directed her administration to fast-track delayed investments. The project is very crucial for Tanzania as it will create employment opportunities and bring in fresh revenue flow for the government once exporting the LNG begins. Note that negotiations for a host government agreement and review production sharing agreements are expected to be completed next year in June.


  • The Cedi responded quickly to the surprise rate hike earlier in the week with investors shorting the currency as it lost some of its yield attractiveness. This is usually the case however the market seens to have settled somewhat with investors now focusing on the renewed vigour a rate cut may inject into the local economy.

  • In terms of the GHS NDFs, it would seem at least in the very near term we have the market content with inflation and rates predictions and the 1m NDF has been moving largely in tandem with the spot market over the past few sessions post the rate cut.

  • As always, there is always two sides to a currency pair and given this we should take a look at developments within the broader dollar market. The strong labour market data released yesterday helped the trade-weighted USD surge stronger. The market is now set for further gains should today's all-important payrolls number surge to stronger levels. Given the extent of the USD's slide since early April, it is now ripe for a phase of recovery that could last a week or two. Technicals have turned stronger, and any further talk of monetary policy tapering is bound to assist the USD secure another leg higher into the weekend. The weekly chart reflects a very strong double bottom formation on the USD index and some clear signals that the bias has shifted to the topside.

Fixed Income

  • Earlier this week, the US Fed indicated it was looking to unwind some of its corporate bond holdings. It was the first sign that the Fed was indeed looking to taper their bond purchases at some point. It was also a warning sign to African governments looking to raise capital that they should consider doing so sooner rather than later and take advantage of the low interest rates, plentiful liquidity and low levels of volatility currently evident in global markets.

  • Numerous sub-Saharan African countries will likely tap foreign investors for funding in the coming weeks including Nigeria, Kenya, Cameroon and Ghana. How much interest they garner will to a large degree be dependent on the commitment they show to structural reforms and fiscal consolidation. Debt restricting has become more prevalent across the continent courtesy of the tough trading environment and investors will likely turn fairly judicious in the way they assess risks. They may even prefer to invest in the Eurobond market later in the year when global levels of volatility could well pick up as the Fed and indeed other central banks consider moderating their monetary stimulus efforts and countries with better fiscal metrics are rewarded.

  • Earlier this week, Senegal entered the bond market with a Eurobond issue in what is a precursor of what is to come. Senegal indicated that part of the proceeds of the EUR775mn bond sale will go towards funding the youth fund which would aim to counter youth unemployment, through the support for small and micro enterprises.

  • Another notable bond market development this week was Kenya indicating that it is looking to raise KES30bn from their reopened 20yr bond. The offer is open until the 15th June, with the coupon of the bond first issued in 2019 standing at 12.873%, although pricing initially sold for 12.0%. The capital raised will go towards the funding of the budget.

  • Elsewhere, there was healthy issuance of shorter dated T-bill across SSA, with Kenya, Burundi, Nigeria, Zambia and Egypt all selling the shorter dated paper for cash-flow purposes.


  • The continent released May PMI numbers en masse yesterday from Egypt in the north to South Africa in the south. All of those releasing PMI figures showed a contraction versus the previous month except for Egypt, however Egypt remained in contractionary territory at 48.6.

  • The Standard Bank South Africa PMI edged marginally lower in May, coming in at 53.2 from 53.7 in the month prior, bettering consensus expectations of a more pronounced decline to 52.5. Despite falling in May, the index remained in expansionary territory for the 8th straight month and recorded the second-highest reading since November 2012. Survey results show that businesses reported a solid increase in output, with the rate of growth one of the quickest recorded since data collection began in 2011. Meanwhile, new orders rose for the sec-ond month in a row, supporting a further solid increase in workforce numbers. Confidence towards future output remained robust in May and was the second-highest in over three years, with firms largely expectant of a recovery in economic conditions over the coming year as the vaccine roll-out continues. On the pricing front, the headwind of rising cost pressures continued to gather speed, with the latest uptick in input costs the fastest since June 2016. As a result, firms raised their selling charges at the sharpest pace for almost five years.

  • Moving over to Ghana, we witnessed the index falling from 52.4 in April to 51.5 in May. Output fell to 52.7 from 53.9 but the reading still marks the 10th consecutive month of expansion.

  • Zambia continues to struggle with fiscal pressures holding back any broadbased manufacturing recovery. The reading for May slipped below the 50 mark which denotes expansion coming in at 49.7 versus 50.1. This is worrying as it suggests that the rebound from the COVID-19 induced lows may have run its course.

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