Africa

South Africa could move toward an even deeper junk credit rating this week by losing the only stable outlook on its debt assessments, Bloomberg News reported. Of the 23 respondents in a Bloomberg survey, 12 expect S&P Global Ratings to change its outlook on the country’s credit rating to negative from stable on Friday. That means the next move from the company, which already assesses South Africa’s foreign-currency debt at three levels below investment grade, could be another downgrade. That would take the country to a single B rating and signal an increased probability of a default.

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Zambia is seeking a compromise solution with bondholders and does not expect them to seize its mining assets even though it defaulted on part of its debt last week, Mines Minister Richard Musukwa said on Thursday, Reuters reported. He also said Zambia had no plans to sell its shares in mining companies to raise cash after the country, which is Africa’s no.2 copper producer, failed to pay the $42.5 million coupon on its Eurobond debt on Friday. “We don’t expect Zambia’s assets to be auctioned or taken away,” he told a news conference.

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African countries face another debt crisis and will need more long-term help than the latest G20 debt plan offers them to ward off trouble ahead and keep much-needed investments coming in, according to policymakers, analysts and investors, Reuters reported. Around 40% of sub-Saharan African countries were in or at risk of debt distress even before this year, while Zambia became the continent’s first pandemic-era default last Friday.

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One of the biggest lenders to South African farmers can’t take on new clients or meet half the needs of existing customers until it gets another government bailout to keep operating, Bloomberg News reported. The state-owned Land and Agricultural Development Bank has asked the National Treasury for 7 billion rand ($455 million) to ease its cash woes and reduce debt. The Pretoria-based institution resumed interest payments on its borrowings in August after getting 3 billion rand from the government, but isn’t yet able to meet capital repayments.

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Pandemic Fuels Global ‘Debt Tsunami’

Global debt rose at an unprecedented pace in the first nine months of the year as governments and companies embarked on a “debt tsunami” in the face of the coronavirus crisis, according to new research, the Financial Times reported. The pace of debt accumulation will leave the global economy struggling to reduce borrowing in the future without “significant adverse implications for economic activity”, the Institute of International Finance warned on Wednesday.

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Zambia finance minister Bwalya Ng’andu said on Wednesday that the country’s default on $3 billion in Eurobonds had increased the risk of bondholders taking legal action, Reuters reported. Zambia became Africa’s first pandemic-era sovereign default after it failed to pay a $42.5 million Eurobond coupon at the expiry of the grace period on Friday. “There are some risks associated with the decision not to pay.

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End Borrowing Binge to Avoid Debt Default

Kenya has a 35 per cent chance of defaulting on its sovereign debt in the next five years, according to a Financial Times survey, The Star reported. The most likely defaulter is Argentina with a probability of 55 per cent but Zambia has just defaulted on its sovereign debt. Debt restructuring is a possibility but lenders like China may reject it and  seize securities like Mombasa port. Even if that is avoided, Kenya will still pay more for its international borrowing because lenders perceive greater risk.

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South Africa’s insolvent national arms company is seeking to fire 13% of its workers in a bid to survive after the government spurned its plea for a bailout, Bloomberg News reported. Denel SOC Ltd., whose predecessor was established to bypass sanctions against the apartheid regime, has told 379 workers in its artillery, ammunition and armored-car divisions that they could lose their jobs, according to Helgard Cronje, a representative of labor union Solidarity. The so-called section 189 notice sent to the employees is a legal step needed before cuts can take place.

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A new framework to resolve debt crises in developing countries, meant to ensure that Chinese and private creditors share the burden of providing relief, faces a key test after Zambia became the first African nation to default during the coronavirus pandemic, The Wall Street Journal reported. Finance ministers from the Group of 20 major economies said Nov.

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Nigeria has passed a law that will create a new resolution fund to support failing or distressed lenders and will get commercial banks to help pay for it, Reuters reported. The Banks and Other Financial Institutions Act 2020 was signed by President Muhammadu Buhari on Friday, and is in response to developments in the financial sector over the past 20 years. Under the new law, the central bank will invest 10 billion naira ($26.3 million) while the Nigerian deposit insurer NDIC will contribute 4 billion naira.

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