Africa

For a quarter-century, South Africa has been able to count on an investment-grade rating from Moody’s Investors Service, Bloomberg News reported. Bond buyers lately may be forgiven for wondering why. Financial markets have been pricing in a downgrade for months, and the other two major rating companies have had South Africa at junk status for two years. Should Moody’s follow suit, the nation would suffer enormous financial consequences.

Fitch Ratings Ltd. said that while South Africa’s worsening debt forecasts don’t include the threats posed by the state taking on any of the embattled power utility’s 450 billion rand ($30 billion) of debt, any risks posed by this are reflected in the nation’s current credit assessment, Bloomberg News reported. Finance Minister Tito Mboweni presented a rapidly deteriorating outlook in his medium-term budget policy statement on Wednesday, with gross government debt seen surging to 80.9% of gross domestic product in the 2028 fiscal year unless urgent action is taken.

Almost half of frontier market countries are either at high risk of falling into debt distress or are already distressed, the IMF has said, up from zero as recently as 2014, the Financial Times reported. The warning comes as issuance of hard currency frontier market debt is set to hit a record high this year, with $38bn set to be raised, according to the IMF.

South Africa unveiled a long-awaited plan to save its debt-stricken power utility, including exposing it to greater competition, lowering fuel costs, increasing renewable-energy output and selling non-core assets, Bloomberg News reported. A policy paper released by Public Enterprises Minister Pravin Gordhan envisions Eskom Holdings SOC Ltd. relinquishing its almost century-old near-monopoly of the electricity industry.

Zimbabwe’s state-owned electricity distributor, grappling with drought and ageing equipment, said on Thursday it will disconnect mines, farms and other users as it looks to recover $77 million in unpaid bills, Reuters reported. The southern African nation is experiencing daily power cuts lasting up to 18 hours after a severe drought reduced water levels at the country’s biggest hydro plant. The Zimbabwe Electricity Transmission and Distribution Company (ZETDC) is also being hampered by ageing coal-fired electricity generators which constantly break down.

The head of Russia’s state bank VTB Andrei Kostin and Mozambique President Filipe Nyusi discussed plans to restructure Maputo’s debt, with the aim to conclude a deal by the year-end. Mozambique needs to restructure a $535 million state-backed loan to Mozambique Asset Management (MAM) arranged by VTB, Reuters reported. The meeting between Kostin and Nyusi was held on Tuesday, a VTB spokeswoman told Reuters. VTB said in a statement on Wednesday that Kostin told Nyusi that the Russian bank would like to agree on the debt restructure plan by the end of this year.

Investors are prepared for the worst as the day of reckoning looms for Eskom Holdings SOC Ltd., the state-owned power utility seen by Goldman Sachs Group Inc as the biggest threat to the country’s economy, Bloomberg News reported. Yields on benchmark South African government notes are at their highest in three weeks, trumped only by junk-rated Nigeria, Turkey and Lebanon among 29 major emerging markets. Rand-denominated sovereign debt has lost 3% for dollar investors this half, the worst performance after Colombia and Argentina.

Angola is hoping sweeping economic reforms will smooth an ambitious plan to sell key state assets, including stakes in oil company Sonangol, a share of Puma Energy and more than 100 other enterprises. Africa’s second biggest oil exporter is in a rush for cash as it struggles to cope with moribund crude prices, slumping output and years of mismanagement that left Sonangol bloated and inefficient, Reuters reported. In August, the government published an extensive list of assets that will be offered to investors via public offerings, stake sales, asset sales or tenders.

Eskom Holdings SOC Ltd., the state-owned South African utility that provides about 95% of the nation’s electricity, implemented power cuts on Wednesday amid maintenance problems, Bloomberg News reported. The rand weakened as investors fretted about the effect on economic growth. Power shortages have been a major constraint on output in Africa’s most industrialized economy. Protracted outages could cost the country its last investment-grade credit rating from Moody’s Investors Service, which is due to deliver its next assessment on Nov. 1.

The trial against one of the alleged ringleaders behind $2 billion in fraudulent loans to Mozambique kicked off in New York on Tuesday, the same day citizens of the southern African nation cast judgment at the ballot box on whether their government had done enough to hold accountable officials involved in the secret deals, The Wall Street Journal reported. Mozambique, one of the world’s poorest countries, plunged into a debilitating crisis after the loans were disclosed in 2016, following reporting by The Wall Street Journal.