Africa

South Africa’s government said on Thursday it wanted its national airline flying again in the first half of next year, after giving it a 10.5 billion rand ($650 million) bailout in the mid-term budget, Reuters reported. The Department of Public Enterprises (DPE) said the latest cash injection meant a restructuring plan for state-owned South African Airways (SAA), which has been in a form of bankruptcy protection since December, can now go forward.

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World Bank officials have told South Africa’s government it will need to reduce its wage bill to secure a loan and that it doesn’t want the money to be used to bail out insolvent state companies, a person familiar with the situation said, Bloomberg News reported.12 Those demands have stalled negotiations on the loan that began in April, the person said, asking not to be identified because the content of the discussions have not been made public.

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The proportion of emerging market high-yield companies who have seen their liquidity position weaken in September has climbed back to June’s record high, with firms in Latin America driving the overall increase, Moody’s said in a research report, Reuters reported. The reading of Moody’s emerging markets liquidity stress indicator returned to an all-time high of 25.8% last month - up 1 percentage point from August and compared with its long-term average of just under 20%, Moody’s found. A rising trend indicates upward pressure on default rates.

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Sovereign default risks are on course to rise further in 2021, with Iraq, Sri Lanka, Angola and Gabon at high probability of default, say Goldman Sachs analysts, Reuters reported. Five sovereign debt defaults or distressed debt exchanges - in which investors swap their debt for new bonds, often with longer maturities and a reduced value - have already happened in 2020 in the aftermath of the COVID-19 crisis, the most in around two decades.

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South Africa’s Treasury is likely to announce additional funding for the state arms company and a government-owned agricultural lender in this week’s budget, people familiar with the situation said, Bloomberg News reported. Denel SOC Ltd., which makes attack helicopters and other weapons, will probably receive between 2 billion rand ($123 million) and 3 billion rand, the people said, asking not to be identified because the information hasn’t been made public. The Land and Agricultural Development Bank of South Africa will get 1.5 billion rand to 2 billion rand, the two people said.

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In a related story, the Financial Times reported that over the past two decades, China has emerged as the biggest bilateral lender to Africa, transferring nearly $150bn to governments and state-owned companies as it sought to secure commodity supplies and develop its global network of infrastructure projects, the Belt and Road Initiative.

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Zambia has three weeks to improve transparency over its debt obligations and make progress toward an IMF-backed reform package, or risk defaulting on its loans, CNBC reported. Last week, a meeting of creditors was adjourned until Nov. 13 after a consortium comprising around 40% of Zambia’s Eurobond holders opted to abstain from voting on the country’s debt relief proposals, rather than voting them down. Experts suggest bondholders are hoping the government can offer more clarity on its debt, particularly to China, and demonstrate progress toward an IMF program ahead of the Nov. 13 meeting.

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Ratings agency S&P has slashed Zambia’s credit rating to “selective default” after the government missed an interest payment last week and announced it would suspend debt service to external commercial creditors, Reuters reported. Zambia - one of the world’s top copper producers - was struggling with its ballooning debt before the coronavirus pandemic roiled global markets and looks headed for a messy and protracted default.

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Mozambique's Attorney General's Office said on Wednesday it will seek the extradition of three former Credit Suisse bankers implicated in a $2 billion debt scandal that sent the country's economy into crisis, Reuters reported. Andrew Pearse, Detelina Subeva and Surjan Singh, who helped arrange the loans to Mozambique, all pleaded guilty in the United States last year to charges including conspiracy to violate U.S. anti-bribery laws and to commit money laundering and securities fraud in relation to their role in the affair.

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Zambia’s government said on Tuesday it had adjourned meetings with creditors on a proposal to defer payments on its Eurobonds to Nov. 13 due to a lack of quorum, pushing the copper producer further towards a protracted debt overhaul, Reuters reported. The meetings had been scheduled for Tuesday morning and were expected to gauge support for a delay in interest payments on $3 billion-worth of three outstanding dollar-denominated bonds until April. Two-thirds of holders of Zambia 2022 and 2024 bonds and three-quarters of its 2027 issue were required to vote.

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