Africa

Emerging-market economies are grappling with a new dilemma as they begin the slow journey to recovery: how to rescue state-owned businesses without also triggering a debt crisis, Bloomberg News reported. Cash-strapped governments in Indonesia, India, South Africa and elsewhere are being pressured to bail out national airlines, energy utilities and other state businesses brought to their knees by virus-related travel restrictions, collapsing demand and plunging oil prices.

Ratings agency Moody’s has downgraded South Africa’s Land Bank deeper into subinvestment grade after the state company missed another debt interest payment due to liquidity challenges, Reuters reported. The Land and Agricultural Development Bank of South Africa (Land Bank), the country’s largest agricultural-focussed lender, defaulted on the loans totalling 50 billion rand ($3.01 billion in April. And in a notice on the Johannesburg Stock Exchange on June 1 Land Banki said it was not in a position to meet interest payments of nearly 120 million rand.

East African finance ministers will have to strike a balance between spending to rebuild economies battered by the coronavirus scourge and burdening their already heavily indebted nations with more loans when they present 2020-21 spending plans, Bloomberg News reported. Foreign exchange from mining and agricultural exports, tourists and remittances have dropped precipitously, and revenue from domestic activity is drying up, forcing governments in the region with some of the world’s fastest-growing economies to borrow.

Across the continent, governments have spent at least $77 billion annually since 2013, erecting everything from critical infrastructure such as bridges and hospitals to sumptuous presidential villas and soaring monuments celebrating national heroes. The building binge has been fueled by at least $600 billion in loans, leaving African governments struggling with record debt, Bloomberg Businessweek reported. The obligations were manageable—barely—when countries in the region were expanding by as much as 10% annually.

South African state airline SA Express escaped liquidation on Tuesday after a judge granted a three-month delay in liquidation proceedings, giving the government more time to clarify its plans for the domestic and regional carrier, Reuters reported. SA Express, a different business to national flag carrier South African Airways (SAA), was placed under provisional liquidation in April after its administrators said they could not secure funding for turnaround efforts.

The head of the International Monetary Fund called on private creditors to join the Group of 20 in providing debt relief for the world’s poorest nations, saying that the alternative to suspension and restructuring is defaults, Bloomberg News reported. A debt-service suspension would provide time for restructuring debt on a case-by-case basis in countries where debt sustainability needs to be restored, Managing Director Kristalina Georgieva said in a webcast with the U.S. Chamber of Commerce Tuesday.

Uganda’s central bank cut its benchmark interest rate for a second time this year to a new low as risks to inflation remain benign and the outlook for economic growth is tilted toward the downside, Bloomberg News reported. The monetary policy committee reduced the rate to 7% from 8%, Governor Emmanuel Tumusiime-Mutebile said Monday in a speech broadcast online. That is the lowest level since the central bank introduced the policy rate in 2011 at 13%. Returning to pre-pandemic levels of economic activity will be gradual, partly due to weak external demand, Tumusiime-Mutebile said.

Creditors of South African Airways (SAA) on Monday approved another delay in the publication of a rescue plan after the cash-strapped airline’s administrators requested an extension because of an objection by trade unions, Reuters reported. The rescue plan for SAA, which has not made a profit since 2011, was due to be published on Monday. It has been repeatedly pushed back amid fierce wrangling over the airline’s future.

Switzerland has opened a probe related to $2 billion of loans to Mozambique that were organized by banks including Credit Suisse Group AG and VTB Bank PJSC, in a scandal that has already attracted the attention of prosecutors in the U.S, Bloomberg News reported. The criminal probe started in February against “persons unknown” on suspicion of money laundering in connection with the credit, the Office of the Attorney General said on Friday. The target of the proceedings is not any specific person or entity, the office said.

South Africa’s Comair , which is under bankruptcy protection, intends to halve its fleet of aircraft as part of efforts to rescue the company, its administrators said on Friday, Reuters reported. Comair, which operates the local British Airways franchise and budget airline kulula.com, filed for business rescue, a South African form of bankruptcy protection, last month after restrictions aimed at curbing the spread of the coronavirus forced airlines to stop flying.