Macro Analysis /

Angolan assets continue to steal the show in April

  • Forex: Angola’s international reserves remain elevated and supportive of the Kwanza

  • Fixed Income: Zambian bond traders are not overly phased by debt restructuring delay risks

  • Macroeconomic: Bank of Uganda leaves rates on hold as inflation expectations remain contained

Kieran Siney
Kieran Siney

Head of African Markets

Takudzwa Ndawona
Takudzwa Ndawona

Financial Markets Analyst

ETM Analytics
13 April 2022
Published byETM Analytics


The news vendors are focused on the new COVID-19 variant detected recently in Botswana. Both researchers in Botswana and South Africa are carrying out further investigations to understand the virulence and infectivity of the new strain. The World Health Organisation reported the following - The identified sub-lineages variant are BA.4 and BA.5. World Health Organization (WHO) experts are working with scientists and researchers in the two countries to deepen analysis of the sub-lineages, which have so far been identified in four people in Botswana and 23 in South Africa. Outside Africa, the BA.4 and the BA.5 have been confirmed in Belgium, Denmark, Germany and the United Kingdom. Currently, there is no significant epidemiological difference observed between the new sub-lineages and known sub-lineages of the Omicron variant, which include BA.1, BA.2 and BA.3 sub-lineages.

We do not expect a knee-jerk reaction to the discovery by the world, as was the case in November 2022 when South Africa and Botswana announced the discovery of the Omicron variant, which resulted in mass shunning of both countries by the international community. The WHO added - “There is no cause for alarm with the emergence of the new sub-variants. We are not yet observing a major spike in cases, hospitalisations or deaths,” said Dr Matshidiso Moeti, WHO Regional Director for Africa. “We are working with scientists in Botswana and South Africa to gain complete behavioural knowledge of these sub-lineages and supporting African countries enhance genomic surveillance to detect potentially dangerous variants and stay ahead of the virus,” Dr Moeti said.


Africa: President and Chairman of the African Export-Import Bank yesterday reported that the lending institution had received financing requests from the continent for more than $15bn as a result of the impact of the war in Ukraine on economies and businesses. The president added that the bank should be able to support up to $16bn with partnerships and structures such as instruments used by hedge funds. To date, the bank has distributed $1.5bn. The president's comments follow on from last week's announcement that the lender had initiated a $4bn trade financing program for members affected by the war.

Egypt: To ensure it has the supplies required to feed its people, as the war in Ukraine upends the global grain trade, Egypt is accelerating its efforts to secure wheat supplies. While the local harvest will soon replenish supplies, Egypt needs to make sure it is building reserves for the coming year. Against this backdrop, Egypt has now scheduled a new tender for Wednesday, April 13, a month sooner than the supply minister had indicated it would return to the market. The government is drawing up plans to allow buying wheat outside of the tender system to bolster purchases and is actively pursuing new sources.

Mauritius: In a boost for a sector that is crucial to the country's foreign exchange income, the Mauritian tourism industry is expected to return to pre-pandemic levels in November if the steady increase in visitors since February persists. Mauritius reopened its borders to fully vaccinated tourists on October 1 after closing them in March 2020 to slow the spread of coronavirus infections. Since then, visitor numbers have risen to 329,138, compared with 6,140 in the same period a year earlier, and are about half of what they were before the pandemic.

Tanzania: Headline inflation in Tanzania edged lower, coming in at 3.6% y/y in March from 3.7% y/y in February. This was the slowest pace of price growth in the economy since June 2021 and marked the third time that inflation has slowed. On a m/m basis, consumer prices rose by 0.8%. Overall inflation in Tanzania remains subdued and below the central bank's target of 5%, suggesting that the central bank will persist with its accommodative monetary policy stance to support business and investment for the foreseeable future.

Uganda: As part of President Museveni's ambitions to expand exploitation of the country's mineral wealth which includes gold, base metals, uranium, rare earths, iron, titanium, vermiculite, and diamonds, to help boost growth, Uganda is inviting expressions of interest from investors to restart a vast copper mine in the country's west that also holds significant cobalt deposits. Government geologists estimate the Kilembe mine to contain about 4mn tonnes of ore, that is, 1.98% copper and 0.17% cobalt. According to the mining and finance ministers, "the redevelopment of Kilembe Mines will catalyse industrialisation, offer significant employment opportunities, and increase revenue." Previous attempts to revive the mine have been stymied by a downturn in the commodities market at a failed 2013 deal with a Chinese investor. But with copper prices hitting all-time highs earlier this year due to supply concerns, investors are looking for new sources of the metal used in electric vehicles.

South Africa: Floods in KwaZulu Natal have washed away the N3 highway that links South Africa's biggest port to the commercial hub of Johannesburg. Moreover, bridges on the N2, which is the main highway along the nation's east coastline, have been destroyed. Officials have closed the highways to southbound traffic due to debris on the roads. South Africa is currently experiencing the La Nina weather phenomenon, which does usually cause above-normal rainfall in the country and its neighbours. However, the current levels of rain are above normality and are expected to continue wreaking havoc in the eastern parts of the country. The flooding has brought supply chains in KwaZulu Natal to a halt and will impact inward and outward bound shipments. This will likely add to inflation pressures in the country. Furthermore, this could potentially have an impact on trade numbers over the next few weeks. There is no indication of the severity of the damage at present or how long it is going to take to be resolved.

Forex: Angola’s international reserves remain elevated and supportive of the Kwanza

Foreign currency reserves play an important role in cushioning against immediate liquidity constraints and a currency’s ability to withstand shocks. It is, therefore, worth looking at the latest reserves data from Angola. Data from the Bank of Angola showed that international reserves fell to $10.26bn in February from an upwardly revised $10.57bn in January. While Angola’s reserves edged lower, they nevertheless remain elevated near January’s 21-month high. Elevated international reserves, improving fiscal dynamics, and higher global oil prices are some of the factors that have underpinned the continued resilience of the Angolan Kwanza in the first four months of the year.

For context, the Kwanza has appreciated by more than 24% on a year-to-date basis against the USD and is ranked as the best performing African currency. Those gains are more than double that of the next best performing African currency, the South African Rand. An improving outlook for the oil-exporting economy that exited an economic recession that it had been mired in since 2016 in 2021, the liberalisation of the foreign exchange regime, and reforms are factors that have also supported the Kwanza.

From a valuation perspective, it is worth noting that the Angolan Kwanza is overvalued by over 16% on a real effective exchange rate basis. Risks for further overvaluation exist in the near term should oil prices remain elevated, fiscal dynamics continue to improve, and the government implements further reforms.

Fixed Income: Zambian bond traders are not overly phased by debt restructuring delay risks

While some significant steps have been made in terms of returning the country towards a more sustainable debt trajectory under the newly elected government, arguably the most important step, a debt restructuring programme with the International Monetary Fund, is likely to be delayed due to ongoing disputes and prolonged negotiations with some of the country’s main creditors. In a recently published report, global credit ratings agency Fitch said that the debt restructuring programme with the IMF could be postponed to 2023.

Fitch added that the timeliness released by President Hakainde Hichilema’s government for an IMF deal on the country’s estimated $14.7bn foreign debt by June 2022 is overly optimistic, given all the niggles that need to be ironed out with the country’s creditors. Recall that reports surfaced late last week that Zambia’s single largest creditor, China, is one of the parties delaying the debt restructuring. Out of Zambia’s total external public-sector debt, commercial and state-owned Chinese lenders account for $5.5bn.

Meanwhile, BlackRock, the world’s largest fund manager, has come under pressure to delay demands for debt interest payments from Zambia, a move aimed at preventing a deepening of the fiscal crisis in the country. BlackRock is amongst a pool of private investors that have thus far refused to reduce the interest rate or delay payments on Zambian bonds. Private creditors are amongst those yet to agree to the debt restructuring terms, which is delaying Zambia’s debt restructuring programme with the IMF. Bloomberg reported that BlackRock holds around $220mn in Zambian bonds and could generate as much as $180mn for clients if the debt were paid in full, marking a profit in excess of 100% for clients.

Negotiations for the debt restructuring are scheduled to take place later this month, with G20 Finance Ministers set to meet on 20 April, during the IMF spring meetings. Zambia is amongst three African nations that last year applied for debt relief under the common framework, which has yet to come into force, partly due to the fact that it requires private creditors to participate. Looking ahead, while the debt restructuring programme with the IMF is likely to be delayed, the broader bullish bias in Zambian bonds is expected to persist as the country continues to benefit from elevated commodity prices and the shift in fiscal policy from the new government with lawmakers already making some notable cuts to expenditure to help balance the country’s budget.

Macroeconomic: Bank of Uganda leaves rates on hold as inflation expectations remain contained

While several African central banks have joined in on the hawkish pivot in monetary policy, the Bank of Uganda’s Monetary Policy Committee voted in favour of leaving the Central Bank Rate unchanged at 6.5% on Tuesday.

The Bank of Uganda highlighted that headline inflation remained below its medium-term target of 5% in March 2022. The bank noted that inflation risks have, however intensified as a result of the supply chain issues and rise in commodity prices caused by the war in Ukraine. Policymakers noted that the resilient Shilling helped ease inflation pressures from the external price shocks.

The central bank said that the main upward risks to inflation are:

1.      Higher global commodity and energy prices due to the worsening of the Russia-Ukraine conflict.

2.      Heightened uncertainty in the financial markets due to the sanctions on Russia and tighter monetary policy in developed markets.

3.      Potential worsening of disruption to global supply chains due to stringent controls of new strains of Covid, such as China’s zero-covid policy.

The central bank flagged the following as possible downside risks to the inflation outlook:

1.      Diminished domestic demand due to higher energy and commodity prices beyond general affordability.

2.      Bumper food crop harvests could lead to lower market prices.

The bank noted that while inflation is expected to rise above the medium-term target, the initial impact of the recent increase in consumer prices has not had knock-on effects. Moreover, the central bank said that inflation expectations remain contained.

On the growth front, the central bank noted that the economy continues to recover from the Covid pandemic related downturn. While downside risks have intensified amid mounting geopolitical tensions and supply chain disruptions, the central bank expects the economy to expand by between 5.5%  and 6.0% in 2022. The bank said that it would continue to provide support for the education and hospitality sectors which were under lockdown for an extended period of time.