Africa

The labor union whose members contribute most to the funds overseen by South Africa’s state pension manager wants the institution to stop investing in the debt of Eskom Holdings SOC Ltd., potentially increasing funding pressure on the heavily indebted utility, Bloomberg News reported. The 240,000-strong Public Servants Association said by buying Eskom’s bonds the Public Investment Corp. is exposing pensioners to excessive risk as the state-owned power company is not selling enough electricity to cover its costs and has had to be bailed out by the government.

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Mozambique reached an agreement in principle on key terms to restructure $726.5 million of Eurobonds, in which bondholders will no longer get access to the country’s future natural-gas revenue, Bloomberg News reported. Bondholders will be invited to vote in favor of an exchange of their debt for a new series of securities maturing on Sept. 15, 2031, according to a Finance Ministry statement.

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Global mining conglomerate Vedanta Resources said on Friday it was seeking international arbitration over Zambia’s appointment of a provisional liquidator to run the company’s Konkola Copper Mines (KCM) business, Reuters reported. Vedanta said on Friday its executives were unable to visit its KCM operation and engage with local management, in a setback to efforts to ease tensions amid a legal battle with Africa’s second-biggest copper producer. The Zambian government has accused KCM of breaching its operating license. Legal proceedings have been adjourned until June 4.

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Zambia’s bonds have reached another grim milestone. The spread on the copper producer’s $750 million of debt maturing in September 2022 rose above 2,000 basis points this week, Bloomberg News reported. At 22%, the yield was 20 percentage points more than U.S. Treasuries of an equivalent maturity. These are levels almost unheard of in the bond world. Only nations already in default, such as Venezuela, have dollar spreads and yields as high as Zambia’s.

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Sluggish economic growth in South Africa is starting to increase risks arising from high levels of debt in the country, the central bank warned on Wednesday, with defaults growing in both consumer and corporate debts, Reuters reported. In its semi-annual review of financial stability, the South African Reserve Bank said some areas of lending, including unsecured lending, car finance and lending to sectors like construction and manufacturing, were showing particular strain.

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Anil Agarwal, the Indian billionaire owner of Vedanta Resources Ltd., said mining companies are likely to stop operating in Zambia as a result of a state-owned firm seeking to liquidate his copper-mining business there, Bloomberg News reported. Agarwal’s warning, published in a government newspaper on Wednesday as a “personal message” to citizens of Africa’s second-biggest copper producer, comes as his company is trying to meet with President Edgar Lungu over state-owned ZCCM Investments Holdings Plc’s move this month to wind up Konkola Copper Mines Plc.

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Kenya’s headroom for new borrowing has shrunk since it tapped the Eurobond market this month and it is time for the country to begin reorganising its debt, central bank governor Patrick Njoroge said on Tuesday, Reuters reported. Njoroge, whose term is due to end next month, told reporters that the $2.1 billion Eurobond issuance in mid-May allowed Kenya to refinance some of its existing loans and “hopefully (give) us more room to expand the economy” and increase export capacity.

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Eskom Holdings SOC Ltd.’s 96-year history is replete with former chief executive officers who rose from within South Africa’s debt-laden state utility to run the company, Bloomberg News reported. There are few obvious choices for the next CEO to come from those same ranks. Two possible candidates from Eskom’s executive team to replace Phakamani Hadebe have strengths but also weaknesses. Chief Financial Officer Calib Cassim is a chartered accountant who’s worked at Eskom for 17 years, yet he has little technical expertise.

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South Africa’s banking industry would be able to withstand a default by Eskom Holdings SOC Ltd. but the impact on pension funds is a concern for the central bank, Governor Lesetja Kganyago said. The power utility is laden with about $35 billion of debt, roughly equally divided into bonds and loans, according to data compiled by Bloomberg from public records, and is struggling to meet demand for electricity from aging and unreliable plants, Bloomberg News reported.

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Steinhoff International Holdings NV’s legal woes deepened as a Frankfurt court received 10 suits to be included in a mass German investor case against the embattled global retailer, Bloomberg News reported. That’s on top of 6.2 billion euros ($6.9 billion) of claims highlighted by Steinhoff in its annual report earlier this month. The owner of Conforama in France and Mattress Firm in the U.S. has called for potential claimants to come forward, seemingly opening the door for negotiated settlements with those who lost money from the company’s late 2017 share-price crash.

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