Africa

South African banks have made their rainy-day provisions. Now, they must wait and see whether the funds set aside will be enough to manage a potential torrent of bad debt and ease pressure on their earnings in coming months, Bloomberg News reported. The country’s so-called “Big Four” experienced a profit slump deeper than that seen during the global financial crisis in the six months ended June after a spike in credit impairment charges as they grappled with the effects of the coronavirus pandemic and a nationwide lockdown.

Administrators at struggling South African Airways (SAA) have called creditors to a meeting on Friday after the government missed a deadline to make funding available for a restructuring plan, Reuters reported. The administrators took control of state-owned SAA in December after almost a decade of financial losses and published a rescue plan in June following repeated delays and wrangling over its future.

The World Bank has piled pressure on commercial lenders to defer debt repayments owed by emerging economies as the impact of the coronavirus pandemic threatens to plunge them into a “lost decade,” the Financial Times reported. The body’s president David Malpass said he was “frustrated” that some countries could cut back spending on health and education to meet debt repayments, creating a long-term drag on their economic prospects.

Kenya’s budget deficit for this financial year could increase due to revenue shortfalls and coronavirus-related disruptions, the finance minister said on Tuesday, Reuters reported. Ukur Yatani, who set the deficit at 7.5% of GDP when he presented the budget in June, did not say how far the gap was likely to expand, adding that they were developing a plan to cover it. “It might be just cutting on some expenditures, particularly the slow-moving projects, and… some state agencies are doing well so we are likely to get some substantial dividends,” Yatani told Reuters.

South African Airways needs short-term funding from the government by the end of next week for the state carrier’s business rescue process to continue, its administrators said on Thursday, Reuters reported. “It is prudent to advise affected persons of the company’s dire financial position,” they said in a statement.

Kenya’s two biggest banks are probably over the worst as far as potential loan losses go, but may still struggle to boost revenue in the wake of the coronavirus pandemic, according to AIB-AXYS Africa, Bloomberg News reported. Equity Group Holdings Plc increased first-half provisions eightfold, while KCB Group Plc’s rose almost four times from a year earlier, hurting earnings. The nation’s lenders are helping customers restructure their debt after the Covid-19 outbreak stalled economic output and shut schools.

A World Bank-backed power plant that provides a tenth of Nigeria’s electricity is at risk of a default on its loan payments because of a severe dollar shortage in the continent’s biggest economy, according to three people briefed on the matter, the Financial Times reported. The $900m Azura-Edo Independent Power Plant in Edo state has been unable to source dollars through the Central Bank of Nigeria, which has restricted access to the greenback in an effort to support the local naira currency, according to an industry executive and a financier briefed on the matter.

Tullow Oil warned it risked defaulting on a debt facility if it does not resolve a potential liquidity shortfall, as the Africa-focused explorer slumped to a $1.4bn pre-tax loss for the first half of the year, the Financial Times reported. The London-listed company said on Wednesday that a “potential liquidity shortfall” threatened its ability to satisfy requirements at a “redetermination” next January of its reserves-based lending facility.

Ethiopian Airlines is in talks over possible involvement in the rescue of flagship carrier South African Airways (SAA), the head of the airline told Reuters on Friday, Reuters reported. SAA hasn’t made a profit since 2011 and has been under a form of bankruptcy protection since late last year. Creditors have approved a restructuring plan, but the government needs to find at least 10 billion rand ($580 million) of funding for it to work.

Ethiopian Airlines Group is among companies in talks with South Africa’s government about potentially offering support to the country’s insolvent state airline, according to people familiar with the matter, Bloomberg News reported. Africa’s biggest carrier is considering ways to help bankrupt South African Airways fly again after more than five months of dormancy, said the people, who asked not to be identified as the talks are private. Taking a stake in the carrier is one of the options under discussion, they said, though negotiations are ongoing and an agreement may not be reached.