Ghana has too much power and gas, and that’s a bad thing for government finances. With capacity that’s almost double the country’s peak demand needs, Ghana’s electricity utility has to pay independent producers about $450 million every year for energy that it doesn’t need or use, Bloomberg News reported. This adds to the sector’s liabilities, which are the biggest debt threat to a nation that seven months ago completed its 16th bailout program with the International Monetary Fund.
South African Airways, the beleaguered state-owned airline that’s reliant on government financial support to continue operating, has started a restructuring process that could see its workforce cut by almost a fifth, Bloomberg News reported. As required by South African law, the carrier has started talks with labor unions about its plans, which could affect 944 of its 5,149 employees, SAA said in an emailed statement. The proposed restructuring includes all SAA divisions and departments, excluding its Mango Airlines, Air Chefs and SAA Technical units, it said.
Investors in frontier-market bonds are on course to get their best returns in seven years. It looks like it’ll be a lot tougher in 2020, Bloomberg News reported. Some of the biggest money managers are already becoming more selective. BNP Paribas Asset Management, which oversees almost $500 billion in assets, is sticking to countries with sound fiscal management such as Ivory Coast, or those with investment-grade ratings like Kazakhstan, Uruguay and Morocco. Aberdeen Standard Investments sees opportunities to get above-market returns by buying the bonds of Sri Lanka, Ecuador and Ghana.
Bribe allegations leveled in court against a VTB Group executive may complicate the Russian state-owned bank’s attempts to recoup a $535 million loan that’s part of a major debt scandal in Mozambique, Bloomberg News reported. A New York court heard testimony last month that the VTB executive in charge of the deal, Makram Abboud, took $2 million in kickbacks. The bank denies the allegations, made by a former Credit Suisse Group AG banker at a criminal trial in which VTB isn’t a party, and its employee hasn’t been charged with any wrongdoing.
Some investors are getting out of Eskom Holdings SOC Ltd. dollar bonds amid concern South Africa is taking too long to implement a turnaround plan and explain what it will do about the utility’s $30 billion of debt, Yahoo Finance reported. Yields on the struggling power company’s dollar bonds due 2025 climbed to a one-month high on Wednesday, even though the government’s 138 billion rand ($9.3 billion) bailout has bought it some time to reorganize its finances.
Cities across South Africa are due to host parades for the country’s rugby team in coming days, following last weekend’s emphatic victory in the World Cup final in Japan. In financial markets, too, there were scenes of celebration on Monday after Moody’s elected not to downgrade the country’s debt to junk, the Financial Times reported.
For a quarter-century, South Africa has been able to count on an investment-grade rating from Moody’s Investors Service, Bloomberg News reported. Bond buyers lately may be forgiven for wondering why. Financial markets have been pricing in a downgrade for months, and the other two major rating companies have had South Africa at junk status for two years. Should Moody’s follow suit, the nation would suffer enormous financial consequences.
Fitch Ratings Ltd. said that while South Africa’s worsening debt forecasts don’t include the threats posed by the state taking on any of the embattled power utility’s 450 billion rand ($30 billion) of debt, any risks posed by this are reflected in the nation’s current credit assessment, Bloomberg News reported. Finance Minister Tito Mboweni presented a rapidly deteriorating outlook in his medium-term budget policy statement on Wednesday, with gross government debt seen surging to 80.9% of gross domestic product in the 2028 fiscal year unless urgent action is taken.
Almost half of frontier market countries are either at high risk of falling into debt distress or are already distressed, the IMF has said, up from zero as recently as 2014, the Financial Times reported. The warning comes as issuance of hard currency frontier market debt is set to hit a record high this year, with $38bn set to be raised, according to the IMF.
South Africa unveiled a long-awaited plan to save its debt-stricken power utility, including exposing it to greater competition, lowering fuel costs, increasing renewable-energy output and selling non-core assets, Bloomberg News reported. A policy paper released by Public Enterprises Minister Pravin Gordhan envisions Eskom Holdings SOC Ltd. relinquishing its almost century-old near-monopoly of the electricity industry.